##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Fiscal Year ended December 31, 2008
 OR
 o
    
    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.
 (Name of Small Business Issuer in its Charter)
 Delaware
    
    65-0159115(State or other jurisdiction 
of incorporation or organization)
    
    (IRS Employer
Identification No.)
 2603 Main Street, Suite 1155, Irvine, CA 92614
(Address of principal executive offices, Zip Code)
 Issuers telephone number, including area code: (949) 643-9540
 Securities registered under Section 12(b) of the Exchange Act: None
 Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.00067 par value
 o þ
 Yes o No þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 Yes o No þ




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##### 



TABLE OF CONTENTS
 PagePART I.Item 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    16Item 1B. Unresolved Staff Comments
    
    
    26Item 2. Properties
    
    
    26Item 3. Legal Proceedings
    
    
    27Item 4. Submission of Matters to a Vote of Security Holders
    
    
    27PART II.Item 5. Market for Registrants Common Equity, Related Stockholders Matters and Issuer Purchases of
Equity Securities
    
    
    28Item 6. Selected Financial Data
    
    
    31Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    31Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    37Item 8. Financial Statements and Supplementary Data
    
    
    37Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    37Item 9A. Controls and Procedures
    
    
    37Item 9B. Other Information
    
    
    39PART III.Item 10. Directors, Executive Officers, and Corporate Governance
    
    
    40Item 11. Executive Compensation
    
    
    40Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
    
    
    40Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    40Item 14. Principal Accountant Fees and Services
    
    
    40PART IV.Item 15. Exhibits, Financial Statement Schedules
    
    
    40Signatures
    
    
    43Index to Financial Statements
    
    
    F-1Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Financial Statements for the Years Ended December 31, 2007 and 2008
    
    
    F-3Exhibit 4.13Exhibit 4.14Exhibit 4.15Exhibit 4.16Exhibit 4.17Exhibit 4.18Exhibit 21.1Exhibit 31.1Exhibit 31.2Exhibit 32.1




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PART I
 
 ITEM 1. BUSINESS
 USE OF FORWARD LOOKING STATEMENTS IN THIS REPORT
  
    
    our business plan;
    
    the commercial viability of our technology and products incorporating our technology;
    
    the effects of competitive factors on our technology and products incorporating
our technology;
    
    expenses we will incur in operating our business;
    
    our liquidity and sufficiency of existing cash;
    
    the success of our financing plans; and
    
    the outcome of pending or threatened litigation.
     Our Business
 Overview
   - 1 -




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Corporate
   - 2 -




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Benefits of Free Iodine Technologies
  
    
    Environmentally FriendlyOur BioLargo technology and the Isan system feature a
scientifically proven effective disinfectant  free iodine (also an essential
nutrient)  which is recognized as part of natures natural cycle of sanitization. The
Isan system also recaptures disinfection-by-products in many of its applications. Both
are green technologies.
 
    
    Inorganic SolutionThe use of iodine in our BioLargo technology and the Isan system
is strategically important because free iodine is generally considered to be the most
effective and potent disinfecting solution, covering a broad range of materials upon
which it is effective. It is also an inorganic solution, so that organic microbes are
not known to be able to develop an acquired resistance to its killing power.
 
    
    Disinfection-DeodorizationThe chemical composition of our BioLargo technology and
free iodine delivered by the Isan system when incorporated into products or used in a
treatment system, deploys an additive germ killing strategy, that includes a flashing
of iodine (as with our CupriDyne technology), or a controlled dose in either the
CupriDyne technology of Isan system and when used in absorbent products, the CupriDyne
technology also lowers PH levels, which creates an acidic environment, oxidation, and
flocculation (or a binding reaction to lock in the microbes), as well as effective odor
control features.
 
    
    Increased Holding PowerOur BioLargo technology can increase significantly the
holding power of absorbent material, depending on product configuration.
 
    
    DisposalIt renders contaminated or infectious material safe to handle.
 
    
    Bio-DegradableThe byproduct of the chemical reaction is bio-degradable.
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
    
    Generally Recognized as Safe (GRAS) and Generally Recognized as Safe and Effective
(GRASE))The actual chemicals used, in both CupriDyne and the Isan system, as well as
the byproduct of the chemical reaction, in our CupriDyne technology, are understood by
the U.S. Food and Drug Administration (FDA) and the scientific community generally as
non-toxic and safe, when delivered within a range of dosages prescribed by the FDA.
Iodine is also considered GRASE for its antimicrobial, sanitizing, disinfecting or
sterilizing capabilities in appropriate product applications.
 
    
    PriceThe cost of raw materials is not expected to add significantly to the cost of
production of products incorporating our BioLargo technology. Additionally, we believe
that the incorporation of our BioLargo technology into absorbent products will offer
those products a price advantage over competing absorbent products by virtue of their
increased performance, namely their increased holding power, absorbency, anti-microbial
capabilities and deodorizing capabilities which may also reduce the amount of absorbent
materials required to be used in product production to maintain acceptable performance
levels. We further believe that the use of our BioLargo technology in non-absorbent
applications will be more cost effective than iodine alternatives, such as chlorines
and bromines or many other complex chemical compounds. The Isan system is
competitively priced as compared to other disinfection technologies, including
chlorine.
 
    
    Safety and Automation-The Isan system is safe and user-friendly. Its controller
module is able to warn the operator of any breach of preset levels and also, in certain
circumstances, can shut down the system. These warnings can be audible, visual and/or
sent electronically to a telephone or a computer. It has automatic monitoring and
dosing capabilities on a continual basis. The controller module monitors and reports;
functionality, dosing, supply of disinfection chemicals, maintenance, dosing treatment
records for quality assurance and traceability.
 
    
    Lower Corrosion- Free Iodine as featured in CupriDyne and the Isan system is less
corrosive than Chlorine which may help extend the useful life of capital equipment as
compared to chlorine systems.
 
    
    Less pH Sensitivity- The Isan system operates effectively within a broad range of
pH, as compared to Chlorine, which can help reduce labor costs and can help improve
quality assurance and traceability when used in a food sanitization system, as compared
to chlorine systems.
  Strategic Alliance with Ioteq
 ®
  - 4 -




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Odor-No-MoreÔ
      Research and Development
   - 5 -




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Independent Laboratory and Scientific Testing
        - 6 -




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Manufacturing
   .
  - 7 -




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Sales and Marketing
     Product Evaluation Agreements
 Amendment of Syngenta Product Evaluation Agreement
    - 8 -




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CPPW Agreement
   Competition
   - 9 -




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Regulation
   Intellectual Property
     - 10 -




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Patents
 
    
    United States Patent 6,146,725, dated November 14, 2000, entitled
absorbent composition, relating to an absorbent composition to be used in the
transport of specimens of bodily fluids
 
    
    United States patent 6,328,929, dated December 11, 2001, entitled
Method of delivering disinfectant in an absorbent substrate, relating to method
of delivering disinfectant in an absorbent substrate
 Patent Applications
 
    
    USPTO Patent Application 11/516,958 (filed September 7, 2006),
relating to the use of our BioLargo technology as a treatment for remediation and
improvement of a mass such as sand or soil that has been contaminated with
microbes such as bacteria, viruses, rickettsiae and fungi.
 
    
    USPTO Patent Application 11/516,960 (filed September 7, 2006),
relating to the use of our BioLargo technology to provide protection against
antimicrobial activity including the preventing of microbial build up that can
occur, when used in close proximity to the bodies of human patients in product
such as sheets, diapers, bandages compresses and the like.
 
    
    USPTO Patent Application 11/973,933 (filed October 11, 2006),
relating to the use of our BioLargo technology for antimicrobial protection, in
environments such as offices, vehicle cabs, operating rooms, vehicle interiors,
grain storage facilities and the like, that need to be protected from or cleansed
of microbial or chemical material that might be of concern. The technology also
includes proprietary coating and/or treatment of provided materials or reagents.
 
    
    USPTO Patent Application 12/001,073 (filed December 8, 2006),
relating to the use of our BioLargo technology as a treatment of environments
including fields, lawns, parks, orchards, farm fields, greenhouses to provide at
least pesticidal activity.
 
    
    USPTO Patent Application 12/009,586 (filed January 18, 2007),
relating to use of our BioLargo technology as a treatment of residue, deposits or
coatings within large liquid carrying structures such as pipes, drains, ducts,
conduits, run-offs, tunnels and the like, using iodine, delivered in a variety of
physical forms and methods, including using its action to physically disrupt
coatings. The iodines disruptive activity may be combined with other physical
removal systems such as pigging, scraping, tunneling, etching or grooving systems
or the like.
 
    
    USPTO Patent Application 12/012,297 (filed February 8, 2007),
relating to the use of our BioLargo technology as protection of against
antimicrobial activity in environments that need to be protected or cleansed of
microbial or chemical material. These
environments include closed and open environments and absorbent sheet materials
that exhibit stability until activated by aqueous environments. The field also
includes novel particle technology, coating technology or micro-encapsulation
technology to control the stability of chemicals that may be used to kill or
inhibit the growth of microbes to water vapor or humidity for such applications.
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
    
    USPTO Patent Application 12/220,484 (filed July 24, 2008), relating
to the use of an article for application to a surface to provide antimicrobial
and/or anti-odor activity. At least one of the reagents is coated with a
water-soluble, water dispersible or water-penetrable covering that prevents
ambient conditions of 50% relative humidity at 25oC from causing more than 10% of
the total reagents exposed to the ambient conditions from reacting in a
twenty-four hour period
 
    
    PCT/US Patent Application 2007/07508 (filed March 27, 2007),
claiming priority from at least some of the earlier USPTO Patent applications
listed above, and expanded the scope of coverage to additional technologies such
as packets for dishwashers.
 
    
    PCT/US Patent Application 2007/07515 (filed March 27, 2007),
claiming priority from USPTO patent application 60/900,374 and its associated
claims.
 
    
    PCT/US Patent Application filed December 3, 2008), claiming
priority from USPTO patent application 12/001,073 and its associated claims.
   Acquisition of the BioLargo Technology
  Acquisition of Assets; Purchase Price.
 
    
    United States Patent Number 6,146,725, relating to an absorbent
composition to be used in the transport of specimens of bodily fluids;
and United States Patent Number 6,328,929, relating to method of
delivering disinfectant in an absorbent substrate; and related patent
applications and national filings;
  - 12 -




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
    
    all proprietary knowledge, trade secrets, confidential information,
computer software and licenses, formulae, designs and drawings,
quality control data, processes (whether secret or not), methods,
inventions and other similar know-how or rights relating to or arising
out of the patents;
 
    
    all license and distribution agreements to which either Mr. Code or
IOWC is presently a party; and
 
    
    certain records,
  Representations and Warranties.
 
    
    good , valid and marketable title to the assets being sold free and
clear of any and all material liens and encumbrances;
 
    
    absence of the need for third party consents;
 
    
    further assurances to take action to vest good title in the name of the Company
 
    
    sufficiency of the assets for the future conduct of business by the Company;
 
    
    intellectual property matters;
 
    
    the absence of litigation and proceedings;
 
    
    compliance with laws; and
 
    
    limitations on the resale of the IOWC Shares in accordance with securities laws
    - 13 -




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Indemnification.
 
    
    liabilities or claims arising out of the assets or the business of IOWC before the closing;
 
    
    liabilities or claims after the closing relating to IOWC or Mr. Code;
 
    
    breach of the representations or warranties made by IOWC or Mr. Code;
 
    
    default in any agreements made by IOWC or Mr. Code;
 
    
    taxes of any kind arise out of or result from the transactions
contemplated by the Asset Purchase Agreement; and
 
    
    liabilities or claims relating to employee matters.
  
    
    breach of the representations and warranties made by the Company; and
 
    
    default in any agreement made by the Company.
  Miscellaneous.
 Code Employment Agreement
    - 14 -




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Consulting Agreement for Investor Relations Services
     - 15 -




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Executive Officers
  
    
    Dennis Calvert: Chief Executive Officer, President and Chairman of the Board
 
    
    Charles K. Dargan: Chief Financial Officer
 
    
    Kenneth Reay Code: Chief Technology Officer
 
    
    Joseph Provenzano: Corporate Secretary and Vice President of Operations
 Employees
  
 ITEM 1A. RISK FACTORS
  We have never generated any significant revenues, have a history of losses, and cannot
assure you that we will ever become or remain profitable.
  Our cash requirements are significant and our operating expenses are increasing. The failure
to raise additional capital will have a significant adverse effect on our financial
condition and its operations.
   - 16 -




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To meet some of our increased operating expenses, we have agreed to issue securities or we
have the option to issue securities in lieu of paying cash for these services. These
issuances are dilutive to our existing stockholders.
  Our stockholders face further potential dilution in any new financing.
  Our stockholders face further potential adverse effects from the terms of any preferred
stock which may be issued in the future.
  There are several specific business opportunities we are considering in further
development of our business. None of these opportunities is yet the subject of a definitive
agreement and most or all of these opportunities will require additional funding obligations
on our part, for which funding is not currently in place.
    - 17 -




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The cost of maintaining our public company reporting obligations is high. We expect to incur
increased costs under the Sarbanes-Oxley Act of 2002.
  We are not in compliance with required internal controls and procedures.
  There are significant risks relating to our BioLargo technology.
  We expect to incur future losses and may not be able to achieve profitability.
   - 18 -




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If we are not able to devote adequate resources to promote commercialization of our BioLargo
technology, our business plans will suffer.
  Many of the products incorporating our BioLargo technology will require regulatory
approval.
  We need to outsource and rely on third parties for the manufacture of the chemicals,
material components or delivery apparatus used in our BioLargo technology and part of our
future success will be dependent on the timeliness and effectiveness of the efforts of these
third parties.
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If any party to which we have outsourced certain functions fails to perform its obligations
under agreements with us, the commercialization of our BioLargo technology could be delayed
or curtailed.
  If our BioLargo technology or products incorporating our BioLargo technology do not gain
market acceptance, it is unlikely that we will become profitable.
   
    
    the willingness and ability of consumers and industry partners to adopt new technologies;
 
    
    our ability to convince potential industry partners and consumers that
our BioLargo technology is an attractive alternative to other
technologies for disinfection, sanitization, remediation, reduction of
disease transfer and as a protective and safety device against
biohazardous materials;
 
    
    our ability to obtain the chemicals from third parties that are used
in our BioLargo technology, in sufficient quantities with acceptable
quality and at an acceptable cost; and
 
    
    our ability to license our BioLargo technology in a commercially effective manner.
  Any revenues that we may earn in the future are unpredictable, and our operating results are
likely to fluctuate from quarter to quarter.
  
    
    delays in product development by us or third parties;
 
    
    market acceptance of products incorporating our BioLargo technology;
 
    
    changes in the demand for, and pricing, of products incorporating our BioLargo technology;
 
    
    competition and pricing pressure from competitive products;
 
    
    manufacturing delays; and
 
    
    expenses related to, and the results of, proceedings relating to our intellectual property.
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We may not be able to attract or retain qualified senior personnel.
  If we lose our key personnel or are unable to attract and retain additional personnel, we
may be unable to achieve profitability.
  Nondisclosure agreements with employees and others may not adequately prevent disclosure of
trade secrets and other proprietary information.
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The licensing of our BioLargo technology or the manufacture, use or sale of products
incorporating our BioLargo technology may infringe on the patent rights of others, and we
may be forced to litigate if an intellectual property dispute arises.
  
    
    incur substantial monetary damages;
 
    
    encounter significant delays in marketing our current and proposed product candidates;
 
    
    be unable to conduct or participate in the manufacture, use or sale of
product candidates or methods of treatment requiring licenses;
 
    
    lose patent protection for our inventions and products; or
 
    
    find our patents are unenforceable, invalid, or have a reduced scope of protection.
  Our patents are expensive to maintain, our patent applications are expensive to prosecute,
and we may face costly intellectual property disputes.
  We are subject to risks related to future operations outside of North America.
  
    
    foreign currency fluctuations;
 
    
    unstable political, economic, financial and market conditions;
 
    
    import and export license requirements;
 
    
    trade restrictions;
 
    
    increases in tariffs and taxes;
 
    
    high levels of inflation;
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
    
    restrictions on repatriating foreign profits back to the United States;
 
    
    greater difficulty collecting accounts receivable and longer payment cycles;
 
    
    less favorable intellectual property laws;
 
    
    Regulatory requirements;
 
    
    unfamiliarity with foreign laws and regulations; and
 
    
    changes in labor conditions and difficulties in staffing and managing international operations.
 The volatility of certain raw material costs may adversely affect operations and competitive
price advantages for products that incorporate our BioLargo technology.
  There are potential claims from prior business affiliates of IOWC regarding the BioLargo
technology.
  Because Mr. Code and an entity he controls hold the majority of our voting power, he can
ensure the outcome of most matters on which our stockholders vote.
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Our common stock is thinly traded and largely illiquid.
  The market price of our stock is subject to volatility.
  
    
    developments with respect to patents or proprietary rights;
 
    
    announcements of technological innovations by us or our competitors;
 
    
    announcements of new products or new contracts by us or our competitors;
 
    
    actual or anticipated variations in our operating results due to the
level of development expenses and other factors;
 
    
    changes in financial estimates by securities analysts and whether any
future earnings of ours meet or exceed such estimates;
 
    
    Conditions and trends in our industry;
 
    
    new accounting standards;
 
    
    general economic, political and market conditions and other factors; and
 
    
    the occurrence of any of the risks described in this Report.
 You may have difficulty selling our shares because they are deemed penny stocks.
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We may not receive any proceeds from the Spring 2008 One-Year Warrants.
  We may have violated certain securities laws in the course of our Fall 2008 Offering.
  If we violated certain securities laws in the course of Fall 2008 Offering, investors who
have already invested in the Fall 2008 Offering may have various remedies available to them,
including the right to rescind their investment. We may not have the funds available to
satisfy a demand for the rescission from these investors.
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In order to discharge our obligations under applicable securities laws, we intend to conduct
a rescission offering to the Original Investors in the Fall 2008 Offering. We do not intend
to conduct the rescission offer until after the Fall 2008 Offering terminates. We may have
to use some of our remaining capital resources, including future proceeds from this Offering
from other investors, to satisfy any demand by the Original Investors to rescind their
investment.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  Sublease of Principal Executive Offices
   - 26 -




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ITEM 3. LEGAL PROCEEDINGS
 Attorney Fee Settlement
   
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   - 27 -




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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF
EQUITY SECURITIES
 Market Information
   2007
    
    
    2008High
    
    
    Low
    
    
    High
    
    
    LowFirst Quarter
    
    $
    1.01
    
    
    $
    0.31
    
    
    $
    2.00
    
    
    $
    0.75Second Quarter
    
    $
    0.70
    
    
    $
    0.32
    
    
    $
    1.70
    
    
    $
    1.01Third Quarter
    
    $
    0.99
    
    
    $
    0.36
    
    
    $
    1.30
    
    
    $
    0.61Fourth Quarter
    
    $
    0.96
    
    
    $
    0.36
    
    
    $
    0.89
    
    
    $
    0.35
  Dividends
  Securities Authorized for Issuance Under Equity Compensation Plans
 Equity Compensation Plan Information
 Number of securitiesto be issued upon
    
    
    Weighted averageexercise of
    
    
    exercise price of
    
    
    Number of securitiesoutstanding options,
    
    
    outstanding options,
    
    
    remaining availablePlan category
    
    warrants and rights
    
    
    warrants and rights
    
    
    for future issuance(a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    785,000
    
    
    $
    1.02
    
    
    
    5,215,000
    (1)Equity compensation
plans not approved
by security holders
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    
    785,000
    
    
    $
    1.02
    
    
    
    5,215,000
 
 (1)
    
    Consists of 6,000,000 shares issuable under our 2007 Equity Incentive
Plan (the 2007 Plan). The 2007 Plan was adopted by our Board of
Directors on August 7, 2007 and approved by the stockholders of the
Company at the 2007 Annual Meeting of Stockholders on September 6,
2007. Excludes 572,800 shares that remained issuable under the
Companys 2004 Equity Plan (the 2004 Plan). Upon the adoption of the
2007 Plan, the 2004 Plan was frozen and no further grants will be made
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Sales of Unregistered Securities
 2007 Offering
   Spring 2008 Offering
    - 29 -




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Fall 2008 Offering
     Stock Issuances in 2008
     - 30 -




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ITEM 6. SELECTED FINANCIAL DATA
  
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
   Overview
   Results of OperationsComparison of the Years Ended December 31, 2008 and 2007
 Revenue
   - 31 -




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Selling, General and Administrative Expense
      Interest expense
   - 32 -




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Research and Development
  Net Loss
  Liquidity and Capital Resources
      - 33 -




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Obligation to New Millennium, related party
   Critical Accounting Policies
       - 35 -




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Recent Accounting Pronouncements
    Business Combinations Business
Combinations
  - 36 -




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
    - 37 -




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Managements Report on Internal Control over Financial Reporting
     - 38 -




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Changes in Internal Control
  
 ITEM 9B. OTHER INFORMATION
   - 39 -




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PART III
  
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
 PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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Exhibit No.
    
    Description of Exhibit3.1
    
    
    Amended and Restated Certificate of Incorporation filed March 16, 2007(6)3.2
    
    
    Certificate of Designations creating Series A Preferred Stock (3)3.3
    
    
    Bylaws, as amended and restated (1)4.1
    
    
    Amended and Restated Warrant No. AG-1 to purchase shares of common stock held
by Augustine II LLC (3)4.2
    
    
    Secured Promissory Note in the face amount of $1,120,000 issued to Summitt
Ventures, Inc., assigned to New Millennium Capital Partners, LLC (2)4.3
    
    
    Warrant Number AG-II to Purchase Common Stock issued July 29, 2005 issued to
Augustine II, LLC (4)4.4
    
    
    Form of Promissory Note issued in the Fall 2006 Offering (5)4.5
    
    
    Form of Warrant issued in the Fall 2006 Offering(6)4.6
    
    
    Form of Promissory Note issued in the 2007 Offering (10)4.7
    
    
    Form of Warrant issued in the 2007 Offering (10)4.8
    
    
    Conversion Agreement dated April 13, 2007 between the Company and New
Millennium Capital Partners LLC(6)4.9
    
    
    Form of Convertible Promissory Note issued in the Spring 2008 Offering (12)4.10
    
    
    Form of One-Year Warrant issued in the Spring 2008 Offering (12)4.11
    
    
    Form of Three-Year Warrant issued in the Spring 2008 Offering (12)4.12
    
    
    Form of Warrant to Purchase Common Stock issued to SC Capital Partners, LLC (12)4.13
    *
    
    Form of Convertible Promissory Note issued in the Fall 2008 Offering4.14
    *
    
    Form of One-Year Warrant issued in the Fall 2008 Offering4.15
    *
    
    Form of Three-Year Warrant issued in the Fall 2008 Offering4.16
    *
    
    Amended Form of Convertible Promissory Note issued in the Spring 2008 Offering4.17
    *
    
    Amended Form of One-Year Warrant issued in the Spring 2008 Offering4.18
    *
    
    Amended Form of Three-Year Warrant issued in the Spring 2008 Offering10.1
    
    
    Asset Purchase Agreement dated as of April 30, 2007 between the Company, BioLargo Life
Technologies, Inc., IOWC Technologies, Inc., and Kenneth R. Code(6)10.2
    
    
    Employment Agreement dated as of April 30, 2007 between the Company and Dennis Calvert(6)10.3
    
    
    Employment Agreement dated as of April 30, 2007 between the Company and Kenneth R. Code(6)
  - 41 -




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.4
    
    
    Assignment of USPTO Patent Application 11/516,958 to BioLargo Life Technologies, Inc. (6)10.5
    
    
    Assignment of USPTO Patent Application 11/516,960 to BioLargo Life Technologies, Inc. (6)10.6
    
    
    Assignment of USPTO Patent Application 60/850,976 to BioLargo Life Technologies, Inc. (6)10.7
    
    
    Assignment of USPTO Patent Application 60/873,763 to BioLargo Life Technologies, Inc. (6)10.8
    
    
    Assignment of USPTO Patent Application 60/881,061 to BioLargo Life Technologies, Inc. (6)10.9
    
    
    Assignment of USPTO Patent Application 60/900,374 to BioLargo Life Technologies, Inc. (6)10.10
    
    
    Promissory note related to professional fees(7)10.11
    
    
    BioLargo, Inc. 2007 Equity Incentive Plan(7)10.12
    
    
    Employment Agreement dated as of January 1, 2008 between BioLargo, Inc. and Joseph L. Provenzano(8)10.13
    
    
    Consulting Agreement dated as of January 1, 2008 between BioLargo, Inc. and Jeffrey C. Wallace(8)10.14
    
    
    Consulting Agreement dated as of January 1, 2008 between BioLargo, Inc. and Robert C. Szolomayer(8)10.15
    
    
    Engagement Agreement dated February 1, 2008 between BioLargo, Inc. and Charles K. Dargan, II
(9)10.16
    
    
    Consulting Agreement dated as of November 6, 2008 between BioLargo, Inc. and Howard Isaacs (11)10.17
    
    
    Form of Warrant issued to Howard Isaacs (111)10.18
    
    
    Agreement dated as of August 19, 2008 by and among BioLargo, Inc., BioLargo Life Technologies,
Inc., and Ioteq IP, Ltd. and Ioteq, Inc. (12)10.19
    
    
    Sublease Agreement dated as of November 13, 2008 (12)10.20
    
    
    Engagement Extension Agreement dated as of February 1, 2009 between BioLargo, Inc. and Charles K.
Dargan, II. (13)21.1
    *
    
    List of Subsidiaries of the Registrant24.1
    *
    
    Power of Attorney (included on Signature Page)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 193431.2
    *
    
    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 193432.1
    *
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
 
 *
    
    Filed herewith.
    
    Management contract or compensatory plan, contract or arrangement(1)
    
    Incorporated herein by reference from the 10-KSB filed by the Company for the year ended
December 31, 2002.(2)
    
    Incorporated herein by reference from the Form 8-K filed by the Company on May 1, 2003.(3)
    
    Incorporated herein by reference from the Form 10-KSB filed by the Company for the year
ended December 31, 2003.(4)
    
    Incorporated herein by reference from the Form 10-QSB filed by the Company for the
three-month period ended March 31, 2005.(5)
    
    Incorporated herein by reference from the Form 8-K filed by the Company on December 4, 2006.  - 42 -




---



##### Table of Contents



(6)
    
    Incorporated herein by reference from the Form 10-KSB filed by the Company for the year
ended December 31, 2007.(7)
    
    Incorporated herein by reference from the Form 10-QSB for the three-month period ended
September 30, 2007.(8)
    
    Incorporated herein by reference from the Form 8-K filed by the Company on January 16, 2008.(9)
    
    Incorporated herein by reference from the Form 8-K filed by the Company on February 4, 2008.(10)
    
    Incorporated herein by reference from the Form 10-KSB filed by the Company for the year
ended December 31, 2007(11)
    
    Incorporated herein by reference from the Form 8-K filed by the Company on November 12, 2008.(12)
    
    Incorporated herein by reference from the Form 10-QSB for the three-month period ended
September 30, 2007.(13)
    
    Incorporated herein by reference from the Form 8-K filed by the Company on February 24, 2009. 
 SIGNATURES
  BIOLARGO, INC.Date: March 31, 2009
    By:

/s/
DENNIS P. CALVERTDennis CalvertPresident and Chief Executive Officer POWER OF ATTORNEY
   Name
    
    Title
    
    Date/s/ DENNIS P. CALVERT

Dennis Calvert
    
    Chairman of the Board,
Chief Executive Officer
and President
    
    March 31, 2009/s/ CHARLES K. DARGAN II

Charles K. Dargan II
    
    Chief Financial Officer
(principal financial
officer and principal
accounting officer)
    
    March 31, 2009/s/ KENNETH R. CODE

Kenneth R. Code
    
    Chief Technology Officer
and Director
    
    March 31, 2009/s/ JOSEPH L. PROVENZANO

Joseph Provenzano
    
    Executive Vice President,
Corporate Secretary and
Director
    
    March 31, 2009/s/ GARY A. COX

Gary Cox
    
    Director
    
    March 31, 2009/s/ DENNIS E. MARSHALL

Dennis E. Marshall
    
    Director
    
    March 31, 2009
  - 43 -




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##### Table of Contents



INDEX TO FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2007 and December 31, 2008
    
    
    F-3Consolidated Statements of Operations for the years ended December 31, 2007 and 2008
    
    
    F-4Consolidated Statements of Stockholders (Deficit) Equity for the years ended
December 31, 2007 and 2008
    
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2007 and 2008
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7  F-29




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
      
  F-2




---



##### Table of Contents



PART I
 Item 1. Financial Statements
 BIOLARGO, INC. AND SUBSIDIARY
 
 CONSOLIDATED BALANCE SHEETS
 AS OF DECEMBER 31, 2007 AND 2008
 December 31,
    
    
    December 31,2007
    
    
    2008ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    457,809
    
    
    $
    90,384Prepaid expenses
    
    
    4,584
    
    
    
    4,586Total current assets
    
    
    462,393
    
    
    
    94,970FIXED ASSETSEquipment, net
    
    
    
    
    
    
    25,954Total fixed assets
    
    
    
    
    
    
    25,954OTHER ASSETSLicensing rights, net
    
    
    10,655,164
    
    
    
    9,633,052Assigned agreements, net
    
    
    340,377
    
    
    
    255,285TOTAL ASSETS
    
    $
    11,457,934
    
    
    $
    10,009,261LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    781,221
    
    
    $
    993,431Accrued option compensation expense
    
    
    635,845
    
    
    
    657,801Convertible notes payable, current portion
    
    
    1,000,000
    
    
    
    1,000,000Discount on convertible notes, current portion net of amortization
    
    
    (443,212
    )
    
    
    (568,738
    )Note payable
    
    
    22,076
    
    
    
    Total Current Liabilities
    
    
    1,995,930
    
    
    
    2,082,494LONG-TERM LIABILITIESConvertible notes payable, net of current portion
    
    
    1,000,000
    
    
    
    973,625Discount on convertible notes, net of current portion and amortization
    
    
    (573,963
    )
    
    
    (400,950
    )Total Long-term Liabilities
    
    
    426,037
    
    
    
    572,675TOTAL LIABILITIES
    
    
    2,421,967
    
    
    
    2,655,169COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTSSTOCKHOLDERS EQUITYConvertible Preferred Series A, $.00067 Par Value, 50,000,000 and
25,000,000 Shares Authorized, -0- Shares Issued and Outstanding, at
December 31, 2008 and December 31, 2007.
    
    
    
    
    
    
    Common Stock, $.00067 Par Value, 200,000,000 Shares
Authorized, 42,261,268 and 39,980,611 Shares Issued, at December 31,
2008 and December 31, 2007, respectively
    
    
    26,779
    
    
    
    28,319Additional Paid-In Capital
    
    
    44,022,471
    
    
    
    49,534,305Accumulated Deficit
    
    
    (35,013,283
    )
    
    
    (42,156,032
    )Total Stockholders Equity
    
    
    9,035,967
    
    
    
    7,384,894TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    11,457,934
    
    
    $
    10,009,261
   F-3




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##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR THE YEAR ENDED DECEMBER 31, 2007 AND 2008
 2007
    
    
    2008Revenue
    
    $
    80,000
    
    
    $
    Total revenue
    
    
    80,000
    
    
    
    Costs and expensesSelling, general and administrative
    
    
    2,994,516
    
    
    
    4,829,061Research and development
    
    
    131,349
    
    
    
    113,748Amortization
    
    
    738,136
    
    
    
    1,109,940Total costs and expenses
    
    
    3,864,001
    
    
    
    6,052,749Loss from operations
    
    
    (3,864,001
    )
    
    
    (6,052,749
    )Other income and (expense)Interest expense
    
    
    (1,564,312
    )
    
    
    (1,149,986
    )Other income
    
    
    88,923
    
    
    
    59,985Net other income and (expense)
    
    
    (1,475,389
    )
    
    
    (1,090,001
    )Net loss
    
    $
    (5,259,390
    )
    
    $
    (7,142,750
    )Loss per common share  basic and dilutedLoss per share
    
    $
    (0.18
    )
    
    $
    (0.17
    )Weighted average common share
equivalents outstanding
    
    
    28,791,898
    
    
    
    41,622,951
   F-4




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##### Table of Contents



BIOLARGO,
INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2008
 Common StockNumber
    
    
    Par
    
    
    Additional
    
    
    Retainedof
    
    
    Value
    
    
    Paid-In
    
    
    EarningsShares
    
    
    $.00067
    
    
    Capital
    
    
    (Deficit)
    
    
    TotalBALANCE DECEMBER 31, 2006
    
    
    3,135,822
    
    
    $
    2,087
    
    
    $
    24,422,819
    
    
    $
    (29,753,892
    )
    
    $
    (5,328,986
    )Conversion of note obligations
(including additional interest
expense)
    
    
    6,985,441
    
    
    
    4,680
    
    
    
    3,125,610
    
    
    
    
    
    
    
    3,130,290Conversion of consultant
obligations (including additional
expense)
    
    
    2,316,884
    
    
    
    1,556
    
    
    
    1,307,035
    
    
    
    
    
    
    
    1,308,591Conversion of Board of Directors
and officer payable obligations
    
    
    1,735,535
    
    
    
    1,166
    
    
    
    684,993
    
    
    
    
    
    
    
    686,159Issuance of warrants as part of
convertible note offering
    
    
    
    
    
    
    
    
    
    
    992,221
    
    
    
    
    
    
    
    992,221Issuance of stock options to Board
of Directors and consultants
    
    
    
    
    
    
    
    
    
    
    156,268
    
    
    
    
    
    
    
    156,268Shares issued for the acquisition
of assets from IOWC
    
    
    22,139,012
    
    
    
    14,833
    
    
    
    11,718,844
    
    
    
    
    
    
    
    11,733,677Conversion of Augustine note
payable
    
    
    2,031,553
    
    
    
    1,361
    
    
    
    715,777
    
    
    
    
    
    
    
    717,138Conversion of New Millennium Note
payable obligation (related party)
    
    
    1,636,364
    
    
    
    1,096
    
    
    
    898,904
    
    
    
    
    
    
    
    900,000Net Loss for the year ended
December 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,259,390
    )
    
    
    (5,259,390
    )BALANCE DECEMBER 31, 2007
    
    
    39,980,611
    
    
    $
    26,779
    
    
    $
    44,022,471
    
    
    $
    (35,013,282
    )
    
    $
    9,035,968Exercised warrants
    
    
    487,000
    
    
    
    334
    
    
    
    608,416
    
    
    
    
    
    
    
    608,750Issuance of warrants as part of
convertible note offering
    
    
    
    
    
    
    
    
    
    
    788,971
    
    
    
    
    
    
    
    788,971Fair value of warrant repricing
    
    
    
    
    
    
    
    
    
    
    76,300
    
    
    
    
    
    
    
    76,300Vested portion of stock options
    
    
    
    
    
    
    
    
    
    
    1,705,276
    
    
    
    
    
    
    
    1,705,276Issuance of warrants to consultants
    
    
    
    
    
    
    
    
    
    
    317,225
    
    
    
    
    
    
    
    317,225Issuance of stock options to Board
of Directors and consultants
    
    
    
    
    
    
    
    
    
    
    748,876
    
    
    
    
    
    
    
    748,876Issuance of stock for services
    
    
    87,441
    
    
    
    39
    
    
    
    42,428
    
    
    
    
    
    
    
    42,467Conversion of convertible note
payable obligations
    
    
    1,706,216
    
    
    
    1,167
    
    
    
    1,171,842
    
    
    
    
    
    
    
    1,173,009Net loss for the year ended
December 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,142,750
    )
    
    
    (7,142,750
    )BALANCE DECEMBER 31, 2008
    
    
    42,261,268
    
    
    $
    28,319
    
    
    $
    49,534,305
    
    
    $
    (42,156,032
    )
    
    $
    7,354,092
   F-5




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##### Table of Contents



BIOLARGO,
INC. AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR YEARS ENDED DECEMBER 31, 2007 AND 2008
 2007
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIESNet Loss
    
    $
    (5,259,390
    )
    
    $
    (7,142,750
    )Adjustments to Reconcile Net Loss to Net Cash Used in
Operating Activities:Non-cash interest expense related to
conversion of noteholder obligations
    
    
    1,216,904
    
    
    
    75,362Non-cash expense related to stock
issued to consultants and
professionals for settlement of
obligations
    
    
    606,655
    
    
    
    42,452Non-cash interest expense related to
the fair value of warrants issued in
conjunction with our convertible
notes
    
    
    514,946
    
    
    
    877,097Non-cash expense related to options
issued to officers
    
    
    643,843
    
    
    
    1,251,548Non-cash expense related to options
issued to consultants
    
    
    148,270
    
    
    
    1,195,560Non-cash expense related to warrants
issued to consultants
    
    
    
    
    
    
    317,225Amortization and depreciation expense
    
    
    738,136
    
    
    
    1,109,940Decrease in prepaid expense
    
    
    11,916
    
    
    
    Increase in accounts payable and
accrued expenses
    
    
    91,195
    
    
    
    374,532Net Cash Used In Operating Activities
    
    
    (1,287,525
    )
    
    
    (1,899,034
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of fixed assets
    
    
    
    
    
    
    (28,690
    )Net Cash Used In Investing Activities
    
    
    
    
    
    
    (28,690
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from exercised warrants
    
    
    
    
    
    
    608,750Payments on note payable
    
    
    
    
    
    
    (22,076
    )Proceeds from convertible notes
    
    
    1,516,000
    
    
    
    973,625Net Cash Provided By Financing Activities
    
    
    1,516,000
    
    
    
    1,560,299NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (228,475
    )
    
    
    (367,425
    )CASH AND CASH EQUIVALENTS  BEGINNING
    
    
    229,334
    
    
    
    457,809CASH AND CASH EQUIVALENTS  ENDING
    
    $
    457,809
    
    
    $
    90,384SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATIONCash Paid During the Period for:Interest
    
    $
    
    
    
    $
    Income taxes
    
    $
    
    
    
    $
    Conversion of note payable, related party to shares of the
Companys common stock
    
    $
    900,000
    
    
    $
    Conversion of convertible notes to shares of the Companys
common stock
    
    $
    2,373,120
    
    
    $
    1,173,009Conversion of accrued expenses to shares of the Companys
common stock:Board of Directors and officer obligations
    
    $
    686,159
    
    
    $Consultant obligations
    
    $
    1,262,841
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING AND INVESTING
ACTIVITIES:Issuance of warrants in conjunction with convertible
note offerings
    
    $
    992,221
    
    
    $
    865,271Repriced warrants in conjunction with convertible
note offering
    
    $
    
    
    
    $
    76,300Issuance of shares of the Companys common stock in
conjunction with the acquisition of assets from IOWC
    
    $
    11,733,676
    
    
    $
    
   F-6




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. Business and Organization
 Outlook
           F-7




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Organization
  Business Overview
      F-8




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Strategic Alliance with Ioteq
 ®
     Odor-No-MoreÔ
      F-9




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Acquisition of the BioLargo Technology
   Change in Control; Election of Mr. Code as Director
    F-10




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 2. Summary of Significant Accounting Policies
              F-11




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             F-12




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Business Combinations Business
Combinations
   Note 3. Intangible Assets/Long-lived Assets
   F-13




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##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 4. Sale of Unregistered Securities
 Fall 2008 Offering
     Spring 2008 Offering
   F-14




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##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2007 Offering
      F-15




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Fall 2006 Offering
     Issuance of Securities in exchange for payment of payables
   F-16




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             F-17




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 5. Warrants
       F-18




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Number ofShares
    
    
    Price RangeOutstanding as of December 31, 2007
    
    
    5,292,682
    
    
    $
    0.125  1.50Issued
    
    
    2,043,549
    
    
    $
    1.00  2.00Exercised
    
    
    (487,000
    )
    
    $
    1.25Expired
    
    
    (1,289,534
    )
    
    $
    0.88  1.25Outstanding as of December 31, 2008
    
    
    5,559,697
    
    
    $
    0.125  2.00
  2007
    
    
    2008Risk free interest rate
    
    
    4.52
    %
    
    
    1.83  2.49
    %Expected volatility
    
    
    276  310
    %
    
    
    203   615
    %Expected dividend yield
    
    
    
    
    
    
    Forfeiture rate
    
    
    
    
    
    
    Expected life in years
    
    
    1.25  1.50
    
    
    
    0.50  3.00
       F-19




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##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 6. Stockholders Equity
 Preferred Stock
  Common Stock
  Note 7. Stock-Based Compensation and Other Employee Benefit Plans
 2007 Equity Incentive Plan
    F-20




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##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        WeightedAverageOptions
    
    
    Shares
    
    
    
    
    
    
    Price perOutstanding
    
    
    Available
    
    
    Price per share
    
    
    shareBalances, December 31, 2007
    
    
    625,000
    
    
    
    5,375,000
    
    
    $
    0.40  $1.03
    
    
    $
    0.95Granted
    
    
    160,000
    
    
    
    (160,000
    )
    
    $
    0.35  1.89
    
    
    $
    1.31Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balances, December 31, 2008
    
    
    785,000
    
    
    
    5,215,000
    
    
    $
    0.35  $1.89
    
    
    $
    1.02
  F-21




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##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Weighted
    
    
    
    
    
    
    Currently ExercisableAverage
    
    
    Weighted
    
    
    Number ofRemaining
    
    
    Average
    
    
    Shares at
    
    
    WeightedContractual
    
    
    Exercise
    
    
    December 31,
    
    
    AverageOptions Outstanding at December 31, 2008
    
    Exercise Price
    
    
    Life
    
    
    Price
    
    
    2008
    
    
    Exercise Price20,000
    
    $
    0.40
    
    
    
    10
    
    
    $
    0.40
    
    
    
    20,000
    
    
    $
    0.40605,000
    
    $
    0.94  1.03
    
    
    
    10
    
    
    $
    0.97
    
    
    
    105,000
    
    
    $
    0.9450,000
    
    $
    1.89
    
    
    
    10
    
    
    $
    1.89
    
    
    
    50,000
    
    
    $
    1.89110,000
    
    $
    0.35  1.65
    
    
    
    10
    
    
    $
    1.04
    
    
    
    110,000
    
    
    $
    1.04
 Stock Options Issued Outside the 2007 Equity Incentive Plan
    Non planOption
    
    
    2007 PlanRisk free interest rate
    
    
    2.17  4.50
    %
    
    
    2.75  4.72
    %Expected volatility
    
    
    800
    %
    
    
    800  837
    %Expected dividend yield
    
    
    
    
    
    
    Forfeiture rate
    
    
    
    
    
    
    Expected life in years
    
    
    5
    
    
    
    5
  F-22




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BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     Note 8. Accounts Payable and Accrued Expenses
  December 31,
    
    
    December 31,2007
    
    
    2008Accounts payable and accrued expenses
    
    $
    229,518
    
    
    $
    302,518Accrued interest
    
    
    493,860
    
    
    
    560,031Officer and Board of Director payable
    
    
    57,843
    
    
    
    130,882Total Accounts Payable and Accrued Expenses
    
    $
    781,221
    
    
    $
    993,431
  Note 9. Other Promissory Notes
   F-23




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BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 10. Related Party Transactions
 New Millennium
    Note 11. Provision for Income Taxes
    Note 12. Commitments and Contingencies
 Litigation
   F-24




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BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Attorney Fee Settlement
  Joseph L. Provenzano Employment Agreement
     Engagement of Charles K. Dargan, II as Chief Financial Officer
   
    
    an option to purchase 50,000 shares of our common stock, granted on
February 1, 2008, at an exercise price equal to the closing price of a
share of our common stock on the grant date, such option to vest in
full 90 days after grant; and
 
    
    options to purchase 10,000 shares of our common stock, each such
option to be granted on the last day of each month commencing April
2008 and ending January 2009, provided that this Agreement has not
been terminated prior to each such grant date, at an exercise price
equal to the closing price of a share of our common stock on each
grant date, each such option to be fully vested upon grant.
  F-25




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BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Other Consulting Agreements
   
    
    not less than 4% nor more than 7% of the Net Licensing Revenue actually and
indefeasibly received by BioLargo in the first 12 months of the License Agreement Period
for such License Agreement;
 
    
    not less than 3% nor more than 5% of the Net Licensing Revenue actually and
indefeasibly received by BioLargo in the second 12 months of the License Agreement Period
for such License Agreement;
 
    
    not less than 1% nor more than 3% of the Net Licensing Revenue actually and
indefeasibly received by BioLargo in the third 12 months of the License Agreement Period
for such License Agreement; and
 
    
    not less than 0.75% nor more than 2% of the Net Licensing Revenue actually and
indefeasibly received by BioLargo in the fourth 12 months and for each 12 month period
thereafter, of the License Agreement Period for such License Agreement.
   F-26




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BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Sublease of Principal Executive Offices
     Consulting Agreement for Investor Relations Services
   F-27




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BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Stock-Based Commitments
  Note 13. Subsequent Events
 Fall 2008 Offering  Repricing
   Extension of Engagement of Charles K. Dargan, II as Chief Financial Officer
   F-28




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BIOLARGO, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
    
    an option to purchase 50,000 shares of the Companys common stock, granted on February
23, 2009, at an exercise price equal to the closing price of a share of the Companys
common stock on the grant date, such option to vest in full 90 days after grant; and
 
    
    options to purchase 10,000 shares of the Companys common stock, each such option to be
granted on the last day of each month commencing April 2009 and ending January 2010,
provided that the Engagement Extension Agreement with Mr. Dargan has not been terminated
prior to each such grant date, at an exercise price equal to the closing price of a share
of the Companys common stock on each grant date, each such option to be fully vested upon
grant.
   F-29




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Exhibit No.
    
    Description of Exhibit3.1
    
    
    Amended and Restated Certificate of Incorporation filed March 16, 2007(6)3.2
    
    
    Certificate of Designations creating Series A Preferred Stock (3)3.3
    
    
    Bylaws, as amended and restated (1)4.1
    
    
    Amended and Restated Warrant No. AG-1 to purchase shares of common stock held
by Augustine II LLC (3)4.2
    
    
    Secured Promissory Note in the face amount of $1,120,000 issued to Summitt
Ventures, Inc., assigned to New Millennium Capital Partners, LLC (2)4.3
    
    
    Warrant Number AG-II to Purchase Common Stock issued July 29, 2005 issued to
Augustine II, LLC (4)4.4
    
    
    Form of Promissory Note issued in the Fall 2006 Offering (5)4.5
    
    
    Form of Warrant issued in the Fall 2006 Offering(6)4.6
    
    
    Form of Promissory Note issued in the 2007 Offering (10)4.7
    
    
    Form of Warrant issued in the 2007 Offering (10)4.8
    
    
    Conversion Agreement dated April 13, 2007 between the Company and New
Millennium Capital Partners LLC(6)4.9
    
    
    Form of Convertible Promissory Note issued in the Spring 2008 Offering (12)4.10
    
    
    Form of One-Year Warrant issued in the Spring 2008 Offering (12)4.11
    
    
    Form of Three-Year Warrant issued in the Spring 2008 Offering (12)4.12
    
    
    Form of Warrant to Purchase Common Stock issued to SC Capital Partners, LLC (12)4.13
    *
    
    Form of Convertible Promissory Note issued in the Fall 2008 Offering4.14
    *
    
    Form of One-Year Warrant issued in the Fall 2008 Offering4.15
    *
    
    Form of Three-Year Warrant issued in the Fall 2008 Offering4.16
    *
    
    Amended Form of Convertible Promissory Note issued in the Spring 2008 Offering4.17
    *
    
    Amended Form of One-Year Warrant issued in the Spring 2008 Offering4.18
    *
    
    Amended Form of Three-Year Warrant issued in the Spring 2008 Offering10.1
    
    
    Asset Purchase Agreement dated as of April 30, 2007 between the Company, BioLargo Life
Technologies, Inc., IOWC Technologies, Inc., and Kenneth R. Code(6)10.2
    
    
    Employment Agreement dated as of April 30, 2007 between the Company and Dennis Calvert(6)10.3
    
    
    Employment Agreement dated as of April 30, 2007 between the Company and Kenneth R.
Code(6)




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Exhibit No.
    
    Description of Exhibit10.4
    
    
    Assignment of USPTO Patent Application 11/516,958 to BioLargo Life Technologies, Inc. (6)10.5
    
    
    Assignment of USPTO Patent Application 11/516,960 to BioLargo Life Technologies, Inc. (6)10.6
    
    
    Assignment of USPTO Patent Application 60/850,976 to BioLargo Life Technologies, Inc. (6)10.7
    
    
    Assignment of USPTO Patent Application 60/873,763 to BioLargo Life Technologies, Inc. (6)10.8
    
    
    Assignment of USPTO Patent Application 60/881,061 to BioLargo Life Technologies, Inc. (6)10.9
    
    
    Assignment of USPTO Patent Application 60/900,374 to BioLargo Life Technologies, Inc. (6)10.10
    
    
    Promissory note related to professional fees(7)10.11
    
    
    BioLargo, Inc. 2007 Equity Incentive Plan(7)10.12
    
    
    Employment Agreement dated as of January 1, 2008 between BioLargo, Inc. and Joseph L.
Provenzano(8)10.13
    
    
    Consulting Agreement dated as of January 1, 2008 between BioLargo, Inc. and Jeffrey C.
Wallace(8)10.14
    
    
    Consulting Agreement dated as of January 1, 2008 between BioLargo, Inc. and Robert C.
Szolomayer(8)10.15
    
    
    Engagement Agreement dated February 1, 2008 between BioLargo, Inc. and Charles K.
Dargan, II
(9)10.16
    
    
    Consulting Agreement dated as of November 6, 2008 between BioLargo, Inc. and Howard
Isaacs (11)10.17
    
    
    Form of Warrant issued to Howard Isaacs (111)10.18
    
    
    Agreement dated as of August 19, 2008 by and among BioLargo, Inc., BioLargo Life
Technologies, Inc., and Ioteq IP, Ltd. and Ioteq, Inc. (12)10.19
    
    
    Sublease Agreement dated as of November 13, 2008 (12)10.20
    
    
    Engagement Extension Agreement dated as of February 1, 2009 between BioLargo, Inc. and
Charles K. Dargan, II. (13)21.1
    *
    
    List of Subsidiaries of the Registrant24.1
    *
    
    Power of Attorney (included on Signature Page)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 193431.2
    *
    
    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 193432.1
    *
    
    Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350.
 
 *
    
    Filed herewith.
    
    Management contract or compensatory plan, contract or arrangement(1)
    
    Incorporated herein by reference from the 10-KSB filed by the Company for the year ended
December 31, 2002.(2)
    
    Incorporated herein by reference from the Form 8-K filed by the Company on May 1, 2003.




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(3)
    
    Incorporated herein by reference from the Form 10-KSB filed by the Company for the year
ended December 31, 2003.(4)
    
    Incorporated herein by reference from the Form 10-QSB filed by the Company for the
three-month period ended March 31, 2005.(5)
    
    Incorporated herein by reference from the Form 8-K filed by the Company on December 4, 2006.(6)
    
    Incorporated herein by reference from the Form 10-KSB filed by the Company for the year
ended December 31, 2007.(7)
    
    Incorporated herein by reference from the Form 10-QSB for the three-month period ended
September 30, 2007.(8)
    
    Incorporated herein by reference from the Form 8-K filed by the Company on January 16, 2008.(9)
    
    Incorporated herein by reference from the Form 8-K filed by the Company on February 4, 2008.(10)
    
    Incorporated herein by reference from the Form 10-KSB filed by the Company for the year
ended December 31, 2007(11)
    
    Incorporated herein by reference from the Form 8-K filed by the Company on November 12,
2008.(12)
    
    Incorporated herein by reference from the Form 10-QSB for the three-month period ended
September 30, 2007.(13)
    
    Incorporated herein by reference from the Form 8-K filed by the Company on February 24,
2009.