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BIEL Joe Noel’s answers to all Shareholder questions – Oct 28, 2009 from yhb

Thank you for the questions. I will do my best to answer each and every one of them. Before I began, however, I have to tell you that these answers are subject to certain conditions, which I have listed at the end. This is simply a legal requirement that all companies must make when addressing information at this level of detail.

One other item I want to point out to you – this is a very detailed list of questions and answering them is going to take a considerable amount of time. I’m going to type out my answers, but I’m not going to edit as this will take time I simply do not have. Therefore, I can guarantee you there will likely be a few typos in what I have written below. Also, I use speech dictation technology, so sometimes the software mixes up words. If you and the other shareholders can forgive these typos and not rip me apart for these, I will be happy to answer these questions in great detail. Thanks for your understanding relative to this issue. Please see below as I have done the best I can to give you the information you are requesting. And don’t forget these answers are subject to the disclaimers below. (Again, a legal requirement)

1. Currently the A/S count is 1.5B. The O/S is very near that number. Are there any plans to raise the A/S, and if so, does it take a vote of the shareholders, or do insiders control enough stock to make it happen without our vote?

Answer – Yes, BIEL is bumping up against its maximum. The share count has increased recently due to additional debt conversions. Several months ago the convertible debentures were paid off via a conversion to equity. Over the past few weeks the remaining debt has also been converted to equity. This strengthens the company’s balance sheet, but of course the downside is dilution. With most of the debt now converted there should be a significant deceleration in dilution. If additional capital needs to be raised or if there is an acquisition the company wants to make then the number of authorized shares would be increased.

2. We all know approval is between Oct 15 and Dec 30. Do you have any comments on the dates

Answer – There is really no way of telling if the approval date is between October 15 and December 30 as the FDA simply does not operate in this manner. We do believe that this is a fairly accurate “guesstimate”, but we do not have any specific basis to make such an assumption. FDA will act on its own timeframe and there’s nothing we can do to accelerate this – we are going to simply have to be patient.

3. What are the official sales figures /per country around the world.

Answer – We have not released official sales figures on a per country basis. I want to emphasize that revenue production is not the major goal of the company. We have said many times that the priorities at BioElectronics are clinical trials, FDA filings, and building our brands. We believe we are on track to meet these goals. Over the next few weeks you will see us change our emphasis toward revenue production. On Monday, we have a meeting specifically to address this new phase in the company’s life. Our revenue plan for next year is very large and we are currently working very hard to devise strategies to meet this revenue production goal. I think shareholders will be very impressed with the programs we are currently putting in place to produce major revenue growth during full year 2010.
4. What are the plans for increasing marketing efforts in US and around the world?

Answer – I allude to this partially in the answer above. The US marketing effort is of course contingent on FDA clearance, which we believe we will have shortly. The US marketing effort will rely heavily on our direct response television advertising as it is simply the best way to move a lot of product very quickly. Expect an aggressive rollout of this campaign in the first quarter of the year. As soon as FDA clearance is granted we will be making major decisions relative to strategic marketing initiatives. These will center on whether we plan to place the product ourselves to the grocery/drug store chains or if we want to license the technology to a major manufacturer. We have had several conversations with major manufacturers and consumer goods distribution companies and we see many options relative to these. It is a decision that has not been made yet, but will be made as soon as FDA clearance to market in the US is granted.

Relative to international we plan to accelerate our current strategy of creating distribution partnerships for specific countries or regional international geographies. We believe this is the best way to leverage our brands considering our limited marketing and managerial staffs.

5. Are the sales online (like Amazon.com) legal?

Answer – Yes, of course. The online sales are through a separate distribution partnership operated under the direction of medical professionals. All customers who purchase the Allay product must complete a health questionnaire designed by medical professionals in order to qualify to receive the product. Therefore, purchase of the product falls under the practice of medicine. ActiPatch, is not marketed online within the United States. The websites that sell the product are operated by Canadian-based distributors.
6. Without going into specifics, any takeover/partnership negotiations going on?

Answer – This is an area that no company representative or management team member would ever venture into and therefore least must simply say we don’t have any comment relative to this issue. We have made no secret of our long-term desire to sell the products or the entire company to a larger organization.
7. Are you aware that REUTERS UPGRADED BIEL TO OUTPERFORM? Any comments ?

Answer – Yes – I am aware of the upgrade. I placed little value on such upgrades as the staff at Reuters performs very little real research into companies and is not really familiar with our operations. We clearly liked the upgrade, though we feel our shareholders are far more qualified to make an accurate assessment of the overall direction of BioElectronics.
8. On FDA approval, what are the plans to raise money for marketing and manufacturing in USA

Answer – Our ability to raise money is very robust. We get many calls each week from wealthy investors and investment organizations offering us money. We do not have specific plans to raise money for marketing and manufacturing as our balance sheet is in pretty good shape at the current moment. I remind you we also have the guarantee from the export/import bank that will allow us to quickly and inexpensively raise working capital to fund exports. We do not believe our domestic marketing campaigns will be particularly expensive. We have already paid for the production of television advertising spots – rather expensive, but you get what you pay for – all should be very high quality. Media buys (television time) should be self funding in that the short-term investment should be paid back with 4 to 1 revenue to expense ratio.
9. You have mentioned several times that BIEL is not considering Reverse Split. What is your latest stand on this issue?

Answer – I have never heard a discussion at BioElectronics relative to a reverse split.

10. Does BIEL plan to hold any shareholder conference calls?

Answer – Yes – We will without a doubt be holding shareholder conference calls.

11. I’d like to know how BIEL used the money they got from the new O/S shares past months. It might be around 30 to 40 million $ in 3 months. It would be fair to tell us what this amount is and what it was used for ?

Answer – There was not $30 to $40 million raised in the past 3 months. Not even close. The increase in shares was mainly related to the conversion of debt into equity. We will be reporting the actual amount of money raised when our auditing firm produces results for the September quarter. I do not have an actual date as of yet as the audit is ongoing.

12. How is the audit coming along? And what exactly is the purpose. Is it to move to OTC.BB ?

Answer – The auditors were in the BIEL office this week and it is ongoing. We are conducting an audit for several purposes – first is that our investors have asked us for the audit – second, as we have stated previously, we want to move off of the pink sheets and onto a different stock trading venue. We have specific plans to do this, but it is inappropriate at this time to discuss in detail.

13. What’s the status of the Class II petition ?

Answer – We do not know. The FDA has not gotten back to this issue – while we are not sure of the exact reason we suspect it is simply a workload issue on their part as all Class III devices cleared under 510K must either be reclassified to Class II or undergo a time-consuming and expensive PMA process. We, and our law firm, fully expect a reclassification to Class II, but we simply have not heard back from FDA.

14. When do you expect to report Q3 earnings/sales ?

Answer – I cannot provide you a date at this time is the auditors are currently working on the numbers.

15. Are there any future plans to reduce the O/S once revenue starts coming in ?

Answer – There are no specific plans to do this – stock buybacks are usually performed by cash rich companies with limited growth prospects. The theoretical argument is: does the company or the shareholder have better investment uses for the cash. We believe, as we think our shareholders also believe, that we have better uses for the investment of cash. We have a great set of products and we believe demand will be very high.

16. What is the deal with Scottrade? This is very bad for the company that people cannot buy on SC. Also, someone reported the same problem with Charles Schwabb starting today.

Answer – Scottrade limits the trading of many pink sheet stocks, not just BIEL. It is more expensive for brokerage firms to perform back office operations relative to pink sheet stocks. Our understanding is that Scottrade simply does not want to incur these additional costs and therefore chooses not to trade certain securities. There’s really nothing we can do about this – but the situation is not specific just to BioElectronics.

All of us would really appreciate if you answer these questions. This will go a long way in boosting investor confidence as right now lot of longs who entered late are losing confidence.

-Thanks and Regards

Certain statements in the above may contain forward-looking information within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. All statements, other than statements of fact, included in this release, including, without limitation, statements regarding potential future plans and objectives of the companies, are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, among other things, the following: general economic and business conditions; competition; unexpected changes in technologies and technological advances; ability to commercialize and manufacture products; results of experimental studies; research and development activities; changes in, or failure to comply with, governmental regulations; and the ability to obtain adequate financing in the future.
Joe Noel
Emerging Growth Research, LLP
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