BioLargo Inc

OTC:BLGO

Earnings Call Transcript 2023-Q1

[Operator]

Greetings. Welcome to the BioLargo First Quarter 2023 Earnings Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Brian Loper. You may begin.

[Brian Loper, executive]

Thank you, operator. Good afternoon, everyone, and welcome to BioLargo's Q1 2023 Quarterly Results Conference Call. By now, everyone should have had access to the earnings press release, which was issued prior to market open, and the 10-Q filed report with the SEC. This call is being webcast and available for replay.

In our remarks today, we may include statements that are considered forward-looking within the meaning of securities laws, including forward-looking statements about future results of operations, business strategies and plans, our relationships with our customers, market and potential growth opportunities. In addition, management may make additional forward-looking statements in response to your questions.

Forward-looking statements are based on management's current knowledge and expectations as of today and are subject to certain risks and uncertainties, and may cause the actual results to differ materially from the forward-looking statements. A detailed discussion of such risks and uncertainties are contained in our most recent 10-K, Form 10-Q and in other reports filed with the SEC. The company undertakes no obligation to update any forward-looking statements.

And just a correction, the 10-K was filed with the SEC.

All right. And with that, I'll now hand the call over to BioLargo's Chief Executive Officer, Dennis Calvert.

[Dennis Calvert, executive]

Hi, Brian. Thank you, and thank you, everyone, for joining us. I appreciate it, and we've got a lot to cover, so we're going to dive right in. So May 18, at BioLargo, we make life better. We've been inventing for well over a decade multiple technology platforms, a number of commercial initiatives in what we call catalysts are driving revenue and growth that we're very excited about. We're going to talk about each of those briefly.

Remember, in the company, we really have 2 groups. We have the Environmental Group and Clyra Medical. And don't count Clyra Medical out. In fact, it's coming alive in a -- so very nice way, with its 510(k) clearance just before COVID. And now it's for sales, building distribution with reps and channel partners. It's got 3 channel partnerships in negotiation. It actually has a really significant future. And rumored net asset, BioLargo owns about 58% of the equity, and so it's coming on strong in the near future. We think we're going to start seeing results soon. We'll talk about what soon means in a bit.

Environmental, the Environmental group. Of course, we have Engineering, Water, mostly R&D, ONM, formerly known as Odor-No-More, really concentrates on industrial and supporting the supply chain for our real product called pooph.com. Pooph, of course, is driving significant revenue for the company.

We're going to talk about PFAS real quick. On the PFAS solution, we have our first customer engaged. We've scoped and priced Phase 2. We are literally waiting for the go-ahead from the customer. We've gotten to verbal. We're ready for a signed contract to begin Phase 2. We've built a significant distribution channel here. Remember, PFAS is per- and poly-fluoroalkyl substances, which are the contaminants called forever chemicals, often called now the contaminant of the century.

The EPA has just published its testing limits down to 4 parts per trillion. And literally, just about every industry that uses water in any way is going to be impacted by PFAS, including food, food production, food processing, water, drinking water, industrial wastewater, leachate from landfills. There is a significant buzz. And we have really positioned ourselves as an expert in the space. We're anxious to get to a full-scale implementation.

And the image that you see right now, there's a -- this is a portable unit. There's the design on the left. There's the actual unit on the right. There's the electrode panels on the bottom right. And this system is actually being configured to go into the field as we speak. We've got a number of clients that want to move forward as an early adopter. We do believe that the key to breaking open wide-scale adoption is getting our first full-scale implementation done.

I want to remind everybody, full-scale implementation in this field can be $5 million to $20 million. It's a big number. And so we're on the march. I wish it was faster, but our positioning as the solution of choice for economics, for ease of use, for a reduction in the waste stream, and as far as we know, we're the only technology in the market that can actually achieve a non-detect status.

That's a level at which science can't detect any residual. For the laymen, that means complete elimination. That claim is substantial. It's gaining us attention all over the world. And now, of course, we're working on a scaled version to deploy to the marketplace. Still very excited about it. It's slow, hard work, a grind, but very exciting, though. So we're going to talk about that as well.

Pooph. Of course, Pooph has led the company in its revenue growth. It is a wonderful product based on our technology. Remember that we're the supply chain partner. We make a small margin on manufacturing. We get a royalty on sales. Our partner buys from us. We sell to them. And we bargained for 20% of the brand equity upon exit. Their stated mission is to get to $100 million, consider selling somewhere between 3 to 7x, that would put that in exit somewhere around $350 million to upwards of $700 million.

The key there is that the product has the capacity, the ability, the wherewithal to support an international brand that can go to $1 billion in sales. And we certainly believe that's the case. Pooph is doing great. Remember that they recently launched nationwide in Walmart. We do have some clarity there. It looks like it's targeted to go into about 3,000 stores, that's the main Walmart stores. And that has been achieved in the last, to our knowledge -- and our partners informed us that that's been achieved in the last 30 days.

And so now we're watching the sell-through. The sell-through, historically, has been 3x the minimum expectation. It was adopted then by Walmart for a national rollout. And I think the most critical thing to note for everyone is not only is that marching forward and being successful, but there's also a number of other major retail accounts coming on board.

Chewy is very excited. That's the #1 online retailer of pet products in the world. I understand they do more revenue than the specialty pet like PetSmart, Petco combined. So this is a major force in the retail buying the pet products. Relative to Pooph,

I do want to point out that as the model was built and successfully proven on a direct-to-consumer model, and now there's a migration, right? So the migration means that now it's becoming a wholesale product into a retail channel with major retailers. And so the advertising campaign is intended to drive attention and steer customers into retail outlets to buy the product.

And so that is a shift. That means a couple of things to us. The first it means is that, often, as they launch into these national retailer accounts, there's a stocking up of inventory. And of course, we witnessed an extraordinary Q1, which we're going to talk about the revenue in just a minute, massive 78% quarter-over-quarter growth. And that is what we believe the representation of the stocking up of inventory that then leads to the sell-through.

And with the new large retail accounts coming on, we will likely see some lumpiness in that. I think maintaining a 70-plus percent quarter-over-quarter growth rate is an extraordinarily difficult challenge. But we know that in the long run, when we look at this over every 6 months to 9 months to a year, we think our growth rate will continue in a very positive way. Everyone is very excited about the product.

So revenues are expected to grow. Our partners tell us that they would generally forecast at something like 20% quarter-over-quarter growth for the next year. That's a loose estimate to target. Historically, they've exceeded those numbers, and so we're optimistic about the future of Pooph. And of course, it's a game changer for the company. It's taken us to near profitability. And we're certainly close to positive cash flow and near profitability. And I think the numbers are going to continue to expand over time.

The battery. This is a sodium-sulfur battery, not to be confused with the sodium-ion 1battery. We've done a lot -- quite a bit of work in this area. The response from the marketplace is pretty incredible. We continue to hear the same thing that if the claims associated -- the technical claims associated with this battery are true, which we certainly believe they are, then we believe that we'll sell as many as we can make.

It just fits a niche in the marketplace that's unmet by lithium and by sodium-ion, namely in their safety profile, the 100% charge-recharge, domestic supply, energy density that matches or beats lithium, and it's primarily designed for fixed site. The other thing I want to point out is the Department of Energy just published a [indiscernible] paper on LDES, long-duration energy storage, estimating that this massive number of $90 billion is required for the United States to keep up with the demand.

Being in the battery business over the next decade is being likened to being in the chip business in terms of its magnitude and impact globally. And so we think this is a great way to enter into the market with a design that we believe should be commercially ready soon.

We'll be manufacturing -- we're actually deploying some capital, building out a prototype manufacturing facility in Oak Ridge as we speak. That means buying parts. We've got a team assembled. We are building equipment. We're building a line. And we'll be in the making battery business in the next few months.

We had forecasted something like 4 to 6 months. Still, that's a good forecast, and we're on the march as we speak. Very exciting. And our response -- again, our response to the marketplace to this is remarkable. It has a chance to be arguably the largest revenue asset in the portfolio.

Financial performance is still pretty clear. Let's make sure we don't forget clear. We mentioned it briefly. I think the biggest news here is that the regulatory approval is in place to do what it's doing. It has a menu of product designs, but it's singularly focused on its Bioclynse as a wound irrigation solution fully vetted, cleared under 510(k) with the FDA for sale, okay?

It's got its first couple of customers. Got a number of hospital systems that want to adopt the product. It's got a menu of key opinion leaders who are literally the top physicians in the field and now channel partners are coming on strong. And we think this is a sleeper that's going to be extraordinarily high growth and margin. And so it's in the works.

I think meaningful sales are literally just in front of us. There's a process. To give you an example. When we sign up a major hospital system, that process can take 90 days, and sometimes, it can take 9 months. It's quite a grind. And so that's what's going on. We're signing up hospital systems going through the QA/QC and what they call a formulary to have these products approved for purchase while physicians are asking for them for the purposes of helping keep people safe from infection in the surgical suite.

And of course, our data continues to stack up, support our patent estate, and it is extraordinarily unusual and unique value proposition to be able to achieve extraordinary results as a leave-in product, high performance with no toxicity and no systemic sensitivity cleared to the bone and tendon. It's a leave-in product, unusual, matching the best with the best antimicrobial-killing agents known to the industry and yet gentle. And that's a value proposition that's unsurpassed at the moment.

Clyra is going to have a great future. Remember, on Clyra, we own 58% as well, 58% of the equity. Other direct investors and management have Clyra on the balance. Okay. 78% quarter-over-quarter is pretty dramatic. If you look at that on an average, it's about 29% quarter-over-quarter. That would kind of match what Pooph is also forecasting generally, right? As a 20% quarter-over-quarter for the foreseeable future and so the balance then is going to be the lumpiness of inventory, right, and launching into big national brands.

But when we look at the annual at 133% year-over-year, it's extraordinary, and the financial implications to the company are dramatic. We think that this rate generally can continue, although we don't expect to be able to maintain a 78% quarter-over-quarter growth rate. So a little bit of grace will be required, but the optimism for the long haul is just off the chart. We're confident where we're going.

So what does this do to the company? Well, of course, we've mentioned this before. At one point, our debt has reached a maximum of $7.2 million. All of that's been long since retired. We now have just a few SBA and a PPP loan in dispute. We're wrangling with the bank and with the SBA to make sure that we get it handled properly and, in the long term, 3% SBA loan. That's it. So no convertibles and certainly no toxic debt, almost none.

And revenues will continue to climb, which means cash flow. Net loss, right, net loss is shrinking. We mentioned in the press release, it's about a 75% reduction this quarter over a year ago, pretty dramatic. And our SG&A is pretty static as well. So notice that we're heading into that 0 mark towards profitability. Our net loss for the quarter was about $475,000. I'll just point out, a lot of that is -- most of that is also noncash -- noncash. So that's a P&L loss and not a cash loss, very close to positive cash flow.

Revenue versus SG&A. We included this really just to point out that we're not dramatically increasing our SG&A. That's important. It's also hard to do. I just want to point -- throughout the company, we have massive plans and visions about what we can accomplish. We try to leverage our partnerships very aggressively. And we do it in a lean operating style so that we don't ramp up significant infrastructure and staffing until we have contracts to pay for them.

And that is a hallmark of the company. It's why we're here, how we survived. And we're testing it as we grow because I think the demands on our team is impactful and dramatic. And so we're going to need to increase SG&A. It can't stay static, but we're extraordinarily careful because we're looking at the potential of a near-term profitability. And we think that's a very important mark, and so that's what we're doing.

Net cash used in operating activities. So there you go right at the line, right? Very, very close to net positive cash flow. I'll point out that in that cash flow item, we are making some significant investments as well, right? And so that was a big part of our accounting. And our reporting this period is to deal with internally constructed assets like the machines that are going into the field for PFAS, how to properly treat those. And so as a result, we're incurring R&D.

We're also building assets. We're using cash to build tools on the infrastructure that we think are critical for commercial success. And so the demands are still there, right? So we're putting money to work for the company. Very, very close to positive cash flow. We also think R&D is just super critical for the business. I mean, think about that. The -- all of these innovations just have a -- continue refinement.

Last year, that number was about $1.5 million in R&D. I don't see that number going down much. We're careful, and we're trying to focus on the things that can bring us near-term revenue, but there's some things we just can't avoid. It's just the nature of our business to continue to advance science and engineering to remain competitive with our assets.

$3.55 million net shareholder equity is a big number, yes. I'll just remind everyone that for an NYSE listing, the number is $4 million minimum. And for a NASDAQ listing, it's $5 million. And notice that we've done that sort of organically. We've done it with a combination of growth and small investments here and there to build that net shareholder equity over time, also deploying some of our capital into assets that can be deployed for income-generating purposes and the commercial strategy.

That combination, over time, and a persistent focus on that agenda has created net shoulder equity of significance. You may not realize it, but in the microcap world, we stand out as literally 1 in 10,000. It's an extraordinary feat. And now, of course, we think we're marching towards the potential significant success and profitability. That's ultimately where we need to get to.

So a couple of highlights are very important. We'll also break them down just a little bit. 78% -- 288% year-over-year for the first quarter, big number, at $3.742 million. Net loss reduced 68%, a huge improvement in our cash position over the course of the year. [ $302.2 ] million, [ $643.264 ] million in cash, that's, whatever, 3-plus times a year ago. So that's important. It also raises questions about when and what's it going to take for us to be able to position ourselves without a going concern, very important.

And we see that in our future. It's -- time will be required, time improving over and over, building the cash reserves, showing that our income opportunities have consistency in cash flow, all of those required to really go into analysis of that test. And we'll be looking to test that theory quarterly for the foreseeable future to see if we can position it r that important feat.

However, Environmental, of course, leading the way big time, 491%, 5x on Q1, 86% versus Q4 2022, pretty dramatic. Of course, Pooph is really the -- that shining star in that growth. It's remarkable what they're accomplishing, and we're so proud to be their partner, and support them with a product that has that capability.

We always believe it could, and now we're proving it can and thus have that potential to really be a national brand in the $1 billion range. Now we haven't proven $1 billion yet, but I think anybody that's a critic and look at it and say, does it have a chance to do that? I think with the combination of marketing and its unique value proposition, I think many people have included, yes.

Finally, Engineering. BioLargo Engineering, a couple of things there, and I know there's a lot of questions that come out about this. The first thing is how is the Engineering group? Well, they have a net loss, and there's a couple of reasons. Let's talk about it real quick, and I'm sure we'll have some detail.

The first is that they have a number of very large contracts that have been promised, but not executed yet. So promises don't work, contracts do. And we believe that those promises from the CEOs and our customers are real, and they will come to bear. It makes me pause and ask questions about macro impacts of the markets, credit markets, capital expenditures could possibly have some impact. But we have so many that have said we're in, we're in, we're in, that we just rest with that for a moment and know that the volume of business and staffing that will be required to fulfill those contracts is so substantial that we should consider ourselves fortunate to have a moment to catch our breath.

So what do we do when we catch our breath? Well, we advance our PFAS We build trailers. We focus the team on doing internal things to advance our commercial liability. So time is not wasted. But as a result of having a significant R&D budget component of their expense line, that shows up as a net loss. Because, of course, they can't record intercompany revenues, so [indiscernible] was at a loss.

The other thing to remember is that for BLEST, a year ago, we had very large contracts, very significant rapid growth and very large. So in -- by comparison, of course, we suffer. And then I just want to reiterate that the Engineering group, our esteemed professionals, and our confidence in them is extraordinarily high, and we intend to continue to build around them for success.

There's no real change in BioLargo Water, its R&D component there. I know some of the questions are coming about the AOS, and we'll talk in the Q&A.

And then Clyra's revenues are kind of not meaningful. But I want you to notice that the infrastructure build to be able to offer a high-qualified, FDA-certified, checking-all-the-boxes product in a highly competitive field are being done and have been done. And again, I just want to encourage everyone that Clyra has a future that is extraordinarily bright, and it will be a shining star in the portfolio. And I think it's coming. I think it's coming soon.

Okay. So I think we stopped there, and then open up for Q&A. Go ahead.

[Brian Loper, executive]

All right. Thank you, Dennis. A lot of exciting things going on, clearly. So yes, thank you for talking about Clyra today. We have some questions around that.

[Dennis Calvert, executive]

Sure.

[Brian Loper, executive]

So first one here, are there any regulatory approvals that Bioclynse is waiting on? Do you believe we will be recognizing income from it in Q3?

[Dennis Calvert, executive]

Yes, yes. No, there are no the regulatory approval requirements have been met. So certainly, it's a highly regulated product, but we've already done all this. So it is qualified with the current approvals to do what it's doing in the marketplace. And so that's number one.

Number two, yes, Q2, Q3 yes, we believe that we will begin to see revenue increases. It's hard to predict the exact timing and date. But given the volume of interest from the market and strategic partners, we know that it is near at hand.

So whether that's a quarter or 2 quarters, we're in the march, and the response from the marketplace is so encouraging that we know we've got a winner. So we're not afraid. We're excited.

[Brian Loper, executive]

Excellent. And can you talk a little bit about the distribution for Bioclynse, how it works with the hospital systems? We mentioned in the K that we're in the process with 2 of those systems, for purchasing Bioclynse.

[Dennis Calvert, executive]

Yes. What happens -- I'll give you the short version because it's a really complicated one. And it's fascinating because it kind of illustrates how difficult it is to launch a product into that market. But the simple version goes like this. It starts with the physician who wants to use it. That's how it starts.

And a clinician who says to an administrator or a purchasing agent at a surgery center or a hospital, I want to use this product, I think this is better, and it can help me with patient quality to manage infection. So then that organization, there's a contact made, whether that's through a rep or a distributor or direct, either one, and we go through kind of a quality assurance process in which they verify regulatory, they check all your FDA compliance, your supply chain.

They basically check all the diligence boxes, and that process goes through a committee,; that's a clinical commit by the way. And they also are going to be looking for economic rationale to justify bringing this product into the portfolio for use. And so that's a process. Some systems do it very fast because maybe because physicians pressure them, or they're cutting edge and they got it down. Some are very slow. Those communities might not meet but every 2 or 3 times a year.

So you have to get on schedule. That's what's going on. And once that happens, then the physicians in the network who are affiliated with those facilities -- and choose the products, and the hospital will begin stocking inventory. And so that's where we're at. That's why it's so slow. It's a really significant burden of time and labor. But again, what's happening is we're establishing customers that will purchase that product every week and every 2 weeks and every month for the foreseeable future.

Now I do want to point out, I think the thing that people don't often recognize about Clyra that's of dramatic value, we've had a chance -- since this has taken a decade, right, to get this product positioned and now seated in the market for its first adoption, we've had a chance to watch all the competition to do what they do. And there's been some really big competitors who've carved out market share and spent small fortunes. I mean, big money to establish the market.

And in each case, as they've established their position in the marketplace, they began to lose sales over time. Over time, like 5 to 10 years. And why did they lose sales? Well, it turns out that they're all toxic. They're all toxic. We're the only one that's not, okay?

So the value proposition is significant. And what's unbelievable is that you can achieve this capacity for killing bugs, this great efficacy, right, in situ in the body and in an open wound, and you can do so without destroying tissue. And so that required significant investment to prove, to prove to crew, which we've done. But now the gap in the market is getting wider and wider because other products that have significant market share are being terminated because they're toxic.

So think about that from selling. One way to sell is to create a market. Oh, my goodness, we've done that. It's really hard. So the other way is to sell by comparison with a market that's established with an alternative that's better. That's what we're doing now.

So the market opportunity is one of our guys says it's like a truck can drive through the gap. It's a big gap, and we're filling it. So we're very encouraged because what's really happening is there's a little bit of a buzz going on at the clinical side, talking about Clyra's Bioclynse product for these claims that are so astonishing.

And astonishing, meaning that they literally, with the claims, make it #1 in the world. I mean, that's what we have. And we always believe it to be true. And now we've proven it. And now we have to take the market, which is what we're doing. So I think that this is the kind of product that not only will find traction, it will be one of the leading products in the world. So that's the opportunity. So that's clear.

[Brian Loper, executive]

Yes, yes. And on that note, we have another final question about Clyra here. How many doctors are becoming aware of the Bioclynse efficacy? Kind of what's the marketing program around it?

[Dennis Calvert, executive]

Well, I think -- I don't know exactly. I think we have 12-or-so key opinion leaders who are listed on our website, be sure and take a look at that. In addition, I want to say we've got about 40 reps now, 40 reps signed up. And so a lot of these are independent reps, and they have a portfolio of customers. Imagine a rep might call on 100 doctors, right? So how many they presented to you? I don't know yet, okay? But this is the way it's done.

And then the other thing is marketing in this field is done primarily through what they call professional meetings. And a meeting is an event, like a wound event or a burn event or an orthopedics event or a biofilm event, where key topics are chosen, physicians will come in from all over the world, all over the country to get their continuing education credits and then also participate in these very high-level talks about the cutting edge of science and results. So we're attending those now, right? So part of that's budget.

We have national sales people, number -- we also have reps. And so we're out in the field attending meetings and participating in the education to position. So how many is that? I don't know. It's got to be, I mean, it's more than hundreds. It's probably pushing to 1,000. But I don't know. Again, remember that the way this works is when the physician says, "I like it," you still have to go get the approval and the vetting for the formulary to be assigned into the hospital. So it's -- this setup is a grind. The fruit on the back end is awesome. That's what we're doing.

[Brian Loper, executive]

Yes. All right. So let's change gears here. I've got three-part question, it's a pretty big question, but let's see how we can do.

[Dennis Calvert, executive]

Sure.

[Brian Loper, executive]

For shareholders, was wondering, can you provide a status update, specifically on the waste-to-energy project in South America, Ultra Safe Nuclear Corp. work and MLD sales?

[Dennis Calvert, executive]

That's a lot Yes. Okay. So the South American project is on a momentary pause. We finished Phase 1. We've been -- again, we've given a verbal for Phase 2 and I believe, our client, given some of the political unrest that's going down there is on pause for a moment, subject to financing, and wants to begin, but we don't know. We don't know when that's going to happen. And we know they're serious. They've invested almost 10 years getting that project positioned for success, and there's a lot of money at stake.

So we'll know more soon. And we continue to communicate with the client. And they've also brought us to an additional 4 opportunities overseas, and they've also given us a verbal on those, Phase 1, which will be quite significant in the multiple millions of dollars of services range, and they literally have said any minute. So we're waiting. So that's that. Second part of that question was that -- what was the second? Oh, only the 3 parts? Okay.

[Brian Loper, executive]

Ultra Safe Nuclear Corp.

[Dennis Calvert, executive]

Yes. I would say Nuclear has agreed to engage us on the next phase. They're very similar. We might have actually received the contract, I'm not sure. I need to verify again. But Phase 2 was additional work. So the relationship there is really good, again, very similar kind of situation, where companies are holding on to capital, slowing down the process. They need to do it. We've been assured of our position, and so we're confident in the next step. So there you go.

And then the third was?

[Brian Loper, executive]

MLD sales.

[Dennis Calvert, executive]

There's a lot of activity going on with Garratt-Callahan. Garratt-Callahan, remember, for those who don't remember, is the largest privately held water company in North America. So we've been together with them now coming on 2.5 years and have built a fully commercialized design and gone through the paces to make sure it's supposed to do what it's supposed to do, and it works.

So the selling channel is now in their hands. We had a little bit of a lull. So of course, we were originally projecting success -- commercial -- first commercial success about 9 months ago, and it has been delayed. I can tell you that the scope and magnitude of the attention within the organization of Garratt-Callahan has increased about tenfold. Where we had maybe 1 or 2, we've got dozens of prospects now being positioned in an evaluation and scoping process. I also say that they're aiming very high for the size and magnitude of these accounts.

And so it's a very similar situation. It's hard to be patient. But we have no question that we will launch commercially with Garratt-Callahan and that the product has a home for recycling water primarily associated with heat exchange and water cooling towers. And it's patented, and it is somewhat of a breakthrough, and it feels avoiding the market that's being unmet. So we're, again, no lack of confidence, lots of activity, many, many accounts.

The other thing we should mention, too, is Garratt-Callahan has also begun selling our PFAS solution. That's a very important thing. Remember, Garratt-Callahan came to us with their idea, and now they're adopting our idea, which is awesome. And of course, we're adopting their prowess in selling product into the marketplace, which, of course, they've proven for over 100 years.

So it's a very good situation. I wish it was faster. I think it's again another rude awaking of the complexity and the difficulty in breaking into the market, but we're going to win. There you go.

[Brian Loper, executive]

Yes. So yes let's switch gears here to Water. So on that train of thought with Garratt-Callahan, AOS clients using [indiscernible] so does that give us a referenceable PFAS client? Can we use them as a case study or testimony?

[Dennis Calvert, executive]

It will. It hasn't yet, but it will. Yes. It hasn't yet. We've got a number of early adopters, is what we would say, right? So our first account is a very, very large industrial account. Phase 1 is done. Phase 2 is proposed. They've given us a verbal -- we're waiting for go-ahead.

There's a number of others, really 3 or 4, that we believe have a chance to go. The clients are saying, let's do it, we want to go. They're smaller in scale, which is fine. They're not as big, that's fine. But proof of claim is really critical.

And so the more we stack up that, the better it is for everyone. And so we think that we'll have some of those early adopters move forward with us. And a number of those are coming from Garratt-Callahan. So that's important as well. So, yes. The key is they're not signed contracts yet, but they're in the process.

[Brian Loper, executive]

Yes. Now we reported with Montreal, forget Quebec innovation center or something like that, they have the AOS. Will there be sales coming out of that? Or is there business development efforts around that project?

[Dennis Calvert, executive]

Well, sure. Well, the AOS, of course, remember, is advanced oxidation. Advanced oxidation and what the AEC does are very much hand in hand. So one of the things, for example, is that we've discovered is how efficient the AEC is at removing chlorides, which is a big deal, chlorides. So we have customers who like it for that reason, all right? And so that's interesting. The other is that the AOS, this advanced oxidation machine focused on extraordinary difficult tasks, like micro pollutants or, in a turbine environment, competing with UV. That's basically its value proposition.

So in our lingo, in our world, our focus is to bring solutions to customers. And wherever those tools can be plugged into a treatment train as a full-blown proposal for a solution, that's what we're doing. The other thing that's important is that the distribution network we have are selling, which is now about 38 reps covering the United States primarily.

All of the products go into the catalog. So we have a catalog, right? And we've got a lot in that catalog. And we have some assets that we can sell that are made by other people because we're a solution provider. We're the expert that they call when they want to get it right, and they want to get it on time, and they want to get it on budget. That's why they call us.

And it's that customization that allows for us to distinguish ourselves from very well-established companies because most of them are trying to sell widgets. And widgets in the water industry is extraordinarily difficult and fraught with problems. So that's how we've differentiated ourselves.

So the AOS is a tool in the toolkit. AEC is a tool in the toolkit. RO filtration is a tool in the toolkit, right? All of those things go hand in hand. And then we work with clients to design custom processes. So I believe the first sales for AOS is going to happen that way. We're going to find spots where it definitely fits, can work, and we plug it in through the treatment train, and we find our first commercial adoption that way.

The innovation is remarkable. It's ahead of its time. And selling it as a stand-alone is going to be very difficult, not impossible, but very difficult. And so we continue to plow forward there. The Montreal is a commercial proof of claim by esteemed researchers. And so that will end up being peer-reviewed papers, which goes a long way and position yourself in a global market. And so the AOS still, we believe, going to find a home. What's happening with the company is we have so many opportunities. There's only so many hours in the day. So rather than, say, we're going to be an AOS company. We say we're a solution company within AOS, and that fits with our mandate. I hope that answers the question.

[Brian Loper, executive]

Yes. Thank you for that. All right. Let's move on to CupriDyne and odor control. So we launched a partnership with BKT. That's got to be maybe 2 years ago now. So folks are wondering about the success with that, any holdups, kind of what we learned from that whole process?

[Dennis Calvert, executive]

Well, it's another testimony of how difficult it is, which we already knew. I mean, it took us years to get ourselves situated in the U.S. market. And so they're having some of the same difficulties we had in getting through the barrier to entry. They haven't quit, though, and they're excited, and we are in constant communication with them.

We're also in communication about expanding opportunities. So there's a lot going on there. It has yet to pay. I'll remind everyone that they made a strategic investment in the company. We took some of that money invested in a joint venture on a non-diluted 40% equity. So it's a good deal for the company.

And also remember that it positions us to now have manufacturing capability in that region to support Southeast Asia. And that has become increasingly important. In fact, just to think about Pooph by itself, that sourcing in the international markets will become increasingly important as Pooph grabs the international market. So -- so this is strategic. It's long term. We don't measure it in terms of quarters. We think they're great partners, and we think they're going to land well.

And so I wish we were making more money faster, but I think it's a wise move. And we certainly think we've picked some winners there. So the biggest testimony is just how difficult it is. It's a very difficult challenge to break into that market.

[Brian Loper, executive]

Got it. So the deal with Ikigai, very positive. You shared a bit about that in the presentation.

[Dennis Calvert, executive]

Sure.

[Brian Loper, executive]

One question here. Are there talks with Ikigai to pursue additional licensing for CupriDyne in other markets.

[Dennis Calvert, executive]

Sure. Always, Yes, always. I mean, that's a constant conversation. Notice that they're testing products here and there -- what the industry would call it a build-out, it was called a brand block. A brand block would be multiple products that fit the Pooph brand in the pet category. There has been discussion about moving beyondpet, although Pooph, as you might expect, really wants to maximize its time, energy and money to build the highest concentrated value in a category. And so they're primarily focused on pets exclusively, and that's where they're making hay. That's where they're building their brand, and they're having significant success.

So the idea that because they're skilled marketers, they could also branch out into other categories, maybe, maybe not. I think they could -- but remember, in this endeavor, they're the capital. They're financing the rollout of a national and potentially international brand. So how many times can you do that? This is -- what they're doing, we've always identified as an extraordinarily high-risk proposition requiring great capital and great skill, and they have both. So they're doing quite well. So to wish upon them than expanded scope of high risk and high capital requirement. I'm not sure that's really in our best interest at the moment.

So the way to think about it is they've acquired the rights to the pet category, we have all other categories still controlled by the company. And as they rise up, literally, all ships rise in the rising ride, So that's what we're seeing. And we do think additional strategic partners will come on board, as they already have, right? They're not as big and flashy as what's going on with Pooph, but they're in place, and we've got more coming. But we like it that way.

But of course, the conversation is always open. They're great partners. We're thankful we'll be working with the team at Pooph. They're extraordinarily skilled at building content that allows customers to recognize the value proposition and make a yes buying decision intuitively when they watch that video, and they're good at it. So that answers the question?

[Brian Loper, executive]

Yes, it does. Thank you. Yes, I think we've answered the majority of investor questions. I'll give you a tough one to end on here. So folks are wondering your reaction to shareholder reaction to the earnings release, kind of shareholder price, volume. Are people [indiscernible].

[Dennis Calvert, executive]

Yes, let me give you a better -- I think there's a better way to do it. We're out into the marketplace talking all the time. So we do presentations internationally, we were just in Puerto Rico, high-net worth retail investors, I mean, some early-stage institutions. And so there's a dichotomy, right? So let's just break that down.

So the way that works is when people look at the company, the first thing they say is, you're way undervalued. So that's pretty much uniform. You're way undervalued. So number one.

Number two. Congratulations, right? Because you're on the verge of making positive cash flow. You're right there, and you've got profit in sight. That's a big deal, took a long time, a lot of money, right? So the people say, congratulations. That's the second response.

And then they say, how quickly do you want to uplift? Because what they're saying is, right, trading on OTC is a tough place because you kind of get trapped in this, like we are now, in this $0.20, $0.25 range, we kind of have a bracket. Is it going to go beyond that? We certainly believe it should, in many ways, it already should have, okay?

So now we've got standard distribution of an investor base. We've got some overhang to sell through. It's common. We're going to chip away. We're also going to continue to increase our numbers in a dramatic fashion, like we have. So the combination will overpower it. I believe that to be true, and I believe the commercial opportunities that we are focused on are so significant that it just won't matter. It just won't matter.

Is that a situation that happens today? It depends on what happens to the market. I know that the capital markets in general are in an uproar. And we may have seen a tech rally in the last 4 or 5 days, but I think there's a general sentiment that there's caution to hanging on to dollars, and that's going to impact everyone, including us.

So for us right, what do we represent? Well, we represent an extraordinary high level of return opportunity, right, where the core technologies have, in many ways, been derisked to the level of acceptance. We've also demonstrated an ability to execute with some discipline to generate now, breaking the cash flow and opportunity for positive cash flow, leveraging the strategy, right, strategy of invention, finding the market, leveraging through channel partners.

That's a tried-and-true process. It's the right process for us. And so now you say, well, which of these assets are going to find the market? Well, they all are. That's the answer. Clyra is going to go. The batteries are going to find a home. PFAS is going to find a way, bundled into a solution provider's umbrella, that's what we're doing.

Obviously, odor control has got a home, and it's got more home to find. So this is a business that, I believe, at this stage, is undervalued. On the -- that's on the optimistic side, of course. That's who we are. We believe in what we're doing.

But we're still trading in the OTC market. We've got a lot of investors who traded into the company in that 2017 to '22 $0.26 range. And if they're a seller at $0.21, shame on them. We're bullish on the future. So we think it's a great future, and we're going to continue to execute.

So in the long run, we don't think it's going to matter. In the short run, we've got to work through that overhang. And we would encourage people to think long, if they can, because, really, in terms of the status of the business from a year ago to today, it's like a new company. People need to view it as a new company ready to roll. We're pretty bullish. There you go.

[Brian Loper, executive]

Excellent.

[Dennis Calvert, executive]

What do you think, Brian? Have we covered it? Brian, are you there?

[Operator]

It looks like Brian's line has disconnected.

[Dennis Calvert, executive]

Well, let's do this, Dan. We'll take a minute. I'll just wrap up. We appreciate everyone staying in touch with the company, of course. I want to remind everyone that we've got an Annual Stockholders Meeting on the 6th. So if you're a stockholder of record, you're certainly invited. We'd love to spend time with you. It's at 10 a.m. in Aliso Viejo. Reach out to the company, if you haven't.

If you're not on our mailing list, everyone, [indiscernible] if you're in the mailing list, please reach out to us. You can send it to info@biolargo or me or alex@biolargo, whatever it takes to get you connected. We're sending out content about once or twice a week, at least, and there's a lot going on. If anybody's got questions, I'd love to entertain them.

And again, thank you for the support, and we're really looking forward to continued push. And I think for -- just again to reiterate for Pooph, we're going to watch sort of a settling in and, in a big push, retail. And so we're still figuring out what that means to us, but it's all very exciting. There you go. See you on the 6th.

Operator, thank you very much.

[Operator]

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.