Scottsdale company, Airware International Group, targets UK snorers

May 10, 2010

Phoenix Business Journal – by Lynn Ducey

A Scottsdale company has brought the bedroom into the boardroom with the discovery that snoring can be a profitable venture.

Airware International Group inked a deal with Boots, a well-known British retailer, to put its Brez snoring aids on store shelves starting this month. Boots pharmacies are the equivalent of Rite-Aid in the U.S., according to Airware President and CEO Mindi Osborn.

That’s only part of Airware’s growth strategy. As the company makes inroads into the consumer marketplace, it also is in discussions to merge with a public company, Osborn said. She would not disclose details.

Founded in 2008 in Scottsdale, the company has developed a product that is inserted into users’ nostrils to stop them from snoring. The pliable plastic device expands and supports the nasal passages, reducing vibrations. The product, manufactured in China, is sold in a variety of drugstores across the U.S.

Osborn said the Boots deal is key to the company’s goal of expanding internationally.

“Snoring is a very big problem in the U.K., and many people have concerns about sleep there. This sleeping/snoring (retail) category is more prominent, so you can find a ‘sleep’ aisle in many drugstores there,” she said.

Airware has grown quickly. It recorded $4.3 million in revenue for fiscal 2008-09 and anticipates revenue in excess of $20 million for the current year, executives said. The company still has its original staff of seven full-time workers.

“We anticipate that for the first year (under the new agreement), our revenue will be about $5 million directly attributed to our relationship with Boots,” Osborn said.

Airware also will launch a direct-to-market advertising campaign next month. The company is spending about $6 million to reach consumers in markets including Hawaii, Boston and Chicago, she said.

“This is a very personal product for us, and we want to develop a direct relationship with our customer,” Osborn said.

Brez is the company’s primary product, but others are in development and soon will go into testing, she said.

Two-minute ads for Brez are expected to air on cable channels including Lifetime and Ion. In anticipation of additional sales the ads will bring, Airware is partnering with a Phoenix nonprofit, Epi-Hab, to prepare and process orders for shipment.

More than 50 years old, Epi-Hab provides employment for people suffering from epilepsy and other challenges. Executive Director Matt Redmann said the group has 38 full- and part-time workers who earn minimum wage. The group performs fulfillment and mailing services for a variety of businesses.

“This is a really great potential for us here. This long-term client and the repeat potential helps us build our employment opportunities,” Redmann said, adding that Epi-Hab could be boxing up to 500 packages a day for Airware.

Depending on demand, Epi-Hab could add four to five new employees, he said.

“This really gives strength to our existing schedule for our workers and gives us more opportunities,” Redmann said.

Airware officials said the company is in discussions to merge with an existing public company in a buyout, a move often referred to as a reverse merger.

“We have a lot of plans for the future, and they are going to require capital. Going public is one way to do that,” Osborn said. “Initially, we never anticipated this; but we are a young company, and we want to grow.”

She declined to provide specific details of the proposed buyout, saying only that talks were under way.

Osborn expects a deal to be finalized by the end of the year.

Paul Jevnick, managing director of investment banking firm Greene Holcombe & Fisher LLC, described such a maneuver as somewhat common.

“This is kind of a back-door (initial public offering). By taking these steps, a company isn’t doing a full IPO process, which can be both lengthy and expensive,” Jevnick said.

A reverse merger allows a company’s shares to be traded freely and creates liquidity, while offering a second opportunity to existing public company shareholders.

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Airware International Group
Product: Brez, nasal breathing aid
Leaders: Mindi Osborn, president and CEO; David Dolezal, founder and chairman
Founded: 2008
U.S. Retailers: Rite-Aid, Lewis Drug Stores, Good Neighbor Pharmacies, Leader Pharmacies, Medicine Shoppe, Thrifty White Pharmacy, and
U.K. Retailer: Boots