Scent of Success

REVIEW SUMMARY
Business: SinoFresh, Venice
Industry: Healthcare
Key: Company is in turnaround mode after several years of financial distress.

David Olund's 15-year-long severe case of sinusitis had driven him bonkers through the fall of 2009.

“It was the type that at 2 a.m. you wake up and your head is splitting down the middle,” says Olund, who at the time had built a successful 30-year career in international finance and insurance. “At that point, you will do anything for relief.”

A friend told Olund about SinoFresh, an over-the-counter homeopathic antiseptic spray to treat congestion and sinus pressure. It worked.

Indeed, SinoFresh, a patented formula that kills germs and bacteria, worked so well that within months Olund's sinusitis was gone. In place of a clean nose, though, was a raw business opportunity: Turns out the company that makes and sells SinoFresh, SinoFresh HealthCare, was not only headquartered in Olund's hometown of Venice, but was faltering.

After a series of investments and transactions, Olund, 52, is now president and CEO of SinoFresh. Olund and board Chairman Tom Fitzgerald are also at the helm of a turnaround effort at SinoFresh that includes several new hires and products.

“There is an unbelievable opportunity to get this product in front of many people,” says Fitzgerald.

True, but Fitzgerald and Olund know SinoFresh, founded by Sarasota entrepreneur Charles Fust in 1999, must first resolve issues with creditors, distributors and accounts receivables. The company, with at least $4 million in annual sales in 2005, had $2.5 million in debt last year.

“From a capital and operational standpoint,” says Olund, “the company was in dire straits.”

Olund, who has lived in Venice since the early 1970s, found out just how bad the company's balance sheet was when he met Fust in late 2009. Olund had called Fust, then president and CEO, merely to set up an in-person meeting to rave about SinoFresh.

Still, Olund smelled opportunity among the financial rubble. SinoFresh lost $4.9 million in 2006, for example, but that was more a byproduct of growing too wide, too fast, than a product flaw, Olund believed. Fust couldn't be reached for comment.

Olund also thought the bones of a solid management team were in place, with people such as Fitzgerald and Bill Wilferth, a pharmaceutical industry executive from upstate New York who joined the company in 2003.

Olund backed up his beliefs with his wallet. By early 2010, Olund and a friend from Denmark invested more than $100,000 into SinoFresh.

“We just started writing checks. We needed to address the immediate issues,” says Olund. “It was a triage period, and we had to stabilize the patient.”

The first wave of checks went to settle a lien on a primary account, says Olund.

Moreover, Olund discovered the company had an extra step in its logistics that cost it thousands of dollars every month. The problem was the suburban Philadelphia company it used to manufacture SinoFresh shipped the products to Venice for distribution, instead of just doing it from Pennsylvania.

“We eliminated one leg of shipping,” says Olund. “That was a very obvious correction.”

'New products'

Olund also created a private company under the SinoFresh name. He calls the entity a corporate firewall that protected investors from the risk in buying stock of the SinoFresh founded by Fust, which is publicly traded.

Olund declined to elaborate on how much money he has invested in the private SinoFresh, but a company spokeswoman says he was the lead shareholder.

Then, in a deal announced late last year, the publicly traded SinoFresh acquired the private entity in an all stock-transaction. SinoFresh marketing coordinator Lisa Dahlquist says the deal essentially amounted to the financially stable private SinoFresh founded by Olund taking over the financially unstable public SinoFresh founded by Fust.

SinoFresh, traded over the counter under the symbol SFSH, hasn't filed a complete financial report with the Securities & Exchange Commission since 2008 — a deficiency Olund hopes to fill by the end of June.

The six-employee company had too many financial issues during the past few years to file full reports, executives say. “We're still in the midst of restarting the company,” says Fitzgerald.

SinoFresh, however, recently hired a firm to audit the company's books. The report will include the company's past three years of financial results and all current figures, says Olund.

SinoFresh is on the cusp of some other moves. For one, the firm announced Feb. 24 it had retained Hollywood-based Tudog Capital to raise additional capital. Tudog has begun to offer restricted stock, says Olund, and is preparing a long-range capital plan.

SinoFresh also recently hired a national wholesale director, Gary Zweig. Zweig previously ran advertising and business development for Quality Care Pharmacies, a 300-store pharmacy chain based in upstate New York.

But what really gets Olund keyed up is SinoFresh's new product line. This way the company no longer must rely on the mainstay SinoFresh Homeopathic Nasal & Sinus Care, good as it is. “A single SKU company,” says Olund, “is a difficult endeavor.”

One new product, SinoFresh Antiseptic Sore Throat Spray, is scheduled to debut by the end of the second quarter.

Wilferth, the vice president of research and development, says the spray is an improved version of a previous SinoFresh formula that was never released. “We moved some ingredients around until it was a sore-throat spray,” says Wilferth.

It remains a homeopathic formula, which SinoFresh executives hope will help separate the product from the competition.

The next new product will be SinoFresh Antiseptic Travelers Nasal Spray. “This may be a very significant product for us,” says Olund, who hopes it can ultimately compete with big sellers in the marketplace such as Zicam and Airborne.

Top focus

Olund is an atypical pharmaceutical company executive.

The son of an ordained minister and a kindergarten teacher, Olund doesn't have a background in science and health.

He instead went into insurance after college in the late 1970s. He worked his way up in executive marketing positions for several companies, including Sun Life of Canada, New York Life and Shearson/American Express. He later picked up a securities license and sold stocks.

With several contacts in Scandinavia, Olund moved into international finance in the 1990s. He opened his own financial consulting firm, with a focus on helping companies go public and find alternative financing. He had clients in Europe and Asia.

Olund didn't intend to get out of the finance business, at least not until he took on SinoFresh. Olund's passionate reaction to SinoFresh is common, Wilferth says. “Sinusitis sufferers are so desperate,” says Wilferth, “that they will literally try anything that comes on the market.”

Olund's top priority, therefore, is to make sure enough consumers not only know about SinoFresh but know how good it is. The company hired Sarasota-based marketing and advertising firm Grapevine Communications to create a nationwide campaign. It also recently announced distribution deals with two large medical supply firms, one in Nevada and one in Ohio.

Potential growth like that is exciting, certainly, but Olund and Fitzgerald are both cognizant that fast growth is what got Fust, the founder, into trouble. “The issues at SinoFresh are not at all uncommon for companies started by inventors,” says Fitzgerald, who joined the board under Fust in 2007. “[Fust] had to let the company go and have a professional management team.”

Olund adds that previous executives had some legal challenges and internal squabbles several years ago, which exacerbated the financial issues. “They did their best,” says Olund, “and took it as far as they could.”

Olund is confident he and his team could take SinoFresh much further if they raise enough capital and stick to the strategy.

Olund cites Mucinex, the now-ubiquitous cough suppressant and cold medicine, as a product that started small and grew into a $2 billion behemoth.

Olund's not yet ready to declare SinoFresh the next Mucinex. But he has motivated the small staff at SinoFresh to think big. Think big and stay busy: Olund preaches a low expenses philosophy, especially while the company is in turnaround mode.

“Multitasking,” says Olund, “is the watchword around here.”