BioLargo (OTCBB: BLGO) Offers a Solution to Water Pollution in Oil and Gas Industry

Orlando, FL 4/17/12 (StreetBeat) -- Contaminated water is a growing concern across North America, especially as related to the oil and gas industry. A December 2011 article posted by staff at the Natural Resources Defense Council highlighted more than 30 reported incidents across 13 U.S. states of drinking water contamination with hydraulic fracturing as the suspected cause. The author emphasized that those listed were only a sampling of reported cases “where a homeowner had enough detailed knowledge to know that a nearby well was recently fractured and specifically included that information in reports.” Cases were reported at wells owned by large publicly-traded companies such as Southwestern Energy Corp. (NYSE: SWN), Ballard Petroleum (now Encana Corporation (NYSE: ECA)), Chesapeake Energy Corp (NYSE: CHK), Devon Energy Corp. (NYSE: DVN) and Range Resources Corp. (NYSE: RRC).

Movie goers that have seen “A Civil Action,” starring John Travolta and Julia Roberts, can imagine that type of lawsuits that are ongoing in those communities claiming damages because hydraulic fracturing has polluted their water. Albeit that movie was about dumping toxic waste, it has a similar undertone as big business is disputing the claims of the residents. Concerned investors and citizens are encouraged to perform their due diligence on pollution and water contamination from hydraulic fracturing and other common practices in the oil and gas industry to better understand the magnitude of the problem.

There is a company that is establishing a growing presence with its ability to offer a solution to the malevolent hydraulic fracturing business. BioLargo, Inc. (OTCBB: BLGO), a creator of patented iodine technologies, has developed CupriDyne™-SAP, a proprietary technology uniquely suited to detoxify water in a variety of applications, including the oil and gas industry. Using Iodine in a stable molecular form, CupriDyne™-SAP is able to eradicate bacteria and sop-up heavy metals and radioactive elements. Iodine, one of nature’s most powerful cleaners, is simply combined with the somewhat ineffective filtration processes that are presently used. The reaction products are harvested; leaving clean water as the end product and eliminating the threats that watersheds, wells and groundwater in the area currently face.

The possibilities for the BioLargo technology are tremendous in the energy sector. Enormous amounts of water are used and/or generated (saline water is extracted from the ground with the oil and gas) every day in collecting oil and gas reserves. The ratio of produced water to oil is roughly 10 barrels of produced water per 1 barrel of oil. According to the American Petroleum Institute, more than 18 billion barrels of waste fluids from oil and gas production are generated annually in the United States. That’s more than two million barrels of tainted water every hour…and that’s just in the U.S.

Energy is an integral part of the Canadian economy. In 2009, the $80.2 billion energy sector represented 6.7% of Canada’s gross domestic product. Canada’s oil sands industry has been put under a microscope in recent years because of its contaminative nature. The oil sands of Northern Alberta are the second largest oil deposits in the world, behind only Saudi Arabia. Because of the way that the oil is trapped in the sands, it takes special processes – and plenty of water – to extract the oil and make it fluid enough to travel through pipelines. In general, three to four barrels of water are used/contaminated for each barrel of oil produced from tar sands.

In June of 2011, the Canadian Association of Petroleum Producers said, “Oil sands growth and new production from existing conventional oil reserves will drive Canadian crude oil production to about 4.7 million barrels per day by 2025.” That means that billions of barrels of polluted water will be generated in the process each year as well.

So what happens with the contaminated water? Theoretically, it is should be processed to ensure that it is non-toxic. According to the U.S. EPA, “Produced waters contain levels of radium and its decay products that are concentrated, but the concentrations vary from site to site. In general, produced waters are re-injected into deep wells or are discharged into non-potable coastal waters.”

Water contamination in the oil and gas industry is a growing concern. As such, people, companies and countries are starting to hone-in on what BioLargo has to offer. That’s why investors should be taking note of its corporate happenings. The company has been appointed as a founding member of a Canada’s Natural Sciences and Engineering Research Council (NSERC) “Industrial Research Chair in Oil Sands Tailings Water Treatment” formed to solve the contaminated water and tailing ponds problems associated with the oil sands industry, leaving the company in a prime position for growth.

“The core technology is well established and with the addition of our world-class team members over the past year, it is now a great time for BioLargo to refine, focus and execute to help solve serious problems that face industry and our world,” said Dennis Calvert, President and CEO of BioLargo in a recent company statement.

The bottom line is that green energy initiatives (i.e. solar, wind) are fantastic in theory and gaining momentum in frequency of use, but still nascent in energy’s big picture. Oil and gas are still going to be the primary sources of energy for the foreseeable future. There are plenty of reserves in North America to accommodate less reliance on foreign oil, but the industry has to transition its processes into having less of an impact on the environment and population. BioLargo holds a key to that evolution.

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Time to Watch BioLargo (OTCBB: BGLO) Go Cash Flow Positive

Austin, TX 3/1/12 (StreetBeat) -- Everybody in the investment world has a “shoulda, woulda, coulda”-type of story about an Apple, Inc. (NASDAQ:AAPL) investment opportunity that slipped by them. After all, shares of Apple could have been bought for under $4 each back in 1997. Pharmasset (NASDAQ:VRUS) was around $3 a share just four years ago, before it spiked to $160, did a 2 for 1 forward split back down to $80 and then got acquired by Gilead Sciences (NASDAQ:GILD) for $137 a share to nearly double again for its shareholders a few months ago.

Obviously, those are clearly extreme examples, but there are countless others that produced gains like Force Protection, Inc. that was a bulletin board play trading under a dollar that moved to the Nasdaq and rose exponentially. FRPT peaked at over $30 in just over a year from its lows before sliding back to around $5.00 and getting bought by General Dynamics last year. Solid companies with disruptive technologies, marketing agreements and distribution points can truly be game changers that impact the world and, as it may be, the life of a shareholder.

It does take a close examination of a company to discern what it really has to offer and just how big the company could go. Ask any CEO and you will rarely hear that the company isn’t going to be huge, so it is up to investors to perform their own due diligence and drill-down on the true potential.

Searching for companies with disruptive technologies that can provide viable solutions across multiple verticals brings BioLargo®, Inc. (OTCBB:BLGO) into the lens. The creator of patented iodine technologies, that delivers “Nature’s Best Solution®” – free iodine – to an array of problems, including odor and moisture control, disinfection, and contaminated water, BioLargo’s technology could be used in a multitude of industries that spans from household brand makers like Clorox Company (NYSE:CLX) and Colgate Palmolive (NYSE:CL) to energy giants like Suncor Energy (NYSE:SU) to Pepsico (NYSE:PEP) to premium pet product maker Central Garden & Pet Company (NASDAQ: CENT) and back again. In fact, the U.S.’s largest purveyor of pet products, Central Garden, has already recognized the value of BioLargo’s assets and signed an exclusive agreement to feature BioLargo technology in its product offerings.

Scrolling deeper in the examination of BioLargo leads to SEC filings that brought about questions that needed answered in order for a thorough evaluation.

For starters, when is the Central Garden agreement going to start generating revenue and how much cash will hit BioLargo coffers as a result? It seems assured that the deal will go, but it cannot be distinguished exactly when. With no definitive answers, the situation caters to the particular strategy of an investor as some prefer building a position in anticipation of the revenue and others favor waiting until cash is booked. How much? Per the standard, no guidance is issued, but the technology clearly has exponential uses and the agreement already signed with Central Garden calls for minimum performance thresholds that come due in the next twelve months in order for them to hang onto their exclusive rights. Consider; the cat litter product segment alone is nearly $2 billion per year, with environmentally-safe cat litter that eliminates all odor and as confirmed in side by side testing, out-performs all the competition, (which fits BioLargo’s offerings). This comprises only a small segment of the massive pet products industry estimated to exceed $50 billion annually according to the American Pet Products Association. Based on the minimum purchases stipulated in the executed agreement and average prices from competitors, the deal should net between $3.5 and $5 million per year for BioLargo on the low end. However, given the accolades awarded to BioLargo’s “Odor-No-More®” product, including a 2010 “Product of the Year” award by the Horse Journal for its animal bedding product, and the recent introduction of its Nature’s Best Solution- free iodine wash products for odor and stain removal, which most certainly fit nicely within the pet product category and Central Garden’s industry leading position, then, leaning towards the low end of expectations may be the safe bet, but quite possibly a low-evaluation of much larger potential as multiple products find their way to market with Central.

This license agreement with Central Garden is the first of its type for BioLargo, and alone it could take the company to profitability.

In the company’s filings, there is one glaring statement that could make investors shudder: “current assets of $270,757 and an accumulated stockholders’ deficit of $66,554,899.” These figures could be intimidating unless a proper analysis is conducted to see how the deficit was derived and what it really means. Biolargo, Inc. was essentially a different business before 2007 when it acquired the BioLargo Technology from IOWC, Inc. and also secured the ongoing services (and inventions) of its inventor (Kenneth Reay Code), both joining the team through a reverse merger and recapitalization transaction. The corporate entity, know known as BioLargo, Inc., had a long history dating back to an original incorporation in 1989 and a series of name changes and business endeavors before becoming BioLargo as it is known today.

Not a true representation of BioLargo today or its lean business model over the last five years, its deficit on the books includes all of the operating history of the previous companies dating back to 1991, the $12 + million that was paid for the technology through the issuance of stock, and, capital raises of about $10 million (at an average of 50 cents per share) to get to the point it is at today. A more accurate reflection of the cash deficit of BioLargo is the approximately $10 million that the company has invested over its five years in operations and development costs as the company is now nearing generating meaningful revenue.

Peeling-back the onion further, the filings show that the company has taken write-downs that will benefit current and future shareholders. The $12+ million purchase price for the technology came with an ongoing $1.1+ million non-cash charge to earnings per annum once revenue started to flow. The technology was originally amortized as an asset in accordance with GAAP accounting standards. But, by later taking an impairment charge in 2009, the asset was effectively written-down to zero, meaning that BioLargo still owns the technology it had booked it as an “intangible asset” that was written-off, eliminating any more ongoing amortization expenses. Those figures are factored into the overall deficit, even though they have no ongoing implications to the company’s operations. By taking the write-down, the ongoing expense is gone and will not affect future earnings per share calculations, whereas they once could have.

Another interesting component that is easily overlooked is the $1.93 million in aggregate principal amount outstanding on various promissory notes and $750,039 of outstanding accounts payable and accrued expenses that BioLargo had on its books as of the quarter ended September 30, 2011 (their quarterly latest filing). The operative words surrounding that debt are “We may pay the principal and interest due on these notes in cash or in stock, at our option, at maturity.” In fact, putting the filings under a microscope shows that all of the true debt of the company is mandatorily convertible to equity on a fixed schedule at fixed prices. Deciphering regulatory filings may sometimes seem like running an accounting obstacle course, but when all is said and done with the BLGO books, it is not unfair to say that the outstanding debt of BioLargo could easily be thought of as equity because of the mandatory conversions.

While there will be some nominal dilution over time as conversions happen, the company’s capital position will be preserved for continuing agreements that generate revenue. The company has been running at a low burn rate of about $1.5 million a year for the last 4 years while it was going through extensive test marketing, research and development to validate their proof of claims, intellectual property protection (27 new patents filed), new licensing agreements, manufacturing and overall growing pains. With that in mind, and potential revenue from its first licensing deal estimated at a low end of $3.5-$5.0 million annually, it would not be a stretch to expect cash from sales to cover BioLargo’s operating expenses.

As mentioned, the Central Garden deal is enough to pave the gravel road to profitability, but it is actually only a small tip of the iceberg and held in the forefront of discussion because it is expected to begin performing in the short-term. After all, it’s only one agreement. As the article began, “potential” is what separates the wheat from the chaff in the developmental company investing business and provides foresight for bigger things to come. For example:

The company has recently purchased a 50% interest in the patents and other intellectual property surrounding the Isan system, a proven iodine-based disinfection system in use across many industries currently. The purchase not only opens the door to more near-term revenues, but is a perfect fit for current BioLargo technologies to become a staple in agriculture production, processing and food safety programs.
BioLargo has been selected as a founding member of a Canadian NSERC (Natural Sciences and Engineering Research Council) “research chair” formed to solve the contaminated water and tailings ponds problems associated with the oil sands industry. Canada’s Alberta Oil Sands are the second largest deposit of oil in the world, but have faced great scrutiny due to water pollution. BioLargo’s technologies can provide a solution to a major issue in the world’s largest industry and they have been recognized by the NSERC for what they have to offer. Now that’s potential.
BioLargo’s technology also has obvious applications in the medical industry and the company is quietly assembling the tools to head into that field as evidenced by a recent hire of a Key Medical Industry Executive- Tim Johnson.
If leadership is a concern for investors, BioLargo has brought in leaders with unparalleled credentials to help gear up for the big league, such as former Halliburton Chief Technology Officer, Dr. Vikram Rao, as a senior advisor to capitalize on initiatives in the oil industry; former Pepsi-Cola International VP of Technical Services Harry DeLonge as a senior advisor to assist in penetration in the food and beverage industry; and added John S. Runyan, Former President and CEO of Associated Grocers and Senior Executive of Fleming Companies, to its Board of Directors that also just added Kent C Roberts, with more than 25 years of senior capital markets experience.

For the sake of any brevity that is left, investors are encouraged to visit the BioLargo website and read their corporate press releases to better understand where the company could be headed in the future.

BioLargo has a series of loyal investors that have supported the company through the most trying economic climate of our lifetime through capital raises tallying nearly $6 million since 2008. Apparently, those investors have read between the lines of the financial reports.

Ultimately, the books for a company with a long history such as that of BioLargo can really be viewed as a case of rather strict public company accounting compliance, that requires a diligent review, which frankly most investor’s just won’t do.

Separating the actual invested capital away from the history of the shell company and recognizing that any looming debt will be converted to clear the books, provides a clearer view and representation of the way that BioLargo is operating today as it nears stronger revenue streams. The fact is that the company has proven itself well-qualified to operate within its own means since the merger in 2007 and there’s not much reason to expect anything different as larger-scale sales begin to happen.

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Biolargo (OTCBB:BLGO): Former Pepsi VP Joins Team

BioLargo (OTCBB:BLGO) announces today that water expert and former Pepsi-Cola International VP of Technical Services, Harry DeLonge has joined the BioLargo management team as a senior advisor. Mr. DeLonge will work closely with BioLargo to help it capitalize on opportunities to commercialize its technology in the food and beverage industry. "I believe that the BioLargo technology presents a unique and cost effective solution that will complement and enhance food and beverage companies' efforts to advance their own sustainable water treatment initiatives throughout the world. I look forward to assisting management in this important work." Harry DeLonge is the President of Tri-Lake Group, a division of DeLonge Technologies, Inc.

He is a recognized expert in the food and beverage industry and frequent consultant and advisor to leading food and beverage companies throughout the world. His invention, "HOT" (Heat Optimized Technology) for carbon towers has been successfully deployed in a number of plants with leading companies. Mr. DeLonge had a 40+ year career with Pepsi-Cola International, serving as VP of Technical Services and VP of Manufacturing Technology with responsibilities encompassing over 300 beverage plants.

He played a key role in assisting Pepsi's expansion into China. He has been awarded a number of patents in the area and is well published. He is the past President and multiple award recipient of the International Society of Beverage Technologists (ISBT). He is a "Life" member of the AWWA (Gold Water Drop Award) and a member of a number of professional societies.

"With more than 40 years experience that literally spans the globe, we consider ourselves fortunate to have such a knowledgeable technical expert and supportive mentor to guide us in preparing to serve this important industry," stated Dennis P. Calvert, President & CEO. "Our recent technical advancements are opening up commercial opportunities within any industry that must contend with contaminated water solutions."

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