Biolargo Inc

moment, and also allow us to invest in an incredibly highly qualified staff. You know, we've got, I don't know, 10 or 12 PhDs and 30-something engineers, and rhetorically we always say the same thing. We can do just about anything. And, of course, not literally, but the concept is highly qualified people that are skilled in this art of innovation, finding the gap, getting these technologies seated in the market. And there's a lot that's unseen. We're going to talk about some of those things that you want to know about. that helps illuminate what can be seen. And the principles are really simple. Unmatched technology, conservative capital is the most precious asset, highly qualified people, and driven by purpose, all very, very critical to the ongoing support. Now, this is a relatively new slide, and it really is the sum of the bull case debate. A lot of our investors see it because they track the company carefully. We did a presentation at LD Micro, and I think it's the first time we presented this publicly. It was also filed under a press release in an 8K. It's not brand new information, but it's pretty close, you know, weeks, 10 days ago, maybe two weeks ago. The basic argument is that the company, given its recent transactions and arguments, because it's really a lot of argument, we should be valued somewhere around $200 million. And yet we have a market cap that's trading somewhere in the $50 million range and with some pressure on it as well. And so that's very frustrating. It's very frustrating for management. It's very frustrating for all the stockholders, including our staff. Sometimes it's disheartening, actually. But here's what happens. We know that the fundamental value sits in our company. And we know what the assets are because we've been living them every day. And we're advancing these to some sort of commercial adoption. So these mark-to-market transactions are really important. The battery technology, we've raised money at a $44 million valuation. That's a mark-to-market, although not public. We believe the valuation will go from $44 to $400 million as we get to the next adoption cycle. We'll talk about that in a minute. The medical has just raised about $2.2 million. The total of investment capital over the last 12 months is about $7.6 million. And the current valuation is at $95 million. Now, I'm just going to point out to you real quick, on a $95 million valuation, BioLargo owns approximately 48%. So that's a little bit of an error in this deck. 48%, I think, is the last count because we raised another couple million dollars from family office investors. Very, very important. Significant investment, significant investors, and the company is heading into an institutional-grade investment scheme, okay, the plan. There's a good argument on the bull case debate that the asset that we own in Clear Medical justifies our entire market cap. The entire market cap is justified by what we've done at Clear. Now, of course, visibility means show me the revenue, show me the expansion of growth, see the market find adoption with these technologies. And we certainly know that that's here and on its way. We believe in this portfolio approach that that opportunity to create an exit value is likely to exceed and should exceed greater than half a billion and has a chance to push a billion. Okay, now just think about that. BioLargo owns roughly 48% plus we own a royalty. That means that asset that's currently valued at about $100 million justifies our $50 million market cap. And yet the portfolio has so much more, including the battery tech, our PFAS solution. Now, real quick, PFAS. We put a $60 million number in. That's an argument. I don't have a mark-to-market transaction. We're going to pursue investment from strategics that are north of $60 million. We haven't closed them yet, but But given the technical advancements, the level of adoption, and the pipeline we've accumulated, we believe we can command that kind of number. And then, of course, in odor, we used to say it's going to be worth at least $100 million. Of course, the PUF has set us back, and we're going to have to reposition that asset. But it's pretty easy to argue something around a $40 million. After all, it allowed us to support PUF that generated $50-plus million last year and 60,000 positive reviews based on our technology. And that technology is ours. It's not theirs. Don't forget it. It needs a repositioning. It's painful. We're going to talk about that in a minute. And then, of course, the upside. As we find adoption, these assets have a future potential, we would argue, in the $4 billion range. And it's a big vision. But make no mistake that that's what we're investing in. And we believe these assets will find that kind of market traction. The bull case debate. We'll have that debate on and on. Okay? So we just did a press release about Advanced Solution. It's a really nice situation. Advanced Solution is a great company. There's a cultural fit. They've got a nationwide presence in their heat map. They cover the domestic U.S., okay? That means they have representatives that are organized under the umbrella of Advanced Solution who are technical specialists in selling wound care products. That's what that is, wound care products. They're wound care specialists. That's a subset of our bigger market. Remember that we have two categories we're primarily focused on, the surgical suite and wound and burn, which is really wound, wound care. Wound and burn is the same. Also, potentially tissue therapy. Those are kind of agglomerating into that category. Now, in the marketplace, this is a big market, and if you layer on the surgical suite, which everyone knows, that we've signed a major partnership with a global leader. We're under NDA. Our partners said, until you're ready to ship product and we're ready to push the button on launch, you need to honor our NDA and keep the name silent, quiet. So we've honored that. It's a lot of pressure for us, a very difficult thing to do, but we're doing it, and we're doing it because we have to. Okay? Now, all those assets are coming to market, and we're going to talk about timing. We have a shot to see first orders before the end of the year with advanced solution, a shot. Product is in production, which is great. Right? Assuming everybody stays on track. We can see first orders, shipment, delivery. Remember, we don't recognize revenue until it's delivered. So we'll just see how that goes when we come into the end of the year. But it's a nice start, and it's a nice start with a high-quality firm that has a great reputation, a highly trained sales force, and they are a stocking distributor. And so we're very proud of that relationship. Also, you'll see soon Advanced Solutions generate its own social media to promote the product and its relationship with CLIRA, and again, a very exciting development. And as we've indicated before, the Surgical Suite products have extraordinarily high bar of performance before they can go to market, and we have been successfully clicking off the list to achieve that. We did a press release about two and a half weeks ago, I think October 7th, and then we just did this one just yesterday, and we've achieved success in the milestones in preparation for the last filing of paperwork to the FDA, the last filing of paperwork. Remember that the technology, the core technology, has already cleared FDA, so that means label changes, indications changes, refinement for the sterile field. That's what we're talking about, okay? With the shutdown that the government, unfortunately, We don't have a good sense of what the FDA is going to do on response time, and therein lies another level of uncertainty about the timing, because we just don't know. So, we believe that we'll finish our testing for stability and ruggedized testing for the package design. That'll come in hopefully before the end of the year, at which point then we prepare for filing of the paperwork with the FDA. We coordinate with our partner. We go through the logistics. then we begin production, and then we launch. That's all coming to bear. It's just very exciting. And the other thing that we mentioned in the last press release, just briefly, that I want to just highlight, we're also doing significant work with clinicians. And so remember, in this industry, clinical work is required to help validate the experience for patient experience and outcomes, as well as physician experience, who witnessed the product going to work and witness and have evidence to support safety. Both of those are super critical. And so that clinical work is expanding rapidly. If you go to Clear Medical's website, you'll see a key opinion leader list. And we believe in Q1, what we'll begin to see next is the rolling out of clinical data presented by the clinicians that do the work with their summary of experience. as well as their opinions about the efficacy and the safety that they've experienced in the use of the product. And that is a great moment. And so we're very excited to see that activity now come to public view that should begin to have public visibility in Q1. And it's a critical piece of the puzzle. I'll also remind everyone that we talked about the UAE in the past, the work that we're doing for Europe and Northern Africa and the Middle East. And in that scenario, it's very important to understand that we have to have a CE mark. A CE mark is a certification that is required, which is primarily a safety confirmation to the specification as assigned by the EU, okay? The E mark, that's what that's called. So we're in the process of doing that. It does require clinical evidence, which thank God we have now, and we're advancing that clinical evidence, and we're checking off the boxes, And as soon as we get clearance on the breadth of the market for our distributor, we'll be announcing that transaction and get going on the European and African and Middle Eastern opportunity as well. Big deal. Big deal. Now, again, I'm just going to remind everybody, this is a technology idea that's 18 years in the making. That's about 18 years in the idea stage more. 13 years investing. Six years to get to FDA. Then you have to do product design and compete. This is, I just have to remind you, it's a transformative technology for patient care at a global scale. Number one, make no mistake, we're claiming number one. It's number one. It provides broad-spectrum efficacy. It's got efficacy proven for duration in three days in a closed environment. It's got efficacy proven through studies for biofilm disruptions. And the basic fundamental claim is it delivers this support for patient advocacy, patient care, health, health, infection control, supporting the process of healing, okay, in a way that does no harm with no local or systemic toxicity. And that claim set makes it number one. And so now it's about getting the word out and getting distribution and supporting our selling agents throughout the world. And finally, we're knocking on the door, ready to go. I'm going to highlight real quick the liquid sodium battery because I still believe it's probably the largest, most significant asset in the portfolio. Imported is a funny word. If you measure imported by moneymaking, yeah, it's got a chance for that for sure because it's so big. Transformative potential in the marketplace, yeah, it fits that bill. I think in terms of mass opportunity and our plan, we've got a great piece of technology that works well. And we're continually de-risking that. And our business model is to sell factories, not sell batteries. So we form joint venture partners around the world. And its role in the world is extraordinarily valuable in this time on this planet, at this time in the world. At this moment, we're talking about a trillion-dollar investment cycle, and we're going to play a significant role. So that takes us to the battery, long-duration energy storage industry as a general. We quote this article all the time. It's about a year old now. expected to grow between $1 and $3 trillion by 2040. Trillion, okay? Long-duration energy storage. In the last three to six months, you're going to watch some companies that have had extraordinary climbs in valuation. And we would argue with not nearly the technology that we offer. Now, some of these companies have significant infrastructure investments. They're producing at scale. They're supplying the market. They're in commerce. And so the R&D dollars, which just about killed them to get there, is long behind them, and now they're in the process of commercializing successfully. Unfortunately, we believe they're not going to be able to keep up with our technology. And the market is so big, it is so big, it's so demanding at this time in the world that not one company can possibly keep up with the demand. So it's important for us to get going. And so what do we need to do, right? We're going to talk about what we need to do to accomplish that. But we fill a void in the market, and I'm going to just highlight Lithium is highly explosive. You're seeing communities now ban the production of lithium batteries and storage of batteries, all kinds of stuff going on. Not well-suited for long duration, highly temperature-sensitive, internal degradation, which creates instability. Instability creates fire risk, and runaway fire risk is the idea that one cell lights another. They have poor environmental outcomes. The biggest thing, though, is China's global supply chain risk. It's an intolerable situation. We've seen the trade war recently with the administration and the push and the pull with China, and you'll notice that in the battery tech, many Chinese companies are state-supported, and they're dominating the world by subsidizing every piece of the supply chain, but it's not a sustainable strategy. And yes, they're big, and yes, they're formidable, and they're selling batteries that are cheap, but they're not as good. And as this expands, quality, safety, durability, sustainability, durability, and efficiency are going to be the key marks that make the market. That's where we fit in. It's a better battery. The punchline is we've got a better battery. And we de-risked it to a large extent. I'm going to talk about risks in a minute. The key claims, I leave this for a leave behind. Don't focus on all this detail right now. Energy density at 2.9 times the energy density at a higher voltage without the Loss of energy. We've got 95% round-trip efficiency. It's a better battery for long-duration storage. That's the punchline. And we can also make it to scale. Now, we haven't proven that. That's a thesis. That's one of our challenges, to prove that. What do you do with these? Well, we're talking about big batteries. Big batteries next to the house or the neighborhood. Big batteries next to data centers. 20-foot trailers full of cells. Okay? That's what we're talking about. I'm not going to go through the thesis of why we need batteries. It's sufficient to say we need The market's going to go to the multi-trillion dollar market over the next few years. But data centers are number one. Resilience. That's the idea. Never down. So mission-critical operations need batteries so when the grid goes down, they don't. You've got to interact with the grid. That's balancing. Arbitrage is buy it low, sell it high. And, of course, if you're in the renewable energy phase, battery storage is super critical. People often ask, well, what's taking so long? Why is it taking so long, right? I say, well... Number one, we bought the technology. We didn't invent it. We had to redo it. It took about two and a half years to redo. And that's important, two and a half years to recreate what we already knew was working. But we had to redo it so that we could claim it as our own. People would say to me, does the battery work? We say, yes, pretty sure it works. And they say, pretty sure it's not going to cut it. And I say, well, I don't have anything else but pretty sure until we do the work. So we completed the work in the first half of this year, about two and a half years worth of work. recreated the cells, and brought in a third-party validation. We did a press release on 6-18, and we have a third-party confirming the claims associated with the cell. Okay, so a little work to do. We're about halfway through that sort of this schematic, which basically is prove the cell, scale the cell, right, continue testing, bring in some money, and form partnerships to build factories around the world. That's all underway. It's actually quite exciting, and we've gotten the attention of industry in a big way. That means there's two buckets. There's two buckets of opportunities that are presenting themselves. The first bucket is people that need batteries. The second bucket is people that need factories with all the goodies that come with factories, like workforce development, employment, economic development, net export, commerce, high-tech manufacturing, factories. They want to enforce, reinforce investment in that area. And then there's the other group. They want the batteries. Okay? And it's fascinating. And so who wants batteries? Well, data centers. Right? In fact, I had a data center developer. He says, I've run the numbers. If we build a factory, you'll save us on our data center. You ready? 1.2 billion in CapEx. The factory's only 170 million. Right? So this thesis can be summarized in the following way. Have we done enough work to be credible so that investors will support the building of a factory? And we believe that we've done a lot of that work, yes. The critic would say, always more. Yes, always more. And so as we continue to advance that thesis, every day we get better. And it's a matter of time between now and adoption. And as we find the first factory partner, we get started. When we get started, we make money. And this is really important in the business model. Very, very important. We're being paid to build a factory. We're being paid to install technology. We're being paid to provision the equipment, to work to start it. We're being paid to train the force and kick off a factory that's making salinity batteries. We get paid throughout the process. So when a project gets financed, we're making money as opposed to burning cash from our balance sheet. It's a great business model. It kind of looks like a franchise when you step away from it. It's not a franchise. It's a joint venture strategy. the response we're getting from the marketplace is astounding. And here's the model. I'm not going to go through it all, but in the 6% Royal and 19% carried interest, as you get factories up and running, you make a lot of money. That's the point. And we've done some economics. We publish these not to go through them now, but I'll tell you the punchline for $170 million factory. Once it goes live, it takes about a year and a half to go to full scale. It generates about 80 to 90 million a year. Okay. So that's two year to two and a half year development cycle. It goes live another year and a half. You pay for the operation in two years after you build it. It's a very profitable business, and that's the point. Plus, you're getting battery tech coming out of that. It's transformative for the marketplace. So the business model is simple. You don't do a factory. You do a dozen. We modeled it at seven. On a seven business factory model, our net present value is about $1.5 billion. Okay? Okay? Now, we're raising money at $44 million. I just want to make sure everybody understands that. So we're not saying it's worth $1.5 billion. What we're saying is the model teaches that if you execute the plan and you secure the financing and you show that you can execute that plan, you're talking about a $1.5 billion net present value on a discount model. So this is where we're headed, and that's the point. This is where we're headed. Is it worth $44 million? You betcha. You betcha it is. We're proving that every day. So we've got MOUs, four MOUs signed, a whole bunch more in the works. You know, you kind of get to where MOUs don't mean much because you really just want to get them into definitive contracts. We are not there yet. We are not at definitive contract stage. But we do believe it's coming. The other thing that's happened is because we're continuing to advance our thesis and get exposure around the world, we now have very large companies, and investors that need batteries that have lots of money and want them. And so that's a good recipe. Okay. So we look at them and say, right, here's ready. How many batteries do you need? They say, how many can you make? I say, how much money you got? I'll build you the factory. We can build you the factory, get all the batteries you want. Okay. And you're going to finance it and we're going to build it for you. And we're going to get paid to build it. And we're going to get a piece of the action. 6% royalty, 90% carried interest. That's a globally scalable business model, and we're proving it every day. I believe that's going to yield fruit, and we've got a shot to do some of that pretty soon, but it's always subject to show me the money. And so, yes, that's our risk factor that we're dealing with, and it's very exciting, primarily because the demand for batteries is insatiable. The competitive profile does not compete. We need to shore up infrastructure to prove that we can produce to scale, very much like we had to do for Clara. And as we do that, we'll realize, we believe, we'll realize not only the capital resources, but the valuation that's associated with it. And so we're pushing hard to get that through. And I'm going to show you later in our economic profile that we're able to do such a significant innovation with relatively small amounts of money compared to what we're doing, because it leverages over our existing infrastructure in such a nice way, in a nice way. Okay, AI solutions. Okay, just everybody knows about AI, right, artificial intelligence. That's data centers. Data centers have massive need for batteries. They need supply chain independence because it's kicking everybody's tail end. They use massive sums of water. And remember, we've been doing water recycling for data centers for three years with Gary Callahan. This is a significant value proposition in the portfolio. We believe we'll find its way to market. And then the other thing is PFAS and contaminants. When these data centers use this water, they're using lots of chemistry, and lots of the surfactants that they use in some of the chemistries are laden with PFAS, and then fundamentally you've got a recycling issue. If you're in the data center business, you've got an end-of-life concern. Those batteries, you have to do something with them when you're done. And so that's becoming a regulatory thing that's happening all over the world as well, and we're particularly well-suited at that one, two, three, four, five punch in the market. PFAS. Okay. So we have performance breakthroughs. We just did a press release about a week ago. I can't remember. Let's see. Yeah. 11-3 and on 9-29. Very important. Very, very important technical advances. We've advanced the thesis for controlling and removing ultra-short-chain molecules. Ultra-short-chain molecules are not regulated yet, but they will be. And the reason we know this is because they're the super small contaminants that are associated with highly concentrated PFAS waste streams, like the people that make PFAS material. That's what we're talking about. Very, very concentrated, and our system works particularly well at that, plus long and short-chain molecules, and we achieve less than four parts per trillion and non-detect status. It's an astonishing claim. The most recent reduction in cost is associated with 90% reduction in the AEC energy cost. If you took a profile of this pitch that we made to the marketplace, which is all real, which says we can reduce your consumption of your waste stream production for handling waste and disposal by $140,000, one part versus $40,000. We now can also say, and we've reduced the operating expense of our energy consumption by 90%, which is a value enhancement that will allow us to say to the market, we are the number one technical performer. with no breakthrough, small waste print, to non-detect status or four parts per trillion or non-detect, depending on what you need, and low energy, which means our OPEX will become competitive. In the combination of total operating expense, we can be the high-value performer at the lowest net cost. And that is a winner. And so with this claim, we've gone back to our proposals We've got over $200 million worth of projects that have been bid, specced, and priced. And while the market was trying to figure out what to do, whether they had the capital, whether regulators were enforcing compliance, or whether they needed to comply to state requirements or litigation, all of that is continuing to move forward. And so we're in a great spot, and we're also – negotiating with a number of very large strategic partners, which we think is a great plan. Let me see. I must have skipped over that. Yeah. Well, it's okay. Let me make sure I didn't miss it. Yeah, it's okay. Let me move on to the next slide. Here we go. A lot going on with PFAS, so stay tuned for more information. Oh, and we'll talk about Lake Stockholm in a minute. Lake Stockholm is prepared to be provisioned and go live. We think it's going to be in the next weeks, not months. and all kinds of delays, but most, you know, beyond our control between state, shipping, regulatory, EPA shutdown, government shutdown, general contractor, on and on and on you go, client, the customer. We're now in a spot where the last piece of the puzzle is being installed, we think, showing up on Monday. Then there'll be a couple-week provisioning. Then they'll begin to test and modify. EPA will come in. The state will come in. All of this activity is now coming to a crescendo, which is great. And here you go. Rest assured, on the PFAS for Lake Stockholm, it works. And we'll make sure it works, okay? So finally, finally in that success mode. Okay. Everyone should know what's up with POOF. We filed a lawsuit on November 11th, and it speaks for itself, so I'm not going to go through all the detail. But we have allegations that we're committed to defend. We believe that our claims in the case are supported by evidence I can assure you this is not about ego. This is not about ego. It's very frustrating, disappointing to say the least, and we would argue unnecessary, okay? But it is what it is, and we're forced to deal with it in such a way that we truly believe we had no choice. We had no choice. We must protect our intellectual property, and we are, and we believe that their unwillingness or inability to to pay us now $3.9 million is unacceptable. It's just real simple. It's unacceptable. So the good news is, in the poof situation, is that the asset technology has proven that it can establish a national brand. The marketing was great. They did a good job. 50,000 positive reviews on Amazon. You don't get 50,000 positive reviews on Amazon without a product that actually works. It's just that simple. It works. It needs to be used as instructed. It needs to be sold properly. All this other noise that comes with this dispute, we fully intend on defending our position and we've taken legal action which we think is fully justified in our response. What are we going to do? We're going to make sure our technology is safe. We believe that Their actions are not excusable. The court is the proper venue. That's great. We'll reposition this asset to redeploy, and we will likely come in with new partners that can share our commitment to quality and transparency and integrity. So we're in a repositioning mode with that asset, but make no mistake, that's what we're going to do. By the way, the lawsuit is public record. I don't know if you can pull it down online yet, but it's public record, so be sure and look for it. It's quite informative and replete. Again, what are we saying? Built a national brand with consumer products and proved it could be done, and our industrial odor control business is continuing and stable. We're also really good at saving for a rainy day, so we think we're in a great spot to deal with the case. and with the demands that that's going to put on us. Don't forget the engineering group. By the way, the engineering group is never for sale. Somebody says, will you sell the engineering group? I'm like, no, because they're the centerpiece of innovation. They support all these innovations throughout the company, and they're really, really good at it. Plus, they're inventing new technology. And so it's just, you know, we're so thankful. They are also breaking revenue records, which is great. I'm going to remind everybody when you see the financials, because they're an intercompany balance, they do a lot of the R&D for BioLargo. and that's booked as revenue but then taken out in consolidation. And because of that, since they're doing R&D for BioLego, they almost can never turn a profit. If we were a third party paying them for services, they'd be profitable, but the skin, the value to us is just enormous. So that's it for the forward-looking sort of the synopsis of the business. I'm going to ask Charlie Dargan to now step in. I take a stab at the next two slides on the financial results and provide some commentary. Charlie, you're up.

Okay, Dennis. Thanks so much. And when you do dig into the quarter three numbers, the 800-pound gorilla is the poof credit loss that we took in the quarter of $3.85 million. So the revenue, as you see here, for the three months is down. It's also down about 50%. in the nine months from about $14 million to $7 million. And with that, it has run through the rest of our statements producing the net losses that we have up on this slide. I'd want to make a specific point towards the SG&A. Again, most of our or a good portion of our SG&A is non-cash. We continue to issue stock options and in some instances stock to our consultants and to employees as a potential reward. So not all of the SG&A is a cash expense. Looking at our cash flow, again, the POOF loss is running through our cash used in operations. I also want to point out that even without POOF, we did increase our receivables by about almost $2 million. So the business is performing without POOF. The other element in our cash flow statement is in our investing, i.e., our capital expenditures, and those are down significantly, much of which is we are coming to the end of the capital expenditure cycle with CLERA. And again, we've been able to finance that through CLERA is financing most of their needs on their own through the issuance of the preferred stock, Class B preferred stock, some debt, and then some warrant issuances and exchanges. So we've been able to maintain our cash position, which is very strong at the moment, of $4.5 million, and our total assets come to a little over $9 million. Again, CLIRA is financing itself largely, and with that, BioLargo itself has very little debt. so we were able to maintain a stockholders equity of a little over three million dollars and let's take a look at slot the next slide and so what we wanted to do is look at the major components of our net loss and you can see once again it's it's poof dominating both in the three months and nine months, and CLIRA. But again, I want to focus that CLIRA is at the end of its CapEx cycle. It's also at the end of large operating expenses. And therefore, we believe in a really good position for us going forward. If there's something to kind of take away from all of this, we obviously took a big hit with POOF. but we survived it and we survived it in the same timeframe that we're also increasing capital expenditures and regular expenditures, getting Claro ready for its market launch. So the bottom line here is, yeah, we took the punch, but we survived it and we continue to stay resilient by, you know, some ability to raise additional cash. and by our ability to manage our operating expenses. So, Dennis, that's sort of the summary of where we are in the quarter three financials.

Yeah, I think that's right, Charlie, and thank you. Yeah, and again, I'll just make notes. I sit with analysts all the time, and we talk about POOP, and their typical response is most companies couldn't take the hit. And again, I think it points to a couple things that are really worth noting. One is diversified portfolio is really critical, all centered around a core competency. That's number one. Number two, we do save for a rainy day. We're not spendthrifts. We don't waste money. We put money to work for assets that we believe have fundamental value, and every day we prove it, and then eventually we get to reap the harvest, a.k.a. Clara. I mean, it's really easy for people to say, Clear is not valuable because it doesn't make money. Well, guess what? That's not true. We just proved it by raising $2.5 million at a $95 million valuation. It's extraordinarily valuable. And wait until it makes money. And so, again, it just points to that underlying investment thesis of, you know, the hidden asset value, the underlying value of technology and its transformative nature. It also points to the resilience that our company has with diversity and lean You know, lean. We do more with a small amount of capital than most companies are ever going to see. That's an argument, but I'll take that argument on any time. So let's open it up to questions, Brian, if we can, and see what we've got next.