President: Dennis Calvert
WSA: Good day from Wall Street. This is Juan Costello, senior analyst with the Wall Street Analyzer. Joining us today is Dennis Calvert, the President and CEO of BioLargo. The company trades on the OTCQB, ticker symbol BLGO. Thanks for joining us today Dennis.
Dennis Calvert: It is my pleasure, Juan. Thank you.
WSA: Great, starting off please give us a brief history and overview of the company for some of our listeners that might be new to your story.
Dennis Calvert: BioLargo has recently validated its new invention, the BioLargo™ AOS filter, which is on its way to transform the way water is treated throughout the world. Our advanced wound care products offer a better solution with a significant cost advantage that will disrupt a $1 billion market. Our consumer products have proven to be the most effective product in their respective markets and we are building distribution through strategic alliances.
BioLargo is a platform technology company. All of our platform technologies include some form of iodine. You may recall that iodine is the broadest spectrum, most potent disinfectant known. It is also an essential nutrient. All of the work that we have done over the years is to advance our technology for the use of iodine across a number of different market segments.
We are the science company that advances and validates and takes the technology into product design for commercialization. So we three areas of primary focus. The first is in water. The water segment represents a significant breakthrough for science and some really significant commercial opportunities are coming our way. We also have a host of medical applications and we also have a consumer products division that features that same iodine for its usefulness and product design.
WSA: Great, and can you talk to us about you most recent breakthrough in the water industry?
Dennis Calvert: Our patented AOS Filter, which is a new invention, was recently validated in proof of concept testing at the University of Alberta in Edmonton, Canada, and the validation showed the technology of the AOS Filter was highly effective at dismantling hard to manage contaminants. This work is focused on the most difficult contaminants that commonly get trapped in the water.
In that testing we validated that our AOS Filter was able to dismantle and remove those contaminants in seconds versus hours, and it accomplished the task at less than one twentieth of the power consumption of the nearest competitors. And what that did is validate of our AOS Filter as a disruptive contender to manage difficult contaminants in water flow that has application in just about every segment of the water industry. So , what does that mean? Difficult and hard to manage contaminants are found in just about every water segment. And our invention can apply to each segment which has a a unique set of obstacles to overcome in treating difficult to manage contaminants.
So, for example, in the oil sands that industry must deal with things like naphthenic acid, which are byproducts of production, and drinking water, of course, bacteria and other contaminants that are very dangerous for humans. But there are also hard to get contaminants like acids and ammonias and solvents; like byproducts from industry production that leach into the ground water like 1,4 – dioxane. In fracking, there are things like hydrocarbons that get trapped in the water that difficult to manage. In pharmaceutical production, you may encounter byproducts from pharmaceuticals that get trapped in the water and they cause problems for people, and of course, in food processing you face threats like salmonella and listeria. So the validation work we have performed is to show that we can do accomplish this difficult task managing contaminants in a very speedy, very fast way, at approximately one twentieth the power consumption of the nearest competitor, which means that our AOS Filter offers an economically compelling value proposition.
Number two; there are a series of things that recently developed for BioLargo that have validated and positioned the technology for adoption. Back in January, data started coming through from a research project that we have been working on for quite some time at the University of Alberta, and most recently we announced that we are heading into a pilot phase to take the AOS Filter from proof of claim into a commercial pilot. So we are now in the design mode and embarking on a commercial validation pilot at the University of Alberta.
Just a few weeks ago we made another announcement about additional accomplishments and some milestone achievements that have occurred in that pilot work. The work has provided a confirmation that the role of advanced oxidation AOS Filter is the key mode of action that is doing this ‘heavy lifting’ and tackling these difficult contaminants. So this recent work included bench scale testing of contaminated water. The water was taken from actual field operations from the oil sands industry, and the work has proven our effectiveness of dismantling and removing targeted naphthenic acids.
One of these naphthenic acids that we are talking about is the high-value, hard to manage and hard to get contaminants that have been an area of focus in the oil sands industry for just about 15 years. We have accomplished this recent proof of claim that we tackle the difficult one and our AOS Filter can manage them.
Thirdly, we have reached an agreement with Professor Lynn McMullen at the Department of Agricultural, Food & Nutritional Science at the University of Alberta, and she has agreed to work with us to expand the scope of the AOS Filter in pilot testing into some areas of focus in food process and agricultural production. That will include livestock areas, CIP and similar applications.
There are a number of applications that the technology will now be validated and tested for efficacy throughout the food industry.
Finally, about 2.5 years ago the company we became a founding member of a research chair sponsored by NSERC. NSERC stands for Natural Sciences and Engineering Research Council of Canada. That project was funded through a science grant that was given to the University of Alberta to focus on evaluating all the known technologies that could be brought to bear to help solve the contaminated water issue associated with the oil sands.
The other founding members who joined BioLargo were Suncor, Syncrude Canada, Shell Canada, Canadian Natural Resources, Epcor, Environment Canada and Alberta Innovates, and BioLargo. We were joined with those leading organizations to form a cooperative of stakeholders to help evaluate all the known technologies to help solve this massive water issue associated with the oil sands production.
All of these developments have culminated recently to give us significant validation and positioning for acceptance and adoption of our AOS Filter.
WSA: Can you help us comprehend what makes the scientific breakthrough so important?
Dennis Calvert: Yes, sure. Iodine is the broadest spectrum and most potent disinfectant known. That is common knowledge. So, what we have done is we have taken that oxidizer – iodine, and we have combined it with well understood technologies like carbon, filter media, ceramics or membrane technologies and when we combine those components we can extract contaminants from the water flow. What is unique about that invention is, that we have combined traditional filter media with an oxidizing technology and electricity, which then allows the device to provide an oxidation potential across the surface area of the filter media and an incredibly effective rate.
What that means basically is that we have taken a filter, and we have converted it into a reactor. So we can then operate at very high flow rates and we operate at incredibly low levels of energy. So the device features high rates of oxidation, low-power, high-speed and a continuous flow.
To provide a little more detail on that, one of the things that is really helpful in explaining the role of advanced oxidation is to look at the example of how a shipyard anchor rusts over time through oxidation from the sea air. When you enter into a harbor and you see an old shipyard anchor that is on the ground, exposed to the sea air, that over time has turned to rust, right? Well, how does it do that?
As the salt air comes across the surface of the metal, it adds oxygen and it grabs electrons and eventually, over time, it breaks down he metal, it dismantles it, and the oxidation converts that anchor into a dusty pile of post-oxidation rust. Well that is advanced oxidation. That concept is the very mechanism of action that the role of iodine plays in all these inventions. So what we have done is we have taken that iodine chemistry, we have combined it with electrolysis and we have combined it with filter media so that we get a very high rate of oxidation at very low power levels across the surface of the filter.
The net result is expected to yield unparalleled cost effectiveness. What is the significance of the breakthrough then? Well, our proof of claim work showed that our AOS Fitler performed at greater than10 times faster, and at about one twentieth the power consumption of the closest competitor to dismantle and remove these very hard to get contaminants in a continuous flow of water. The combination of those results provide a scientific breakthrough in the way that water can be treated and managed in a continuous flow device. It is really quite a special validation and we know that the AOS Filter has a big a role to play across the entire industry.
WSA: Right so you feel the technology will be useful across a number of segments of the water industry, then why is BioLargo starting in the oil sands industry?
Dennis Calvert: Right. It is a good question, being an innovator, working to bring technologies to market is always a challenge. There are incumbents and other significant barriers to entry. So, why the oil sands? The oil sands may be considered one of the most difficult, challenging water treatment situations in the world. As an innovator, what we are always looking for is the opportunity and market demand that can help pull us through the barrier to entry.. So that demand pull could be leveraged. It could be in the form of an economic opportunity or compelling political reasons or, the right relationships or the important validations necessary to help pull it through the barrier to entry.
The oil sands is a fascinating marketplace. The Canadian oil sands, in particular, are widely considered the second or third largest deposit of oil in the world. The process by which operators extract that oil is a highly water intensive process. In fact for about every barrel of oil that is produced there is about 3.5 barrels of water that is used in the process of producing that oil.
They use a heat process, where they essentially use hot water and steam assisted gravity drainage to extract the various fractions and one of the byproducts is a highly contaminated, concentrated water. In fact, there is about a billion cubic meters on the ground already in the Athabasca oil sands. The current treatment technology is to put that water into settling ponds or tailings ponds as a holding tank so that it can be treated over time and they have accumulated over years of production about a billion cubic meters. In addition they are producing about 177 million cubic meters of contaminated water which add to the tailings ponds..
So the stress on the system, for that market, is that the industry would very much like to double production, in fact they are forecasting to double production over about the next 15 years. And if you think about the magnitude of that goal, you’re talking about 177 million cubic meters of water already being produced at existing levels and the increase then, is a major water volume. It has already got a billion cubic meters on the ground and the industry wants to double its production, and they use 3.5 times as much water as they – to produce one barrel of crude. So the scale of these numbers is simply not sustainable.
Everyone in the industry knows, the politicians know, the government regulators know that these metrics will not work. So the stakeholders really want to come together and figure out how to find an acceptable solution that is economically viable. Years ago the government set up reclamation fund. It is essentially a super fund of about $3.5 billion. It is supported through tariff on each barrel of production. And that fund is growing. That fund was created for the reclamation, which includes land and water.
The water has really got some difficult challenges for it. So from our perspective, why are we in the oil sands? Well, the oil sands is a key starting point because it is a segment where we’re very well positioned. We are positioned for validation. We are positioned for acceptance. We are a co-founder of one of the leading research projects in the industry with some of the top players in that market place and we have been able to align ourselves with the key research and technical validators across that industry, which is at the University of Alberta, widely considered a center of excellence in the industry.
So in the oil sands case there is this massive problem begging for an answer. They are looking for the right technology, they are looking for a way to getting it commercial. The situation has got the infrastructure to get through validation and support in way that key stakeholders can support it. In this situation it is just the perfect spot for BioLargo.
WSA: Good. So how long will the commercial pilot take, Dennis, and how will BioLargo expand into other areas beyond the oil sands?
Dennis Calvert: The current pilot work is focused on the design and validation phase. So now we are taking various components of the AOS Filter, we are breaking it down into subsets and we are optimizing it for performance of high flow rate, low power and then managing the byproducts of the reaction. So the first phase is design phase. The next phase really is commercial scale testing and validation. And so we are forecasting that in the oil sands in particular over the next 6 to 12, maybe 18 months we will have done enough work to validate the AOS Filter’s effectiveness for use in the oil sands and maybe some other markets sufficient to get early stage adoption on a commercial approacOur most recent announcement also spoke to the fact that we are expanding the scope to include agricultural work. Again the invention is the AOS Filter, its application can touch many different markets. So the opportunities to expand into other markets are already presenting themselves, and we are already talking with potential strategic alliance partners, and potential licensing partners in other markets where specific contaminants are of such importance that we see the demand ‘pull’ that can help us get into the marketplace.
The total pilot project that we have agreed to pursue with the university, should span a four-year period. The first phase is to get to focus on this oil sands produced water scenario, which is the tailings ponds, and then expand into other markets like – like agriculture, which is already in motion and then continue to expand the scope to focus on very specific contaminants in applications across multiple markets. So, first phase 6 to 12 maybe 18 months; total project, probably a 4-year project; to broaden the scope across the entire water industry.
WSA: Great and how do you describe management’s level of confidence about future commercial success in this area?
Dennis Calvert: From our perspective, we are on the inside looking at the data, looking at the proof of claim. As you might imagine, this has been quite a journey. This technical breakthrough did not just happen overnight. So, from our perspective, given the data from the proof of claim, we believe commercial success is just a matter of time. It primarily depends on our ability to remain steadfast and precise, as we have done throughout our journey So when you look at the claims we are reporting; less than one tenth of the time and one twentieth of the power of the nearest competitor, they are obviously dramatic and have far reaching implications. To our knowledge we can become the low-cost, economic contender in just about every market.
The data we continue to accumulate supports these claims. Now, there is more work to do. We need to validate a commercially scalable device. We need to continue to refine its application and the design components. But we know it works. So our confidence about the question, does the device work? And, is it going to find a commercial application of importance for BioLargo and for our shareholders? We certainly believe the answer is YES and YES.
The data is being validated at the highest level. It is so critical, that as we take an emerging technology to marketplace, it is more important what other people say about our technology than what we say. We know this fact. The third reason that we are confident about our future, is that the technology is simple. Sometimes the most simple technology is the best. Simple is easy for adoption, and in many ways our AOS Filter is elegantly simple technology.
It is a discovery. It is new and it is novel. It is different, and we are achieving results that as far as we can tell, have never been seen before. This advancement positions us with a very confident position as we push through the barriers, as we gain adoption, as we recruit the right strategic alliances and as we continue to move our technology forward. Finally a reason we can be so confident is because of the leadership of our Chief Science Officer and inventor, Kenneth Reay Code. He is so disciplined to set this technical performance bar high and above reproach and establish defensible claims. His discipline has proved invaluable as we introduce the technology to industry and work to gain acceptance.
Having technology is one thing. Getting the acceptance is another, and that is a journey. That is not an endpoint. That is a continual journey of taking technology from proof of claim to validation and commercial success. In this case, our confidence is really high because the technology is just that good.
WSA: And I guess what everybody wants to know including investors and the financial press is how will BioLargo make money with this technology?
Dennis Calvert: The AOS Filter in particular has a number of commercial opportunities ahead of it. Of course, you know, the big success commercially is going to rely first on getting through this pilot phase, which is a journey. So there is an early stage journey and there will be a later stage journey. The commerical opportunities really take three different forms. One opportunity would be to provide integrated services. When you look at the water industry, you can observe that the bulk of the dollars that are spent in the water industry really focus on engineering and the implementation of technology and technical support and engineering to customize these technologies to solve very specific problems that the industry faces. Those industries are forced focus on the very local circumstances, the flow rates, and contaminants and all these variables that can be unique to each customer.
It is a very customized process. In fact, within the industry you hear, ‘water is a global industry practice locally’, water quality, water contaminants, the systems that these companies and the customers use, all have different variables. That is what we mean when we say integrated services mean. It comes into the situations and focuses on solving problems for a customer. It is where the bulk of the money is in this enormous industry.
In this type of opportunity, our AOS Filter can be such a significant advancement in the way that water can be treated that it could provide an integrated services company such a significant competitive advantage. So much so, that we believe there are significant commercial opportunity to advance that infrastructure to be able to go out and solve problems for the client. Obviously, the AOS Filter is also a piece of equipment. So what that means is, we could license its deisgn into equipment manufacturers, we could partner with them or we could make our own. We could sub-contract out manufacturing. For BioLargo, making those decisions really will be largely determined by our measure of readiness, speed, adoption rate, capitalization, infrastructure and expertise.
We think the AOS Filter also creates a great opportunity to partner with potential manufacturing, and of course, finally, intellectual property licensing. You know, when we talk about licensing for an intellectual property company like BioLargo, we are talking about an opportunity that really touches every segment of the globe, and it can be broken down by segment and it can be broken down by region. So, as we emerge from this pilot phase with sufficient scalable proof of claim for commercial viability, we believe the opportunities exist throughout the world, by both segment and by industry region. So there is a lot of ways to make money with this technology.
WSA: Well, Dennis, BioLargo’s breakthrough in water sounds like a pretty big deal, but the company has other commercial opportunities that are also important, can you describe how it is that an emerging technology company like BioLargo can have such a broad reach and how will those other technologies get to market?
Dennis Calvert: Yes, I sure can, Juan, thank you. The, advanced oxidation… remember the analogy we spoke about, the shipyard anchor and the situation where the salt air adds oxygen and grabs electrons. Okay, so that basic reaction is what iodine chemistry does. In all of the platforms that we focused on, we take that basic mode of action and refine it for a specific target or purpose for use in a product or market application.
We are really an advanced oxidation specialist, and we are really good at using iodine, the all- natural, broad-spectrum potent disinfectant. Okay. So, for things like consumer products the key is to deliver that for disinfection, odor control and moisture control. We can do so in a way that is all safe, non-toxic, non-staining. In the medical field, we are raising the bar with those basic claims to meet FDA standards, for precise dosing, safety and efficacy, but we rely on the same basic mode of action, advanced oxidation, gentle, safe, broad-spectrum, potent.
And now with the recent developments of the AOS Filter we take that same basic reaction and we raised the bar again. This time we excite the molecule to a very hot oxidation state and we install it into a system that allows us to dismantle these very difficult to get contaminants.
In addition, you may also recall that we have a system called the Isan System that was first developed in Australia, and we have recently received a deposit on the license agreement and that technology and delivery system is now being advanced and prepared to go to market in the agricultural field, which is really focused on a dosing mechanism for iodine.
So, they all weave together, it is that basic mode of action, oxidation, and it is the core of our technology. We have secured 8 or 10 patents. We have another 10 or so in process, with plans to file more. The water industry applications are clearly the most robust opportunity in our arsenal, but any of these technology applications can move the needle for BioLargo, and we believe they will do just that.
WSA: Right. Well, I guess you have, you know, several products that could fit under that technology including the Odor-No-More platform.
Dennis Calvert: Exactly.
WSA: So what does the next 12 months look like for the company?
Dennis Calvert: The next 12 months are going to be pretty dynamic. I think the milestones in the water technology are probably going to get the most visibility because of the importance ot that marketplace. There will be a series of confirmations of grant aid, expansion of strategic alliances, data that continues to come through and refine its application for specific targets. All of this effort is geared to head as rapidly as possible into the commercial mode, and so we think the AOS Filter is going to be number one focus for investors.
Number two, in the consumer products category, we have done so much work over an extended period of time that has lead to meaningful discussions with a number of potential licensing candidates. We believe the technology in this area, makes a strong case for adoption. So the challenge is really to find the right strategic alliance that can break through some of the barriers for market adoption.
And then in the medical area, we are gearing up to finish the work in preparation of an FDA application and we are pursuing a 510 (k) strategy, which is a predicate route – predicate device route. So it is a pretty quick process, but being ready is the most critical and we are in the ‘getting ready phase’. Once we get through that stage, then, we would face about 6 to 9 months to get through the FDA process. So we are targeting, assuming we can get through the get ready phase, sometime in 2015 to secure that FDA approval for those devices.
WSA: And do you believe investors understand BioLargo’s value proposition and why should they take a look at the company now?
Dennis Calvert: I really don’t think they have been able to do that as well as they can now. If you look at our journey, we have had various forms of validation and we have been very careful because we have never really wanted to put more information than we could back up out in the marketplace. If you take a look at the business today and you ask what is different today about, our Company since last year and even more so, since the year before, the answer is that the validations and the swell of confirmations about our claims are so substantial, and they are being validated at the highest level in what I would argue is probably one of the largest commercial opportunities known- water treatment.
The water treatment industry is a massive commercial opportunity. So, do investors understand the value? A lot of people simply don’t know about it yet. We are in an early stage of disclosure, and we now believe that we are able to back up our claims. We are now sharing our story because we know it is very exciting and important., Our steadfast and trustworthy approach in the waynwe release this information about our emerging technology has held us back…until now. And now it is different. Why is it different? We now we have the credibility, the standing, research partners and the validations necessary to breakthrough that barrier of credibility.
So our business is very exciting and it is certainly dynamic at this stage. There is a lot going on with BioLargo, and our patented technology is right on the leading edge and our AOS Filter has opened up this promise of a huge commercial opportunity for BioLargo. Our culture is very entrepreneurial at heart and we strive on this challenge and the adventure to create and validate and commercialize these breakthrough technologies.
This is a moment. More than any moment in our journey before, a time in which our confidence about our bright future is so high, that we believe we are still just showing the tip of the iceberg of our future commercial opportunities. This is part of the reason we want to do the interview with you Juan, to get the word out, make sure that people have a sense of the significance of our technology– of where we sit and where we’re going. So we are very excited.
WSA: Well that is certainly appreciated and once again joining us today is Dennis Calvert, CEO and President of BioLargo, which trades on the OTCQB, ticker symbol BLGO, currently trading at $0.79 a share, market cap is in the $60 million range, and we like to thank you for taking the time to join us today Dennis and update our investor audience on BLGO. It is always good to have you on.
Dennis Calvert: Juan. Thank you for having us. It is our pleasure.
Juan Costello: Anytime.
*This transcript was edited from the actual live interview to provide clarification for the reader where deemed appropriate and the original unedited version is available at the link on this page.
Safe Harbor Statement
The statements contained herein, which are not historical, are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, including, but not limited to, the risks and uncertainties included in BioLargo’s current and future filings with the Securities and Exchange Commission, including those set forth in BioLargo’s Annual Report on Form 10-K for the year ended December 31, 2013.