# EDGAR Filing Document

**Accession Number:** 0000880242
**File Stem:** 0001437749-23-008876
**Filing Date:** 2023-3
**Character Count:** 424932
**Document Hash:** 492b7c32abd0a0d1a4d29bb2b569961c
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001437749-23-008876.hdr.sgml**: 20230331

**ACCESSION NUMBER**: 0001437749-23-008876

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 79

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230331

**DATE AS OF CHANGE**: 20230331

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** BIOLARGO, INC.
- **CENTRAL INDEX KEY:** 0000880242
- **STANDARD INDUSTRIAL CLASSIFICATION:** CHEMICALS & ALLIED PRODUCTS [2800]
- **IRS NUMBER:** 650159115
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-19709
- **FILM NUMBER:** 23789128

**BUSINESS ADDRESS:**
- **STREET 1:** 14921 CHESTNUT ST.
- **CITY:** WESTMINSTER
- **STATE:** CA
- **ZIP:** 92683
- **BUSINESS PHONE:** 888 400-2863

**MAIL ADDRESS:**
- **STREET 1:** 14921 CHESTNUT ST.
- **CITY:** WESTMINSTER
- **STATE:** CA
- **ZIP:** 92683

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** NUWAY MEDICAL INC
- **DATE OF NAME CHANGE:** 20030205

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** NUWAY ENERGY INC
- **DATE OF NAME CHANGE:** 20010815

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** LATIN AMERICAN CASINOS INC
- **DATE OF NAME CHANGE:** 19960520

blgo20221231_10k.htm

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**UNITED STATES** 

**SECURITIES AND EXCHANGE COMMISSION** 

**Washington, D.C. 20549** 

**FORM 10-K** 

**(Mark One)** 

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

**For the Fiscal Year ended December 31, 2022**

**OR** 

☐ **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** 

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| **BIOLARGO, INC.**  |
| **(Exact Name of registrant as specified in its Charter)**  |

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| **Delaware** | **65-0159115** |
| **(State or other jurisdiction**<br> **of incorporation or organization)** | **(IRS Employer**<br> **Identification No.)** |

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|:---|:---|
| **14921 Chestnut St., Westminster, CA**  | **92683**  |
| **(Address of principal executive offices)** | **(Zip Code)**  |

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**Registrant**'**s telephone number, including area code: (888) 400-2863**

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

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|:---|:---|:---|
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock | BLGO | OTCQB |

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Securities registered under Section 12(g) of the Exchange Act: none

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 ☐

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

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|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Large accelerated filer ☐ | Accelerated filer ☐ |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-accelerated filer ☒ | Smaller reporting company ☒ |
|  | Emerging growth company ☐ |

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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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common stock was last sold as of the last business day of the registrant's most recently completed second fiscal quarter was $40,752,460.

The number of shares outstanding of the issuer's class of common equity as of March 29, 2023, was 283,192,091. No preferred shares are issued or outstanding as of that date.

DOCUMENTS INCORPORATED BY REFERENCE

Information required by Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K are incorporated by reference from the Registrant's definitive Proxy Statement for its annual meeting of stockholders to be filed within 120 days of the end of the Registrant's fiscal year ended December 31, 2022.

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**TABLE OF CONTENTS** 

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|:---|:---|:---|
|  |  | **Page** |
| [**PART I.**](#parti) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 1. | [<u>Business</u>](#item1) | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 1A. | [Risk Factors](#item1a) | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 1B. | [Unresolved Staff Comments](#item1b) | 24 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 2. | [Properties](#item2) | 24 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 3. | [Legal Proceedings](#item3) | 24 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Item 4. | [Mine Safety Disclosures](#item4) | 24 |
| [**PART II.**](#partii) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 5. | [Market for Registrant's Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities](#item5) | 25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 6. | [Selected Financial Data](#item6) | 26 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 7. | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#item7) | 26 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 7A. | [Quantitative and Qualitative Disclosures About Market Risk](#item7a) | 33 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 8. | [Financial Statements and Supplementary Data](#item8) | 33 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 9. | [Changes In and Disagreements with Accountants on Accounting and Financial Disclosure](#item9) | 33 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 9A. | [Controls and Procedures](#item9a) | 34 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 9B. | [Other Information](#item9b) | 35 |
| [**PART III.**](#partiii) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 10. | [Directors, Executive Officers, and Corporate Governance](#item10) | 39 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 11. | [Executive Compensation](#item11) | 39 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#item12) | 39 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 13. | [Certain Relationships and Related Transactions, and Director Independence](#item13) | 39 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 14. | [Principal Accounting Fees and Services](#item14) | 39 |
| [**PART IV.**](#partiv) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item 15. | [Exhibits, Financial Statement Schedules](#item15) | 40 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [<u>Signatures</u>](#sigs) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [<u>Signatures</u>](#sigs) | 44 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [<u>Index to Financial Statements</u>](#index) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [<u>Index to Financial Statements</u>](#index) | F-1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [<u>Report of Independent Registered Public Accounting Firm</u>](#auditor) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [<u>Report of Independent Registered Public Accounting Firm</u>](#auditor) | F-2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [<u>Consolidated Financial Statements for the Years Ended December 31, 2022 and 2021</u>](#bs) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [<u>Consolidated Financial Statements for the Years Ended December 31, 2022 and 2021</u>](#bs) | F-3 |

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**PART I** 

**ITEM 1. BUSINESS** 

**USE OF FORWARD-LOOKING STATEMENTS IN THIS REPORT** 

This annual report on Form 10-K for the year ended December 31, 2022 (the "Annual Report") contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical fact, included in this Annual Report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management are forward-looking statements. These forward-looking statements include, but are not limited to, predictions regarding:

• 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.

You can identify these and other forward-looking statements by the use of words such as "anticipates," "believes," "estimates," "expects," "intends," "may," "plans," "projects," "will," "would" and similar expressions, or the negative of such terms, although not all forward-looking statements contain these identifying words. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements.

We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that the expectations underlying our forward-looking statements are reasonable, these expectations may prove to be incorrect, and all of these statements are subject to risks and uncertainties. Therefore, you should not place undue reliance on our forward-looking statements. We have included important risks and uncertainties in the cautionary statements included in this Annual Report; particularly, the section titled "Risk Factors" incorporated by reference herein. We believe these risks and uncertainties could cause actual results or events to differ materially from the forward-looking statements that we make. Should one or more of these risks and uncertainties materialize, or should underlying assumptions, projections or expectations prove incorrect, actual results, performance or financial condition may vary materially and adversely from those anticipated, estimated or expected. Our forward-looking statements do not reflect the potential impact of future acquisitions, mergers, dispositions, joint ventures or investments that we may make. We do not assume any obligation to update any of the forward-looking statements contained herein, whether as a result of new information, future events or otherwise, except as required by law. In the light of these risks and uncertainties, the forward-looking events and circumstances discussed in this report may not occur, and actual results could differ materially from those anticipated or implied in the forward-looking statements. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made.

When we refer in this report to "BioLargo," the "Company," "our Company," "we," "us" and "our," we mean BioLargo, Inc., and our subsidiaries, including BioLargo Life Technologies, Inc., which holds our intellectual property; ONM Environmental, Inc., which manufactures, markets, sells and distributes our odor and volatile organic compound control products; BioLargo Energy Technologies, Inc. ("BETI"), formed to commercialize our proprietary battery technology; our Canadian subsidiary BioLargo Water, Inc., which develops and markets our AOS water treatment technologies; BioLargo Engineering, Science & Technologies, LLC ("BLEST"), a professional engineering services division in Oak Ridge Tennessee; BioLargo Equipment Solutions & Technologies, Inc.; BioLargo Development Corp., which employs and provides benefits to our employees; and Clyra Medical Technologies, Inc. ("Clyra Medical"), which commercializes our technologies in the medical and dental fields. All subsidiaries are wholly owned, except for BETI, BLEST and Clyra Medical.

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**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 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.

Our revenues more than doubled in 2022 as compared with 2021, and that trend is continuing in the first quarter of 2023. The standout has been the pet odor product (brand name "Pooph") sold by our consumer packaged goods partners at Ikigai Marketing Works, whose sales contributed significantly to the record product revenues of our odor and VOC control products division ONM Environmental.

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

● The launch in major retailers of the Pooph pet odor control product by our consumer packaged goods partners at Ikigai.

● Our first PFAS removal project at a large industrial site (announced in 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.

● Expanded commercial roll-out of our PFAS treatment technology through a growing network of sales rep organizations.

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

● Our engineering work with Ultra Safe Nuclear.

● Our engineering services division's engagements as consultants to support large capital projects which are sponsored and or financed by the customers.

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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:

1. 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.

2. 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.

3. 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.

***Technology***

BioLargo has continually advanced its robust 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:

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| o | Removal of per- and polyfluoroalkyl substances (PFAS) and chlorides from drinking and ground water |

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| o | Micro-pollutant destruction and removal |

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| o | Legionella detection and water treatment solutions |

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| o | Minimum and zero liquid discharge systems (MLD/ZLD) |

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| o | Disinfection |

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| o | Electro-oxidation |

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● 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 33 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. 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 customers' needs.

***<u>Combating the PFAS Forever-Chemical Crisis</u>*** <u>–</u> ***<u>the AEC</u>***

One of the most significant and timely innovations in our portfolio is our per- and 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 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 EPA proposed new drinking water standards on March 14, 2023, limiting certain PFAS chemicals to four parts per trillion – a standard our AEC can meet. We believe these proposed rules will continue to push the market to find and adopt commercially viable 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, 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 the AEC is scalable to a commercial scale and 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.

In August 2022, our engineering division secured its first customer to engineer a comprehensive PFAS mitigation plan for an industrial site. The customer contract is for the first phase 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. We recently delivered a proposal for a system that will serve as a mobile commercial pilot, and scoping, preliminary design and budget for the building of the full-scale system.

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. We have secured channel partner agreements with several sales representative organizations ensuring 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), 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.

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We are also in negotiations with multiple prospective industrial and municipal customers to treat PFAS contaminated water. 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 minimizing the need for small scale field piloting, which can be expensive and time consuming.

***<u>ONM Environmental - Industrial Odor and VOC Solutions</u>***

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® 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), and are also 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 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).

***Consumer Packaged 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. 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. In late 2022, Ikigai launched the Pooph product in a limited number of Walmart retail stores, to Walmart stores nationwide in the second quarter of 2023. Our agreement with Ikigai grants them an exclusive license to sell the Pooph pet odor-control product, 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 expanding, their sales have increased, and correspondingly, their purchase of product from us has increased, such that for the year ended December 31, 2022, it comprised almost 50% of our total revenue. Ikigai management expects this trend of growth to continue as the product experiences increased adoption in retail stores around the country.

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***South Korean Joint Venture***

On February 12, 2020, we executed a "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 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 discussions to expand their license to allow for the sale of consumer products.

***<u>Full Service Environmental Engineering</u>***

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.

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 most of whom collectively worked together for almost 30 years and have experience in diverse engineering fields. 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. Many of the other team members are also former employees of CB&I and Shaw, with the exception of more recent staff hires. The team is highly experienced across multiple industries and are considered experts in their respective fields, 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 developed an extended network of trusted engineering subcontractors that assist in serving specific client projects as 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's patented technology that is able to reduce industrial wastewater discharge and therefore reduce wastewater discharge fees for customers. Garratt-Callahan is currently 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 could begin. Garratt-Callahan has identified multiple customer prospects, as has BioLargo, through its own marketing efforts. We remain confident that this innovation and partnership will find commercial success.

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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 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.

***Waste-to-Energy Conversion Plant Project***

In April 2022, our engineering subsidiary was hired by a Southern California based sustainable energy services company to conduct a comprehensive project plan (i.e., "feasibility study") for a waste-to-energy (WTE) conversion plant in South America – one of multiple projects in planning stages by the company. Our engineers completed the initial feasibility study and have delivered a proposal for the next phase of the project (front end engineering design, aka FEED). The client has also requested feasibility studies and a FEED proposal for WTE plants in Asia.

***<u>BioLargo Water and the Advanced Oxidation System</u>*** <u>–</u> ***<u>AOS</u>***

BioLargo Water is our wholly owned subsidiary located in Edmonton, Alberta, Canada, 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 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.

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.

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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.

***<u>Municipal Wastewater Treatment Pilot</u>*** <u>–</u>***<u>Montreal</u>***

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.

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, which was completed successfully.

***<u>Clyra Medical Technologies</u>***

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 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 product in three separate healthcare markets.

***<u>BioLargo Energy Technologies, Inc.</u>***

BioLargo acquired a proprietary sodium-sulfur battery technology and has formed and secured initial capital for a subsidiary – BioLargo Energy Technologies, Inc. ("BETI") – designed to address the 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.

BETI will lead the manufacturing, scale-up, and operations for the sodium-sulfur battery technology with the help of one of the technology's original developers, who has joined BETI. 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:

● This sodium-sulfur battery technology demonstrates increased safety, no runaway fire risks, and a more sustainable design – with no rare-earth elements – that is capable of being manufactured completely from the domestic supply chain.

● Unlike lithium-ion batteries, BioLargo's battery can charge and discharge completely, with no degradation of performance, ensuring virtually unlimited charge/discharge cycles, without self-discharge.

● BioLargo's battery technology also demonstrates increased energy efficiency and energy density in comparison to lithium-ion batteries, and a longer useful life expectancy of at least 10 years.

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BioLargo's battery uses common, inexpensive, domestically available materials, and through its unique design and manufacturing process, creates an energy storage solution that has higher energy density than lithium virtually unlimited charge/discharge cycles, stable and secure supply chain management, and which is far safer than lithium-ion batteries, the current dominant energy storage technology. While the concept of sodium-sulfur salt batteries is not new (a concept conceived more than 80 years ago), no known competing 'salt' battery can match the performance metrics of our battery.

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.

***<u>Conclusion</u>***

BioLargo has advanced its technologies and infrastructure to achieve a critical mass to capitalize on its commercial efforts and have a positive impact around the world with clean water, clean air, and infection control solutions. We have a scalable business model 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 unlock the value of our portfolio of disruptive technologies to advance our mission to "make life better" and continue creating shareholder value.

**Intellectual Property**

We have 25 patents issued, including 19 in the United States, and multiple pending. We believe these patents provide a foundation from which to continue building our patent portfolio, and we believe that our technology is sufficiently useful and novel that we have a reasonable basis upon which to rely on our patent protections. We also rely on trade secrets and technical know-how to establish and maintain additional protection of our intellectual property. As our capital resources permit, we expect to expand our patent protection as we continue to refine our inventions as well as make new discoveries. See the detailed discussion below of our patent portfolio.

We regard our intellectual property as critical to our ultimate success. Our goal is to obtain, maintain and enforce patent protection for our products and technologies in geographic areas of commercial interest and to protect our trade secrets and proprietary information through laws and contractual arrangements.

We incurred approximately $1,319,000 in expense related to our research and development activities in the year ended December 31, 2022, and $1,367,000 in the year ended December 31, 2021.

The description of our intellectual property, at present, is as follows:

***U.S. Patents***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● U.S. Patent 11,565,947 issued January 31, 2023, related to the mitigation of microbe buildup within a potable water supply system, incorporating the use of certain BioLargo technologies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● U.S. Patent 11,457,632, issued October 5, 2022, relating to liquid antimicrobial disinfectant compositions for treatment of coronaviruses and SARS-CoV-2 on skin and surfaces, which have extended antimicrobial and antiviral activity for more than 24 hours, are suitable for personal, clinical and surgical use, and are safe to skin, mucous membranes and wounds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● U.S. Patent 10,654,731, issued on May 19, 2020, 10,238,990, issued on March 26, 2019, and 10,051,866, issued on August 21, 2018, which protect our AOS system.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● U.S. Patent 10,046,078, issued on August 14, 2018, relating to the misting systems that eliminate odors in waste transfer stations, landfills, and other waste handling facilities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● U.S. Patent 9,883,653 issued on February 6, 2018, which encompasses a litter composition used in the absorption of animal wastes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● US Patent 9,414,601 granted August 16, 2016, 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● U.S. Patent 8,846,067, issued on September 30, 2014, which encompasses a method of treating a wound or burn on tissue to reduce microbe growth about a wound comprising applying an antimicrobial composition to the wound or burn on tissue using a proprietary stable iodine gel or liquid. This patent covers our technology as used in products being developed by our subsidiary, Clyra Medical Technologies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● U.S. Patent 8,757,253, issued on June 24, 2014, relating to the moderation of oil extraction waste environments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● U.S. Patent 8,734,559, issued on May 27, 2014, relating to the moderation of animal waste environments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● U.S. Patent 8,679,515 issued on March 25, 2014, titled "Activated Carbon Associated with Alkaline or Alkali Iodide," which provides protection for our BioLargo AOS filter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● U.S. Patent 8,642,057, issued on February 4, 2014, titled "Antimicrobial and Antiodor Solutions and Delivery Systems," relating to our liquid antimicrobial solutions, including our gels, sprays and liquids imbedded into wipes and other substrates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● U.S. Patent 8,574,610, issued on November 5, 2013, relating to flowable powder compositions, including our cat litter additive.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● U.S. Patent 8,257,749, issued on September 4, 2012, relating to the use of our 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● U.S. Patent 8,226,964, issued on July 24, 2012, relating to use of our 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● U.S. Patent 8,021,610, issued on September 20, 2011, titled "System providing antimicrobial activity to an environment," relating to the reduction of microbial content in a land mass. Related to this patent are patents held in Canada and the European Union.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● U.S. Patent 7,943,158, issued on May 17, 2011, titled "Absorbent systems providing antimicrobial activity," relating to the reduction of microbial content by providing molecular iodine to stabilized reagents.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● U.S. Patent 7,867,510, issued on January 11, 2011, titled "Material having antimicrobial activity when wet," relating to articles for delivering stable iodine-generating compositions.

***Pending Patent Applications***

Subject to adequate financing, we intend to continue to expand and enhance our suite of intellectual property through ongoing focus on product development, new intellectual property development and patent applications, and further third-party testing and validations for specific areas of focus for commercial exploitation. We currently anticipate that additional patent applications will be filed during the next 12 months with the USPTO and the PCT, although we are uncertain of the cost of such patent filings, which will depend upon the number of such applications prepared and filed. The expenses associated with seeking patent rights in multiple foreign countries is expensive and will require substantial ongoing capital resources. However, we cannot give any assurance that adequate capital will be available. Without adequate capital resources, we will be forced to abandon patent applications and irrevocably lose rights to our technologies.

**Our Company**

BioLargo, Inc. is a corporation organized under the laws of the state of Delaware. Our common stock is quoted on the OTC Markets OTCQB "Venture Marketplace" under the trading symbol "BLGO".

Our corporate offices are located at 14921 Chestnut St., Westminster, California 92683. We have a research facility and offices at the University of Alberta in Canada, and our engineering team is located at 105 Fordham Road in Oak Ridge, Tennessee. Our telephone number is (888) 400-2863. We operate through multiple subsidiary entities.

Our principal corporate website is www.BioLargo.com. We also maintain a blog at www.BioLargo.blogspot.com. Websites concerning our subsidiaries are www.ONMEnvironmental.com, www.CupriDyne.com<u>,</u> www.ClyraMedical.com, www.BioLargoWater.com<u>,</u> and <u>www.BioLargoEngineering.com</u>. The information on our websites and blog are not, and shall not be deemed to be, a part of this Annual Report on Form 10-K.

**Executive Officers** 

As of December 31, 2022, and as the date of this report, our executive officers were:

● Dennis P. Calvert: Chief Executive Officer, President and Chairman of the Board

● Charles K. Dargan II: Chief Financial Officer

● Joseph L. Provenzano: Corporate Secretary and Vice President of Operations

Our operational subsidiaries are led by:

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| | |
|:---|:---|
| **<u>Subsidiary</u>** | **<u>President</u>** |
| ONM Environmental, Inc. | Joseph L. Provenzano |
| BioLargo Engineering, Science & Technologies, LLC | Randall Moore |
| BioLargo Water, Inc. (Canada) | Richard Smith |
| Clyra Medical Technologies, Inc. | Steven V. Harrison |

---

**Employees** 

As of March 29, 2023, we had 33 employees, of which 32 were full-time. Our employees including professional engineers, masters of engineering, and PhDs, as well as sales, support and administrative personnel. We also utilize consultants and independent contractors on an as-needed basis who provide certain specified services, such as professional engineers used from time to time by our engineering group in Tennessee.

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| | |
|:---|:---|
| **ITEM 1A.** | **RISK FACTORS**  |

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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 following cautionary discussion of risks, uncertainties and assumptions relevant to our business includes 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.

**Risks relating to our Financial Condition**

***We have incurred net losses on an annual basis since our inception and may continue to experience losses and negative cash flow in the future.***

We have not yet generated enough revenue or gross profit from operations to fund our expenses, and, accordingly, we have incurred net losses every year since our inception. We recorded net loss of $5,132,000 for the year ended December 31, 2022, and a net loss of $6,894,000 for the year ended December 31, 2021. At December 31, 2022, we had $1,851,000 cash and cash equivalents. We have funded the majority of our activities through the issuance of equity securities, both at corporate level and through direct third-party investments in our subsidiaries. Although we are devoting more energy and money to our sales and marketing activities, and our revenues have increased year-over-year for the last eight years, we continue to anticipate net losses and negative cash flow for the foreseeable future. Our ability to reach positive cash flow depends on many factors, including our ability to fund sales and marketing activities, the rate of client adoption of our products, and the efforts and success of third parties, such as Ikigai Marketing Works that sells an odor-control product for pets based on our technology. We may continue to incur losses and experience negative cash flows from operations for the foreseeable future. If we cannot achieve positive cash flow from operations or net income, we may need to raise additional capital on acceptable terms.

***Our cash requirements are significant. We will continue to require additional financing to sustain our operations and without it we may not be able to continue operations.***

Our cash requirements and expenses continue to be significant. For the year ended December 31, 2022, we used $2,762,000 cash in operations, and at December 31, 2022, we had working capital of $1,587,000, and current assets of $3,153,000. In order to become profitable, we must significantly increase our revenues. Although our revenues are increasing through sales of our private-label products and from our engineering division, we expect to continue to use cash for the foreseeable future as it becomes available, and expect to continue to need to sell our securities to fund operations.

Our auditor's report for the year ended December 31, 2022, includes an explanatory paragraph in their audit opinion stating that our recurring losses from operations and working capital deficiency raise substantial doubt about our ability to continue as a going concern. We do not currently have sufficient financial resources to fund our operations or those of our subsidiaries. Therefore, we need additional financing to continue these operations.

We have relied on private securities offerings, as well as sales of stock to Lincoln Park Capital Fund, LLC ("Lincoln Park"; see Part II, Item 9B), to provide cash needed to close the gap between operational revenue and expenses. Our ability to rely on private financing may change if the United States enters a recession, if the Dow Industrial Average or Nasdaq composite decline significantly, if interest rates rise, if real estate values decline, if international events affect the global economy, or many other factors that impact private investors' willingness to invest in high-risk companies. Thus, while we have been able to rely on private investments in the past, we may not be able to do so in the near future.

During the year ended December 31, 2022, we relied on our financing agreement with Lincoln Park to sell shares and raise capital, as well as other private investors, and received approximately $2,600,000 in gross proceeds. These sales of our common stock are dilutive to our existing stockholders. We intend to continue these financing activities, and thus intend to continue to dilute existing and future stockholders.

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***Our ability to access capital markets could be limited.***

From time-to-time, we may need to access capital markets to obtain long-term and short-term financing. However, our ability to access capital markets could be limited or adversely affected by, among other things, the performance of the stock market in general, interest rates, our asset base, our track record in the industries in which we operate, our financial condition, and the health or market perceptions of the US or global economy. In addition, many of the factors that affect our ability to access capital markets, including the liquidity of the overall capital markets in general and the lack of liquidity for our common stock and the state of the economy, among others, are outside of our control. No assurance can be given that we will be able to access capital markets on terms acceptable to us when required to do so, which could adversely affect our business, financial condition and results of operations.

***We expect to incur future losses and may not be able to achieve profitability.***

Although we are generating revenue from the sale of our products and from providing services, and we expect to generate revenue from new products we are introducing, and eventually from other license or supply agreements, we anticipate net losses and negative cash flow to continue for the foreseeable future until our products are expanded in the marketplace and they gain broader acceptance by resellers and customers. Our current level of sales is not sufficient to support the financial needs of our business. We cannot predict when or if sales volumes will be sufficiently large to cover our operating expenses. We intend to expand our marketing efforts of our products as financial resources are available, and we intend to continue to expand our research and development efforts. Consequently, we will need to generate significant additional revenue or seek additional financings to fund our operations. This has put a proportionate corresponding demand on capital. Our ability to achieve profitability is dependent upon our efforts to deliver a viable product and our ability to successfully bring it to market, which we are currently pursuing. Although our management is optimistic that we will succeed in licensing our technology, we cannot be certain as to timing or whether we will generate sufficient revenue to be able to operate profitably. If we cannot achieve or sustain profitability, then we may not be able to fund our expected cash needs or continue our operations. If we are not able to devote adequate resources to promote commercialization of our technology, then our business plans will suffer and may fail.

Because we have limited resources to devote to sales, marketing and licensing efforts with respect to our technology, any delay in such efforts may jeopardize future research and development of technologies and commercialization of our technology. Although our management believes that it can finance commercialization efforts through sales of our securities and possibly other capital sources, if we do not successfully bring our technology to market, our ability to generate revenues will be adversely affected.

***Some of our revenues are dependent on the marketing efforts of third parties.***

We manufacture and sell private-labeled odor-control products to third parties who market those products to consumers and retailers. A significant amount of our revenue in the year ended December 30, 2022 (almost 50%), was from sales to one such third party. We have no control over that third-party's marketing budget or sales activities. If they curtail their marketing efforts, currently through national television advertising, our sales to them could decrease. If they discontinue their marketing campaign, our sales to them would be significantly reduced.

***A significant portion of our revenue is concentrated with a select number of customers.***

In the last year, almost 50% of our total revenue was from one customer, and an addition 10% from one other customer. In the prior year, three customers made up approximately 36% of our total revenue. A disruption in our relationship with any of these customers could adversely affect our business. Our customers' demand for our products may fluctuate due to factors beyond our control, including their willingness to spend money on advertising, the success of such advertising, and their success of selling to retail accounts. Our inability to meet our customers' requirements or to qualify our products with them could adversely impact our revenue. The loss of, or restrictions on our ability to sell to, one or more of our major customers, or any significant reduction in orders from, or a shift in product mix by, customers could have a material adverse effect on our business, results of operations, or financial condition.

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***Our revenue growth rate may not be indicative of future performance and may slow over time.***

Although our revenues have grown over the last several years and in recent quarters, our revenue growth rate may slow over time for a number of reasons, including increasing competition, market saturation, slowing demand for our products and services, increasing regulatory costs and challenges, the impact of COVID-19, and failure to capitalize on growth opportunities.

***We do not have contracts with customers that require the purchase of a minimum amount of our products.***

Very few of our customers provide us with firm, long-term or short-term volume purchase commitments. As a result, we could have periods during which we have no or limited orders for our products but will continue to have fixed costs. We may not be able to find new customers in a timely manner if we experience no or limited purchase orders. Periods of no or limited purchase orders for our products would adversely affect our business, financial condition and results of operations.

***Supply Chain Challenges***

As we emerge with new products like our AEC and AOS water treatment systems, and battery storage systems, we will likely face supply chain challenges, including supply and pricing volatility, that will be beyond our control that might include steel, electrodes, membranes, electronic components (like chips), raw chemicals. We predict that at some level we may face delays and or extended delivery times for systems sold to clients and that could lead to delays in our anticipated growth.

***We need to outsource and rely on third parties for the manufacture of the chemicals, material components or delivery apparatus used in our technology and products, and part of our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.***

We do not have the required financial and human resources or capability to manufacture the chemicals necessary to make our odor control products. Our business model calls for the outsourcing of the manufacture of these chemicals in order to reduce our capital and infrastructure costs as a means of potentially improving our financial position and the profitability of our business. Accordingly, we must enter into agreements with other companies that can assist us and provide certain capabilities, including sourcing and manufacturing, which we do not possess. We may not be successful in entering into such alliances on favorable terms or at all. Even if we do succeed in securing such agreements, we may not be able to maintain them. Furthermore, any delay in entering into agreements could delay the development and commercialization of our technology or reduce its competitiveness even if it reaches the market. Any such delay related to such future agreements could adversely affect our business. While we have been able to secure materials and supplies like plastic containers through the COVID-19 crisis, we have not assurances that our ability to purchase in large quantities on a continual basis.

***If any party to which we have outsourced certain functions fails to perform its obligations under agreements with us, the commercialization of our technology could be delayed or curtailed.***

To the extent that we rely on other companies to manufacture the chemicals used in our technology, our products, or sell or market products incorporating our technology, we will be dependent on the timeliness and effectiveness of their efforts. If any of these parties does not perform its obligations in a timely and effective manner, the commercialization of our technology could be delayed or curtailed because we may not have sufficient financial resources or capabilities to continue such efforts on our own.

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***We rely on a small number of key supply ingredients in order to manufacture our odor control products, including CupriDyne Clean and our private-label products.***

The raw ingredients used to manufacture our liquid odor control products are readily available from multiple suppliers. However, commodity prices for these ingredients can vary significantly, and the margins that we are able to generate could decline if prices rise. If our manufacturing costs rise significantly, we may be forced to raise the prices for our products, which may reduce their acceptance in the marketplace. Given the current delays in supply chain delivery on a global scale, we are anticipating and developing strategies to manage the expected increases in our cost of raw goods and potential supply limitations which could impact our business and results of operations.

***If our technology or products incorporating our technology do not gain market acceptance, it is unlikely that we will become profitable.***

The potential markets for products into which our technology can be incorporated are rapidly evolving, and we have many successful competitors including some of the largest and most well-established companies in the world. The commercial success of products incorporating our technology will depend on the adoption of our technology by commercial and consumer end users in various fields.

Market acceptance may depend on many factors, including:

● the willingness and ability of consumers and industry partners to adopt new technologies from a company with little or no history in the industry;

● our ability to convince potential industry partners and consumers that our technology is an attractive alternative to other competing technologies;

● our ability to license our technology in a commercially effective manner;

● our ability to continue to fund operations while our products move through the process of gaining acceptance, before the time in which we are able to scale up production to obtain economies of scale; and

● our ability to overcome brand loyalties.

If products incorporating our technology do not achieve a significant level of market acceptance, then demand for our technology itself may not develop as expected, and, in such event, it is unlikely that we will become profitable.

***If we are not able to manage our anticipated growth effectively, we may not become profitable.***

We anticipate that expansion will continue to be necessary to address potential market opportunities for our technologies and our products. Our existing infrastructure is limited. While we believe our current manufacturing processes as well as our office and warehousing provide the basic resources to expand to sales of more than $2 million per month, our infrastructure will need more staffing to support manufacturing, customer service, administration as well as sales/account executive functions. There can be no assurance that we will have the financial resources to create new infrastructure, or that any such infrastructure will be sufficiently scalable to manage future growth, if any. There also can be no assurance that, if we invest in additional infrastructure, we will be effective in expanding our operations or that our systems, procedures or controls will be adequate to support such expansion. In addition, we will need to provide additional sales and support services to our partners if we achieve our anticipated growth with respect to the sale of our technology for various applications. Failure to effectively manage an increase in customer demands could result in a material adverse effect on customer satisfaction, our ability to meet our contractual obligations, and our operating results.

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***Some of the products incorporating our technology will require regulatory approval.***

The products in which our technology may be incorporated have both regulated and non-regulated applications. The regulatory approvals for certain applications may be difficult, impossible, time consuming and/or expensive to obtain. While our Company management believes such approvals can be obtained for the applications contemplated, until those approvals from the FDA or the EPA or other regulatory bodies, at the federal and state levels, as may be required are obtained, we may not be able to generate commercial revenues for regulated products. Certain specific regulated applications and their use require highly technical analysis and additional third-party validation and will require regulatory approvals from organizations like the FDA. Certain applications may also be subject to additional state and local agency regulations, increasing the cost and time associated with commercial strategies. Additionally, most products incorporating our technology that may be sold in the European Union ("EU") will require EU and possibly individual country's regulatory approval. All such approvals, including additional testing, are time-consuming, expensive and do not have assured outcomes of ultimate regulatory approval.

***Our internal controls are not effective.***

We have determined that our disclosure controls and procedures and our internal controls over financial reporting are currently not effective. The lack of effective internal controls, has not yet, but could in the future, materially adversely affect our financial condition and ability to implement our business plan, and the accuracy of our financial statements. As more financial resources become available, we need to invest in additional personnel to better manage the financial reporting processes.

***We may not be able to attract or retain qualified senior personnel.***

We believe we are currently able to manage our current business with our existing management team. However, as we expand the scope of our operations, we will need to obtain the full-time services of additional senior management and other personnel. Competition for highly-skilled personnel is intense, and there can be no assurance that we will be able to attract or retain qualified senior personnel. Our failure to do so could have an adverse effect on our ability to implement our business plan. As we add full-time senior personnel, our overhead expenses for salaries and related items will increase from current levels and, depending upon the number of personnel we hire and their compensation packages, these increases could be substantial.

***If we lose our key personnel or are unable to attract and retain additional personnel, we may be unable to achieve profitability.***

Our future success is substantially dependent on the efforts of our senior management, particularly Dennis P. Calvert, our president and chief executive officer. The loss of the services of Mr. Calvert or other members of our senior management may significantly delay or prevent the achievement of product development and other business objectives. Because of the scientific nature of our business, we heavily rely on our ability to attract and retain qualified marketing, scientific and technical personnel. There is intense competition among specialized and technologically-oriented companies for qualified personnel in the areas of our activities. If we lose the services of, or do not successfully recruit, key marketing, scientific and technical personnel, then the growth of our business could be substantially impaired. At present, we do not maintain key man insurance for any of our senior management, although management is evaluating the potential of securing this type of insurance in the future as may be available.

***Nondisclosure agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.***

In order to protect our proprietary technology and processes, we rely in part on nondisclosure agreements with our employees, potential licensing partners, potential manufacturing partners, testing facilities, universities, consultants, agents and other organizations to which we disclose our proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position. Since we rely on trade secrets and nondisclosure agreements, in addition to patents, to protect some of our intellectual property, there is a risk that third parties may obtain and improperly utilize our proprietary information to our competitive disadvantage. We may not be able to detect unauthorized use or take appropriate and timely steps to enforce our intellectual property rights.

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***We may become subject to product liability claims.***

As a business that manufactures and markets products for use by consumers and institutions, we may become liable for any damage caused by our products, whether used in the manner intended or not. Any such claim of liability, whether meritorious or not, could be time-consuming and/or result in costly litigation. Although we maintain general liability insurance, our insurance may not cover potential claims of the types described above and may not be adequate to indemnify for all liabilities that may be imposed. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage could harm our business and operating results, and you may lose some or all of any investment you have made, or may make, in our company.

***Litigation or the actions of regulatory authorities may harm our business or otherwise distract our management.***

Substantial, complex or extended litigation could cause us to incur major expenditures and distract our management. For example, lawsuits by employees, former employees, investors, stockholders, partners, customers or others, or actions taken by regulatory authorities, could be very costly and substantially disrupt our business. As a result of our financing activities over time, and by virtue of the number of people that have invested in our company, we face increased risk of lawsuits from investors. Such lawsuits or actions could from time to time be filed against our company and/or our executive officers and directors. Such lawsuits and actions are not uncommon, and we cannot assure you that we will always be able to resolve such disputes or actions on terms favorable to our company.

***If we suffer negative publicity concerning the safety or efficacy of our products, our sales may be harmed.***

If concerns should arise about the safety or efficacy of any of our products that are marketed, regardless of whether or not such concerns have a basis in generally accepted science or peer-reviewed scientific research, such concerns could adversely affect the market for those products. Similarly, negative publicity could result in an increased number of product liability claims, whether or not those claims are supported by applicable law.

***Any revenues that we may earn in the future are unpredictable, and our operating results are likely to fluctuate from quarter to quarter.***

We believe that our future operating results will fluctuate due to a variety of factors, including:

● delays in product development by us or third parties;

● market acceptance of products incorporating our technology;

● changes in the demand for, and pricing of, products incorporating our technology;

● competition and pricing pressure from competitive products; and

● expenses related to, and the results of, proceedings relating to our intellectual property.

We expect our operating expenses will continue to fluctuate significantly in 2023 and beyond, as we continue our research and development and increase our marketing and licensing activities. Although we expect to generate revenues from licensing our technology in the future, revenues may decline or not grow as anticipated, and our operating results could be substantially harmed for a particular fiscal period. Moreover, our operating results in some quarters may not meet the expectations of stock market analysts and investors. In that case, our stock price would most likely decline.

***The licensing of our technology or the manufacture, use or sale of products incorporating our technology may infringe on the patent rights of others, and we may be forced to litigate if an intellectual property dispute arises.***

If we infringe or are alleged to have infringed another party's patent rights, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not obtain a license, do not successfully defend an infringement action or are unable to have infringed patents declared invalid, we may:

● incur substantial monetary damages;

● encounter significant delays in marketing our current and proposed product candidates;

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● 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

Parties making such claims may be able to obtain injunctive relief that could effectively block our company's ability to further develop or commercialize our current and proposed product candidates in the United States and abroad and could result in the award of substantial damages. Defense of any lawsuit or failure to obtain any such license could substantially harm our company. Litigation, regardless of outcome, could result in substantial cost to, and a diversion of efforts by, our company.

***Our patents are expensive to maintain, our patent applications are expensive to prosecute, and thus we are unable to file for patent protection in many countries.***

Our ability to compete effectively will depend in part on our ability to develop and maintain proprietary aspects of our technology and either to operate without infringing the proprietary rights of others or to obtain rights to technology owned by third parties. Pending patent applications relating to our technology may not result in the issuance of any patents or any issued patents that will offer protection against competitors with similar technology. We must employ patent attorneys to prosecute our patent applications both in the United States and internationally. International patent protection requires the retention of patent counsel and the payment of patent application fees in each foreign country in which we desire patent protection, on or before filing deadlines set forth by the International Patent Cooperation Treaty ("PCT"). We therefore choose to file patent applications only in foreign countries where we believe the commercial opportunities require it, considering our available financial resources and the needs for our technology. This has resulted, and will continue to result, in the irrevocable loss of patent rights in all but a few foreign jurisdictions.

***We are subject to risks related to future business outside of the United States.***

Over time, we may develop business relationships outside of North America, and as those efforts are pursued, we will face risks related to those relationships such as:

● 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;

● restrictions on repatriating foreign profits back to the United States;

● greater difficulty collecting accounts receivable and longer payment cycles;

● less favorable intellectual property laws, and the lack of intellectual property legal protection;

● regulatory requirements;

● unfamiliarity with foreign laws and regulations; and

● changes in labor conditions and difficulties in staffing and managing international operations.

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***The volatility of certain raw material costs may adversely affect operations and competitive price advantages for products that incorporate our technology.***

Most of the chemicals and other key materials that we use in our business, such as minerals, fiber materials and packaging materials, are neither generally scarce nor price sensitive, but prices for such chemicals and materials can be cyclical. Supply and demand factors, which are beyond our control, generally affect the price of our raw materials. We try to minimize the effect of price increases through production efficiency and the use of alternative suppliers, but these efforts are limited by the size of our operations. If we are unable to minimize the effects of increased raw material costs, our business, financial condition, results of operations and cash flows may be materially adversely affected.

***Certain of our product sales historically have been highly impacted by fluctuations in seasons and weather.***

Industrial odor control products have proven highly effective in controlling volatile organic compounds that are released as vapors produced by decomposing waste material. Such vapors are produced with the highest degree of intensity in temperatures between 40 degrees Fahrenheit (5 degrees Celsius) and 140 degrees Fahrenheit (60 degrees Celsius). When weather patterns are cold or in times of precipitation, our clients are less prone to use our odor control products, presumably because such vapors are less noticeable or, in the case of precipitation, can be washed away or altered. This leads to unpredictability in use and sales patterns for, especially, our CupriDyne Clean product line which accounts for over one-half our total sales.

***If our battery does not gain market acceptance, it is unlikely that we will become profitable.***

The commercial success of our sodium-sulfur battery will depend on the adoption of our technology by commercial and consumer end users in various fields.

Market acceptance may depend on many factors, including:

● the willingness and ability of consumers and industry partners to adopt new technologies from a company with little or no history in the industry;

● our ability to convince potential industry partners and consumers that our technology is an attractive alternative to other competing technologies;

● our ability to license our technology in a commercially effective manner;

● our ability to continue to fund operations while our products move through the process of gaining acceptance, before the time in which we are able to scale up production to obtain economies of scale; and

● our ability to overcome brand loyalties.

If products incorporating our technology do not achieve a significant level of market acceptance, then demand for our technology itself may not develop as expected, and, in such event, it is unlikely that we will become profitable.

***There may be battery technologies that we are not aware of, and some of them may be subject to patent applications.***

We may not be aware of technologies that are similar or identical to our sodium-sulfur battery. We may not be aware of patent applications that have been filed that may include claims that are similar or identical to portions of our molten salt battery or our manufacturing process. No assurance can be made that our sodium-sulfur battery, or our proprietary manufacturing process, does not infringe on the intellectual property rights of third parties. If our technology or manufacturing process infringes on the intellectual property rights of third parties, we may be subject to litigation, or required to pay royalties, to such third parties, and our results of operations and financial condition may be adversely affected.

***We expect to face strong competition for our products from a growing list of established and new competitors.***

The worldwide battery market is highly competitive today and we expect it will become even more so in the future. For example, Tesla is one of the largest companies in the United States as measured by its market capitalization, and sells lithium-ion batteries for grid-scale applications, commercial and home storage, as well as in its vehicles. There are many other well capitalized and established companies that manufacture and/or sell batteries. Many of the companies have significantly greater or better-established resources than we do to devote to the design, development, manufacturing, distribution, promotion, sale and support of their products. This competition may prevent us from entering the marketplace, or if we do, may prevent us from establishing market share.

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***There may not be a market for our sodium-sulfur battery.***

While we believe that there will be customer demand for our sodium-sulfur battery provided that we are able to prove its competitive advantages, there is no assurance that there will be any market acceptance of it, or any broad market acceptance. There also may not be broad market acceptance of our sodium-sulfur battery if competitors offer batteries which are preferred by prospective customers. In such event, there may be a material adverse effect on the company's results of operations and financial condition, and the company may not be able to achieve its goals.

***Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.***

Our operations, and those of our contractors and consultants, could be subject to pandemics, earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics, acts of terrorism, acts of war and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. We rely in part on third-party manufacturers to produce and process our products or the raw materials used to make our products. Our ability to obtain supplies of our products or raw materials could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster, pandemics, epidemics, or other business interruption, including the recent novel strain of coronavirus (SARS-CoV-2 aka COVID-19) that originally surfaced in Wuhan, China in December 2019. The extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain 2 or treat its impact, among others. Our corporate headquarters and offices of ONM are in Southern California near major earthquake faults and fire zones. Our operations and financial condition could suffer in the event of a major earthquake, fire or other natural disaster.

**General Risks**

***Although it appears to be winding down, the COVID-19 coronavirus pandemic could still result in significant disruptions to our clients and/or supply chain which could have a material adverse effect on our business and revenues.***

Although the governmental emergency declarations in various states are ending, the COVID-19 pandemic is still evolving and much of its impact remains unknown. It is impossible to predict the impact it or any future respiratory disease or other pandemic may have on the development of our business and on our revenues in the future.

The severity of the coronavirus pandemic could also make access to our existing supply chain difficult or impossible by delaying the delivery of key raw materials used in our product candidates and therefore delay the delivery of our products. Any of these results could materially impact our business and have an adverse effect on our business.

***Because of high inflation and increased Federal Reserve interest rates in response, and world events, the effect on the capital markets and the economy is uncertain, and we may have to deal with a recessionary economy and economic uncertainty.***

Certain events have affected the global and United States economy including continued inflation, Federal Reserve interest rate increases in response, substantial increases in the prices of oil and gas, dramatic declines in the capital markets, and world events such as Russia's invasion of Ukraine and other world power's developing response to the invasion. The duration of Russia's war and its impact are at best uncertain. The economy appears to be headed into a recession with uncertain and potentially severe impacts upon public companies and us. We cannot predict how this will affect the market for our products and services, but the impact may be adverse.

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The global banking system has recently come under increased pressure and uncertainty about every bank's ability to maintain solvency in times of crisis and when a 'run on the bank' occurs. While the US Government has taken action to stabilize the current banking situation, it is not possible to predict the future and the psychology of the market can be fickle and unpredictable. Our company is not exposed to the risk associated with smaller regional banks like Silicon Valley Bank, but we do maintain balances in excess of the $250,000 FDIC insurance level, at large money center banks and as such should the actions taken by the US Government fail to mitigate the situation, impacts could extend to the largest banks in the world, including ours.

***A recession in the United States may affect our business.***

If the U.S. economy were to contract into a recession or depression, our existing clients, and potential future clients, may divert their resources to other goods and services, and our business may suffer.

***The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business.***

The federal securities laws require us to comply with SEC reporting requirements relating to our business and securities following the effectiveness of the registration statement of which this prospectus is a part. Complying with these reporting and other regulatory obligations is time-consuming and will result in increased costs to us which could have a negative effect on our financial condition or business. As a public company, we are subject to the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act. These requirements may place a strain on our systems and resources. We will be required to file annual, quarterly and current reports with the SEC disclosing certain aspects and developments of our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we will need to commit significant resources, hire additional executive officers and personnel and provide for additional management oversight. We intend to implement additional procedures and processes for the purpose of addressing the standards and requirements applicable to SEC reporting companies. Sustaining our growth will also require us to commit additional managerial, operational and financial resources to identifying competent professionals to join our Company and to maintain appropriate operational and financial systems to adequately support our intended expansion. These activities may divert management's attention from other business concerns, which could have a material adverse effect on our results of operations, financial condition or business.

**Risks Relating to our Common Stock**

***If we are not successful, you may lose your entire investment.***

Prospective investors in our company should be aware that if we are not successful in our business, their entire investment could become worthless. Even if we are successful, we can provide no assurances that investors will derive a profit from their investment. We need additional capital to meet our obligations and achieve our business objectives, and we cannot guarantee we will be successful in locating additional required capital as and when needed or that any such amounts will be sufficient for us to establish material revenue growth. If we are not successful, you may lose your entire investment.

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***The sale or issuance of our common stock to Lincoln Park may cause dilution, and the sale of the shares of common stock acquired by Lincoln Park, or the perception that such sales may occur, could cause the price of our common stock to fall.***

On December 13, 2022, we entered into a Purchase Agreement with Lincoln Park (see Part II, Item 9B), 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, noted above in our Risks Related to our Business. We generally have the right to control the timing and amount of any sales of our shares to Lincoln Park. Sales of our common stock, if any, to Lincoln Park will depend on market conditions and other factors to be determined by us. We may ultimately decide to sell to Lincoln Park all, some or none of the shares of our common stock that may be available for us to sell pursuant to the LPC Agreement. If and when we do sell shares to Lincoln Park, after Lincoln Park has acquired the shares, Lincoln Park may resell all, some or none of those shares at any time or from time to time in its discretion. Therefore, sales to Lincoln Park by us could result in substantial dilution to the interests of other holders of our common stock, as well as sales of our stock by Lincoln Park into the open market causing reductions in the price of our common stock. Additionally, the sale of a substantial number of shares of our common stock to Lincoln Park, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise desire to effect sales.

***Our common stock is thinly traded and largely illiquid.***

Our stock is currently quoted on the OTC Markets (OTCQB). Being quoted on the OTCQB has made it more difficult to buy or sell our stock and from time to time has led to a significant decline in the frequency of trades and trading volume. Continued trading on the OTCQB will also likely adversely affect our ability to obtain financing in the future due to the decreased liquidity of our shares and other restrictions that certain investors have for investing in OTCQB traded securities. While we intend to seek listing on the Nasdaq Stock Market ("Nasdaq") or another national stock exchange when our company is eligible, there can be no assurance when or if our common stock will be listed on Nasdaq or another national stock exchange.

***The market price of our stock is subject to volatility.***

Our stock price has been and is likely to continue to be volatile. As a result of this volatility, investors may not be able to sell their common stock at or above their purchase price. The market price of our common stock and warrants may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

● Because our stock is thinly traded, its price can change dramatically over short periods, even in a single day. An investment in our stock is subject to such volatility and, consequently, is subject to significant risk. The market price of our common stock could fluctuate widely in response to many factors, including:

● 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;

● the size of our public float;

● short sales, hedging, and other derivative transactions involving our common stock;

● sales of large blocks of our common stock including sales by our executive officers, directors, and significant stockholders, including Lincoln Park;

● general economic, political and market conditions and other factors; and

● the occurrence of any of the risks described herein.

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***You may have difficulty selling our stock because it is deemed a*** "***penny stock***" ***and not quoted on a national exchange.***

Because our common stock is not quoted or listed on a national securities exchange, if the trading price of our common stock remains below $5.00 per share, which we expect for the foreseeable future, trading in our common stock will be subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which require additional disclosure by broker-dealers in connection with any trades involving a stock defined as a penny stock (generally, any non-Nasdaq equity security that has a market price of less than $5.00 per share, subject to certain exceptions). Such rules require the delivery, before any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally defined as an investor with a net worth in excess of $1,000,000 or annual income exceeding $200,000 individually or $300,000 together with a spouse). For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction before the sale. The broker-dealer also must disclose the commissions payable to the broker-dealer and current bid and offer quotations for the penny stock and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Such information must be provided to the customer orally or in writing before or with the written confirmation of trade sent to the customer. Monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. The additional burdens imposed on broker-dealers by such requirements could discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market liquidity of our common stock and the ability of holders of our common stock to sell their shares.

***Because our shares are deemed a*** "***penny stock,***" ***rules enacted by FINRA make it difficult to sell previously restricted stock.***

Rules put in place by the Financial Industry Regulatory Authority (FINRA) require broker-dealers to perform due diligence before depositing unrestricted common shares of penny stocks, and as such, some broker-dealers, including many large national firms (such as eTrade and Charles Schwab), are refusing to deposit previously restricted common shares of penny stocks. We routinely issued non-registered restricted common shares to investors, vendors and consultants. The issuance of such shares is subjected to the FINRA-enacted rules. As such, it can be difficult for holders of restricted stock, including those issued in our private securities offerings, to deposit the shares with broker-dealers and sell those shares on the open market.

***Because we will not pay dividends in the foreseeable future, stockholders will only benefit from owning common stock if it appreciates.***

We have never declared or paid a cash dividend to stockholders. We intend to retain any earnings that may be generated in the future to finance operations. Accordingly, any potential investor who anticipates the need for current dividends from his investment should not purchase our common stock, and must rely on the benefit of owning shares, and presumably a rise in share price. We cannot predict the future price of our stock, and due to the factors enumerated herein, can make no assurance of a future increase in the price of our common stock.

***We regularly issue stock, or stock options, instead of cash, to pay some of our operating expenses. These issuances are dilutive to our existing stockholders.***

We are party to agreements that provide for the payment of, or permit us to pay at our option, securities rather than cash in consideration for services provided to us. We include these provisions in agreements to allow us to preserve cash. We anticipate that we will continue to do so in the future. All such issuances preserve our cash reserves, but are also dilutive to our stockholders because they increase (and will increase in the future) the total number of shares of our common stock issued and outstanding, even though such arrangements assist us with managing our cash flow. These issuances also increase the expense amount recorded.

***Our stockholders face further potential dilution in any new financing.***

In the year ended December 31, 2022, we issued approximately 22 million shares of common stock. Our private securities offerings typically offer convertible securities, including notes and warrants. Those warrants often include provisions that require investors to pay for the underlying shares with cash, which if executed would generate working capital for the company. Any additional capital that we raise would dilute the interest of the current stockholders and any persons who may become stockholders before such financing. Given the price of our common stock, such dilution in any financing of a significant amount could be substantial.

***Our stockholders face further potential adverse effects from the terms of any preferred stock that may be issued in the future.***

Our certificate of incorporation authorizes 50 million shares of preferred stock. None are outstanding as of the date hereof. In order to raise capital to meet expenses or to acquire a business, our board of directors may issue additional stock, including preferred stock. Any preferred stock that we may issue may have voting rights, liquidation preferences, redemption rights and other rights, preferences and privileges. The rights of the holders of our common stock will be subject to, and in many respects subordinate to, the rights of the holders of any such preferred stock. Furthermore, such preferred stock may have other rights, including economic rights, senior to our common stock that could have a material adverse effect on the value of our common stock. Preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, can also have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock, thereby delaying, deferring or preventing a change in control of our company.

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**ITEM 1B. UNRESOLVED STAFF COMMENTS**

None.

**ITEM 2. PROPERTIES** 

Our company owns no real property. We currently lease approximately 9,000 square feet of office and industrial space at 14921 Chestnut Street, Westminster, California. In addition to serving as our principal offices, it is also a manufacturing facility where we manufacture our products, including our CupriDyne Clean Industrial Odor control product, and the home of our subsidiary ONM Environmental.

We also lease approximately 22,000 square feet of office, warehouse and lab space at 105 Fordham Road, Oak Ridge, Tennessee, for our professional engineering division, BioLargo Engineering, Science & Technologies, LLC.

We also lease approximately 1,500 square feet of office and lab space from the University of Alberta. These offices serve as our primary research and development facilities and is the home of our subsidiary, BioLargo Water.

Our telephone number is (888) 400-2863.

**ITEM 3. LEGAL PROCEEDINGS** 

Our company is not a party to any legal proceeding.

**ITEM 4. MINE SAFETY DISCLOSURES** 

Not applicable.

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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** 

Since January 23, 2008, our common stock has been quoted on the OTC Markets "OTCQB" marketplace (formerly known as the "OTC Bulletin Board") under the trading symbol "BLGO". The OTCQB is a regulated quotation service that displays real-time quotes, last-sale prices and volume information in over-the-counter equity securities. The OTCQB securities are traded by a community of market makers that enter quotes and trade reports. This market is limited in comparison to the national stock exchanges and any prices quoted may not be a reliable indication of the value of our common stock. Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

**Holders**

As of March 29, 2023, there were approximately 533 registered holders of our common stock. This does not include beneficial owners.

**Dividends** 

We have never declared or paid a cash dividend to stockholders. We intend to retain any earnings which may be generated in the future to finance operations.

**Securities Authorized for Issuance Pursuant to Equity Compensation Plans**

**Equity Compensation Plan Information as of December 31, 2022**

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| | | | |
|:---|:---|:---|:---|
| Plan Category | Number of securities to be<br> issued upon exercise of<br> outstanding options,<br> warrants and rights<br> (a) | Weighted average<br> exercise price of<br> outstanding options,<br> warrants and rights<br> (b) | Number of securities<br> remaining available for<br> future issuance<br> (c) |
| Equity compensation plans approved by security holders | 26641926<sup>(1)</sup> | $0.22 | 23262159 |
| Equity compensation plans not approved by security holders<sup>(2)</sup> | 18516329 | $0.39 | n/a |
| Total | 45158255 | $0.27 | 23262159 |

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(1) Includes 1,904,085 shares issuable under the 2007 Equity Plan. The 2007 Equity Plan expired September 6, 2017, and 24,737,841 shares issuable under the 2018 Equity Incentive Plan adopted by the Board on March 7, 2018 and subsequently approved by stockholders on May 23, 2018.

(2) This includes various issuances of warrants or options to specific individuals either as a conversion of un-paid obligations pursuant to a plan adopted by our board of directors, or as part of their agreement for services.

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**Sales of Unregistered Securities** 

The following is a report of the sales of unregistered securities in the past two years not previously reported in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.

On October 5, 2022, we sold 114,890 shares of our common stock to one accredited investor and received $25,000 in gross and net proceeds. In addition, we issued the investor a warrant to purchase 114,890 shares of common stock at $0.261 per share expiring six months from the date of issuance, and a warrant to purchase 114,890 shares of common stock at $0.3264 per share expiring five years from the date of issuance.

On December 13, 2022, we issued 1,250,000 shares to Lincoln Park as a commitment fee related to the purchase agreement entered into on that same date (see Part II, Item 9B Other Information).

During the three months ended December 31, 2022, we issued 47,544 shares of our common stock to a vendor to reduce amounts owed to the vendor in the aggregate amount of $11,250.

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.

**ITEM 6. SELECTED FINANCIAL DATA** 

Not applicable

**ITEM 7. MANAGEMENT**'**S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

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

This discussion contains forward-looking statements that involve risks and uncertainties. Such statements, which include statements concerning future revenue sources and concentration, selling, general and administrative expenses, research and development expenses, capital resources, additional financings and additional losses, are subject to risks and uncertainties, including, but not limited to, those discussed above in Part I, Item 1 and elsewhere in this Annual Report, particularly in "Risk Factors," that could cause actual results to differ materially from those projected. The forward-looking statements set forth in this Annual Report are as of December 31, 2022, unless expressly stated otherwise, and we undertake no duty to update this information.

**Results of Operations**—**Comparison of the years ended December 31, 2022 and 2021** 

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;

● BLEST, which provides professional engineering services supporting our internal business units, advancing innovations like the AEC to remove PFAS contaminants from water, and serving outside clients on a fee for service basis;

● Clyra Medical, which develops and sells medical products based on our technology;

● BioLargo Water, located in Edmonton, Alberta Canada, that has been historically pure research and development, and is now transitioning to focus on commercializing our AOS system; and

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

Our consolidated revenue for the year ended December 31, 2022 was $5,884,000, which is a 133% increase over the same period in 2021. Services revenue increased 53% ($491,000), while revenue from product sales increased by 182% ($2,862,000). The increase in service revenues was related to increased third-party client work by our subsidiary BLEST. The increase in product 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.

***<u>ONM Environmental</u>***

Our wholly-owned subsidiary ONM Environmental generates revenues through sales of our flagship product CupriDyne Clean, by providing design, installation, and maintenance services on the systems that deliver CupriDyne Clean at its clients' facilities, and through sales of private-label products based on our CupriDyne Clean technology.

***Revenue (ONM Environmental)***

ONM Environmental's revenues for the year ended December 31, 2022, were $4,374,000, an increase of $2,862,000 or 182% from the same period in 2021. 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 (which increased by $2,712,000). Because ONM Environmental has no control over the marketing and sales activity or levels of Pooph, it cannot predict sales volumes related to it in future periods. Pooph management has indicated their intentions to continue their national advertising campaign as they place the product in national retail chains, including the introduction of the product in Walmart nationally. While they have performed well in the past, their execution of those future plans has inherent risks that are out of our control. (See the Risk Factor above titled "A significant portion of our revenue is concentrated with a select number of customers.")

Revenues from sales of industrial odor control products (e.g., CupriDyne Clean) were $1,190,000 for the year ended December 31, 2022, $1,000 less than the prior year.

***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 2% in 2022 to 45%. The decrease was related to normal price fluctuations for raw materials and increased purchase volume.

***Selling, General and Administrative Expense (ONM Environmental)***

ONM Environmental's SG&A expenses were $1,276,000 in 2022, compared to $1,235,000 in 2021. We expect these expenses to remain flat in 2023.

***Operating Income (ONM Environmental)***

ONM Environmental generated operating income of $1,130,000 in 2022, compared to an operating loss of $511,000 in 2021. Provided that its private-label clients continue to increase their purchase of product, we expect this trend to continue.

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***<u>BLEST (engineering division)</u>***

***Revenue (BLEST)***

BLEST generated $1,453,000 of revenue from third parties in 2022, compared to $961,000 in 2021, representing a 51% increase from the prior year. The increase is due to an increased number of client contracts, including those as a subcontractor for Bhate pursuant to which BLEST is providing services to U.S. Air Force bases.

In addition to providing service 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 year ended December 31, 2022, it totaled $490,000, primarily used 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, materials, as well as subcontracted labor costs. In 2022, its cost of services were 61% of its revenues, versus 69% in 2021. This decrease is due to contracts with better margins. We expect the cost of services to remain consistent in 2023 based on the contracts currently in progress.

***Selling, General and Administrative Expense (BLEST)***

BLEST SG&A expenses were $549,000 in 2022, compared to $411,000 in 2021, due to increased head-count related expenses. We expect these expenses to continue to increase in the current year as its revenues increase.

***Operating Loss (BLEST)***

BLEST had an operating loss of $452,000 in 2022, compared to an operating loss of $629,000 in 2021.

BLEST provides substantial support to BioLargo's other operations. While we are unable to record revenues generated from services by the engineering group to other BioLargo operating divisions for important projects such as the development of the AOS and AEC technologies, it is important to note that its net loss would be eliminated if it were selling these services to a third party at fair market value.

Because the subsidiary had a net loss, 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. We expect that in 2023 its sales and thus its gross profit will continue to increase. Our goal for this operation is that it produces a profit and contributes to corporate overhead in a significant way, although predicting when that will happen is difficult.

***<u>Selling, General and Administrative Expense</u>*** <u>–</u>***<u>consolidated</u>***

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 increased by 9% ($559,000) in the year ended December 31, 2022, to $6,731,000. Our non-cash expenses (through the issuance of stock and stock options) were $2,362,000 in 2022, compared with 2021 total of $2,241,000. The largest components of our SG&A expenses included (in thousands):

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| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** |
| Salaries and payroll related | $2754 | $2581 |
| Professional fees | 629 | 662 |
| Consulting | 867 | 920 |
| Office expense | 1502 | 1177 |
| Board of director expense | 401 | 262 |
| Sales and marketing | 287 | 315 |
| Investor relations | 291 | 255 |

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Our salaries and payroll-related increased in the year ended December 31, 2022, 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. Office expense increased due to an increase in square footage of rented space and an increase in general office expenses related to expanded operations. 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. Board of director expense increased due to options issued to two new board members in November 2022, and replacement of expired options.

***<u>Impairment Expense</u>***

Impairment expense decreased by 42% for the year ended December 31, 2022, as compared with the year ended December 31, 2021, due to a one-time 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" (see Note 9), recorded in the year ended December 31, 2021. During each of the years ended December 31, 2022 and 2021, management recognized $197,000 impairment of Clyra's prepaid marketing asset (see Note 9).

***<u>Research and Development</u>***

In the year ended December 31, 2022, we spent $1,319,000 in the research and development of our technologies and products. This was a decrease of 4% ($48,000) compared to 2021, due to decreased activity and limited liquidity.

***<u>Other Income and Expense</u>***

Primarily through our wholly owned Canadian subsidiary, we have been awarded more than 80 research grants over the years from various 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. The amount of grant income increased $19,000 in the year ended December 31, 2022, to $74,000. Grant funds paid directly to third parties are not included as income in our financial statements.

Our Canadian subsidiary applied for and received a refund on our income taxes pursuant to the "Scientific Research and Experimental Development Program", a Canadian federal tax incentive program designed to encourage Canadian businesses to conduct research and development in Canada. For the years ended December 31, 2022 and 2021, we recorded a refund of $63,000 and $20,000, respectively.

The U.S. Small Business Administration forgave a portion ($174,000) of the Paycheck Protection Program loan granted to our subsidiary ONM Environmental during the year ended December 31, 2022; in the prior year, a $43,000 Paycheck Protection Program loan granted to our subsidiary Clyra Medical was forgiven. The Company currently has $97,000 outstanding in Paycheck Protection Program loans that were denied forgiveness, and has appealed those decisions.

***<u>Interest expense</u>***

Our interest expense for the year ended December 31, 2022, was $53,000, a decrease of 77% compared with 2021. The significant decrease in interest expense is related to the significant decrease of our debt obligations and a reduction of debt issued during 2022 versus 2021. Of our interest expense, $36,000 was paid in cash. Our non-cash interest expenses were $17,000 in amortization of debt discounts related to warrants issued in conjunction with debt instruments.

Our outstanding debt as of December 31, 2022, was lower than as of December 31, 2021. We expect our interest expense in the year ending December 31, 2023, to be in line with the prior year, provided we do not issue debt with attached warrants during the remainder of the year. We also are currently selling units of common stock and warrants instead of using convertible debt for financing our working capital needs, which if continued, will continue to reduce our ongoing interest expense as compared with prior years.

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***<u>Net Loss</u>***

Net loss for the year ended December 31, 2022, was $5,132,000 a loss of $0.02 per share, compared to a net loss for the year ended December 31, 2021, of $6,894,000 a loss of $0.03 per share, a decrease in net loss of 26%. Our net loss this year declined because of the 132% increase in revenues, and 159% increase in gross profit.

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

---

| | | |
|:---|:---|:---|
| **Net income (loss)** | **Year ended December**<br> **31, 2022** | **Year ended December**<br> **31, 2021** |
| ONM Environmental | $1304 | $(511) |
| BLEST | &nbsp;&nbsp;&nbsp;(425) | &nbsp;&nbsp;&nbsp;(629) |
| Clyra Medical | &nbsp;&nbsp;&nbsp;(1412) | &nbsp;&nbsp;&nbsp;593 |
| BioLargo Water | &nbsp;&nbsp;&nbsp;(604) | &nbsp;&nbsp;&nbsp;(566) |
| BioLargo corporate | &nbsp;&nbsp;&nbsp;(3995) | &nbsp;&nbsp;&nbsp;(5781) |
| Consolidated net loss | $(5132) | $(6894) |

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In the year ended December 31, 2022, approximately 50% of our net loss was attributable to non-cash expenses, including $2,071,000 of stock option compensation expense, and $291,000 of services paid by the issuance of our common stock.

In the year ended December 31, 2021, approximately 40% of our net loss was attributable to non-cash expenses, including $135,000 in interest expense, $1,872,000 of stock option compensation expense, and $367,000 of services paid by the issuance of our common stock. Clyra Medical's net income of $593,000 during the year ended December 31, 2021, was not due to operating activities, but rather due to the recent transaction with Scion Solutions (see Note 9).

The change in Clyra Medical's net income/loss in the years ended December 31, 2022 and 2021 of $2,005,000 is due to the one-time recognition of gain resulting from the March 1, 2022 Scion transaction (see Note 9). Without the one-time recognition of gain, Clyra Medical's net loss for the year ended December 31, 2021, was $1,412,000.

***<u>Liquidity and Capital Resources</u>***

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 year ended December 31, 2022, we had a net loss of $5,132,000, used $2,762,000 cash in operations, and at December 31, 2022, we had working capital of $1,587,000, and current assets of $3,153,000. We do not believe gross profits in 2023 will be sufficient to fund our current level of operations or pay our debts as they become due during the next 12 months, and therefore we will have to obtain further investment capital to continue to fund operations and seek to refinance our existing debt. We have been, and anticipate that we will continue to be, limited in terms of our capital resources.

During the year ended December 31, 2022, we generated revenues of $5,884,000 through our subsidiaries. (See Note 12.) Other than ONM Environmental, our subsidiaries did not individually or in the aggregate generate enough revenues or gross profits to fund their operations, or fund our corporate operations or other business segments. To meet our cash obligations during the year ended December 31, 2022, we (i) sold 6,011,701 shares of our common stock to Lincoln Park for $1,253,000 (see Part II, Item 9B), and (ii) sold 13,568,524 shares of common stock, and issued warrants to purchase 27,137,048 shares of common stock, to private investors for $2,364,000 (see Notes 3 and 6).

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As of December 31, 2022, our cash and cash equivalents totaled $1,851,000, and our total liabilities included: $50,000 in convertible debt that was due in March 2023 (subsequent to year end converted to equity); $261,000 owed by our partially owned subsidiary Clyra Medical Technologies, Inc. ("Clyra") due in Sept 2024 (see Note 9); $140,000 due in U.S. Small Business Administration ("SBA") loans issued pursuant to the Paycheck Protection Program (see Note 4); and $150,000 due on an Economic Injury Disaster program (EIDL) payable to the SBA over 30 years at $800 per month.

Subsequent to December 31, 2022, we continue to sell common stock to Lincoln Park for working capital (see Note 14).

If we are unable to rely on our current arrangement with Lincoln Park 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. To reduce our operational cash burdens, we regularly issue officers and vendors stock or options in lieu of cash, and anticipate that we will continue to be able to do so in the future.

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.

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. BioLargo Energy Technologies, Inc. has been capitalized primarily through investments from third parties. Our corporate operations generate cash through private offerings of stock, debt instruments, and warrants.

Although ONM Environmental, BLEST, and Clyra Medical generated revenues in the year ended December 31, 2022, only ONM generated operating and net income. We provided cash subsidies to each of these business segments to allow them to continue operations.

**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. We believe that the following significant accounting policies and assumptions may involve a higher degree of judgment and complexity than others.

The methods, estimates and judgments the Company uses in applying these most critical accounting policies have a significant impact on the results of the Company reports in its financial statements.

***<u>Revenue Recognition</u>***

We adopted ASU 2014-09, "Revenue from Contracts with Customers", Topic 606, on January 1, 2018. The guidance focuses on the core principle for revenue recognition.

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The core principle of the guidance 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, an entity should apply the following steps:

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

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 have revenue from two subsidiaries, ONM and BLEST. ONM identifies its contract with the customer through 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. ONM recognizes revenue at a point in time when the order for its goods are shipped if its agreement with the customer is FOB ONM's warehouse facility, 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. ONM also 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. Revenue is recognized in arrears as the work is performed.

BLEST identifies services to be performed in a written contract, which specifies the performance obligations and the rate at which the services will be billed. Each service is separately negotiated and priced. Revenue is recognized as services are performed and completed. BLEST's contracts typically call for invoicing for time and materials incurred for that contract. A few contracts have called for milestone or fixed cost payments where BLEST bills an agreed-to amount 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 receivable or payable is created. 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.

***<u>Warrants</u>***

Warrants issued with our convertible 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.

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The warrant relative fair values are also recorded as a discount to the convertible promissory notes. At 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.

***<u>Share-based Payments</u>***

It is the Company's policy to expense share-based payments as of the date of grant or over the term of the vesting period in accordance with Auditing Standards Codification Topic 718 "Share-Based Payment." Application of this pronouncement requires significant judgment regarding the assumptions used in the selected option pricing model, including stock price volatility and employee exercise behavior. Most of these inputs are either highly dependent on the current economic environment at the date of grant or forward-looking expectations projected over the expected term of the award.

***<u>Fair Value Measurement</u>***

Generally accepted accounting principles establishes a hierarchy to prioritize the inputs of valuation techniques used to measure fair value. The hierarchy gives the highest ranking to the fair values determined by using unadjusted quoted prices in active markets for identical assets (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). Observable inputs are those that market participants would use in pricing the assets based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company's assumptions about inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The Company has determined the appropriate level of the hierarchy and applied it to its financial assets and liabilities.

Management believes the carrying amounts of the Company's financial instruments as of December 31, 2022 and 2021, approximate their respective fair values because of the short-term nature of these instruments. Such instruments include cash, accounts receivable, prepaid assets, accounts payable, 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.

**Recent Accounting Pronouncements**

See Note 2 to the Consolidated Financial Statements, "Summary of Significant Accounting Policies – Recent Accounting Pronouncements", for the applicable accounting pronouncements affecting the Company.

**ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK** 

Not applicable.

**ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA** 

Our consolidated financial statements as of and for the years ended December 31, 2022 and 2021 are presented in a separate section of this report following Item 14 and begin with the index on page F-1.

**ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE** 

None.

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**ITEM 9A. CONTROLS AND PROCEDURES** 

**Evaluation of Disclosure 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) as of the end of the period covered by this Annual Report.

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. The volume of our product sales continues to grow, increasing strain on our accounting systems. And, our operations do not yet generate enough cash to fund operations, and thus we rely on financing activities to maintain our level of operations and fund our anticipated growth. In combination, these activities put stress on our overall controls and procedures. Based on this evaluation, our chief executive officer and chief financial officer 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.

**Management**'**s Report on Internal Control over Financial Reporting** 

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, and the fact that we operate our business in three distinct locations in the U.S. and Canada, 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. In reaching this conclusion, management considered that despite this weakness, and others identified in past years, the company has not identified material misstatements in prior financial statements, and believes that the material weakness identified herein is not likely to lead to a material misstatement in the financial statements contained within this report.

Management has concluded that its internal controls over financial reporting are not effective. Management identified a material weakness with respect to deficiencies in its financial closing and reporting procedures. Management believes this is due to a lack of resources. Management intends to add accounting personnel and operating staff and more sophisticated systems in order to improve its reporting procedures and internal controls, subject to available capital. A material weakness is a significant deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected. While management has recognized the material weakness, nothing additionally has changed in internal controls over financial reporting in the fourth quarter or the fiscal year ended December 31, 2022.

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This Annual Report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management's report in this Annual Report.

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.

***<u>Changes in Internal Control over Financial Reporting</u>***

There were no changes in the Company's internal control over financial reporting during the fourth quarter of 2022, 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, the Company's internal control over financial reporting.

**ITEM 9B. OTHER INFORMATION** 

***<u>Lincoln Park</u>***

On December 13, 2022, we entered into a purchase agreement, dated as of December 13, 2022 (the "Purchase Agreement"), and a registration rights agreement, dated as of December 12, 2022 (the "Registration Rights Agreement"), with Lincoln Park Capital Fund, LLC ("Lincoln Park"), pursuant to which Lincoln Park has committed to purchase up to $10.0 million of the Company's common stock, par value $0.00067 per share (the "Common Stock"), subject to certain limitations and the satisfaction of the conditions set forth in the Purchase Agreement.

Under the Purchase Agreement, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $10.0 million of the Company's Common Stock. Such sales of Common Stock by the Company, if any, will be subject to certain limitations set forth in the Purchase Agreement, and may occur from time to time, at the Company's sole discretion, over the 36-month period commencing on the date that the conditions to Lincoln Park's purchase obligation set forth in the Purchase Agreement are satisfied, including that a registration statement covering the resale by Lincoln Park of shares of Common Stock that have been and may be issued to Lincoln Park under the Purchase Agreement, which the Company agreed to file with the Securities and Exchange Commission (the "SEC") pursuant to the Registration Rights Agreement, is declared effective by the SEC and a final prospectus relating thereto is filed with the SEC (the date on which all of such conditions are satisfied, the "Commencement Date").

From and after the Commencement Date, on any business day selected by the Company, the Company may, by written notice delivered by to Lincoln Park, direct Lincoln Park to purchase up to 100,000 shares of Common Stock on such business day, at a purchase price per share that will be determined and fixed in accordance with the Purchase Agreement at the time such written notice is delivered to Lincoln Park (each, a "Regular Purchase"), provided, however, that the maximum number of shares the Company may sell to Lincoln Park in a Regular Purchase may be increased to (i) up to 125,000 shares, provided that the closing sale price of the Common Stock on the applicable purchase date is not below $0.20, (ii) up to 150,000 shares, provided that the closing sale price of the Common Stock on the applicable purchase date is not below $0.30, and (iii) up to 200,000 shares, provided that the closing sale price of the Common Stock on the applicable purchase date is not below $0.50, in each case, subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase Agreement; provided, however, that Lincoln Park's maximum purchase commitment in any single Regular Purchase may not exceed $500,000. The purchase price per share of Common Stock sold in each such Regular Purchase, if any, will be based on prevailing market prices of the Common Stock immediately preceding the time of sale as computed under the Purchase Agreement. The Company may deliver a notice for a Regular Purchase to Lincoln Park on any business day selected by the Company, provided that at least one Business Day has elapsed since the purchase date for the most recent prior Regular Purchase effected by the Company under the Purchase Agreement.

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In addition to Regular Purchases, provided that we have directed Lincoln Park to purchase the maximum amount of shares that we are then able to sell to Lincoln Park in a Regular Purchase, and provided that the closing sale price of the Common Stock on the applicable purchase date for such Regular Purchase is not below $0.10 per share, we may, in our sole discretion, also direct Lincoln Park to purchase additional shares of Common Stock in "accelerated purchases," and "additional accelerated purchases" as set forth in the Purchase Agreement. The purchase price per share of Common Stock sold in each such accelerated purchase and additional accelerated purchase, if any, will be based on prevailing market prices of the Common Stock at the time of sale as computed under the Purchase Agreement. There are no upper limits on the price per share that Lincoln Park must pay for shares of Common Stock in any purchase under the Purchase Agreement.

The Company will control the timing and amount of any sales of Common Stock to Lincoln Park pursuant to the Purchase Agreement. Lincoln Park has no right to require the Company to sell any shares of Common Stock to Lincoln Park, but Lincoln Park is obligated to make purchases as the Company directs, subject to certain conditions.

Actual sales of shares of Common Stock to Lincoln Park 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 Company's Common Stock and determinations by the Company as to the appropriate sources of funding 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.

The Purchase Agreement prohibits the Company from directing Lincoln Park to purchase any shares of Common Stock if those shares, when aggregated with all other shares of Common Stock then beneficially owned by Lincoln Park (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 thereunder), would result in Lincoln Park beneficially owning more than 4.99% of the outstanding shares of Common Stock.

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 (with certain limited exceptions) on entering into a "Variable Rate Transaction," as defined in the Purchase Agreement. Lincoln Park has agreed not to engage in or effect, directly or indirectly, for its own principal account or for the principal account of any of its affiliates, any short sales of the Common Stock or hedging transaction that establishes a net short position in the Common Stock during the term of the Purchase Agreement.

As consideration for Lincoln Park's commitment to purchase shares of the Company's Common Stock from time to time at the Company's direction upon the terms of and subject to satisfaction of the conditions set forth in the Purchase Agreement, has agreed (i) to issue to Lincoln Park 1,250,000 shares of Common Stock (the "Commitment Shares") upon the execution of the Purchase Agreement and (ii) to pay to Lincoln Park a cash fee of $250,000 upon the Company's receipt of aggregate cash proceeds of $3.0 million from sales of Common Stock to Lincoln Park under the Purchase Agreement. The Company will not receive any cash proceeds from the issuance of the Commitment Shares to Lincoln Park pursuant to the Purchase Agreement.

The Purchase Agreement and the Registration Rights Agreement contain customary representations, warranties, conditions and indemnification obligations of the parties. The Company has the right to terminate the Purchase Agreement at any time with one business days' notice, at no cost or penalty. During any "event of default" under the Purchase Agreement, 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.

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***<u>Clyra Medical</u>*** <u>–</u>***<u>Series A Preferred</u>***

On December 20, 2022, Clyra began a preferred unit offering and sold 726 shares of its Series A Preferred Stock for $310 per share, and in exchange received $225,000 in gross and net proceeds, from two accredited investors. Each investor also received a warrant to purchase the same number of shares of 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 a conversion rate of $310 per share.

Each investor also entered into an agreement with BioLargo whereby the investor may exchange some or all of its Clyra 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.

Subsequent to December 31, 2022, Clyra received an additional $225,000 in investments from two accredited investors, and issued 726 shares of its Series A Preferred stock, and warrants to purchase the same number of shares of common stock for $372 per share.

On December 31, 2022, BioLargo converted $418,000 owed to it by Clyra into 1,349 shares of Series A Preferred stock and a warrant to purchase 1,349 shares of Clyra common stock at $372 per share. Subsequent to December 31, 2022, BioLargo converted an addition $40,000 owed to it by Clyra into 129 shares of Series A Preferred stock and a warrant to purchase 129 shares of Clyra common stock at $372 per share.

***<u>BioLargo Energy Technologies, Inc.</u>***

On January 1, 2023, BioLargo's wholly owned subsidiary BioLargo Energy Technologies, Inc. ("BETI"), began an offering of its common stock for $2.00 per share. From the period January 1, 2023, through March 29, 2023, the company received $700,000 in investments, and issued 350,000 shares of its common stock. Of the $700,000 invested, $100,000 was from BioLargo. As of March 29, 2023, BioLargo owns 96.8% of the company's common stock.

Each investor also entered into an agreement with BioLargo whereby the investor may exchange some or all of its BETI common stock into shares of BioLargo common stock, at a price equal to a 20% discount of the volume weighted average price of BioLargo's common stock over the 30 prior trading days. Elections to exchange must be made by the investor during the calendar year 2024. An investor can make such election only one time; BioLargo does not have the ability to compel an investor to exchange its shares.

***<u>Satisfaction of $50,000 Note</u>***

On March 6, 2023, we entered into an agreement with the holder of a $50,000 note originally issued in March 2018 to convert the 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.

***<u>CFO Engagement Extension</u>***

On March 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 21, 2023 (the "Engagement Extension Agreement") provides for an additional one-year term to expire January 31, 2024 (the "Extended Term"), at which time Mr. Dargan will continue to serve as CFO, unless and until either party terminates the agreement.

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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 21, 2023, and the remaining shares to vest 25,000 shares monthly beginning March 31, 2023, and each month thereafter, so long as the agreement is in full force and effect. The Option is exercisable at $0.20 per share, the closing price of BioLargo's common stock on the March 21, 2023 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.

***<u>Clyra Medical</u>***

On January 9, 2023, the holder of a line of credit of Clyra Medical elected to convert 322 shares of Clyra Medical common stock into 527,983 shares of BioLargo common stock at $0.1894 per share in accordance with the amendment to the line of credit agreement dated December 13, 2022.

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**PART III**

Certain information required by Part III is incorporated by reference from our definitive Proxy Statement to be filed with the SEC within 120 days of the end of the fiscal year ended December 31, 2022, in connection with the solicitation of proxies for our 2023 Annual Meeting of Stockholders (the "Proxy Statement").

**ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE** 

The information required by this section is incorporated by reference from the section entitled "Proposal One—Election of Directors" in the Proxy Statement. Item 405 of Regulation S-K calls for disclosure of any known late filing or failure by an insider to file a report required by Section 16 of the Exchange Act. This disclosure is incorporated by reference to the section entitled "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement. The information required by this Item with respect to our executive officers is contained in Item 1 of Part I of this Annual Report under the heading "Business—Executive Officers".

**ITEM 11. EXECUTIVE COMPENSATION** 

The information required by this section is incorporated by reference from the information in the section entitled "Executive Compensation" in the Proxy Statement.

**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS** 

The information required by this section is incorporated by reference from the information in the section entitled "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement.

**ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE** 

The information required by this section is incorporated by reference from the information in the section entitled "Certain Relationships and Related Transactions" in the Proxy Statement.

**ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES** 

The information required by this section is incorporated by reference from the information in the section entitled "Ratification of Appointment of Independent Auditor" in the Proxy Statement.

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**PART IV**

**ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.**

The following documents are filed as a part of this report:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. *Financial Statements*. The consolidated financial statements required to be filed in this report are listed on the Index to Financial Statements immediately preceding the financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. *Financial Statement Schedules*. Separate financial statement schedules have been omitted either because they are not applicable or because the required information is included in the consolidated financial statements or the notes thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. *Exhibits.* See the Exhibit Index for a list of the exhibits being filed or furnished with or incorporated by reference into this report.

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**<u>Exhibit Index</u>**

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| | | | |
|:---|:---|:---|:---|
|  |  | **<u>Incorporated by</u>**<br> **<u>Reference Herein</u>** | **<u>Incorporated by</u>**<br> **<u>Reference Herein</u>** |
| **<u>Exhibit</u>**<br> **<u>Number</u>** | **<u>Exhibit Description</u>** | **<u>Form</u>** | **<u>File Date</u>** |
| 3.1 | [<u>Bylaws of BioLargo, Inc., as amended and restated</u>](http://www.sec.gov/Archives/edgar/data/880242/000114420403002812/doc14.txt) | Form 10-KSB | 5/23/2003 |
| 3.2 | [<u>Amended and Restated Certificate of Incorporation for BioLargo, Inc. filed March</u> <u>16, 2007</u>](http://www.sec.gov/Archives/edgar/data/880242/000119312507102934/dex31.htm) | Form 10-KSB | 5/4/2007 |
| 3.3 | [<u>Certificate of Amendment to Certificate of Incorporation, filed May 25, 2018</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774918012304/ex_116664.htm) | Pos Am | 6/22/2018 |
| 3.4 | [<u>Certificate of Amendment to Certificate of Incorporation, filed August 30, 2022</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774922027358/ex_446700.htm) | Form 10-Q | 11/14/2022 |
| 3.5\* | [Amended and Restated Articles of Incorporation of Clyra Medical Technologies, Inc. (filed December 30, 2022)](ex_495027.htm) |  | filed herewith |
| 4.1 | [<u>BioLargo, Inc. 2007 Equity Incentive Plan</u>](http://www.sec.gov/Archives/edgar/data/880242/000119312507249991/dex102.htm) | Form 10-QSB | 11/19/2007 |
| 4.2 | [<u>Amendment No. 1 to BioLargo 2007 Equity Incentive Plan</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774911002711/biolargo_def14c-042911.htm) | Def 14C<br> (Exhibit A) | 5/2/2011 |
| 4.3 | [<u>Form of Stock Options issued in exchange for reduction in accounts payable.</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774915006503/ex4-12.htm) | Form 10-K | 3/31/2015 |
| 4.4 | [<u>Purchase Agreement, dated as of August 25, 2017 by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774917015495/ex10-1.htm) | Form 8-K | 8/31/2017 |
| 4.5 | [<u>$50,000 convertible note, matures March 8, 2020</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774918009797/ex_114400.htm) | Form 10-Q | 5/14/2018 |
| 4.6 | [<u>2018 Equity Incentive Plan</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774918012288/ex_116745.htm) | Form S-8 | 6/22/2018 |
| 4.7 | [<u>Stock Option Award Agreement under 2018 Equity Incentive Plan</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774918012288/ex_116749.htm) | Form S-8 | 6/22/2018 |
| 4.8 | [<u>Notice of Stock Option Grant under 2018 Equity Incentive Plan</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774918012288/ex_116748.htm) | Form S-8 | 6/22/2018 |
| 4.9 | [<u>Restricted Stock Unit Award Agreement under 2018 Equity Incentive Plan</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774918012288/ex_116747.htm) | Form S-8 | 6/22/2018 |
| 4.10 | [<u>Notice of Restricted Stock Unit Award under 2018 Equity Incentive Plan</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774918012288/ex_116746.htm) | Form S-8 | 6/22/2018 |
| 4.11 | [<u>Promissory note issued by Clyra Medical to Scion Solutions dated September 26, 2018</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774918017693/ex_124900.htm) | Form 8-K | 10/2/2018 |
| 4.12 | [<u>Stock Purchase Agreement and Plan of Reorganziation dated September 26, 2018, with Scion Solutions, LLC</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774918017693/ex_124899.htm) | Form 8-K | 10/2/2018 |
| 4.13 | [<u>Revolving Line of Credit Agreement dated June 30, 2020, between Clyra Medical and Vernal Bay</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774920014798/ex_193295.htm) | Form 8-K | 7/7/2020 |
| 4.14 | [<u>Security Agreement dated June 30, 2020, between Clyra Medical and Vernal Bay</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774920014798/ex_193296.htm) | Form 8-K | 7/7/2020 |
| 4.15 | [<u>Revolving Line of Credit Note issued by Clyra Medical to Vernal Bay on June 30, 2020</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774920014798/ex_193297.htm) | Form 8-K | 7/7/2020 |

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| | | | |
|:---|:---|:---|:---|
| 4.16 | [<u>Warrant issued in 2020 Unit Offering</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774920018050/ex_199467.htm) | Form 10-Q | 8/14/2020 |
| 4.17 | [<u>Amendment to $50,000 Convertible Note dated March 8, 2018</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774921007650/ex_237877.htm) | Form 10-K | 3/30/2021 |
| 4.18 | [<u>Warrant issued to $50,000 Convertible Noteholder on March 1, 2020</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774921007650/ex_237878.htm) | Form 10-K | 3/30/2021 |
| 4.19\* | [Satisfaction of Convertible Note dated March 8, 2018](ex_495028.htm) |  | filed herewith |
| 10.1† | [<u>Employment Agreement dated as of January 1, 2008 between BioLargo, Inc. and Joseph L. Provenzano</u>](http://www.sec.gov/Archives/edgar/data/880242/000119312508007166/dex101.htm) | Form 8-K | 1/16/2008 |
| 10.2 | [<u>License Agreement to Clyra Medical Technologies, Inc., dated December 17, 2012</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774916023206/ex10-1.htm) | Form 8-K | 1/6/2016 |
| 10.3 | [<u>December 30, 2015 amendment to License Agreement with Clyra Medical Technologies, Inc.</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774916023206/ex10-2.htm) | Form 8-K | 1/6/2016 |
| 10.4 | [<u>Consulting Agreement dated December 30, 2015 with Beach House Consulting LLC</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774916023206/ex10-3.htm) | Form 8-K | 1/6/2016 |
| 10.5 | [<u>Commercial Office Lease Agreement for 14921 Chestnut St., Westminster, CA 92683</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774916038004/ex10-1.htm) | Form 8-K | 8/24/2016 |
| 10.6† | [<u>Employment Agreement with Dennis P. Calvert dated May 2, 2017.</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774917008016/ex10-1.htm) | Form 8-K | 5/4/2017 |
| 10.7† | [<u>Lock-Up Agreement with Dennis P. Calvert dated April 30, 2017</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774917008016/ex10-2.htm) | Form 8-K | 5/4/2017 |
| 10.8† | [<u>Lock-Up Agreement with Dennis P. Calvert dated May 2, 2017.</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774917008016/ex10-3.htm) | Form 8-K | 5/4/2017 |
| 10.9 | [<u>Commercial Office Lease Agreement for Oak Ridge Tennessee</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774917015808/ex10-1.htm) | Form 8-K | 9/8/2017 |
| 10.10 | [<u>Form of Employment Agreement for Engineering Subsidiary</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774917015808/ex10-2.htm) | Form 8-K | 9/8/2017 |
| 10.11 | [<u>Form of Option issued to founding employees of Engineering subsidiary (BLEST)</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774917015808/ex10-3.htm) | Form 8-K | 9/8/2017 |
| 10.12† | [<u>Provenzano Employment Agreement dated May 28, 2019</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774919012571/ex_148427.htm) | Form 8-K | 6/24/2019 |
| 10.13† | [<u>Lock-Up Agreement dated May 28, 2019</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774919012571/ex_148428.htm) | Form 8-K | 6/24/2019 |
| 10.14 | [<u>Purchase Agreement, dated as of March 30, 2020 by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC.</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774920006611/ex_179638.htm) | Form 8-K | 3/31/2020 |
| 10.15 | [<u>Amendment dated June 30, 2020 to License Agreement with Clyra Medical Technologies, Inc.</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774920014798/ex_193293.htm) | Form 8-K | 7/7/2020 |
| 10.16 | [<u>Amendment dated June 30, 2020 to Consulting Agreement dated December 30, 2015 between Clyra Medical and Beach House Consulting LLC</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774920014798/ex_193294.htm) | Form 8-K | 7/7/2020 |
| 10.17† | [<u>2021 Engagement Extension Agreement with CFO</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774921006577/ex_235249.htm) | Form 8-K | 3/19/2021 |
| 10.18 | [<u>Agreement dated March 1, 2022, by and between Scion Solutions, LLC, Clyra Medical Technologies, Inc., and BioLargo, Inc</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774922005539/ex_344257.htm) | Form 8-K | 3/3/2022 |
| 10.19 | [<u>Agreement dated March 1, 2022, by and between Clyra Medical Technologies, Inc., and BioLargo, Inc.</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774922005539/ex_344258.htm) | Form 8-K | 3/3/2022 |
| 10.20† | [<u>2022 Engagement Extension Agreement with CFO</u>](http://www.sec.gov/Archives/edgar/data/0000880242/000143774922007109/ex_350451.htm) | Form 8-K | 3/24/2022 |
| 10.21 | [<u>Registration Rights Agreement, dated as of December 13, 2022, by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774922029358/ex_456164.htm) | Form 8-K | 12/19/2022 |
| 10.22 | [<u>Purchase Agreement, dated as of December 13, 2022, by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC.</u>](http://www.sec.gov/Archives/edgar/data/880242/000143774922029358/ex_456165.htm) | Form 8-K | 12/19/2022 |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 42

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[**Table of Contents**](#toc)

---

| | | | |
|:---|:---|:---|:---|
| 10.23\* | [Form of indemnity agreement between the Company at its officers and directors](ex_495029.htm) |  | filed herewith |
| 10.24† | [<u>2023 Engagement Extension Agreement with CFO</u>](http://www.sec.gov/ix?doc=/Archives/edgar/data/0000880242/000143774923007938/blgo20230322_8k.htm) | Form 8-K | 3/27/2023 |
| 14.1 | [<u>Code of Ethics</u>](http://www.sec.gov/Archives/edgar/data/880242/000114420404019205/v08341_ex14-1.txt) | Form 10-KSB | 11/16/2004 |
| 21.1\* | [List of Subsidiaries of the Registrant](ex_495030.htm) |  | filed herewith |
| 23.1\* | [Consent of Haskell & White LLP](ex_495031.htm) |  | 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](ex_495032.htm) |  | 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](ex_495033.htm) |  | filed herewith |
| 32\* | [Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.](ex_495034.htm) |  | 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 (embedded within the Inline XBRL and contained in Exhibit 101) |  |  |

---

\* Filed herewith

\*\* Furnished herewith

† Management contract or compensatory plan, contract or arrangement

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 43

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[**Table of Contents**](#toc)

**SIGNATURES** 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | **BIOLARGO, INC.** | **BIOLARGO, INC.** |
| Date: March 31, 2023 | By: | /s/ Dennis P. Calvert  |
|  |  | **Dennis P. Calvert**<br> **President and Chief Executive Officer** |

---

**POWER OF ATTORNEY** 

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints, jointly and severally, Dennis P. Calvert and Joseph L. Provenzano, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the date indicated:

---

| | | |
|:---|:---|:---|
| **Name** | **Title** | **Date** |
| /s/ Dennis P. Calvert | Chairman of the Board, Chief | March 31, 2023 |
| **Dennis P. Calvert** | Executive Officer and President |  |
| /s/ Charles K. Dargan II | Chief Financial Officer | March 31, 2023 |
| **Charles K. Dargan II** | (principal financial officer and principal accounting officer) |  |
| /s/ Kenneth R. Code | Chief Science Officer and Director | March 31, 2023 |
| **Kenneth R. Code** |  |  |
| /s/ Joseph L. Provenzano | Executive Vice President, Corporate | March 31, 2023 |
| **Joseph L. Provenzano** | Secretary and Director |  |
| /s/ Jack B. Strommen | Director | March 31, 2023 |
| **Jack B. Strommen** |  |  |
| /s/ Dennis E. Marshall | Director | March 31, 2023 |
| **Dennis E. Marshall** |  |  |
| /s/ Linda Park | Director | March 31, 2023 |
| **Linda Park** |  |  |
| /s/Christina Bray | Director | March 31, 2023 |
| **Christina Bray** |  |  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 44

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**INDEX TO FINANCIAL STATEMENTS**

---

| | |
|:---|:---|
| [<u>Report of Independent Registered Public Accounting Firm</u>](#auditor) (PCAOB name: HASKELL & WHITE LLP and PCAOB ID: 200) | F-2 |
| [<u>Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021</u>](#bs) | F-6 |
| [<u>Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2022 and 2021</u>](#ocl) | F-7 |
| [<u>Consolidated Statements of Stockholders</u><u>'</u> <u>Equity (Deficit) for the years ended December 31, 2022 and 2021</u>](#equity) | F-8 |
| [<u>Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021</u>](#cash) | F-9 |
| [<u>Notes to Consolidated Financial Statements</u>](#notes) | F-10 – F-33 |

---

&nbsp;&nbsp;&nbsp;&nbsp; F-1

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[**Table of Contents**](#toc)

**Report of Independent Registered Public Accounting Firm**

To the Board of Directors and Stockholders

BioLargo, Inc. and Subsidiaries

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheets of BioLargo, Inc. and Subsidiaries (the "Company") as of December 31, 2022 and 2021, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022 and 2021, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

**Going Concern**

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has experienced recurring losses, negative cash flows from operations, and has limited capital resources. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

**Basis for Opinion**

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F-2

------

**Report of Independent Registered Public Accounting Firm (continued)**

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

**Critical Audit Matters**

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

*<u>Fair Value of Stock Options</u>*<u>—</u>*<u>Refer to Notes 2, 5 and 10 to the Consolidated Financial Statements</u>*

*Critical Audit Matter Description*

The Company issues options from both BioLargo, Inc. as well as its partially-owned subsidiary, Clyra Medical. Management uses the Black-Scholes option-pricing model to estimate the fair value of its stock options. The Black-Scholes option-pricing model involves the use of significant estimates, including the following:

---

| | |
|:---|:---|
| ■ | Risk-free interest rate; |

---

---

| | |
|:---|:---|
| ■ | Expected share price volatility; |

---

---

| | |
|:---|:---|
| ■ | Expected dividend yield; and |

---

---

| | |
|:---|:---|
| ■ | Expected life of the award. |

---

In addition, management discounts the estimated fair value of the Clyra Medical stock options because the partially-owned subsidiary is a private company with no secondary market for its common stock. Given the significant estimates involved in estimating the fair value of stock options, the related audit effort in evaluating management's estimates in determining the fair value of stock options was extensive and required a high degree of auditor judgment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F-3

------

**Report of Independent Registered Public Accounting Firm (continued)**

*How the Critical Audit Matter was Addressed in the Audit*

We obtained an understanding over the Company's process to estimate the fair value of stock options, including how the Company develops each of the estimates required to utilize the Black-Scholes option-pricing model. We applied the following audit procedures related to testing the Company's estimates utilized in the Black-Scholes option-pricing model:

---

| | |
|:---|:---|
| ■ | We compared the Company's risk-free interest rate used to the comparable United States Treasury yield for a term comparable to the stock options' expected term. |

---

---

| | |
|:---|:---|
| ■ | We recalculated the Company's historical share price volatility for a term comparable to the stock options' expected term. For Clyra Medical, we recalculated a comparable public company's historical share price volatility for a term comparable to the stock options' expected term. |

---

---

| | |
|:---|:---|
| ■ | We performed a look-back at the Company's previously issued dividends, noting there were none. We inquired with management of the Company who informed us that no future dividends were currently anticipated. |

---

---

| | |
|:---|:---|
| ■ | We agreed the expected term of stock options granted to employees and non-employees to the original contractual term of the option as management deems it likely they will remain outstanding for the entire original term. We further noted that this was consistent with historical options granted. |

---

In addition, we reviewed management's analysis over the fair value of the common stock price and discount that was used on the estimated fair value of the Clyra Medical stock options. We noted that Clyra Medical is a private company and therefore its common stock is not actively traded. We reviewed both the common stock and preferred stock sales history of Clyra Medical, noting the last sales prices. Management concluded that both the illiquidity and lack of marketability warranted a discount to the estimated fair value calculated using the Black-Scholes option-pricing model. From our review of the common stock sales history of Clyra Medical, we noted that the infrequent common stock sales support management's assertions of both illiquidity and lack of marketability. We further researched published articles on valuation discounts and noted that the liquidity and lack of marketability discount used by management was within a reasonable range.

*<u>Impairment of Long-lived Asset</u>* <u>–</u>*<u>Refer to Notes 2 and 9 to the Consolidated Financial Statements</u>*

*Critical Audit Matter Description*

As reflected in the Company's consolidated financial statements at December 31, 2022, the Company's net carrying amount of Clyra Medical prepaid marketing is $394,000. As disclosed in Note 2 to the consolidated financial statements, long-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. As a result of these assessments, management concluded that there was an impairment to the Company's prepaid marketing asset during the year ended December 31, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F-4

------

**Report of Independent Registered Public Accounting Firm (continued)**

Auditing management's impairment test of its prepaid marketing asset was complex and highly judgmental due to the significant measurement uncertainty in determining the fair value of the prepaid marketing asset. In particular, the fair value estimate of the prepaid marketing asset was sensitive to changes in significant assumptions such as discount rates and revenue growth rates. These assumptions are affected by expected future market or economic conditions.

*How the Critical Audit Matter was Addressed in the Audit*

We obtained an understanding of the Company's process to evaluate long-lived assets for impairment and related controls. We then obtained the projected revenues of Clyra Medical as well as the Company's calculation of the expected present value of the prepaid marketing asset that were used by management to determine the fair value of the prepaid marketing asset, in accordance with ASC 350 (*Intangibles* – *Goodwill and Other*).

We applied the following audit procedures related to testing the fair value of the prepaid marketing asset:

---

| | |
|:---|:---|
| ■ | We assessed the valuation methodologies and tested the reasonableness of significant assumptions and underlying data used by management, including forecasted revenue and discount rates. |

---

---

| | |
|:---|:---|
| ■ | We agreed the triggering start date and term used in the present value calculation to the forecasted revenue and the original contractual term. |

---

---

| | |
|:---|:---|
| ■ | We compared management's summary of the fair value of the prepaid marketing asset to its carrying value, noting that the carrying value exceeded the fair value of the prepaid marketing asset. As such, we concurred with management that there was an impairment of its prepaid marketing asset. |

---

/s/HASKELL & WHITE LLP

HASKELL & WHITE LLP

We have served as the Company's auditor since 2011.

Irvine, California

March 31, 2023

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F-5

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[**Table of Contents**](#toc)

**BIOLARGO, INC. AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

(in thousands, except for per share data)

---

| | | |
|:---|:---|:---|
|  | **DECEMBER 31,** | **DECEMBER 31,** |
|  | **2022** | **2021** |
| ***Assets*** | ***Assets*** | ***Assets*** |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp; Cash and cash equivalents | $&nbsp;&nbsp;&nbsp;&nbsp;1851 | $&nbsp;&nbsp;&nbsp;&nbsp;962 |
| &nbsp;&nbsp;&nbsp; Accounts receivable, net of allowance | &nbsp;&nbsp;&nbsp;&nbsp;1064 | &nbsp;&nbsp;&nbsp;&nbsp;513 |
| &nbsp;&nbsp;&nbsp; Inventories, net of allowance | &nbsp;&nbsp;&nbsp;&nbsp;120 | &nbsp;&nbsp;&nbsp;&nbsp;241 |
| &nbsp;&nbsp;&nbsp; Prepaid expenses and other current assets | &nbsp;&nbsp;&nbsp;&nbsp;118 | &nbsp;&nbsp;&nbsp;&nbsp;85 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total current assets | &nbsp;&nbsp;&nbsp;&nbsp;3153 | &nbsp;&nbsp;&nbsp;&nbsp;1801 |
| Equipment, net of depreciation | &nbsp;&nbsp;&nbsp;&nbsp;287 | &nbsp;&nbsp;&nbsp;&nbsp;61 |
| Other non-current assets | &nbsp;&nbsp;&nbsp;&nbsp;124 | &nbsp;&nbsp;&nbsp;&nbsp;69 |
| Investment in South Korean joint venture | &nbsp;&nbsp;&nbsp;&nbsp;33 | &nbsp;&nbsp;&nbsp;&nbsp;48 |
| Right of use, operating lease, net of amortization | &nbsp;&nbsp;&nbsp;&nbsp;867 | &nbsp;&nbsp;&nbsp;&nbsp;453 |
| Clyra Medical prepaid marketing (Note 10) | &nbsp;&nbsp;&nbsp;&nbsp;394 | &nbsp;&nbsp;&nbsp;&nbsp;591 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets | $&nbsp;&nbsp;&nbsp;&nbsp;4858 | $&nbsp;&nbsp;&nbsp;&nbsp;3023 |
| **Liabilities and stockholders**' **equity (deficit)** | **Liabilities and stockholders**' **equity (deficit)** | **Liabilities and stockholders**' **equity (deficit)** |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp; Accounts payable and accrued expenses | $&nbsp;&nbsp;&nbsp;&nbsp;940 | $&nbsp;&nbsp;&nbsp;&nbsp;559 |
| &nbsp;&nbsp;&nbsp; Clyra Medical accounts payable and accrued expenses | &nbsp;&nbsp;&nbsp;&nbsp;238 | &nbsp;&nbsp;&nbsp;&nbsp;230 |
| &nbsp;&nbsp;&nbsp; Debt obligations, net of discount (Note 4) | &nbsp;&nbsp;&nbsp;&nbsp;100 | &nbsp;&nbsp;&nbsp;&nbsp;314 |
| &nbsp;&nbsp;&nbsp; Deferred revenue | &nbsp;&nbsp;&nbsp;&nbsp;17 | &nbsp;&nbsp;&nbsp;&nbsp;89 |
| &nbsp;&nbsp;&nbsp; Lease liability | &nbsp;&nbsp;&nbsp;&nbsp;97 | &nbsp;&nbsp;&nbsp;&nbsp;103 |
| &nbsp;&nbsp;&nbsp; Deposits | &nbsp;&nbsp;&nbsp;&nbsp;184 | &nbsp;&nbsp;&nbsp;&nbsp;79 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total current liabilities | &nbsp;&nbsp;&nbsp;&nbsp;1576 | &nbsp;&nbsp;&nbsp;&nbsp;1374 |
| Long-term liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Debt obligations, net of current (Note 4) | &nbsp;&nbsp;&nbsp;&nbsp;237 | &nbsp;&nbsp;&nbsp;&nbsp;180 |
| &nbsp;&nbsp;&nbsp;Lease liability, net of current | &nbsp;&nbsp;&nbsp;&nbsp;773 | &nbsp;&nbsp;&nbsp;&nbsp;349 |
| &nbsp;&nbsp;&nbsp; Clyra Medical debt obligations (Note 10) | &nbsp;&nbsp;&nbsp;&nbsp;261 | &nbsp;&nbsp;&nbsp;&nbsp;187 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total long-term liabilities | &nbsp;&nbsp;&nbsp;&nbsp;1271 | &nbsp;&nbsp;&nbsp;&nbsp;716 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | &nbsp;&nbsp;&nbsp;&nbsp;2847 | &nbsp;&nbsp;&nbsp;&nbsp;2090 |
| COMMITMENTS AND CONTINGENCIES (Note 13) |  |  |
| STOCKHOLDERS' EQUITY (DEFICIT): |  |  |
| Preferred Series A, $0.00067 Par Value, 50,000,000 Shares Authorized, -0- Shares Issued and Outstanding, at December 31, 2022 and December 31, 2021 |  |  |
| Common stock, $0.00067 Par Value, 400,000,000 Shares Authorized, 278,462,706 and 255,893,726 Shares Issued, at December 31, 2022 and December 31, 2021 | &nbsp;&nbsp;&nbsp;&nbsp;186 | &nbsp;&nbsp;&nbsp;&nbsp;171 |
| Additional paid-in capital | &nbsp;&nbsp;&nbsp;&nbsp;148435 | &nbsp;&nbsp;&nbsp;&nbsp;143718 |
| Accumulated deficit | &nbsp;&nbsp;&nbsp;&nbsp;(143594) | &nbsp;&nbsp;&nbsp;&nbsp;(139121) |
| Accumulated other comprehensive loss | &nbsp;&nbsp;&nbsp;&nbsp;(149) | &nbsp;&nbsp;&nbsp;&nbsp;(115) |
| Total BioLargo Inc. and subsidiaries stockholders' equity | &nbsp;&nbsp;&nbsp;&nbsp;4878 | &nbsp;&nbsp;&nbsp;&nbsp;4653 |
| Non-controlling interest (Note 10) | &nbsp;&nbsp;&nbsp;&nbsp;(2867) | &nbsp;&nbsp;&nbsp;&nbsp;(3720) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total stockholders' equity | &nbsp;&nbsp;&nbsp;&nbsp;2011 | &nbsp;&nbsp;&nbsp;&nbsp;933 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and stockholders' equity | $&nbsp;&nbsp;&nbsp;&nbsp;4858 | $&nbsp;&nbsp;&nbsp;&nbsp;3023 |

---

*See accompanying notes to consolidated financial statements and report of Independent Registered Public Accounting Firm.*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F-6

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[**Table of Contents**](#toc)

**BIOLARGO, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS**

(in thousands, except for per share data)

---

| | | |
|:---|:---|:---|
| | **Year ended December 31,** | **Year ended December 31,** |
| | **2022** | **2021** |
| Revenue |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Product revenue | $&nbsp;&nbsp;&nbsp;4434 | $&nbsp;&nbsp;&nbsp;1572 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Service revenue | &nbsp;&nbsp;&nbsp;1450 | &nbsp;&nbsp;&nbsp;959 |
| Total revenue | &nbsp;&nbsp;&nbsp;5884 | &nbsp;&nbsp;&nbsp;2531 |
| Cost of revenue |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cost of goods sold | &nbsp;&nbsp;&nbsp;(2177) | &nbsp;&nbsp;&nbsp;(781) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cost of service | &nbsp;&nbsp;&nbsp;(850) | &nbsp;&nbsp;&nbsp;(647) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total cost of revenue | &nbsp;&nbsp;&nbsp;(3027) | &nbsp;&nbsp;&nbsp;(1428) |
| Gross profit | &nbsp;&nbsp;&nbsp;2857 | &nbsp;&nbsp;&nbsp;1103 |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Selling, general and administrative expenses | &nbsp;&nbsp;&nbsp;6731 | &nbsp;&nbsp;&nbsp;6172 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Research and development | &nbsp;&nbsp;&nbsp;1319 | &nbsp;&nbsp;&nbsp;1367 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment expense | &nbsp;&nbsp;&nbsp;197 | &nbsp;&nbsp;&nbsp;342 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total operating expenses | &nbsp;&nbsp;&nbsp;8247 | &nbsp;&nbsp;&nbsp;7881 |
| Operating loss | &nbsp;&nbsp;&nbsp;(5390) | &nbsp;&nbsp;&nbsp;(6778) |
| Other income (expense): |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; PPP forgiveness | &nbsp;&nbsp;&nbsp;174 | &nbsp;&nbsp;&nbsp;43 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Grant income | &nbsp;&nbsp;&nbsp;74 | &nbsp;&nbsp;&nbsp;55 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tax credit income | &nbsp;&nbsp;&nbsp;63 | &nbsp;&nbsp;&nbsp;20 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest expense | &nbsp;&nbsp;&nbsp;(53) | &nbsp;&nbsp;&nbsp;(234) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total other (expense) income | &nbsp;&nbsp;&nbsp;258 | &nbsp;&nbsp;&nbsp;(116) |
| Net loss | &nbsp;&nbsp;&nbsp;(5132) | &nbsp;&nbsp;&nbsp;(6894) |
| Net (loss) income attributable to noncontrolling interest | &nbsp;&nbsp;&nbsp;(659) | &nbsp;&nbsp;&nbsp;186 |
| Net loss attributable to common stockholders | $&nbsp;&nbsp;&nbsp;(4473) | $&nbsp;&nbsp;&nbsp;(7080) |
| Net loss per share attributable to common stockholders: |  |  |
| Loss per share attributable to stockholders – basic and diluted | $&nbsp;&nbsp;&nbsp;(0.02) | $&nbsp;&nbsp;&nbsp;(0.03) |
| Weighted average number of common shares outstanding: | 268302234 | &nbsp;&nbsp;&nbsp;247203625 |
| Comprehensive loss attributable to common stockholders |  |  |
| &nbsp;&nbsp;&nbsp; Net loss | $&nbsp;&nbsp;&nbsp;(5132) | $&nbsp;&nbsp;&nbsp;(6894) |
| &nbsp;&nbsp;&nbsp; Foreign currency translation adjustment | &nbsp;&nbsp;&nbsp;(34) | &nbsp;&nbsp;&nbsp;(14) |
| &nbsp;&nbsp;&nbsp; Comprehensive loss | (5166) | &nbsp;&nbsp;&nbsp;(6908) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Comprehensive income (loss) attributable to noncontrolling interest | &nbsp;&nbsp;&nbsp;(659) | &nbsp;&nbsp;&nbsp;186 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Comprehensive loss attributable to stockholders | $&nbsp;&nbsp;&nbsp;(4507) | $&nbsp;&nbsp;&nbsp;(7094) |

---

*See accompanying notes to consolidated financial statements and report of Independent Registered Public Accounting Firm.*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F-7

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[**Table of Contents**](#toc)

**BIOLARGO, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS**' **EQUITY (DEFICIT)**

(in thousands, except for share data)

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Common stock** | **Common stock** | **Additional**<br> **paid-in** | **Accumulated** | **Accumulated** <br> **other**<br> **comprehensive**  | **Non-**<br> **controlling** | **Total stockholders**' **equity**  |
|  | **Shares** | **Amount** | **capital** | **deficit** | **Loss** | **interest** | **(deficit)** |
| Balance, December 31, 2020 | 225885682 | $151 | $135849 | $(132041) | $(101) | $&nbsp;&nbsp;&nbsp;(4093) | $&nbsp;&nbsp;(235) |
| &nbsp;&nbsp;&nbsp; Conversion of notes | 1966439 | &nbsp;&nbsp;&nbsp;&nbsp;1 | 327 |  |  |  | 328 |
| &nbsp;&nbsp;&nbsp; Issuance of common stock for services | 2127467 | &nbsp;&nbsp;&nbsp;&nbsp;1 | 366 |  |  |  | 367 |
| &nbsp;&nbsp;&nbsp; Issuance of common stock for interest | 81777 |  | 16 |  |  |  | 16 |
| &nbsp;&nbsp;&nbsp; Sale of stock for cash | 29691886 | &nbsp;&nbsp;&nbsp;&nbsp;20 | 4862 |  |  |  | 4882 |
| &nbsp;&nbsp;&nbsp; Warrant exercise | 1283333 | &nbsp;&nbsp;&nbsp;&nbsp;1 | 163 |  |  |  | 164 |
| &nbsp;&nbsp;&nbsp; Return of shares held by Clyra Medical (re Scion) | (5142858) | &nbsp;&nbsp;&nbsp;&nbsp;(3) | (921) |  |  | 1286 | 362 |
| &nbsp;&nbsp;&nbsp; Stock option compensation expense | *—* |  | 1308 |  |  |  | 1308 |
| &nbsp;&nbsp;&nbsp; Fair value of warrant recorded as debt discount | *—* |  | 35 |  |  |  | 35 |
| &nbsp;&nbsp;&nbsp; Noncontrolling interest allocation | *—* |  | 1149 |  |  | (1149) |  |
| &nbsp;&nbsp;&nbsp; Clyra stock options issued for services | *—* |  | 564 |  |  |  | 564 |
| &nbsp;&nbsp;&nbsp; Issuance of Clyra common stock for cash | *—* |  |  |  |  | 50 | 50 |
| &nbsp;&nbsp;&nbsp; Net (loss) gain | *—* |  |  | (7080) |  | 186 | (6894) |
| &nbsp;&nbsp;&nbsp; Foreign currency translation | *—* |  |  |  | (14) |  | (14) |
| Balance, December 31, 2021 | 255893726 | $171 | $143718 | $(139121) | $(115) | $&nbsp;&nbsp;&nbsp;(3720) | $&nbsp;&nbsp;933 |
| &nbsp;&nbsp;&nbsp; Sale of stock for cash | 19580225 | &nbsp;&nbsp;&nbsp;&nbsp;13 | 3604 |  |  |  | 3617 |
| &nbsp;&nbsp;&nbsp; Stock issued as commitment fee | 1250000 | &nbsp;&nbsp;&nbsp;&nbsp;1 | (1) |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Issuance of common stock for services | 1448512 | &nbsp;&nbsp;&nbsp;&nbsp;1 | 290 |  |  |  | 291 |
| &nbsp;&nbsp;&nbsp; Stock option exercise | 290243 |  | 40 |  |  |  | 40 |
| &nbsp;&nbsp;&nbsp; Stock option compensation expense | *—* |  | 1663 |  |  |  | 1663 |
| &nbsp;&nbsp;&nbsp; Noncontrolling interest allocation | *—* |  | (1287) |  |  | 1287 |  |
| &nbsp;&nbsp;&nbsp; Clyra stock options issued for services | *—* |  | 408 |  |  |  | 408 |
| &nbsp;&nbsp;&nbsp; Sale of Clyra preferred stock for cash | *—* |  |  |  |  | 225 | 225 |
| &nbsp;&nbsp;&nbsp; Net (loss) gain | *—* |  |  | (4473) |  | (659) | (5132) |
| &nbsp;&nbsp;&nbsp; Foreign currency translation | *—* |  |  |  | (34) |  | (34) |
| Balance, December 31, 2022 | 278462706 | $186 | $148435 | $(143594) | $(149) | $&nbsp;&nbsp;&nbsp;(2867) | $&nbsp;&nbsp;2011 |

---

*See accompanying notes to consolidated financial statements and report of Independent Registered Public Accounting Firm.*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F-8

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**BIOLARGO, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

(in thousands, except for per share data)

---

| | | |
|:---|:---|:---|
| | **DECEMBER** <br> **31, 2022** | **DECEMBER** <br> **31, 2021** |
| Cash flows from operating activities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net loss | $&nbsp;&nbsp;&nbsp;(5132) | $&nbsp;&nbsp;(6894) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock option compensation expense | &nbsp;&nbsp;&nbsp;2071 | &nbsp;&nbsp;&nbsp;1872 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock issued for services | &nbsp;&nbsp;&nbsp;291 | &nbsp;&nbsp;&nbsp;367 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Impairment expense | &nbsp;&nbsp;&nbsp;197 | &nbsp;&nbsp;&nbsp;342 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Inventory reserve | &nbsp;&nbsp;&nbsp;158 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock issued for interest |  | &nbsp;&nbsp;&nbsp;16 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest expense related to amortization of the discount on convertible notes payable | &nbsp;&nbsp;&nbsp;17 | &nbsp;&nbsp;&nbsp;119 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loss on investment in South Korean joint venture | &nbsp;&nbsp;&nbsp;15 | &nbsp;&nbsp;&nbsp;15 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; PPP forgiveness | &nbsp;&nbsp;&nbsp;(174) | &nbsp;&nbsp;&nbsp;(43) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amortization and depreciation expense | &nbsp;&nbsp;&nbsp;45 | &nbsp;&nbsp;&nbsp;20 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Changes in assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts receivable | &nbsp;&nbsp;&nbsp;(551) | &nbsp;&nbsp;&nbsp;(29) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Inventories | &nbsp;&nbsp;&nbsp;(35) | &nbsp;&nbsp;&nbsp;36 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable and accrued expenses | &nbsp;&nbsp;&nbsp;382 | &nbsp;&nbsp;&nbsp;47 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Clyra accounts payable and accrued expenses | &nbsp;&nbsp;&nbsp;8 | &nbsp;&nbsp;&nbsp;132 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred revenue | &nbsp;&nbsp;&nbsp;(72) | &nbsp;&nbsp;&nbsp;41 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepaid expenses and other assets | &nbsp;&nbsp;&nbsp;(90) | &nbsp;&nbsp;&nbsp;(57) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Right of use and lease liability, net | &nbsp;&nbsp;&nbsp;3 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deposit | &nbsp;&nbsp;&nbsp;105 | &nbsp;&nbsp;&nbsp;79 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash used in operating activities | &nbsp;&nbsp;&nbsp;(2762) | &nbsp;&nbsp;&nbsp;(3937) |
| Cash flows from investing activities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Equipment purchases | &nbsp;&nbsp;&nbsp;(271) | &nbsp;&nbsp;&nbsp;(21) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Patent purchase | &nbsp;&nbsp;&nbsp;— | &nbsp;&nbsp;&nbsp;(13) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash used in investing activities | &nbsp;&nbsp;&nbsp;(271) | &nbsp;&nbsp;&nbsp;(34) |
| Cash flows from financing activities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from sale of common stock | &nbsp;&nbsp;&nbsp;3617 | &nbsp;&nbsp;&nbsp;4882 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from warrant exercise |  | &nbsp;&nbsp;&nbsp;164 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from BioLargo stock option exercise | &nbsp;&nbsp;&nbsp;40 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Repayment of note payable and line of credit |  | &nbsp;&nbsp;&nbsp;(828) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Repayment by Clyra on inventory line of credit | &nbsp;&nbsp;&nbsp;(26) | &nbsp;&nbsp;&nbsp;(37) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from sale of preferred stock in Clyra Medical | &nbsp;&nbsp;&nbsp;225 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from Clyra Medical note payable | &nbsp;&nbsp;&nbsp;100 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from sale of common stock in Clyra Medical |  | &nbsp;&nbsp;&nbsp;50 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash provided by financing activities | &nbsp;&nbsp;&nbsp;3956 | &nbsp;&nbsp;&nbsp;4231 |
| Net effect of foreign currency translation | &nbsp;&nbsp;&nbsp;(34) | &nbsp;&nbsp;&nbsp;(14) |
| Net change in cash | &nbsp;&nbsp;&nbsp;889 | &nbsp;&nbsp;&nbsp;246 |
| Cash at beginning of year | &nbsp;&nbsp;&nbsp;962 | &nbsp;&nbsp;&nbsp;716 |
| Cash at end of year | $&nbsp;&nbsp;&nbsp;1851 | $&nbsp;&nbsp;962 |
| Supplemental disclosures of cash flow information |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash paid during the year for: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest | $&nbsp;&nbsp;&nbsp;36 | $&nbsp;&nbsp;99 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income taxes | $&nbsp;&nbsp;&nbsp;3 | $&nbsp;&nbsp;2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Short-term lease payments not included in lease liability | $&nbsp;&nbsp;&nbsp;99 | $&nbsp;&nbsp;52 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-cash investing and financing activities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Return of in-process research and development (Scion) | $&nbsp;&nbsp;&nbsp;— | $&nbsp;&nbsp;&nbsp;1804 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cancellation of Clyra debt obligations and accounts payable (Scion) | $&nbsp;&nbsp;&nbsp;— | $&nbsp;&nbsp;(1465) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Liability to Scion shareholders | $&nbsp;&nbsp;&nbsp;— | $&nbsp;&nbsp;(540) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fair value of warrants issued with convertible notes and letter of credit | $&nbsp;&nbsp;&nbsp;— | $&nbsp;&nbsp;35 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Conversion of convertible notes payable into common stock | $&nbsp;&nbsp;&nbsp;— | $&nbsp;&nbsp;328 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value of common stock issued to Lincoln Park as finance fee | $&nbsp;&nbsp;&nbsp;240 | $&nbsp;&nbsp;— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Present value of new operating right of use and lease liability | $&nbsp;&nbsp;&nbsp;443 | $&nbsp;&nbsp;186 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Allocation of stock option expense within noncontrolling interest | $&nbsp;&nbsp;&nbsp;1287 | $&nbsp;&nbsp;1149 |

---

*See accompanying notes to consolidated financial statements and report of Independent Registered Public Accounting Firm*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F-9

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

**Note *1.* Business and Organization** 

***<u>Description of Business</u>* **

BioLargo, Inc. ("BioLargo", or the "Company") 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 control, air quality control, infection control, and myriad environmental 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.

***<u>Liquidity / Going concern</u>***

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 year ended *December 31, 2022,* we had a net loss of $5,132,000, used $2,762,000 cash in operations, and at *December 31, 2022,* we had working capital of $1,587,000, and current assets of $3,153,000. We do *not* believe gross profits in *2023* will be sufficient to fund our current level of operations, and therefore we will have to obtain further investment capital to continue to fund operations and seek to refinance our existing debt. We have been, and anticipate that we will continue to be, limited in terms of our capital resources.

During the year ended *December 31, 2022,* we generated revenues of $5,884,000 through our subsidiaries. (See Note *12.*) Our subsidiaries did *not* in the aggregate generate enough revenues or gross profits to fund their operations, or to fund our corporate operations or other business segments. To meet our cash obligations during the year ended *December 31, 2022,* we (i) sold 6,011,701 shares of our common stock to Lincoln Park Capital Fund, LLC ("Lincoln Park") for $1,253,000 (see Note *3*), and (ii) sold 13,568,524 shares of common stock and issued warrants to purchase 27,137,048 shares of common stock to private investors for $2,364,000 (see Notes *3* and *6*).

As of *December 31, 2022,* our cash and cash equivalents totaled $1,851,000. Our total liabilities included $50,000 in debt that is due at the *March 2023* maturity date, $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 $261,000 owed a subsidiary due in *2024* (see Note *10*).

Subsequent to *December 31, 2022,* we continue to sell common stock to Lincoln Park for working capital as needed (see Note *14*).

If we are unable to rely on our current arrangement with Lincoln Park 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *10*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

***<u>Organization</u>***

We are a Delaware corporation formed in *1991.* We have six 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 Energy Technologies, Inc. (formerly BioLargo Water Investment Group, Inc.) organized under the laws of the State of California in *2019,* 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 *11*) of BioLargo Engineering Science and Technologies, LLC ("BLEST"), organized under the laws of the State of Tennessee in *2017,* and 58% of Clyra Medical Technologies, Inc. ("Clyra" or "Clyra Medical"), organized under the laws of the State of California in *2012.* We consolidate the financial statements of our partially owned subsidiaries (see Note *2,* subheading "Principles of Consolidation," and Note *10*).

**Note *2.* Summary of Significant Accounting Policies** 

***<u>Principles of Consolidation</u>***

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

***<u>Foreign Currency</u>***

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.

***<u>Cash and Cash Equivalents</u>***

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. 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 *December 31, 2022* and *2021,* our cash balances were made up of the following (in thousands):

---

| | | |
|:---|:---|:---|
| | **December 31,** <br> **2022** | **December 31,**<br> **2021** |
| BioLargo, Inc. and subsidiaries | $1685 | $941 |
| Clyra Medical Technologies, Inc. | 166 | 21 |
| Total | $1851 | $962 |

---

***<u>Accounts Receivable</u>***

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 *December 31, 2022* and *2021* was *$12,000.*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *11*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

***<u>Credit Concentration</u>***

We have a limited number of customers that account for significant portions of our revenue. During the year ended *December 31, 2022,* there were two customers that each accounted for more than 10% of consolidated revenues, and during the year ended *December 31, 2021,* there were three customers that each accounted for more than 10% of consolidated revenues, as follows:

---

| | | |
|:---|:---|:---|
|  | **December 31,** <br> **2022** | **December 31,** <br> **2021** |
| Customer A | 47% | <10% |
| Customer B | 10% | <10% |
| Customer C | <10% | 14% |
| Customer D | <10% | 11% |
| Customer E | <10% | 11% |

---

We had one customer that accounted for more than 10% of consolidated accounts receivable at *December 31, 2022* and two customers that each accounted for more than 10% of consolidated accounts receivable at *December 31, 2021,* as follows:

---

| | | |
|:---|:---|:---|
| | **December 31,** <br> **2022** | **December 31,** <br> **2021** |
| Customer A | 24% | <10% |
| Customer F | <10% | 32% |
| Customer G | <10% | 12% |

---

***<u>Inventory</u>***

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

---

| | | |
|:---|:---|:---|
| | **December 31,** <br> **2022** | **December 31,** <br> **2021** |
| Raw material | $46 | $108 |
| Finished goods | 74 | 133 |
| Total | $120 | $241 |

---

***<u>Other Non-Current Assets</u>***

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, of which $13,000 was paid in cash and the remaining $21,000 was paid through the issuance of 125,000 shares of common stock at $0.17 per share. The tax credit receivable is from the Canadian government related to a research and development credit from our Water subsidiary for which we've applied for and received in prior periods.

---

| | | |
|:---|:---|:---|
| | **December 31,** <br> **2022** | **December 31,** <br> **2021** |
| Patents | $34 | $34 |
| Security deposits | 36 | 35 |
| Tax credit receivable | 54 |  |
| Total | $124 | $69 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *12*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

***<u>Equity</u> <u>Method of</u> <u>Accounting</u>***

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.

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. During the years ended *December 31, 2022* and *2021,* the joint venture incurred a loss and our 40% ownership share reduced our investment interest by $15,000 each year.

***<u>Impairment</u>***

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 year ended *December 31, 2022,* management determined that there was an impairment of Clyra's prepaid marketing asset (See Note *9*).

For the year 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" (see Note *9*), and an impairment of Clyra's prepaid marketing asset (see Note *9*). Total impairment expense for the years ended *December 31, 2022* and *2021* is $197,000 and $342,000, respectively.

***<u>Earnings (Loss) Per Share</u>***

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 years ended *December 31, 2022* and *2021,* 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.

***<u>Use of Estimates</u>***

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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *13*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

***<u>Share-Based Compensation Expense</u>***

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.

The following methodology and assumptions were used to calculate share-based compensation for the years ended *December 31, 2022* and *2021:*

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **2022** | **2022** | **2022** | **2022** | **2021** | **2021** | **2021** | **2021** |
|  | **Non Plan** | **Non Plan** | **2018 Plan** | **2018 Plan** | **Non Plan** | **Non Plan** | **2018 Plan** | **2018 Plan** |
| Risk free interest rate | 2.32 | *3.83*% | 2.32 | 3.83% | *1.49* | 1.73% | 0.93 | 1.73% |
| Expected volatility | 114 | *117*% | 114 | 117% | *118* | 124% | 118 | 124% |
| 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 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.

***<u>Warrants</u>***

Warrants issued with our convertible 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *14*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

***<u>Non-Cash Transactions</u>***

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 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.

***<u>Revenue Recognition</u>***

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:

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

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| | |
|:---|:---|
| Step *2:* | Identify the performance obligations in the contract. |

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| | |
|:---|:---|
| Step *3:* | Determine the transaction price. |

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

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

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The Company's products are sold through a contract with the customer 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 goods are shipped if the agreement is FOB manufacturer, and when goods are delivered if FOB destination. Revenue is recognized with a reduction for sales discounts, as appropriate and negotiated in the customer's purchase order.

Service contracts are performed through a written contract, which specifies the performance obligations and the rate at which the services will be billed, typically by time and materials. Each service is separately negotiated and priced. Revenue is recognized as services are performed and completed, or, for services related to product installations, at the completion of the installation. A few contracts have called for milestone or fixed cost payments, where we invoice an agreed-to amount 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 receivable or payable is created. 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.

In the event that we generate revenues from royalties or license fees from our intellectual property, we anticipate a licensee would pay a license fee in *one* or more installments and ongoing royalties based on their sales of products incorporating or using our licensed intellectual property. Upon entering into a licensing agreement, we will determine the appropriate method of recognizing the royalty and license fees.

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.

***<u>Government Grants</u>***

We have been awarded multiple research grants from the private and public Canadian research programs. Income we receive directly from grants is recorded as other income. We have been awarded over *80* grants 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 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *15*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

***<u>Income Taxes</u>***

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 *December 31, 2022* and *2021.*

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 *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.

***<u>Fair Value of Financial Instruments</u>***

Management believes the carrying amounts of the Company's financial instruments as of *December 31, 2022* and *2021* 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, 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.

***<u>Tax Credits</u>***

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. Those refunds are classified in Other Income on our Consolidated Statement of Operations and Comprehensive Loss.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *16*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

***<u>Leases</u>***

In *February 2016,* the FASB issued ASU Update *No. 2016*-*02,* "Leases," which requires lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability, and lessors to recognize a net lease investment. Additional qualitative and quantitative disclosures are also required (see Note *11*). 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 assets and liabilities; this balance *may* fluctuate over time as we enter into new leases, extend or terminate current leases. Upon the transition to ASC *842,* the Company elected to use hindsight as a practical expedient with respect to determining the lease terms and in assessing any impairment of right-of-use assets for existing leases As of *December 31, 2022,* the right-of-use assets totaled $867,000 and the lease liability totaled $870,000 on our balance sheet related to our operating leases.

<u>***Equipment***</u>

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.

***<u>Recent Accounting Pronouncements</u>***

*None.*

**Note *3.* Sale of Stock for Cash**

***<u>Lincoln Park Financing</u>***

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* lowest closing prices in the prior *12* business days. There are *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 entered into a Registration Rights Agreement, pursuant to 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.*

Pursuant to the *2022* LPC Purchase Agreement, we issued 1,250,000 shares to Lincoln Park as a commitment fee, valued at $240,000 and recorded as additional-paid-in-capital on our equity statement.

Pursuant to a similar purchase agreement dated *March 30, 2020,* during the years ended *December 31, 2022* and *2021,* we sold 6,011,701 and 24,255,920 shares to Lincoln Park, and received $1,253,000 and $4,018,000, respectively, in gross and net proceeds. Subsequent to *December 31, 2022,* we began to draw on the *2022* LPC Purchase Agreement for working capital (see Note *14*).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *17*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

***<u>Unit Offerings</u>***

During the year ended *December 31, 2022,* we sold 13,568,524 shares of our common stock and received $2,364,000 in gross and net proceeds from accredited investors. In addition to the shares, we issued each investor a *six*-month and a five-year warrant to purchase additional shares. (See Note *6,* "Warrants Issued in Unit Offering".) During the year ended *December 31, 2021,* we sold 5,435,966 shares of our common stock and received $864,000 in gross and net proceeds from accredited investors. In addition to the shares, we issued each shareholder a six-month and a five-year warrant to purchase additional shares. (See Note *6,* "Warrants Issued in Unit Offering".)

**Note *4.* Debt Obligations**

The following table summarizes our debt obligations outstanding as of *December 31, 2022* and *2021* (in thousands). The table does *not* include debt obligations of our partially owned subsidiary Clyra Medical (see Note *10,* "Debt Obligations of Clyra Medical").

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
| | **2022** | **2021** |
| **Current portion of debt:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SBA Paycheck Protection Program loan | $&nbsp;&nbsp;&nbsp;&nbsp;43 | $&nbsp;&nbsp;&nbsp;&nbsp;314 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Convertible note payable, matures March 1, 2023 | &nbsp;&nbsp;&nbsp;&nbsp;50 | &nbsp;&nbsp;&nbsp;&nbsp;— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SBA EIDL Loan, matures July 2053, current portion | &nbsp;&nbsp;&nbsp;&nbsp;10 | &nbsp;&nbsp;&nbsp;&nbsp;— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Debt discount, net of amortization | &nbsp;&nbsp;&nbsp;&nbsp;(3) | &nbsp;&nbsp;&nbsp;&nbsp;— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total current portion of debt | $&nbsp;&nbsp;&nbsp;&nbsp;100 | $&nbsp;&nbsp;&nbsp;&nbsp;314 |
| **Long-term debt:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SBA Paycheck Protection Program loans, matures May 2025 | $&nbsp;&nbsp;&nbsp;&nbsp;97 | $&nbsp;&nbsp;&nbsp;&nbsp;— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Convertible note payable, matures March 1, 2023 | &nbsp;&nbsp;&nbsp;&nbsp;— | &nbsp;&nbsp;&nbsp;&nbsp;50 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Debt discount, net of amortization |  | &nbsp;&nbsp;&nbsp;&nbsp;(20) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SBA EIDL Loan, matures July 2053 | &nbsp;&nbsp;&nbsp;&nbsp;140 | &nbsp;&nbsp;&nbsp;&nbsp;150 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total long-term debt, net of current | $&nbsp;&nbsp;&nbsp;&nbsp;237 | $&nbsp;&nbsp;&nbsp;&nbsp;180 |
| Total | $&nbsp;&nbsp;&nbsp;&nbsp;337 | $&nbsp;&nbsp;&nbsp;&nbsp;494 |

---

For the years ended *December 31, 2022* and *2021,* we recorded $53,000 and $234,000 of interest expense related to the amortization of discounts on convertible notes payable and coupon interest from our convertible notes and lines of credit.

***<u>Cash payment of Debt Obligations</u>***

On *August 13, 2021,* we paid $178,000 in cash to Vernal Bay Investments, LLC, as payment of *one*-half the outstanding principal on the convertible note scheduled to mature on *August 12, 2021.* In addition, we issued 1,272,321 shares of our common stock to pay the remaining $228,000 principal and interest due on the note.

On *March 1, 2021,* we paid in cash the outstanding principal of $600,000 on the promissory note issued *August 9, 2019,* and scheduled to mature on *August 9, 2021.*

On *March 1, 2021,* we paid in cash the outstanding principal of $50,000 on the remaining amount due on a line of credit in which was due on demand at any time after *September 1, 2019.* There is no remaining balance on this line of credit, and we *no* longer have the ability to draw on the line of credit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *18*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

***<u>Conversion of Debt Obligations</u>***

On its maturity date of *April 20, 2021,* we converted to equity a promissory note in the principal balance of $100,000 into 400,000 shares of our common stock, and $9,994 of accrued interest into 48,706 shares of our common stock.

***<u>Convertible note payable, matures *March 1, 2023*</u>***

On *March 8, 2018,* we received $50,000 and entered into a note payable. The note is due on upon demand from the noteholder, with *sixty* days' notice. On *March 1, 2021,* we and the holder of a $50,000 note payable modified the note to set a specific maturity date of *March 1, 2023,* and allow the investor to convert the note to our common stock at a price of $0.16 per share. In lieu of interest during the extended period of the note, we issued the investor a stock purchase warrant (see Note *6*). Subsequent to *December 31, 2022,* this note was paid (see Note *14*).

***<u>SBA</u> <u>Program</u> <u>Loans</u>***

On *February 7, 2022,* we received notice that the SBA had forgiven $174,000 of ONM Environmental's $217,243 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 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 *May 2025.* On *March 19, 2021,* we received notice that the SBA had approved the application for forgiveness of Clyra's PPP loan totaling $43,000.

In *July 2020,* our subsidiary ONM Environmental received an Economic Injury Disaster loan from the U.S. Small Business Administration in the amount of $150,000. The has a 3.75% annual interest rate. Monthly payments of $800 began *January 2023.*

**Note *5.* Share-Based Compensation**

<u>***Issuance of Common Stock in exchange for Services***</u>

***Payment of Officer Salaries***

During the year ended *December 31, 2022,* certain of our officers agreed to convert an aggregate $120,000 of accrued and unpaid salary into 532,225 shares of our common stock. The unpaid salary is converted on the last day of each quarter as follows: on *September 30, 2022,* we issued 268,330shares of our common stock at $0.27; on *June 30, 2022,* we issued 263,895 shares of our common stock at $0.18 per share.

During the year ended *December 31, 2021,* certain of our officers agreed to convert an aggregate $46,000 of accrued and unpaid salary into 214,206 shares of our common stock. The unpaid salary is converted on the last day of each quarter as follows: *December 31, 2021,* we issued 15,000 shares of our common stock at $0.21 per share; on *September 30, 2021,* we issued 61,842 shares of our common stock at $0.19; on *March 31, 2021,* we issued 137,364 shares of our common stock at $0.23 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 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 recognition of $3,000,000 in revenue, over a *12*-month period from the sale of products and/or the license of technology; and (iii) the Company's breach of the employment agreement between the Company and Officer and resulting in Officer's termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *19*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

***Payment of Consultant Fees***

During *2022,* certain of our consultants agreed to convert an aggregate $171,000 accrued and unpaid obligations into 916,287 shares of our common stock. The unpaid obligations were converted on the last day of each quarter as follows: *December 30, 2022,* we issued 642,041 shares of our common stock at $0.20 per share; on *September 30, 2022,* we issued 110,498 shares of our common stock at $0.27; on *June 30, 2022,* we issued 76,996 shares of our common stock at $0.18; on *March 31, 2022,* we issued 86,752 shares of our common stock at $0.23 per share.

During *2021,* certain of our consultants agreed to convert an aggregate $282,000 accrued and unpaid obligations into 1,913,261 shares of our common stock. The unpaid obligations were converted on the last day of each quarter as follows: *December 31, 2021,* we issued 348,772 shares of our common stock at $0.21 per share; *September 30, 2021,* we issued 586,963 shares of our common stock at $0.19 per share; *June 30, 2020,* we issued 367,403 shares of our common stock at $0.16 per share; *March 31, 2021,* we issued 610,123 shares of our common stock at $0.23 per share.

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.

***Payment of Interest***

During *June 2021,* pursuant to terms included in our debt agreements, we converted an aggregate $16,000 accrued interest into 81,777 shares of our common stock at $0.19 per share.

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.

***<u>Stock Option Expense</u>***

During the years ended *December 31, 2022* and *2021,* we recorded an aggregate $2,071,000 and $1,872,000, respectively, in selling general and administrative expense related to the issuance of stock options. Of that amount, we recorded an aggregate $2,071,000 and $1,872,000, in selling general and administrative expense related to the issuance of stock options. We issued options through our *2018* Equity Incentive Plan, and outside of this plan. Of that amount, $408,000 and $564,000 were issued by our subsidiary Clyra Medical (see Note *10*).

***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*<sup>st</sup> by the lesser of (a) 2 million shares, or (b) such number of shares determined by our Board. As of *December 31, 2022,* 48,000,000 shares are authorized under the plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *20*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Activity for our stock options under the *2018* Plan during the year ended *December 31, 2022,* and the year ended *December 31, 2021,* is as follows:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  |  |  | | **Weighted** |  |
|  |  |  | | **Average** | **Aggregate** |
|  | ***Options*** | ***Exercise*** | ***Exercise*** | ***Price per*** | ***Intrinsic*** |
|  | ***Outstanding*** | ***Price per share*** | ***Price per share*** | ***share*** | **Value<sup>(1)</sup>** |
| Balance, December 31, 2020 | 18865525 | $0.12 | 0.43 | $0.19 |  |
| Granted | 4320617 | $0.13 | 0.23 | $0.19 |  |
| Balance, December 31, 2021 | 23186142 | $0.12 | 0.43 | $0.19 |  |
| Granted | 6322233 | $0.18 | 0.27 | $0.22 |  |
| Exercised | (290243) | $0.13 | 0.23 | $0.16 |  |
| Expired | (733583) | $0.12 | 0.40 | $0.33 |  |
| Balance, December 31, 2022 | 28484549 | $0.12 | 0.43 | $0.19 |  |
| Non-vested | (3746708) | $0.18 | 0.27 | $0.19 |  |
| Vested, December 31, 2022 | 24737841 | $0.12 | 0.43 | $0.19 | $596000 |

---

(*1*) – Aggregate intrinsic value based on closing common stock price of $0.20 at *December 31, 2022.*

The options granted to purchase 6,322,233 shares during the year ended *December 31, 2022* with an aggregate fair value of $1,329,000 were issued to officers, board of directors, employees and consultants: (i) we issued options to purchase 495,135 shares of our common stock at an exercise price on the respective grant date of $0.17 and $0.23 per share to our CFO and President to replace options that had expired and resulted in a fair value of $97,000; (ii) we issued options to purchase 1,861,456 shares of our common stock at an exercise price on the respective grant date ranging between $0.18 – $0.27 per share to members of our board of directors for services performed, in lieu of cash; the fair value of these options totaled $401,000; (iii) we issued options to purchase 2,933,901 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 per share; the fair value of employee retention plan options totaled $608,000 and will vest quarterly over four years as long as they are retained as employees; (iv) we issued options to purchase 731,741 shares of our common stock to consultants in lieu of cash for expiring options and per agreement totaling $155,000, and (v) we issued 300,000 options to our Chief Financial Officer with a fair value of $68,000(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.

**<u>Chief Financial Officer Contract Extension</u>**

On *March 22, 2022,* 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 (*the "Engagement Extension Agreement") provides for an additional one-year term through *January 31, 2023 (*the "Extended Term"; see Note *14*).

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,* and the remaining shares to vest 25,000 shares monthly beginning *March 22, 2022,* and each month thereafter, so long as the agreement is in full force and effect. The Option is exercisable at $0.24 per share, the closing price of BioLargo's common stock on *March 22, 2022,* 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. See also Note *14,* Subsequent Events.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *21*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

***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 years ended *December 31, 2022* and *2021* is as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | | ***Exercise*** | ***Exercise*** | | |
| | <br>***Options***<br>***Outstanding*** | ***price per share*** | ***price per share*** | **Weighted**<br>**Average**<br>***Price per***<br>***share*** | <br>**Aggregate**<br>***intrinsic***<br>**Value<sup>(1)</sup>** |
| Balance, December 31, 2020 | 5689363 | $0.23 | 0.94 | $0.44 |  |
| &nbsp;&nbsp;&nbsp; Expired | (2810117) | 0.34 | 0.51 | 0.38 |  |
| Balance, December 31, 2021 | 2879246 | $0.23 | 0.94 | $0.49 |  |
| &nbsp;&nbsp;&nbsp; Expired | (975161) | 0.35 | 0.40 | 0.36 |  |
| Balance, December 31, 2022 | 1904085 | $0.23 | 0.94 | $0.56 | $*—* |

---

<sup>(*1*)</sup> – Aggregate intrinsic value based on closing common stock price of $0.20 at *December 31, 2022.*

***Non-Plan Options issued***

Activity of our non-plan stock options issued for the years ended *December 31, 2022* and *2021* is as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | | ***Exercise*** | ***Exercise*** | | |
| | <br>***Non-plan***<br>***Options***<br>***outstanding*** | ***price per share*** | ***price per share*** | **Weighted**<br>***average***<br>***price per***<br>***share*** | <br>***Aggregate***<br>***intrinsic***<br>**value**<sup>(1)</sup>** |
| Balance, December 31, 2020 | 20749583 | $0.12 | 1.00 | $0.41 |  |
| &nbsp;&nbsp;&nbsp; Granted | 169624 | 0.17 | 0.23 | *0.20* |  |
| &nbsp;&nbsp;&nbsp; Expired | (800000) | 1.00 | 1.00 | 1.00 |  |
| Balance, December 31, 2021 | 20119207 | $0.12 | 0.83 | $0.39 |  |
| &nbsp;&nbsp;&nbsp; Granted | 571358 | 0.17 | 0.27 | 0.19 |  |
| &nbsp;&nbsp;&nbsp; Expired | (1666736) | 0.30 | 0.40 | 0.31 |  |
| Balance, December 31, 2022 | 19023829 | $0.12 | 0.83 | $0.39 |  |
| &nbsp;&nbsp;&nbsp; Unvested | (507500) | 0.45 | 0.45 | 0.45 |  |
| Vested and outstanding, December 31, 2022 | 18516329 | $0.12 | 0.83 | $0.39 | $77000 |

---

(*1*) – Aggregate intrinsic value based on closing common stock price of $0.20 at *December 31, 2022.*

During the year ended *December 31, 2022,* we issued options to purchase an aggregate 571,358 shares of our common stock at exercise prices ranging between $0.17 – $0.27 per share to vendors for fees for services. The fair value of the options issued totaled an aggregate $109,000 and is recorded in our selling, general and administrative expense.

During the year ended *December 31, 2021,* we issued options to purchase an aggregate 169,624 shares of our common stock at exercise prices ranging between $0.17 – $0.23 per share to vendors for fees for services. The fair value of the options issued totaled an aggregate $34,000 and is recorded in our selling, general and administrative expense.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *22*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

**Note *6.* Warrants**

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

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | | ***Exercise*** | ***Exercise*** | | |
| | <br>***Warrants***<br>***outstanding*** | ***price per share*** | ***price per share*** | **Weighted**<br>**average**<br>***price per***<br>***share*** | <br>**Aggregate**<br>***intrinsic***<br>**value**<sup>(1)</sup>** |
| Balance, December 31, 2020 | 32980989 | $0.13 | 1.00 | $0.29 |  |
| &nbsp;&nbsp;&nbsp; Granted | 11096992 | 0.12 | 0.14 | 0.21 |  |
| &nbsp;&nbsp;&nbsp; Exercised | (1283333) | 0.12 | 0.14 | 0.13 |  |
| &nbsp;&nbsp;&nbsp; Expired | (6029086) | 0.12 | 0.70 | 0.30 |  |
| Balance, December 31, 2021 | 36765562 | $0.13 | 1.00 | $0.27 |  |
| &nbsp;&nbsp;&nbsp; Granted | 27137048 | 0.12 | 0.14 | 0.23 |  |
| &nbsp;&nbsp;&nbsp; Exercised |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Expired | (14879152) | 0.12 | 0.48 | 0.24 |  |
| Balance, December 31, 2022 | 49023398 | $0.13 | 1.00 | $0.26 | $691000 |

---

(*1*) – Aggregate intrinsic value based on closing common stock price of $0.20 at *December 31, 2022.*

***<u>Warrants issued in Unit Offerings</u>***

During the year ended *December 31, 2022,* pursuant to our Unit Offerings (see Note *3*), we issued six-month stock purchase warrants to purchase an aggregate 13,568,524 shares of our common stock at prices from $0.19 - $0.26 per share, and five-year stock purchase warrants to purchase an aggregate 13,568,524 shares of our common stock at prices from $0.24 - $0.33 per share.

During the year ended *December 31, 2021,* pursuant to our Unit Offering (see Note *3*), we issued six-month stock purchase warrants to purchase an aggregate 5,435,996 shares of our common stock at prices from $0.14 - $0.23 per share, and five-year stock purchase warrants to purchase an aggregate 5,435,996 shares of our common stock at prices from $0.16 - $0.29 per share.

***<u>Warrant issued in conjunction with amendment to note payable</u>***

On *March 1, 2021,* we and the holder of a $50,000 note payable modified the note (see Note *4*). In lieu of interest during the extended period of the note, we issued the investor a warrant to purchase 225,000 shares of our common stock at $0.16 per share for a period of five years. The fair value of these warrants totaled $35,000 and is recorded as a debt discount on our consolidated balance sheets, of which amount will be amortized to interest expense over the two-year term of the debt.

***<u>Exercise of Warrants</u>***

During the year ended *December 31, 2021,* we issued an aggregate 1,283,333 shares of our common stock from the exercise of outstanding stock purchase warrants and in exchange we received proceeds totaling an aggregate $164,000.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *23*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

***<u>Fair Value</u>*** <u>–</u>***<u>Interest Expense</u>***

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. The principal assumptions we used in applying this model were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **2022** | **2022** | **2021** | **2021** |
| Risk free interest rate | 3.69 | 3.88% | 0.71% | 0.71% |
| Expected volatility | 40% | 40% | 100% | 100% |
| Expected dividend yield | *—* | *—* | *—* | *—* |
| Forfeiture rate | *—* | *—* | *—* | *—* |
| Expected life in years | *3* | *3* | .5 | 5 |

---

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** 

As of *December 31, 2022,* accounts payable and accrued expenses included the following (in thousands):

---

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

---

As of *December 31, 2021,* accounts payable and accrued expenses included the following (in thousands):

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Category | BioLargo | ONM | BLEST | Water | Intercompany<br> amounts | Totals |
| Accounts payable | $156 | $72 | $73 | $96 | $(47) | $350 |
| Accrued payroll | 37 | 53 | 94 |  |  | 184 |
| Accrued interest | 25 |  |  |  |  | 25 |
| Total |  |  |  |  |  | $559 |

---

See Note *10,* "Accounts Payable and Accrued Expenses", for the accounts payable and accrued expenses of Clyra Medical.

**Note *8.* Provision for Income Taxes**

Given our historical losses from operations, income tax obligations have been limited to the minimum franchise tax assessed by the State of California. Since *2016,* we have *not* consolidated for tax purposes our subsidiary Clyra Medical, as our ownership interest was less than *80%.* Our subsidiary BLEST is a Tennessee limited liability company and as such, is *not* consolidated in our corporate tax return. As a pass-through entity, it does *not* pay federal taxes. However, the state of Tennessee charges franchise and excise taxes for limited liability companies, and thus BLEST will incur a nominal franchise tax and will *not* pay an excise tax unless and until it is profitable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *24*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At *December 31, 2022,* we had federal and California tax net operating loss carry-forwards ("NOLs") of approximately $101,000,000 and $54,000,000 respectively. Due to changes in our ownership through common stock issuances throughout the year, the utilization of NOLs *may* be subject to annual limitations and discounts under provisions of the Internal Revenue Code. We have *not* conducted a complete analysis to determine the extent of these limitations or any future limitation. Such limitations could result in the permanent loss of a significant portion of the NOLs. Under the Tax Cuts and Jobs Act ("TCJA") signed into law on *December 22, 2018, post-2018* NOLs *may* be carried forward indefinitely, and *pre-2018* NOLs have a *20*-year limitation on carryforwards; however, the NOLs are limited to the lesser of (*1*) the aggregate of the NOL carryovers to such year, plus the NOL carry-backs to such year, or (*2*) *80%* of taxable income (determined without regard to the deduction) (Internal Revenue Code Sec. *172*(a)). Generally, NOLs can *no* longer be carried back but are allowed to be carried forward indefinitely (Sec. *172*(b)(*1*)(A), which applies to *2018* and later NOLs only). Nevertheless, for California purposes, the additional taxable income limitations on NOL carryforwards as well as the indefinite time to use the NOLs have *not* been adopted. Therefore, for California, NOLs expire after 20 years. As such, ours will begin to expire in for the tax period ending *December 31, 2024.* Realization of our deferred tax assets, which relate to operating loss carryforwards and timing differences, is dependent on future earnings. The timing and amount of future earnings are uncertain and therefore we have established a 100% valuation allowance.

**Note *9.* In-Process Research and Development; Impairment expense**

***<u>Scion Solutions Transaction dated *March 1, 2022*</u>***

On *September 26, 2018,* BioLargo and Clyra Medical entered into a transaction (the "Scion Transaction") whereby BioLargo would acquire, and then license back to Clyra, the intangible assets of Scion Solutions, LLC ("Scion"), and in particular its in-process research and development of the "SkinDisc," a method for treating advanced hard-to-treat wounds including diabetic ulcers. In addition to a pending patent application, the assets included the technical know-how and data developed by the Scion team.

The consideration provided to Scion, which was subject to an escrow agreement dated *September 26, 2018 (*"Escrow Agreement") and earn out provisions, included: (i) 21,000 shares of the Clyra Medical common stock; (ii) 10,000 shares of Clyra Medical common stock redeemable for 7,142,858 BioLargo common shares (detailed below); and (iii) a promissory note in the principal amount of $1,250,000 owed by Clyra Medical ("Clyra-Scion Note"). The Clyra-Scion note accrued interest at an annual rate of 5%. As of *December 31, 2021,* $243,000 had be paid in reduction of principal owed on the Clyra-Scion note.

Immediately following Clyra Medical's purchase of Scion's intangible assets, Clyra Medical sold to BioLargo the assets, along with 12,755 Clyra Medical common shares. In exchange, BioLargo issued Clyra Medical 7,142,858 shares of BioLargo common stock. Concurrently, BioLargo licensed back to Clyra Medical the Scion assets. Scion *may* exchange its 10,000 Clyra Medical common shares for the 7,142,858 shares of BioLargo common stock issued to Clyra Medical, subject to the escrow and earn-out provisions described above. The fair value of the *7,142,858* BioLargo shares at *December 31, 2020,* was $2,150,000.

During the year ended *December 31, 2020,* Clyra Medical's gross revenue exceeded $200,000, and thus the *first* and *second* performance metrics in the Escrow Agreement were met. As a result, Scion vested 6,200 Clyra Medical common shares, of which 2,200 are redeemable for 1,428,571 BioLargo shares. The fair value of the newly vested shares total was $257,000 at *December 31, 2020.* On our balance sheet, the In-Process Research and Development asset, and Common Stock Held for Redemption liability, each increased by that amount as of *December 31, 2020.*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *25*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

By written agreement dated *March 1, 2022,* fully executed on *March 3, 2022,* Clyra Medical and BioLargo agreed to sell back to Scion the Scion IP purchased in the *2018* Scion Transaction. In exchange, Scion agreed to (i) accept 2,000,000 (of the 5,000,000) BioLargo common shares it had earned, (ii) forgive the outstanding principal (of $1,007,000) and interest (of $133,000) due on the Scion Promissory Note, and (iii) return all shares of Clyra common stock owned by Scion. Additionally, Scion members Spencer Brown, Tanya Rhodes, and Dr. Brock Liden each forgave all amounts due to them pursuant to their consulting agreements with Clyra Medical, which, in the aggregate, represented $305,000 on Clyra Medical's accounts payable, and Spencer Brown resigned from Clyra Medical's board of directors. The agreement further provided that Clyra Medical and BioLargo indemnify Scion and related parties from any claims related to the SkinDisc, and for mutual releases of any claims between the parties.

Spencer Brown and Tanya Rhodes each entered into non-disclosure agreements whereby they agreed *not* to disclose Clyra Medical or BioLargo's proprietary information, and five-year non-compete provisions whereby they agreed *not* to engage in competition with copper-iodine complex technologies that are the same or substantially similar to Clyra Medical's intellectual property. In exchange, Clyra Medical, BioLargo, and certain agents of Clyra Medical and BioLargo agreed *not* to engage in competition with Scion's SkinDisc technology.

Separately, BioLargo and Clyra Medical entered into an agreement dated *March 3, 2022,* whereby (i) BioLargo agreed to transfer to Scion the Scion IP in accordance with the *March 1, 2022* agreement listed on its balance sheet as In-process Research and Development, which was valued at $2,150,000, and (ii) Clyra Medical transferred to BioLargo for its return to treasury 5,142,858 shares of BioLargo common stock.

Although these agreements were *not* fully executed until *March 3, 2022,* the essential terms of the agreement between Scion and Clyra Medical/BioLargo that would have a material impact on BioLargo's financial statements remained unchanged since the *first* draft of the transaction document prepared and agreed to by both parties in *December 2021,* subject to document finalization and execution, and therefore, management considered the guidance in Accounting Standard Codification *855,* whereby since the condition existed as of the balance sheet date, with further evidence arising subsequent to the balance sheet date, the Company recognizes the financial statement effects of this transaction as of *December 31, 2021.*

***<u>Impairment of Other Asset, Prepaid Marketing</u>***

On *December 30, 2015,* Clyra entered into a consulting agreement with Beach House Consulting, LLC, through which Jack B. Strommen is obligated to provide consulting services to Clyra Medical related to its sales and marketing activities, in exchange for $23,000 per month for a period of four years. On *June 30, 2020,* at Clyra's request, Beach House Consulting agreed to accept 3,639 shares of Clyra common stock valued at $788,000, in lieu of cash, as full prepayment of the consulting fee. The obligation to provide the consulting services is dependent on Clyra generating an average of $250,000 in monthly sales over *three* consecutive months, which has *not* been met. The value of the shares issued to Beach House totaled *$788,000,* and the obligation is recorded as a non-current asset on our consolidated balance sheet.

Management determined as of *December 31, 2021,* to impair the asset by $197,000. The impairment amount was charged to impairment expense on our consolidated statement of operations.

The following table summarizes the expenses related to the foregoing transactions as of *December 31, 2021.*

---

| | | | |
|:---|:---|:---|:---|
| | **Biolargo** <br> **Corporate** | **Clyra**  | **Total** |
| In-Process Research and Development | $(2150000) | $— | $(2150000) |
| Clyra debt obligations (Clyra-Scion note) |  | 1007000 | 1007000 |
| Accounts payable and accrued interest |  | 458000 | 458000 |
| Liability to Scion shareholders |  | 540000 | 540000 |
| Other asset, prepaid marketing |  | (197000) | (197000) |
| Total | $(2150000) | $1808000 | $(342000) |

---

In light of Clyra Medical's revenues for the year ended *December 31, 2022,* and its shift of focus to a surgical wash product, Management determined as of *December 31, 2022,* to further impair the asset by $197,000.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *26*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

**Note *10.* Noncontrolling Interest** – **Clyra Medical**

As 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 *December 31, 2022.*

***<u>Debt Obligations of Clyra Medical</u>***

***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. Clyra Medical received $260,000 in draws and made repayments totaling $99,000. 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 note earns interest at 15%, matures in one year, and requires Clyra pay interest and principal from gross product sales. For the *first 180* days, on a monthly basis, Clyra is required to pay 30% of gross product sales to reduce amounts owed, and thereafter 60% of gross sales. Clyra issued Vernal Bay 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.

On *December 13, 2022,* 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 maximum of 15% of the principal amount then due under the note. Additionally, BioLargo agreed to allow Vernal Bay to elect to convert, any time prior to the note's maturity date, the 322 shares of Clyra common stock it received as consideration for the line of credit into shares of Biolargo common stock at the then market price of BioLargo's common stock. Vernal Bay elected to convert the shares (see Note *14*).

As of *December 31, 2022,* the balance outstanding on this line of credit totals $161,000. As of *December 31, 2021,* the balance outstanding on this line of credit totaled $187,000.

***<u>Equity Transactions</u>***

As of *December 31, 2022,* Clyra had 91,149 common shares, and 2,075 Series A Preferred shares, outstanding. Of that amount, BioLargo owned 52,601 common shares, and 1,349 Series A Preferred shares. BioLargo owns 58% of Clyra's issued and outstanding shares.

***Sales of Common Stock***

During the year ended *December 31, 2022,* 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *27*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended *December 31, 2021,* Clyra sold 161 shares of its common stock for $50,000 to private investors at $310 per Clyra share.

***Sales of Series A Preferred Stock***

On *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* accredited investors. Each investor 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 these warrants totaled $55,000. 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 a conversion rate of $310 per 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.

Subsequent to *December 31, 2022,* Clyra continued to sell its Series A Preferred Stock (see Note *14*).

***Stock Options***

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Clyra*** |  |  | |
|  | ***Options*** | ***Exercise*** | ***Exercise*** | |
|  | ***Outstanding*** | ***price per share*** | ***price per share*** | **Weighted**<br>***average***<br>***price per***<br>***share*** |
| Balance, December 31, 2020 | 11411 | $— | 1.00 | $1.00 |
| Granted | 2594 |  | 1.00 | 1.00 |
| Balance, December 31, 2021 | 14004 | $— | 1.00 | $1.00 |
| Granted | 1829 | 1.00 | 310 | 40.24 |
| Balance, December 31, 2022 | 15833 | $1.00 | 310 | $5.53 |

---

Clyra issues options to its employees and consultants in lieu of compensation owed on a regular basis. During the years ended *December 31, 2022* and *2021,* Clyra issued options to purchase 1,829 and 2,594 shares of its common stock, respectively. Each option vests upon issuance and has an expiration date 10 years from the date of grant. The exercise price of the options granted in the year ended *December 31, 2021,* was $1.00 per share. Of the 1,829 options granted in the year ended *December 31, 2022,* the exercise price of 1,597 are *$1.00* per share, and the remainder are $310 per share. The fair value of the options issued in the year ended *December 31, 2022* and *2021* totaled $408,000 and $564,000, 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.

***Accounts Payable and Accrued Expenses***

At *December 31, 2022* and *2021,* Clyra had the following accounts payable and accrued expenses (in thousands):

---

| | | |
|:---|:---|:---|
| Category | 2022 | 2021 |
| Accounts payable | $186 | $149 |
| Accrued payroll | 45 | 30 |
| Accrued interest | 7 | 51 |
| Total | $238 | $230 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *28*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

**Note *11.* 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 a *three*-year office lease in the Knoxville, Tennessee area, and entered into employment agreements with *six* scientists and engineers. (See Note *12* "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), 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.

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 each of the years ended *December 31, 2022.*

**Note *12.* 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:

*1.* ONM Environmental -- which sells odor and volatile organic control products and services (located in Westminster, California);

*2.* Clyra Medical Technologies ("Clyra Medical") -- which develops and sells medical products based on our technologies;

*3.* 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

*4.* 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).

Historically, *none* of our operating business units have operated at a profit (other than ONM the last *two* quarters of *2022*) 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. Clyra Medical has also been funded by *third* party investors who invest directly in Clyra Medical in exchange for equity ownership in that entity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *29*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The segment information for the years *December 31, 2022* and *2021,* is as follows (in thousands):

---

| | | |
|:---|:---|:---|
|  | **2022** | &nbsp;&nbsp;&nbsp; **2021** |
| **Revenues** |  |  |
| BioLargo corporate | $5 | $&nbsp;&nbsp;&nbsp;7 |
| ONM Environmental | 4374 | &nbsp;&nbsp;&nbsp;1419 |
| BLEST | 1943 | &nbsp;&nbsp;&nbsp;1635 |
| Clyra Medical | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;56 | &nbsp;&nbsp;&nbsp;139 |
| BioLargo Water | &nbsp;&nbsp;&nbsp;1 | &nbsp;&nbsp;&nbsp;12 |
| Intersegment revenue | (495) | &nbsp;&nbsp;&nbsp;(681) |
| Total | $5884 | $&nbsp;&nbsp;&nbsp;2531 |
| **Research and development** |  |  |
| BioLargo corporate | $(674) | $&nbsp;&nbsp;&nbsp;(1001) |
| BLEST | &nbsp;&nbsp;&nbsp;(469) | &nbsp;&nbsp;&nbsp;(488) |
| Clyra Medical | &nbsp;&nbsp;&nbsp;(110) | &nbsp;&nbsp;&nbsp;(66) |
| BioLargo Water | &nbsp;&nbsp;&nbsp;(565) | &nbsp;&nbsp;&nbsp;(486) |
| BioLargo corporate - intersegment | &nbsp;&nbsp;&nbsp;499 | &nbsp;&nbsp;&nbsp;674 |
| Total | $(1319) | $&nbsp;&nbsp;&nbsp;(1367) |
| **Operating income (loss)** |  |  |
| BioLargo corporate | $(3971) | $&nbsp;&nbsp;&nbsp;(5688) |
| ONM Environmental | 1130 | &nbsp;&nbsp;&nbsp;(511) |
| BLEST | (452) | &nbsp;&nbsp;&nbsp;(629) |
| Clyra Medical | (1383) | &nbsp;&nbsp;&nbsp;666 |
| BioLargo Water | &nbsp;&nbsp;&nbsp;(714) | &nbsp;&nbsp;&nbsp;(616) |
| Total | $(5390) | $&nbsp;&nbsp;&nbsp;(6778) |
| **Interest expense** |  |  |
| BioLargo corporate | $(24) | $&nbsp;&nbsp;&nbsp;(118) |
| Clyra Medical | (29) | &nbsp;&nbsp;&nbsp;(116) |
| Total | $(53) | $&nbsp;&nbsp;&nbsp;(234) |
| **Net income (loss)** |  |  |
| BioLargo corporate | $(3995) | $&nbsp;&nbsp;&nbsp;(5781) |
| ONM Environmental | 1304 | &nbsp;&nbsp;&nbsp;(511) |
| BLEST | (425) | &nbsp;&nbsp;&nbsp;(629) |
| Clyra Medical | (1412) | &nbsp;&nbsp;&nbsp;593 |
| BioLargo Water | (604) | &nbsp;&nbsp;&nbsp;(566) |
| Consolidated net loss | $(5132) | $&nbsp;&nbsp;&nbsp;(6894) |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| As of December 31, 2022 | BioLargo | ONM | Clyra | BLEST | Water | Elimination | Total |
| Tangible assets | $669 | $2064 | $631 | $441 | $194 | $(41) | $3958 |
| Right of use | 136 |  |  | 731 |  |  | 867 |
| Investment in South Korean joint venture | 33 |  |  |  |  |  | 33 |
| Total | $838 | $2064 | $631 | $1172 | $194 | $(41) | $4858 |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| As of December 31, 2021 | BioLargo | ONM | Clyra | BLEST | Water | Elimination | Total |
| Tangible assets | $555 | $451 | $816 | $595 | $152 | $(47) | $2522 |
| Right of use | 222 |  |  | 231 |  |  | 453 |
| Investment in South Korean joint venture | 48 |  |  |  |  |  | 48 |
| Total | $825 | $451 | $816 | $433 | $152 | $(47) | $3023 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *30*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

**Note *13.* Commitments and Contingencies** 

***<u>Office Leases</u>***

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. Short-term leases less than *one*-year are **not* included in our analysis. For the years ended *December 31, 2022* and *2021,* rental expense was $316,000 and $288,000, respectively. The lease of our Westminster facility expires **August 2024.* It is too early for management to determine if it will exercise its option to extend the lease four 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 and on our **December 31, 2022,* balance sheet our right of use and lease liability totaled $867,000. 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.

As of *December 31, 2022,* our weighted average remaining lease term is nine years and the total remaining operating lease payments is $1,793,000. Our minimum lease payments over the next *five* years are as follows:

---

| | | | |
|:---|:---|:---|:---|
| Year ending | &nbsp;&nbsp;&nbsp; BioLargo<br> Corp / ONM | BLEST | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total |
| December 31, 2023 | &nbsp;&nbsp;&nbsp;118000 | &nbsp;&nbsp;&nbsp;151000 | &nbsp;&nbsp;&nbsp;269000 |
| December 31, 2024 | &nbsp;&nbsp;&nbsp;70000 | &nbsp;&nbsp;&nbsp;154000 | &nbsp;&nbsp;&nbsp;224000 |
| December 31, 2025 | &nbsp;&nbsp;&nbsp;*--* | &nbsp;&nbsp;&nbsp;157000 | &nbsp;&nbsp;&nbsp;157000 |
| December 31, 2026 | &nbsp;&nbsp;&nbsp;*--* | &nbsp;&nbsp;&nbsp;160000 | &nbsp;&nbsp;&nbsp;160000 |
| December 31, 2027 | &nbsp;&nbsp;&nbsp;*--* | &nbsp;&nbsp;&nbsp;161000 | &nbsp;&nbsp;&nbsp;161000 |
| Thereafter | &nbsp;&nbsp;&nbsp;*--* | &nbsp;&nbsp;&nbsp;822000 | &nbsp;&nbsp;&nbsp;822000 |
| Total minimum lease payments | $&nbsp;&nbsp;&nbsp;188000 | $&nbsp;&nbsp;&nbsp;1605000 | $&nbsp;&nbsp;&nbsp;1793000 |

---

**Note *14.* Subsequent Events.** 

Management has evaluated subsequent events through the date of the filing of this Annual Report and management noted the following for disclosure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *31*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

***<u>Lincoln Park Capital Purchase of Shares</u>***

From *January 1, 2023,* through *March 29, 2023,* we sold 545,402 shares of common stock to Lincoln Park pursuant to the *2022* LPC Purchase Agreement (see Note *3*), and received $105,000 in gross and net proceeds. These sales were registered with the SEC on Form S-*1* (file number *333*-*268973*).

***<u>Clyra Medical</u>*** <u>–</u>***<u>Series A Preferred</u>***

From *January 1, 2023,* through *March 29, 2023,* Clyra Medical accepted subscriptions in the aggregate amount of $225,000 and sold 726 shares of its Series A Preferred Stock for $310 per share. The investor also received a three-year warrant to purchase the same number of additional shares of common stock for $372 per share. The investor also entered into an agreement with BioLargo whereby the investor *may* exchange some or all of its Clyra 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 erred offering (which has *not* yet taken place), or *June 30, 2023,* whichever is earlier. (See Note *10.*)

***<u>Unit Offering</u>***

From *January 1, 2023,* through *March 29, 2023,* we accepted $694,640 in subscriptions from *twelve* accredited investors and issued 3,500,000 shares of our common stock, six-month warrants to purchase 3,500,000 shares of our common stock at $0.228 per share, and five-year warrants to purchase 3,787,579 shares of our common stock at $0.285 per share.

***<u>BioLargo Energy Technologies, Inc.</u>***

On *January 1, 2023,* BioLargo's wholly owned subsidiary BioLargo Energy Technologies, Inc. ("BETI"), formed to commercialize a proprietary sodium-sulfur battery technology, began an offering of its common stock for $2.00 per share. From *January 1, 2023,* through *March 29, 2023,* the company received $700,000 in investments, and issued 350,000 shares of its common stock. Of the $700,000 invested, $100,000 was from BioLargo. As of *March 29, 2023,* BioLargo owns 96.8% of the company's common stock.

Each investor also entered into an agreement with BioLargo whereby the investor *may* exchange some or all of its BETI common stock into shares of BioLargo common stock, at a price equal to a *20%* discount of the volume weighted average price of BioLargo's common stock over the *30* prior trading days. Elections to exchange must be made by the investor during the calendar year *2024.* An investor can make such election only *one* time; BioLargo does *not* have the ability to compel an investor to exchange its shares.

***<u>Satisfaction of *$50,000* Note</u>***

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.

***<u>CFO Engagement Extension</u>***

On *March 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 21, 2023 (*the "Engagement Extension Agreement") provides for an additional one-year term to expire *January 31, 2024 (*the "Extended Term"), at which time Mr. Dargan will continue to serve as CFO, unless and until either party terminates the agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F- *32*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; BIOLARGO, INC. AND SUBSIDIARIES

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 21, 2023,* and the remaining shares to vest 25,000 shares monthly beginning *March 31, 2023,* and each month thereafter, so long as the agreement is in full force and effect. The Option is exercisable at $0.20 per share, the closing price of BioLargo's common stock on the *March 21, 2023* 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.

***<u>Clyra Medical</u>***

On *January 9, 2023,* the holder of a line of credit of Clyra Medical elected to convert 322 shares of Clyra Medical common stock into 527,983 shares of BioLargo common stock at $0.1894 per share in accordance with the amendment to the line of credit agreement dated *December 13, 2022. (*See Note *10,* subheading "Line of Credit".)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; F-33

## Exhibit 3.5

**Exhibit 3.5**

**AMENDED AND RESTATED**

**ARTICLES OF INCORPORATION**<br> **OF**<br> **CLYRA MEDICAL TECHNOLOGIES, INC.** 

**ARTICLE I:** The name of this corporation is Clyra Medical Technologies, Inc. (the "Corporation").

**ARTICLE II:** The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.

**ARTICLE III:** The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 200,000 shares of Common Stock ("**Common Stock**") and (ii) 10,000 shares of Series A Preferred Stock ("**Preferred Stock**").

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. COMMON STOCK

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>General</u>. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Voting</u>. The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of shareholders (and written actions in lieu of meetings). Every shareholder entitled to vote at an election for directors may cumulate such shareholder's votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which such shareholder's shares are otherwise entitled, or distribute the shareholder's votes on the same principle among as many candidates as such shareholder desires. No shareholder, however, shall be entitled to so cumulate such shareholder's votes unless (i) the names of such candidate or candidates have been placed in nomination prior to the voting, and (ii) the shareholder has given notice at the meeting, prior to the voting, of such shareholder's intention to cumulate such shareholder's votes. If any shareholder has given proper notice to cumulate votes, all shareholders may cumulate their votes for any candidates who have been properly placed in nomination. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of the Articles of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. SERIES A PREFERRED STOCK

10,000 shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated "**Series A Preferred Stock**" with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations. Unless otherwise indicated, references to "sections" or "subsections" in this <u>Part B</u> of this <u>Article V</u> refer to sections and subsections of <u>Part B</u> of this <u>Article V</u>.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Dividends</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <u>15% Cumulative Dividends</u>. From and after the date of the issuance of any shares of Series A Preferred Stock, and thereafter dividends at the rate of fifteen percent (15%) of the Base Amount shall accrue on such shares of Series A Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock) (the "**Accruing Dividends**").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <u>Payment</u>. Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative and compound annually; <u>provided</u>, <u>however</u>, that except as set forth in <u>Subsection 1.3</u> and <u>Subsection 2.1</u>, such Accruing Dividends shall be payable only when, as, and if declared by the Board of Directors and the Corporation shall be under no obligation to pay such Accruing Dividends.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <u>Other Dividends</u>. The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Articles of Incorporation) the holders of the Series A Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series A Preferred Stock in an amount at least equal to the greater of (i) the amount of the aggregate Accruing Dividends then accrued on such share of Series A Preferred Stock and not previously paid and (ii) (A) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series A Preferred Stock as would equal the product of (1) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series A Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (B) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series A Preferred Stock determined by (1) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (2) multiplying such fraction by an amount equal to the Series A Original Issue Price (as defined below); <u>provided</u> that if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series A Preferred Stock pursuant to this <u>Section 1</u> shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series A Preferred Stock dividend.

The "**Base Amount**" shall mean the Series A Original Issue Price plus previously accrued but unpaid dividends on such shares.

The "**Series A Original Issue Price**" shall mean Three Hundred Ten Dollars ($310) per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales</u>.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <u>Preferential Payments to Holders of Series A Preferred Stock</u>. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum of (i) any Accruing Dividends accrued but unpaid thereon, whether or not declared plus (ii) any other dividends declared but unpaid thereon (the amount payable pursuant to this sentence is hereinafter referred to as the "**Series A Liquidation Amount**"). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its shareholders shall be insufficient to pay the holders of shares of Series A Preferred Stock the full amount to which they shall be entitled under this <u>Subsection 2.1</u>, the holders of shares of Series A Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <u>Payments to Holders of Common Stock</u>. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after the payment of all preferential amounts required to be paid to the holders of shares of Series A Preferred Stock, the remaining assets of the Corporation available for distribution to its shareholders shall be distributed among the holders of shares of Series A Preferred Stock and Common Stock, pro rata based on the number of shares held by each such holder (with the number of shares of Series A Preferred Stock calculated as if all shares of Series A Preferred Stock been converted into Common Stock pursuant to <u>Section 4</u> immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <u>Deemed Liquidation Events</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3.1 <u>Definition</u>. Each of the following events shall be considered a "**Deemed Liquidation Event**" unless the holders of at least a majority of the outstanding shares of Series A Preferred Stock elect otherwise by written notice sent to the Corporation at least ten (10) days prior to the effective date of any such event:

(a) a merger, share exchange or consolidation in which

(i) the Corporation is a constituent party or

(ii) a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,

except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or

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(b) the sale, lease, transfer, assignment, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole including, without limitation, the termination or assignment of that certain License Agreement by and between the Corporation and BioLargo, Inc. dated December 17, 2012, as amended), or the sale or disposition (whether by merger, share exchange, consolidation or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3.2 <u>Effecting a Deemed Liquidation Event</u>.

(a) The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in <u>Subsection 2.3.1(a)(i)</u> unless the agreement or plan of merger, share exchange or consolidation for such transaction (the "**Merger Agreement**") provides that the consideration payable to the shareholders of the Corporation shall be allocated among the holders of capital stock of the Corporation in accordance with <u>Subsections 2.1</u> and <u>2.2</u>.

(b) In the event of a Deemed Liquidation Event referred to in <u>Subsection 2.3.1(a)(ii)</u> or <u>2.3.1(b)</u>, if the Corporation does not effect a dissolution of the Corporation within ninety (90) days after such Deemed Liquidation Event, then (i) the Corporation shall send a written notice to each holder of Series A Preferred Stock no later than the ninetieth (90th) day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause; (ii) to require the redemption of such shares of Series A Preferred Stock; and (iii) if the holders of at least a majority of the then outstanding shares of Series A Preferred Stock so request in a written instrument delivered to the Corporation not later than one hundred twenty (120) days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors of the Corporation), together with any other assets of the Corporation available for distribution to its shareholders, all to the extent permitted by California law governing distributions to shareholders (the "**Available Proceeds**"), on the one hundred fiftieth (150th) day after such Deemed Liquidation Event, to redeem all outstanding shares of Series A Preferred Stock at a price per share equal to the Series A Liquidation Amount. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Series A Preferred Stock, the Corporation shall ratably redeem each holder's shares of Series A Preferred Stock to the fullest extent of such Available Proceeds, and shall redeem the remaining shares as soon as it may lawfully do so under California law governing distributions to shareholders. Prior to the distribution or redemption provided for in this <u>Subsection 2.3.2(b)</u>, the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3.3 <u>Amount Deemed Paid or Distributed</u>. The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, share exchange, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3.4 <u>Allocation of Escrow and Contingent Consideration</u>. In the event of a Deemed Liquidation Event pursuant to <u>Subsection 2.3.1(a)(i)</u>, if any portion of the consideration payable to the shareholders of the Corporation is payable only upon satisfaction of contingencies (the "**Additional Consideration**"), the Merger Agreement shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the "**Initial Consideration**") shall be allocated among the holders of capital stock of the Corporation in accordance with <u>Subsections 2.1</u> and <u>2.2</u> as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the shareholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with <u>Subsections 2.1</u> and <u>2.2</u> after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this <u>Subsection</u><u> </u><u>2.3.4</u>, consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Voting</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <u>General</u>. On any matter presented to the shareholders of the Corporation for their action or consideration at any meeting of shareholders of the Corporation (or by written consent of shareholders in lieu of meeting), each holder of outstanding shares of Series A Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series A Preferred Stock held by such holder are convertible as of the record date for determining shareholders entitled to vote on such matter. Except as provided by law or by the other provisions of the Articles of Incorporation, holders of Series A Preferred Stock shall vote together with the holders of Common Stock as a single class.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <u>Series A Preferred Stock Protective Provisions</u>. At any time when shares of Series A Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, share exchange, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Articles of Incorporation) the written consent or affirmative vote of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void *ab initio*, and of no force or effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.1 liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any merger, share exchange or consolidation or any other Deemed Liquidation Event, or consent to any of the foregoing;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.2 amend, alter or repeal any provision of the Articles of Incorporation or Bylaws of the Corporation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.3 create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock, or increase the authorized number of shares of Series A Preferred Stock or increase the authorized number of shares of any additional class or series of capital stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.4 (i) reclassify, alter or amend any existing security of the Corporation that is *pari passu* with the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Series A Preferred Stock in respect of any such right, preference, or privilege or (ii) reclassify, alter or amend any existing security of the Corporation that is junior to the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or *pari passu* with the Series A Preferred Stock in respect of any such right, preference or privilege; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.5 purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Series A Preferred Stock as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and (iii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection with the cessation of such employment or service at a price not exceeding the then-current fair market value thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. <u>Optional Conversion</u>. The holders of the Series A Preferred Stock shall have conversion rights as follows (the "**Conversion Rights**"):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <u>Investor</u><u>'</u><u>s Right to Convert</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.1 <u>Conversion Ratio</u>. Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series A Original Issue Price by the Series A Conversion Price (as defined below) in effect at the time of conversion. The "**Series A Conversion Price**" shall initially be equal to the Series A Original Issue Price. Such initial Series A Conversion Price, and the rate at which shares of Series A Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.2 <u>Conversion of Dividends</u>. Accruing Dividends and any declared but unpaid dividends shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the amount of such dividends by the Series A Conversion Price in effect at the time of conversion. Dividends shall be converted at the time the Series A Preferred Stock is converted.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.3 <u>Termination of Conversion Rights</u>. In the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Series A Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <u>Fractional Shares</u>. No fractional shares of Common Stock shall be issued upon conversion of the Series A Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Series A Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <u>Mechanics of Conversion</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.1 <u>Notice of Conversion</u>. In order for a holder of Series A Preferred Stock to voluntarily convert shares of Series A Preferred Stock into shares of Common Stock, such holder shall (a) provide written notice to the Corporation's transfer agent at the office of the transfer agent for the Series A Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent) that such holder elects to convert all or any number of such holder's shares of Series A Preferred Stock and, if applicable, any event on which such conversion is contingent and (b), if such holder's shares are certificated, surrender the certificate or certificates for such shares of Series A Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Series A Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent). Such notice shall state such holder's name or the names of the nominees in which such holder wishes the shares of Common Stock to be issued. If required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such notice and, if applicable, certificates (or lost certificate affidavit and agreement) shall be the time of conversion (the "**Conversion Time**"), and the shares of Common Stock issuable upon conversion of the specified shares shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time (i) issue and deliver to such holder of Series A Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Series A Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, and (ii) pay in cash such amount as provided in <u>Subsection 4.2</u> in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.2 <u>Reservation of Shares</u>. The Corporation shall at all times when the Series A Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series A Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to the Articles of Incorporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.3 <u>Effect of Conversion</u>. All shares of Series A Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in <u>Subsection 4.2</u> and to receive payment of any Accruing Dividends, all accrued dividends, whether or not declared. Any shares of Series A Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for shareholder action) as may be necessary to reduce the authorized number of shares of Series A Preferred Stock accordingly.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.4 <u>No Further Adjustment</u>. Upon any such conversion, no adjustment to the Series A Conversion Price shall be made for any Accruing Dividends or declared but unpaid dividends on the Series A Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 <u>Adjustment for Stock Splits and Combinations</u>. If the Corporation shall at any time or from time to time after the Series A Original Issue Date effect a subdivision of the outstanding Common Stock, the Series A Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Series A Original Issue Date combine the outstanding shares of Common Stock, the Series A Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5 <u>Adjustments for Other Dividends and Distributions</u>. In the event the Corporation at any time or from time to time after the Series A Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of <u>Section 1</u> do not apply to such dividend or distribution, then and in each such event the holders of Series A Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of Series A Preferred Stock had been converted into Common Stock on the date of such event.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6 <u>Adjustment for Merger or Reorganization, etc</u>. Subject to the provisions of <u>Subsection</u><u> </u><u>2.3</u>, if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Series A Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by <u>Subsections 4.4</u>, <u>4.6</u> or <u>4.7</u>), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series A Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Series A Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this <u>Section 4</u> with respect to the rights and interests thereafter of the holders of the Series A Preferred Stock, to the end that the provisions set forth in this <u>Section</u><u> </u><u>4</u> (including provisions with respect to changes in and other adjustments of the Series A Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Series A Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7 <u>Certificate as to Adjustments</u>. Upon the occurrence of each adjustment or readjustment of the Series A Conversion Price pursuant to this <u>Section 4</u>, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than ten (10) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series A Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Series A Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Series A Preferred Stock (but in any event not later than ten (10) days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Series A Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Series A Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8 <u>Notice of Record Date</u>. In the event:

(a) the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Series A Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

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(b) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

(c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

then, and in each such case, the Corporation will send or cause to be sent to the holders of the Series A Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Series A Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Series A Preferred Stock and the Common Stock. Such notice shall be sent at least ten (10) days prior to the record date or effective date for the event specified in such notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. <u>Mandatory Conversion</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <u>Trigger Events</u>. Upon the closing of (i) the sale of shares of Common Stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $5,000,000 of gross proceeds to the Corporation (the time of such closing referred to herein as the "**Mandatory Conversion Time**"), then all outstanding shares of Series A Preferred Stock and Accrued Dividends shall automatically be converted into shares of Common Stock, at the then effective conversion rate as calculated pursuant to <u>Subsection 4.1.1</u>. The conversion of such shares shall be deemed to have occurred immediately prior to the closing of such offering.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <u>Procedural Requirements</u>. All holders of record of shares of Series A Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Series A Preferred Stock pursuant to this <u>Section 5</u>. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Series A Preferred Stock in certificated form shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Series A Preferred Stock converted pursuant to <u>Subsection 5.1</u>, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender any certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of any certificate or certificates of such holders (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this <u>Subsection 5.2</u>. As soon as practicable after the Mandatory Conversion Time and, if applicable, the surrender of any certificate or certificates (or lost certificate affidavit and agreement) for Series A Preferred Stock, the Corporation shall (a) issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and (b) pay cash as provided in <u>Subsection 4.2</u> in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Series A Preferred Stock converted. Such converted Series A Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for shareholder action) as may be necessary to reduce the authorized number of shares of Series A Preferred Stock accordingly.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. <u>Redeemed or Otherwise Acquired Shares</u>. Any shares of Series A Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Series A Preferred Stock following redemption.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. <u>Waiver</u>. Any of the rights, powers, preferences and other terms of the Series A Preferred Stock set forth herein may be waived on behalf of all holders of Series A Preferred Stock by the affirmative written consent or vote of the holders of at least a majority of the shares of Series A Preferred Stock then outstanding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. <u>Notices</u>. Any notice required or permitted by the provisions of this <u>Article V</u> to be given to a holder of shares of Series A Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the California Corporations Code, and shall be deemed sent upon such mailing or electronic transmission.

**ARTICLE IV:** Subject to any additional vote required by the Articles of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.

**ARTICLE V:** For purposes of Section 500 of the California Corporations Code (to the extent applicable), in connection with any repurchase of shares of Common Stock permitted under these Articles of Incorporation from employees, officers, directors or consultants of the Corporation in connection with a termination of employment or services pursuant to agreements or arrangements approved by the Board of Directors (in addition to any other consent required under these Articles of Incorporation), such repurchase may be made without regard to any "preferential dividends arrears amount" or "preferential rights amount" (as those terms are defined in Section 500 of the California Corporations Code). Accordingly, for purposes of making any calculation under California Corporations Code Section 500 in connection with such repurchase, the amount of any "preferential dividends arrears amount" or "preferential rights amount" (as those terms are defined therein) shall be deemed to be zero (0).

**ARTICLE VI:** To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director. If the California Corporations Code or any other law of the State of California is amended after approval by the shareholders of this <u>Article VIII</u> to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the California Corporations Code as so amended. Any repeal or modification of the foregoing provisions of this <u>Article VIII</u> by the shareholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.

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**ARTICLE VII:** The Corporation is authorized to indemnify directors, officers and agents (as that term is defined in Corporations Code section 317(a)) of the Corporation to the fullest extent possible under California law, through Bylaw provisions, agreements with such agents or other persons, vote of shareholders or disinterested directors or otherwise. To the fullest extent possible under California law, the Corporation is authorized to advance expenses incurred in defending any proceeding prior to the final disposition of the proceeding upon receipt of an undertaking by or on behalf of the agent to repay that amount if it shall be determined ultimately that the agent is not entitled to be indemnified. Any amendment, repeal or modification of the foregoing provisions of this <u>Article IX</u> shall not adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification.

## Exhibit 4.19

**Exhibit 4.19**

**<u>Satisfaction of Promissory Note</u>**

THIS SATISFACTION OF PROMISSORY NOTE (the "**Satisfaction**") is entered into as of March 6, 2023 (the "**Effective Date**"), by and among BioLargo, Inc., a Delaware corporation **(**"**BioLargo**"**),** and Bruce Kelber ("**Kelber**"), with reference to the following described "**Note**":

Issuance Date: March 8, 2018

Maturity Date: March 1, 2023

Note No. 33097

Principal Amount: $50,000

Holder: Bruce Kelber

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledges, the parties agree as follows.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Representation</u>. Kelber hereby represents and warrants that he is the sole holder of the Note, and owns the Note free and clear of any mortgage, pledge, lien, security interest, encumbrance, or other charge.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Conversion</u>. Kelber hereby elects to convert the $50,000 principal amount due under the Note into 25,000 shares of common stock of BioLargo Energy Technologies, Inc. ("BETI"), in accordance with BETI's private offering memorandum dated January 1, 2023. Kelber acknowledges that he will have an opportunity to review the offering memorandum, and may reconsider this conversion after doing so, and if he so chooses to convert, will sign a subscription agreement for such investment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Interest</u>. BioLargo acknowledges that the original warrant issued to Kelber for interest at $0.50 per share expired unexercised because the warrant strike price was above BioLargo's stock price, and therefore agrees to issue an additional warrant to Kelber allowing for the purchase of 200,000 shares of its common stock at $0.21 per share for a period of five years. This warrant shall compensate Kelber for interest over the first two years of the Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. <u>Satisfaction of the Note</u>. Kelber agrees to accept as full satisfaction of the Note the BETI shares as required by Section 1, and the warrant as required by Section 2. Upon receipt of same, Kelber hereby releases and discharges BioLargo from any claims or obligations on the Note. Kelber further agrees to surrender the Note as cancelled.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. <u>Binding on Successors</u>. This Satisfaction is binding on the successors and assigns of Kelber.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. <u>Counterparts</u>. This Satisfaction may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

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**IN WITNESS WHEREOF**, the parties have duly executed this Satisfaction to Promissory Note as of the date first above written.

BIOLARGO, INC.<br>/s/Dennis P. Calvert<br> By: ______________________<br> Name: Dennis P. Calvert<br> Title: President<br> Date signed: March 6, 2023<br>HOLDER<br>/s/Bruce Kelber<br> By: ______________________<br> Name: Bruce Kelber<br> Date signed: March 6, 2023<br>

## Exhibit 10.23

**Exhibit 10.23**

**FORM OF INDEMNIFICATION AGREEMENT**

THIS INDEMNIFICATION AGREEMENT (the "**Agreement**") is made and entered into as of ____, by and between BioLargo, Inc., a Delaware corporation (the "**Company**"), and the undersigned officers and directors of the Company (each, individually, an "**Indemnitee**").

**WITNESSETH THAT:**

**WHEREAS**, highly competent persons have become more reluctant to serve corporations as directors or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

**WHEREAS**, the Board of Directors of the Company (the "**Board**") has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself. The Bylaws and Articles of Incorporation of the Company require indemnification of the officers and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware ("**GCL**"). The Bylaws and Articles of Incorporation and the GCL contemplate that contracts may be entered into between the Company and members of the Board, officers and other persons with respect to indemnification;

**WHEREAS**, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons;

**WHEREAS**, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company's shareholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

**WHEREAS**, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;

**WHEREAS**, this Agreement is a supplement to and in furtherance of the Bylaws and Articles of Incorporation of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and

**WHEREAS**, Indemnitee does not regard the protection available under the Company's Bylaws and Articles of Incorporation and insurance as adequate in the present circumstances, and may not be willing to serve as an officer or director without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified.

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**NOW, THEREFORE**, in consideration of Indemnitee's agreement to serve as a director from and after the date hereof, the parties hereto agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Indemnity of Indemnitee</u>. The Company hereby agrees to hold harmless and indemnify Indemnitee to the fullest extent permitted by law, as such may be amended from time to time. In furtherance of the foregoing indemnification, and without limiting the generality thereof:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Proceedings Other Than Proceedings by or in the Right of the Company</u>. Indemnitee shall be entitled to the rights of indemnification provided in this <u>Section l(a)</u> if, by reason of his Corporate Status (as hereinafter defined), the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of the Company. Pursuant to this <u>Section 1(a)</u>, Indemnitee shall be indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him, or on his behalf, in connection with such Proceeding or any claim, issue or matter therein, if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, had no reasonable cause to believe the Indemnitee's conduct was unlawful.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Proceedings by or in the Right of the Company</u>. Indemnitee shall be entitled to the rights of indemnification provided in this <u>Section 1(b)</u> if, by reason of his Corporate Status, the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company. Pursuant to this <u>Section 1(b)</u>, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by the Indemnitee, or on the Indemnitee's behalf, in connection with such Proceeding if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; <u>provided</u>, <u>however</u>, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that a court of competent jurisdiction in the State of California shall determine that such indemnification may be made.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Indemnification for Expenses of a Party Who is Wholly or Partly Successful</u>. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified to the maximum extent permitted by law, as such may be amended from time to time, against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Additional Indemnity</u>. In addition to, and without regard to any limitations on, the indemnification provided for in <u>Section 1</u> of this Agreement, the Company shall and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or in the right of the Company), including, without limitation, all liability arising out of the negligence or active or passive wrongdoing of Indemnitee. The only limitation that shall exist upon the Company's obligations pursuant to this Agreement shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in <u>Sections 6</u> and <u>7</u> hereof) to be unlawful.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Contribution</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Whether or not the indemnification provided in <u>Sections 1</u> and <u>2</u> hereof is available, in respect of any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action, suit or proceeding without requiring Indemnitee to contribute to such payment and the Company hereby waives and relinquishes any right of contribution it may have against Indemnitee. The Company shall not enter into any settlement of any action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall contribute to the amount of Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction or events from which such action, suit or proceeding arose; <u>provided</u>, <u>however</u>, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the transaction or events that resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which applicable law may require to be considered. The relative fault of the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary and the degree to which their conduct is active or passive.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors, or employees of the Company, other than Indemnitee, who may be jointly liable with Indemnitee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. <u>Indemnification for Expenses of a Witness</u>. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness, or is made (or asked) to respond to discovery requests, in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. <u>Advancement of Expenses</u>. Notwithstanding any other provision of this Agreement, the Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee's Corporate Status within thirty (30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by a written undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this <u>Section 5</u> shall be unsecured and interest free.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. <u>Procedures and Presumptions for Determination of Entitlement to Indemnification</u>. It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the GCL and public policy of the State of Delaware. Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification. Notwithstanding the foregoing, any failure of Indemnitee to provide such a request to the Company, or to provide such a request in a timely fashion, shall not relieve the Company of any liability that it may have to Indemnitee unless, and to the extent that, such failure actually and materially prejudices the interests of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of <u>Section 6(a)</u> hereof, a determination with respect to Indemnitee's entitlement thereto shall be made in the specific case by one of the following four methods, which shall be at the election of the Board (1) by a majority vote of the disinterested directors, even though less than a quorum, (2) by a committee of disinterested directors designated by a majority vote of the disinterested directors, even though less than a quorum, (3) if there are no disinterested directors or if the disinterested directors so direct, by independent legal counsel in a written opinion to the Board, a copy of which shall be delivered to the Indemnitee, or (4) if so directed by the Board, by the shareholders of the Company. For purposes hereof, disinterested directors are those members of the Board who are not parties to the action, suit or proceeding in respect of which indemnification is sought by Indemnitee.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to <u>Section 6(b)</u> hereof, the Independent Counsel shall be selected as provided in this <u>Section 6(c)</u>. The Independent Counsel shall be selected by the Board. Indemnitee may, within ten (10) days after such written notice of selection was given, deliver to the Company a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "**Independent Counsel**" as defined in <u>Section 13</u> of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification pursuant to <u>Section 6(a)</u> hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition a court of competent jurisdiction in the State of California or other court of competent jurisdiction for resolution of any objection which shall have been made by the Indemnitee to the Company's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under <u>Section 6(b)</u> hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to <u>Section 6(b)</u> hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this <u>Section 6(c)</u>, regardless of the manner in which such Independent Counsel was selected or appointed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence. Neither the failure of the Company (including by its directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Indemnitee shall be deemed to have acted in good faith if Indemnitee's action is based on the records or books of account of the Enterprise (as hereinafter defined), including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this <u>Section 6(e)</u> are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) If the person, persons or entity empowered or selected under <u>Section 6</u> to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; <u>provided</u>, <u>however</u>, that such sixty (60) day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making such determination with respect to entitlement to indemnification in good faith requires such additional time to obtain or evaluate documentation and/or information relating thereto; and <u>provided</u> <u>further</u>, that the foregoing provisions of this <u>Section 6(f)</u> shall not apply if the determination of entitlement to indemnification is to be made by the shareholders pursuant to <u>Section 6(b)</u> of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination, the Board or the Disinterested Directors, if appropriate, resolve to submit such determination to the shareholders for their consideration at an annual meeting thereof to be held within seventy five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of shareholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel, member of the Board or shareholder of the Company shall act reasonably and in good faith in making a determination regarding the Indemnitee's entitlement to indemnification under this Agreement. Any costs or expenses (including attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any action, claim or proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such action, suit or proceeding. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. <u>Remedies of Indemnitee</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) In the event that (i) a determination is made pursuant to <u>Section 6</u> of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to <u>Section 5</u> of this Agreement, (iii) no determination of entitlement to indemnification is made pursuant to <u>Section 6(b)</u> of this Agreement within ninety (90) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to this Agreement within ten (10) days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to <u>Section 6</u> of this Agreement, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of California, or in any other court of competent jurisdiction, of Indemnitee's entitlement to such indemnification. Indemnitee shall commence such proceeding seeking an adjudication within one hundred eighty (180) days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this <u>Section 7(a)</u>. The Company shall not oppose Indemnitee's right to seek any such adjudication.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In the event that a determination shall have been made pursuant to <u>Section</u><u> </u><u>6(b)</u> of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this <u>Section 7</u> shall be conducted in all respects as a de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of the adverse determination under <u>Section 6(b)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If a determination shall have been made pursuant to <u>Section 6(b)</u> of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this <u>Section 7</u>, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's misstatement not materially misleading in connection with the application for indemnification, or (ii) a prohibition of such indemnification under applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) In the event that Indemnitee, pursuant to this <u>Section 7</u>, seeks a judicial adjudication of his rights under, or to recover damages for breach of, this Agreement, or to recover under any directors' and officers' liability insurance policies maintained by the Company, the Company shall pay on his behalf, in advance, any and all expenses (of the types described in the definition of Expenses in <u>Section 12(d)</u> of this Agreement) actually and reasonably incurred by him in such judicial adjudication, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this <u>Section 7</u> that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefore) advance, to the extent not prohibited by law, such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. <u>Non</u><u>-</u><u>Exclusivity; Survival of Rights; Insurance; Primacy of Indemnification; Subrogation</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Articles of Incorporation, the By-laws, any agreement, a vote of shareholders, a resolution of directors of the Company, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the GCL, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Articles of Incorporation, Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any director, officer, employee, agent or fiduciary under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has directors' and officers' liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) The Company's obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. <u>Exception to Right of Indemnification</u>. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of <u>Section 16(b)</u> of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation, or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. <u>Duration of Agreement</u>. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer or director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under <u>Section 7</u> hereof) by reason of his Corporate Status, whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. <u>Enforcement</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it hereby in order to induce Indemnitee to serve as an officer or director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an officer or director of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Company shall not seek from a court, or agree to, a "bar order" which would have the effect of prohibiting or limiting the Indemnitee's rights to receive advancement of expenses under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. <u>Definitions</u>. For purposes of this Agreement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) "**Corporate Status**" describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving at the express written request of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) "**Disinterested Director**" means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) "**Enterprise**" shall mean the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that Indemnitee is or was serving at the express written request of the Company as a director, officer, employee, agent or fiduciary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) "**Expenses**" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding, or responding to, or objecting to, a request to provide discovery in any Proceeding. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersede as bond, or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) "**Independent Counsel**" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) "**Proceeding**" includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of his or her Corporate Status, by reason of any action taken by him or of any inaction on his part while acting in his or her Corporate Status; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement; including one pending on or before the date of this Agreement, but excluding one initiated by an Indemnitee pursuant to <u>Section 7</u> of this Agreement to enforce his rights under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13. <u>Severability</u>. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. Without limiting the generality of the foregoing, this Agreement is intended to confer upon Indemnitee indemnification rights to the fullest extent permitted by applicable laws. In the event any provision hereof conflicts with any applicable law, such provision shall be deemed modified, consistent with the aforementioned intent, to the extent necessary to resolve such conflict.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14. <u>Modification and Waiver</u>. No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15. <u>Notice By Indemnitee</u>. Indemnitee agrees promptly to notify the Company in writing upon being served with or otherwise receiving any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder. The failure to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16. <u>Notices</u>. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the addresses set forth below the parties' signatures hereto or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17. <u>Counterparts</u>. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., <u>www.docusign.com</u>) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18. <u>Headings</u>. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19. <u>Governing Law and Consent to Jurisdiction</u>. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. The Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the state and federal courts in the State of California (the "**California Court**"), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the California Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue of any such action or proceeding in the California Court, and (iv) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the California Court has been brought in an improper or inconvenient forum.

## Exhibit 21.1

**Exhibit 21.1**

**<u>List of Subsidiaries of Registrant</u>**

BioLargo Life Technologies, Inc., a California corporation

ONM Environmental, Inc., a California corporation

BioLargo Energy Technologies, Inc., a California corporation

BioLargo Equipment Solutions & Technologies, Inc., a California corporation

BioLargo Water, Inc., a Canadian corporation

BioLargo Development Corp., a California corporation

BioLargo Engineering, Science & Technologies, LLC, a Tennessee limited liability company\*

Clyra Medical Technologies, Inc., a California corporation\*

\* BioLargo owns less than 100% of the ownership interests in this entity.

## Exhibit 23.1

**Exhibit 23.1**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We consent to the incorporation by reference in the Registration Statements of BioLargo, Inc. on Form S-8 (File Nos. 333-225821 and 333-153193) of our report dated March 31, 2023, appearing in the Annual Report on Form 10-K of BioLargo, Inc. for the year ended December 31, 2022.

Our report dated March 31, 2023, contains an explanatory paragraph that states the Company has experienced recurring losses, negative cash flows from operations, and has limited capital resources. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ HASKELL & WHITE LLP

Irvine, California

March 31, 2023

## Exhibit 31.1

**Ex. 31.1**

I, Dennis P. Calvert, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this Annual Report on Form 10-K of BioLargo, Inc. (the "Registrant");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Dated: March 31, 2023 | /s/ DENNIS P. CALVERT |
|  | Dennis P. Calvert<br> Chief Executive Officer |

---

## Exhibit 31.2

**Ex. 31.2**

I, Charles K. Dargan, II, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this Annual Report on Form 10-K of BioLargo, Inc. (the "Registrant");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Dated: March 31, 2023 | /s/ CHARLES K. DARGAN II |
|  | Charles K. Dargan, II<br> Chief Financial Officer |

---

## Ex-32

**Exhibit 32**

**CERTIFICATION OF CHIEF EXECUTIVE OFFICER**

**AND CHIEF FINANCIAL OFFICER**

**PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

I, Dennis P. Calvert, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of BioLargo, Inc. on Form 10-K for the fiscal year ended December 31, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of BioLargo, Inc.

---

| | |
|:---|:---|
| Dated: March 31, 2023 | /s/ DENNIS P. CALVERT |
|  | Dennis P. Calvert<br> Chief Executive Officer |

---

A signed original of this written statement required by Section 906 has been provided to BioLargo, Inc. and will be retained by BioLargo, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

I, Charles K. Dargan II, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of BioLargo, Inc. on Form 10-K for the fiscal year ended December 31, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of BioLargo, Inc.

---

| | |
|:---|:---|
| Dated: March 31, 2023 | /s/ CHARLES K. DARGAN II |
|  | Charles K. Dargan II<br> Chief Financial Officer |

---

A signed original of this written statement required by Section 906 has been provided to BioLargo, Inc. and will be retained by BioLargo, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.