The first thing any investor in the small cap world needs to figure out about a potential company is whether it is a real company. Does it have revenue? Does it have valuable intellectual property? Does it have an effective management team?
These three questions rule out a solid 85% of small cap companies that I review.
The process for me then shifts to whether the company is likely to bring me returns worthy of my investment, which I’ll admit is a pretty high bar. Then I decide whether they are doing something beneficial. Every once in a great while, I find a company that is grossly undervalued, aligned with my principles, and has commercial-ready technology.
BioLargo, Inc. (OTCMKTS:BLGO) has passed my test with flying colors, and I truly believe we are witnessing the birth of a giant.
"BioLargo stands a good chance of moving up to the big boards naturally in the next two to three years."
On the surface they are an environmental engineering company, but if you look closely, they are a publicly held incubator of technology, held inside an agile business. They have developed several technology platforms that are being commercialized in time with mass adoption in their sectors. They have a special focus on sustainable cleantech solutions to big problems facing our planet.
This is the point in time where I like to enter a company, when all the hard work starts to pay off.
BioLargo has a market cap of a mere $68 million, and yet it is becoming a leading innovator in multi-billion-dollar industries. While it may be a penny stock now, I think BioLargo stands a good chance of moving up to the big boards naturally in the next two to three years.
The OTC is really a proving ground for companies, where the real companies and the paper companies get separated and where solid technology, business models, and management rise above.
For reference, Apple traded for only $3 in 2003.
Before talking about the incredible technologies BioLargo developed, we should talk about why their process is superior. BioLargo invents, develops, and commercializes, and then leverages their technology with channel partners. They take the time to evolve each technology to the point where they can extract maximum value for shareholders.
To cover all of their technologies would take more time than any of us has today, but covering the three most immediate revenue catalysts and most promising technology is doable in a few pages.
Leveraging their expertise in engineering and science, their primary technologies involve clean air, clean water, and environmental remediation.
The Aqueous Electrostatic Concentrator (AEC) represents what many believe will be BioLargo’s biggest long-term revenue catalyst.
AEC is a water treatment system that removes PFAS compounds from wastewater, groundwater, and surface water. PFAS, or per- and polyfluoroalkyl substances, are also known as “forever chemicals." These are man-made chemicals like Teflon, GoreTex and Scotchgard, and they can be found in textiles, firefighting foams, and cleaning products everywhere.
The big problem with PFAS is that they break down over centuries, can build up in our bodies and the environment, and are linked to adverse health effects like birth defects and cancer. These chemicals are found in water systems throughout the world. PFAS contamination is measured in parts per trillion (think a grain of sand in an Olympic swimming pool). Conventional water treatment solutions are not efficient, are very expensive, and create a massive quantity of hazardous waste products.
BioLargo's AEC system passes water through an electrochemical field and takes advantage of the PFAS molecule’s polarity to selectively capture the hazardous material on a membrane. Traditional activated carbon filters create 1,000 times the hazardous waste as the AEC system and this hazardous waste must be handled and disposed of appropriately. A recent BioLargo press release showed that they were able to achieve total elimination [in technical terms below ‘non-detect’] of multiple PFAS compounds in testing with a large municipality in Southern California. Tests have shown that the AEC can treat 1,000,000 gallons of highly contaminated water with little waste material at a very low cost.
This is massive proof of concept!
After countless water crises (like the one in Flint, Michigan) and increasing droughts, people and governments have started paying more attention to their water systems. How much of a problem is PFAS? So much, that the federal infrastructure bill that was just passed included 10 billion dollars for PFAS cleanup.
In fact, many industry observers believe this will be an 80-billion-dollar market.
The U.S. EPA also just highlighted their technology in a publication as a solution provider. Right in the company’s backyard, the Orange County Water District reports that PFAS contamination is present in 67 wells and that they estimated the cost to treat it at more than $1.5 billion over 30 years.
Orange County Water District, which supplies water to over 2.5 million people in California, is in the early stages of a working relationship with BioLargo. The company has been testing the AEC on real-life water samples to optimize performance with the intent to move to a field pre-commercial trial and then to a commercial scale project.
It is also worth mentioning that the EPA granted a $131 million Water Infrastructure Finance and Innovation Act loan to the Orange County Water District for PFAS removal from groundwater.
The company is currently in early stage commercial testing with several customers, including the federal government. Recently, BioLargo’s CEO disclosed that the size of projects are much larger than initially thought and that the company is currently in discussions with customers and engineering firms that include multiple 10+year projects that will be in the 100-200 million dollars. While the company is cautious to avoid forecasting without having more history to rely upon, we can easily deduce that the AEC could readily translate to $5 to $10 million or more in contracts secured over the next 12 months. The biggest variable will be how fast the company is able to respond to the massive opportunity that is unfolding so rapidly and how well they can leverage their technology with channel partners.
The company CEO reports that discussions are underway with partners already and that management is well aware of the need to build up infrastructure to meet the growing demand for its solution. He also quickly points out that many of these projects will require a staging-in of work that includes, feasibility, preliminary design, full design, construction. and implementation of operations to achieve full scale operations for very large projects. This is big business with big industry. Given the pedigree of the team at BioLargo Engineering and their 30+ years of experience working with the likes of major industry, the U.S. armed forces, and governments, it certainly appears that BioLargo has found a niche in which it is likely to experience hyper-growth and do something great for our planet at the same time.
Garratt Callahan Partnership
BioLargo entered into a contract to engineer and produce equipment that will be marketed and sold by Garratt Callahan (G-C), which is the largest privately owned water treatment company in America. G-C has been in business for over a century, has industrial and municipal customers and hundreds of salespeople. BioLargo is manufacturing Minimum Liquid Discharge (MLD) equipment for G-C customers to salvage as much usable water as possible from commercial facilities wastewater streams. With water in such short supply in so many areas and increasing legislation governing the wasting of water, there is considerable interest.
In an investor’s forum earlier this week, CEO Dennis Calvert announced that the strategic partnership intends to build and sell 30 to 50 units a year at a cost of $100 to 500k. Expected to launch with its first sale “very soon,” this could generate an estimated $2.5m to $10m in new contracts over the next 12 months and then continue annually just on the initial rollout of the MLD equipment.
G-C has also expressed interest in the rest of BioLargo’s water treatment products.
CupriDyne, a Platform Technology
Much lies beneath the surface here.
CupriDyne Clean is the company’s first commercial product success, and it leverages components of a complete patent estate that features a novel copper-iodine complex that the company refers to as the CupriDyne Technology. First and foremost, the CupriDyne Clean product provides complete odor elimination while remaining safe for people, animals, and the planet. It has been adopted by leading waste handling companies, and its recent contract wins include top municipal customers.
The CupriDyne Technology on the other hand, is really a cornerstone of the company, and it is the original technology that BioLargo was formed around in 2007.
Because of CupriDyne Technology's unique properties, it has infinite product possibilities. Think: air quality control, personal care, surface treatments, household products, cleaners, disinfectants, sanitizers, water treatment, animal care, and medical products, to name a few. The company has reported many times that it is ‘in process’ with the EPA to secure registered antimicrobial claims for new products in development. The pipeline is robust.
This is another place where the genius of BioLargo’s business model is apparent.
They are breaking out the applications one by one in narrow licenses.
They created Clyra Medical Technologies, a company that already has a FDA 510(k) cleared product under license from BioLargo and is in early stages of commercialization of its wound irrigation solution. Clyra also has several additional products in the pipeline for infection control, wound care products, orthopedic, dental, and more.
BioLargo also formed a joint venture with a leading South Korean wastewater treatment company that is making and selling CupriDyne Clean. The company is enjoying organic growth in sales but as management has stated many times, "We have only scratched the surface of the opportunity ahead."
Which leads me to the next topic, which is that all that is about to change-
Pooph Passes the Smell Test
BioLargo has partnered with Ikigai Holdings to manufacture a product named Pooph.
Pooph utilizes the CupriDyne Technology to eliminate pet odor. The solution permanently and completely breaks down organic odors at the molecular level, yet is safe for pets, people, and the planet. The team behind Ikigai Holdings has an extensive track record that includes the successful launching and building of billion-dollar, household brand names, such as Febreze, Copperfit, Zevo, Flawless, Snuggies, and Swiffer.
Ikigai has strong financial backing and has created an intensive marketing campaign, while BioLargo is responsible for manufacturing the product. The plan is to grow the product into a household name that will be sold at major retail stores around the world, and, then, once established, the brand and pet product will be sold off to a major consumer products company. It's important to note that some of the previously mentioned products have been sold off for approximately $500 million or more.
BioLargo will receive a manufacturer's margin, a 6% royalty on sales, and a 20% take when Pooph is sold off.
So far, Ikigai has stated that the product is exceeding all expectations.
If you haven’t already come across it, You can check out the commercial here: Pooph™ - The Pet Odor Remover That Takes STINK Out of the Equation.
We estimate that from a revenue perspective for BioLargo, Pooph sales could generate anywhere from $1.5 to $3.5 million this year depending on how fast they ramp up, and up to $45 to $100 million or more to BioLargo at the final sale of the brand. No one knows how fast the exit or ramp up can happen, but given the track record of the other blockbuster products in their successful backgrounds, and the nature of its aggressive venture strategy, it sure seems like major incentives and tools in place could make an exit happen in the next 1 to 3 years.
We will be watching this one closely as sales ramp up and retailers pick up the brand.
As always, my comments about the future performance are my own conclusions and opinions based on research. I can rationally deduce that revenues could come in around the $9 million mark this year, but their total revenues and/or combined backlog could go as high as $23 million.
The final revenue numbers for 2021 won’t be out for a few months, but $9 million looks to be around a four-fold increase in revenue.
BioLargo’s tagline is: “We Make Life Better.”
While their products certainly match the motto, I can’t help but think that they are also setting up to make shareholders' portfolios better. In a sea of red, BioLargo’s share price continues to climb. With virtually no debt and several technologies in their diverse portfolio at their inflection point, BioLargo looks to be on the verge of a breakout and major recognition in the market.
This is not investment advice, and I am not an investment advisor. I am a mom and a professional firefighter, and I am passionate about clean and disruptive technology. I own shares in BioLargo and am not compensated by anyone for my due diligence reports.
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