BioLargo, Inc. (BLGO) CEO Dennis Calvert on Q4 2021 Results – Earnings Call Transcript

BioLargo, Inc. (OTCQB:BLGO) Q4 2021 Earnings Conference Call April 4, 2022 4:30 PM ET

Company Participants

Brian Loper – IR, ClearThink Capital

Dennis Calvert – Chief Executive Officer

Charley Dargan – CFO


Good afternoon, ladies and gentlemen. And welcome to the BioLargo Year End 2021 Earnings Results Conference Call. At this time, all participants have been placed on a listen-only mode.

It is now my pleasure to turn the floor over to your host, Brian Loper. Sir, the floor is yours.

Brian Loper

Thank you, operator. I appreciate that. Good afternoon, everyone. And welcome to BioLargo’s 2021 annual results conference call. By now, everyone should have had access to the earnings press release, which was issued last Thursday prior to market open and the annual report filed with the SEC. And this call is being webcast and is available for replay.

In our remarks today, we may include statements that are considered forward-looking within the meanings of securities laws, including forward-looking statements about future results of operations, business strategies and plans, our relationships with our customers, market and potential growth opportunities. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management’s current knowledge and expectations as of today, and are subject to certain risks and uncertainties and may cause the actual results to differ materially from the forward-looking statements. A detailed discussion of such risks and uncertainties are contained in our most recent Form 10-K, Form 10-Q and in other filed at the SEC. The company undertakes no obligation to update any forward-looking statements.

And with that, I’ll now hand the call over to BioLargo’s Chief Executive Officer, Dennis Calvert.

Dennis Calvert

Hey, Brian, and thank you, everyone. I’m glad you are here. We’ve got a lot to cover and we also have Charley Dargan, our CFO joining us today. Charley, can you say hello?

Charley Dargan

Hello, everyone. Glad to be here.

Dennis Calvert

There you go. Yes, I’m glad you’re here too, Charley. And Charley will be speaking and reviewing some of those numbers as well in his comments about our progress. So, BioLargo right, an innovator and solution provider focused on clean air, clean water, a cleaner Earth, all with this overriding purposeful work to make life better. It’s been a very exciting time and long time coming to get to this stage. Our symbol, of course, is BLGO [Technical difficulty]

last year’s performance and sort of to-date, year-to-date where we’re at, at some level as well. So we do have a new presentation we’d like to share. In just a second we’ll get that started. And here we go. Let’s watch this for a few minutes

[Audio-Video Presentation]

Alright. That’s a great segue, of course. And for the stockholders who have been with us for a while, you know that we’ve segmented the business in really two operating groups, the Environmental Group and the Medical Group. Clyra Medical has actually made some significant strides. We will spend a lot of time talking about it, but it’s got products that are now going to market. It’s got a clean balance sheet and really a remarkable future. And BioLargo is now about a 56% shareholder in that company. So, we’re very excited about it. We think it’s a great target for spinoff in the coming near future. So, that’s very exciting.

On the Environmental Group, amazingly, each of these companies has a discrete focus, but they overlap quite often. They overlap in science and engineering. So, where one picks up, the other leaves off and vice versa, and it creates an incredible team. We are going to tell you stories as we get through this presentation about our recent win that involves both ONM Environmental and our Engineering Group combined to land a significant, significant business opportunity that’s turned into a contract. So, we’ll talk about that in a bit.

As we’ve published significant information about, we have three catalysts that are major growth catalysts. There is actually more than that, but these are the big ones. These are the ones that have leverage in front of them, the idea that we are going to not only grow organically, but grow through partnerships to create replication and margin. And I think they are all very important. The relationship with Garratt-Callahan is progressing very nicely. It’s about a year and a half old. I think the key takeaway: number one, this is the largest privately held water company in the United States. We came together because they had an idea and they suggested to BioLargo that if we make an invention for a minimum liquid discharge, make it, prove it up, validate it, that we could become the manufacturer and service provider, and they would become our partner for selling into the market, with an existing footprint. The first customer has been identified and we are building a portable unit to take that first constructive product that is working for minimal liquid discharge and proven successful into the marketplace, as we speak. We are anticipating something like 30 to 50 units, averaged somewhere between a 100,000 and 500,000. The first project is bigger than all of that, which is good. And this is just now taking shape to go-to-market. So, we think this is a significant catalyst that can drive value for our shareholders, and frankly can keep us busy for years.

Our relationship with Ikigai Holdings, as everyone knows, the product POOPH has been launched. You probably have seen it on TV. I get calls all the time. They saw it on CNN and they see it on eBay and see it on LinkedIn and Facebook, and this is getting attention all over the marketplace. And it’s a growing revenue stream where we are very excited to be partnered up with Ikigai. This is a winner. And it has a chance — I always want to remind everyone, we will get into some detail. These folks are thinking big. They want to go big mass market and build an international brand that is going to be desirable for very, very large, the largest consumer products companies in the world for purchase. So, the agenda is to drive it to retail, create significant brand value as fast as possible, create something that’s sellable as an asset in which we would participate as a 20% owner partner. It’s going very, very well. Very exciting.

There you see is an invention developed by our Engineering Group to concentrate and remove PFAS, P-F-A-S, widely considered a multi-billion dollar market. Most people recommend that it’s something like 60 billion a year in aggregate. It’s an emerging market. People spend a lot of money. We have got a great technical solution. It’s now a hot button for the regulators, by the EPA, by the Biden administration. We are looking at projects that we believe will be in the 10 plus million a year range and could run for 10 and 20 years, and these are big, big projects. A way to think about those is, they are sort of like a Superfund remediation project, and we are smacked out in the middle of that storm with an innovation that is just on the verge of becoming commercially available.

Now, we’ll take a quick look back and I will ask Charley Dargan to make some comments. Charley has been with us for a very long time, intimate in the business. And Charley, I think you might have some comments and thoughts about our performance. I’m going to hand it over to you.

Charley Dargan

Yes. And just to make it clear, it’s 14 years that I’ve been with the company. So a little bit of history there. Yes, we did the earnings release last week and we continue to improve dramatically. Revenue is up. But more importantly, the acceleration of revenue in the fourth quarter over the third quarter which is about 10% is really placing on a really good foundation platform leading into this year, 2022. The other element, which is you’re seeing is a dramatic reduction in debt. And that has really improved the balance sheet, again, providing us with a great foundation and with the revenue increases and the decline in debt, meaning also the interest, we had an almost 30% improvement in our net loss.

And what I think that does for us when you step back is, it sets a stage for us to find the big anchor to help us because we get a lot of opportunities coming our way, and we do have to try and pick and choose which ones will be the most helpful to us. But the good news is, as Dennis mentioned that the subsidiaries are working together and there is absolutely a synergy there, which dramatically helps our financial statements. So this coming year, again, a little bit into the future, I feel very good about both from our balance sheet and our ability to drive revenue.


Dennis Calvert

Yes. Thank you, Charley. I just moved to the next slide as well. And we’ve got a couple of these key numbers, which you basically have covered. The biggest is the reduction in the net loss figure, which is really interesting. And you might comment too. See, to me, it’s dramatic that the company has maintained a significant investment in R&D for a extended period of time. Do you have thoughts on that?

Charley Dargan

Yes. Absolutely. Even though there wasn’t a dramatic increase, we have been able to maintain a significant level of investment in research and development. I mean, that’s what developed the PFAS solution. It’s what’s happening in odor environmental with their new solutions. So the integration of research and to the point of development, trying to get out as we have commercial development, is extremely important. And even through these terrible times with COVID and now a war, we’ve been able to maintain a significant investment in R&D, which has been extremely helpful.

Dennis Calvert

Yes. I mean, the way I like to talk about it is it creates a diversity of opportunity when put in the hands of science and engineering professionals on the front line, it means that there’s multiple value propositions that can create commercial opportunity. And we’re witnessing that. Especially we’re going to talk about a specific project, recent win in a minute. But especially when it comes to, just sort of let me frame it, our operating unit ONM Environmental has continued to morph, right, morph itself. And it started out with this great chemistry, a technology CupriDyne that became a product, that became part of the system, that became a vertically integrated service company with professionals from the waste industry who are engineers, combined with an engineering firm, who now have the ability to offer value across the field, right, across the industry. And it’s a pretty remarkable sort of evolution, part necessity, right? And part opportunity.

One is the — when you face these technology adoption cycles that are so difficult with barriers to entry, the idea that you can come in with the breadth of knowledge and talent to secure wins, while you are selling technology in, we are proving it daily that, that combination model sets us apart in the marketplace. And it’s always funny to me because I see it on the front line, a client will say, “Oh, you are that odor control company.” And I say, “Oh, we are a lot more than that.” Right? And yet that’s awesome. It creates the opportunity. I’ll just remind our stockholders that, that is a breadth of investment and focus across the field at the highest level on science and engineering with the environmental focus, that’s enabled us to now compete in such an incredible way, right? Okay.

Charley Dargan

Yes. I agree. All the elements are there to take stuff into commercial development, which is extremely exciting.

Dennis Calvert

It is. Thank you, Charley. And to jump in anytime, I’m going to go high level on some of these technologies and products and how they are unfolding. We’re going to cover some detail. So the engineering, I can’t speak enough. This team of people have 20 and 30 years’ experience and at the highest level. We say that all the time but it’s really true. When you look at the backlog — or not the backlog, the history of their accomplishments, the projects where they have worked and succeeded in so many ways, they bring a wealth of experience to the marketplace. And I think we are just seeing the tip of the iceberg there. As we like to say, people are calling us now, and the phone is ringing. People laugh at that and I go, no, it really is true. Some of the biggest and most significant projects that we are involved in, in many ways our partner or our customers sought us out looking for a solution to a very special problem. The engineers have been a critical part of that.

PFAS, we mentioned briefly in the film. This is an incredibly fast moving market. I often get the question. Do you have competition? Like, oh my goodness. There is a thousand competitors. What distinguishes us from the competition is the question, and anybody that’s in the environmental services business wants to have access to a solution because they probably have a client that’s got some PFAS somewhere they have to deal with. And so, what we have really focused on is developing a toolkit, this AEC technology, proven to the farthest possible degree, the most advanced commercial stage we can make it, even if that’s a project all the way through, to be able to position that for adoption with channel partners and customers at the highest order and we are doing just that. We think this is an enormously significant market for us, and we have a winner.

And behind the scenes, we are participating in industry conferences. Our people have been keynote speakers, technical leaders, really on-the-site subject matter experts in so many anyways, and that is continuing to expand. And in the project pool, oh, we have got at least, I don’t know, 8 or 10 projects moving through some stage of analysis, right? And they are all a lot of work. So, don’t miss that. They’re not fast either, but they are significant and each one of these projects represents a significant commercial opportunity.

We also have two channel partner agreements on PFAS in negotiation as we speak, that was referenced in our 10-K. And so, we are refining the details in preparation of launching into the commercial market, not only with customers, but with channel partners, representing the opportunity for expansion and the leverage that, that creates. The key value proposition for the AEC is really pretty simple. I mean it’s low cost, it’s available for use in a wide variety of waters. That’s the infographic on the right. But the biggest is the waste stream. 1/1000th waste stream of a typical activated carbon system. Activated carbon systems are being installed actually. It’s amazing. And you look at it and you think, my goodness, they must be really desperate to put a carbon system with the kind of expense associated with the management of the waste stream. And in fact, that’s exactly what’s happening. They feel compelled. They have to do it. There are the regulatory mandates. Something is making them move extraordinarily fast, even though many times they recognize that it’s not the most economical and long term sustainable solution for the environment.

Our relationship with Garratt-Callahan, we talked about that. I think the key takeaway here is that we’ve got our first customer identified. We’re doing trailer-mounted units, they will go on site. That pilot would probably run about 45, 60 days. We already know the customer wants the system. So this is the last field trial to prove that’s going to work in site — on site for them. And then we’ll have an order in the deliverable. And there’s a menu of potential clients behind this one. We’re already working on one’s project in particular that’s pretty significant, $1 million plus sort of project. And in that case, just like everyone else, they want to see as much proof as we possibly can through that commercial stage before we get going, but it is stacking up and we’re excited about this, actually launching into the commercial mode in the near — very near future.

That’s about POOPH, early feedback is great. The key takeaway here is that this is a leverage transaction for us. We spent years developing the data, the knowledge, the proof of claim, the evidence in the commercial markets, the knowhow, relationships with the co-packers and distributors and third party fulfillment, all the things that come together when approached with a great brand idea and a marketing budget and a strategy for launching into big box retail. We predict that this will be in big box retail much sooner than everyone might realize. And when you get to that level, the numbers become very exciting for everyone, including BioLargo. So this is a very exciting project and its evidence is really validates the technical achievement of this product performance, safety and performance both. And now in the hands with the right budget, it has a chance to really go big. So we’re excited about that. So if you haven’t seen it, be sure and watch it,, It’s probably — if you’re a stockholder of BioLargo, it’s probably hitting your social media somewhere. So be sure and like it, and try it. And of course give some feedback anytime.

Charley Dargan

I can give some feedback there, I use the product. So it’s very, very good.

Dennis Calvert

Does it actually work? That’s the question.

Charley Dargan

It actually works. Yes, right.

Dennis Calvert

Every time somebody says I tried the product, we say, “Well, I hope it worked.” Yes, it really works. Yes, it’s a technically proven oxidation of organic molecules. And absolutely it works. There you go. And it’s not going to hurt our soul or a thing. It’s really, really good. So here’s the thing, in the ONM, this is just this great case study. Again, we’re going to come to this big client that we’re going to talk about in a few minutes, but this was deciding because this — the team led by Joe Provenzano and his team have become expert in what they do. They had to learn it, trial and error, define the business.

We landed in a number of the major waste handling companies under national contract, but we have really had to work hard to get sort of the traction of rapid adoption. I mean, the way I characterize it is, this is one hard working business, okay? And it’s interesting because had we not done all that work, learned that business with such refinement, such skill, the opportunity with Ikigai and the POOPH product would never have happened. It’s like the — we have laid down cornerstones that do not shake. And as a result of that long development cycle and hard work, we are now in a position to capture opportunities for leverage. So, that’s what’s happening. And thank God because it’s taking a long time. I mean, it’s not easy. But let me support everyone with the idea that, number one, we know it’s the number one technical performer, technically that we know of in the world. I mean, so make no bones about it. There is no question. How do people find out about it? How do they use it? How do they get the system? How do you overcome the idea that people just think odors are part of their situation and there is no real solution anyway, that’s a common theme, right? And so, the answer is you keep showing up and that’s what our joint venture in South Korea is doing. They’re just showing up. They have done 30 something trials with the idea of prove it, prove it, prove it, prove it beyond reproach, gather the data to hold yourself in front of a customer or an opportunity, and know that you are going to be successful. That’s what’s happening and it’s continuing to happen.

So, the business is expanding, not just organically because that’s happening, but also through leverage. And when I say leverage, I talk about distribution, white label, partnerships like the Ikigai and like the relationship in South Korea. South Korea hasn’t hit the big numbers yet, but they will. These are very skilled people. They are committed to the future. They know it’s a number one performing product and they are spending a lot of time with distributors, right? So, how do you build a business? Do you sell each customer or do you teach a distributor how to sell 50? That’s not easy. That’s what they are doing. That’s happening also at ONM Environmental. It’s pretty amazing. So not only within the waste industry, but other markets.

And so, there is a couple of recent wins, and we are not going to give too much detail, one for competitive reasons, but the second is they are still just unfolding. There’s new relationships that are focused on additional markets, who route us then in agriculture, the paint industry, automotive industry, asphalt. I mean, there is rendering plants, I mean agricultural production. It goes on and on and on. And in each of these situations, while we go out and get one account or two accounts or three accounts and we achieve that level of success, the game, the business strategy is to take those wins and convert them into a relationship with someone who already sells to that market. When we think about Garratt-Callahan, and this is this wonderful company, right? They are a 100 plus years old. It takes an enormous amount of work to build that kind of infrastructure and trust across the market with the client base. So, we are looking to bring our technology in as a supply chain partner. And the good news is, it’s happening. And we have also have new distribution coming in internationally. So, that’s very exciting. Again, a chance to place minimum orders, be a wholesale supplier of raw ingredients and formulations and knowhow and watch other people invest and expand their markets and purchase some of those components from us. So, we think that’s very exciting. And then again, we are going to talk about a big project.

Alright. Let’s see. Here we go. These are examples of the — CupriDyne Clean delivery systems. We have referenced a couple of times last year. We got this big exclusive supply chain contract with a municipal client. That’s a big deal. It’s exclusive with one of the leaders on the Western half of the United States, it is a showcase account and it’s expanding. So we’re happy, we’re happy with that. And it also is a calling card for new business.

This is AOS, we talked about that. This is a technology that’s received over a hundred grants. We believe it will find commercial traction. It has specialness. It’s got a number of things that are very special, but number 1 is it’s incredibly effective at destroying and collecting, removing micro pollutants. Micro pollutants, things like pharmaceutical byproducts stuck in more water. We have an ongoing commercial trial in Montreal, in Quebec. And it’s a great showcase, because it’s getting such academic rigor. We’ve got a lot of support for that. And we are in negotiations with our first commercial accounts that are not quite finalized, but we think the first one’s going to be a good one. It’ll probably be over $1 million in a total project. And we’re just right at that last minute trying to finalize agreement. So we hope to have that result soon. We know it’s been elusive, it seemed it’s incredibly difficult journey to get through that first barrier. But we’re anxious and we know that it will, and we’ve been able to advance that technology in such a significant way. So this is a — this will be a commercial cornerstone as it finds its way through that barrier.

And so again, we’re bidding on the first project. So we’ve had multiple pre-commercial demonstration pilots. We’ve become very good at this business and making that device work in the field. And so we’ll see results.

And 1 project I want to talk about, that’s this one. This is a big deal. We’re pretty excited about this. This is an example — the story of how this came to be is enlightening. As everyone knows, we’ve served the waste handling industry. I don’t know, gosh, it’s got to be 2016, four or five years, almost seven years. We’ve had some wins, but we had to work really hard. And as I mentioned before, in the marketplace, a lot of times people will say, oh, you’re that odor control company. And I always think to myself, oh, it just falls so short of who we are, but yes, we have the number 1 performing odor control technology that we know of in the world, right? So it’s not bad. That’s good. But as a result of hiring very talented people, expanding the services of our Engineering Group, we find ourselves with a lot more in the toolkit than we originally planned for. And as a result, we’ve just been awarded a new contract, which is a waste energy conversion project of an extremely large capital project. We’re predicting that it will easily exceed $250 million over its life cycle. And it could be much bigger.

It’s a little early to start forecasting timing and performance, because in each of these relationships, a project of this magnitude, there’s a series of steps that are required to get to a successful conclusion. We wanted to share with you this story, because we are now marching on a progressive project that will take about four years to get to a fully executable project of significant large capital scale. In this, we were selected for a whole number of reasons. One is our Engineering Group, of course; and secondarily, because of our extraordinary experience with ONM Environmental in the waste industry. They know us and they know we show up and we do great work, and we know we love our customers, right? And they know our engineers have this extraordinary experience. So, the way these typically will rollout over time is, they start with what the industry call a feasibility study.

So, we are engaged now, under contract with a very large capital project. This project in particular is based in Latin America. We are working with a company that is specialist in project finance, and we have been retained now to participate, essentially like an EPC contractor or project leader. So the way that looks to us is, it starts with feasibility, the next will be in order of magnitude, bigger, preliminary design and process design and then detail design, then construction, then startup and commission of an operating plant. And then ultimately, there will be an operate and maintain, right, operate and maintain agreement. Our company has the potential to start a feasibility and compete for every stage of the project over the 4 year period, right?

Now, when we say construction, we are of course not a big construction company, but what would happen is the project leaders would be operating as the general manager of supervising construction, that would be pretty normal. So what’s special really is, this is an example of the scale at which our company is able to compete for customers, show credibility, show knowhow and experience and the staying power and the sort of the wherewithal to see these projects all the way through. The opportunities like this are also expanding dramatically. It’s hard to explain why, right? Why? Well, I think part of it is we keep showing up. The other part is that one success leads to another, the reputation for quality becomes known in the market. We have all the talent in place. Where we don’t have the talent, we can contract the talent to bring them in. There is a certain amount of critical mass that occurs that allows you to now step into the marketplace and compete. And remember, we are all competitive, to compete for opportunities like this, where we have a chance to do something significant and meaningful with a lot of revenue attached over a very long period of time.

I always remind everybody, you have to earn your way, and by the way, so does everybody, other competitor. Nobody gives you the five year contract. You do stage-by-stage. They are all bid driven. They are project budget driven. But this is a really nice piece of business and it’s a wonderful complement to the way that our operating units work together, and it’s remarkable. And so, I’m proud of this in a big way. And of course, I think it’s going to do quite well for making value for our shareholders and as we say, it’s the tip of the iceberg. So, this is an existing contract that’s now marching ahead.

So, we are going to get to questions in just a second. In closing, right, we have a family of companies, Environmental Group and Medical, they work very closely together. Science and engineering, solving big problems. The way to think about it, it’s an environmental engineering but with an entrepreneurial square and technology and replication that allows us to create margin where others cannot and with a can do attitude the market has obviously taken a liking to. So, this is the best time in the history of the company. We have extraordinary growth opportunities ahead for us. And as we always say to everyone, including ourselves, let’s just go and get it done. Let’s go and get it done. It’s about time, right?

Alright. So let me stop there and let’s open up for questions and answers and see what we need to do.

Question-And-Answer Session

A -Brian Loper

All right. I was going to say excellent progress. So a lot of projects are unfolding as you’ve been describing over the past few years here. We’ve been doing these conference calls. So it’s really great to see things coming to fruition. We do have an active — I’d say activist shareholder base. A lot of folks are pretty knowledgeable on what BioLargo does, the vision, the things that have been accomplished and what we’re continuing to do moving forward here. So we do have quite a few questions. So let’s just run on down.

Dennis Calvert

Jump in. Sure.

Brian Loper

Yes. So first one here. I would guess there’s a balancing act between getting contracts and hiring additional staff as the company grows. Do you view a lack of manpower right now that’s holding you back?

Dennis Calvert

Yes, that’s a great question. I think if there’s anything that sort of wakes me up at 4.30 in the morning thinking about business, it’s that one? Yes, I mean, you hit the nail on the head. How do you go from doing a couple of million dollars to a big number, $20 million, $40 million and how much manpower is required? We’re actually, doing some really sophisticated manpower studies internally and one of our key engineers is a project manager from not only the infrastructure side, but also legal, which is really fascinating. And I pose this question internally all the time. Let’s go through the order of magnitude of growth potential of the contracts that are on our table. The ones that are here now, not maybes, the ones that are talking about doing business with us now and running analysis of time required, capital infrastructure required, manpower and time, and let’s do some serious planning, right? And the truth is that the biggest bulk of that shortfall is going to come through subcontracting while we grow our infrastructure.

The other thing is when we hire engineer scientists, we hire extraordinarily talented people. They’re not hanging out looking for a job. They’re imminently employable. So to us, it’s the combination of outsourcing, recruiting good talent, building internal training systems, right? And at the same time, the challenger is, we’re also bootstrapping the revenue growth organically while we invest in R&D and now quote major projects.

I mean, it’s an incredible challenge, okay? So how do you find your way through that? Well the way we think about it is, it starts with a project. I mean, it’s just — it’s really that simple. You don’t want to go out and hire 20 people and hope you get a contract. You want to get a contract and then hire 20 people and outsource where you have to. And so that chicken and egg balance is a balance. And so just like this project, we just announced waste energy conversion. That’s a significant amount of work just to get through the first phase. And it’s going to be taxing while we’re doing trials for AEC, while we’re doing commercial trial with Garratt-Callahan. So absolutely the manpower is going to be an issue.

So how do you do that? Well, we think that the marketplace is going to appreciate what we’ve built and we will see investor enthusiasm rise, and we will see our access to capital at much lower per prices come available. And we will leverage our tools to grow that infrastructure with a first priority on quality, outsourcing where we fall short and then continuous rigorous training internally as we mature into the next level. It’s not going to happen overnight. It’s going to take a lot of work. So, the conversations internally have shifted. Now we say, it’s not a question of, can we get a customer? It’s a question of how many customers can we actually manage? Because we got a lot of customers. Okay. Go ahead.

Brian Loper

Thank you for that. Good explanation there. So another question here popped up a couple of times. We’ve all been hearing about supply chain challenges globally. So, one of the questions here is, what’s the impact of that on the BioLargo’s subsidiary businesses?

Dennis Calvert

Well, we have seen marginal impact for sure. We see some price increases on some of our commodities, [chemistry] that’s happening. Certainly steel and stainless steel is in incredibly short supply. And so, when it comes to projects like the Garratt-Callahan where you are building out stainless steel machines for food process and things like that, it means prices go way up. We have not seen a situation where we can’t get what we need. We’ve had delays. We have seen delays in shipping. We have received notices of price increase. We have actually got one customer or one vendor that sent us a notice of allocation. We are on an allocation now. And so, certainly at some level, we say to ourselves, are any of these going to make us hemorrhage? I’m going to tell you, I don’t think any are favorable. The way to say it is, do any of these threaten the business? No. They don’t threaten the business. They just make it really hard, hard and expensive. And so — and maybe they could on an explosive growth situation challenge that growth, right?

But we live in an information world, global access. I look at some of these businesses, like the electric battery business, that’s using rare Earth elements that you just can’t get and they have a problem, okay, or chips that are in short supply that you can only get from a vendor. We don’t have those kind of problems, right? We have problems of just going from small to big in a crazy time. We are not financed in a position to stockpile inventory and stockpile raw goods. And so, we are subject to that distribution channel market and the pricing under the ways that they face. So the challenge is not, can we survive? It’s how do we manage client expectations, set the table properly, so that we don’t disappoint. And it’s just — even recently, we got a project that started out at about $1.4 million. It raised to $2 million. And then it’s all in now at about $2.6 million project, where we are working through the details with the client. And out of that increase, probably 25% of it’s just price increases because of supply chain. And so, you have to be very careful, when you are bidding and buying and requisition and constructing, you got to make sure you got that stuff covered. So, we’re well aware of it. Our team has experience in this area. And I guess if you were bigger, you would have more stockpile. But more stockpile also means risk. And so, we are going to face some of those bumps, but I don’t think they are fatal. I just think we will see the bumps along the way. I hope that answers the question.

Brian Loper

Yes, yes. Certainly. Alright. A few more here. So besides POOPH, are you aware of any additional products that Ikigai is currently working on to bring to market? I guess it’s more of a question about Ikigai.

Dennis Calvert

Well, the POOPH product is a brand, okay? And it’s focused on odor control for the pet sector, and in so many ways our company wants to assist them in any way possible to achieve success that would fit — excuse me, the category of odor control in the pet category. So if that’s a cat litter product or that’s a special wash product like a laundry detergent or something, all of those can fall into that basic category. And that’s definitely a relationship that evolves over time as they refine the sweet spot of their economic yield for invested capital, right? Because that’s the way their business is driven. How much money do I put in, how much money can I take out and do it in the most excellent way? And if that’s a bundle, that’s a bundle, that’s fine. We support that fully. So relative to how many other companies is Ikigai working with similar to what we’re doing with us, I don’t think there’s any, I think we’re the only one. They certainly are not contractually limited to only us, but it’s a lot to bite off and swallow. So they’re busy. I don’t think they’re ready for two or three more products.

As they expand, they will, their business model is brilliant. They’re extraordinarily talented in what they do. They’re able to tell a story and hit the hot buttons of a response to drive home a need, fill a void in the market that’s been unmet for some time and make people realize that it feels a void that’s not met in the market, and that it’s valuable and worthy and safe and friendly and all these things they sell. It’s a great situation.

So as far as I know, we’re the number 1 project in the portfolio, but I’ll tell you what it wouldn’t surprise me if they end up with 10 more, because they’re quite skilled at what they do. We’re happy to work with them. We have the unique advantage of a lot of years of refinement and now relationships and scalability that makes us a really good partner for them. And so we’re thankful for that relationship, okay?

Brian Loper

Yes. Great, great. Can you talk a little bit about the partnership with Aquaco, any news to pass along?

Dennis Calvert

Well, we’ve had some progress. We love them, they’re extraordinarily talented business people and we came together to focus on a discrete market in the agricultural sector. And it started out as — with a Memorandum of Understanding with a big broad focus that both of us promptly narrowed, and which I think is great. And we narrowed it to specific relationships with an emphasis on wastewater. And so we’ve just gotten through our first proposal and bidding situation. It’s quite large. It’s with a very large customer. I think it’ll be a win-win for both companies. And the buying and purchasing cycle when you get to those potentially multi-million dollar projects, they’re not overnight decisions, so they take a little bit of process. And so our relationship with Aquaco is in place. It’s good. I think it’s got a chance to expand. And as we always say, let’s get a win under our belt, everything else will get easier. So that’s what we’re doing.

Brian Loper

Yes. Great, great. Next question. Want that?

Dennis Calvert

Go ahead.

Brian Loper

Alright. Yes. Moving right along. So this question here is in regard to product maturity of AEC and MLD. Folks are wondering if it’s production-ready, if it’s in production. Give us a little bit more clarity on the commercial and scaling on those.

Dennis Calvert

Well, those are — that’s a hard question. So in each of these cases, the equipment that serves this segment of industry is often a glomeration of technical innovation put together in an assembly process that integrates with other tools in a treatment train. Treatment train is the idea that, you hit it with a filter, you hit it with a micro filter, a big filter, a course filter, a little filter, you might have special technologies for disinfection destruction. You might have a separation technology. Those components are all called a treatment train.

In this business, it’s very common, okay, to essentially design treatment trains, where components may standalone as a commodity. But when they are combined together, they are integrated as a custom job, that’s the way our business works. So you would never want to buy 10 machines and have them sitting on a warehouse floor and hope somebody will buy them. Because what happens is, when you get into the marketplace, especially when it involves water, there is a highly customized process. So, the unique thing that we present to the market is the idea that we have. Number one, knowledge, people. We have extraordinary talented people that can go into a situation, analyze what’s required and how to get to success, number one. Number two, we have an engineering team that’s capable and willing to teach a customer how to be successful, even if it’s not our technology. And I can’t point out enough how critical that is because it separates you from 95% of the competition. You really look out for the customer first and it just so happens we got great technology, right?

Okay. So, now has that dovetailed into production? Well, the AEC is largely ready for commercialization. That means, that doesn’t mean we will stop refining it. It means we will continue to optimize it for maximum performance, meaning it already works. How long will it last? How long can you operate before you have replacement of membranes? Is there an optimization for energy? Can you enhance reporting capabilities over time? All of those are a never ending continual improvement process. Can we make an AEC today for a customer and make it work in the field? The answer is yes, we can. So, if you define that as, okay, does that mean it’s commercially available and ready? The answer is given the scale and what we know in the marketplace, the answer is, yes. We can make that. So, what does that look like? That means parts that are assembled in our facility in Oak Ridge, Tennessee, and it’s shipped out of the field and made ready to work. We can make that work.

The other question, let’s see, you had the AEC. What was the other one?

Brian Loper

Well, in case of Garratt-Callahan for example. There is a few questions here about this.

Dennis Calvert

Sure. No problem.

Brian Loper

An estimate of the number of units that we shipped and sold in 2022, for example.

Dennis Calvert

Well, there is not yet. I mean, if we analyze it from the perspective — and let me share it this way, what I know. I mean, we will share with what we know. That we know the first project is probably over $1 million, it’s probably three years. So this is a customer that’s an industrial customer. They make an industrial product, and they use a lot of water. The water that comes off their system also has a significant use of heat exchange, okay? In the heat exchange system, there is a number of problems in heat exchange, systems that have a continual problem all over the world, that’s minerals. They accumulate and deposit minerals across the water cooling towers in the systems. The disposal of those are very problematic. They are expensive, they are costly. And in a place where water is scarce, okay, they do not allow for maximum utilization, maximum use of good water. They are very inefficient. So in other words, they are chewing up a bunch of water in a system that can still get the job done, because they’re not doing nothing, but it has significant waste footprint. Well therein lies the opportunity for us.

So what’s the opportunity? In this case, it’s taking the existing water footprint and replicating a treatment train putting on site that can treat that spent water, that blow down water from a heat exchange system, take that out the mineral content and put it back into the system and reuse it probably 3x or 4x. So that’s 300% to 400% more improvement in water utilization, corresponding reduction, right, do the same job, a lot less water. Okay. And the waste stream is therefore more concentrated to a dewatered situation that becomes landfill material. Okay.

So how many can we do of those? We’ve got our first customer. It’s probably going for be for three. It’s probably going to be close to $1 million and there’s more in the queue and we’re just marching through it. And it’s, I think it’s just too early to forecast and say, yes, we can do three now and six the next quarter and start ramping up that way, because we’re just in the midst of finalizing the first orders. But here’s the thing I can testify too that we know, we know the demand is there. The demand is there. So let’s get the first one, make it really good. Look at that cycle, refine the bumps and the hiccups along the way, and then be in a position to go out and take the next wave of business and do it well. That’s what we’re doing. I don’t know how to — I mean, really doing it differently means more capital, more risk, more what ifs and the truth is we just need to walk before we run. And we’re about to jump into the market on a nice trot and that trot is going to be a full-court sprint, as they say, full-court press in a blink.

And so we’re very excited. And I will also say that the Garratt-Callahan relationships with our customers demands the highest excellence. There’s no room to screw it up. Okay. You don’t go out and screw it up. What you do is you go out and you make it as close to perfect as you possibly can. And that’s what we’re doing. Okay. So it’s going to be built to last. It’s going to work. We’re not going to fail. And then we’re going to manage a supply chain and a scale up at a pace that the company has never seen before. Our people have. Our people have seen all that in their careers, but for this company, that’s the next challenge. And I think we’re up for it. So…

Brian Loper

Alright, alright. Thank you for sharing all that. Kind of changing the tunes here. We have a question here about, Clyra. Can you elaborate on — update with that and what’s going on the medical arm?

Dennis Calvert

Yes. So the there’s good news there. We have a, we did an 8-K, it’s also published the detail of the transactions and things that went on for our annual report. So this is a lot of public information. There’s a product here called Bioclynse. Bioclynse is focused on the orthopedics markets as a wound irrigation solution, leveraging the prior work on the 510(k) just prior to COVID, got its first couple of customers. Steve Harrison is running the company. He has also recruited a National Sales Director with extraordinary background. And again, the strategy very similar to the BioLargo strategy is to advance through its early stage commercial adoption, secure the partners for distribution and let it grow through that — those distribution channels, where your partner has a significant stake in the upside and the outcome of those efforts.

The amazing thing about this little segment of the market is that the valuations are so extraordinarily high. We have competitors that have 1 million and 2 million and 3 million, 5 million worth of revenue and valuations well in excess of a 100 billion. And the reason is because the markets are so difficult to get into, and the value proposition is so high. These are very high margin products and very difficult to get through the barrier to entry.

So what have we done? We as in Clyra and BioLargo, well, we have derisked it. What we have done is, we have stayed the course over an extraordinarily long period of time to get through and have a product design that meets the specification of the market, which is Bioclynse. We have had some bumps, everyone remembers Clyraguard, wonderful product design, very, very difficult barrier to entry, and also a global political environment that made it near impossible to sell. So, we tried to respond, which we did during the COVID crisis. And as that whole industry shifted with the political wins, we retrenched our core competency, cleaned up our balance sheet, retired debt. We also unwound and did a purchase, a buyback of the SkinDisc technology in really a good situation for all parties concerned. We looked at that and said to ourselves, how are we at this stage of the business going to finance the significant investment capital required to see that technology all the way through to the marketplace? So, we made the decision to step back, take a focus, and we did a transaction that we think is really good for everyone, including BioLargo and Clyra. And the net result is that, we increased our position to about 56% of the equity. The debt is — we are down to a very small line of credit about $185,000 that’s tied to inventory and some of the growth capital and some payables. That’s it.

We have a dedicated team, singularity of focus, multiple channel partners in the negotiation pipeline, first couple of customers, quality assurance, quality controls in place, technical experts in place and the products ready to roll out. It’s going to be difficult to achieve significant numbers without capital, and we believe Clyra will be very successful in raising capital necessary to go big. So it’s not done. Make sure everybody knows that, but we are working on it and I believe it will be successful. And I believe a long, long, hard journeys are going to turn out to be very, very profitable and lucrative for the owners, including BioLargo and BioLargo’s shareholders. So, don’t miss that. We think it’s a winner. So if doesn’t answer the question, come back with more questions. I’m happy to answer them.

Brian Loper

No. I appreciate that. So just one more question here for the afternoon. Can you update us about plan to uplift to NASDAQ?

Dennis Calvert

So sure. It’s interesting. As everyone knows, if you are stockholder here, you have done your deep dive, you will see that the company has always sought stockholder approval, asking the stockholders to give the Board of Directors the authority to affect a reverse split, okay? And those words are very important. It’s asking for the authority, not the action, given the authority. It’s a big difference. So, we’ve had that — I think it’s the fourth or fifth year running. The thesis of that request is really, I think, points to who we are, where we are at in the cycle and where we think we are going. We have anticipated and believed that the technologies and the things that we are doing will ultimately result in significant revenue and ultimately profits and growth. We just — why do it, if it’s not, right? I mean, we just believe it to our soul and we stayed the course to see it happen and weathering all these obstacles.

So, how does that translate to all of that? Well, to uplift to a national exchange like NASDAQ, you are going to need $5 million in net shoulder equity. We are about $1 million, okay? So, that’s another $4 million number. You are going to need capital in the bank to accommodate a burn rate. If you’re not profitable in cash flow, if you’re not making cash flow, which we’re not yet, you’ll need about a year and a half worth of capital in the bank based on your historical burn rate. So let’s just round number, say that’s $3 million, so you’ll need $4.5 in the bank or you’ll need contracts in place with enough substance and look back history to be able to give a listing exchange the confidence to know that the revenue and the revenue of the business is sufficient to carry the operation.

But minimum bid, minimum strike price on the stock for NASDAQ is $3. Those are your basic requirements, okay? There’s a more basic — there’s even more fundamental requirement, not in the rule book and that is, you better be ready. Okay? It’s not about technical requirements. It’s about being ready and ready at that level is to have confidence in your revenue stream sufficient to carry your expectations for the future. The ability to look back and then look forward, okay? So to me, the biggest part of that is that’s what we need to do.

So what’s the plans to uplift to NASDAQ or an equivalent? The answer is to build the company. We’re going to build the company, and the company is going to enjoy its process to get to a national exchange, because it deserves to be there. So that’s our plan, right? That’s our plan. It’s not about timing. It’s not about taking a shortcut. It’s not about taking an aggressive reverse split to accommodate the inefficiencies of an OTC market. They are highly inefficient, right? And we can go through a point counterpoint debate on whether we’re we have an accurate valuation for this company. It is traded in an inefficient OTC market where 95% of the capital that invests in small company in converse cannot invest. So no, it’s not efficient. And yet here we are, right, with this great business, all these assets finding their way through this adoption cycle, talented people swinging, swinging for commercial success at an extraordinarily high level and showing a discipline to stay the course through all the rough and tumble to get to the spot and now win as a competitor right? Because it’s a highly competitive field in everything we do.

So the way I think about that next step is there’s going to be a natural mode, right. And I’d like to do it, of course — and again, trying to forecast, so be careful, I’d like to do it without a reverse split. Okay. So you say, well, is that even rationally possible right? You got — let’s say we got a $0.25 stock, $60 million valuation, well at 10x would be $2.60. We’re almost there. So what is it about this company that makes someone believe it’s worth $2.60? Well, I would say it’s the things that we’re doing. These are extraordinarily significant opportunities and we are competing at an extraordinarily high level. So what do we need to do? Well, we just need to get it done. I mean, it’s that simple. And by the way we are. I wish it was faster. If I could — I always say, no one is going to hold the feet to my fire more than me. I just don’t. We have an extraordinarily high mark for success. And what we’ve demonstrated for the marketplace is the insiders the stakeholders who are building this company are all long. And those short term sellers, no fast money. This is a business that needs the tools to build a business that has significance in mass, and I believe it’s coming otherwise we wouldn’t do it. So, what’s the plan to uplift? When we’re loaded with revenue, right? And the valuation reflects an optimism, optimistic version of our future, which we believe is so. So, hope that’s a good answer.

Brian Loper

Love it. Okay.

Dennis Calvert

I hope that’s a good answer.

Brian Loper

Yes. I’d like to hear the optimism. Alright. Well, those are all the questions for today. I really appreciate the update and all the information you have shared with us today. There is a lot of really great things clearly going on at BioLargo. So, we are just going to hold steady, be patient and wait for some of these bigger things to come to fruition. But they are clearly in process.

Dennis Calvert

So, yes they are. Yes. And again, I would encourage everyone to reach out to us, either to Brian Loper, to Investor Relations Department. You can also reach out to management. It’s really exciting time. This is probably the most clearly visible optimistic moment in our history and we are anxious to accelerate. So, thank you for your support.

Brian Loper

Great, great. And the last thing I wanted to mention to the shareholders on the call today is, if you didn’t get a chance to see that new corporate update video, please take the time to watch it, it’s an excellent video and overview of BioLargo. It is on the Investor Relations page and on social media. Please do share that with your friends and your chat groups and all that. We worked hard on that and we are really excited to debut that here today. So, thanks again.

Charley Dargan

Alright, awesome. Thanks, everybody.


Thank you, ladies and gentlemen. This concludes today’s event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

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