BioLargo Letter to Stockholders: Recent Milestones and Successes (Oct 31 2018)

The pace quickens with key breakthroughs and our commercial track becomes more well defined than ever before

October 31^st, 2018

Dear Stockholder,

Today I want to bring you an update on the progress that each of our business units has made in the past few months, and share with you why we remain confident that our progress will translate to growth in the near- and long-term. Each of our businesses faces challenges in their road to commercial success, and it’s important to highlight when those challenges are overcome, because those moments underline the innovation, tenacity, and perseverance of the BioLargo team that drives this business forward. Of course, we encourage you to review our SEC filings for the most complete view of our business and outlook (link HERE), and remind you that our third quarter results will be filed by November 14, 2018.

Let’s dig in. We’ll examine our business units one-by-one and focus on the important progress that has been made in each one. I encourage you to reach out to me if you have any specific questions on anything you read here.

Odor-No-More

Odor-No-More is on track to exceed $1 million in revenue for 2018, and we should break this record soon. This is an important milestone! Looking back, in 2017 we were at just over a half million, and in 2016 just over a quarter million dollars in revenue. As you can imagine, we’re excited to pass this threshold, and we believe it bodes well for our future. What accounts for the improvement? Hard work and perseverance. And, it helps to be selling the number one performer in the marketplace. CupriDyne Clean has been a big hit in the waste handling industry, and orders from the US military for our products developed for the US Military keep coming in. Let’s review:

·         CupriDyne Clean - Industrial Odor and VOC Eliminator

o   4 national accounts

o   Focused on regional adoption (and succeeding - 100% of locations owned by industry leaders in LA and Orange County California) – we are rolling out the product location-by-location, region-by-region

o   Big potential in waste industry – current customers operate almost 2,000 locations nationwide that could use our product.

o   We’re not just selling product – we are now a full-service firm, designing and installing systems to deliver CupriDyne Clean and being asked to manage other improvements. This translates to greater customer retention.

o   Expanding to other industries (new customer manufactures steel) and opportunities expanding in wastewater treatment.

o   Money and infrastructure needed – with any growing business, we need the resources to hire more salespeople and open new offices

BioLargo Engineering, Science & Technologies (BLEST)

BioLargo Engineering, Science & Technologies (BLEST) is our team of veteran environmental engineers based in Oak Ridge, TN who began working for us one year ago. They are hard at work supporting our Canadian research team and Odor-No-More, and also doing work for outside clients in traditional engineering roles. Their next milestone is profitability – that is to say their revenue from outside clients exceeding expenses.

Clyra Medical Technologies

Our medical subsidiary, Clyra, was formed to develop advanced wound care products featuring our BioLargo technologies. Recently, we acquired a stem cell therapy technology for the treatment of chronic wounds (link to 8-K here). We believe this product has the potential to create enormous value for our company and our shareholders, and also to provide superior advanced wound care for patients all around the world. (See more details below.)

Our antimicrobial advanced wound care products have a bright future ahead of them, and the market potential for them is huge, especially given the synergy with our new stem cell technology. That being said, as with any medical product, there are significant hurdles that innovators in this space must overcome before reaching commercial success with Clyra wound care products. I’d like to take the time to address one of these hurdles – the regulatory process:

·         We submitted premarket notification to the FDA under Section 510(k) in late June of 2018 for an advanced wound care product. The FDA responded by identifying areas of concern and requesting additional information to address those concerns.   

·         Our management recently met in Washington DC with representatives from the FDA to clarify the concerns and additional information requested, and the optimal pathway forward for approval of our product.  

o   The meeting was successful in that the discussion enabled management to identify a clear pathway to the successful clearance of the application. 

o   The primary focus of request for information by the FDA has been narrowed to two areas, one of which will require us to conduct a live animal study.

o   Clyra is working diligently to confirm the appropriate test protocols, secure appropriate GLP laboratories, and negotiate the package of services by third party experts to perform this work. We believe the time frame to meet these requests is manageable within the next few months, and that the outcome will ultimately result in FDA clearance of the product.

o   While we remain confident that we will ultimately receive premarket clearance for this product, we can make no assurance or prediction as to success of these efforts and must wait patiently for the process with the FDA to conclude. Clyra has numerous medical device product designs that it intends to pursue in the future as resources permit.

·         We recently executed definitive agreements to acquire a break-through stem cell therapy technology (8-k link here), which is licensed from BioLargo to Clyra in exchange for long-term license equal to 3% of sales and an increase of BioLargo’s ownership of Clyra to approximately 60% Clyra shares on a pre-money basis. This final closing of the transaction is conditioned upon $1M of direct investment into Clyra from outside investors.

BioLargo Water

BioLargo Water’s Advanced Oxidation System (AOS) is a technological breakthrough in water and wastewater treatment and has the potential to provide effective and cost-efficient elimination of pathogens and hard-to-treat organics in countless water treatment markets and applications. Like all water treatment technologies, the AOS is complex, and with complexity comes technical barrier-to-entry that must be overcome. We have overcome innumerable challenges in the development of the AOS, and we’re proud to say this product is nearing commercialization and is even currently part of several pre-commercial pilot projects in real world industrial settings – a major milestone. Let’s review some of the highlights on the AOS’ progress:

·         BioLargo has received over 60 government and industry grants supporting research and development of the AOS

·         Commercial progress:

o   Currently involved in two pre-commercial pilots, and on-site work is slated to begin in the 4^th quarter of 2018. These pilots, which are at a poultry producer and a microbrewery, represent a critical step toward commercialization, as they will provide crucial real-life technical and economic data required for the technology’s adoption by future customers.

o   We are preparing for two additional on-site pilots in the stormwater and industrial wastewater markets, plus one important validation project in the oil and gas industry.

·         The AOS was recently validated by an independent third-party expert that conducted a study of the AOS’s ability to eliminate specific micro-pollutants which was summarized for the company in a confidential written report. The results are currently being prepared for scientific publication and expanded patent coverage. We intend to disclose additional information about this confirmation breakthrough as it becomes available in the near future.

·         BioLargo Water and BioLargo Engineering are collaborating to prepare the AOS for commercialization, including materials engineering work to prepare the AOS for mass production, longer useful lifespan, ruggedization, and logistical challenges that it will face in commercial settings.

BioLargo Corporate

Behind the scenes, BioLargo’s corporate office is advancing the company’s varied business interests tirelessly. We’ve accomplished some important work recently:

·         The successful conversion of $6.4 million of debt to equity (link to Press Release)

·         The extension of existing short-term debt and the securing new bridge financing since September totaling $1,270,000- (See our 8-k reports on the topic here)

·         The company is working to meet its stated goal to uplist the company’s common stock to Nasdaq or equivalent national market (link to 8-k)

·         The first analyst coverage was initiated by The Edison Group and is a great tool to help the market understand our business (link to analyst report)

Closing Remarks

Given our recent commercial wins and scientific advances, this is the most exciting time in our company’s history. Yet, because everyone (including me) would love to have arrived at these breakthrough moments faster, it can also seem like the most challenging time. With limited capital resources, we have labored tirelessly to fully develop and prove out our innovations and the disruptive nature of our products.

We are poised for significant commercial success as resources and strategic relationships will continue to expand in our favor. The next step in our journey will depend on proper capital, having the right people, precise execution, and most importantly – patience.

Thank you for your continued support, and feel free to contact me at any time! 

Dennis P. Calvert
President and CEO
BioLargo, Inc.

About BioLargo, Inc.

BioLargo, Inc. is an innovative technology developer and environmental engineering company driven by a mission to "make life better" by delivering robust, sustainable solutions for a broad range of industries and applications, with a focus on clean water, clean air, and advanced wound care. We develop and commercialize disruptive technologies by providing the capital, support, and expertise to expedite them from "cradle" to "maturity" (www.biolargo.com). Our engineering division features experienced professional engineers dedicated to integrity, reliability, and environmental stewardship (www.biolargoengineering.com). Our industrial odor control division, Odor-No-More (www.odornomore.com) features CupriDyne Clean Industrial Odor Eliminator (www.cupridyne.com), which eliminates the odor-causing compounds and VOCs rather than masking them, and is now winning over leading companies in the solid waste handling and wastewater industries and other industries that contend with malodors and VOCs. Our subsidiary BioLargo Water (www.biolargowater.ca) develops the Advanced Oxidation System "AOS," a disruptive industrial water treatment technology designed to eliminate waterborne pathogens and recalcitrant contaminants with better energy-efficiency and lower operational costs than incumbent technologies. Our subsidiary Clyra Medical (www.clyramedical.com) features effective and gentle solutions for chronic infected wounds to promote infection control and regenerative tissue therapy.

Contact Information Dennis Calvert President and CEO BioLargo, Inc. 949-643-9540 x2

Safe Harbor Act

This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results.

BioLargo Spotlight: BLEST Awarded Contract for Natural Gas Conversion Plant

BLEST was recently awarded a contract by one of its key accounts to prepare all environmental permits applications for a new production plant that will convert natural gas into diesel fuel and paraffin waxes. The new plant is to be built in modular stages with each stage capable of producing 200 barrel per day of liquid fuel, with an eventual goal of ten production units, with an eventual total production capacity of 2,000 barrels per day of synthesized diesel fuel and waxes.  Environmental permitting is central to the plant design process and it is imperative to develop a full understanding of the permitting issues in order to make informed design decisions.

This project is a great example of the sort of environmental permitting work that BLEST conducts for industry, and why permitting is so important in North America’s highly regulated manufacturing arena . For that reason, we’ve taken a few paragraphs to explain the process for this contract and discuss the rationale behind some of the permitting process.

An LNG Plant

The first phase of the project is to prepare a permitting strategy document that records our evaluation of which potentially applicable environmental regulations and how they may impact design and operation of the proposed facility.  The permitting approach can be categorized by media, that is: emissions to the air, emissions to the water and solid waste.  There are numerous potential regulations that may apply for each of the media, including, but certainly not limited to the broad Federal regulatory categories below:

• Resource Conservation and Recovery Act
• Clean Air Act Amendments Title V
• Clean Air Act Amendments Title III
• New Source Performance Standards, New Source Review
• Prevention of Significant Deterioration (PSD)
• Toxic Substances Control Act
• National Pollutant Discharge Elimination System
• Process Safety Management

In addition to the Federal regulations that may apply, each state and many cities and counties have regulations for specific parameters that must be considered during the design process.  In total, a new plant may be required to comply with over thirty separate environmental regulations, some of which may conflict, making compliance impossible.

Permitting is often considered an afterthought or a “sideline” issue during the plant design process.  However, incorporating the permitting strategy in the design process can save both time and money.  There are numerous thresholds built into the regulations that, if exceeded, escalate permitting fees, design and operating costs and extend the time from inception to operation by an order of magnitude.  For example, if PSD is triggered, it becomes necessary to conduct an ambient air study and collect data for a calendar year before a permit application can be considered.  The site-specific ambient air quality data establishes a baseline air quality that, under PSD, cannot be appreciably impacted by emissions from the proposed plant.  By designing the scale of the proposed plant so that PSD is not triggered, at least a year can be saved between inception and plant operation.  Conversely, if PSD is not considered in the early planning process, the plant operation can be delayed by at least a year and potentially be denied permission to construct due to local ambient air quality impacts.  This outcome requires the plant to be completely redesigned and likely reduced in scale, which could make the economics of the entire endeavor prohibitive.

Early and thorough regulatory planning is imperative to a successful project.  Under today’s regulatory setting, designing in ignorance of regulatory requirements is tantamount to project failure.

What is a BioLargo Spotlight?

It’s an exciting time at BioLargo. We’re moving fast, and it can be difficult to keep our stockholders and the investing public informed of our progress. In light of this, we will be posting a series of short articles titled “BioLargo Spotlight”, highlighting certain business activities and other important information in between our required SEC filings. Of course, these do not replace our public filings, which contain more complete information than can be delivered in this forum, and thus we urge you to carefully read and rely on those filings for definitive information, and to review our risk factors and caution regarding forward-looking statements. We are optimistic about our business as we work hard to continue to grow and ultimately generate profits for our stockholders.  

Legal Disclaimer

Our attorneys remind us that while we believe these developments are important and that these small victories could add up and lead to big victories, at this stage they do not rise to the level of an official material disclosure. As the size and magnitude of these developments become material, we will naturally report that information in an 8-K and our regular SEC filings.

BioLargo Spotlight: NSERC Grant Awarded to Evaluate AOS Water Chemistry

If you follow BioLargo Water and its Advanced Oxidation System, you may sometimes wonder how exactly it functions – ie how does it actually treat water? You have probably seen our short descriptions of its function: that it generates highly reactive iodine molecules at its electrodes, resulting in disinfection and decontamination, but the truth is A) this is an oversimplification and B) you may not be entirely clear on what this means!

To expand on this simplified explanation: in the AOS there are two modes of actions by which it treats water. One is the oxidation – the chemical action of removing electrons - of proteins inside bacteria passing through the AOS, resulting in inactivation or killing of those bacteria. The second mode of action is the breaking down of pollutants by oxidation, that is to say the structural or chemical alteration of chemical pollutants by the process of oxidation.

A peak at an AOS Spiral Reactor

Understanding these modes of action is crucial to BioLargo from a technical AND business perspective. Why? Because by having a solid understanding of how the AOS works on a fundamental molecular level, we can optimize and modify the AOS to maximize its water treatment potential without causing it to consume more electricity or consumables – both of which translate to money ($$$)!

We’re happy to say that BioLargo Water, our water treatment subsidiary, has been awarded $50,000 CAD last week by the National Science and Engineering Research Council of Canada (NSERC) to investigate, using cutting-edge analytical tools, the mechanism of complete breakdown of harmful compounds by the AOS (discussed further in this article). Congratulations to BioLargo Water!

Wastewaters can be treated by a huge variety of techniques. In recent years, electrochemical treatment has become of high interest to the water treatment industry given its ability to provide simultaneous disinfection and oxidation/reduction of chemical compounds – this is why we invented the AOS. Electrochemical treatment has shown disinfection capabilities for a variety of waters and good performance for both disinfection and decontamination. The advantages of the AOS include its ability to treat wastewaters cost- and energy-efficiently, at ambient temperature and pressure, its requirement for minimal chemical addition, and its low solid waste production. However, any advanced oxidation technique has the potential to generate by-products (BPs) while breaking down harmful organics. It is of high importance, therefore, to evaluate the AOS for the possible generation of of by-products (BPs) – it’s essentially a necessary step for an electrochemical water treatment system.

Dr. Susana Kimura-Hara

Because our AOS reactor has reduction chambers which would potentially eliminate/minimize the production of iodinated-BPs (I-BP), BioLargo Water proactively decided to peruse two scientific studies to prove that the AOS effluent is 100% safe. The first study is a toxicity study on zebra fish which we discussed in a previous blog. The second study pertains to the identification and quantification of any potential I-BPs made by the AOS. These two studies complement each other and are designed to eliminate any market risk in the future. BioLargo Water, our water treatment subsidiary, has been awarded $50,000 CAD last week by the Canadian Government to investigate the water quality of the AOS’s effluent. This grant was awarded after BioLargo Water showed through the hard work of their team that the AOS reactor can be used for treatment of several municipal and industrial wastewaters and allow effective and efficient water reuse. The recycling of water allowed by our system presents a great value proposition for industry’s current and future water needs.

Dr. Susana Kimura-Hara at the University of Calgary is our lead academic partner in this project. She will use her unique expertise in analytical chemistry, specifically in the field of identification and formation mechanisms of unregulated disinfection by-products, and will be using state-of-the-art techniques and instrumentations that are not otherwise available to BioLargo Water. This project will empower BioLargo Water to accelerate the commercialization of the AOS technology with assurances of the safety of its effluent.

Analyst Report on BioLargo, Inc. Published by The Edison Group

Our first analyst coverage has been initiated by The Edison Group and the first report is now published internationally through their distribution channels. The first report can be found at this link:  https://www.edisoninvestmentresearch.com/research/report/biolargo/preview/. It can also be found at the Investor Relations section of our web site HERE.

We selected and engaged The Edison Group to provide coverage for at least one year. This work will be instrumental in helping us share our story as we grow our business. We selected The Edison Group because they are known for their integrity, credibility and trustworthiness in producing high quality research reports that strive to be objective, insightful, financially rigorous, readable and timely. See their stated principals here: https://www.edisoninvestmentresearch.com/about/principles

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is their world renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, their research is widely read by international investors, advisors and stakeholders. They follow more than 700 stocks, reach 128 countries, have 420 corporate clients and do all this with a team of 110 employees.

BioLargo acquires breakthrough stem cell therapy technology to expand medical product portfolio

 Westminster, CA – October 2, 2018 – BioLargo, Inc. (OTCQB:BLGO), developer of sustainable science and technologies and a full-service environmental engineering company, announced today that it had entered into definitive agreements to acquire a breakthrough stem cell therapy technology called “SkinDisc”. Developed by Scion Solutions, LLC, SkinDisc uses a patient’s own bone marrow and plasma to generate a cell-rich biogel which heals chronic wounds. The product has been tested in over 250 patient cases with no adverse side effects, and successfully aided in the salvage of limbs that otherwise would have been amputated.

The SkinDisc product will be sold through BioLargo subsidiary Clyra Medical Technologies, Inc. In addition to the SkinDisc product, Scion’s key team members will join Clyra to support Clyra’s commercial strategy, including Dr. Brock Liden, a renowned medical podiatrist and expert in wound care and diabetic limb salvage, and Spencer Brown, a medical device industry veteran with more than 35 years of experience working in medical sales, account management, and distribution in the medical device industry.

The acquisition is contingent upon Clyra raising initial minimum capital of $1 million. If Clyra is unable to raise the funds in 120 days, either party may unwind the transaction.  

As consideration for the SkinDisc product and other intellectual property, Scion will receive approximately 20% of Clyra’s common stock (half of which would be released upon raising the $1 million initial minimum capital, and the second half released subject to performance metrics), 7,142,858 shares of BioLargo common stock (subject to the same escrow and earn out provisions), and a promissory note in the principal amount of $1,250,000 which would be paid through the capital raise conducted by Clyra.

Dennis P. Calvert, CEO of BioLargo commented, “Company management believes this transaction carries significant value for both BioLargo and Clyra for several reasons. First, our antimicrobial products and the SkinDisc are highly complementary as they will both serve the same advanced wound care market and can often be used together. Second, a fairness opinion report written by an independent evaluator suggested that there is good evidence, based on comparable company analysis, that the combined value of Clyra and Scion would be approximately $33 million following this transaction.  Third, the two technical platforms - our antimicrobial products and the SkinDisc - present a long list of product design opportunities establishing a foundation upon which to build an internationally competitive wound care company. Finally, we are particularly excited to be working with the Scion team members that have successfully launched a number of products into the medical industry and believe they bring crucial expertise regarding how to position these products and support the selling process. We remind our shareholders that we cannot predict the timing of the approval of our current application before the FDA, but that we are highly encouraged with the interaction with the FDA staff and believe we are on the right track to be successful.”

Clyra Medical Technologies develops products for wound management that feature broad-spectrum antimicrobial efficacy with no known acquired resistance, sustained release, biofilm efficacy, and being gentle on skin and tissue. Its first product called the Clyra Wound Wash is currently in review by the FDA under a 510 (k) application. The company believes its first target commercial markets will be in the areas of general wound therapy, infection control for the orthopedic surgery market, and a dental rinse. The Clyra technology presents the potential for multiple additional product designs.

About BioLargo, Inc.

BioLargo, Inc. is an innovative technology developer and environmental engineering company driven by a mission to "make life better" by delivering robust, sustainable solutions for a broad range of industries and applications, with a focus on clean water, clean air, and advanced wound care. We develop and commercialize disruptive technologies by providing the capital, support, and expertise to expedite them from "cradle" to "maturity" (www.biolargo.com). Our engineering division features experienced professional engineers dedicated to integrity, reliability, and environmental stewardship (www.biolargoengineering.com). Our industrial odor control division, Odor-No-More (www.odornomore.com) features CupriDyne Clean Industrial Odor Eliminator (www.cupridyne.com), which eliminates the odor-causing compounds and VOCs rather than masking them, and is now winning over leading companies in the solid waste handling and wastewater industries and other industries that contend with malodors and VOCs. Our subsidiary BioLargo Water (www.biolargowater.ca) develops the Advanced Oxidation System "AOS", a disruptive industrial water treatment technology designed to eliminate waterborne pathogens and recalcitrant contaminants with better energy-efficiency and lower operational costs than incumbent technologies. Our subsidiary Clyra Medical (www.clyramedical.com) features effective and gentle solutions for chronic infected wounds to promote infection control and regenerative tissue therapy.

Contact Information Dennis Calvert President and CEO BioLargo, Inc. 949-643-9540 x2