OC Startups Now will periodically run Q&A’s with interesting entrepreneurs, investors and other key players in the OC startup/innovation ecosystem, in their own words.
This Q&A is with Dennis Calvert, CEO of BioLargo, a chemical company developing and marketing innovative products for a range of industries. Recent reports predicting the company’s demise have been exaggerated, Calvert said. It’s just business as usual for the 20-year-old company that is still in the startup stage.
The company’s core expertise is the unique chemistry of iodine, which it has leveraged to develop the following: an industrial odor control product (currently marketed as CupriDyne Clean); an irrigation solution for chronic wounds; and a wastewater treatment solution.
The goal is to build independent companies around each of these products, which can then be spun out, with BioLargo acting as the catalyst and development engine.
A recent financial report by Edison Investment Research shows that BioLargo is generating revenue, although it’s in the early early stages of commercialization.
The company had revenue of $327,000 in Q2, a substantial increase year-on-year (compared to $100,000 in Q2 of 2017). The net loss for Q2 was $3.6 million, of which $1.7 million comprised non-cash payments associated with convertible notes. The majority of these notes have been recently converted (from $6.8 million at the end of 2017 to $2 million now) so this expense is expected to decrease this significantly.
OCSN: Talk about the conversion from debt to equity over the past decade.
Calvert: We’ve received about $23 million in investment over the past 10 years. We have about $1.2 million in near-term debt.
In the early years, we used debt financing to offer investors yield, but the underlying terms provided for mandatory conversion into equity.
The total investment has allowed us to take ideas and convert them to create four business units, three technical platforms, two commercial business units and two that are about to emerge from R&D.
OCSN: What are your four business units? And which are generating revenue now?
Calvert: Our first business unit is Odor No More. It developed CupriDyne Clean, an odor control agent marketed to the solid waste management and water treatment industries, with potential inroads into other industries, like composting and animal waste.
This unit is on the cusp of positive cash flow. It’s secured national purchasing agreements with four of the largest waste handling companies in the industry. It now includes engineering design, construction, service and maintenance so it’s a full-service provider.
Our second unit is engineering. It’s just now reached the point ofsecuring contracts with outside customers, where revenue exceed expenses.
This unit was a new startup that was created by taking the innovation unit from one of the largest engineering companies in the industry, Chicago Bridge and Iron (CB&I). Earlier this year, CB&I merged into McDermott International
This unit has two goals: to supply internal services for BioLargo’s emerging tech and serve its own external clients to generate revenue.
The third business unit is Clyra Medical Technologies, a wound care startup that just announced a $1 million equity investment. (See related story here.)
BioLargo owns close to 50% of the equity. Cylra has received $3.5 million in equity investment to date.
The fourth unit deals, BioLargo Water, deals with water purification. It’s a year away from commercialization. It’s in the midst of four pre-commercial pilots being sponsored by grants. It’s received 65 grants to date.
The water purification market is potentially a $750 billion market. We (recently) received independent validation on the ability of our tech to remove micropollutants.
OCSN: Are you still considering a reverse stock split with the goal of uplisting to NASDAQ? (In a special shareholder meeting in September, a reverse stock split was approved. It would take a raise of $5 million to meet this listing requirement.)
Calvert: In making the decision for a reverse stock split, the company needs equity investment, no question. We believe that a national exchange is really required and a company running on the OTC has become increasingly difficult to manage.
But, we also believe the national capital markets are under extreme pressure right now, so we are at the point of evaluating all of our capital resources that would allow us to achieve positive cash flow and consider the option of uplisting to a national exchange.
We’re evaluating our options on a daily basis.
OCSN: Anything else you’d like to add?
Calvert: We have 20 Ph.D.’s and engineers involved in our business. One of the challenges we have perpetually faced over our journey is the notion that our value propositions sometimes can appear too good to be true. Our response is they are in fact true.
What’s new is we’re now achieving a level of commercial validation and accumulation of third-party validations that reinforce our original claims. But that’s required significant time and investment to achieve critical mass to stand in front of the industry and have our tech be recognized as a disruptor.
I don’t mind criticism. We speak openly about the challenges we face as a disruptor for change.
When we went into waste handling industry, we positioned ourselves with truth, as the only product that actually works. That means the market had been trained that there was no product that actually worked. Everything was a band-aid, nothing was a fix. When we said we would solve it, the natural reaction is to say “We don’t believe you.”
The challenge is if you believe nothing works why would you do anything? In many of the things we’re doing, we’re presenting claims that in each case, it’s never been seen before. And therein lies the challenge.
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