Q4 2023 BioLargo Inc Earnings Call

Participants

Brian Loper; IR; ClearThink Capital LLC

Dennis Calvert; Chairman of the Board, President, Chief Executive Officer; BioLargo Inc

Charles Dargan; Chief Financial Officer; BioLargo Inc

Presentation

Operator

Greetings. Welcome to BioLargo annual fourth quarter 2023 earning results conference call. (Operator Instructions) Please note this conference is being recorded. I would now like to turn the conference over to Brian Loper. You may begin.

Brian Loper

Great. Thank you, operator. Good afternoon, everyone, and welcome to BioLargo's 2023 annual results conference call. By now, everyone should have had access to the earnings press release, which was issued yesterday prior to market open, and the 10-Q report filed with the SEC. This call is being webcast and is available for replay.
In our remarks today, we may include statements that are considered forward-looking within the meaning of the securities laws, including the 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 Form 10-K, 10-Q, and other reports filed with the SEC. The company undertakes no obligation to update any forward-looking statements.
And with that, I now hand the call over to BioLargo's Chief Executive Officer, Dennis Calvert.

Dennis Calvert

Hey, thank you, Brian. This is Dennis. Thank you, everyone, for joining us. We're going to cover quite a bit of territory. Also want to mention Charles Dargan, our CFO, has joined us as well than me presenting some of the financial information and also available for Q&A.
So just a real quick review of who we are and what we're doing, right? BioLargo will make life better to be calling focus on purposeful innovation to make change for good for clean air, clean water. And remember, our strategy invented, prove it and partner a partner for success, and it's a critical component. So who are we write? Well, safe harbors, Brian cover that cover that quite well innovators and scientists, passion about doing something important for sustainable innovation and human health, driven by this purpose, but for best in class solutions, lots of engineering, Heavy Engineering emphasis and focus on problems with our solutions.
We do now, of course, since the first acquisition of the biological technology in the spring of 2007, and we have years of innovation and multiple platforms. We call the biological engine, the innovation engine at the corporate office. We have we have deep engineering staff joined us about five years ago, making significant contribution. Our company up in Canada is now called BioLargo Canada heavily emphasized on it focus on R & D recipient over 100 grants critical piece of the puzzle as well as we as we delve into these advanced developments for our technology is not going to cover all the details, but I do want to publish these details so that when you look back to it. You can see some of these notes, but the punch line is clearly Medical is really focused on product launch, and we've recently made some significant acquisitions of capital equipment for our contract manufacturer contract manufacturer, very critical clear has gone through the regulatory, the design, the complete safety protocol, QA, QC contracts out manufacturing, very important contracts and manufacturing that builds distribution through relationships. That's that partner component. And we're in the process now preparing for some significance. We've been talking about that for months. It's very close at hand and we're excited about the future for nuclear energy. It's a new technology. We've built a small manufacturing facility. We're making cells for testing. We're on a journey there. It's quite exciting and we've got a number of partnerships that are in development stage. We'll talk about that in a minute. Of course, we can't miss O&M environmental for our odor and our blockbuster relationship with Cook eat it continued to break records, a trend that's astonishing and the rest of the financial results speak for themselves there. They're just impeccable. And we heard just the other day, they're calling the fastest, the fastest-growing odor control product in the world, right anyway. So a lot of social media buzz on that product mix, incredible. They've done a great job. And then of course, our water solutions company, right by Argo equipment solutions and technology. This has now brought together all the innovations. We've got first customers and P5. We've got a significant robust pipeline and our all of our operating units supports that enterprises and commercializes those technologies. It's arduous, Rich, and we think going to be significant.
I'll now pass this to Charlie Dargan to talk about the results for the year and some of the commentary that. Charles wants to step in here with me.

Charles Dargan

Okay. Great. Thanks, Dennis. Personally, it's really been exciting times for the company and for me to be involved with the company. So very excited to be here. And it was a great year for us. We had a 108% year-over-year increase in revenue, a doubling of stockholders' equity with very little debt, and our cash balance was $3.5 million.
From this chart, you can see the accelerated revenue growth from 2021, culminating in $12.2 million in 2023. And even in the 2023 year, growth has accelerated with the fourth quarter revenue of $4.4 million, which was a 64% quarter-over-quarter increase from 2020-- third quarter 2023.
Although we had a net loss of $4.6 million in 2023, it's still a 9% decrease from 2022. The net loss contained as non-cash expense -- 60% non-cash expenses. So from a cash basis, we are we had a really, really good year.
Most importantly, our cash burn has declined dramatically. BioLargo almost -- we almost broke even in the fourth quarter as we're showing right here. And and the cash used in operations was really only $2,000. So back to you, Dennis.

Dennis Calvert

Yes, it's a great summary. Real quick what's interesting often, people you have to dig a little deeper. But as you dig into the use of cash, we would remind people that there's some projects in some business development like ClearOne Medical, where we've accelerated some of the expense in preparation of launch a product in a big way. And it just kind of comes with the territory. Same thing really for which which was primarily financed with outside investments. Very important outside investment is the key and the same thing for the battery technology outside investment brought in about $1 million, just under $1 million, and we use that money to invest in equipment. Some of that's investing activities, some of it to support a rather nominal overhead in the development phase in preparation of proving out batteries and get ready for commercialization. So while we've expanded some of the opportunities, that's basically I want to make sure we're covering that concept.
Anything else, Charlie?

Charles Dargan

No, not at the moment. It's like I said, it was a great year for us and the performance, it shows that.

Dennis Calvert

Yes. And then you know, maybe just to add we believe that the trend of this performance will continue. Now when we say that we always have a little caveat, we're into Q1 now we're not in a position to provide guidance. But what we can say is the trend is continuing. And we've had a great first quarter and there's always a caveat because there's a couple of numbers that we just won't know, we just won't know for another probably 30, 45 days, at least, and that's primarily the royalty and the work in process and those will impact revenue. But what we can say is with that trending and the significant performance in Q4, we would expect a similar type performance, if not more, to continue in Q1 and beyond.
Now we always we always have that caveat a lot of the results we don't control, especially when we're partnering with third parties that take product to market. So if they are content able to continue their historic trend like too. And they continue that trend from 2022 to 2023 and 2024. It's going to make our system as a blockbuster year for Largo. And so we anticipate that trend to continue. This over equities increased knows the number, everyone, just why do you put this number? So remember, when we contemplate the potential uplisting to a national exchange. This will be a big number. This in a very important number. And as X percent at about $5 million also make sure that our burn rate is low as we're demonstrating with improved cash flow as we did in Q4, as revenues climb the rate of increase of overhead as nominal diminish, we believe it will continue to stay soft, and that will give us the ability to continue to accumulate cash and ultimately build that shareholder. So proof we cover that. Just to remind everybody, the business deal number would the Company was formed by a key guy marketing works women's business deal with a company called taste to manufacture a product using our technology. We control the manufacturing for them on a cost plus a minimum warranty excuse me, royalty. And then we participate ultimately in the exit of two, if it's ever sold for 20% of the exit. They stated their mission to achieve $100 million run rate. And at that point they would consider some sort of exit. And we've been with are on track for that. Last last count on our side was close to $10 million, which means that prove has a shot continued if it continues its current growth rate and its stated target at 20% quarter over quarter has a chance to double again this next year.
So it's a big part of our business and we're very grateful to them. They prove an exceptional at their ability to build a brand and compel customers to make a buy decision post the great product, of course, and it's a wonderful testimony to the science behind the products and even in the industrial side, right? This is these are products that they work and whose value proposition hinges on the claim that it can completely eliminate odor completely eliminate odor dose for dose when delivered right and proper way, it's going to it's going to provide a reaction that breaks down the others compounds that won't come back. It's joined many national retail accounts. It's continued to expand. Again, the numbers speak for themselves. New products. The wipes have been launched and pumping pads for introduced it Global Pet Expo. It's a great little side story. They brought puppies in the shop in the booth and put a bunch of folks stands in the middle of the books and everybody wants to get the copies. And of course, the products really eliminate odor in an incredible way. And so this is another great testimony to the long cycle of innovation by Largo that allows us to turn up these products on demand for an existing distribution channel. That incremental innovation is profitable and meaningful for many, many ways. So we're grateful for them. We expect great things from proved to continue. And we wanted to highlight clearly because we've started putting some money to work here and we did mention this in the K and again, just want to make sure we're clear. We're working with a third party that's contract manufacturing, third party FDA compliant manufacturing. That means we're not we're not going to be in the factory business. We're going to be in the contract with the battery business and building through distribution. So our role really focuses on the design, the QA, QC, 15 compliance, the position in the training for distribution to take products to market. We just committed to about [$800,000] that's ongoing worth of equipment that will go on site for a contract manufacturer.
Just I just want to note that the contract manufacturing at this stage for this type of product is also quite significant and they've made substantial commitments to be able to support what we believe is going to be a significant rollout. It's all in preparation. We're anxious for more news BioCleanse and start via clears out as a wound care product focused on Wound Care. So that would be like diabetic ulcers that sort of work. Rsv is a great product to is not quite ready for market. And there's a menu of additional product designs. We think clearer is not only a fulfillment of the original innovation is founded the company. So it's a full circle story. It's also has a chance to be one of the most meaningful impacts and highly profitable operations. So we're anxious to start demonstrating results. They're very active and intense and so stand by for more information PFS, we all know about PFS, mostly, it's called forever chemicals and everyone seems to have caught on to the fact that PFS is a big problem. All kinds of words describe it is a big problem and people starting to spend money. Some early adopters jumped early, some of them probably regret what they did, but they did jump early. There's a lot of people poised to take action, primarily hinging upon finding good answer like ours and also upon regulatory clarity and the federal government through the EPA's analysis become becoming soon with regulatory standards will be published book that will set the case for the Clean Water Act and others. Our value proposition, again is real simple. One of the deep dive happy to do it offline. Stimulus is thought through it's really very simple be the most excellent collector, be the most excellent collector. And we're seeing all kinds of different types of water. We can save money and where we create literally to two pounds of waste the competition creates up to 80,000 pounds. If that materials has that require special handling and destruction in handling the cost of managing the waste streams, just literally off the charts. And so our value proposition is efficiency, competitive CapEx and extraordinary lower OpEx. And it just makes a lot of sense to be the most excellent collector. The work is continuing. And here's a great example. You want a truckload of carbon or you want to pay off all of our spent media. I should that P. phosphate that collects on our eight you see?
Well, the answer is obvious. You want a small PMPM, small-ticket managing cost of destruction costs of handling. This is low and manageable Perrigo. The pilots have been incredible they've done it for over seven states for types of water, including late landfill leachate. That's really important member. We've been serving the landfill and the waste handling industry now for almost eight or nine years. We have national accounts and relationships. Pfis for landfill is a big deal that's investment that some tough water to manage and P5 is extraordinarily common in the landfill. And so this is an emerging field of regulatory action. We're doing trials now with some of them, some some big customers and our results have been highly encouraging. And so we believe that will be an expanded segment for our commercial future for our people solution mobile treatment unit. You've seen it before, was this for?
Well, we want to show that this unit can go out in the field to people. It works as basically you can also treat a small body of water to functional unit. And and you know, it's it's We it's running all the time was running all that either in our office or out. But really it's the kind of unit that allows us to demonstrate portability and functionality is required. And then this is a scaled units. The unit on the right is an image of something like 1,000 gallon a minute system. I recall that earlier this year we announced, our first pass project in New Jersey is underway. Monies flowing work has been has begun construction. We're targeting targeting successful installation sometime by November of 2024. So stay tuned for more information on that. And we know our pipeline is robust. We have a big internal debate about what the pipeline means, how much of how much business it really represents. And of course, one of the things we caveat is some of the selling cycles can be long. These are very large capital projects we've had. We've had projects that have taken us six months or a year to get to even the closing cycle. Some can be longer. But what's happening for us is we're stacking them up. So we go through a scoping sometimes a bit sometimes not trying to become sole sole source supplier. There's also two relationship they're advancing. It's incredibly demanding work. It's active. It's a it's a significant pipeline of business and we believe it's kind of like a domino effect. You know, what's what's the big caveat? Well, everything wants to see scale deployment as number one show scale deployment and put it in the field, show me show me where it's working well, that's in process as we speak as number one. We're also working with a number of government groups to get sponsorship to work through a scaled, large scale deployment. And we just remind everybody, you know, these are these projects. The low end is probably around $0.5 million range versus what we're doing currently, but they go all the way up to $8 million and $10 million-plus. So these are these can be big projects. And so again, we're in it to win it. We believe we have a winner and we're experiencing the grind of getting adoption in the marketplace, but we have no fear and we're highly confident in what we're doing and the selling partners.
The other I'll just mention Gary Callahan real quick. Your account in Washington has been great slow long, long process to bring new innovation to the marketplace. But the number of projects and the breadth and size and scope of them is expanding and dramatic. And so again, we're predicting success and we know it's been a long time coming. So both here at Calian biologics anxious to get that done from a solidity. This is the brand of our battery tech and we like it. We think it's a winner. And we've done quite a bit of work since we last spoke with our shareholders. So let's do a little bit of that in addition to these articles around the last couple of days. One is I wanted to point out this is in Forbes Magazine, the long duration that that long duration energy storage key is the core to tripling the mills by 2030, meaning you can't do it without it. You have some place to store energy to accommodate renewable energy has to go somewhere. The grid just can't store grids going to use it storing balancing the grid critical piece. It's all over the news. And then this other article, Google and Microsoft seeking technologies, you know what it really shows is that the customers, the ultimate customers of these batteries are the people that need the matter who's at Big Data share data centers up renewable energy, yes, people to support the grid utilities, the heavy industry, they need the batteries. And there's a thesis we're going to talk about in a minute on what we think a good battery is and why we have a chance to win big here. So lithium is a problem. You know, the fires, the real risk is high thermal runaway. It's when one fire lights and other cells kind of go off and off system going. There's a huge global suppliers and outcry, some of the geopolitical things we've been talking about. My politicians and economists globally are impacting this. They'd like to see Made in America. We'd like to see domestic supply. They'd like to see non rarer elements be put to work and the incentives and the things everyone, they're pretty astonishing between the IRA and the Made in America tax are significant, but there's more there's more anyway, I think everybody knows that and it's become really visible start with. We have a better battery, right? We've it's funny. People seem to name. We've called it sodium sulfur. We've held liquid sodium sodium battery. What we've discovered is that the name is a little tricky because the performance of our battery is so different than traditional sodium sulfur, namely in that we can perform at extraordinarily much lower temperature and it fails to really give value to the to the to the name. So we're redefining that referring to how we fit in the competitive fast-moving world of competition. But the punch line is we think it's better why is it better will just answer better, not venting, longer-lasting. We've proven up to 10 years. We think it's going to be a 20 year boundary for any to prove them and we can do a domestic supply 100% domestic, and that's an actual sale that's protein from the right from when I show you, though, that we've made some progress and the production stats not going to alter the staff announced. It's too much detail, but I want to show it I wanted to be published. So people can really stack it up high energy density, right? No loss and discharge a lot of these batteries, they just sit there and they lose their energy. I mean, it's it's not okay. And they're also limited in their scope like lithium charter and charged 80% discharge to 20%, gets 60% of the functional energy storage anyway and a nice high voltage and in very low comparable low low operating temperature seems to optimize around once they see their mobile-only low risk, no wearing elements. And the combination make our battery for long duration, fixed site, long-duration energy storage winter. These are some examples of the various put up system that the competition does. And we just wanted to point out, these are fixed site batteries, and we would compete with those designs for one megawatt hour and a 25 kilowatt hour design. We believe that's where the market's going to risks in that 20 foot trailer design. And so this is industrial scale backup for all sorts of different applications. Now we're making ourselves. We will when we have cell ready for testing, which we believe soon will be holding that up and saying, hey, it's ready for testing. And once it goes out, we'll be validating its metrics for performance. That metric for performance is our our desire is to replicate the prior data to be able to stand with third party confidence that we have represent we can present a viable designed for commercial scale and scope of manufacturing, and that's mixed. This is all located in Oklahoma and see this we put about $1 million into this, so not $100 million, but certainly real money. And we also had some staff and so yes, people talk about that saying we're very excited about the battery, and I'm going to explain that on the next slide. How do you make money with the new battery tech, right? You make money?
Well, if you look carefully at the incumbents who's in the battery business, they tend to follow a pretty common trajectory. They spend a lot of money sourcing. They do a lot of money. Maybe they get government support, maybe they don't, but it's a lot of money is very capital-intensive and it's risky and expensive. And we looked at that. We said, you know, we don't want to do that. We're not over yet. That said, we're going to focus on doing what we do, which is Savant proven partner and so as we went out to the marketplace, two things happen. The first thing is that we had this little factory this little plant and we look at ourselves as it could could we make commercials designed batteries here and the conclusion was yes. And that doesn't mean it doesn't have some some hurdles, right, staffing and all that scale. And you could make a lot, but you can make commercial design batteries. So we've concluded that and we looked around and we said these processes, some of the automated center, not but there's a level of automation that can can occur.
We also look very carefully at the components. We decided really that the components, the manufacturing of the components that make our battery was going to be the key linchpin to being able to scale up manufacturing. So then we sat around and we ask ourselves who who once these batteries who needs these batteries and I wonder.
And we asked the question, so I wonder if we could show the world that we had a better battery, I wonder who would partner with us to make better batteries for either their own use or for sale, right? So just like these articles is big data guys have all the money in the world. They need these batteries to function they need them to function and expand and they'll pay for them and they'll invest in them. And so we really have formulated a model. It's still it's still being formulated, but we're talking with people we ask ourselves, do we want to sell batteries, Duracell battery factories. We do selling battery factories as the business to be in. So that will preserve cash that means that we're higher, we help our partner, build and operate, build and then operate battery factory, whether for sale or for their own use and participate in that on a licensing basis so that we can really exploit our key value.
Our key value are key are critical metrics that we can perform at, which is the design, the engineer implementation, manufacturing it leverages our core competencies. It also shares well creates extraordinarily high ROI. And then ultimately, we scale up for the production of critical supply chain components with a design that we own. That's our battery. We think that model is a winner thing. And so we've gone out and tested it and the level of response has been extraordinary. I mean, extraordinary people people come to us and say how many can we build? So there's a lot of chicken and egg there. So we point that out for everyone, first things. First, they have a battery that you've proven to a third party spec. So that's what we're doing now.
Okay. I've got to get that done at that point. They'll all sorts of questions like what do you do with offtake? And that's why we point out this third piece of the puzzle, the offtake when you're going to do with the battery's ability to have a mass supply. What you learn is that if you're going to be in the energy business, you do need some batteries. If you're in the renewable energy is requires sufficient. California. We can put up solar without a battery. And we're seeing companies with two year backlogs and production and purchase order for commitments for half of 1 billion megawatt hours of batteries. Those are those are forward commitments in the $300 million and $400 million, $500 million range. I understand that there's a competitor that's in the space doing a zinc bromide battery, they got $1.2 billion in standby orders, $1.2 billion. So we look at that and we say, you know, a better battery has a market, and we think it's such a good market that if we find the right partners, we can exploit it commercially. So this is where we're heading to. And then, of course, there's a marching order and the track to success for that technology.
And what are you going to do?
Well, the automation test themselves, you got to scale up the patch for commercial grade makes some partnerships and build out some component manufacturing to ultimately get to scale. And we think the market is literally in the billions, and we think that we have a very important role to play if you do a deep enough dive, but you're going to find out as all sorts of people racing to be in the long-duration energy storage business. But so far, we've not seen a battery company with a technical spec that matches ours. So therefore, we're very encouraged. And yes, we have a lot of work to do. So that's then I'll sum it up. We're very excited about last year was a great year for Sangamo now, and I hope we've provided some clarity here on our financial picture and our expectations near term and long term, and I will now turn this over to questions.

Question and Answer Session

Brian Loper

Great. Thank you, Dennis. That was terrific from the team. There's been a lot more attention on BioLargo in the recent months, and it's been pretty exciting. We might have some new folks on the call today, and I was wondering if we could back up to that six year revenue chart, and that is pretty incredible stuff there.
And one thing I was wondering if you can clarify is talk a little bit about the bio Argo business. It's the parent subsidiary model. You've talked a lot about the cycle of innovation and having a portfolio of clean tech products. Casino hadn't like irons in the fire, the shots on goal versus a traditional model, maybe just product and services sales. So wondering if you can just give us a brief history and high level of this past six year revenue chart and how this unique business model plays into this yeear?

Dennis Calvert

Yes. I mean, there's a couple of great examples there. Of course, the the older the older business is the most vivid testimony of the how the business model consumption and reward everyone find everyone.
So the idea, of course, is that if you go back to the history of the Company, we first acquired Ballard technology. And in that process, we discovered and refined the idea that this this chemistry can be used for odor control and a really nice way. And by the way, has many other uses. It's a platform technology. Odor was one of them. And we said to ourselves what we should make some odor control products and see if we can find a market and it was really hard. I mean, it was really difficult because you were out selling first of all what we learned in the other businesses. When you say I've got an odor control product that works usually people say, yes, right? They don't believe yet because so many products don't work or they just don't work that well, they Mascot or they eliminate some of it, but they don't completely eliminated. It comes back and there's all kinds of stuff that goes on. So we were vertical within industrial. We decided that we could probably find more success there. Selling average tickets in the $25,000 to $50,000 as opposed to $15 bottle of consumer product. We weren't really well situated plus we haven't done the work yet. So as a result of that journey, we became expert in order bonafide expert. We also became expert at all the manufacturing techniques and we built a repository of data to support claims that is beyond reproach. Because of that work, we were able to recruit a partner called proving crops and brought together by the he gained marketing works team who think came to us and say we think you have $1 billion product. And so yes, we do, too. And so in that structure, if you think about it from their side of the equation. They got to pick up a product that had gone through all that development work with all the quote hardest, not all the work that all the hardest work, achieve the data support the claims, and it gave them this head start. They test marketed. They proved that it had a marketplace for the claims that were being offered, they put their creative umbrella around and then they started executing. And when they started executing because they sort of took the ball and went took it from us and said we'll carry it into the end zone. Let's go right, then we can focus on our key value contribution of managing the supply chain, working with claims, doing some creative work and supporting them in that rollout. And of course, now the rest is history that product is going to be clipping on clipping along around $60 million on a run rate basis on their end. That means our revenue for that for that kind of production will continue to scale up. We generally think it's around 20%, 25% of what they're producing that we believe they will achieve their $100 million plus run rate. And if they stay on target, it could be a lot sooner than people realize. That's an example of a hybrid model where we've invented it and we've proved it. And then we partnered. And through that partnership, we maintained a supply chain role and we maintained an equity role in the in the exclusivity and exchange rates of seven. And we've got a small royalty role to give acknowledgment to the innovation itself for those three revenue streams are compelling. And I always remind people, there's also an aggregate and the exit could be big in the same business principle applies all the assets in our portfolio. They're all built for that kind of business model. And so just as a matter fact, if you look at the clearing model, we think that the clearer model not only is it the full circle story for the company's entire journey from its innovation at inception now, well over 20 years ago, the high purpose for healing people, right, protecting people from from infection person says postsurgical infection control at such a high value proposition that saves lives. So that's one. But number two, the model itself, you can exploit that same kind of opportunity because what we really have done is proven the claim supported the data, taking it to the journey of regulatory approval to build out of manufacturing, support the contracting with third party manufacturers, the installation specialized equipment to make it happens, we're there now.
And then what will the new partner to significance instead of trying to replicate that distribution channel that another company has probably spent 15 or 20 or 30 plus years building, we tap into it with a value proposition that allows for instant revenue and margin recognition for them. And in exchange for that, typically those become long-term partners or potential sort of right to acquire the company in the future. That's typically how they deal with down some. So that's the model. And I think the same thing's going to happen for the battery tech for sure. I think we're going to have to do quite a lot more work on the P P5 and Waterside before it becomes that kind of targets for partnership. But that's okay because we can make money all the way through. And so we're heading that direction to. So I hope that answered the question, Brian.

Brian Loper

Yes, thank you very much. So yes, about proof, I mean, that's kind of the star in the portfolio right now. And how are things going with proof and what are we participating for Q1 24?

Dennis Calvert

Yes. So again, we mentioned this earlier. And so just to repeat, there's caveats on anything that's forward looking there because we won't know royalty revenue and we don't know some of the work in process for existing orders. What I can say is that the order flow is matching past production and exceeding it. So the order flow so now depending on royalty and depending on work in process where that shakes out, we're going to see numbers comparable to last quarter, if not more. And we think that trend will continue. So there, you know, the one thing about the team, the marketing team at approved as they do what they say, and they say Our mission is to achieve 20% quarter over quarter growth so they can run their own them for their great quarter over quarter growth the next year and the financial implications to our Company are dramatic.

Brian Loper

Several investors have written in wondering about some are any of other BioLargo products generating revenue?

Dennis Calvert

Well, yes, that's a good question. In the Water & P fast rise. So PFAS is really a water solution company that includes P. five is the way to say that there's a number of things going on there. We actually represents some products that were manufactured by other people where we got distribution rights ideas to go into a customer and say how can we help you? And if they say they're going to need we've got the knowledge and the talent and the engineering staff to pull that off, whether it's our innovation or not. So in the solution business as a way to enter the market, I think is I think it's really good, um, and so some of that's occurred in the past, which is nice and some will continue in the future. So that's good the key focus, however, is to get our technologies launched in that market on the odor control business has a very much diversified portfolio. I mean, they do a lot of things that are missing systems, pumps, service trailers, trucks. I mean, it's just the trucks that are water systems on trucks. The better way to say it is a lot going on to make money. And that's the things that are ancillary to the ultimate agenda and odor control. And then as evidenced by the incorporation of P. Foss for potential treatment of leachate, those become brand X product extensions into a selling portfolio where we already have national corporate accounts, great example of where the the operations support each other.
And then relative to innovation, there's an entire portfolio. It's not that it's unimportant. We focus on the things that are more medium commercial. But you know, as we said, there's at least a technology platforms of the company and we're exploring a handful. And some of those are it's not the right time. There's some work to do. They'll come. They'll come to us later. But we do believe the nature of our company will allow us to introduce new products over and over and over on a continuing basis, and we're committed to that. We're also always looking at outside technologies to incorporate with ours. Lot of innovators bring the technologies to our company for potential use because we do have some market share and we're really good at that quote, early adoption phase of doing the grinding work to get it seeded in the market. So I hope that answers the question.

Brian Loper

Yes, that's great. Another question here, kind of changing gears and when is the New Jersey AEC. project expected to start and when we begin to recognize revenue?

Dennis Calvert

Well, that's a good question. You know, it started already. So we're getting deposits. And our target is to install this, as mentioned in the slide deck by November, November of this year. So that will all be in 2024 relative to the quarter-by-quarter revenue recognition. I hate even spend a lot of time on that because it will be whether or not we've earned VERSUS deliverables and it needs to go through a pretty sophisticated accounting analysis. But if we achieve that target worst case, we'll see recognition in Q4. So it's in process. And so I don't know if Charlie, anything to add to that or did I get it right?
We hear you might not be available.

Charles Dargan

Sorry, I muted.

Dennis Calvert

Yeah, I figured.

Charles Dargan

Sorry, I didn't hear it now. That's correct. Yes, that's exactly right from an accounting perspective.

Dennis Calvert

you probably recall some deposits and they have work in process. This is the contract is preclude. It is prudent to provision the contract to deliver me a working unit that means you probably can't road revenue to get that done.

Charles Dargan

That's correct shuttle. It ends up in either customer deposits or deferred revenue. And then when we start to deliver on the actual product, we'll recognize revenue.

Dennis Calvert

Yes. And that process that accounting treatment is going to not 100%, but to be the primary saying that will go on with the water solution company. That's kind of the way it works. Some of these projects will take a year, they're big and so you've got deposits, you'll have you'll have current revenue, you have revenue generating contracts under your belt even if revenue doesn't show up yet. So deferred revenue is probably the key metric, but we should have more and more of that as an operation, it expands. So which is good. It ultimately translates to revenue and profit itself, but it's a lot of work and it's a business that's not little widgets. These are big, complicated machines and they solve a big problem. People pay a lot of money for them. And so we think it's a good business. And as we establish yourself, it'll be worth our investment of time, energy and money. So go ahead, Brian.

Brian Loper

Yes, I'm changing gears again. So the Clyra deal was expected to close in Q1. Can you say today that your expectation is the deal will close during this month?

Dennis Calvert

Yes, here's the thing. You know, we don't control a lot of that. We just don't. I mean that's that's the trouble that's the problem with them. We are waiting on a lot of people. I wish we picked some better words in the past, right because what's clear to me sitting at the side and watching all this activity is there's a lot more going on than deciding if you have a partner what's going on is the launch of significant product. I mean, a big scale and it's a lot of work and it's it's an FDA compliant product going to go into some significant distribution. The energy the work that's happening is in preparation of that. And it's a lot of work. And so for a small company like ours, that's a big that's a big load. And we've been carrying that load pretty pretty nicely. So I'm proud of that ability of the team and clear as exceptional. They brought in some incredible talent, highly skilled, highly knowledgeable in the field is expensive. It's not cheap, clear spend some real money. They can spend some more real money, but the reward is amazing and it will be amazing. And again, you have to remember, this is now over 16 years of investing, assuming we get right 13 years of investing over $16 million. And so now watch it come to fruition. I think the most important thing we can do is pick really good partners and get it right? And that's what we're doing. We're picking really good partners are getting it right. So right means ready ready for the kind of scale we're talking about. So if they don't close this month, we don't actually know that’s really the better way to say it. It could be it could be next month. It could be a couple of months. We don't think we're into a situation where we wonder if we're going to find a distribution that we seek. We believe that's going to happen. So I hope it's soon.

Brian Loper

Great. Great, right. So we have a few financial questions here. So have you or Charlie want to take a stab at the first one is, can you help us understand why 108% increase in revenue only cut company losses by $500,000 in '23 versus '22?

Charles Dargan

I'd be happy to take a shot at that, Dennis.

Dennis Calvert

Go ahead. Thanks, Charlie.

Charles Dargan

Okay. So if you look at our numbers, the increase in revenue increased our gross profit. We maintained our margins at the gross level, which is really, really good, and that's about $3.3 million. And then it was offset by an increase in our other expenses, SG&A, but also a good thing. We also increased our R&D spending. And so as part of that offset the R&D went up as we're only increasing our battery venture and then if you look at our other income, it's probably another $300,000- plus that it went down. And that's largely from last year where we had bigger PP. Ki forgiveness and higher or larger tax credit. So you put that all together, it drives our net loss down by about $500,000

Brian Loper

Okay. Another one.

Dennis Calvert

Let me just point out there that on the net operating income on the out of operation, which carries the most the most mature operation in the Company versus make sure we're clear. Hollywood is a drop, can't net cash of $4.3 million. It's an astonishing thing. I mean, it's awesome. And that's that's designed by design. It's designed to do that. That's the way the business model works. And so all these others need to do the same thing, reach a level of maturity find the right partners get large distribution and the same type of dynamic will occur for them as well. So so it's a great thing, and I think diversity is really critical for the company as well. We're trying to stay within our means we're leveraging our core competencies and we're leveraging opportunities to expand with partners. And it just provides its extraordinary return when you get it, right. And so that's what we're doing. We'll make sure we get it right.

Brian Loper

Another financial question here. And last year, we had an all-time record in the Q1 23, but then Q2 with a severe drop, I mean revenue and so folks are wondering if you could give us some color. We can expect the same type of decline in the coming months.

Dennis Calvert

Here you're talking about this in the past, that was the lumpiness of signing national account number. That's when the Walmart rollout occurred and Walmart's rollout is notorious for doing what Walmart wants to do. So it works. And so they do it on their schedule and their timing, and it really plays long. And that's great. Everybody's happy to be there. Okay.
But that did create some lumpiness because of the way poof needed to prepare for that was to build up an inventory supply sufficient to meet the need at whatever level and whatever timeframe was required and that led to some lumpiness. We also mentioned in prior quarters that potential could occur again as additional national accounts. I think the dramatic nature of Walmart is one of the first ones. And so early in the game for us just highlighted that lumpiness. And I don't anticipate we don't see and we don't have visibility currently to a similar sort of performance.
Okay. So it's hard for us to say it won't happen. I don't know that we know enough to say that, but we don't see it happening. So we can't forecast at this moment and we don't expect it. We're getting it is basically we're getting a leveling out because of the diversity of their revenue base, which is quite good.

Brian Loper

Got it. Yes, that sounds great. Final questions. Save the best for last, right.
So when do you expect to stop the dilution of shares that we continue to see quarter after quarter. And it gets back to generating revenue streams per site.

Dennis Calvert

Okay.
Yes, I mean, we always we've curtailed a lot of that. So dramatically, that's something to be proud of. And ultimately, it will come down to reaching a point at which excess cash flow exceed our need for investing activities.
Sg&a associated with fulfilling these these business models to the point which they can capture themselves. And so it's a delicate balance, and we think we're doing we're winning. We're winning on that battle, it's become less and less an issue. And but the appetite for growth for Dialog, as you know, there was a post the other day on social media. Mediocrity is not part of our DNA. There's no complacency sitting here anywhere. So in people, you know, if we wanted to stop expansion as I sit back and make all our money supporting a product in the consumer category. I guess we can do that and show profit. I'm not sure that's going to drive shareholder value. The way of battery tech that can disrupt the multibillion-dollar market will do so we think it's worthy of investment and we do it carefully and we stretch ourselves. But that careful expansion is really the name of the game for us now the good news is we've got so many at a level of maturity back, and I'll start to change. So just let's just imagine for a minute, let's just imagine for a minute that we get an exit on one of these assets and we pick up a check for $100 million. Do we do something good?
Yes, about $500 million. I mean, you just have to realize that what we're doing here is building out technical assets that will change these markets and their value proposition is far beyond tomorrow's sale. It's getting sales, getting adoption, getting partners and then it's watching these technologies. And these these game changers change the game. And when we change the game, these issues go away so yes, we're on the right track and we want to be very careful. And I think we've been pretty diligent people that look at the scope of what we're doing most often, you know what they say, how could you do so much with so little? How could you do so much with so little?
That's what we've done. And so we're proud of it. We're proud of it and we want to be diligent and careful on the dilution. And I think we are, but it's really critical that we don't give up the one thing that's going to make us Shine among all others. And that is that innovation, that thing that we do with innovation to prove up buying the market, proved out partnered out. That's a winner and we're good at it. So I think we should pursue it. So I hope that helps.

Brian Loper

Very good. Great answers. That's all we have on our side for questions today.

Dennis Calvert

Let me ask, Charlie, is there anything you want to say in closing, Charlie?

Charles Dargan

No, as I said, it's been a great year for performance and generating cash. And on the accounting and finance side, it feels good that we're making significant progress towards getting to a cash flow breakeven. And then I think your dilution issue becomes less and less of a problem.

Dennis Calvert

Yes, Amen. this is Dennis. I want to say to everybody. Thank you. Thank the patients. It's really tested a lot of people in. I wish some of this had been faster. It took a long time to get here. We're at a we're at a moment in time where we've got some critical mass that sort of, as I say, the flywheel is spinning on its own now at some level and on were credible in ways that we were not before and that credibility. So clinical design and market adoption for some of these solutions. And we've got a capable staff. I mean, just remarkable what we are able to do, especially within our means our resources so we think the future is extraordinarily bright, and we're just going to keep marching and knocking down the milestones. And I think this next year will be another record breaker and I think we're going to see a moment at which these current business opportunities are throwing off a lot of money, a lot of cash, and that will be very helpful for everyone too. So there we go. Thank you for joining us today.

Brian Loper

Thank you very much, Dennis.

Operator

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