New BIEL Interview with CEO Andy Whelan
February 16, 2010 – Update on BioElectronics Corp. (BIEL)
by Joe on February 16, 2010
February 16, 2010 – Update on BioElectronics Corp. (BIEL)
This weekend we had the opportunity to sit down with Andy Whelan, CEO of BioElectronics for an update on corporate and business activities. Over the past few weeks we have assembled a list of questions from investors. Below, Mr. Whelan provides answers to these questions.
Question – What is the status of the audit? And why is it taking so long to complete?
Mr. Whelan: First of all, let me reiterate that this was a completely voluntary audit on our part. It is simply something we did not have to do. Second, I want to make sure that everyone understands that completing an audit is not an easy task. We have a very limited staff at BioElectronics and the completion of this audit caused us to have two professional staff members almost completely off-line for two full months. We, of course, are very happy to have most of this process behind us.
The audit was started at the end of October with the process running for several months. Over the last few weeks the audit team did a lot of additional checking of their work to ensure complete accuracy. This was clearly a very thorough audit. Many full audits take between 60 and 90 days, so considering the audit did not get fully under way until the end of October, it was completed relatively on time. I can appreciate, however that our investors wanted to see the results sooner rather than later.
Late last week we received the report from the audit team, which raised no new issues. It covers the Company’s operations through the year ending 2008. Additionally, the auditor conducted a full financial review up through the September quarter of 2009. This is normal operating procedure for auditing firms as full audits typically correspond to full operating fiscal years. In the case of BioElectronics, we have a December year end, which means the next audit period will end on December 31, 2009. We have already advised the auditor to proceed with completion of the full audit period for full year 2009. With that said, I want to emphasize that a full financial review by the auditing firm up through the third quarter of 2009 has been conducted. We are very happy with the results.
Question: What is the status of moving off the Pink Sheets?
Mr. Whelan: The completion of the audit and financial review offers us increased flexibility on several fronts. Upon completion of the full audit for 2009, we will be able to invoke one of several strategies relative to the trading of BioElectronics shares. We think we have come up with several innovative strategies, but at this time it is not really appropriate for us to publicly announce these. We certainly understand the need to do something in this area and were working hard toward a resolution. Stay tuned for developments as our strategy moves forward.
Question: We have heard rumors there are some major product upgrades in the works. What can you tell us relative to this area?
Mr. Whelan: We are very excited about a major product upgrade that is in the final stages. One of the issues with our ActiPatch Therapy product has always been just how to attach the product to the body. As most of you know, last year we were awarded a groundbreaking patent for PEMF products that are attached to the skin. The specific methodology for attachment has continuously been refined over the past few years and now we think we are on the verge of another major upgrade. We are now well past the testing phase and moving into the manufacturing phase of a new wrap that holds the technology against the body. This upgraded product utilizes a much stronger fabric that not only allows for better adhesion against the skin, but at the same time is much more flexible, while being significantly more durable. We now have full product samples in house and we are quickly moving all manufacturing to this new wrap technology. We feel strongly this is a significant product upgrade for ActiPatch.
We have also made some major product improvements to the Allay Menstrual Therapy product and packaging. The product now includes several replaceable soft, fabric sleeves. This will enable a woman to frequently change the sleeve while still maintaining cost effectiveness. We believe this is also a significant upgrade to our product line. The Allay products being shipped in support of our new Latin America marketing campaign will include this upgrade.
While we have been making modifications to the existing product, our product managers have also been working on an entirely new back pain product. We have designed a very elegant product specific to back pain. It is a very high quality belt that contains small pockets that will enable our core technology to be specifically placed directly over the site of back pain. We have always said that the back pain market is the single largest market for us and we believe this new product could be a huge winner for us allowing us to compete for shelf space next to some of the big back pain brands within the grocery and drug chain stores. We are very excited about this new break through product offering, which we hope to formally announce and show to investors very soon.
Question: What is the status of Latin American marketing campaign?
Mr. Whelan: The Latin American operation is taking a little bit longer than expected to get off the ground. It has clearly been a lot of work on our part, but we think we are now ready to launch. I was in Miami less than two weeks ago meeting with our marketing partner for the operation and was very impressed with what has been completed. We are very happy with the television spot to introduce the Allay product to Latin America and we are expecting to begin testing over the next week or so. As is normal in this type of campaign, we will probably make a few minor modifications using information from the tests and then began full launch. We are very excited about this product introduction launch and will closely be monitoring this rollout as it occurs.
Question: What is the update relative to other international marketing initiatives?
Mr. Whelan: There is a tremendous amount of marketing activity within the international markets. I was recently in China meeting with our distribution partner, local government officials and television executives. We are currently working on introducing the Allay product to the country.
As many of you know, we also have a major initiative in the works to penetrate the Japanese market. In this endeavor we have partnered with a new publicly traded company that will be bringing both ActiPatch and Allay into Japan. This deal resulted in the largest single order we have ever received.
We also recently launched a major infomercial program expansion in the country of Turkey for the ActiPatch and Allay products, which is backed by orders totaling more than $1 million in 2010. We are also very close to our ActiPatch launch in Canada. The television spots we had planned to run in Canada needed some minor regulatory modifications. These modifications are currently underway. All of these new international initiatives augment our existing distribution agreements in other parts of the world.
Question: In one of your last press releases a comment was made about strengthening the balance sheet. Please explain.
Mr. Whelan: We are very proud of what we have been able to accomplish relative to our balance sheet. Over the past year, we retired all of the convertible debt that was very unfavorable to the Company and we have paid virtually all of the Company’s other debts. The recent large orders we received at the end of the fourth quarter allowed us to further strengthen the balance sheet by paying the debt down even further. We believe our year end 2009 balance sheet will show some very strong financial ratios – certainly significantly stronger than the vast majority of companies our size – we think we are in very good shape.
Question: What is the update relative to FDA clearance for ActiPatch and Allay?
Mr. Whelan: FDA is still in process of reviewing our 510K submissions. Additionally, we recently applied for reclassification from Class III to Class II. This application is also currently under review at FDA. In our last meeting with FDA personnel it was suggested by them that BioElectronics might want to file a different type of application called a PMA. While receiving clearance under PMA (Pre-Marketing Approval) would likely offer us some additional protections against would be competitors, it’s a much more exhaustive process. While we have indicated we will be filing a PMA application, it may not be necessary after all. All of this is in a bit of a state of flux right now, but it should be sorted out more thoroughly as we have additional correspondence with FDA over the next few weeks. The easiest thing for us is still OTC clearance under 510K, which will allow us to market our products on store shelves within the U.S. – but as I indicated, we will know more over the next few weeks as additional correspondence with FDA personnel takes place.
We think the bottom line relative to FDA is that while the process has not been pain-free for us and we have not been on an easy regulatory clearance path, we believe clearance will be granted. We have sold over 200,000 ActiPatch’s worldwide without a single safety complaint. The devices have helped thousands upon thousands receive effective pain relief. We have conducted several IRB supervised clinical studies that have proven both the safety and efficacy of the Allay and ActiPatch devices. Navigating through the FDA is difficult, but we believe we will be successful in gaining clearance.
