Chemical Engineer: February 2001
BioShield Technologies began as an antimicrobial company that created a new molecule derived from an original Dow Coming Corporation technology (now Dow Chemical Corporation). The antimicrobial technology created by Dow Coming is methanol based and, while effective in killing microorganisms, remains highly unstable and poisonous to humans. With the goal of making the compound suitable for human use, the founders of BioShield Technologies, began research at Emory University in 1985 to reengineer the molecule.
By 1995, BioShield Technologies had reengineered the highly unstable methanol-based system into a nontoxic, environmentally friendly molecule, radically transforming the way the technology was originally used. By transferring this molecule into a water-based system, BioShield Technologies developed the first broadly applicable residual antimicrobial formulations that could be used safely in the consumer market.
On September 21, 1999, the Company received its first U.S. Patent for the water stabilized antimicrobial molecule. In February 2000, BioShield received U.S. EPA registration for its concentrated active ingredient, BSTI 1860. By July 2000, the antimicrobial application AM 500 had been approved for direct homeowner use. In September 2000, the Company received two additional U.S. patents expanding the current applications of the base technology.
Product sales for fiscal year ended June 30, 2000 increased to $946,000 from $305,000 for the fiscal year ended June 30, 1999. The increase was attributable to an increase in the distribution of the OdorFree(TM) product, primarily in the southwestern and mid-United States, along with the introduction of two new sizes of Hypoallergenic OdorFree(TM). The Company also gained new market penetration in the northern and southeastern United States.
The Company has developed, produced, sold, and marketed distinct products under the BioShield name as well as the OdorFree(TM) and DuraLaSt(TM) brands. In April 1999, the Company began shipping its OdorFree(TM) product, an odor eliminator and fabric refresher, into its initial test markets within Texas. To date, the OdorFree(TM) products are available in over 20,000 retail outlets throughout the United States. The Company has appointed representatives throughout the United States to market its unique blend of odor eliminator products primarily under the OdorFree(TM) and DuraLaSt(TM) brands. New products are being developed for use on clothing and other in-home surfaces that will provide sanitization and residual protection from the growth of microorganisms. These products along with other consumer products being developed, will be distributed to virtually all major supermarkets and other selected outlets.
The Company currently produces private and controlled brand products for a select group of food retailers within the United States. As new products are developed some will be made available for private label distribution, particularly those that make non-pesticidal claims. In addition, private label opportunities will be extended into other retail channels such as mass merchandisers. The expansion of private label sales will only be executed in situations where both the anticipated volume and pricing are such that positive profitability is available.
Utilization of BioShield's patented technology in leading consumer goods offered by other organizations represents lucrative licensing revenues for the Company. The unique attributes of BioShield's technology permit incorporation into existing products as a value-added ingredient that imparts anti-microbial properties to the base product.
Consumer goods categories that offer significant potential include household cleaners, gloves, feminine hygiene, laundry and fabric care as well as deodorants and body washes. Many other products that benefit from an antimicrobial claim will be added as the technology progresses.
Marketing programs for value-added products will be designed to support the global branding strategy of BioShield. The licensing agreements with manufacturers will contain a marketing portion that outlines the requirements that each joint product will bear a notification of ``Protected By BioShield'' or other similar awareness-building programs. This extension of the Company's trademarks into categories, products, and geographies will enhance the long term branding campaign as well.
BioShield's last approach is to make available to Specialty retailers consumer products that incorporate its technology into their store brand products. These products will offer the Specialty Retailers an opportunity to increase revenue by extending their theme store product mix and overall brand reach to their loyal in-store shoppers.
BioShield is currently engaged in testing multiple applications of its core technology and products with leading manufacturers, many of who are Fortune 500 companies. The Company is committed to a value-added strategy to have our revolutionary antimicrobial technology incorporated into the products of these leading manufacturers. It is BioShield's intention to produce co-branded products in the near future.
and International Agreements
The Company has also developed several international agreements that encompass licensing agreements and highlight BioShield's global presence. A customer, based in the U.S., has an exclusive agreement with BioShield to distribute a proprietary line of cleaner/biostat products (incorporating BSTI 3651) for the automotive after-market in Japan. In Mexico, non-woven wiping cloths produced by Milyon incorporate BioShield's active agent to inhibit the growth of bacteria and mold on the wet cloth during household use. Distribution agreements signed with major sailcloth producers provide coverage in the Americas, Europe and Asian regions in the marine industry. The most important global distribution alliance to date involves the agreement with Southchem to distribute BioShield products to the textile industry. Southchem's parent company is Brenntag AG, a German company with a major global presence in the chemical industry.
The Company has also entered into additional agreements with specialty chemical companies to achieve national distribution. BioShield believes there will be significant volume in these agreements that will drive substantial revenue and licensing opportunities and growth.
The Company intends to follow a path taken by many other proprietary chemical manufacturers and has targeted leading industrial and institutional product companies that currently formulate and market to this industry. The Company anticipates generating significant revenues given that it received EPA approval of its core products in February 2000.
The I & I marketplace is highly fragmented into numerous distributors that cater to the unique cleaning, sanitization and lubrication needs of various businesses. These industries include transportation, hospitality, water sanitization, etc.
Trends are consolidation and acquisition of smaller companies by larger companies to cover larger geographic areas and to create wider product offerings. Organic growth for the industry is forecasted to be 3% annually. Few companies in the I & I market distribute antimicrobial products that offer residual protection against the growth of multiple microorganisms; nor are these products typically sold through this distribution channel due to their high cost. Given BioShield's ability to manufacture its active ingredient, the Company can offer antimicrobial products at comparable prices to current market products while offering such attributes as non-leaching and residual protection. The addition of these products will enable companies to lower costs by cleaning less often, utilizing less material, and employing less labor.
The Professional Division's business strategy combines profitable acquisitions with organic growth. The execution of both strategies simultaneously will provide accelerated growth within the I & I market segments.
The acquisition of a platform I & I company will provide a profitable opportunity for growth, coupled with attractive cash flows. The I & I platform acquisition will be utilized as the roll-up vehicle as BioShield acquires similar companies that specialize in chemical sales to the I & I market.