Lifestream Technologies, Inc. (KFL)
Interview with: Christopher Maus, Chairman, President and CEO
Business News, Financial News, Stocks, Money & Investment Ideas, CEO Interview
and Information on their
at-home cholesterol monitor that aids the consumer in monitoring their risk of heart disease.

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Lifestream Technologies is now in over 15,000 retail outlets with its at-home cholesterol monitor

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Healthcare
Medical Equipment
(AMEX: KFL)


Lifestream Technologies, Inc.

510 Clearwater Loop – Ste. 101
Post Falls, ID 83854
Phone: 208-459-9409


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Christopher Maus
Chairman, President and
Chief Executive Officer

Interview conducted by:
Lynn Fosse
Editor

CEOCFOinterviews.com
April 2003

BIO:

Christopher Maus
Chairman of the Board, President and
Chief Executive Officer
Lifestream Technologies, Inc.

Christopher Maus, the Company founder, brings significant experience in marketing and distribution leadership to early stage companies in the consumer health and beauty industry.   In the past, Mr. Maus has managed the manufacturing and international sales for eight different products in a medical industry niche market.  A founder of Solaire Cosmetic Device Company, he grew the Company to $12 million in sales in 18 months. The Company was later sold in a private sale transaction.

In addition to developing the Lifestream Cholesterol Monitor and putting together a team of top development and management professionals, Mr. Maus facilitated the raising of approximately $8.0 million for the formation and ongoing capital requirements of the Company and has negotiated numerous contracts and agreements.   He was previously a member of the board of directors for Performance Coatings, Inc., an INC. 500 Company; and one of the fastest growing privately held companies in the United States.  Mr. Maus attended North Texas State University.

Company Profile:
Lifestream Technologies developed the first at-home cholesterol monitor. The Company’s product line aids the health conscious consumer in monitoring their risk of heart disease. By regularly testing cholesterol at home, individuals can monitor the benefits of their diet, exercise and/or drug therapy programs. Monitoring these benefits can support the physician and the individual’s efforts to improve compliance. Lifestream’s products also integrate a smart card reader further supporting compliance by storing test results on an individual’s personal health card for future retrieval, trend analysis and assessment.

The Lifestream Cholesterol Monitor is an affordable, hand-held device, which provides users with accurate results in less than three minutes. The product line has been designed to accommodate The Data Concern™ smart card allowing multiple users the ability to store their personal results. Lifestream's products are now available in pharmacy and retail outlets nationwide. To find out which retailers carry Lifestream’s products, go to “Store Locator” at the Web site www.knowitforlife.com. For more information, visit www.lifestreamtech.com.


The Lifestream Cholesterol Monitor: Provides total cholesterol results in just 3 minutes, meets accuracy and precision standards of the National Cholesterol Education Program (NCEP), requires no fasting, tests using a single drop of blood from a finger stick and stores up to 200 dated test results using a Smart Card.

CEOCFOinterviews: Mr. Maus, please give us a brief history of Lifestream Technologies.

Mr. Maus: “Lifestream Technologies was started in 1994, developing a home cholesterol monitor. This type of technology has traditionally been used in the professional market, for the purpose of testing patients to determine if their cholesterol was elevated enough to put them on a therapy program. Lifestream felt that the monitoring side of diagnostics would fulfill a niche in the consumer market and today we are in over 15,000 retail stores. We just did three million dollars in the first three quarters of the fiscal year and we are very close to cash flow positive.”

CEOCFOinterviews: Are most people using this at home as opposed to going for blood tests, and what would the difference be?

Mr. Maus: “There are three different types of tests.   Screening - that’s identifying people that don’t know.  The purpose of screening is to direct them to a physician if necessary.  The doctor does clinical diagnostics, such as a lipid panel: good, bad cholesterol, triglycerides, glucose, etc., to determine whether there is a need for clinical intervention.  In other words, they decide whether to treat or not to treat. Once you’re on a program, whether prescribed by a physician or self-imposed through exercise or diet, the feedback, the behavioral component, is by monitoring. If you take a weight-loss drug or you are going to do a weight loss program, you have a bathroom scale that you can step on and determine whether or not your program is working.  The same thing happens with cholesterol.   Lifestream’s cholesterol monitor allows the consumer to know if their cholesterol-lowering regime, whether it be cholesterol-lowering drugs or diet and exercise or both, is making a difference.”

CEOCFOinterviews: Is it a common practice to monitor cholesterol at home?

Mr. Maus: “We are the first product on the market for monitoring cholesterol at home, much like blood pressure cuffs were in 1972.  Last year, over seven million new blood pressure devices were sold to consumers who want to test their blood pressure at home. Individuals who monitor cholesterol, like those who monitor blood pressure, are monitoring their state of health for the purpose of “Health Management.”  The outcome is positive reinforcement that supports behavioral change and compliance with drug therapies and lifestyle changes.  Studies indicate that frequent monitoring gives positive reinforcement and supports lifestyle changes.

We have seen our customer base grow at double and close to triple digits this past year alone.  We see the format in which we supply our solution as the driving factor.  There are two types of testing devices on the market today: one device uses a test strips and the other device is a single-use disposable.  Each product services the need of the consumer, but Lifestream believes the market will follow the path of the blood pressure, tympanic thermometry and glucose markets, specifically, instrument-based devices.    This is something that will develop over time, but the acceptance has been very positive.”

CEOCFOinterviews: Do you need to convince doctors or is it the public that you need to target?

Mr. Maus:  “Cholesterol is the number one health care awareness issue in the US.  The cholesterol-lowering drug category, now the largest drug category in history is expected to reach $25 billion in revenue by 2005. Studies show that cholesterol is a contributing factor to Alzheimer’s and dementia, because the plaque builds up in the small vessels of the brain. We are seeing more and more push by the federal government. Why? The number one cause of death in the United States is coronary heart disease, and the three major components are smoking, blood pressure and elevated cholesterol levels. Hypertension is pretty well under control; both monitoring and the drugs are well accepted and have been used for years. They are trying to legislate smoking and tax smoking and make it socially unacceptable. Cholesterol is really the only area left, so we feel there’s a great opportunity here. We think it has a very close correlation to hypertension.

Our products are purchased by people who (1) want to know their cholesterol level or  (2) are on doctor-recommended dietary and/or exercise programs.  The positive reinforcement these people receive from monitoring assists them in staying compliance with their cholesterol reducing programs.  While it is beneficial for us to have the recommendation of the medical community, it is not a necessity for our consumer at-home monitor.

Lifestream does have a professional cholesterol monitor for use by healthcare professionals that has the same demonstrated accuracy and precision of the at-home monitor, but also includes the Health Risk Assessment wherein the healthcare professional can input fifteen other cardiac risk factors (e.g., gender, age, weight, tobacco use, etc.) identified by the Framingham Study and ascertain the likely overall cardiac condition of the patient.  This monitor can be programmed for Adult Care (includes the AHA’s thresholds for total cholesterol in adults) or for Pediatric Care (includes the AAP’s lower thresholds for total cholesterol in children and adolescents).”

CEOCFOinterviews: How do you get people to know about it and use it?

Mr. Maus: “The way we bring awareness to the product is through marketing, advertising and the media. Cholesterol is a hot subject and probably the most written-about subject in healthcare. Federal government initiatives, food companies, pharma companies, and health organizations have consciously pushed an education program over the last fifteen years targeted at bringing awareness to cholesterol. Our effort is not to build awareness of cholesterol but to make people aware our product is available. Most people intuitively know when they have something that is symptomatic and they are doing something to change that. This works to our favor and we find that one of the major benefits is the educational level of the general public regarding cholesterol. We are enhancing what they already know with our advertising campaign.”

CEOCFOinterviews: What are your marketing efforts?

Mr. Maus: “Our focus is radio, print and television. Right now, our primary focus in advertising is co-op advertising with the retailers who have purchased our products, including national chains such as CVS; Eckerd Drugs; Albertsons, Inc., including Sav-on Drugs, Osco Drug, Albertsons-Osco, and Albertsons-Sav-on; Rite Aid Corporation and Longs Drug Stores.   We do anticipate moving into an aggressive radio campaign in the near future to facilitate an awareness campaign. Eventually, we’ll go into television. Print is not the most advantageous for us at the moment, but we do expect that to come into play as well.”

CEOCFOinterviews: Do disposables play a big part for Lifestream?

Mr. Maus: “Lifestream’s monitors sell for $99.95 to $129.95 (MSRP).   A package of six test packets sells for $19.95.  Test packets are an intricate part of our sales strategy, because of the recurring revenue.  Currently, studies are being done to look at determining how often a person should test for compliance, in other words, how often should a person test to know whether or not their lifestyle changes and/or drug therapies are working. The outcome of these tests could be beneficial for Lifestream because a test packet is required for every test.”

CEOCFOinterviews: Is this reimbursable and is that important to move product?

Mr. Maus: “No, not at this time.  I don’t think that you will see insurance company reimbursement in the near future.  Last year, there were seven million blood pressure cuffs sold to consumers without any reimbursement.  We think cholesterol will follow that trend.”

CEOCFOinterviews: Your product is the first to market, are there others on your heels?

Mr. Maus: “Competition can be broken down into two groups: products using equivocal, single-use cholesterol tests (non-instrument) primarily used for screening, and products using a quantitative instrument and disposable strip. ChemTrak, Inc., sells a single-use disposable screening test offering test results in 15 minutes. The test uses color-metric readings, which are difficult to interpret and produce imprecise results. Lifestream sells multiple use monitors (suggested retail price of between $99 and $129) and six test strips for ($19.95). Lifestream’s monitors are considerably more affordable and offer the only instrument-based product with the capability of storing cholesterol test data, combined with other lifestyle data, to analyze the risk for stroke and cardiac disease. No product on the market today has the capability of downloading stored results from a home diagnostic unit via a smart card to the Internet. As Lifestream is the first to market with a cholesterol monitor, it is not unreasonable to expect that the Company will have a commanding lead and essentially dominate the market. In addition, the Company believes that the retailers are supportive of Lifestream’s product line as the gross margins afforded retailers are in excess of the typical margins of other consumer healthcare products.”

CEOCFOinterviews: Is retail your only sales channel?

Mr. Maus: “We go through a number of channels. We see our product as a health management product. You will see our product in catalogs.  Although they are not our primary business, they do help build awareness. Primarily, we are at the drugstores, mass merchants and, eventually, we expect to be in the wholesale clubs. The pharmacy is where the drug is being prescribed.  Last year, the cholesterol-lowering drug category was the largest category in history.  Lipitor is the largest drug ever, and probably the first drug in history to ever generate ten billion dollars a year. We believe the pharmacy is the most natural place for selling our product. When it is all said and done, 90% of our business will go through stores that have a pharmacy.”

CEOCFOinterviews: How do you manufacture your product?

Mr. Maus: “Lifestream is a design, engineering, marketing and sales company.  The production of our monitors is contracted out. Currently, we are partnered with Sanmina-SCI (NASDAQ: SANM, a leading international electronics OEM) and Servatron, Inc., of Spokane, WA, to manufacture the cholesterol monitoring devices.  Lifestream and SCI have recently implemented new cost saving processes that have significantly improved margins, benefiting Lifestream’s bottom line.

We also have an exclusive license and supply contract with Roche Diagnostics to provide dry chemistry test strips and calibration keys required for the cholesterol monitors.  We package the test strip packets, in addition to receiving and shipping product, at our corporate headquarters in Post Falls, Idaho.”

CEOCFOinterviews: What is the financial situation for the company?

Mr. Maus: “The company has, over the last four quarters, moved from a negative three million in revenue to a negative two, negative one, and down to a negative three hundred thousand, which means that we are moving very rapidly to cash flow positive. We have very strong margins.   A cost reduction implemented in October gave us a very aggressive shift in our gross margins, coming up almost 900% over the last six months. Our cash position is quite low right now.  Management has been pleased with the acceptance of the marketplace and sell through is good.  We do need additional cash for operating capital and marketing, and to manage this growth.”

CEOCFOinterviews: In closing, what would you like to say to shareholders and potential investors?

Mr. Maus:  “We are moving from a development stage company to an operating company, shifting from just burning cash and developing the company to the point of bringing in revenue.  If people look at the numbers and what makes the numbers improve… our operational expense is down, revenue is up and our margins are up… those are all good signs. We think that money will follow that basic model for success within our business.”

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