UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2022.~~

March 31, 2023.

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-19709

BIOLARGO, INC.

(Exact name of registrant as specified in its charter)

Delaware

65-0159115

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

14921 Chestnut St.

Westminster, CA 92683

(Address of principal executive offices)

(888) 400-2863

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock	BLGO	OTC Markets (OTCQB)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

~~Table of Contents~~

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐

Non-accelerated filer ☒		Smaller reporting company ☒

		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the Registrant’s Common Stock outstanding as of ~~November 10, 2022~~May 15, 2023 was ~~275,417,050~~284,690,284 shares.

Table of Contents

BIOLARGO, INC.

FORM 10-Q

INDEX

PARTI


Item 1	Financial Statements	4F-1

Item 2	Management's Discussion and Analysis and Financial Condition and Results of Operations	2524

Item 4	Controls and Procedures	35

PARTII

Item 1A	Risk Factors	36

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	3736

Item 5	Other~~Other~~ Information	3837

Item 6	Exhibits	3937

	Signatures	4039

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

BIOLARGO, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF ~~SEPTEMBER 30, 2022~~MARCH 31, 2023 AND DECEMBER 31, ~~2021~~2022

(in thousands, except for share and per share data)

									MARCH 31,			DECEMBER 31,
									2023 (unaudited)			2022
		September 30, 2022 (Unaudited)			December 31, 2021
*Assets*	*Assets*							*Assets*
Current assets:
Cash and cash equivalents		$	1,268		$	962			$	3,264		$	1,851
Accounts receivable, net of allowance			884			513				1,380			1,064
Inventories, net of allowance			260			241				135			120
Prepaid expenses and other current assets			120			85				95			118
Total current assets			2,532			1,801				4,874			3,153

Non-current assets
Equipment and leasehold improvements, net of depreciation			196			61
Equipment, net of depreciation										391			287
Other non-current assets			123			69				124			124
Investment in South Korean joint venture			33			48				27			33
Right of use operating lease, net of amortization			896			453
Clyra Medical prepaid marketing (Note 8)			591			591
Right of use, operating lease, net of amortization										837			867
Clyra Medical prepaid marketing										394			394
Total assets		$	4,371		$	3,023			$	6,647		$	4,858
Liabilities and stockholders’ equity (deficit)

Liabilities and stockholders’ equity								Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses		$	520		$	559			$	1,224		$	940
Debt obligations, net of discount and amortization (Note 4)			86			314
Contract liability			6			89
Customer deposits			109			79
Clyra Medical accounts payable and accrued expenses										278			238
Debt obligations										66			100
Deferred revenue										21			17
Lease liability			97			103				97			97
Clyra Medical accounts payable and accrued expenses (Note 8)			211			230
Deposits										113			184
Total current liabilities			1,029			1,374				1,799			1,576

Long-term liabilities:
Debt obligations, net of discount and amortization (Note 4)			247			180
Clyra Medical debt obligations (Note 8)			263			187
Lease liability			799			349
Debt obligations, net of current										302			237
Lease liability, net of current										747			773
Clyra Medical debt obligations										247			261
Total long-term liabilities			1,309			716				1,296			1,271
Total liabilities			2,338			2,090				3,095			2,847

COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred Series A, $0.00067 Par Value, 50,000,000 Shares Authorized, -0- Shares Issued and Outstanding, at September 30, 2022 and December 31, 2021			—			—
Common stock, $0.00067 Par Value, 550,000,000 Shares Authorized, 274,622,640 and 255,893,726 Shares Issued, at September 30, 2022 and December 31, 2021			184			171
COMMITMENTS AND CONTINGENCIES (Note 12)

STOCKHOLDERS’ EQUITY:
Preferred Series A, $0.00067 Par Value, 50,000,000 Shares Authorized, -0- Shares Issued and Outstanding, at March 31, 2023 and December 31, 2022										—			—
Common stock, $0.00067 Par Value, 550,000,000 Shares Authorized, 284,122,581 and 278,462,706 Shares Issued, at March 31, 2023 and December 31, 2022, respectively										190			186
Additional paid-in capital			147,470			143,718				150,191			148,435
Accumulated deficit			(142,505	)		(139,121	)			(143,841	)		(143,594	)
Accumulated other comprehensive loss			(185	)		(115	)			(155	)		(149	)
Total BioLargo Inc. and subsidiaries stockholders’ equity			4,964			4,653				6,385			4,878
Non-controlling interest (Note 8)			(2,931	)		(3,720	)
Non-controlling interest										(2,833	)		(2,867	)
Total stockholders’ equity			2,033			933				3,552			2,011
Total liabilities and stockholders’ equity		$	4,371		$	3,023			$	6,647		$	4,858

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4F-1
Table of Contents

BIOLARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30,~~MARCH 31, 2023 AND 2022 ~~AND 2021~~
(in thousands, except for share and per share data)
(unaudited)

THREE MONTHS

NINE MONTHS

MARCH 31, 2023

MARCH 31, 2022

SEPTEMBER
30, 2022

SEPTEMBER
30, 2021

SEPTEMBER
30, 2022

SEPTEMBER
30, 2021

Revenues

Revenue

Product revenue
$ 1,216 $ 431 $ 2,532 $ 1,190 $ 3,548 $ 610
Service revenue
284 281 1,254 553 194 355
Total revenue
1,500 712 3,786 1,743 3,742 965

Cost of revenue

Cost of goods sold
(515 ) (204 ) (1,174 ) (600 ) (1,797 ) (293 )
Cost of service
(233 ) (158 ) (720 ) (363 ) (135 ) (151 )
Total cost of revenue
(748 ) (362 ) (1,894 ) (963 ) (1,932 ) (444 )
Gross profit
752 350 1,892 780 1,810 521

Operating expenses

Operating expenses:

Selling, general and administrative expenses
1,424 1,461 4,847 4,766 1,722 1,839
Research and development
271 344 1,018 1,027 565 392
Total operating expenses
1,695 1,805 5,865 5,793 2,287 2,231

Operating loss
(943 ) (1,455 ) (3,973 ) (5,013 ) (477 ) (1,710 )

Other (expense) income:

Other income (expense):

PPP forgiveness
— 174
Grant income
31 5
Interest expense
(14 ) (26 ) (42 ) (208 ) (48 ) (13 )
PPP loan forgiveness
— — 174 43
Tax credit
66 21 66 50
Grant income
44 25 51 25
Total other (expense) income:
96 18 249 (90 )
Total other (expense) income
(17 ) 166

Net loss
(847 ) (1,435 ) (3,724 ) (5,103 ) (494 ) (1,544 )
Net (loss) income attributable to noncontrolling interest
(247 ) 108
Net loss attributable to common stockholders
$ (247 ) $ (1,652 )

Net loss attributable to noncontrolling interest
(343 ) (134 ) (340 ) (549 )
Net loss attributable to common shareholders
$ (504 ) $ (1,301 ) $ (3,384 ) $ (4,554 )
Net loss per share attributable to common stockholders:

Loss per share attributable to stockholders – basic and diluted
$ (0.0009 ) $ (0.0063 )
Weighted average number of common shares outstanding:
280,711,278 260,805,418

Net loss per share attributable to common shareholders:

Loss per share attributable to shareholders – basic and diluted
$ (0.00 ) $ (0.01 ) $ (0.01 ) $ (0.02 )
Weighted average number of common shares outstanding:
270,665,820 252,912,561 265,812,188 243,529,117
Comprehensive loss:

Comprehensive loss attributable to common stockholders

Net loss
$ (847 ) $ (1,435 ) $ (3,724 ) $ (5,103 ) $ (494 ) $ (1,544 )
Foreign currency translation
(59 ) (7 ) (70 ) (9 )
Foreign currency translation adjustment
(6 ) (8 )
Comprehensive loss
(850 ) (1,442 ) (3,794 ) (5,112 ) (500 ) (1,552 )
Comprehensive loss attributable to noncontrolling interest
(343 ) (134 ) (340 ) (549 )
Comprehensive loss attributable to common stockholders
$ (507 ) $ (1,308 ) $ (3,454 ) $ (4,563 )
Comprehensive (loss) income attributable to noncontrolling interest
(247 ) 108
Comprehensive loss attributable to stockholders
$ (253 ) $ (1,660 )
The accompanying notes are an integral part of these unaudited consolidated financial statements.

5

~~Table of Contents~~
~~BIOLARGO, INC. AND SUBSIDIARIES~~
~~CONSOLIDATED STATEMENT OF STOCKHOLDERS~~’ ~~EQUITY (DEFICIT)~~
~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021~~
~~(in thousands, except for share data)~~
~~(unaudited)~~

Common stock

Additional
paid-in

Accumulated

Accumulated
other
comprehensive

Non-
controlling

Total
stockholders’

Shares

Amount
capital
deficit

Loss

interest
equity (deficit)
Balance, December 31, 2021
255,893,726 $ 171 $ 143,718 $ (139,121
)
$ (115
)
$ (3,720
)
$ 933
Sale of common stock for cash
6,703,789 4 1,198 — — — 1,202
Issuance of common stock for service
86,752 — 17 — — — 17
Stock option compensation expense
— — 660 — — — 660
Clyra Medical stock option expense
— — 141 — — — 141
Noncontrolling interest allocation
— — (528
)
— — 528 —
Net loss
— — — (1,652
)
— 108 (1,544
)
Foreign currency translation
— — — — (8
)
— (8
)
Balance, March 31, 2022
262,684,267 $ 175 $ 145,206 $ (140,773
)
$ (123
)
$ (3,084
)
$ 1,401
Sale of common stock for cash
5,011,570 4 944 — — — 948
Issuance of common stock for service
340,891 — 59 — — — 59
Stock option compensation expense
— — 234 — — — 234
Clyra Medical stock option expense
— — 82 — — — 82
Noncontrolling interest allocation
— — (103
)
— — 103 —
Net loss
— — — (1,228
)
— (105
)
(1,333
)
Foreign currency translation
— — — — (3 ) — (3
)
Balance, June 30, 2022
268,036,728 $ 179 $ 146,422 $ (142,001
)
$ (126
)
$ (3,086
)
$ 1,388
Sale of common stock for cash
6,207,084 4 1,113 — — — 1,117
Issuance of common stock for service
378,828 1 95 — — — 96
Stock option compensation expense
— — 253 — — — 253
Clyra Medical stock option expense
— — 85 — — — 85
Noncontrolling interest allocation
— — (498
)
— — 498 —
Net loss
— — — (504
)
— (343
)
(847
)
Foreign currency translation
— — — — (59 ) — (59
)
Balance, September 30, 2022
274,622,640 $ 184 $ 147,470 $ (142,505
)
$ (185
)
$ (2,931
)
$ 2,033
~~The accompanying notes are an integral part of these unaudited consolidated financial statements.~~
6

~~Table of Contents~~

Common stock

Additional
paid-in

Accumulated

Accumulated
other
comprehensive

Non-
controlling

Total
stockholders’

Shares
Amount capital
deficit

Loss

interest
equity (deficit)
Balance, December 31, 2020
225,885,682 $ 151 $ 135,849 $ (132,041
)
$ (101
)
$ (4,093
)
$ (235
)
Sale of common stock for cash
13,330,619 9 2,097 — — — 2,106
Issuance of common stock for service
747,487 1 110 — — — 111
Stock option compensation expense
— — 424 — — — 424
Warrants and conversion feature issued as discount on convertible note payable
— — 35 — — — 35
Clyra Medical stock option expense
— — 161 — — — 161
Noncontrolling interest allocation
— — (313
)
— — 313 —
Clyra Medical securities offering
— — — — — 50 50
Net loss
— — — (1,631
)
— (247
)
(1,878
)
Foreign currency translation
— — — — (2
)
— (2
)
Balance, March 31, 2021
239,963,788 $ 161 $ 138,363 $ (133,672
)
$ (103
)
$ (3,977
)
$ 772
Conversion of notes
1,966,439 1 327 — — — 328
Sale of common stock for cash
8,627,237 6 1,408 — — — 1,414
Issuance of common stock for service
357,132 — 60 — — — 60
Issuance of common stock for interest
81,777 — 16 — — — 16
Stock option compensation expense
— — 330 — — — 330
Clyra Medical stock option expense
— — 102 — — — 102
Noncontrolling interest allocation
— — (314
)
— — 314 —
Net loss
— — — (1,622
)
— (168
)
(1,790
)
Foreign currency translation
— — — — — — —
Balance, June 30, 2021
250,996,373 $ 168 $ 140,292 $ (135,294
)
$ (103
)
$ (3,831
)
$ 1,232
Conversion of notes
3,306,708 2 598 — — — 600
Sale of common stock for cash
648,805 1 122 — — — 123
Issuance of common stock for interest
416,667 — 60 — — — 60
Stock option compensation expense
— — 251 — — — 251
Clyra Medical stock option expense
— — 179 — — — 179
Noncontrolling interest allocation
— — (159
)
— — 159 —
Net loss
— — — (1,301
)
— (134
)
(1,435
)
Foreign currency translation
— — — — (7 ) — (7 )
Balance, September 30, 2021
255,368,553 $ 171 $ 141,343 $ (136,595
)
$ (110
)
$ (3,806
)
$ 1,003
~~The accompanying notes are an integral part of these unaudited consolidated financial statements.~~
7F-2
Table of Contents

BIOLARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS
’ EQUITY (DEFICIT)

FOR THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER 30,~~MARCH 31, 2023 AND 2022 ~~AND 2021~~

(in thousands, except for share and per share data)

(unaudited)

	Common stock				Additional paid-in		Accumulated			Accumulated other comprehensive			Non- controlling			Total stockholders’
	Shares		Amount		capital		deficit			Loss			interest			equity (deficit)

Balance, December 31, 2022		278,462,706	$	186	$	148,435	$	(143,594	)	$	(149	)	$	(2,867	)	$	2,011
Sale of stock for cash		4,201,402		3		797		—			—			—			800
Issuance of common stock for services		930,490		1		206		—			—			—			207
Issuance of common stock in exchange for Clyra shares		527,983		—		—		—			—			—			—
Stock option compensation expense		—		—		195		—			—			—			195
Clyra Medical Technologies, Inc. (Clyra) stock options issued for services		—		—		61		—			—			—			61
Warrant issued for interest		—		—		30		—			—			—			30
Clyra – sales of Series A Preferred Stock		—		—		—		—			—			225			225
Clyra – Series A Preferred Stock – dividend		—		—		—		—			—			(27	)		(27	)
Biolargo Energy Technology Inc. (BETI) offering		—		—		—		—			—			550			550
Noncontrolling interest allocation		—		—		467		—			—			(467	)		—
Net loss		—		—		—		(247	)		—			(247	)		(494	)
Foreign currency translation		—		—		—		—			(6	)		—			(6	)
Balance, March 31, 2023		284,122,581	$	190	$	150,191	$	(143,841	)	$	(155	)	$	(2,833	)	$	3,552

SEPTEMBER 30,
2022

SEPTEMBER 30,
2021

Cash flows from operating activities

Net loss
$ (3,724
)
$ (5,103
)
Adjustments to reconcile net loss to net cash used in operating activities:

Stock option compensation expense
1,455 1,447
Common stock issued in lieu of salary to officers and fees for services from vendors
172 294
Common stock issued for interest
— 16
Interest expense related to amortization of the discount on convertible notes payable and line of credit
13 114
PPP loan forgiveness
(174
)
(43
)
Loss on investment in South Korean joint venture
15 23
Depreciation expense
28 17
Changes in assets and liabilities:

Accounts receivable
(371
)
20
Prepaid expenses and other current assets
(85
)
(71
)
Inventories
(19
)
27
Accounts payable and accrued expenses
(40
)
(85
)
Contract liability
(83
)
114
Customer deposits
30 79
Clyra Medical accounts payable and accrued expenses
(20
)
189
Net cash used in operating activities
(2,803
)
(2,962
)
Cash flows from investing activities

Purchase of equipment
(164
)
(21
)
Net cash used in investing activities
(164
)
(21
)
Cash flows from financing activities

Proceeds from sales of common stock
3,267 4,120
Proceeds from the sale of stock in Clyra Medical
— 50
Proceeds from the issuance of Clyra Medical convertible notes
100 —
Exercise of warrants
— 60
Payment of debt obligations
— (828
)
Payment of Clyra Medical debt obligations
(24
)
(28
)
Net cash provided by financing activities
3,343 3,374
Net effect of foreign currency translation
(70
)
(9
)
Net change in cash
306 382
Cash at beginning of period
962 716
Cash at end of period
$ 1,268 $ 1,098
Supplemental disclosures of cash flow information

Cash paid for:

Interest
$ 11 $ 56
Non-cash investing and financing activities

Fair value of warrants issued with convertible notes
$ — $ 35
Conversion of notes payable to common stock
$ — $ 328
Right of use
$ 433 $ —
Allocation of noncontrolling interest
$ 1,129 $ 786

	Common stock				Additional paid-in			Accumulated			Accumulated other comprehensive			Non- controlling			Total stockholders’
	Shares		Amount		capital			deficit			Loss			interest			equity (deficit)
Balance, December 31, 2021		255,893,726	$	171	$	143,718		$	(139,121	)	$	(115	)	$	(3,720	)	$	933
Sale of common stock for cash		6,703,789		4		1,198			—			—			—			1,202
Issuance of common stock for service		86,752		—		17			—			—			—			17
Stock option compensation expense		—		—		660			—			—			—			660
Clyra Medical stock option expense		—		—		141			—			—			—			141
Noncontrolling interest allocation		—		—		(528	)		—			—			528			—
Net loss		—		—		—			(1,652	)		—			108			(1,544	)
Foreign currency translation		—		—		—			—			(8	)		—			(8	)
Balance, March 31, 2022		262,684,267	$	176	$	145,205		$	(140,773	)	$	(123	)	$	(3,085	)	$	1,400

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-3

Table of Contents

BIOLARGO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

(in thousands, except for share and per share data)

(unaudited)

	MARCH 31, 2023			MARCH 31, 2022
Cash flows from operating activities
Net loss	$	(494	)	$	(1,544	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock option compensation expense		256			801
Common stock issued for services		207			17
Interest expense related to amortization of the discount on note payable		3			4
Fair value of warrant issued for interest		30			—
PPP loan forgiveness		—			(174	)
Loss on investment in South Korean joint venture		6			8
Depreciation expense		22			2
Changes in assets and liabilities:
Accounts receivable		(316	)		(178	)
Inventories		(17	)		(29	)
Prepaid expenses and other assets		25			(59	)
Accounts payable and accrued expenses		284			114
Clyra accounts payable and accrued expenses		14			(25	)
Deferred revenue		4			(89	)
Right of use and lease liability, net		4			—
Deposit		(71	)		12
Net cash used in operating activities		(43	)		(1,140	)

Cash flows from investing activities
Equipment purchases		(48	)		(32	)
Net cash used in investing activities		(48	)		(32	)

Cash flows from financing activities
Proceeds from sale of common stock		800			1,202
Proceeds from sale of BETI common stock		550			—
Repayment of note payable		(50	)		—
Repayment by Clyra on inventory line of credit		(15	)		(10	)
Proceeds from sale of Clyra Medical preferred stock		225			—
Net cash provided by financing activities		1,510			1,192
Net effect of foreign currency translation		(6	)		(8	)
Net change in cash		1,413			12
Cash at beginning of year		1,851			962
Cash at end of period	$	3,264		$	974

Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest	$	15		$	7
Income taxes	$	5		$	—
Short-term lease payments not included in lease liability	$	13		$	52
Non-cash investing and financing activities
Equipment added via vehicle loan	$	80		$	—
Conversion of intercompany receivable into Clyra shares	$	—		$	633
Allocation of noncontrolling interest	$	467		$	528
Conversion of Clyra common stock to BioLargo common stock	$	100		$	—

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-4

Table of Contents

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Business and Organization

Description of Business

BioLargo, Inc. ~~is an~~(“BioLargo”, or the “Company”) invents, develops, and commercializes innovative ~~technology developer~~platform technologies to solve challenging environmental problems like PFAS contamination (per- and polyfluoroalkyl substances), advanced water and wastewater treatment, industrial odor control, air quality control, infection control, and myriad 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 a cleaner earth. The company also owns a majority interest in a medical products subsidiary that has licensed BioLargo’s technologies.remediation challenges. Our business strategy is straightforward: we invent or acquire technologies that we believe have the potential to be disruptive in large commercial markets; we develop and validate these technologies to advance and promote their commercial success as we leverage our considerable scientific, engineering, and entrepreneurial talent; we then monetize these technical assets through a variety of business structures that may include licensure, joint venture, sale, spin off, or by deploying direct to market strategies.

Organization

We are a Delaware corporation formed in 1991. We have five wholly-owned subsidiaries: BioLargo Life Technologies, Inc., organized under the laws of the State of California in 2006; ONM Environmental, Inc., organized under the laws of the State of California in 2009; BioLargo Equipment and Technologies, Inc., organized under the laws of the State of California in 2022; BioLargo Water, Inc. (“Water”), organized under the laws of Canada in 2014; and BioLargo Development Corp., organized under the laws of the State of California in 2016. Additionally, we own 82% (see Note 9) of BioLargo Engineering Science and Technologies, LLC (“BLEST”), organized under the laws of the State of Tennessee in 2017, 58% of Clyra Medical Technologies, Inc. (“Clyra” or “Clyra Medical”), organized under the laws of the State of California in 2012, and 97.1% of BioLargo Energy Technologies, Inc. (“BETI”) organized under the laws of the State of California in 2022. We consolidate the financial statements of our partially owned subsidiaries (see Note 2, subheading “Principles of Consolidation,” and Note 8).

Liquidity / Going concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of our business. For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we generated revenues of $3,742,000 through our subsidiaries (see Note 11), had a net loss of ~~$3,724,000,~~$494,000, used ~~$2,803,000~~$43,000 cash in operations, and at ~~September 30, 2022,~~March 31, 2023, we had working capital of ~~$1,503,000,~~$3,075,000, and current assets of ~~$2,532,000. During the~~ ~~three~~ ~~months ended~~ ~~September 30, 2022,~~ ~~we generated revenues of $1,500,000. Only~~ ~~one~~ of$4,874,000. While our ~~subsidiaries – ONM Environmental – generated~~ operating ~~income. (See Note~~ 9.)

~~We do~~ ~~not~~ ~~believe gross profits~~loss has decreased in ~~the year ended~~ ~~December 31, 2022,~~ ~~or in the immediately subsequent~~recent quarterly periods, ~~will be sufficient~~as has our cash used in operations, we expect to ~~fund our current level of operations, and therefore believe we will have~~continue to ~~obtain~~need further investment capital to ~~continue to~~ fund ~~operations, such as through our purchase agreement with Lincoln Park Capital, which expires in~~ ~~March 2023,~~ ~~and private sales of our securities. (See Note~~ 3.)operations. We have been, and anticipate that we will continue to be, limited in terms of our capital resources.

During the three months ended March 31, 2023, we (i) sold $105,000 of our common stock to Lincoln Park Capital Fund, LLC (“Lincoln Park”) (see Note 3), (ii) sold $695,000 of our common stock and warrants to accredited investors (see Notes 3 and 6), (iii) sold $225,000 of Clyra Medical Series A Preferred Stock (see Note 8), and (iv) sold $550,000 of BETI common stock (see Note 10).

As of March 31, 2023, our cash and cash equivalents totaled $3,264,000. Our total liabilities included a $78,000 vehicle loan, $140,000 due in U.S. Small Business Administration (SBA) loans issued pursuant to the Paycheck Protection Program (see Note 4), $150,000 due to the SBA issued pursuant to the Economic Injury Disaster program (see Note 4), and $247,000 owed by Clyra Medical due in 2024 (see Note 8).

Subsequent to March 31, 2023, we continued to sell common stock to Lincoln Park for working capital as needed (see Note 13).

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BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

If we are unable to rely on our current arrangement with Lincoln Park ~~to continue~~ to fund our working capital requirements, we will have to rely on other forms of financing, and there is no assurance that we will be able to do so, or if we do so, it will be on favorable terms.

The foregoing factors raise substantial doubt about our ability to continue as a going concern, unless we are able to continue to raise funds through stock sales to Lincoln Park or other private financings, and in the long term, our ability to attain a reasonable threshold of operating efficiencies and achieve profitable operations by licensing or otherwise commercializing products incorporating our technologies. The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

~~Organization~~

~~We are a Delaware corporation formed in~~ ~~1991.~~ ~~We have~~ ~~four~~ ~~wholly-owned subsidiaries: BioLargo Life Technologies, Inc., organized under the laws of the State of California in~~ ~~2006;~~ ~~ONM Environmental, Inc., organized under the laws of the State of California in~~ ~~2009;~~ ~~BioLargo Water Investment Group Inc., organized under the laws of the State of California in~~ ~~2019,~~ ~~which wholly owns BioLargo Water, Inc., organized under the laws of Canada in~~ ~~2014;~~ ~~and BioLargo Development Corp., organized under the laws of the State of California in~~ ~~2016.~~ ~~Additionally, we own 89% of BioLargo Engineering Science and Technologies, LLC (“BLEST”), organized under the laws of the State of Tennessee in~~ ~~2017.~~ ~~We also own 58% of Clyra Medical Technologies, Inc. (“Clyra” or “Clyra Medical”), organized under the laws of the State of California in~~ ~~2012,~~ ~~and consolidate their financial statements (see Note~~ 2, ~~subheading “Principles of Consolidation,” and Note~~ 8).

The unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to Rule 8-03 ~~of Regulation S-~~X ~~under the Securities Act of~~ ~~1933,~~ ~~as amended. Accordingly, they do~~ ~~not~~ include all of the information and notes required by generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. For some of our activities, we are still operating in the early stages of the sales and distribution process, and therefore our operating results for the ~~nine~~ ~~months ended~~ ~~September 30, 2022~~ ~~are~~ ~~not~~ ~~necessarily indicative of the results that~~ ~~may~~ ~~be expected for the year ending~~ ~~December~~ ~~31,~~~~2022,~~ or for any other period. These unaudited consolidated financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Annual Report on Form 10~~-K for the year ended~~ ~~December 31, 2021,~~ ~~filed with the Securities and Exchange Commission (the “SEC”) on~~ ~~March 31, 2022.~~

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~~BIOLARGO, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Note 2. Summary of Significant Accounting Policies

In the opinion of management, the accompanying balance sheet and related statements of operations, cash flows, and stockholders’ deficit include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its ~~wholly-owned~~wholly owned subsidiaries, and ~~partially-owned~~partially owned subsidiaries BETI, BLEST and Clyra Medical. All intercompany accounts and transactions have been eliminated.

Foreign Currency

The Company has designated the functional currency of BioLargo Water, Inc., our Canadian subsidiary, to be the Canadian dollar. Therefore, translation gains and losses resulting from differences in exchange rates are recorded in accumulated other comprehensive income.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less when acquired to be cash equivalents. Substantially all cash equivalents are held in short-term money market accounts at one of the largest financial institutions in the United ~~States.~~States, Bank of America. From time to time, our cash account balances are greater than the Federal Deposit Insurance Corporation insurance limit of $250,000 per owner per bank, and during such times, we are exposed to credit loss for amounts in excess of insured limits in the event of non-performance by the financial institution. We do not anticipate non-performance by our financial institution.

As of ~~September 30, 2022~~March 31, 2023, and December 31, ~~2021,~~2022, our cash balances were made up of the following (in thousands):

	September 30, 2022		December 31, 2021		March 31, 2023		December 31, 2022
BioLargo, Inc. and subsidiaries	$	1,251	$	941	$	3,171	$	1,685
Clyra Medical Technologies, Inc.		17		21		93		166
Total	$	1,268	$	962	$	3,264	$	1,851

Accounts Receivable

Trade accounts receivable are recorded net of allowances for doubtful accounts. Estimates for allowances for doubtful accounts are determined based on payment history and individual customer circumstances. The allowance for doubtful accounts as of ~~September 30,~~March 31, 2023, and December 31, 2022 was ~~$12,000~~ ~~and at~~ ~~December 31, 2021,~~ ~~was~~ ~~$12,000~~.$12,000.

~~Credit Concentration~~

~~We had a limited number of customers that account for significant portions of our revenue. During the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2022~~ ~~and~~ ~~2021,~~ ~~we had the following customers that accounted for more than~~ ~~10%~~ ~~of consolidated revenues, as follows:~~

	~~September 30,~~ ~~2022~~			~~September 30,~~ ~~2021~~
~~Customer A~~		44	%		~~<10~~	%
~~Customer B~~		14	%		~~<10~~	%
~~Customer C~~		~~<10~~	%		12	%
~~Customer D~~		~~<10~~	%		14	%
~~Customer E~~		~~<10~~	%		11	%

106

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Credit Concentration

We ~~had~~have a limited number of customers that account for significant portions of our revenue. During the three months ended March 31, 2023, one customer accounted for more than 10% of consolidated revenues, and during the three months ended March 31, 2022, two customers each accounted for more than 10% of consolidated revenues:

March 31,

2023

March 31,
2022

Customer A

Customer B

<10

At March 31, 2023, and December 31, 2022, one customer accounted for more than 10% of consolidated accounts ~~receivable at~~ ~~September 30, 2022,~~ ~~and at~~ ~~December~~ ~~31,~~~~2021,~~ ~~as follows:~~receivable:

	~~September 30,~~ ~~2022~~			~~December 31,~~ ~~2021~~
~~Customer A~~		13	%		~~<10~~	%
~~Customer B~~		15	%		~~<10~~	%
~~Customer F~~		11	%		~~<10~~	%
~~Customer G~~		~~<10~~	%		32	%
~~Customer H~~		~~<10~~	%		12	%

March 31,

2023

December 31,

2022

Customer A

Inventory

Inventories are stated at the lower of cost or net realizable value using the average cost method. The allowance for obsolete inventory as of ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, was ~~$3,000~~.$158,000. Inventories consisted of (in thousands):

	September 30, 2022		December 31, 2021		March 31, 2023		December 31, 2022
Raw material	$	123	$	108	$	52	$	46
Finished goods		137		103		83		74
Total	$	260	$	241	$	135	$	120

Other Non-Current Assets

September 30,
2022

December 31,
2021

Patents
$ 34 $ 34
Security deposits
35 35
Tax credit receivable
54 $ -
Total $ 123 $ 69

Other non-current assets consisted of (i) security deposits related to our business offices, (ii) three patents acquired on October 22, 2021, for $34,000, and (iii) tax credit receivables from the Canadian government related to a research and development credit from our Canadian subsidiary for which we’ve applied for and received in prior periods.

	March 31, 2023		December 31, 2022
Patents	$	34	$	34
Security deposits		36		36
Tax credit receivable		54		54
Total	$	124	$	124

EquityMethod ofAccounting

On March 20, 2020, we invested $100,000 into a South Korean entity (Odin Co. Ltd., “Odin”) pursuant to a Joint Venture agreement we had entered into with BKT Co. Ltd. and its U.S. based subsidiary, Tomorrow Water. We received a 40% non-dilutive equity interest, and BKT and Tomorrow Water each received 30% equity interests for an aggregate $150,000 investment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

We account for our investment in the joint venture under the equity method of accounting. We have determined that while we have significant influence over the joint venture through our technology license and our position on the Board of Directors, we do not control the joint venture or are otherwise involved in managing the entity and we own less than a majority of the equity. Therefore, we record the asset on our consolidated balance sheet and record an increase or decrease the recorded balance by our percentage ownership of the profits or losses in the joint venture. The joint venture has incurred a loss ~~during the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2022~~ since inception and~~2021,~~ our 40% ownership share reduced our investment interest during the three months ended March 31, 2023, and 2022,by ~~$15,000~~$6,000 and ~~$23,000,~~$8,000, respectively.

Impairment

Long-lived and definite lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected future undiscounted cash flows from the use of the asset and its eventual disposition is less than the carrying amount of the asset, then an impairment loss is recognized. The impairment loss is measured based on the fair value of the asset. Any resulting impairment is recorded as a reduction in the carrying value of the related asset in excess of fair value and a charge to operating results. ~~For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2022~~ ~~and~~ ~~2021,~~ ~~management determined that there was no impairment of its long-lived assets, including its patents.~~

~~Nevertheless, during the~~ ~~three~~ ~~months ended~~ ~~December 31, 2021,~~ management determined that there was an impairment expense related to the sale back to Scion Solutions, LLC (“Scion’) of certain intellectual property, recorded on our balance sheet as “In-Process Research and Development” and an impairment of Clyra’s prepaid marketing. Total impairment expense for ~~2021~~ ~~was~~ ~~$342,000.~~

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~~BIOLARGO, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Earnings (Loss) Per Share

We report basic and diluted earnings (loss) per share (“EPS”) for common and common share equivalents. Basic EPS is computed by dividing reported earnings by the weighted average shares outstanding. Diluted EPS is computed by adding to the weighted average shares the dilutive effect if convertible notes payable, stock options and warrants were exercised into common stock. For the three ~~and~~ ~~nine~~months ended ~~September 30, 2022~~March 31, 2023, and ~~2021,~~2022, the denominator in the diluted EPS computation is the same as the denominator for basic EPS due to the Company’s net loss which creates an anti-dilutive effect of the convertible notes payable, warrants and stock ~~options on the Company’s net loss.~~options.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period reported. Actual results could differ from those estimates. Estimates are used when accounting for stock-based transactions, debt transactions, derivative liabilities, allowance for bad debt, asset depreciation and amortization, impairment expense, among others.

The methods, estimates and judgments we use in applying these most critical accounting policies have a significant impact on the results of our financial statements.

Share-Based Compensation Expense

We recognize compensation expense for stock option awards on a straight-line basis over the applicable service period of the award, which is the vesting period. Fair value is determined on the grant date. Share-based compensation expense is based on the grant date fair value estimated using the Black-Scholes Option Pricing Model.

For stock and stock options issued to consultants and other non-employees for services, the Company measures and records an expense as of the earlier of the date at which either: a commitment for performance by the non-employee has been reached or the non-employee’s performance is complete. The equity instruments are measured at the current fair value, and for stock options, the instruments are measured at fair value using the Black Scholes option model.

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BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following methodology and assumptions were used to calculate share-based compensation for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023, and ~~2021:~~2022:

	2022						2021						2023						2022
	Non Plan			2018 Plan			Non Plan			2018 Plan			Non Plan			2018 Plan			Non Plan			2018 Plan
Risk free interest rate	2.32	–	3.83%	2.32	–	3.83%		1.73	%	0.93	–	1.73%		3.48	%		3.48	%	2.32	–	3.83%	2.32	–	3.83%
Expected volatility	115	–	117%	115	–	117%		124	%	121	–	124%		114	%		114	%	114	–	117%	114	–	117%
Expected dividend yield		—			—			—			—			—			—			—			—
Forfeiture rate		—			—			—			—			—			—			—			—
Life in years		10			10			10			10			10			10			10			10

Expected price volatility is the measure by which our stock price is expected to fluctuate during the expected term of an option. ~~Expected~~The expected volatility is derived from the historical daily change in the market price of our common stock, as we believe that historical volatility is the best indicator of future volatility.

The risk-free interest rate used in the Black-Scholes calculation is based on the prevailing U.S. Treasury yield as determined by the U.S. Federal Reserve. We have never paid any cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future.

~~Historically, we have~~ ~~not~~ had significant forfeitures of unvested stock options granted to employees and Directors. A significant number of our stock option grants are fully vested at issuance or have short vesting provisions. Therefore, we have estimated the forfeiture rate of our outstanding stock options as zero.

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~~BIOLARGO, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Warrants

Warrants issued with our convertible ~~promissory notes, note payables, line of credit~~and non-convertible debt instruments are accounted for under the fair value and relative fair value method.

The warrant is first analyzed per its terms as to whether it has derivative features or not. If the warrant is determined to be a derivative and not qualify for equity treatment, then it is measured at fair value using the Black Scholes option model and recorded as a liability on the balance sheet. The warrant is re-measured at its then current fair value at each subsequent reporting date (it is “marked-to-market”).

If the warrant is determined to not have derivative features, it is recorded into equity at its fair value using the Black Scholes option model, however, limited to a relative fair value based upon the percentage of its fair value to the total fair value including the fair value of the convertible note.

Convertible debt instruments are recorded at fair value, limited to a relative fair value based upon the percentage of its fair value to the total fair value including the fair value of the warrant.

The warrant relative fair values are also recorded as a discount to the convertible promissory notes. As present, these equity features of the convertible promissory notes have recorded a discount to the convertible notes that is substantially equal to the proceeds received.

Non-Cash Transactions

We ~~have established a policy relative to the methodology to~~ determine the value assigned to each intangible we acquire, and/or services or products received for non-cash consideration of our common ~~stock. The value is~~stock based on the market price of our common stock issued as consideration, at the date of the agreement of each transaction or when the service is rendered or product is received.

Revenue Recognition

We account for revenue in accordance with ASC 606, “Revenue from Contacts with Customers”. The guidance focuses on the core principle for revenue recognition, which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the guidance provides that an entity should apply the following steps:

Step 1: Identify the contract(s) with a customer.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

~~We generate revenue~~The Company’s products are sold through ~~our subsidiaries. For the sale of goods, the subsidiary identifies its~~a contract with the customer ~~through~~and a written purchase order, in which the details of the contract are defined including the transaction price and method of shipment. The only performance obligation is to create and ship the product, and each product has separate pricing. Revenue is recognized at a point in time when the ~~order for its~~ goods are shipped if ~~its~~the agreement ~~with the customer~~ is FOB manufacturer, and when goods are delivered ~~to its customer~~ if ~~its agreement with the customer is~~ FOB destination. Revenue is recognized with a reduction for sales discounts, as appropriate and negotiated in the customer’s purchase order. In association with certain product purchases, ONM Environmental installs misting systems for which it bills on a time and materials basis. It identifies its contract with the customer through a written purchase order in which the details of the time to be billed and materials purchased and an estimated completion date. The performance obligation is the completion of the installation, and at that time revenue is recognized.

~~For services, such as~~Service contracts are performed through ~~our engineering group, the subsidiary identifies services to be performed in~~ a written contract, which specifies the performance obligations and the rate at which the services will be ~~billed.~~billed, typically by time and materials. Each service is separately negotiated and priced. Revenue is recognized as services are performed and ~~completed. Service~~completed, or, for services related to product installations, at the completion of the installation. A few contracts ~~typically call for invoicing for time and materials incurred for that contract, although some provide~~have called for milestone or fixed cost payments, where we invoice an agreed-to amount ~~is invoiced~~ per month for the life of the contract. In these instances, completed work, billed hourly, is recognized as revenue. If the billing amount is greater or lesser than the completed work, a ~~contract~~ receivable or ~~contract liability~~payable is created. ~~As of~~ ~~September 30, 2022,~~ ~~we had $6,000 of contract liability. As of~~ ~~December 31, 2021,~~ ~~we had contract liability totaling $89,000.~~These accounts are adjusted upon additional billings as the work is completed. To date, there have been no discounts or other financing terms for the contracts.

~~Table~~

The Company has outstanding contract liability obligations of ~~Contents~~

~~BIOLARGO, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

$21,000 as of March 31, 2023, recorded as deferred revenue. We recognized $8,000 in revenue and reduce the deferred revenue balance by the same amount as performance obligations were satisfied in the three months ended March 31 ,2023. The outstanding balance will be recognized over the remaining life of the contracts.

~~Royalties~~

As we generate revenues from royalties or license fees from our intellectual property, ~~are~~a licensee will pay a license fee in one or more installments and ongoing royalties based on ~~the licensee’s~~their sales of products incorporating or using our licensed intellectual property. We have entered into a licensing agreement for the CupriDyne Clean product, and we recognize royalty and license fees on a quarterly basis as the product is sold through to third parties and reported to us.

Clyra also has certain distribution agreements that call for consigned inventory. Although the product is shipped to a third party, it is not revenue until that consigned inventory is sold to end user customer.

Government Grants

We have been awarded multiple research grants from the private and public Canadian ~~National Research Institute – Industrial Research Assistance Program (NRC-IRAP) and the National Science and Engineering Research Council of Canada (NSERC).~~research programs. The income we receive directly from grants ~~received are considered~~is recorded as other ~~income and are included in our consolidated statements of operations.~~income. We ~~received our~~ ~~first~~ ~~grant in~~ ~~2015~~ ~~and~~ have been awarded over 80 grants ~~totaling over $3.7 million.~~since our first in 2015. Some of the funds from these grants are given directly to third parties (such as the University of Alberta or a third-party research scientist) to support research on our technology. The grants have terms generally ranging between ~~nine~~six and eighteen months and support a majority, but not all, of the related research budget costs. This cooperative research allows us to utilize (i) a depth of resources and talent to accomplish highly skilled work, (ii) financial aid to support research and development costs, (iii) independent and credible validation of our technical claims.

The grants typically provide for (i) recurring monthly amounts, (ii) reimbursement of costs for research talent for which we invoice to request payment, and (iii) ancillary cost reimbursement for research talent travel related costs. All awarded grants have specific requirements on how the money is spent, typically to employ researchers. None of the funds may be used for general administrative expenses or overhead in the United States. These grants have substantially increased our level of research and development activities in Canada. We continue to apply for Canadian government and agency grants to fund research and development activities. Not all of our grant applications have been awarded, and no assurance can be made that any pending grant application, or any future grant applications, will be awarded.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Income Taxes

The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of asset and liabilities. Deferred tax assets and liabilities are determined based on the differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on deferred tax asset and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

We account for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation, and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by generally accepted accounting principles (“GAAP”). Under GAAP, the tax effects of a position are recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the position are recognized. Management believes there are no unrecognized tax benefits or uncertain tax positions as of ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021.~~2022.

The Company assessed its earnings history, trends and estimates of future earnings and determined that the deferred tax asset could not be realized as of ~~September 30,~~March 31, 2023, and December 31, 2022. Accordingly, a valuation allowance was recorded against the net deferred tax asset.

The Company recognizes interest and penalties on income taxes as a component of income tax expense, should such an expense be realized.

Fair Value of Financial Instruments

Management believes the carrying amounts of the Company’s financial instruments ~~(excluding debt and equity instruments)~~ as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022 approximate their respective fair values because of the short-term nature of these instruments. Such instruments consist of cash, accounts receivable, prepaid assets, accounts payable, ~~lines~~line of credit, and other assets and liabilities. The carrying amount of debt instruments are believed to approximate fair value as the stated interest rates are reflective of the prevailing market rates.

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~~BIOLARGO, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Tax Credits

Our research and development activities in Canada may entitle our Canadian subsidiary to claim benefits under the “Scientific Research and Experimental Development Program”, a Canadian federal tax incentive program designed to encourage Canadian businesses of all sizes and in all sectors to conduct research and development in Canada. Benefits under the program include credits to taxable income. If our Canadian subsidiary does not have taxable income in a reporting period, we instead receive a tax refund from the Canadian Revenue Authority. ~~A refund has been submitted totaling $54,000, which is~~Those refunds are classified in Other Income on our Consolidated Statement of Operations and Comprehensive Loss.

Leases

In At inception of a lease contract, we assess whether the contract is, or contains, a lease. Our assessment is based on: (~~February 2016,~~1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period of the contract, and (3) whether we have the right to direct the use of the asset during such time period. At inception of a lease, we allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. Leases are classified as either finance leases or operating leases. A lease must be classified as a finance lease if any of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any of these criteria. We have no leases classified as finance leases. As of March 31, 2023, the ~~FASB issued ASU Update~~ ~~No.~~~~2016~~-~~02,~~ ~~“Leases,” which requires lessees to recognize most~~weighted average remaining lease term for our operating leases ~~on their balance sheets as~~was nine years. The weighted average discount rate for our operating leases was 18%. For all leases at the lease commencement date, a right-of-use asset ~~with~~and a ~~corresponding~~ lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, management estimates the incremental borrowing rate, which currently is estimated to be 18%. Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and ~~lessors~~payments for early termination options unless it is reasonably certain the lease will not be terminated early. Lease components are included in the measurement of the initial lease liability. Additional payments based on a change in our portion of the operating expenses, including real estate taxes and insurance, are recorded as a period expense when incurred. Lease modifications result in remeasurement of the lease liability. Lease expense for operating leases consists of the lease payments plus any initial direct costs, primarily brokerage commissions, and is recognized on a straight-line basis over the lease term. We have elected not to recognize ~~a net lease investment. Additional qualitative and quantitative disclosures are also required (see Note~~ 10~~). We adopted this standard effective~~ ~~January 1, 2019~~ ~~using the effective date option, as approved by the FASB in~~ ~~July 2018,~~ ~~which resulted in a $399,000 gross up of~~right-of-use assets and ~~liabilities; this balance~~lease liabilities for short-term leases that have a term of ~~may~~ 12~~fluctuate over time as we enter into new~~ months or less. The effect of short-term leases ~~extend or terminate current leases. Upon~~ on our right-of-use asset and lease liability was not material.

As of March 31, 2023, the ~~transition to ASC~~ ~~842,~~ ~~the Company elected to use hindsight as a practical expedient with respect to determining~~right-of-use assets totaled $837,000 and the lease ~~terms and in assessing any impairment of right-of-use assets for existing leases.~~ No ~~impairment is expected at this time. As of~~ ~~September 30, 2022,~~ ~~the right of use assets~~liability totaled $844,000 on our balance sheet related to our operating ~~leases totals $896,000.~~leases.

Equipment

Equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from 3 - 5 years. Additions, renewals, and betterments that significantly extend the life of the asset are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred. For assets sold or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from the accounts, and any related gain or loss is reflected in income for the period.

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BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, which sets out the principles for the recognition of measurement of credit losses on financial instruments, including trade receivables. The standard eliminates the probable initial recognition threshold and requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. The new standard was effective for the Company beginning January 1, 2023 and primarily impacted trade accounts receivable.

Accounts receivable are customer obligations that are unconditional. Accounts receivable are presented net of an allowance for doubtful accounts for expected credit losses, which represents an estimate of amounts that may not be collectible. The Company performs ongoing credit evaluations of its customers and, if necessary, provides an allowance for doubtful accounts and expected credit losses. A provision to the allowances for doubtful accounts for expected credit losses is recorded based on factors including the length of time the receivables are past due, the current business environment, and the Company’s historical experience. Provisions to the allowances for doubtful accounts for expected credit losses are recorded to general and administrative expenses. The Company writes off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues collection of the receivable. The Company does not have any off-balance-sheet credit exposure related to customers. As of March 31, 2023 and December 31, 2022, the allowance for doubtful accounts for expected credit losses was $12,000.

Recent Accounting Pronouncements

In ~~August 2020,the FASB issued Accounting Standards Update~~~~No.~~~~2020~~-~~06,~~~~“Debt—Debt with Conversion and Other Options (Subtopic~~~~470~~-20~~) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic~~~~815~~-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”. For convertible instruments, the FASB decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1~~) those with embedded conversion features that are~~~~not~~~~clearly and closely related to the host contract, that meet the definition of a derivative, and that do~~~~not~~~~qualify for a scope exception from derivative accounting and (~~2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The FASB decided to amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The FASB observed that the application of the derivatives scope exception guidance results in accounting for some contracts as derivatives while accounting for economically similar contracts as equity. The FASB also decided to improve and amend the related EPS guidance. The amendments in this Update are effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after ~~December 15, 2021,including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after~~ ~~December 15, 2023,~~~~including interim periods within those fiscal years; early adoption is permitted. Management has evaluated this update and adopted it as of~~ ~~January 1, 2022.~~ ~~In do so, we evaluated the convertible debt issued by Clyra Medical during the~~ ~~three~~ ~~months ended~~ ~~June 30, 2022 (~~~~see Note~~ 8~~), and determined that the beneficial conversion feature was fixed at the time of issuance and~~ ~~not~~ ~~an embedded derivative under Subtopic~~ ~~815~~-~~15.~~ ~~As a result of the early adoption,~~Currently there are no ~~other potential affects on~~recently released pronouncements that are considered applicable to the Company’s ~~current~~ financial statements.

Note 3. Sale of Stock for Cash

Lincoln Park Financing

~~During~~On December 13, 2022, we entered into a stock purchase agreement (the “2022 LPC Purchase Agreement”) with Lincoln Park, pursuant to which Lincoln Park agreed to purchase from us at our request up to an aggregate of $10,000,000 of our common stock (subject to certain limitations) from time to time over a period of three years. The agreement allows us, at our sole discretion, to direct Lincoln Park to purchase shares of our common stock, subject to limitations in both volume and dollar amount. The purchase price of the shares that may be sold to Lincoln Park under the agreement is the lower of (i) the lowest sale price on the date of purchase, or (ii) the average of the three ~~and~~lowest closing prices in the prior ~~nine~~12 ~~months ended~~business days. There are ~~September 30,~~ no restrictions on future financings, rights of first refusal, participation rights, penalties, or liquidated damages other than a prohibition on entering into a “Variable Rate Transaction,” as defined in the agreement. Concurrently with the 2022 LPC Purchase Agreement, we ~~sold 2,440,958 and 4,353,919 shares~~entered into a Registration Rights Agreement, pursuant to ~~Lincoln Park, and in exchange received $485,000 and $903,000 in gross and net proceeds.~~which we filed a registration statement on Form S-1 with the SEC on December 23, 2022. This registration statement was declared effective on January 19, 2023.

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~~BIOLARGO, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

During the three ~~and~~ ~~nine~~months ended ~~September 30, 2021,~~March 31, 2023, and 2022,we sold ~~2,917,819~~545,402 and ~~21,444,128~~1,506,821 shares of our common stock to Lincoln Park, and ~~in exchange~~ received ~~$530,000~~$105,000 and ~~$3,545,000~~$346,000, respectively, in gross and net proceeds.

Unit Offerings

During the three ~~and~~ ~~nine~~months ended ~~September 30,~~ March 31, 2023, and 2022,~~pursuant to our unit offerings,~~ we sold ~~3,766,126~~3,656,000 and ~~13,568,524~~5,196,968 shares of our common stock and received ~~$632,000~~$695,000 and ~~$2,364,000~~$856,000 in gross and net proceeds from ~~thirty~~accredited investors.

~~During the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021,~~ ~~pursuant to our unit offerings, we sold 388,889 and 3,820,436 shares of our common stock and received $70,000 and $575,000 in gross and net proceeds from~~ ~~four~~ ~~accredited investors.~~

In addition to the shares, we issued each investor a six-month and a five-year warrant to purchase additional ~~shares (see~~shares. (See Note 6, “Warrants Issued in Unit ~~Offerings”~~Offering”.).

Note 4. Debt Obligations

The following table summarizes our debt obligations outstanding as of ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021~~2022 (in thousands). The table does not include debt obligations of our partially owned subsidiary Clyra Medical (see Note 8, “Debt Obligations of Clyra Medical”).

	September 30, 2022 (Unaudited)			December 31, 2021			March 31, 2023		December 31, 2022
Current portion of debt:
SBA Paycheck Protection Program loans, mature April 2025	$	43		$	314
SBA Paycheck Protection Program loan							$	43	$	43
Vehicle loan, current portion								13		—
Convertible note payable, matures March 1, 2023		50			—			—		50
SBA EIDL Loan, matures July 2053, current portion								10		10
Debt discount, net of amortization		(7	)		—			—		(3	)
Total current portion of debt	$	86		$	314		$	66	$	100


Long-term debt:
SBA EIDL Loan	$	150		$	150
SBA Paycheck Protection Program loans, mature May 2025		97			—
Convertible note payable, matures March 1, 2023		—			50
Debt discount, net of amortization		—			(20	)
Total long-term debt		247			180
SBA Paycheck Protection Program loans, matures May 2025							$	97	$	97
Vehicle loan, matures March 2029								65		—
SBA EIDL Loan, matures July 2053								140		140
Total long-term debt, net of current							$	302	$	237
Total	$	333		$	494		$	368	$	337

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BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

For the three ~~and~~ ~~nine~~months ended ~~September 30,~~ March 31, 2023, and 2022,we recorded ~~$14,000~~$48,000 and ~~$42,000, and for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021,~~ ~~we recorded $42,000 and $208,000,~~$13,000 of interest expense related to the amortization of discounts on convertible notes payable and coupon interest from our ~~note payable,~~ convertible notes and ~~line~~lines of credit.

Vehicle loan

On February 7, 2023, we entered a loan agreement with Bank of America for the purchase of a vehicle used in operations totaling $80,000, at 5.29% annual interest which matures March 7, 2029. The ~~following discussion includes debt instruments~~loan agreement requires monthly payments of $1,118.

Convertible note payable, matures March 1, 2023

On March 6, 2023, we entered into an agreement with the holder of a $50,000 note to convert that note into common stock of BETI (see note 10). As payment for interest, a warrant to purchase 200,000 shares of BioLargo common stock at $0.21 was issued to the investor, expiring five years from the grant date. (See Note 6).

SBAProgramLoans

On February 7, 2022, we received notice that the SBA had forgiven $173,821 of ONM Environmental's $217,243 Paycheck Protection Program (PPP) loan. ONM has appealed this decision. On May 12, 2022, we received notice that the SBA had denied the forgiveness application of BLEST’s $97,000 PPP loan. We have appealed that decision. During the period upon which ~~amendments were made or included other activity that management deemed appropriate~~a forgiveness decision is on appeal, loan payments are deferred. The maturity date of the BLEST PPP loan was officially extended on our request to ~~disclose during~~May 2025.

In July 2020, ONM Environmental received an Economic Injury Disaster Loan from the SBA in the amount of $150,000. The note has a 3.75% annual interest rate. For the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023, interest expense totaled $2,000.

Note 5. Share-Based Compensation

Issuance of Common Stock in exchange for Services

Payment of Officer Salaries

On March 31, 2023, an officer agreed to convert an aggregate $6,000 of accrued and ~~2021.~~ ~~Each~~unpaid salary into 30,747 shares of our common stock at $0.20 per share. Shares issued to Officers are unvested at the date of grant and subject to a lock-up agreement restricting vesting and sale until the earlier of (i) the consummation of a sale (in a single transaction or in a series of related transactions) of BioLargo by means of a sale of (a) a majority of the ~~debt instruments contained~~then outstanding common stock of BioLargo (whether by merger, consolidation, sale or transfer of common stock, reorganization, recapitalization or otherwise) or (b) all or substantially all of the assets of BioLargo; and (ii) the successful commercialization of BioLargo’s products or technologies as demonstrated by its receipt of at least $3,000,000 in cash, or the ~~above table are disclosed more fully~~recognition of $3,000,000 in revenue, over a 12-month period from the ~~financial statements contained in~~sale of products and/or the license of technology; and (iii) the Company’s ~~Form~~ 10~~-K filed~~ ~~March 31, 2022.~~breach of the employment agreement between the Company and Officer and resulting in Officer’s termination.

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BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~SBA Program Loans~~

In ~~April 2020,~~ our subsidiaries ONM Environmental, BLEST and Clyra Medical received $218,000, $96,000 and $43,000, respectively, in loans pursuant to the Small Business Association’s (“SBA”) Paycheck Protection Program (“PPP”). The loans mature ~~two~~ ~~years from the inception date (although any payments due are deferred once a forgiveness application has been filed), and incur interest at~~ ~~1%.~~ ~~Management believes that it has fully complied with the terms of forgiveness as set forth by the SBA, and each subsidiary has filed forgiveness applications. On~~ ~~February 7, 2022,~~ ~~we received notice that the SBA had partially approved ONM Environmental's application for forgiveness of its PPP loan in the amount of~~ ~~$174,000;~~ ~~ONM has appealed and provided additional documentation to support forgiveness of the remaining $43,000. The forgiveness application of BLEST remains pending. On~~ ~~March 19, 2021,~~ ~~we received notice that the SBA had approved the application for forgiveness Clyra’s PPP loan.~~

~~Note~~ 5. ~~Share-Based Compensation~~

~~Issuance of Common Stock in exchange for payment of payables~~

~~Payment of Officer Salaries~~

On ~~September 30, 2022,~~ ~~we issued 167,781 shares of our common stock at $0.27 per share in lieu of $72,000 of accrued and unpaid salary to our officers.~~

On ~~September 30, 2021,~~ ~~we issued 61,842 shares of our common stock at $0.19 per share in lieu of $12,000 of accrued and unpaid salary to our officers. On~~ ~~March 31, 2021,~~ ~~we issued 137,364 shares of our common stock at $0.23 per share in lieu of $31,000 of accrued and unpaid salary to our officers.~~

Payment of Consultant Fees

On ~~September 30, 2022,~~March 31, 2023, we issued ~~211,047~~899,743 shares of our common stock at ~~$0.27~~$0.20 per share in lieu of ~~$24,000~~$201,000 of accrued and unpaid obligations to consultants. On ~~June 30, 2022,~~ ~~we issued 76,996 shares of our common stock at $0.18 per share in lieu of $60,000 of accrued and unpaid obligations to consultants.~~

On March 31, 2022, we issued 86,752 shares of our common stock at $0.23 per share in lieu of ~~$31,000~~$17,000 of accrued and unpaid obligations to consultants.

OnAll of these offerings and sales were made in reliance on the exemption from registration contained in Section ~~September 30, 2021,~~ 4~~we issued 586,963 shares~~(2) of ~~our common stock at $0.19 per share in lieu~~the Securities Exchange Act and/or Regulation D promulgated thereunder as not involving a public offering of ~~$71,000 of accrued and unpaid salary to consultants. On~~ ~~June 30, 2021,~~ ~~we issued 357,132 shares of our common stock at $0.17 per share in lieu of $60,000 of accrued and unpaid obligations to consultants. On~~ ~~March 31, 2021,~~ ~~we issued 610,123 shares of our common stock at $0.23 per share in lieu of $81,000 of accrued and unpaid obligations to consultants.~~

~~Payment of Accrued Interest~~

~~During the~~ ~~three~~ ~~months ended~~ ~~June 30, 2021,~~ ~~we issued 81,777 shares of our common stock at $0.17 per share in lieu of $16,000 of accrued and unpaid interest.~~securities.

Stock Option Expense

During the three ~~and~~ ~~nine~~months ended ~~September 30,~~ March 31, 2023, and 2022,we recorded an aggregate ~~$338,000~~$256,000 and ~~$1,455,000, and during the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021,~~ ~~we recorded an aggregate $430,000 and $1,447,000~~$801,000, respectively, in selling general and administrative expense related to the issuance of stock options. We issued options through our 2018 Equity Incentive Plan, ~~our now expired~~ ~~2007~~ ~~Equity Incentive Plan,~~ and outside of this plan. Within these ~~plans. See~~totals, $61,000 and $141,000 were issued by our subsidiary Clyra Medical (see Note 8 ~~for information on stock option expense for options issued by subsidiary Clyra.~~).

2018 Equity Incentive Plan

On June 22, 2018, our stockholders adopted the BioLargo 2018 Equity Incentive Plan (“2018 Plan”) as a means of providing our directors, key employees, and consultants additional incentive to provide services. Both stock options and stock grants may be made under this plan for a period of 10 years. It is set to expire on its terms on June 22,2028. Our Board of Director’s Compensation Committee administers this plan. As plan administrator, the Compensation Committee has sole discretion to set the price of the options. The plan authorizes the following types of awards: (i) incentive and non-qualified stock options, (ii) restricted stock awards, (iii) stock bonus awards, (iv) stock appreciation rights, (v) restricted stock units, and (vi) performance awards. The total number of shares reserved and available for awards pursuant to this Plan as of the date of adoption of this 2018 Plan by the Board is 40 million shares. The number of shares available to be issued under the 2018 Plan increases automatically each January 1~~1st~~^st by the lesser of (a) 2 million shares, or (b) such number of shares determined by our Board. As of March 31, 2023, 50,000,000 shares are authorized under the plan.

Activity for our stock options under the 2018 Plan during the three months ended March 31, 2023, and 2022, is as follows:

	Options Outstanding			Exercise Price per share				Weighted Average Price per share		Aggregate intrinsic Value⁽¹⁾
Balance, December 31, 2022		28,484,549		$0.12	–	0.43	$	0.19
Granted		1,320,498			$0.20		$	0.2
Balance, March 31, 2023		29,805,047		$0.12	–	0.43	$	0.19
Unvested		(4,073,761	)	$0.12	–	0.32	$	0.19
Vested, March 31, 2023		25,731,286		$0.12	–	0.43	$	0.19	$	678,000

Balance, December 31, 2021		23,186,142		$0.16	–	0.40	$	0.19
Granted		2,621,229		$0.12	–	0.23	$	0.23
Balance, March 31, 2022		25,807,371		$0.12	–	0.40	$	0.19

(1) – Aggregate intrinsic value based on closing common stock price of $0.20 at March 31, 2023.

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BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~Activity for our stock options under the~~ ~~2018~~ ~~Plan for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2022~~ ~~and~~ ~~September 30, 2021,~~ ~~is as follows:~~

Weighted

Average

Aggregate

Options

Exercise

Price per

intrinsic

Outstanding

Price per share

share

Value⁽¹⁾

Balance, December 31, 2021
23,186,142 $0.12 – 0.43 $ 0.19
Granted
4,748,212 0.18 – 0.27 0.22
Balance, September 30, 2022
27,934,354 $0.12 – 0.43 $ 0.19
Non-vested
(4,449,874
)
0.12 – 0.40 0.22
Vested, September 30, 2022
23,484,480 $0.12 – 0.43 $ 0.19 $ 1,893,000

Balance, December 31, 2020
18,865,525 $0.16 – 0.40 $ 0.19
Granted
3,686,462 0.13 – 0.23 0.19
Balance, September 30, 2021
22,591,987 $0.12 – 0.43 $ 0.19

(1~~) Aggregate intrinsic value based on closing common stock price of $0.27 at~~ ~~September 30, 2022.~~

The options granted to purchase ~~4,748,212~~1,320,498 shares during the ~~nine~~three months ended ~~September 30, 2022~~ March 31, 2023with an aggregate fair value of $248,000 were issued to ~~officers,~~an officer, board of directors, employees and ~~consultants:~~a consultant: (i) we issued options to purchase ~~290,135~~347,730 shares of our common stock at an exercise price on the respective grant date of $0.22 and $0.23 per share to our CFO and President to replace options that had expired; (ii) we issued options to purchase 1,134,356 shares of our common stock at an exercise price on the respective grant date ranging between $0.18 – $0.27$0.20 per share to members of our board of directors for services performed, in lieu of cash; the fair value of these options totaled $~~246,000;~~65,000; ~~(iii)~~(ii) we issued options to purchase ~~2,340,730~~570,204 shares of our common stock to employees as part of an employee retention plan at an exercise price on the respective date ~~ranging between $0.18 – $0.27~~of $0.20 per share; the fair value of employee retention plan options totaled ~~$492,000~~$108,000 and will vest quarterly over four years as long as they are retained as employees; ~~(iv)~~(iii) we issued options to purchase ~~682,991~~102,564 shares of our common stock to consultants in lieu of cash for expiring options at $0.20 per share totaling $19,000, and ~~per agreement totaling $145,000, and (v)~~(iv) we issued 300,000 options to our Chief Financial Officer with a fair value of $56,000 (see “Chief Financial Officer Contract Extension” immediately below). All stock option expense is recorded on our consolidated statement of operations as selling, general and administrative expense.

The options granted to purchase 2,621,229 shares during the three months ended March 31, 2022with an aggregate fair value of $564,000 were issued to officers, board of directors, employees and consultants: (i) we issued an option to purchase 39,848 shares of our common stock at an exercise price on the respective grant date of $0.23 per share to our CFO and President to replace options that had expired; the fair value of this option was $9,000; (ii) we issued options to purchase 444,092 shares of our common stock at an exercise price on the respective grant date of $0.23 per share to members of our board of directors for services performed, in lieu of cash; the fair value of these options totaled $96,000; (iii) we issued options to purchase 1,690,257 shares of our common stock to employees as part of an employee retention plan at an exercise price on the respective date of $0.23 per share; the fair value of employee retention plan options totaled $362,000 and will vest quarterly over four years as long as they are retained as employees; and (iv) we issued options to purchase 447,032 shares of our common stock to consultants in lieu of cash for expiring options and per agreement totaling $97,000. All stock option expense is recorded on our consolidated statement of operations as selling, general and administrative expense.

Chief Financial Officer Contract Extension

On March ~~22, 2022,~~21, 2023, we and our Chief Financial Officer Charles K. Dargan, II formally agreed to extend the engagement agreement dated February 1, 2008 (the “Engagement Agreement”, which had been previously extended multiple times), pursuant to which Mr. Dargan has been and continues to serve as the Company’s Chief Financial Officer. The Engagement Extension Agreement dated as of March ~~22, 2022~~21, 2023 (the “Engagement Extension Agreement”) provides for an additional one-year term to expire January 31, ~~2023~~2024 (the “Extended Term”)., at which time Mr. Dargan will continue to serve as CFO, unless and until either party terminates the agreement.

As the sole compensation for the Extended Term, Mr. Dargan was issued an option (“Option”) to purchase 25,000 shares of the Company’s common stock for each month during the Extended Term (thus, an option to purchase 300,000 shares reflecting an extended term of 12 months). The Option vests over the period of the Extended Term, with 25,000 shares having vested as of March ~~22, 2022,~~21, 2023, and the remaining shares to vest 25,000 shares monthly beginning March ~~22, 2022,~~31, 2023, and each month thereafter, so long as the agreement is in full force and effect. The Option is exercisable at ~~$0.24~~$0.20 per share, the closing price of BioLargo’s common stock on the March ~~22, 2022,~~21, 2023 ~~the~~ grant date, expires ten years from the grant date, and was issued pursuant to the Company’s 2018 Equity Incentive Plan.

The Option is Mr. Dargan’s sole compensation for the Extended Term. As was the case in all prior terms of his engagement, there is no cash component of his compensation for the Extended Term. Mr. Dargan is eligible to be reimbursed for business expenses he incurs in connection with the performance of his services as the Company’s Chief Financial Officer (although he has made no such requests for reimbursement in the past). All other provisions of the Engagement Agreement not expressly amended pursuant to the Engagement Extension Agreement remain the same, including provisions regarding indemnification and arbitration of disputes.

~~Table of Contents~~

~~BIOLARGO, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~The options granted to purchase 3,686,462 shares during the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021~~ were issued to an officer, board of directors, employees and consultants: (i) we issued options to purchase 300,000 shares of our common stock at an exercise price on the respective grant date of $0.17 per share to our CFO as described below; (ii) we issued options to purchase 1,049,024 shares of our common stock at an exercise price on the respective grant date of $0.17 and $0.23 per share to members of our board of directors for services performed, in lieu of cash; the fair value of these options totaled ~~$198,000;~~ (iii) we issued options to purchase 1,800,011 shares of our common stock to employees as part of an employee retention and expiring options plan at exercises price on the respective date ranging between $0.17 and $0.23 per share; the fair value of employee retention plan options totaled $327,000 and will vest quarterly over ~~four~~ years as long as they are retained as employees; and (iv) we issued options to purchase 537,427 shares of our common stock to consultants and employees in lieu of cash for unpaid obligations totaling $95,000. All stock option expense is recorded on our consolidated statement of operations as selling, general and administrative expense.

2007 Equity Incentive Plan

On September 7, 2007, and as amended April 29, 2011, the BioLargo, Inc. 2007 Equity Incentive Plan (“2007 Plan”) was adopted as a means of providing our directors, key employees and consultants additional incentive to provide services. Both stock options and stock grants may be made under this plan for a period of 10 years, which expired on September 7, 2017. The Board’s Compensation Committee administers this plan. As plan administrator, the Compensation Committee has sole discretion to set the price of the options. As of September 2017, the Plan was closed to further stock option grants.

~~Activity for our stock options under the~~ ~~2007~~ ~~Plan for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2022~~ ~~and~~ ~~2021~~ ~~is as follows:~~

Weighted

Average

Aggregate

Options

Exercise

Price per

intrinsic

Outstanding

price per share

share

Value⁽¹⁾

Balance, December 31, 2021
2,879,246 $0.28 – 0.94 $ 0.49
Expired
(975,161
)
$0.28 – 0.35 0.36
Balance, September 30, 2022
1,904,085 $0.28 – 0.94 $ 0.56 $ —

Balance, December 31, 2020
5,689,363 $0.28 – 0.94 $ 0.44
Expired
(1,769,008
)
0.39 – 0.51 0.40
Balance, September 30, 2021
3,920,355 $0.28 – 1.65 $ 0.45

(1~~) – Aggregate intrinsic value based on closing common stock price of $0.27 at~~ ~~September 30, 2022.~~

~~Non-Plan Options issued~~

~~Activity of our non-plan stock options issued for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2022~~ ~~and~~ ~~2021~~ ~~is as follows:~~

Weighted

Non-plan

average

Aggregate

Options

Exercise

price per

Intrinsic

Outstanding

price per share

share

value⁽¹⁾

Balance, December 31, 2021
20,119,207 �� $0.17 – 1.00 $ 0.41
Granted
105,797 $0.23 – 0.27 0.26
Balance, September 30, 2022
20,225,004 $0.17 – 1.00 $ 0.39
Non-vested
(1,050,000
)
0.17 – 0.45 0.45
Vested, September 30, 2022
19,175,004 $0.17 – 1.00 $ 0.38 $ 274,000

Balance, December 31, 2020
20,749,583 $0.17 – 1.00 $ 0.41
Granted
43,956 0.23 0.23
Expired
(800,000
)
1.00 1.00
Balance, September 30, 2021
19,993,539 $0.17 – 1.00 $ 0.39

(1~~) – Aggregate intrinsic value based on closing common stock price of $0.27 at~~ ~~September 30, 2022.~~

1915

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BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~During~~Activity for our stock options under the ~~nine~~2007 Plan for the three months ended ~~September 30,~~ March 31, 2023, and 2022 is as follows:

						Weighted
						Average		Aggregate
	*Options*		*Exercise*			*Price per*		*intrinsic*
	*Outstanding*		*price per share*			*share*		Value⁽¹⁾
Balance, December 31, 2022		1,904,085	$0.28	–	0.69	$	0.56
Expired		–		–			–
Balance, March 31, 2023		1,904,085	$0.28	–	0.69	$	0.56	$	–

Balance, December 31, 2021		2,879,246	$0.23	–	0.94	$	0.49
Expired		–		–			–
Balance, March 31, 2022		2,879,246	$0.23	–	0.94	$	0.49

⁽¹⁾ – Aggregate intrinsic value based on closing common stock price of $0.20 at March 31, 2023.

Non-Plan Options issued

Activity of our non-plan stock options issued for the three months ended March 31, 2023 and 2022 is as follows:

							Weighted
	*Non-plan*						*average*		*Aggregate*
	*Options*			*Exercise*			*price per*		*intrinsic*
	*outstanding*			*price per share*			*share*		value⁽¹⁾
Balance, December 31, 2022		19,023,829		$0.12	–	0.83	$	0.39
Granted		48,804			0.20			0.20
Balance, March 31, 2023		19,072,633		$0.12	–	0.83	$	0.39
Unvested		(507,500	)		0.45			0.45
Vested, March 31, 2023		18,565,133		$0.12	–	0.83	$	0.38	$	88,000

Balance, December 31, 2021		20,119,207		$0.12	–	0.83	$	0.39
Granted		32,609			0.23			0.23
Balance, March 31, 2022		20,151,816		$0.12	–	0.83	$	0.39

(1) – Aggregate intrinsic value based on closing common stock price of $0.20 at March 31, 2023.

During the three months ended March 31, 2023, we issued options to purchase ~~105,797~~an aggregate 48,804 shares of our common stock at ~~prices on the grant date ranging~~ ~~$0.23~~ ~~– $0.27~~$0.20 per share to ~~a vendor~~vendors for fees for services. The fair value of ~~these~~the options ~~total $36,000~~issued totaled an aggregate $9,000 and is recorded in our selling, general and administrative expense.

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we issued ~~an option~~options to purchase ~~43,956~~an aggregate 32,609 shares of our common stock at $0.23 per share to ~~a vendor~~vendors for fees for services. The fair value of ~~these~~the options ~~total $10,000~~issued totaled an aggregate $7,000 and is recorded in our selling, general and administrative expense.

~~Note~~ 6. ~~Warrants~~

~~We issued warrants to purchase our common stock, at various prices for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2022~~ ~~and~~ ~~2021,~~ ~~is as follows:~~

Weighted

average

Aggregate

Warrants

Exercise

price per

Intrinsic

outstanding

price per share

share

value_⁽¹⁾

Balance, December 31, 2021
36,765,502 $0.16 – 1.00 $ 0.27
Issued
27,137,048 0.19 – 0.33 0.23
Expired
(10,273,722
)
0.19 – 0.48 0.25
Balance, September 30, 2022
53,628,828 $0.14 – 1.00 $ 0.26 $ 2,094,000

Balance, December 31, 2020
32,980,989 $0.16 – 1.00 $ 0.29
Issued
7,865,872 0.14 - 0.27 0.20
Exercised
(416,667
)
0.14 0.14
Expired
(2,743,406
)
0.12 - 0.70 0.59
Balance, September 30, 2021
37,686,788 $0.12 – 1.00 $ 0.27

(1)

~~Aggregate intrinsic value based on closing common stock price of $0.27 at~~ ~~September 30, 2022~~

~~Warrants issued in Unit Offerings~~

~~During the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2022,~~ ~~pursuant to our Unit Offerings (see Note~~ 3~~), we issued~~ ~~nine~~~~-month stock purchase warrants to purchase an aggregate 13,568,524 shares of our common stock at $0.19 - $0.23 per share, and~~ ~~five-year stock purchase warrants to purchase an aggregate 13,568,524 shares of our common stock at $0.24 - $0.33 per share.~~

~~During the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021,~~ ~~pursuant to our Unit Offerings (see Note~~ 3~~), we issued~~ ~~six~~~~-month stock purchase warrants to purchase an aggregate 3,932,936 shares of our common stock at exercise prices between $0.14 – 0.22 per share, and~~ ~~five-year stock purchase warrants to purchase an aggregate 3,923,936 shares of our common stock at exercise prices between $0.18 – 0.27 per share.~~

On ~~August 6, 2021~~ ~~a holder of a~~ ~~six~~~~-month stock purchase warrant exercised the warrant and we received $60,000 and issued 416,667 shares of our common stock.~~

2016

Table of Contents

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 6. Warrants

We have certain warrants outstanding to purchase our common stock, at various prices, as described in the following table:

							Weighted
							average		Aggregate
	*Warrants*			*Exercise*			*price per*		*intrinsic*
	*outstanding*			*price per share*			*share*		value⁽¹⁾
Balance, December 31, 2022		49,023,398		$0.13	–	1.00	$	0.26
Granted		7,512,000		0.21	–	0.29		0.25
Expired		(4,684,986	)	0.19	–	0.35		0.21
Balance, March 31, 2023		51,850,412		$0.13	–	1.00	$	0.26	$	122,000

Balance, December 31, 2021		36,765,562		$0.16	–	1.00	$	0.27
Granted		10,393,936		0.20	–	0.25		0.22
Expired		(388,889	)		0.22			0.22
Balance, March 31, 2022		46,770,549		$0.14	–	1.00	$	0.29

(1) – Aggregate intrinsic value based on closing common stock price of $0.20 at March 31, 2023.

Warrants issued in Unit Offerings

During the three months ended March 31, 2023, pursuant to our Unit Offerings (see Note 3), we issued six-month stock purchase warrants to purchase an aggregate 3,656,000 shares of our common stock at $0.228 per share, and five-year stock purchase warrants to purchase an aggregate 3,656,000 shares of our common stock at $0.285 per share.

During the three months ended March 31, 2022, pursuant to our 2020 Unit Offering (see Note 3), we issued six-month stock purchase warrants to purchase an aggregate 5,196,968 shares of our common stock at $0.204 per share, and five-year stock purchase warrants to purchase an aggregate 5,196,968 shares of our common stock at $0.25 per share.

Warrant issued in conjunction with amendment to note payable

On March 6, 2023, we entered into an agreement with the holder of a $50,000 note (see Note 4, “Convertible note payable, matures March 1, 2023”) to convert that note into common stock of BETI. As payment for interest, a warrant to purchase 200,000 shares of BioLargo common stock at $0.21 was issued to the investor, expiring five years from the grant date. The fair value of this warrant totaled $30,000 and was recorded as interest expense on our statement of operations.

Fair Value – Interest Expense

To determine interest expense related to our outstanding warrants issued in conjunction with debt offerings, the fair value of each award grant is estimated on the date of grant using the Black-Scholes option pricing model and the relative fair values are amortized over the life of the warrant. For the determination of expense of warrants issued for services, extinguishment of debt and settlement management also uses the option-pricing model. ~~During the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2022~~ ~~and~~ ~~2021,~~no ~~warrants~~The principal assumptions we used in applying this model were ~~issued in conjunction with debt offerings.~~as follows:

	2023			2022
Risk free interest rate	3.88	–	4.27%	3.69	–	3.88%
Expected volatility	40	–	95%		40%
Expected dividend yield		—			—
Forfeiture rate		—			—
Expected life in years	3	–	5		3

Table of Contents

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant. Expected volatilities are based on historical volatility of our common stock. The expected life in years is based on the contract term of the warrant.

Note 7. Accounts Payable and Accrued Expenses

~~Accounts~~As of March 31, 2023, accounts payable and accrued expenses ~~for our operations other than our partially-owned subsidiary Clyra Medical~~ included the following (in thousands):

	September 30, 2022		December 31, 2021
Accounts payable and accrued expense	$	334	$	349
Category					BioLargo		ONM		BLEST		Water		Intercompany amounts			Totals
Accounts payable					$	169	$	794	$	37	$	121	$	(82	)	$	1,039
Accrued payroll						36		49		75		—		—			160
Accrued interest		25		25		25		—		—		—		—			25
Accrued payroll		161		185
Total accounts payable and accrued expenses	$	520	$	559
Total																$	1,224

~~Accounts~~As of December 31, 2022, accounts payable and accrued expenses ~~includes ordinary business payables incurred by~~included the ~~Company and its operational subsidiaries.~~ following (in thousands):

Category	BioLargo		ONM		BLEST		Water		Intercompany amounts			Totals
Accounts payable	$	187	$	486	$	7	$	119	$	(82	)	$	717
Accrued payroll		20		58		120		—		—			198
Accrued interest		25		—		—		—		—			25
Total												$	940

See Note 8, “Accounts Payable and Accrued Expenses”, for the accounts payable and accrued expenses of Clyra Medical.

Note 8. Noncontrolling Interest – Clyra Medical

WeAs discussed in Note 2 above, we consolidate the operations of our partially owned subsidiary Clyra Medical, of which we owned 58% of its outstanding shares as of ~~September 30, 2022.~~

~~BioLargo and its partially owned subsidiary Clyra Medical entered into an agreement dated~~ March ~~3, 2022,~~ 31, 2023.~~whereby BioLargo agreed to convert $633,000 in working capital advances, made to or on behalf of Clyra Medical, into 2,042 shares of Clyra Medical common stock at a rate of $310 per share.~~

Debt Obligations of Clyra Medical

Promissory Note

On April 8, 2022, Clyra Medical issued a promissory note in the principal amount of $100,000 to an individual investor, payable April 8, 2024, and bearing 8% annual interest. The note may be converted by its holder at any time prior to the maturity date, and automatically converts to stock upon (i) Clyra’s sale of $5,000,000 or more of its common or preferred stock, or (ii) the maturity date, at a conversion price equal to 70% of the lowest price-per-share of shares sold to a future investor prior to the maturity date.

Line of Credit

On June 30, 2020, Clyra Medical entered into a Revolving Line of Credit Agreement whereby Vernal Bay Capital Group, LLC committed to provide a $1,000,000 inventory line of credit. ~~Since inception,~~Clyra Medical received $260,000 in ~~line of credit~~ draws ~~were~~and made ~~and Clyra has repaid $97,000. As of~~ ~~September 30, 2022,~~ ~~the balance outstanding on this line of credit totals $163,000.~~repayments totaling $113,000. Funds from the line of credit must be used to produce inventory. Additional draws are conditional upon the presentation of invoices or purchase orders to the lender equal to the greater of one-half of principal outstanding on the line of credit, and $200,000. The line of credit ~~accrues~~note earns interest at 15%, matures in one year, and requires Clyra pay interest and principal from gross product ~~sales, and is due on demand.~~sales. For the first6 months, Clyra is required to pay ~~60%~~30% of gross product sales to reduce amounts owed, ~~on the line~~and thereafter 60% of ~~credit.~~gross sales. Clyra issued Vernal Bay ~~323~~322 shares of its common stock as a commitment fee for the line of credit, valued at $70,000. A security agreement of the same date grants Vernal Bay a security interest in Clyra’s inventory, as that term is defined in the Uniform Commercial Code. Clyra may prepay the note at any time.

2118

Table of Contents

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~Prepaid Marketing - Consulting Agreement~~

On December ~~30, 2015,~~13, 2022, ~~Clyra~~we entered into an amendment of the Revolving Line of Credit Agreement whereby the maturity date of the line of credit was extended to September 30, 2024, and the payment terms were modified such that amounts of principal due in each month are capped at a consulting agreement with Beach House Consulting, LLC, through which Jack B. Strommen will be providing consulting services to Clyra related to its sales and marketing activities, and in exchange receive $23,000 per month for a periodmaximum of ~~four~~ ~~years. On~~ ~~June 30, 2020,~~ ~~at Clyra’s request, Beach House Consulting~~15% of the principal amount then due under the note. Additionally, BioLargo agreed to ~~accept 3,639~~allow Vernal Bay to elect to convert, any time prior to the note’s maturity date, the 322 shares of Clyra common stock ~~in lieu~~it received as consideration for the line of ~~cash, as full prepayment~~credit into shares of Biolargo common stock at the ~~consulting fee. The obligation~~then market price of BioLargo’s common stock. Vernal Bay elected to ~~provide~~ convert Clyra shares to 527,983 BioLargo shares of common stock.

As of March 31, 2023, the ~~consulting services is dependent~~balance outstanding on ~~Clyra generating an average~~this line of ~~$250,000 in monthly sales over~~credit totals $147,000. As of ~~three~~December 31, 2022, ~~consecutive months, which has~~ ~~not~~ ~~been met. The value~~the balance outstanding on this line of ~~the shares issued to Beach House were higher but the asset was impaired in~~ ~~2021,~~ ~~the asset totals $591,000 and is recorded as a non-current asset on our balance sheet.~~credit totaled $161,000.

~~Clyra Medical~~ Equity ~~transactions~~Transactions

As of ~~September 30,~~December 31, 2022, Clyra ~~Medical~~ had ~~the following~~91,149 common shares, ~~outstanding:~~

Shareholder

Shares

Percent

BioLargo, Inc.
51,249 58
%
Sanatio Capital
18,704 21
%
Other
19,118 21
%
Total
89,071

and 2,800 Series A Preferred shares, outstanding. Of that amount, BioLargo owned 51,571 common shares, and 1,352 Series A Preferred shares. As of March 31, 2023, BioLargo owns 58% of Clyra’s issued and outstanding shares.

Sales of Common ~~Shares~~Stock

During the ~~nine~~three months ended ~~September 30,~~March 31, 2023, Clyra did not sell shares of its common stock. On March 2, 2022, BioLargo converted $633,091 owed to it by Clyra into 2,032 shares of Clyra common stock.

Sales of Series A Preferred Stock

During the three months ended March 31, 2023, Clyra sold 725 shares of its Series A Preferred Stock, and in exchange received $225,000 in gross and net proceeds. On ~~2021,~~December 20, 2022, Clyra sold 725 shares of its Series A Preferred Stock, and in exchange received $225,000 in gross and net proceeds, from two ~~Clyra raised $0~~accredited investors. Purchasers of the Series A Preferred Stock also received a 3-year warrant to purchase the same number of additional shares of common stock for $372 per share. The fair value of the warrants issued totaled $110,000. Shares of Series A Preferred Stock earn a dividend of 15% each year, compounding annually; the company is under no obligation to pay such dividends in cash, and ~~$50,000~~such dividends automatically convert to common stock upon conversion of the Series A Preferred Stock to common stock. Each share of Series A Preferred stock can be converted by the holder at any time for one share of common stock, and automatically convert upon the completion of a public offering of shares in which at least $5,000,000 of gross proceeds is received by the company. Accrued dividends may be converted to common stock at a conversion rate of $310 per ~~Clyra~~ share.

Each investor also entered into an agreement with BioLargo whereby the investor may exchange some or all of its Series A Preferred stock, plus accrued dividends, into shares of BioLargo common stock, at a price equal to a 20% discount of the volume weighted average price over the 30 prior trading days. Elections must be made during the 18-month period that begins 18 months after the closing of the Series A Preferred offering (which has not yet taken place), or June 30, 2023, whichever is earlier.

Clyra Stock Options

						Weighted
		*Clyra*				*average*
	*Options*		*Exercise*			*price per*
	*Outstanding*		*price per share*			*share*
Balance, December 31, 2022		15,833	$1.00	-	310	$	5.53
Granted		426	1.00	-	271		148.27
Balance, March 31, 2023		16,259	$1.00	-	310	$	9.27

Balance, December 31, 2021		14,004	$		1.00	$	1.00
Granted		648			1.00		1.00
Balance, March 31, 2022		14,652	$		1.00	$	1.00

Table of Contents

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Clyra issues options to its employees and consultants in lieu of compensation owed on a regular basis. ~~As of~~ ~~December 31, 2021,~~ ~~the Company had issued options to purchase 14,004 shares of Clyra stock. During the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2022~~ ~~and~~ ~~2021,~~ Clyra issued options to purchase 1,403 and 2,074 shares of its common stock. Each option issued has an exercise price of $1.00 per share, are vested upon issuance and an expiration date 10 years from the date of grant. The fair value of the options issued in the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023, and ~~2021~~2022 totaled ~~$304,000~~$61,000 and ~~$442,000.~~$141,000, respectively. We used the Black-Scholes model to calculate the initial fair value, assuming a stock price on date of grant of $310 per share. Because Clyra is a private company with no secondary market for its common stock, the resulting fair value was discounted by 30%. ~~We also used a risk-free rate ranging between 2.32% - 3.83%, a volatility of 40% and an expected life of 10 years.~~

	March 31, 2023			December 31, 2022
Risk free interest rate	3.88	–	4.27%		2.32	%
Expected volatility		40%			40	%
Expected dividend yield		—			—
Forfeiture rate		—			—
Expected life in years		10			10

~~Clyra~~ Accounts Payable and Accrued Expenses

At March 31, 2023, and December 31, 2022, Clyra had the following accounts payable and accrued expenses ~~as follows:~~(in thousands):

	September 30, 2022		December 31, 2021
Accounts payable and accrued expense	$	202	$	149
Category					2023		2022
Accounts payable					$	235	$	186
Accrued payroll						6		45
Accrued interest		4		51		8		7
Accrued payroll		5		30
Total Clyra Medical accounts payable and accrued expenses	$	211,000	$	230
Accrued dividend						29		---
Total					$	278	$	238

The accrued dividend relates to the Series A Preferred Stock. Clyra is not required to pay accrued dividends in cash. The holder of Series A Preferred Stock may convert accrued dividends to common stock at any time. Any accrued dividends automatically convert to Clyra common stock upon conversion of the Series A Preferred Stock.

Note 9. BioLargo Engineering, Science and Technologies, LLC

In September 2017, we commenced a full-service environmental engineering firm and formed a Tennessee entity named BioLargo Engineering, Science & Technologies, LLC (“BLEST”). In conjunction with the start of this subsidiary we entered into employment agreements with six scientists and engineers. (See Note 11 “Business Segment Information”.) BLEST was capitalized with two classes of membership units: Class A, 100% owned by BioLargo, and Class B, held by management of BLEST, and which initially have no “profit interest,” as that term is defined in Tennessee law. However, over the succeeding five years, the Class B members can earn up to a 30% profit interest. They also have been granted options to purchase up to an aggregate 1,750,000 shares of BioLargo, Inc. common stock. The profit interest and option shares are subject to a five year vesting schedule tied to the performance of the subsidiary, including gross revenue targets that increase over time, obtaining positive cash flow by March 31, 2018 (which was not met), collecting 90% of its account receivables, obtaining a profit of 10% in its first year (and increasing in subsequent years) (which was not met), making progress in the scale-up and commercialization of our AOS system, and using BioLargo research scientists (such as our Canadian team) for billable work on client projects. These criteria are to be evaluated annually by BLEST’s compensation committee (which includes BioLargo’s president, CFO, and BLEST’s president), beginning September 2018. Given the significant performance criteria, the Class B units and the stock options will only be recognized in compensation expense if or when the criteria are satisfied.

Table of Contents

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The BLEST Compensation Committee has met regularly since the subsidiary commenced operations. In 2018, it reviewed the operating performance and determined that the performance metrics were not met and as a result, did not award any Class B units or stock options. In November 2019, it determined that a portion of the performance metrics were met, and that one-half of the eligible profits interests would be vested (2.5% in the aggregate), and therefore one-half of the option interests (10%) would be vested (175,000 options shares in the aggregate). The vesting of option shares resulted in a fair value totaling $44,000, recorded on our consolidated statement of operations as selling, general and administrative expense. The fair value of the profit interest was nominal and not booked. In January 2021, the committee again reviewed the operating performance and determined that a portion of the performance metrics were met. It was agreed that one-half and one-quarter of the eligible profit interests would be vested (3.75% in the aggregate), and therefore one-half of the option interests (15%) would be vested (262,500 options shares in the aggregate). The vesting of option shares resulted in a fair value totaling $65,000, recorded on our consolidated statement of operations as selling, general and administrative expense for the year ended December 31, 2020. In January 2022, the committee again reviewed the operating performance and determined that a portion of the performance metrics were met. It was agreed that an additional one-half and one-quarter of the eligible profits interests would be vested (11.25% in the aggregate), and therefore an additional half of the option interests would be vested (525,000 options shares in the aggregate). The vesting of option shares resulted in a fair value totaling $65,000, recorded on our consolidated statement of operations as selling, general and administrative expense for the year ended December 31, 2021. In December 2022, the committee again reviewed the operating performance and determined that a portion of the performance metrics were met. It was agreed that an additional one-half and one-quarter of the eligible profits interests would be vested (17.75% in the aggregate), and therefore an additional half of the option interests would be vested (1,242,500 options shares in the aggregate). The vesting of option shares resulted in a fair value totaling $135,000 and is recorded on our consolidated statement of operations as selling, general and administrative expense for the year ended December 31, 2022.

At March 31, 2023, BioLargo owns 82.25% of BLEST.

Note 10. BioLargo Energy Technologies, Inc.

Subsidiary BioLargo Energy Technologies, Inc. (“BETI”) was formed for the purpose of commercializing a sodium-sulfur battery technology.

During the three months ended March 31, 2023, BETI sold 325,000 shares of its common stock to six accredited investors for $2.00 per share. Of that amount, BioLargo purchased 50,000 shares for $100,000, and one investor converted a $50,000 note owed by BioLargo into 25,000 shares. Net proceeds from third parties totaled $550,000.

Each investor also entered into an agreement with BioLargo whereby the investor may exchange some or all of its shares of BETI common stock into shares of BioLargo common stock, at a price equal to a 20% discount of the volume weighted average price over the 20 trading days prior to the election to exchange. Elections must be made during calendar year 2024.

As of March 31, 2023, there are 9,325,000 shares outstanding, of which BioLargo holds 9,050,000.

Note 11. Business Segment Information

BioLargo currently has four operating business segments, plus its corporate entity which is responsible for general corporate operations, including administrative functions, finance, human resources, marketing, legal, etc. The four operational business segments are:

~~ONM Environmental (“ONM”) -- which sells odor and volatile organic control products and services (located in Westminster, California);~~

ONM Environmental ~~(“ONM”)~~ -- which sells odor and volatile organic control products and services (located in Westminster, California);

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~~BIOLARGO, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Clyra Medical Technologies (“~~Clyra”~~Clyra Medical”) -- which develops and sells medical products based on our ~~technologies, including BioClynse wound irrigation solution;~~technologies;

BLEST -- which provides professional engineering services on a time and materials basis for outside clients and supports our internal operations as needed (located in Oak Ridge, Tennessee); and

BioLargo Water (“Water”) -- which historically focused entirely on R&D, and has now shifted its focus to commercializing the AOS technology (located in Edmonton, Alberta Canada).

BioLargo Energy Technologies, Inc. (“BETI”) – formed to commercialize a sodium-sulfur battery technology.

~~Historically,~~ Other than ONM Environmental during the last three quarterly periods, none of our operating business units have operated at a profit, ~~(other than ONM this last quarter)~~ and therefore each required additional cash to meet its monthly expenses, funded through BioLargo’s sales of debt or equity, research grants, and tax credits. BETI and Clyra Medical ~~has~~have also been funded by third party investors who invest directly ~~in Clyra Medical~~ in exchange for equity ownership in that entity.

The segment information for the three ~~and~~ ~~nine~~months ended ~~September 30, 2022~~March 31, 2023, and ~~2021,~~2022, is as follows (in thousands):

Three months ended
September 30,

Nine months ended
September 30,

2022

2021

2022

2021

Revenue

BioLargo corporate
$ 2 $ — $ 4 $ 7
ONM
1,199 420 2,499 1,058
BLEST
401 416 1,613 1,070
Water
1 2 1 9
Clyra Medical
17 9 34 114
Intersegment revenue
(120 ) (135 ) (365 ) (522 )
Total
$ 1,500 $ 712 $ 3,786 $ 1,743

Operating income (loss)

BioLargo corporate
$ (783 ) $ (868
)
$ (2,925 ) $ (2,726 )
ONM
400 (72
)
418 (355 )
Clyra Medical
(240 ) (219
)
(736 ) (958 )
BLEST
(179 ) (140
)
(158 ) (513 )
Water
(141 ) (156
)
(572 ) (461 )
Total
$ (943 ) $ (1,455
)
$ (3,973 ) $ (5,013 )

Interest expense

BioLargo corporate
$ (6 ) $ (6
)
$ (18 ) $ (106 )
Clyra Medical
(8 ) (20
)
(24 ) (96 )
Total
$ (14 ) $ (26
)
$ (42 ) $ (208 )

Research and development expense

BioLargo corporate
$ (140 ) $ (220
)
$ (570 ) $ (765 )
Clyra Medical
(31 ) (20
)
(73 ) (53 )
BLEST
(100 ) (123
)
(288 ) (358 )
Water
(119 ) (109
)
(446 ) (366 )
Intersegment R&D
119 135 359 515
Total
$ (271 ) $ (344
)
$ (1,018 ) $ (1,027 )

~~The segment asset information for~~ ~~September 30, 2022~~ ~~and~~ ~~December 31, 2021,~~ ~~is as follows (in thousands):~~

As September 30, 2022

BioLargo

ONM

Clyra

BLEST

Water

Elimination

Total

Tangible assets
$ 785 $ 1,079 $ 814 $ 590 $ 194 $ (20 ) $ 3,442
Right of use
157 — — 739 — — 896
Investment in South Korean joint venture
33 — — — — — 33
Total
975 1,079 814 1,329 194 (20 ) 4,371

March 31, 2023	BioLargo			ONM			Clyra			BLEST			Water			BETI			Elimination			Total
Revenue	$	—		$	3,543		$	6		$	363		$	—		$	—		$	(170	)	$	3,742
Intersegment revenue		—			—			—			(170	)		—			—			170			—
R&D expense		(189	)		—			(134	)		(245	)		(135	)		(32	)		170			(565	)
Operating income (loss)		(799	)		1,387			(426	)		(368	)		(184	)		(87	)		—			(477	)
Grant income		—			—			—			—			31			—			—			31
Interest expense		(36	)		(2	)		(10	)		—			—			—			—			(48	)
Net income (loss)		(835	)		1,385			(436	)		(368	)		(153	)		(87	)		—			(494	)

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BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

As of December 31, 2021

BioLargo

ONM

Clyra

BLEST

Water

Elimination

Total

Tangible assets
$ 690 $ 451 $ 832 $ 445 $ 152 $ (47 ) $ 2,522
Right of use
222 — — 231 — — 453
Investment in South Korean joint venture
48 — — — — — 48
Total
960 451 832 676 152 (47 ) 3,023

March 31, 2022	BioLargo			ONM			Clyra			BLEST			Water			Elimination			Total
Revenue	$	2		$	600		$	10		$	545		$	—		$	(188	)	$	965
Intersegment revenue		(2	)		(2	)		—			(188	)		—			192			—
Research and development		(265	)		—			(16	)		(108	)		(197	)		194			(392	)
Operating loss		(1,220	)		13			(240	)		(35	)		(228	)		—			(1,710	)
Grant income		—			—			—			—			5			—			5
Interest expense		(6	)		—			(7	)		—			—			—			(13	)
Net income (loss)		(1,226	)		187			(247	)		(35	)		(223	)		—			(1,544	)

As of March 31, 2023	BioLargo		ONM		Clyra		BLEST		Water		BETI		Elimination			Total
Tangible assets	$	530	$	3,392	$	578	$	505	$	223	$	628	$	(73	)	$	5,783
Right of use (leased assets)		114		—		—		723		—				—			837
Investment in South Korean joint venture		27		—		—		—		—				—			27
Total	$	671	$	3,392	$	578	$	1,228	$	223	$	628	$	(73	)	$	6,647

As of December 31, 2022	BioLargo		ONM		Clyra		BLEST		Water		Elimination			Total
Tangible assets	$	669	$	2,064	$	631	$	441	$	194	$	(41	)	$	3,958
Right of use (leased assets)		136		—		—		731		—		—			867
Investment in South Korean joint venture		33		—		—		—		—		—			33
Total	$	838	$	2,064	$	631	$	1,172	$	194	$	(41	)	$	4,858

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BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note ~~10.~~12. Commitments and Contingencies

Office Leases

We have long-term operating leases for office, industrial and laboratory space in Westminster, California, Oak Ridge, Tennessee, and Alberta, Canada. Payments made under operating leases are charged to the Consolidated Statement of Operations and Comprehensive Loss on a straight-line basis over the term of the operating lease agreement. On ~~January 1, 2019,~~ ~~we adopted ASC~~ ~~842~~ ~~which resulted in a right-of-use asset and lease liability.~~ Short-term leases less than one-year are not included in our analysis. For the three months ended March 31, 2023, and 2022, rental expense was $83,000 and $63,000. The lease of our Westminster facility expires August 2024. ~~It is too early for management to determine if~~Management has not yet determined whether it will exercise its option to extend the lease four ~~years,~~years; therefore the four-year extension is not included in the analysis. In September 2022, the lease of our Oak Ridge, Tennessee facility was extended for ten years. The ~~ten~~ ~~year lease added $443,000 to our right of use and lease liability on our~~ ~~September 30, 2022~~ ~~balance sheet. The~~ lease of our Canadian facility is less than one year. None of our leases have additional terms related to the payments or mechanics of the lease. The leases have no additional payment terms such as common area maintenance payments, tax sharing payments or other allocable expenses. Likewise, the leases do not contain other terms and conditions of use, such as variable lease payments, residual value guaranties or other restrictive financial terms. Since there is no explicit interest rate in our leases, management used its incremental borrowing rate, which is estimated to be 18% to determine lease liability.

Note ~~11.~~13. Subsequent Events.

Management has evaluated subsequent events through the date of the filing of this ~~Quarterly Report~~quarterly report and management noted the following for disclosure.

~~Sales to~~ Lincoln Park Capital Purchase of Shares

From ~~October~~April 1, ~~2022,~~2023, through ~~November 10, 2022,~~May 12, 2023, we sold ~~479,546~~567,713 shares of ~~our~~ common stock to Lincoln Park pursuant to the 2022 LPC Purchase Agreement (see Note 3), and received ~~$107,000~~$101,000 in gross and net proceeds. These sales were registered with the SEC on Form S-1 (file number 333-268973).

~~Unit Offering Investments~~Clyra Medical – Series A Preferred

From ~~October~~April 1, ~~2022,~~2023, through ~~November 10, 2022,~~May 12, 2023, weClyra Medical sold 401 shares of its Series A Preferred Stock, and in exchange received ~~$567,000 of~~$124,000 in gross and net ~~proceeds from~~ ~~fifteen~~ ~~investors in our Unit Offering (see Note~~ proceeds. Purchasers of the Series A Preferred Stock also received a 3~~), and issued an aggregate 3,432,486~~-year warrant to purchase the same number of additional shares of common stock ~~six-month warrants to purchase~~for $372 per share. Each investor also entered into an ~~aggregate 3,432,486~~agreement with BioLargo whereby the investor may exchange some or all of its Series A Preferred stock, plus accrued dividends, into shares of BioLargo common stock, at ana price equal to a 20% discount of the volume weighted average ~~$0.198 per share, and~~ ~~five-year warrants to purchase an aggregate 3,432,486 shares~~price over the 30 prior trading days. (See Note 8, “Sales of ~~common stock at an average $0.248 per share.~~Series A Preferred Stock”.)

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report on Form 10-Q contains forward-looking statements. These forward-looking statements involve risks and uncertainties, including statements regarding BioLargo’s capital needs, business plans and expectations. Such forward-looking statements involve risks and uncertainties regarding BioLargo’s ability to carry out its planned development and production of products. Forward-looking statements are made, without limitation, in relation to BioLargo’s operating plans, BioLargo’s liquidity and financial condition, availability of funds, operating and exploration costs and the market in which BioLargo competes. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks outlined in our Form most recent annual report on Form 10-K, and, from time to time, in other reports BioLargo files with the SEC. These factors may cause BioLargo’s actual results to differ materially from any forward-looking statement. BioLargo disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. The information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Unless otherwise expressly stated herein, all statements, including forward-looking statements, set forth in this Form 10-Q are as of ~~September 30, 2022,~~March 31, 2023, unless expressly stated otherwise, and we undertake no duty to update this information.

As used in this report, “we” and “Company” refers to (i) BioLargo, Inc., a Delaware corporation; and (ii) its partially or wholly-owned subsidiaries BioLargo Life Technologies, Inc., a California corporation which holds our registered patents, ONM Environmental, Inc., a California corporation which manufactures, markets, sells and distributes our odor and volatile organic compound control products, BioLargo Water Investment Group, Inc., a California corporation (which wholly owns BioLargo Water, Inc., a Canadian corporation), ~~and~~ BioLargo Development Corp., a California corporation ~~(iii) its majority-owned subsidiary~~which employs and provides benefits to our employees, BioLargo Engineering, Science & Technologies, LLC, a Tennessee limited liability company ~~and Canadian subsidiary~~(“BLEST”) that provides professional engineering services out of Oak Ridge Tennessee, BioLargo ~~Water,~~Energy Technologies, Inc.;, a California corporation (“BETI”) formed to commercialize our proprietary battery technology, BioLargo Equipment Solutions & Technologies, Inc., a California corporation, and ~~(iv)~~ Clyra Medical Technologies, Inc. ~~(“Clyra”)~~, a ~~partially~~California corporation (“Clyra Medical”) which commercializes our technologies in the medical and dental fields. All subsidiaries are wholly owned, ~~subsidiary.~~except for BETI, BLEST and Clyra Medical.

The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and the related notes to the consolidated financial statements included elsewhere in this report.

Our Business - Innovator and Solution Provider

BioLargo, Inc. invents, develops, and commercializes innovative platform technologies to solve challenging environmental problems like PFAS contamination (per- and polyfluoroalkyl substances), advanced water and wastewater treatment, industrial odor ~~and VOC~~ control, air quality control, infection control, and myriad environmental remediation challenges. Having conducted continual and extensive research and development, BioLargo holds a wide array of issued patents, maintains a robust pipeline of products, and provides full-service environmental engineering. With a keen emphasis on partnerships with academic, government, and commercial organizations and associations, BioLargo has proven itself by executing on challenging environmental engineering projects, demonstrating its powerful technologies through pilots, trials, and early commercial adoption, publishing high-impact academic and industry publications, and winning over 90 grants. We monetize our innovations through direct sales and recurring service contracts, as well as through channel partnerships, meaning licensing agreements, exclusive and non-exclusive distribution agreements, brand development partnerships, sale referral partnerships, strategic joint venture formation, and/or the sale of the IP. Channel partnerships allow us to extend the commercial reach of our products and services disproportionately to our core infrastructure and staffing.

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Our revenues increased 288% in the ~~third quarter of~~three months ended March 31, 2023, as compared with the same period in 2022, ~~we again set a new company-wide quarterly revenue record, building on~~having more than doubled in the ~~second quarter’s unprecedented performance. As a result,~~year ended December 31, 2022, as compared with the ~~Company~~year ended December 31, 2021. The standout has ~~already locked in a record revenue growth rate for the entire year, even before the fourth quarter. A standout this quarter was~~been the pet odor product (brand name “Pooph”) sold by our consumer packaged goods partners at Ikigai ~~called Pooph,~~Marketing Works, whose sales contributed significantly to the record product revenues of our odor and VOC control products division ONM ~~Environmental.~~Environmental, and comprised 86% of our revenues in the quarter.

~~The Company has~~We have several key ongoing projects that Company management believes will stimulate accelerated growth through 2023. These are:

●

The ~~expected~~ launch in major retailers of the Pooph pet odor control product by ~~the Company’s~~our consumer packaged goods partners at ~~Ikigai, which is expected to start in Q4.~~Ikigai.

●

Our first PFAS removal project at a large industrial site (announced in ~~August)~~August 2022), currently in the initial phase of a multi-phase process, which we expect to continue advancing as we engineer a comprehensive PFAS mitigation plan.

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●

Expanded commercial roll-out of ~~the company’s~~our PFAS treatment technology through ~~its~~a growing network of sales rep organizations.

●

Garratt-Callahan’s launch of the jointly developed minimal liquid discharge wastewater treatment product.

●

~~The Company’s~~Our engineering work with Ultra Safe Nuclear.

●

Our engineering services ~~division completed the first phase of a~~division’s engagements as consultants to support large capital ~~project in~~projects which are sponsored and or financed by the cleantech and environmental technologies space - a waste-to-energy conversion plant in South America (see Waste-to-Energy Conversion Plant Project below). This project is expected to advance to additional phases in 2023, and has the potential to lead to additional projects of a similar nature.customers.

These projects are of a greater commercial significance than projects contracted and executed in previous years. Company management believes BioLargo is now earning more significant commercial opportunities for multiple reasons:

~~Credibility~~

First, we have built our credibility as cleantech technology innovators and environmental engineering service providers to the point where clients, potential clients, and prospective partners rightfully view us as an effective and reliable means to solve their challenges. We operate with a mandate to serve our customers and partners with technical excellence, provide timely and cost-effective results, and a commitment to helping them make the best choices for any particular challenge.

~~Channel Partner Relationships~~

We have key relationships that we believe will continue advancing to become high-revenue and profit generating projects with channel partners such as Garratt-Callahan and Ikigai, as well as our new channel partners in the PFAS remediation industry.

~~Investments in Talent and Technology~~

This “critical mass” of credibility as a cleantech solutions provider is a result of our investments in our talented team of engineers, scientists and team members who have a proven track record of executing complex engineering projects, and our history of developing creative and powerful new technologies that work and are best of class. Secondly, our core patented water treatment technologies, the BioLargo Advanced Oxidation System (AOS) and Aqueous Electrostatic Concentrator (AEC), have now been demonstrated in successful pilot projects, either on-site at a prospective client’s facility, or in-house with client-provided contaminated waters.

~~Formula for Success:~~~~Technology, Talent and Purpose~~

Technology

~~BioLargo has~~We have continually advanced ~~its robust~~our portfolio of technologies since the first acquisition of early iterations of the BioLargo technology in the spring of 2007. Our innovations have primarily been developed through our internal resources, and some through acquisition. These include patents, patents pending, and trade secrets that include solutions for:

●

Water decontamination, including:

Removal of per- and ~~poly-fluoroalkyl~~polyfluoroalkyl substances (PFAS) and chlorides from drinking and ground water

Micro-pollutant destruction and removal

Legionella detection and water treatment solutions

Minimum and zero liquid discharge systems (MLD/ZLD)

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Disinfection

Electro-oxidation

●
Battery energy storage

●
Air quality controls and systems including odor and VOC control

●

Mineral processing

●

Infection control

●

Wound management

●

Disinfection

Talent

We have grown our team to 3133 team members and numerous other part-time consultants, including highly qualified PhDs, engineers, MDs and medical professionals, construction professionals, field service technicians, innovators, sales marketing specialists, entrepreneurial and executive leadership.

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Purpose

Our mission to make life better drives us to serve others with integrity, knowledge, technology, and solutions that protect the environment, improve quality of life, and protect lives. ~~All~~Most of our technologies were developed from the ground-up to be sustainable, practical solutions to significant global challenges. We are unique in our ability to tailor our offerings to serve our customers with proven expertise, proven technology and, if needed, we often have the ability to develop new technical solutions to meet our ~~customer’s~~customers’ needs.

Combating the PFAS Forever-Chemical Crisis – the AEC

One of the most significant and timely innovations in our portfolio is our per- and ~~poly-fluoroalkyl~~polyfluoroalkyl substances (PFAS) removal and collection/disposal solution we call the Aqueous Electrostatic Concentrator (AEC). Our engineers developed and are now commercializing the AEC, which is a novel water treatment system that removes PFAS from water at a ~~fraction of the~~lower operating cost and generating only a fraction of the PFAS-laden waste of the most common currently used solutions (carbon filtration, ion exchange, and reverse osmosis). PFAS chemicals have been linked to cancer, immune disorders, liver dysfunction, and many other human health problems, and are contained in a vast range of manufactured goods, common household products (e.g., cleaning products, cookware), and electronics, and contaminate drinking water in unsafe levels all over the globe.

PFAS is often referred to as the “contaminant of the decade”, and as such, it is considered a multi-billion dollar commercial market opportunity. The ~~current White House has made the~~EPA proposed new drinking water standards on March 14, 2023, limiting certain PFAS ~~crisis~~chemicals to four parts per trillion – a ~~critical agenda item and experts expect the EPA and local regulatory agencies to continue to tighten the regulatory requirements to mitigate, manage and limit human exposure to PFAS, all of which we~~standard our AEC can meet. We believe these proposed rules will continue to push the market to find and adopt commercially viable ~~solutions. Notably,~~solutions to remove PFAS chemicals from water. Additionally, some emerging regulations on PFAS in the U.S. are expected to skew the market toward seeking treatment technologies that produce as little PFAS-laden solid waste as possible, a favorable trend for our AEC that generates very little PFAS-laden waste. Detection of unsafe levels of PFAS around the world has given rise to a number of market opportunities, including in drinking water, industrial wastewater, municipal wastewater, solid waste, organic foods and more.

We have successfully validated the AEC as an effective system to selectively extract and collect PFAS chemicals from contaminated water including performance testing that shows “non-detect” levels of ~~removal.~~removal, which meets new EPA standards. We have demonstrated more than nine months of continuous operation showing no materially significant degradation of the AEC system’s components or performance over time. ~~We have also successfully demonstrated that~~As a modular system, we believe the AEC is scalable to a commercial scale, and we believe that our engineering team has the ~~proven~~ experience to ~~successfully~~ deliver systems to meet the needs of a commercial ~~installation and sale. Our team has a history of successful execution in the environmental remediation industry and the knowhow to successfully commercialize the AEC.~~installation.

In August 2022, ~~our~~we began engineering ~~division secured its first customer to engineer~~ a comprehensive PFAS mitigation plan for client operating an industrial site. The ~~customer contract~~initial preliminary engineering phase and project budgeting is complete. We recently delivered a proposal for a system that will serve as a mobile commercial pilot, and scoping, preliminary design and budget for the ~~first phase~~building of what is expected to be a multi-phase comprehensive PFAS remediation project. The contract was secured in collaboration with a new channel partner, which has been appointed to promote, market, and distribute BioLargo’s water treatment equipment and PFAS-related engineering and project integration services.the full-scale system.

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The AEC’s commercial roll-out will be executed with the help of a network of sales representative organizations whose role will be to market and sell the treatment system, related equipment, and the Company’s engineering services to municipal and industrial customers across the country. ~~Thus far, we~~We have ~~already~~ secured channel partner agreements with several sales representative organizations and have verbal commitments from several more as a result of our own business development efforts at recent water industry trade shows. Assuming all these companies sign with us, we will have sales repensuring coverage for most of the continental United States.

In October 2022, we entered into a channel partner agreement with Product Recovery Management, Inc. to sell, distribute and act as a contract manufacturer for the AEC and other BioLargo water treatment technologies. Product Recovery Management (PRM) (~~https://www.prmfiltration.com/~~), based out of Butner, NC, is a UL-certified equipment integrator specializing in remediation services with over 40 years of history serving customers. PRM designs and manufactures treatment systems that address a wide variety of contamination challenges in the remediation and landfill industries, including PFAS contamination. Their Butner operations include a 250,000 square foot manufacturing facility with large-scale fabrication capabilities.

We are also in negotiations with multiple prospective industrial and municipal customers to treat PFAS contaminated water. Having completed our initial testing of client water (to “non-detect” levels) from a leading water district in Southern California, we are in continuing discussions with their technical team to organize a practical commercial field trial. In light of the fact that we now have our first commercial project under contract, we believe that our expected success with an industrial customer will be a key factor to help advance marketing efforts in the municipal market as well as potentially ~~minimize~~minimizing the need for small scale field ~~piloting.~~piloting, which can be expensive and time consuming.

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ONM Environmental - Industrial Odor and VOC Solutions

ONM Environmental, Inc. is BioLargo’s subsidiary that delivers robust and comprehensive products and services to control and mitigate odor and volatile organic compounds (“VOCs”) emitted from a variety of industrial activities, including landfills and other waste handling facilities. Its flagship product – CupriDyne® Clean – reduces and eliminates tough odors and VOCs in various industrial settings. ~~CupriDyne~~CupriDyne® Clean is delivered through misting systems, sprayers, water trucks and similar water delivery systems designed, manufactured and installed by ONM. We believe the product is the number-one performing odor-control product in the market, and that it offers substantial savings to our customers compared with competing products. ONM Environmental holds General, Electrical, Plumbing and Low Voltage contractor licenses issued by the California Contractors State License Board, and offers a menu of services to landfills, transfer stations, wastewater treatment facilities as well as facilities in non-waste related industries. These services include engineering design, construction, installation, ongoing maintenance and on-site support services to assist our clients in the implementation and continued use of the various systems that deliver our liquid products in the field (such as misting systems).

We have been and expect to continue selling product to the largest solid waste handling companies in the country, with a portion of chemistry product sales resulting from national purchasing agreements (NPAs) ~~with large waste handling companies. ONM Environmental~~, and are also is currently servicing an exclusive three-year supply contract with a large municipality in Southern California for the delivery of CupriDyne Clean, which will provide a steady source of chemistry supply revenue for the company over the next three years.serving municipalities.

In addition to its goal to keep growing its revenues organically through the sale of odor and VOC control chemistry and air quality control systems to its primary market segment (municipal solid waste handling in California), ONM Environmental aims to accelerate its growth through development of new sales and distribution ~~channels. Some of these, including~~channels without being limited by our own sales and distribution infrastructure, such as through our partnership with Ikigai Marketing Works, LLC (see “Consumer Packaged Goods Products” below) and our joint venture with BKT Co. Ltd. in South Korea are already actively advancing toward their end-goal, which is to foster new distribution opportunities for our patented odor and VOC control chemistry without being limited by our own sales and distribution infrastructure..

Consumer Packaged ~~Goods~~and Private-Label Products

We sell pet odor-control products under the brand “Pooph” to Ikigai Marketing Works, ~~LLC, founded by accomplished industry executives from the consumer-packaged goods industry who have executed successful launches of at least five blockbuster products.~~LLC. After a successful test marketing phase, they have been executing a national advertising campaign through extensive television and internet advertising and have launched the product for web sales on their own website and on ~~Amazon, and are launching~~Amazon. In late 2022, Ikigai launched the ~~products soon~~Pooph product in ~~major retailers~~a limited number of Walmart retail stores, expanding to Walmart stores nationwide in the ~~United States (including Walmart).~~second quarter of 2023. Our agreement with Ikigai grants them an exclusive license to sell the Pooph pet odor-control product, ~~provided certain minimum volume thresholds are met once retail sales begin,~~ and requires, in addition to purchasing product from us at an agreed-upon manufacturing margin, they are required to pay us an additional six percent of their sales.

As Ikigai has expanded their national television advertising, their sales have increased, and correspondingly, their purchase of product from us has increased, such that for the three months ended March 31, 2023, it comprised 86% of our total (company-wide) revenue.

South Korean Joint Venture

In February 2020 we executed a ~~6% royalty~~“Joint Venture Framework Agreement” with a leading wastewater treatment solution provider based in South Korea (BKT Co. Ltd., “BKT”), to create a South Korean entity that would manufacture odor and VOC control products based on ~~sales.~~our CupriDyne® Clean products. We own 40% of the joint venture. Although the joint venture established manufacturing and is marketing the product, the COVID-19 pandemic significantly impacted the expected growth of the company. While the management team continues to market the product to industrial clients, their efforts have struggled to gain a foothold, and we are in ~~negotiations~~discussions to expand their ~~rights under~~license to allow for the ~~license agreement.~~

sale of consumer products.

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Sales of Pooph increased significantly in the past quarter, and accounted for a significant portion of revenues earned by our odor and VOC control products division, ONM Environmental. Ikigai management expects this trend of growth to continue, particularly with the expected launch of the product in major retailers in Q4 of 2022 and beyond.

Full Service Environmental Engineering

~~Our subsidiary~~ BioLargo Engineering, Science & Technologies, LLC (“BLEST”) offers full service environmental engineering to third parties and provides engineering support services to our internal teams to accelerate the commercialization of our technologies. ~~Its website is found at~~ ~~www.BioLargoEngineering.com~~.

BLEST focuses its efforts in three areas:

●

providing engineering services to third-party clients;

●

supporting internal product development and business units’ services to customers (e.g., the AOS); and

●

advancing their own technical innovations such as the AEC PFAS treatment technology and the battery energy storage system which was recently added to the portfolio.

The subsidiary is located in Oak Ridge (a suburb of Knoxville, Tennessee), and employs a group of scientists and engineers, ~~who collectively worked together for almost 30 years and experience in diverse engineering fields.~~many of whom are owners of the entity (BioLargo owns 82.25%). The team is led by Randall Moore, who served as Manager of Operations for Consulting and Engineering for the Knoxville office of CB&I Environmental & Infrastructure and was formerly a leader at The Shaw Group, Inc., a Fortune 500 global engineering firm. ~~The~~Many of the other team members are also former employees of CB&I and ~~Shaw. The~~Shaw, with the exception of more recent staff hires. We believe the team is highly experienced across multiple industries and ~~they~~ are considered experts in their respective fields, ~~including~~including: chemical engineering, wastewater treatment (including design, operations, data gathering and data evaluation), process safety, energy efficiency, air pollution, design and control, technology evaluation, technology integration, air quality management & testing, engineering management, permitting, industrial hygiene, applied research and development, air testing, environmental permitting, HAZOP review, chemical processing, thermal design, computational fluid dynamics, mechanical engineering, mechanical design, NEPDES permitting, RCRA/TSCA compliance and permitting, project management, storm water design & permitting, computer assisted design (CAD), bench chemistry, continuous emission monitoring system operator, data handling and evaluation and decommissioning and decontamination of radiological and chemical contaminated facilities. The team has decades of high-level experience in the energy industry. The engineering team has also ~~has~~ developed an extended network of trusted engineering subcontractors that assist in serving specific client projects as ~~needed, from time to time.~~needed.

In association with Garratt-Callahan, a national industrial water treatment company, BLEST developed a “minimal liquid discharge” (MLD) wastewater treatment system based on ~~Garratt-Callahan proprietary~~Garratt-Callahan’s patented technology that is able to reduce industrial wastewater discharge and therefore reduce wastewater discharge fees for customers. Garratt-Callahan is currently ~~preparing to launch~~marketing the MLD system to its customers. BLEST will serve as the manufacturing partner and Garratt-Callahan will serve as the selling distributor to leverage their national sales force and over one hundred years of providing services and products to customers. BioLargo’s engineers completed the first full-scale prototype of this new technology and tested it with Garratt-Callahan client provided water, with Garratt-Callahan technical staff present on-site at BLEST’s facility. In this “factory acceptance” testing, the system removed over 98% of the target contaminants from water in continuous operation, in line with results achieved by Garratt-Callahan’s original bench-scale and batch processing tests. This factory acceptance testing was a necessary step before commercial trials and/or sales to Garratt-Callahan customers ~~can~~could begin. ~~Garret-Callahan~~Garratt-Callahan has identified multiple customer prospects, as has BioLargo, through its own marketing efforts. We ~~are working on contractual agreements to move the project forward to first sales.~~remain confident that this innovation and partnership will find commercial success.

In the second quarter of 2022, BLEST was contracted by Ultra Safe Nuclear to assist in producing the first prototype fuel production systems for their ~~revolutionary~~ new nuclear reactor called the Micro Modular Reactor (MMR®). Ultra Safe Nuclear is a Seattle-based nuclear energy ~~innovator, and~~company that has invented a “fission battery” - a fourth generation modular nuclear reactor – that can deliver safe, zero-carbon, cost-effective energy anywhere. The MMR® uses ceramic-encapsulated nuclear fuel – Fully Ceramic Micro-encapsulated (FCM+++) – an extremely rugged and stable fuel with ~~extraordinary~~ high temperature stability. BioLargo has been retained to provide engineering design support, fabrication, and integration for the company’s prototype fuel production systems. Because of the success of the early phase of the project, this project is expected to expand over the coming months in scope and significance to BioLargo, making them an important customer for BLEST.

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Waste-to-Energy Conversion Plant Project

In April 2022, our engineering subsidiary was hired ~~to conduct a comprehensive project plan (i.e., “feasibility”) study~~ by a Southern California based sustainable energy services company ~~intending~~ to ~~build~~conduct a comprehensive project plan (i.e., “feasibility study”) for a waste-to-energy (WTE) conversion plant in South ~~America. The site~~America – one of multiple projects in planning stages by the proposed conversion plant is approximately 296 acres, where it is planned to process between two million and up to 8 million tons of municipal solid waste annually and is projected to produce 500 megawatts of energy per year.

~~The~~company. Our engineers completed the initial feasibility study ~~having been completed, our engineers are now preparing proposals~~and have delivered a proposal for the next phase of the ~~project.~~project (front end engineering design, aka FEED). The client has ~~reviewed the~~also requested feasibility ~~study~~studies and ~~is currently evaluating its plans~~a FEED proposal for ~~advancing the project forward. It is expected that if the project moves forward, the second phase is expected to begin~~WTE plants in ~~the first quarter 2023.~~Asia.

BioLargo Water and the Advanced Oxidation System – AOS

BioLargo Water is our wholly owned subsidiary located in Edmonton, Alberta, Canada, ~~that developed~~which has and is commercializing our Advanced Oxidation water treatment system (AOS). The AOS is our patented water treatment device that generates highly oxidative and energetic species of iodine and other molecules which allow it to ~~rapidly and effectively~~ eliminate pathogenic organisms and organic contaminants rapidly and effectively as water passes through the device. The key value proposition of the AOS is its ability to reduce or eliminate a wide variety of waterborne contaminants with high performance while using very little electricity and input chemicals. This is made possible by the highly oxidative iodine compounds and reactive oxygen species generated within the AOS reactor as well as the unique and proprietary physical constitution and geometry of the reactor. Our proof-of-concept studies and on-site pilot projects have generated results that project the AOS will be more cost- and energy-efficient than commonly used advanced water treatment technologies such as UV, electro-chlorination, and ozonation. Furthermore, our technology has been proven capable of removing hard-to-treat organic micropollutants such as pharmaceuticals from water more quickly and energy-efficiently than other technologies. Together, these characteristics make the AOS an economical and versatile tool to enable wastewater treatment and reuse in the face of emerging water contaminants and increasing regulatory scrutiny on industrial wastewater discharge. The capabilities of the AOS as a sustainable water treatment technology have been the subject of several high-impact academic papers in scientific journals. The company pursues a policy of publishing about the technology in academic journals as much as possible in order to promote transparency about the technology’s safety and efficacy while also contributing to the field of advanced water treatment science. In June of 2022, the fourth peer-reviewed scientific paper about the AOS was published, in the journal Environmental Science and Pollution Research.

BioLargo’s AOS water treatment technology has completed several pre-commercial demonstration pilots, including one at a poultry farm in Alberta, one at a microbrewery in Southern California, and another in Southern California where stormwater was treated by the AOS. It has an ongoing pilot near Montreal to treat municipal wastewater. It is our belief that once these pre-commercial pilots have concluded with the AOS, our ability to entice major water industry players to partner with BioLargo Water to accelerate market adoption of the AOS will be increased dramatically. Our team in Canada is in discussions with potential early adopters in the agriculture space, and has secured significant provincial and federal grant funding to help defray the cost of a first commercial project.

In the first quarter of 2022, BioLargo Water received a grant from Next Generation Manufacturing Canada (NGen) to support the company’s collaboration with a specialized electrical component designer to assist in optimizing the electrical performance of the AOS with the ultimate goal of maximizing the lifespan of the AOS’ components. In the second quarter of 2022, the development work funded by this grant advanced, focusing on improving the performance of the conductive materials within the AOS which allow for water disinfection and decontamination.

The AOS has been included as a component of treatment train (comprehensive system) for a number of projects being scoped and budgeted through our engineering subsidiary. In addition, it has been included in the catalog of offerings being sold through our independent representatives as well as channel partners.

Municipal Wastewater Treatment Pilot – Montreal

Our commercial-scale AOS demonstration pilot (run in partnership with ~~acclaimed~~ water experts at the Centre des Technologies de L’Eau) at a municipal wastewater treatment plant near Montreal, Quebec, is ongoing and providing important data that shows the AOS is removing five target pharmaceuticals from the wastewater faster and using less electricity than the ultraviolet (UV) disinfections system used in the facility. Notably, the pilot project also showed that the AOS was able to also remove total coliforms (bacteria) from the municipal wastewater more effectively than the UV disinfection system currently in use at the facility.

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In January 2022, BioLargo Water was awarded a grant from the government of Canada’s Natural Sciences and Engineering Research Council (NSERC) that allowed for the extension of the pilot project to allow for use of a new, higher flow-rate AOS system, as well as the installation of an AEC system at the pilot to assess its removal of PFAS chemicals from the municipality’s ~~wastewater. This AEC system~~wastewater, which was ~~recently shipped to the municipal wastewater treatment plant, and is expected to be installed and operational shortly.~~completed successfully.

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Clyra Medical Technologies

Clyra Medical Technologies, Inc. is our partially owned subsidiary creating medical products based on our technology. It is launching a product to be used by surgeons generally, with a first target market aimed toward orthopedic surgeons for use as a wound irrigation solution and to help manage patient care and ~~outcomes.~~outcomes and, for wound care. Clyra has secured its first two hospital customers for the product, established a robust quality control system for FDA compliance, recruited a national director of sales, and is negotiating with three separate channel partners to form a commercial alliance. It has secured its first manufacturer’s representatives and is actively expanding these efforts to build out a national rep network. Its other product designs are on hold until such time as it is able to secure the capital and resources to complete any final development and support additional inventory, technical support and sales for these products. There are channel partnerships in development for Clyra’s ~~BioClynse~~Bioclynse product in three separate healthcare markets.

~~Conclusion~~BioLargo Energy Technologies, Inc.

InBioLargo acquired a proprietary sodium-sulfur battery technology and has formed and secured initial seed capital for a subsidiary – BioLargo Energy Technologies, Inc. (“BETI”) – designed to address the ~~past quarter:~~ongoing shift toward renewable energy production and the growth in global electricity demand, and the consequent drastic expansion in energy storage capacity in the US and world-wide that will be needed to accommodate increased demand and the intermittent nature of renewable energy sources like wind and solar.

The initial capital raised – $650,000 – will be used to construct prototype batteries. These batteries will be tested to confirm energy efficiency, useful life expectancy, energy density, safety profile, number of charge/discharge cycles, and other technical claims that differentiate the battery from incumbent technologies. Batteries built based on the underlying technology a decade ago demonstrated features that far surpass comparable lithium-ion batteries, the dominant incumbent technology in the market:

●

~~Our company generated approximately $1.5 million in company-wide revenue representing a 111% increase compared with the third quarter of 2021~~This sodium-sulfur battery technology demonstrates increased safety, no runaway fire risks, and a ~~13% increase compared~~more sustainable design – with no rare-earth elements – that is capable of being manufactured completely from the ~~second quarter of 2022, (see “Results of Operations”, below);~~domestic supply chain.

●

~~Our company continued to demonstrate the commercial viability~~Unlike lithium-ion batteries, BioLargo’s battery can charge and discharge completely, with no degradation of ~~our cleantech products and services through organic growth leading to increased revenue;~~performance, ensuring virtually unlimited charge/discharge cycles, without self-discharge.

●

~~We improved our financial condition by increasing cash flow from revenues, adding~~BioLargo’s battery technology also demonstrates increased energy efficiency and energy density in comparison to ~~the improved balance sheet resulting from dramatic reduction in debt over the past year;~~lithium-ion batteries, and

●

~~We advanced the commercialization~~ a longer useful life expectancy of ~~our technology assets in target markets through channel partnerships that are either already in place and executing, or are currently developing.~~at least 10 years.

~~BioLargo~~BioLargo’s battery uses common, inexpensive, domestically available materials, and through its unique design and manufacturing process, creates an energy storage solution that has ~~advanced its technologies~~higher energy density than lithium virtually unlimited charge/discharge cycles, stable and ~~infrastructure to achieve a critical mass to capitalize on its commercial efforts~~secure supply chain management, and ~~have a positive impact around~~which is far safer than lithium-ion batteries, the ~~world with clean water, clean air, and infection control solutions. The company presents a scalable business model~~current dominant energy storage technology. While the concept of sodium-sulfur salt batteries is not new (a concept conceived more than 80 years ago), we are not aware of any known ‘salt’ battery that targets high-impact cleantech market opportunities. We leverage our considerable scientific, engineering, and entrepreneurial talent to monetize our technologies and ensure high-quality customer service and increased revenue potential. We seek to unlockcan match the ~~value~~performance metrics of our ~~portfolio of disruptive technologies to advance our mission to “make life better” and continue creating shareholder value.~~battery.

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Our battery technology operates at higher temperatures, and its casing and materials when combined, are heavier than lithium-ion, making it more suitable for stationary energy storage applications like grid-scale energy storage, electric vehicle charging stations, and commercial and residential energy storage, and believed to be less suitable for placement into electric vehicles or portable electronics. We are currently building out facilities to manufacture prototype batteries in our Oak Ridge Tennessee operations.

Results of Operations

We operate our business in distinct business segments:

●

ONM Environmental, which manufactures and sells our odor and VOC control products and services ~~including our flagship product, CupriDyne Clean;~~for sale by itself and third parties through private labels;

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BLEST, our professional engineering services division, ~~supporting our internal business units and~~advancing innovations like the AEC to remove PFAS contaminants from water, serving outside clients on a fee for service ~~and/or project bid basis;~~basis, and supporting our internal business units;

●

Clyra Medical, our partially owned subsidiary which develops and sells medical products based on our technology;

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BioLargo Water, our Canadian division that has been historically pure research and development, and is now transitioning to focus on commercializing our AOS system;

●

~~Clyra Medical, our partially owned subsidiary focused on the medical device industry;~~ and

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Our corporate operations, which support the operating segments with legal, accounting, human resources, and other services.

Consolidated revenue for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, was ~~$1,500,000 and $3,786,000 which is~~$3,742,000, a ~~111% and 117%~~288% increase over the same ~~periods~~period in ~~2021.~~2022, and a 78% increase over the prior quarter (ended December 31, 2022). Our ~~service revenue increased 1% and 127% for the three and nine months ending September 30, 2022, while~~ revenue from product sales and related services increased by ~~182% and 113% for the three and nine months ending September 30, 2022 as compared to the same periods in the prior year. Our product~~482%, while our service revenue ~~includes sales of our CupriDyne Clean industrial odor control product, and sales of consumer packaged goods products based on our CupriDyne formula.~~decreased by 45%.

ONM Environmental

Our ~~wholly owned~~wholly-owned subsidiary ONM Environmental ~~generated~~generates revenues through (i) sales of ~~its~~our flagship product CupriDyne Clean, ~~and by providing~~including related design, installation, and maintenance services on the systems that deliver CupriDyne Clean at its clients’ ~~facilities.~~facilities, and (ii) sale of private-label products to third parties.

Revenue (ONM Environmental)

ONM Environmental’s revenues ~~for~~increased 491% (to $3,543,000) in the three ~~and nine~~ months ended ~~September 30, 2022, were $1,199,000 and $2,499,000, an increase of $779,000 and $1,441,000 from the same periods in 2021, and an increase of $411,000 as~~March 31, 2023, compared with the same period in the prior ~~quarter.~~ year. Revenues in the quarter were comprised primarily of $3,218,000 in revenues to one customer selling private label products, and $431,000 in revenues of its industrial odor-control product CupriDyne Clean.

The increase in revenues was almost entirely due to an increase in the volume of sales of private label odor-control products, specifically the Pooph branded pet-odor product ~~and an increase in license royalties from sales~~purchased by Ikigai, which comprised 91% of the Pooph branded pet-odor product. License royalties were $218,000 and $316,000 for the three and nine months ended September 30, 2022; no license royalties were recognized in the same periods in 2021.ONM Environmental’s revenue total. Because ONM Environmental has no control over ~~the~~Ikigai’s marketing and sales activity ~~or levels of its private-label clients, including Pooph, it cannot predict sales volumes related to these clients in future periods.~~

~~Cost of Goods Sold (ONM Environmental)~~

ONM Environmental’s revenues for the three and nine months ended September 30, 2022, were $1,199,000 and $2,499,000, an increase of $779,000 and $1,441,000 from the same periods in 2021, and an increase of $411,000 as compared with the prior quarter. The increase in revenues was almost entirely due to an increase in the volume sales of private label odor-control products, specifically the Pooph branded pet-odor product, and an increase in license royalties from sales of the Pooph branded pet-odor product. License royalties were $218,000 and $316,000 for the three and nine months ended September 30, 2022; no license royalties were recognized in the same periods in 2021. Because ONM Environmental has no control over the marketing and sales activity or levels of Pooph, it cannot predict its sales ~~volumes related~~of the product to itIkigai in future periods. ~~Management at Pooph~~Ikigai has indicated their intentions to continue their national advertising campaign as they place the product in national retail ~~chains.~~chains, including the introduction of the product in Walmart nationally. Their execution of those future plans has inherent risks that are out of our control. (See Part II, Item 1A, and the risk factor titled “A significant portion of our revenue is concentrated with one customer.”) Given the foregoing, management cannot be certain of the continued purchase of the Pooph product by Ikigai. Their failure to continue to purchase product would have a material impact on ONM Environmental’s revenues.

Industrial odor-control revenues increased 42% in the three months ended March 31, 2023, compared with the same period in the prior year, and increased 16% compared with the prior quarter (ended December 31, 2022).

Cost of Goods Sold (ONM Environmental)

ONM Environmental’s cost of goods sold includes costs of raw materials, contract manufacturing, and portions of depreciation, salaries and expenses related to the manufacturing and installation of its products. As a percentage of revenue, ONM Environmental’s costs of goods decreased 3% for the three months ended March 31, 2023, to 49%, compared to the same period in 2022, due to increased sales. Cost of goods sold increased 2% from the prior three months ended December 31, 2022. The fluctuation in cost of goods is due our efforts to improve margins in in our private-label products, and increases in raw material costs.

Selling, General and Administrative Expense (ONM Environmental)

ONM Environmental’s selling, general and administrative expenses increased by 22% ($65,000) during the three months ended March 31, 2023, as compared with the same period in 2022. These expenses increased due to a increase of sales and support staff. We expect these expenses to increase to add support if revenue continues to increase in the year ending December 31, 2023.

Operating Income (ONM Environmental)

~~For the three and nine month ended September 30, 2022,~~ ONM Environmental generated operating income of ~~$400,000 and $418,000, compared with an operating loss of $72,000 and $355,000 for~~$1,387,000 in the three ~~and nine~~ months ended ~~September 30, 2021. Provided that its private-label clients continue~~March 31, 2023, compared to ~~increase their purchase~~operating income of $13,000 in 2022. The generation of operating income this past quarter was entirely dependent on sale of Pooph product ~~we expect this trend~~ to ~~continue.~~Ikigai.

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BLEST (engineering division)

Revenue (BLEST)

~~For the three and nine months ended September 30, 2022, our~~Our engineering segment (BLEST) generated ~~$283,000 and $1,254,000~~$193,000 of revenue ~~from third parties,~~in the three months ended March 31, 2023, net of intersegment revenue, compared to ~~$281,000 and $555,000 for the same three and nine months~~$357,000 in ~~2021.~~2022, representing a 45% decrease. The ~~increase~~decrease is due to ~~completion of projects, an increased~~a decrease in the number of client contracts, an increase in intercompany services, and multiple clients delaying the ~~recognition~~start of ~~$83,000 of deferred revenue for ongoing projects that had achieved certain completion milestones.~~projects.

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In addition to providing ~~service~~services to third party clients, BLEST provides services to BioLargo and its subsidiaries for internal BioLargo projects. These services are billed internally, are considered intersegment revenue, and are eliminated in the consolidation of our financial statements. In the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, intersegment revenue for BLEST totaled ~~$118,000~~$170,000, consisting primarily of research and ~~$359,000, compared to $135,000 and $515,000 for the same periods in 2021. Intersegment revenue primarily used~~development to further ~~engineer and develop~~ our flagship AOS water filtration system and our AEC PFAS treatment system. In addition, BLEST engineers are performing a critical role in the AOS pilot projects, some of which are supported by third-party research grants and has been instrumental in developing and supporting a professional engineered design service for misting systems being sold by our ONM operating unit.

Cost of Goods (Services) Sold (BLEST)

BLEST’s cost of services includes employee labor as well as subcontracted ~~labor~~ costs. In the three ~~and nine~~ months ended ~~September 30, 2022, its~~March 31, 2023, cost of services were ~~82% and 60%~~69% of its revenues, versus ~~71%~~42% in the same period in 2022. This increase is due to contracts with reduced margins and ~~76% cost~~the reduction in overall revenue, as well as the recognition of ~~services~~deferred revenue in ~~comparable periods in 2021. These fluctuations are a result of more subcontract costs for~~ the three months ended March 31, 2022, which did not occur in the same period in 2023.

Selling, General and ~~increases~~Administrative Expense (BLEST)

BLEST SG&A expenses were $184,000 in ~~efficiencies related~~the three months ended March 31, 2023, compared to ~~flat-fee monthly contracts for the nine months.~~$134,000 in 2022, primarily due to increased rental costs and staff.

Operating Loss (BLEST)

~~For~~BLEST incurred an operating loss of $368,000 in the three ~~and nine~~ months ended ~~September 30, 2022, BLEST~~March 31, 2023, compared to an operating loss of $35,000 in 2022.

Because the subsidiary had an operating loss, ~~of $179,000~~we invested cash during the year to allow it to maintain operations. BLEST’s need for a cash subsidy to support its operations has decreased over time. Our goal for this operation is that it produces a profit and ~~$158,000. For~~contributes to corporate overhead in a significant way, although predicting when that will happen and other uncertainties in the market, and our limited resources, is difficult.

Clyra Medical

Clyra Medical generated $6,000 in revenues in the three ~~and nine~~ months ended ~~September 30, 2021, BLEST had~~March 31, 2023, total costs and expenses of $431,000, including $134,000 in research and development expenses, and an operating loss of ~~$140,000~~$426,000. In the same period in 2022, it generated $11,000 in revenue, had total costs and ~~$513,000.~~expenses of $250,000, including $16,000 in research and development expenses, and an operating loss of $239,000. Clyra has been limited in terms of capital resources, and its level of activity has been largely dependent on available cash.

BETI

Formed to develop and commercialize a sodium-sulfur battery technology, BETI raised $650,000 in investment capital in the three months ended March 31, 2023, did not generate revenue, and incurred $87,000 in expenses, primarily related to the build out of space to manufacture battery prototypes.

~~Other Income~~Selling, General and Administrative Expense – consolidated

Our Selling, General and Administrative expense (“SG&A”) include both cash (for example, salaries to employees) and non-cash expenses (for example, stock option compensation expense). Our consolidated SG&A decreased in the aggregate by 6% ($113,000) in the three months ended March 31, 2023, to $1,722,000. Our non-cash expenses (through the issuance of common stock, warrants, and stock options) decreased in the three months ended March 31, 2023 compared with 2022 ($463,000 compared to $822,000) , which accounted for the largest decline in salaries and consulting expense. The largest components of our SG&A expenses included (in thousands):

Three months ended
March 31, 2023

Three months ended
March 31, 2022

Salaries and payroll related
$ 636 $ 809
Professional fees
210 149
Consulting
198 316
Office expense
427 310
Board of director expense
65 111
Sales and marketing
93 59
Investor relations
93 85
In the three months ended March 31, 2023, our non-cash expenses from stock for service, stock options and warrant expense total $496,000. In the three months ended March 31, 2022, our non-cash expenses from stock for service, stock options and warrant expense total $822,000.
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Research and Development
In the three months ended March 31, 2023, we spent $565,000 in the research and development of our technologies and products. This was an increase of 44% ($173,000) compared to 2022. The increase is related to headcount and work at BETI.
Interest expense
Our interest expense for the three months ended March 31, 2023, was $48,000, compared with $13,000 in the same period in 2022. Of our total interest expense in 2023, $15,000 was paid in cash, and the remainder was comprised primarily of non-cash debt discounts related to warrants issued in conjunction with debt instruments being amortized over the life of the debt instrument; for the three months ended March 31, 2023, non-cash interest expense totaled $33,000.
Other Income and Expense
The amount of grant income increased $26,000 in the three months ended March 31, 2023, to $31,000. Primarily through our wholly owned Canadian subsidiary, ~~has~~we have been awarded more than 80 research grants over the years from various ~~Canadian~~ public and private agencies, including the Canadian National Research Institute – Industrial Research Assistance Program (NRC-IRAP), the National Science and Engineering Research Council of Canada (NSERC), and the Metropolitan Water District of Southern California’s Innovative Conservation Program “ICP”. The research grants received are considered reimbursement grants related to costs we incur and therefore are included as Other Income. ~~We continued to win grants and it is important to note that amounts~~Grant funds paid directly to third parties are not included as income in our financial statements.

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, we ~~received grant~~recorded $174,000 in income totaling $44,000 and $52,000, which was an increase of $19,000 and $27,000 from the same periods in 2021. Although we are continuing to apply for government and industry grants, and indications from the various grant agencies is highly encouraging, we cannot be certain of continuing those successes in the future.
On February 7, 2022, we received notice that the SBA had partially approved ONM Environmental's application for forgiveness of its PPP loan in the amount of $174,000. During the three months ended September 30, 2022, Biolargo Water recorded $66,000 of tax credits, primarily related to the ~~refund filed pertaining~~forgiveness of Paycheck Protection Act loan to ~~the research and development tax credit.~~
~~On March 19, 2021, we received notice that the SBA had approved the application for forgiveness Clyra’s PPP loan totaling $43,000.~~
~~Selling, General and Administrative Expense~~ – ~~consolidated~~
Our SG&A expenses include both cash expenses and non-cash expenses (including non-cash stock option compensation expenses). Our SG&A expenses decreased by 2% ($35,000) and increased by 2% ($79,000) in the three and nine months ended September 30, 2022, compared to the same periods in 2021. Our non-cash expenses totaled $1,640,000 in the nine months ended September 30, 2022, compared to $1,314,000 in the nine months ended September 30, 2021. The largest components of our SG&A expenses included (in thousands):

Three months ended:

Nine months ended:

September 30,
2022

September 30,
2021

September 30,
2022

September 30,
2021

Salaries and payroll related
$ 593 $ 552 $ 2,035 $ 1,912
Professional fees
110 149 451 500
Consulting
155 189 605 805
Office expense
341 311 1,072 900
Sales and marketing
71 96 205 255
Investor relations
86 100 233 196
Board of director expense
68 64 246 198
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The increase in salaries and payroll expenses in the nine months ended September 30, 2022 versus 2021 is primarily related to the implementation of a stock option bonus compensation program for employees and other related stock option compensation expenses, and also the hiring of additional personnel to support increasing operations. The decline in the three months ended September 30, 2022 versus 2021 is consistent with reduced stock option grants to employees. Consulting expense decreased as we have reduced the use of consultants to identify business opportunities. The reduction in professional fees is largely due to the reduced use of outside legal counsel and other service providers.
~~Research and Development~~
In the three and nine months ended September 30, 2022, we spent $271,000 and $1,018,000 in the research and development of our technologies and products. In the three and nine months ended September 30, 2021, we spent $343,000 and $1,027,000 in the research and development of our technologies and products. This was due to limited liquidity and $59,000 capitalized equipment related to the development of our AEC filters.
~~Interest expense~~
Our interest expense for the three and nine months ended September 30, 2022, was $14,000 and $42,000, a decrease of 46% and 80% compared with the same periods of 2021. Our interest expense includes interest from outstanding debt and it is related to the issuance of and modification of convertible promissory notes. We expect our interest expense to be lower in each quarterly period of the year ending December 31, 2022, as compared with the same periods in 2021, due to reduced amounts of debt on our balance sheet.ONM Environmental.

Net Loss

Net loss for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, was ~~$847,000 and $3,724,000,~~$494,000 a loss of ~~$0.00 and $0.01~~$0.0015 per share, compared to a net loss for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, of ~~$1,435,000 and $5,103,000,~~$1,544,000, a loss of ~~$0.01 and $0.02~~$0.0059 per ~~share. The decrease in~~share, a reduction of 68% . Our net loss ~~is due primarily to~~this period declined because of the 288% increase in revenues, combined with a reduction in interest expense. As noted above (see “Interest Expense”), the reduction of interest expense is directly related to our reduction of the use of debt instruments to finance our working capital requirements.expenses, primarily sales, general and administrative costs.

The net income (loss) per business segment is as follows (in thousands):

Three months ended

Nine months ended

September 30,
2022

September 30,
2021

September 30,
2022

September 30,
2021

Net income (loss)

March 31, 2023

March 31, 2022

ONM Environmental
$ 1,385 $ 187
BLEST
(368 ) (35 )
Clyra Medical
(436 ) (247 )
BioLargo Water
(153 ) (233 )
BETI
(87 ) --
BioLargo corporate
(789 ) (851 ) (2,944 ) (2,813 ) (835 ) (1,266 )
ONM
400 (72 ) 592 (355 )
Clyra Medical
(248 ) (239 ) (760 ) (1,011 )
BLEST
(152 ) (136 ) (131 ) (513 )
BioLargo Water
(58 ) (137 ) (481 ) (411 )
Net loss
(847 ) (1,435 ) (3,724 ) (5,103 )
Consolidated net loss
$ (494 ) $ (1,544 )

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Liquidity and Capital Resources

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of our business. For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we generated revenues of $3,742,000 through our subsidiaries (see Note 11), had a net loss of ~~$3,724,000,~~$494,000, used ~~$2,803,000~~$43,000 cash in operations, and at ~~September 30, 2022,~~March 31, 2023, we had working capital of ~~$1,503,000,~~$3,075,000, and current assets of ~~$2,532,000. During the nine months ended September 30, 2022,~~$4,874,000. While our operating loss has decreased in recent quarterly periods, as has our cash used in operations, we ~~generated revenues of $3,786,000 through our operational subsidiaries. (See Note 9.) Our subsidiaries did not individually or in the aggregate generate profits sufficient~~expect to ~~fund their operations, or for our corporate operations or other business segments. We do not believe gross profits in 2022 will be sufficient~~continue to ~~fund our current level of operations during the next 12 months, and therefore we will have to obtain~~need further investment capital to ~~continue to~~ fund ~~operations and seek to refinance our existing debt, such as through our purchase agreement with Lincoln Park Capital and private securities offerings. (See Note 3.)~~operations. We have been, and anticipate that we will continue to be, limited in terms of our capital resources.

34

~~Table~~
During the three months ended March 31, 2023, we (i) sold $105,000 of ~~Contents~~
our common stock to Lincoln Park Capital Fund, LLC (“Lincoln Park”) (see Note 3), (ii) sold $695,000 of our common stock and warrants to accredited investors (see Notes 3 and 6), (iii) sold $225,000 of Clyra Medical Series A Preferred Stock (see Note 8), and (iv) sold $550,000 of BETI common stock (see Note 10).
As of March 31, 2023, our cash and cash equivalents totaled $3,264,000. Our total liabilities included a $78,000 a vehicle loan, $140,000 due in SBA loans issued pursuant to the Paycheck Protection Program (see Note 14), $150,000 due to the SBA issued pursuant to the Economic Injury Disaster program (EIDL) over 30 years, and $247,000 owed by a subsidiary due in 2024 (see Note 4).
Subsequent to March 31, 2023, we continue to sell common stock to Lincoln Park for working capital as needed (see Note 13).

If we are unable to rely on our current arrangement with Lincoln Park to fund our working capital requirements, we ~~would~~will have to rely on other forms of financing, and there is no assurance that we will be able to do so, or if we do so, it will be on favorable terms. ~~Our current financing arrangement with~~
The foregoing factors raise substantial doubt about our ability to continue as a going concern, unless we are able to continue to raise funds through stock sales to Lincoln Park ~~expires~~or other private financings, and in ~~March 2023;~~the long term, our ability to attain a reasonable threshold of operating efficiencies and achieve profitable operations by licensing or otherwise commercializing products incorporating our technologies. The consolidated financial statements do not include any adjustments that might be necessary if we ~~expect~~are unable to ~~enter into~~continue as a ~~new agreement with Lincoln Park prior to that expiration.~~
We operate our business in five distinct business segments. Each of these segments obtains cash to fund operations in unique ways. ONM and BLEST generate cash by selling products and services. Clyra Medical obtains cash from revenues, and third-party investments of sales of its common stock. BioLargo Water generates cash through government research grants and tax credits; our corporate operations currently generate cash through private offerings of stock, debt instruments, and warrants, and then provides supplemental capital to support to our various business segments as they advance their technologies, products and commercial efforts.going concern.

Critical Accounting Policies

Our discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, valuation of offerings of debt with equity or derivative features which include the valuation of the warrant component, any beneficial conversion feature and potential derivative treatment, and share-based payments. We base our estimates on anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results that differ from our estimates could have a significant adverse effect on our operating results and financial position.

~~Note 2, “Summary~~
34
Table of ~~Significant Accounting Policies”~~Contents
Our significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements are described in (i) in Part I, Item 1 of this Form 10-Q, Note 2, “Summary of Significant Accounting Policies” and (ii) in the Form 10-K for the year ended December 31, 2022, filed with the SEC on March 31, 2023, in the Notes to Consolidated Financial Statements ~~of the Company’s Form 10-K filed March 31, 2022~~ in Part II, Item 8, and “Critical Accounting Policies and Estimates” in Part II, Item ~~7, describe the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements.~~7. There have been no material changes to the Company’s critical accounting policies and estimates since the ~~Company’s~~filing of its Form ~~10-K filed March 31, 2022.~~10-K.

Item 4.         Controls and Procedures

We conducted an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended – the “Exchange Act”) as of the end of the period covered by this Report. There were no changes in our internal control over financial reporting during the quarter ended ~~September 30, 2022,~~March 31, 2023, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Our procedures have been designed to ensure that the information relating to our company, including our consolidated subsidiaries, required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow for timely decisions regarding required disclosure. However, our Company is continuing to grow and evolve, as our product and services sales continues to grow, and as we diversify our clients to include municipalities, increasing strain on our accounting systems. These activities put stress on our overall controls and procedures. As our operations do not yet generate enough cash to fund operations, and we rely on financing activities to maintain our level of operations and fund our anticipated growth, we do not yet have the ability to implement the more sophisticated control systems used by larger companies. Although we have made some improvements, our chief executive officer and chief financial officer have concluded that, as of the evaluation date, our disclosure controls and procedures were not effective, due to the material weakness identified below.

It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

35

~~Table of Contents~~
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Under the supervision and with the participation of our management, including our chief executive officer and the chief financial officer, we have established internal control procedures in accordance with the guidelines established in the 2013 Framework —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Management evaluated the effectiveness of our internal controls, and concluded that due to our limited financial and personnel resources, the fact that we operate our business in three distinct locations in the U.S. and Canada, and the lack of sophisticated reporting systems, we continue to have a material weakness in our internal controls with respect to the closing our financial statements. Until the Company has the financial resources to implement more robust automated systems, or to hire additional dedicated accounting personnel, we expect this material weakness to continue.

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls or our internal control over financial reporting, or any system we design or implement in the future, will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

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PART II

OTHER INFORMATION

Item 1A. Risk Factor
Our future results of operations, financial condition and liquidity and the market price for our securities are subject to numerous risks, many of which are driven by factors that we cannot control. The risk factors set forth in our report on Form 10-K for the period ended December 31, 2022, filed with the SEC on March 31, 2023, and below, discuss risks, uncertainties and assumptions relevant to our business and include factors we believe could cause our actual results to differ materially from expected and historical results. Other factors beyond those listed below, including factors unknown to us and factors known to us which we have not currently determined to be material, could also adversely affect our business, results of operations, financial condition, prospects and cash flows. Also see “Forward-looking Statements” above.
A significant portion of our revenue is concentrated with a one customer.
In the year ended December 31, 2022, almost 50% of our total revenue was from the sale of Pooph branded pet-odor products to Ikigai. In the three months ended March 31, 2023, sales to Ikigai accounted for 86% of our total revenue. Our contract with Ikigai does not require they purchase a minimum amount of product from us, and their demand for our product is dependent entirely on their customers’ demand. They create customer demand through television and other advertising, and sell directly to consumers as well as to retailers. Any decrease in their advertising is likely to correspondingly decrease their purchase of product from us. We have no control over their advertising budget or methods, and therefore have no control over their need for product from us. Other factors beyond our control may affect customer demand for the Pooph product. Any such decrease in demand for Pooph product would have a material adverse effect on our business, results of operations, or financial condition.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
~~Unregistered Sales of Equity Securities and Use of Proceeds~~

The following is a report of ~~the~~ sales of unregistered securities during the period covered by this report not previously reported in an annual report on Form 10-K, a Quarterly Report on Form 10-Q, or a Current Report on Form 8-K.

Unit Offering
During the three months ended ~~September 30, 2022,~~March 31, 2023, we sold ~~3,766,126 and~~2,340,211 shares of our common stock and received ~~$632,000~~$470,000 in gross and net proceeds from ~~fourteen~~eleven accredited investors. In addition to the shares, we issued ~~each investor~~the investors six-month warrants to purchase an aggregate 2,340,211 additional shares at $0.228 per share, and five-year warrants to purchase an aggregate 2,340,211 additional shares at $0.285 per share.
Clyra Medical
During the three months ended March 31, 2023, Clyra sold 725 shares of its Series A Preferred Stock, and in exchange received $225,000 in gross and net proceeds. Purchasers of the Series A Preferred Stock also received a ~~six-month and a five-year~~3-year warrant to purchase the same number of ~~shares they had purchased, at prices equal to 120% and 150% of the purchase price.~~
~~On September 30, 2022, we issued 211,047~~additional shares of ~~our~~common stock for $372 per share. Shares of Series A Preferred Stock earn a dividend of 15% each year. Each share of Series A Preferred stock can be converted by the holder at any time for one share of common stock. Accrued dividends may be converted to common stock at ~~$0.27~~a conversion rate of $310 per ~~share in lieu~~share.
Each investor also entered into an agreement with BioLargo whereby the investor may exchange some or all of ~~$23,000~~its Series A Preferred stock, plus accrued dividends, into shares of ~~accrued~~BioLargo common stock, at a price equal to a 20% discount of the volume weighted average price over the 30 prior trading days. Elections must be made during the 18-month period that begins 18 months after the closing of the Series A Preferred offering (which has not yet taken place), or June 30, 2023, whichever is earlier.
BETI
During the three months ended March 31, 2023, BETI sold 350,000 shares of its common stock to seven accredited investors for $2.00 per share. Of that amount, BioLargo purchased 50,000 shares for $100,000, and ~~unpaid obligations~~one investor converted a $50,000 note owed by BioLargo into 25,000 shares. Net proceeds from third parties totaled $550,000.
Each investor also entered into an agreement with BioLargo whereby the investor may exchange some or all of its shares of BETI common stock into shares of BioLargo common stock, at a price equal to ~~consultants.~~ a 20% discount of the volume weighted average price over the 20 trading days prior to the election to exchange. Elections must be made during calendar year 2024.
As of March 31, 2023, BioLargo holds 9,050,000 shares of BETI common stock, and third parties hold 300,000 shares.

All of these offerings and sales were made in reliance on the exemption from registration contained in Section 4(2) of the Securities Exchange Act and/or Regulation D promulgated thereunder as not involving a public offering of securities.

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Table of Contents

Item 5.Other Information
~~Other Information~~

~~Increase in Authorized Shares~~Lincoln Park

On ~~August 30,~~December 13, 2022, the Company filed with the Delaware Secretary of State an amendment to its Certification of Incorporation increases the number of authorized shares of its common stock from 400,000,000 to 550,000,000. This action was taken in accordance with the shareholder approval of Proposal 5 at the Company’s annual stockholder’s meeting held June 2, 2022.
~~Lincoln Park~~
~~On March 30, 2020,~~ we entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”), with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which ~~the Company has the right to sell to~~ Lincoln Park has committed to purchase up to ~~$10,250,000 in shares~~$10.0 million of the Company’s common stock, ~~$0.00067~~ par value $0.00067 per share (the “Common Stock”), ~~over the 36-month term of the Purchase Agreement,~~ subject to certain limitations and the satisfaction of the conditions set forth in the Purchase Agreement.
Concurrently with the execution of the Purchase Agreement on March 30, 2020, we entered into a registration rights agreement (the “Registration Rights Agreement”) with Lincoln Park pursuant to which the Company agreed, among other things, to file a registration statement with the SEC to register for sale under the Securities Act of 1933, as amended (the “Act”), the shares of common stock that may be issued and sold to Lincoln Park from time to time under the Purchase Agreement. We filed a registration statement on Form S-1 with the SEC, which was deemed effective on April 21, 2020.
The Purchase Agreement provides that, commencing on the date that a registration statement is declared effective by the SEC and a final prospectus in connection therewith is filed and the other terms and conditions of the Purchase Agreement are satisfied from time to time on any trading day the Company selects, the Company has the right, in its sole discretion, subject to the conditions and limitations in the Purchase Agreement, to direct Lincoln Park to purchase up to 100,000 shares of Common Stock (each such purchase, a “~~Regular Purchase~~”) over the 36-month term of the Purchase Agreement, provided that at least one trading day has passed since the last Regular Purchase. The purchase price of shares of Common Stock pursuant to the Purchase Agreement will be based on the prevailing market price at the time of sale as set forth in the Purchase Agreement. There are no trading volume requirements or restrictions under the Purchase Agreement. Lincoln Park’s obligation under each Regular Purchase shall not exceed $500,000. There is no upper limit on the price per share that Lincoln Park must pay for Common Stock under the Purchase Agreement.
In addition to regular purchases, as described above, the Company may also direct Lincoln Park to purchase additional amounts as accelerated purchases. In all instances, the Company may not sell shares of its Common Stock to Lincoln Park under the Purchase Agreement if it would result in Lincoln Park beneficially owning more than 4.99% of the Common Stock.
Lincoln Park represented to the Company, among other things, that it was an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended) (See Item 9B titled “Other Information”, and the ~~Company sold the securities in reliance upon exemptions from the registration requirements of United States federal and state securities laws.~~
The Purchase Agreement and the Registration Rights Agreement contain customary representations, warranties, agreements and conditions to completing future sale transactions, indemnification rights and obligations of the parties. The Company has the right to terminate the Purchase Agreement at any time, at no cost or penalty. During any “event of default” under the Purchase Agreement, all of which are outside of Lincoln Park’s control, Lincoln Park does not have the right to terminate the Purchase Agreement; however, the Company may not initiate any regular or other purchase of shares by Lincoln Park, until such event of default is cured. There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement or Registration Rights Agreement, other than a prohibition on entering into any “Variable Rate Transaction,” as defined in the Purchase Agreement.
Actual sales of shares of Common Stock to Lincoln Park under the Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the Common Stock and determinations by the Company as to the appropriate sources of fundingsubheading “Lincoln Park”, for ~~the Company and its operations.~~
The net proceeds under the Purchase Agreement to the Company will depend on the frequency and prices at which the Company sells shares of its stock to Lincoln Park. The Company expects that any proceeds received by the Company from such sales to Lincoln Park will be used for working capital and general corporate purposes.additional information.)

During the three months ended ~~September 30, 2022,~~March 31, 2023, we sold ~~2,440,958~~545,142 shares of our common stock to Lincoln Park, and ~~in exchange~~ received ~~$485,000 and~~$105,000 in gross and net proceeds.

38

~~Table of Contents~~
Item 6.         Exhibits

See the Exhibit Index for a list of exhibits filed as part of this report and incorporated herein by reference.

Exhibit Index

Incorporated by
Reference Herein
Exhibit
Number
Exhibit Description
Form
File Date
3.1
Bylaws of BioLargo, Inc., as amended and restated
Form 10-KSB
5/23/2003
3.2
Amended and Restated Certificate of Incorporation for BioLargo, Inc. filed March 16, 2007
Form 10-KSB
5/4/2007
3.3
Certificate of Amendment to Certificate of Incorporation, filed May 25, 2018
Pos Am
6/22/2018
3.4*3.4
Certificate of Amendment to Certificate of Incorporation, filed August 30, 2022
Form 10-Q
11/14/2022
3.5
Amended and Restated Articles of Incorporation of Clyra Medical Technologies, Inc. (filed December 30, 2022)
Form ~~8-K~~10-K
~~1/6/2016~~3/31/2023
4.1
~~2018~~BioLargo, Inc. 2007 Equity Incentive Plan
Form ~~S-8~~10-QSB
~~6/22/2018~~11/19/2007
4.2
~~Stock Option Award Agreement under 2018~~Amendment No. 1 to BioLargo 2007 Equity Incentive Plan
~~Form S-8~~Def 14C (Exhibit A)
~~6/22/2018~~5/2/2011
4.3
~~Notice of Stock Option Grant under 2018 Equity Incentive Plan~~
~~Form S-8~~
~~6/22/2018~~
~~4.4~~
~~Restricted Stock Unit Award Agreement under 2018 Equity Incentive Plan~~
~~Form S-8~~
~~6/22/2018~~
~~4.5~~
~~Notice of Restricted Stock Unit Award under 2018 Equity Incentive Plan~~
~~Form S-8~~
~~6/22/2018~~
~~4.6~~
Form of Stock Options issued in exchange for reduction in accounts payable.
Form 10-K
3/31/2015
~~4.7~~4.4
$50,000 convertible note, matures March 8, 2020
Form 10-Q
5/14/2018
4.5
2018 Equity Incentive Plan
Form S-8
6/22/2018
4.6
Stock Option Award Agreement under 2018 Equity Incentive Plan
Form S-8
6/22/2018
4.7
Notice of Stock Option Grant under 2018 Equity Incentive Plan
Form S-8
6/22/2018
4.8
Restricted Stock Unit Award Agreement under 2018 Equity Incentive Plan
Form S-8
6/22/2018
4.9
Notice of Restricted Stock Unit Award under 2018 Equity Incentive Plan
Form S-8
6/22/2018
37

Table of Contents
4.10
Revolving Line of Credit Agreement dated June 30, 2020, between Clyra Medical and Vernal Bay
Form 8-K
7/7/2020
~~4.9~~4.11
Security Agreement dated June 30, 2020, between Clyra Medical and Vernal Bay
Form 8-K
7/7/2020
~~4.10~~4.12
Revolving Line of Credit Note issued by Clyra Medical to Vernal Bay on June 30, 2020
Form 8-K
7/7/2020
~~4.11~~4.13
~~Registration Rights Agreement, dated as of March 30, 2020, by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC~~
~~Form 8-K~~
~~3/31/2020~~
~~4.12~~
Warrant issued in 2020 ~~and 2022~~ Unit Offering
Form 10-Q
8/14/2020
~~4.13~~4.14
Amendment to $50,000 Convertible Note dated March 8, 2018
Form 10-K
3/30/2021
4.15
Warrant issued to $50,000 Convertible Noteholder on March 1, 2020
Form 10-K
3/30/2021
4.16
Satisfaction of Convertible Note dated March 8, 2018
Form 10-K
3/~~30/2021~~31/2023
~~4.14~~10.1
~~Warrant issued to $50,000 Convertible Noteholder on March 1, 2020~~Form of indemnity agreement between the Company at its officers and directors
Form 10-K
3/~~30/2021~~31/2023
39

~~Table of Contents~~
~~10.1~~10.2
License Agreement to Clyra Medical Technologies, Inc., dated December 17, 2012
Form 8-K
1/6/2016
~~10.2~~10.3
December 30, 2015 amendment to License Agreement with Clyra Medical Technologies, Inc.
Form 8-K
1/6/2016
~~10.3~~10.4
Consulting Agreement dated December 30, 2015 with Beach House Consulting LLC
Form 8-K
1/6/2016
~~10.4~~10.5
Commercial Office Lease Agreement for 14921 Chestnut St., Westminster, CA 92683
Form 8-K
8/24/2016
~~10.5†~~10.6†
~~2020 Engagement Extension~~Employment Agreement with ~~CFO~~Dennis P. Calvert dated May 2, 2017.
Form 8-K
~~2/27/2020~~5/4/2017
~~10.6~~10.7†
Lock-Up Agreement with Dennis P. Calvert dated April 30, 2017
Form 8-K
5/4/2017
10.8
Commercial Office Lease Agreement for Oak Ridge Tennessee
Form 8-K
9/8/2017
10.9
Form of Employment Agreement for Engineering Subsidiary
Form 8-K
9/8/2017
10.10
Form of Option issued to founding employees of Engineering subsidiary (BLEST)
Form 8-K
9/8/2017
10.11†
Employment Agreement with Joseph L. Provenzano dated May 28, 2019
Form 8-K
6/24/2019
10.12†
Lock-Up Agreement dated May 28, 2019
Form 8-K
6/24/2019
10.13
Purchase Agreement, dated as of March 30, 2020 by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC.
Form 8-K
3/31/2020
~~10.7†~~10.14
~~2021~~Amendment dated June 30, 2020 to License Agreement with Clyra Medical Technologies, Inc.
Form 8-K
7/7/2020
10.15
Amendment dated June 30, 2020 to Consulting Agreement dated December 30, 2015 between Clyra Medical and Beach House Consulting LLC
Form 8-K
7/7/2020
10.16†
2022 Engagement Extension Agreement with CFO
Form 8-K
3/24/2022
10.17
Purchase Agreement, dated as of December 13, 2022, by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC.
Form 8-K
12/19/~~2021~~2022
10.18
Registration Rights Agreement, dated as of December 13, 2022, by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC
Form 8-K
12/19/2022
10.19†
2023 Engagement Extension Agreement with CFO
Form 8-K
3/27/2023
10.20*
Form of Share Exchange Agreement between BioLargo, Inc., and purchasers of Clyra Medical Series A Preferred Stock
filed herewith
38

Table of Contents
10.21*
Form of Share Exchange Agreement between BioLargo, Inc., and purchasers of BioLargo Energy Technologies, Inc. common stock
filed herewith
21.1*
List of Subsidiaries of the Registrant
filed herewith
31.1*
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rules 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934

filed herewith
31.2*
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rules 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934

filed herewith
32*
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section ~~1350.~~1350

filed herewith
101.INS**
Inline XBRL Instance

101.SCH**
Inline XBRL Taxonomy Extension Schema

101.CAL**
Inline XBRL Taxonomy Extension Calculation

101.DEF**
Inline XBRL Taxonomy Extension Definition

101.LAB**
Inline XBRL Taxonomy Extension Labels

101.PRE**
Inline XBRL Taxonomy Extension Presentation

104
Cover Page Interactive Data File ~~(formatted as~~(embedded within the Inline XBRL and contained in Exhibit 101).

* Filed herewith

** Furnished herewith

† Management contract or compensatory plan, contract or arrangement

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BIOLARGO, INC.
Date: May 17, 2023
By:
/s/ DENNIS P. CALVERT
Dennis P. Calvert
Chief Executive Officer

~~Date: November 14, 2022~~
~~By: /s/ DENNIS P. CALVERT~~

Date: May 17, 2023
   ~~Dennis P. Calvert~~
   ~~Chief Executive Officer~~
By: /s/ CHARLES K. DARGAN, II

~~Date: November 14, 2022~~
~~By: /s/ CHARLES K. DARGAN, II~~
Chief Financial Officer

4039

	THREE MONTHS						NINE MONTHS						MARCH 31, 2023			MARCH 31, 2022
	SEPTEMBER 30, 2022			SEPTEMBER 30, 2021			SEPTEMBER 30, 2022			SEPTEMBER 30, 2021

Revenues
Revenue
Product revenue	$	1,216		$	431		$	2,532		$	1,190		$	3,548		$	610
Service revenue		284			281			1,254			553			194			355
Total revenue		1,500			712			3,786			1,743			3,742			965

Cost of revenue
Cost of goods sold		(515	)		(204	)		(1,174	)		(600	)		(1,797	)		(293	)
Cost of service		(233	)		(158	)		(720	)		(363	)		(135	)		(151	)
Total cost of revenue		(748	)		(362	)		(1,894	)		(963	)		(1,932	)		(444	)
Gross profit		752			350			1,892			780			1,810			521

Operating expenses
Operating expenses:
Selling, general and administrative expenses		1,424			1,461			4,847			4,766			1,722			1,839
Research and development		271			344			1,018			1,027			565			392
Total operating expenses		1,695			1,805			5,865			5,793			2,287			2,231

Operating loss		(943	)		(1,455	)		(3,973	)		(5,013	)		(477	)		(1,710	)

Other (expense) income:
Other income (expense):
PPP forgiveness														—			174
Grant income														31			5
Interest expense		(14	)		(26	)		(42	)		(208	)		(48	)		(13	)
PPP loan forgiveness		—			—			174			43
Tax credit		66			21			66			50
Grant income		44			25			51			25
Total other (expense) income:		96			18			249			(90	)
Total other (expense) income														(17	)		166

Net loss		(847	)		(1,435	)		(3,724	)		(5,103	)		(494	)		(1,544	)
Net (loss) income attributable to noncontrolling interest														(247	)		108
Net loss attributable to common stockholders													$	(247	)	$	(1,652	)

Net loss attributable to noncontrolling interest		(343	)		(134	)		(340	)		(549	)
Net loss attributable to common shareholders	$	(504	)	$	(1,301	)	$	(3,384	)	$	(4,554	)
Net loss per share attributable to common stockholders:
Loss per share attributable to stockholders – basic and diluted													$	(0.0009	)	$	(0.0063	)
Weighted average number of common shares outstanding:														280,711,278			260,805,418

Net loss per share attributable to common shareholders:
Loss per share attributable to shareholders – basic and diluted	$	(0.00	)	$	(0.01	)	$	(0.01	)	$	(0.02	)
Weighted average number of common shares outstanding:		270,665,820			252,912,561			265,812,188			243,529,117
Comprehensive loss:
Comprehensive loss attributable to common stockholders
Net loss	$	(847	)	$	(1,435	)	$	(3,724	)	$	(5,103	)	$	(494	)	$	(1,544	)
Foreign currency translation		(59	)		(7	)		(70	)		(9	)
Foreign currency translation adjustment														(6	)		(8	)
Comprehensive loss		(850	)		(1,442	)		(3,794	)		(5,112	)		(500	)		(1,552	)
Comprehensive loss attributable to noncontrolling interest		(343	)		(134	)		(340	)		(549	)
Comprehensive loss attributable to common stockholders	$	(507	)	$	(1,308	)	$	(3,454	)	$	(4,563	)
Comprehensive (loss) income attributable to noncontrolling interest														(247	)		108
Comprehensive loss attributable to stockholders													$	(253	)	$	(1,660	)

	SEPTEMBER 30, 2022			SEPTEMBER 30, 2021
Cash flows from operating activities
Net loss	$	(3,724	)	$	(5,103	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock option compensation expense		1,455			1,447
Common stock issued in lieu of salary to officers and fees for services from vendors		172			294
Common stock issued for interest		—			16
Interest expense related to amortization of the discount on convertible notes payable and line of credit		13			114
PPP loan forgiveness		(174	)		(43	)
Loss on investment in South Korean joint venture		15			23
Depreciation expense		28			17
Changes in assets and liabilities:
Accounts receivable		(371	)		20
Prepaid expenses and other current assets		(85	)		(71	)
Inventories		(19	)		27
Accounts payable and accrued expenses		(40	)		(85	)
Contract liability		(83	)		114
Customer deposits		30			79
Clyra Medical accounts payable and accrued expenses		(20	)		189
Net cash used in operating activities		(2,803	)		(2,962	)
Cash flows from investing activities
Purchase of equipment		(164	)		(21	)
Net cash used in investing activities		(164	)		(21	)
Cash flows from financing activities
Proceeds from sales of common stock		3,267			4,120
Proceeds from the sale of stock in Clyra Medical		—			50
Proceeds from the issuance of Clyra Medical convertible notes		100			—
Exercise of warrants		—			60
Payment of debt obligations		—			(828	)
Payment of Clyra Medical debt obligations		(24	)		(28	)
Net cash provided by financing activities		3,343			3,374
Net effect of foreign currency translation		(70	)		(9	)
Net change in cash		306			382
Cash at beginning of period		962			716
Cash at end of period	$	1,268		$	1,098
Supplemental disclosures of cash flow information
Cash paid for:
Interest	$	11		$	56
Non-cash investing and financing activities
Fair value of warrants issued with convertible notes	$	—		$	35
Conversion of notes payable to common stock	$	—		$	328
Right of use	$	433		$	—
Allocation of noncontrolling interest	$	1,129		$	786

Shareholder	*Shares*		*Percent*
BioLargo, Inc.		51,249		58	%
Sanatio Capital		18,704		21	%
Other		19,118		21	%
Total		89,071

	Three months ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021
Revenue
BioLargo corporate	$	2		$	—		$	4		$	7
ONM		1,199			420			2,499			1,058
BLEST		401			416			1,613			1,070
Water		1			2			1			9
Clyra Medical		17			9			34			114
Intersegment revenue		(120	)		(135	)		(365	)		(522	)
Total	$	1,500		$	712		$	3,786		$	1,743

Operating income (loss)
BioLargo corporate	$	(783	)	$	(868	)	$	(2,925	)	$	(2,726	)
ONM		400			(72	)		418			(355	)
Clyra Medical		(240	)		(219	)		(736	)		(958	)
BLEST		(179	)		(140	)		(158	)		(513	)
Water		(141	)		(156	)		(572	)		(461	)
Total	$	(943	)	$	(1,455	)	$	(3,973	)	$	(5,013	)

Interest expense
BioLargo corporate	$	(6	)	$	(6	)	$	(18	)	$	(106	)
Clyra Medical		(8	)		(20	)		(24	)		(96	)
Total	$	(14	)	$	(26	)	$	(42	)	$	(208	)

Research and development expense
BioLargo corporate	$	(140	)	$	(220	)	$	(570	)	$	(765	)
Clyra Medical		(31	)		(20	)		(73	)		(53	)
BLEST		(100	)		(123	)		(288	)		(358	)
Water		(119	)		(109	)		(446	)		(366	)
Intersegment R&D		119			135			359			515
Total	$	(271	)	$	(344	)	$	(1,018	)	$	(1,027	)

As September 30, 2022	BioLargo		ONM		Clyra		BLEST		Water		Elimination			Total
Tangible assets	$	785	$	1,079	$	814	$	590	$	194	$	(20	)	$	3,442
Right of use		157		—		—		739		—		—			896
Investment in South Korean joint venture		33		—		—		—		—		—			33
Total		975		1,079		814		1,329		194		(20	)		4,371

As of December 31, 2021	BioLargo		ONM		Clyra		BLEST		Water		Elimination			Total
Tangible assets	$	690	$	451	$	832	$	445	$	152	$	(47	)	$	2,522
Right of use		222		—		—		231		—		—			453
Investment in South Korean joint venture		48		—		—		—		—		—			48
Total		960		451		832		676		152		(47	)		3,023

	Three months ended March 31, 2023		Three months ended March 31, 2022
Salaries and payroll related	$	636	$	809
Professional fees		210		149
Consulting		198		316
Office expense		427		310
Board of director expense		65		111
Sales and marketing		93		59
Investor relations		93		85

	Three months ended:				Nine months ended:
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Salaries and payroll related	$	593	$	552	$	2,035	$	1,912
Professional fees		110		149		451		500
Consulting		155		189		605		805
Office expense		341		311		1,072		900
Sales and marketing		71		96		205		255
Investor relations		86		100		233		196
Board of director expense		68		64		246		198

	Three months ended						Nine months ended
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Net income (loss)													March 31, 2023			March 31, 2022
ONM Environmental													$	1,385		$	187
BLEST														(368	)		(35	)
Clyra Medical														(436	)		(247	)
BioLargo Water														(153	)		(233	)
BETI														(87	)		--
BioLargo corporate		(789	)		(851	)		(2,944	)		(2,813	)		(835	)		(1,266	)
ONM		400			(72	)		592			(355	)
Clyra Medical		(248	)		(239	)		(760	)		(1,011	)
BLEST		(152	)		(136	)		(131	)		(513	)
BioLargo Water		(58	)		(137	)		(481	)		(411	)
Net loss		(847	)		(1,435	)		(3,724	)		(5,103	)
Consolidated net loss													$	(494	)	$	(1,544	)

		Incorporated by Reference Herein
Exhibit Number	Exhibit Description	Form	File Date
3.1	Bylaws of BioLargo, Inc., as amended and restated	Form 10-KSB	5/23/2003
3.2	Amended and Restated Certificate of Incorporation for BioLargo, Inc. filed March 16, 2007	Form 10-KSB	5/4/2007
3.3	Certificate of Amendment to Certificate of Incorporation, filed May 25, 2018	Pos Am	6/22/2018
3.4*3.4	Certificate of Amendment to Certificate of Incorporation, filed August 30, 2022	Form 10-Q	11/14/2022
3.5	Amended and Restated Articles of Incorporation of Clyra Medical Technologies, Inc. (filed December 30, 2022)	Form ~~8-K~~10-K	~~1/6/2016~~3/31/2023
4.1	~~2018~~BioLargo, Inc. 2007 Equity Incentive Plan	Form ~~S-8~~10-QSB	~~6/22/2018~~11/19/2007
4.2	~~Stock Option Award Agreement under 2018~~Amendment No. 1 to BioLargo 2007 Equity Incentive Plan	~~Form S-8~~Def 14C (Exhibit A)	~~6/22/2018~~5/2/2011
4.3	~~Notice of Stock Option Grant under 2018 Equity Incentive Plan~~	~~Form S-8~~	~~6/22/2018~~
~~4.4~~	~~Restricted Stock Unit Award Agreement under 2018 Equity Incentive Plan~~	~~Form S-8~~	~~6/22/2018~~
~~4.5~~	~~Notice of Restricted Stock Unit Award under 2018 Equity Incentive Plan~~	~~Form S-8~~	~~6/22/2018~~
~~4.6~~	Form of Stock Options issued in exchange for reduction in accounts payable.	Form 10-K	3/31/2015
~~4.7~~4.4	$50,000 convertible note, matures March 8, 2020	Form 10-Q	5/14/2018
4.5	2018 Equity Incentive Plan	Form S-8	6/22/2018
4.6	Stock Option Award Agreement under 2018 Equity Incentive Plan	Form S-8	6/22/2018
4.7	Notice of Stock Option Grant under 2018 Equity Incentive Plan	Form S-8	6/22/2018
4.8	Restricted Stock Unit Award Agreement under 2018 Equity Incentive Plan	Form S-8	6/22/2018
4.9	Notice of Restricted Stock Unit Award under 2018 Equity Incentive Plan	Form S-8	6/22/2018

4.10	Revolving Line of Credit Agreement dated June 30, 2020, between Clyra Medical and Vernal Bay	Form 8-K	7/7/2020
~~4.9~~4.11	Security Agreement dated June 30, 2020, between Clyra Medical and Vernal Bay	Form 8-K	7/7/2020
~~4.10~~4.12	Revolving Line of Credit Note issued by Clyra Medical to Vernal Bay on June 30, 2020	Form 8-K	7/7/2020
~~4.11~~4.13	~~Registration Rights Agreement, dated as of March 30, 2020, by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC~~	~~Form 8-K~~	~~3/31/2020~~
~~4.12~~	Warrant issued in 2020 ~~and 2022~~ Unit Offering	Form 10-Q	8/14/2020
~~4.13~~4.14	Amendment to $50,000 Convertible Note dated March 8, 2018	Form 10-K	3/30/2021
4.15	Warrant issued to $50,000 Convertible Noteholder on March 1, 2020	Form 10-K	3/30/2021
4.16	Satisfaction of Convertible Note dated March 8, 2018	Form 10-K	3/~~30/2021~~31/2023
~~4.14~~10.1	~~Warrant issued to $50,000 Convertible Noteholder on March 1, 2020~~Form of indemnity agreement between the Company at its officers and directors	Form 10-K	3/~~30/2021~~31/2023

~~10.1~~10.2	License Agreement to Clyra Medical Technologies, Inc., dated December 17, 2012	Form 8-K	1/6/2016
~~10.2~~10.3	December 30, 2015 amendment to License Agreement with Clyra Medical Technologies, Inc.	Form 8-K	1/6/2016
~~10.3~~10.4	Consulting Agreement dated December 30, 2015 with Beach House Consulting LLC	Form 8-K	1/6/2016
~~10.4~~10.5	Commercial Office Lease Agreement for 14921 Chestnut St., Westminster, CA 92683	Form 8-K	8/24/2016
~~10.5†~~10.6†	~~2020 Engagement Extension~~Employment Agreement with ~~CFO~~Dennis P. Calvert dated May 2, 2017.	Form 8-K	~~2/27/2020~~5/4/2017
~~10.6~~10.7†	Lock-Up Agreement with Dennis P. Calvert dated April 30, 2017	Form 8-K	5/4/2017
10.8	Commercial Office Lease Agreement for Oak Ridge Tennessee	Form 8-K	9/8/2017
10.9	Form of Employment Agreement for Engineering Subsidiary	Form 8-K	9/8/2017
10.10	Form of Option issued to founding employees of Engineering subsidiary (BLEST)	Form 8-K	9/8/2017
10.11†	Employment Agreement with Joseph L. Provenzano dated May 28, 2019	Form 8-K	6/24/2019
10.12†	Lock-Up Agreement dated May 28, 2019	Form 8-K	6/24/2019
10.13	Purchase Agreement, dated as of March 30, 2020 by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC.	Form 8-K	3/31/2020
~~10.7†~~10.14	~~2021~~Amendment dated June 30, 2020 to License Agreement with Clyra Medical Technologies, Inc.	Form 8-K	7/7/2020
10.15	Amendment dated June 30, 2020 to Consulting Agreement dated December 30, 2015 between Clyra Medical and Beach House Consulting LLC	Form 8-K	7/7/2020
10.16†	2022 Engagement Extension Agreement with CFO	Form 8-K	3/24/2022
10.17	Purchase Agreement, dated as of December 13, 2022, by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC.	Form 8-K	12/19/~~2021~~2022
10.18	Registration Rights Agreement, dated as of December 13, 2022, by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC	Form 8-K	12/19/2022
10.19†	2023 Engagement Extension Agreement with CFO	Form 8-K	3/27/2023
10.20*	Form of Share Exchange Agreement between BioLargo, Inc., and purchasers of Clyra Medical Series A Preferred Stock		filed herewith

10.21*	Form of Share Exchange Agreement between BioLargo, Inc., and purchasers of BioLargo Energy Technologies, Inc. common stock	filed herewith
21.1*	List of Subsidiaries of the Registrant	filed herewith
31.1*	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rules 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934	filed herewith
31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rules 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934	filed herewith
32*	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section ~~1350.~~1350	filed herewith
101.INS**	Inline XBRL Instance
101.SCH**	Inline XBRL Taxonomy Extension Schema
101.CAL**	Inline XBRL Taxonomy Extension Calculation
101.DEF**	Inline XBRL Taxonomy Extension Definition
101.LAB**	Inline XBRL Taxonomy Extension Labels
101.PRE**	Inline XBRL Taxonomy Extension Presentation
104	Cover Page Interactive Data File ~~(formatted as~~(embedded within the Inline XBRL and contained in Exhibit 101).

	BIOLARGO, INC.


Date: May 17, 2023	By:	/s/ DENNIS P. CALVERT
		Dennis P. Calvert
		Chief Executive Officer



~~Date: November 14, 2022~~	~~By: /s/ DENNIS P. CALVERT~~
Date: May 17, 2023	~~Dennis P. Calvert~~ ~~Chief Executive Officer~~ By:	/s/ CHARLES K. DARGAN, II


~~Date: November 14, 2022~~	~~By: /s/ CHARLES K. DARGAN, II~~
	Chief Financial Officer