BioLargo comments on recent unauthorized third-party promotional activity pursuant to OTC Markets request
Westminster, California (October 22, 2019). On October 17, 2019, BioLargo, Inc. (OTCQB:BLGO) received a written request from the OTC Markets Group, Inc. alerting BioLargo to certain promotional activity and, in accordance with the OTC Market’s Policy on Stock Promotion, requesting that BioLargo issue a press release commenting on the promotional activity.
The OTC Markets notification on October 17, 2019 was the first that BioLargo’s management became aware of the promotional activities in question, which included two almost identical emails dated October 16 and October 17. These email campaigns state that they were sent by ”Penny Stocks 101” and “Research OTC” (and the emails reference affiliated companies by the names of PennyStockLocks LLC, MJ Capital LLC, Finance Marketing Group and Pennystock.org). The emails were addressed to the “members” of those companies.
Upon being informed of these unauthorized promotional activities, BioLargo’s management conducted an inquiry into the matter that included all officers, directors, controlling shareholders and third-party service providers that were engaged to do any investor relations services, public relations services, marketing or other related services including the promotion of the company or its securities. Based on the results of that inquiry, BioLargo’s management is able confirm the following:
BioLargo does not have, and has never had, any relation, whether direct or indirectly, with these companies or the emails in question. The emails sent out by these companies were not authorized, nor were the emails drafted or reviewed in any way by BioLargo, its officers, directors, affiliates or service providers prior to their being sent out. Neither BioLargo nor any of its officers, directors, affiliates or third-party service providers paid for or otherwise compensated either Penny Stocks 101 or Research OTC for these promotional activities, nor were any such persons involved in the creation or distribution of these emails.
To evaluate the effect of these emails on the trading activity of the company’s stock consider the following:
1. On October 16th, 2019, the day of the first email, the company’s stock opened at $.35, traded to a high of $.37 and a low of $.32, and closed at $.36, on 309,600 shares traded, a 35% increase (approximately 80,000 shares) above the three-month average trading volume.
2. On October 17th, 2019 the company’s stock opened at $.37, traded to a high of $.39 and a low of $.35, and closed at $.36, on 710,400 shares traded, a 300% increase (approximately 480,000 shares) above the three-month average trading volume.
3. By comparison, the day before these unauthorized emails were sent out, the stock had opened at $.31, traded at a high of $.38 and a low of $.32, and closed at $.34, on 237,000 shares (slightly higher than the daily average of approximately 200,000 shares from October 1 to October 15).
While the October 17th email coincided with increased trading volume, it is difficult for BioLargo management to come to a definitive conclusion regarding the two emails’ effect on stock price and trading volume given recent market volatility (for example, over 1.6 million shares traded on September 23, 2019, the day BioLargo announced its subsidiary Clyra Medical received FDA pre-market clearance, and the stock price has increased over 50% since that time).
The OTC Markets also asked BioLargo to carefully review the emails and comment as to whether the emails contained inaccurate or misleading factual information. The bulk of the emails include what appear to be restated and summary information from recent BioLargo press releases and periodic reports filed with the Securities and Exchange Commission (“SEC”). To the extent these emails restate information published and filed by BioLargo, management stands behind those statements, but encourages the investing public to carefully review BioLargo’s reports filed with the SEC, including the Risk Factors beginning on page 16 of its annual report filed May 14, 2019 on Form 10-K.
BioLargo has 18 authorized press releases since January 1, 2019. They can be seen at the OTC Markets here: https://www.otcmarkets.com/stock/BLGO/overview
Management has identified some statements in the unauthorized promotional campaigns that it believes are materially false and/or misleading:
1. A misstatement in the scope of work for the contracts awarded to BioLargo’s engineering subsidiary by the U.S. Air Force (which are through a third-party as primary contractor). The emails incorrectly claim the scope of work was to clean up toxic “PFAS” (which are per- and poly-fluoroalkyl substances). We have described the actual scope of work of the prime contract, of which we are only a part, as “environmental services” that include a host of environmental engineering services focused on hazardous waste, hazardous materials, air quality, water quality, natural and cultural resources. The clean-up of PFAS is not specifically contemplated in the contracts.
2. The emails claim that there is “very good potential” that our engineering subsidiary would gain contracts to work at every military base in the United States. BioLargo’s management does not believe that there is “very good potential” that BioLargo would service every military base in the United States, although we are working with the prime contractor to respond to additional Requests for Proposal by other U.S. Air Force bases.
3. The emails claim that BioLargo’s AOS system had been awarded an EPA grant – the correct information is that BioLargo’s engineering subsidiary was awarded an EPA grant to investigate solutions for the removal of PFAS from water.
4. The emails claim that BioLargo’s industrial odor control product, CupriDyne Clean, is being “pulled in as fast as BioLargo can deliver” to the waste handling industry. While it is true that CupriDyne Clean sales are increasing, it is not the case that BioLargo is at manufacturing capacity or struggling to keep up with orders, or that we are selling the product as fast as we can make it.
5. The emails claim that BioLargo’s AOS water treatment system can eliminate “solvents” and “sulfurs”, and in reality, the scope of these claims are not yet proven.
6. The emails falsely overstate that the AOS system has the potential to generate several billion dollars of revenue per year in the next five years. While management believes revenues from the AOS system can be realized in the near-term future, and the markets are very large, forecasting such a dramatic increases in revenues would require substantial capital and other resources which the company does not currently have and, even with proper capitalization, the forecasting of this level of revenue growth would be inherently misleading and not credible.
7. In the discussions of the Cannabis Industry, the emails state industry specific facts about the consequence of odors in growing operations that the company is unable to verify as true or false. The emails also state that CupriDyne Clean is “the only product that works well.” While the company believes its product is the best performing product, the statement could be misconstrued to imply that competition for odor control is limited, which is not the case. Other companies offer both air filtration and air treatment systems to combat odors.
8. The emails compare CupriDyne Clean to the product Fabreze, which is marketed as a product that eliminates tough lingering odors. BioLargo has never conducted a comprehensive comparison of CupriDyne Clean with Fabreze, and thus cannot verify the claim in the email that seems to state an unqualified opinion, “One short demo will clearly show CupriDyne [Clean’s] vast superiority to Fabreze.”
9. The emails mischaracterize the company’s pilot projects as “commercial” rather than “pre-commercial”. In September 2019, we announced the conclusion of a pre-commercial pilot and the client’s request for a proposal for a commercial pilot project at the same facility, as well as the approval and start of another pre-commercial pilot focused on treating storm water. Other pilots are in various stages of being organized.
10. The emails state that the value of BioLargo’s patented, proven assets are not reflected in the company’s market capitalization and BioLargo’s management believes that “it won’t be long until this changes”. Although management does believe in the value of its technology portfolio, BioLargo has never stated that the value has not been incorporated into its market capitalization and has never predicted the timing of stock market assimilation of these asset values.
11. The emails state that the recent FDA approval of the Clyra wound product has the potential to increase BioLargo’s market cap to $500.0 million, which translates to a stock price of over $3.50 per share. BioLargo never predicts future stock prices or market capitalization and does not endorse these statements.
In addition to the noted factual misstatements, these emails portray the author’s unreasonable or unsupported opinions regarding the value of the company and future for BioLargo’s stock price, in what appears to be an attempt to encourage investors to purchase shares of BioLargo. In simple terms, these unauthorized emails would commonly be understood to ‘tout’ the stock in a way that lacks a balanced presentation of inherent risks and caveats associated with forward-looking statements. The opinions stated in the unauthorized emails are not the express opinions of BioLargo’s management nor are they authorized or endorsed by BioLargo.
While BioLargo’s management has consistently demonstrated its determination and optimism about the future, it has been careful to provide balance in its presentation, and limit predictions of future performance, to help insure that adequate risks factors and uncertainty about the future results would be fully considered and juxtaposed to any forward looking statements.
The company’s press releases report of what management believes are significant accomplishments over the past six months, including the milestone accomplishments that include that the company had secured contracts to serve the US Air Force announced July 22nd, that its subsidiary Clyra Medical had received FDA pre-market clearance on its advanced wound care product announced September 23rd, its disclosure that it was continuing to break revenue records, and that it had made multiple improvements in its balance sheet and pay-off of variable priced debts announced October 10th. Management believes that the stock price increase from a low of $.16 in May to $.35 currently is primarily related to the significant results achieved over the past six months and not a direct result of the unauthorized promotional emails in question.
Having conducted a thorough inquiry and based on the findings in that inquiry, BioLargo’s management is able to confirm the following facts:
1. Neither the company, nor any of its officers, directors, control persons, controlling stockholders, or any affiliates or third-party service provider was involved, directly or indirectly, with the creation, distribution, or payment of these promotional materials and activities.
2. No BioLargo officer, director, controlling stockholder, or third-party service provider has purchased (except as disclosed below) or sold BioLargo securities within the past 90 days, other than two third-party service providers (Prashant Mehta, Ph.D., and Flathead Business Solutions).
3. BioLargo routinely grants to its officers, directors, employees and service providers common stock or options to purchase common stock in lieu of cash compensation. Such transactions are disclosed on Form 4, as appropriate, and in our periodic reports filed with the SEC.
4. The company has from time to time over the past 12 months worked with the following third-parties to perform some activity related to investor relations services, public relations services, marketing or other services related to the promotion of the Company and its securities:
· Uptick Newswire
· Stock Day Media
· Proactive Investors
· Rich Keys Capital LLC
· Prashant Mehta, Ph.D.
· Flathead Business Solutions dba Tamarak Advisors
· Howard Isaacs
· Richard Cavalli
5. As reported in the company’s periodic reporting to the SEC, over the past 12 months it has entered into a series of financings that included variable-priced conversion mechanisms that allowed conversion of debt into stock based on a discount to then-current market prices. All of these debt investments have paid in full (either through the payment of cash to the investor, or by the conversion to common stock), except one remaining investor that still holds variable rate convertible debt instruments that mature in February and April 2020 in the amounts of $60,000 and $330,000, respectively. These two debt instruments were issued to Vista Capital LLC on December 18, 2017, and January 17, 2019, and allow for conversion into stock at a discount of 30% and 35%, respectively, to the low closing bid price of the 25 trading days prior to the conversion. In addition, as disclosed in our periodic reports filed with the SEC, upon conversion of the variable-priced convertible debt, we were required to issue stock at a discount to the then current market price, including to Vista Capital. We also issued stock pursuant to stock purchase warrants at prices below the then-current market price. In addition, we conducted an offering of twelve-month “original issue discount” notes that convert to common stock at $0.17 per share, issued at various dates from June through August 2019. At the time of issuance, the conversion price was below the then-current stock price.
Dennis P. Calvert, CEO offers the following comment, “We believe unauthorized third-party reports such as these emails can easily create confusion in the marketplace and, in order to avoid confusion, we encourage everyone to perform their own due diligence by reading our SEC filings for the most comprehensive understanding of our company. We are proud of our accomplishments, having survived an incredibly long and expensive development cycle. With the support of our long-term investors we believe we can continue to march ahead and build a world-class company that is dedicated to innovation and delivering solutions to some of the most troubling issues that impact people, the environment and commerce around the world.“
About BioLargo, Inc.
BioLargo, Inc. is an innovative technology developer and environmental engineering company driven by a mission to "make life better" by delivering robust, sustainable solutions for a broad range of industries and applications, with a focus on clean water, clean air, and advanced wound care. We develop and commercialize disruptive technologies by providing the capital, support, and expertise to expedite them from "cradle" to "maturity" (www.biolargo.com). Our engineering division features experienced professional engineers dedicated to integrity, reliability, and environmental stewardship (www.biolargoengineering.com). Our industrial odor control division, Odor-No-More (www.odornomore.com) features CupriDyne Clean Industrial Odor Eliminator (www.cupridyne.com), which eliminates the odor-causing compounds and VOCs rather than masking them, and is now winning over leading companies in the solid waste handling and wastewater industries and other industries that contend with malodors and VOCs. Our subsidiary BioLargo Water (www.biolargowater.ca) develops the Advanced Oxidation System "AOS," a disruptive industrial water treatment technology designed to eliminate waterborne pathogens and recalcitrant contaminants with better energy-efficiency and lower operational costs than incumbent technologies. Our subsidiary Clyra Medical (www.clyramedical.com) features effective and gentle solutions for chronic infected wounds to promote infection control and regenerative tissue therapy.
Contact Information
Dennis Calvert President and CEO BioLargo, Inc., 888-400-2863 x2
Safe Harbor Act
This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results.
