Welcome to the Harrington Group Limited (“Harrington”) CEO Update.
From January 2006, the CEO Update will accompany our quarterly cash flow statement and provide an overview of our Company’s continued progress and development.
In this our inaugural CEO Update we review the “key events” for calendar year 2005 - a year in which the Company has established a solid platform for future cash flow and significant growth:
- Harrington enters the high growth drug screening industry with the acquisition of 40% of New Jersey, USA based Sun Biomedical Laboratories Inc. ;
- Harrington establishes a “world class” Scientific Advisory Board”; and
- Harrington completes the successful firing of its ShockRounds™ prototype “electric” bullet from a standard 37mm weapon…a world first.
SUN BIOMEDICAL LABORATORIES INC.
In late September, Harrington entered into an agreement to acquire 40% of Sun Biomedical Laboratories Inc (“SBL”), an acknowledged world leader in saliva drug screening products & development. Harrington has an option to acquire the remaining 60% of SBL by 30 June 2006. The agreement to acquire 100% of SBL for a total $3.7 million was approved by Harrington shareholders in November with the consideration for the first 40% satisfied through the issue this month of 12 million shares in Harrington.
SBL specializes in illicit drug testing products for use globally in: - the workplace, roadside drug testing, policing, correctional facilities, and the military and professional sports. Increasingly workplace drug testing is being utilized in safety critical sectors such as airline, road transport, construction and the resources industry. In many cases these changes are being dictated by the insurance industry that is demanding effective solutions to widespread drug use in the workplace and beyond. In Australia, it is estimated that workplace illicit drug use costs industry $9.2 billion annually in lost productivity while the true cost needs to take into account the many billions more through an estimated 20-25% of all occupational injuries and 3-15% of workplace fatalities being a result of drug and/or alcohol use.
Dr. Ming Sun, SBL’s founder and one of the most respected scientists and researchers in this industry, has five (5) patents to his name, a number pending and 20 illicit drug testing products with FDA 510k marketing clearances. Whilst SBL is acknowledged as a world leader in its field, the sales & marketing of its products has been weak for the last three fiscal years and has not taken advantage of its established global reputation and opportunity.
As the Company’s CEO I am very excited by the immediate and medium term revenue potential of the illicit drug screening side of SBL as well as the immense potential of the disease diagnostic products under development. Harrington is concentrating its efforts in two major areas:
1. Increasing sales of the Sun Biomedical saliva and urine drug screening products through both established as well as through new distributors mainly generated through leveraging the relationships & distribution networks Harrington was rapidly building in the law enforcement, corrections and homeland security sectors around the world.
In particular, we are confident that SBL’s marquee product, the OraLine® saliva drug screen, will generate growing sales as industries globally, inevitably move toward saliva screening for illicit drugs in the workplace and police forces worldwide adopt saliva based roadside drug testing. For many drugs, saliva testing is the only way in which impairment can be assessed in an instant onsite non-invasive test.
In October Harrington announced that it had formed a collaborative agreement with Australian labour contract company, Workforce International Pty Ltd, to supply SBL’s unique saliva test units for its own 1,500 workers and to introduce the products to its national client base. In November, Harrington announced that it had been appointed as the innovation & technology partner for drug screening to Correctional Emergency Response Team Network (“CERT Network”) and their worldwide partners. CERT Network represents more than 30,000 operators from approximately 3,000 prisons worldwide (including Australia). Also in November, SBL showcased drug testing products at Medica, the world’s largest medical industry tradeshow held in Düsseldorf, Germany. SBL is increasing its distributor base significantly as a result of interest in the products established at Medica and forecasts a significant jump in sales in 2006. Finally, in December, Harrington launched a global brand and accompanying website to reposition the SBL product lines for increased sales and better market reach – www.sunbiomed.com.
Leading the sales effort from our US offices will be a recognized team from the medical diagnostics industry with a proven track record of establishing, cultivating and closing sales both in the US market and overseas. Their experience in this sector combined with their existing contact base and belief in the SBL products is expected to result in a significant sales increase moving into 2006.
2. Production capacity and costing has been a major recent focus with the current situation at Sun Biomedical headquarters in New Jersey being solidly reviewed. Harrington has already generated significant interest in the Sun Biomedical products but at present is unable to process order confirmations as production capability cannot meet the global demand. The Harrington Managing Director, Peter Boonen, has this week returned from a week-long trip to China where total production of the OraLine product is being negotiated at an approximate reduction of 80-85% of current costs. This planned production arrangement is through a US Federal Drug Administration (FDA) compliant facility with full EU and US “Good Manufacturing Practice” (GMP) approval.
Aside from the established drug screening business, the underlying SBL saliva screening technology can and will be applied to “diagnostic applications.” As well as disease diagnostics such as cancer and HIV, these diagnostics include immigration and homeland security applications where screening for communicable diseases, bioterrorism threat agents as well as for pandemic threats such as Avian flu (H5N1) and other influenzas, has become critical. The market potential of these latter initiatives is immense and I look forward to advising you of progress in the near term.
SCIENTIFIC ADVISORY BOARD
In March the Company established a world class Scientific Advisory Board that among other things has recommended a broader vision for the Company that – “focuses on cash flow business opportunities centered around and targeted to our rapidly growing global database of leading industry contacts”.
Chairman of the Scientific Advisory Board is Colonel John B. Alexander, PhD (US Army Ret). Colonel Alexander is recognized as one of the world’s leading authorities on non-lethal weapons. He currently serves as a consultant to the US Government, to the US Joint Special Operations University and is a member of the National Research Council Committee for Assessment of Non-Lethal Weapons Science and Technology in the US.
Other members of the Scientific Advisory Board are:
Christopher C. Green, MD, PhD, FAAFS
Dr Green is in the practice of forensic medicine and neuroimaging. Dr Green serves on numerous Department of Defense, Intelligence and National Academy of Sciences Commissions. He Chairs the Science Board for the Undersecretary of the Army for Operations Research and has served as Chair of the Board on Army Science and Technology. He holds the President’s National Intelligence Medal and served as an Officer and continues as a consultant with the Central Intelligence Agency.
Edward L. Stephen, DVM
Dr Stephen is a specialist in bioterrorism and biodefense. While at Ft. Detrick Special Operations Division he played key roles in bioterrorism defense including assessment of vulnerability of limited targets such as the New York subway system and the Pentagon. Further, he was involved in the R&D of a range of weapons and helped to test and evaluate various kinds of drugs, chemicals, and toxins as they might relate to capture or restraint.
Allen I. Bain, PhD
Dr Bain is a pharmacologist focused on new drug development. Until recently, Dr Bain was an honorary lecturer at the Department of Pharmacology and Therapeutics at the University of British Columbia, where he was awarded his doctorate in pharmacology in 1994 for his work in neuroscience.
Further biographical information on the members of the Scientific Advisory Board can be found on the Harrington website http://www.hgrltd.com/abouthg/board.php.
SHOCKROUNDS
In February the Company underwent a significant transformation from a conveyor fabrication and forestry business to a developer of law enforcement, corrections and homeland security products and solutions, including its ShockRounds ‘electric’ bullet technology.
By mid-year, the Company announced the successful firing of its ShockRounds prototype round from a standard 37mm weapon – a world first achievement that should not be underestimated. Unfortunately, ongoing news of an increasing number of lawsuits relating to Taser’s ‘stun gun’ technology has led to considerable dampening of investor confidence in our segment of the less-lethal sector. We continue to progress our ShockRounds development while also keeping a watchful eye on industry developments.
Throughout 2005 the Company established and consolidated a number of significant relationships within the law enforcement, corrections, defense and homeland security industries that we believe will serve the Company well going forward. We are working at establishing a significant ShockRounds development and commercialisation program through partnering with an industry major and look forward to progressing this initiative through early 2006.
Calendar year 2005 has been an eventful development year for Harrington Group Limited. A year of significant achievement and progress during which we have secured strong global alliances together with strategic investments & partnerships that establish a solid platform from which the Company will generate forecast cash flow and profitability. We are looking forward to another successful year in 2006.
The next CEO Update will be issued by the end of January along with our quarterly cash flow statement. We trust that you will find these updates of interest and welcome your feedback and comments at info@hgrltd.com.
Marshall Couper, CEO