BIOLARGO INC

Note1.** Business and Organization**

Description of Business*** ***

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.

Liquidity / Going concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of our business. During the year ended* December 31, 2023*, we generated revenues of $12,230,000 through our business segments (see Note12), had a net loss of $4,648,000, used $2,365,000 cash in operations, and at* December 31, 2023*, we had working capital of $3,652,000, and current assets of $6,362,000. We didnot generate enough revenues or gross profits to fund our operations during the year, and thus to meet our cash obligations we (i) sold $995,000 of our common stock to Lincoln Park Capital Fund, LLC (“Lincoln Park”) (see Note3), (ii) sold $1,158,000 of our common stock and warrants to accredited investors (see Notes3 and6), (iii) sold $1,575,000 of Clyra Medical Series A Preferred Stock and $35,000 of Clyra common stock (see Note10), and (iv) sold $raised $1,005,000 from the sale of its common stock (of that amount, $100,000 was invested by BioLargo, and $50,000 was from the conversion of BioLargo debt). (See Note4). We have been, and anticipate that we will continue to be, limited in terms of our capital resources, and expect to continue to need further investment capital to fund operations.

We intend to reinvest available cash into business operations and intend to continue to seek further investment capital for the remainder of this year. We have been, and anticipate that we will continue to be, limited in terms of our capital resources.

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 isno 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 donot include any adjustments that might be necessary if we are unable to continue as a going concern.

F-13

Organization

We are a Delaware corporation formed in1991. We have five wholly-owned subsidiaries: BioLargo Life Technologies, Inc., organized under the laws of the State of California in2006; ONM Environmental, Inc., organized under the laws of the State of California in2009; BioLargo Equipment Solutions & Technologies, Inc., organized under the laws of the State of California in2022; BioLargo Canada, Inc., organized under the laws of Canada in2014; and BioLargo Development Corp., organized under the laws of the State of California in2016. Additionally, we own 96% (see Note9) of BioLargo Energy Solutions Technologies, Inc. ("BETI") organized under the laws of the State of California in2019, 53% (see Note10) of Clyra Medical Technologies, Inc. (“Clyra” or “Clyra Medical”), organized under the laws of the State of California in2012 and redomiciled to Delaware in2023, and 82% (see Note11) of BioLargo Engineering Science and Technologies, LLC (“BLEST”), organized under the laws of the State of Tennessee in2017. We consolidate the financial statements of our partially owned subsidiaries (see Note2, subheading “Principles of Consolidation”).

Note2.**** Summary of Significant Accounting Policies**

Principles of Consolidation

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

Foreign Currency

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

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities ofthree months or less when acquired to be cash equivalents. Substantially all cash equivalents are held in short-term money market accounts atone 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 donot anticipate non-performance by our financial institution.

As of* December 31, 2023and2022*, our cash balances were made up of the following (in thousands):

Accounts Receivable

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

Accounts receivable are customer obligations that are unconditional. Accounts receivable are presented net of an allowance for doubtful accounts for expected credit losses, which represents an estimate of amounts that* may**not* be collectible. The Company performs ongoing credit evaluations of its customers and, if necessary, provides an allowance for expected credit losses. A credit less expenses for expected credit losses is recorded based on factors including the length of time the receivables are past due, the current business environment, and the Company’s historical experience. Expected credit losses are recorded to general and administrative expenses. The Company writes off accounts receivable against the allowance when it determines a balance is uncollectible andno longer actively pursues collection of the receivable. The Company doesnot have any off-balance-sheet credit exposure related to customers. As of* December 31, 2023,and December 31, 2022,the allowance for expected credit losses was $84,000 and $12,000, respectively. During the year ended December 31, 2023,*the Company wrote off as bad debt expense $85,000.

F-14

Credit Concentration

We have a limited number of customers that account for significant portions of our revenue. During the year ended* December 31, 2023*, there wasone customer that accounted for more than 10% of consolidated revenues, and during the year ended* December 31, 2022*, there weretwo customers that each accounted for more than 10% of consolidated revenues, as follows:

We hadone customer that accounted for more than 10% of consolidated accounts receivable at* December 31, 2023** and2022**,*as follows:

Inventory

Inventories are stated at the lower of cost or net realizable value using the average cost method. The allowance for obsolete inventory as of* December 31, 2023and2022* was $212,000 and $158,000, respectively. Inventories consisted of (in thousands):

Other Non-Current Assets

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 in2022 is from the Canadian government related to a research and development credit from our Canadian subsidiary for which we’ve applied for and received in prior periods. This tax credit in2022 was reversed in2023, as it was determined during2023, that our Canadian subsidiary wouldnot be eligible for the credit as it didnot generate taxable income.

F-15

Equity Method of Accounting

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 donot 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, 2023and2022**,* the joint venture incurred a loss and our 40% ownership share reduced our investment interest by $14,000 and $15,000, respectively.

Impairment

Long-lived and definite lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset* may**not* be recoverable. If the sum of the expected future undiscounted cash flows from the use of the asset and its eventual disposition is less than the carrying amount of the asset, then an impairment loss is recognized. The impairment loss is measured based on the fair value of the asset. Any resulting impairment is recorded as a reduction in the carrying value of the related asset in excess of fair value and a charge to operating results.

For the year ended* December 31, 2023**,management determined that there was complete impairment of Clyra’s prepaid marketing asset (see Note10*). Impairment expense related to Clyra's prepaid marketing asset for the years ended* December 31, 2023and2022* is $394,000 and $197,000, respectively.

Loss Per Share

We report basic and diluted loss per share (“LPS”) for common and common share equivalents. Basic LPS is computed by dividing reported earnings by the weighted average shares outstanding. Diluted LPS 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, 2023and2022**,* the denominator in the diluted LPS computation is the same as the denominator for basic LPS due to the Company’s net loss which creates an anti-dilutive effect of the convertible notes payable, warrants and stock options.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") 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 consolidated financial statements, and revenues and expenses during the year 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 consolidated financial statements.

F-16

Share-Based Compensation Expense

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

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

The following methodology and assumptions were used to calculate share-based compensation for the years ended* December 31, 2023and2022**:*

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 donot anticipate paying cash dividends on our common stock in the foreseeable future.

Warrants issued with our convertible and non-convertible debt instruments are accounted for under the fair value and relative fair value method.

The warrant isfirst analyzed per its terms as to whether it has derivative features ornot**. If the warrant is determined to be a derivative andnot qualify for equity treatment, then it is measured at fair value using the Black Scholes option model, and recorded as a liability on the consolidated balance sheets. 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 tonot 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.

F-17

Non-Cash Transactions

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

Revenue Recognition

We account for revenue in accordance with ASC606**, “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:

Step1: Identify the contract(s) with a customer.

Step2: Identify the performance obligations in the contract.

Step3: Determine the transaction price.

Step4: Allocate the transaction price to the performance obligations in the contract.

Step5: Recognize revenue when (or as) the entity satisfies a performance obligation.

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 beenno discounts or other financing terms for the contracts.

The Company has outstanding contract liability obligations of $303,000 and $17,000 as of* December 31, 2023,and2022,* respectively. The outstanding balance will be recognized per the terms of the contracts. Our Canadian subsidiary had a customer deposit outstanding at* December 31, 2023,and2022,* totaling$113,000, that was awarded as part of a grant for a particular project that has been delayed. ONM Environmental had a customer deposit outstanding at* December 31, 2023,and2022,* totaling $4,000 and$71,000, related to customer purchase ordersnot yet fulfilled.

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

Government Grants

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 over80 grants since ourfirst in2015*.* Some of the funds from these grants are given directly tothird parties (such as the University of Alberta or athird-party research scientist) to support research on our technology. The grants have terms generally ranging betweensix andeighteen months and support a majority, butnot 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.

F-18

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, andno* assurance can be made that any pending grant application, or any future grant applications, will be awarded.

Income Taxes

The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of asset and liabilities. Deferred tax assets and liabilities are determined based on the differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on deferred tax asset and liabilities of a change in tax rates is recognized in operations in the year 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 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 isnot considered “more-likely-than-not” to be sustained, thenno benefits of the position are recognized. Management believes there areno unrecognized tax benefits or uncertain tax positions as of* December 31, 2023and2022**.*

The Company assessed its earnings history, trends and estimates of future earnings and determined that the deferred tax asset couldnot be realized as of* December 31, 2023**.*Accordingly, a valuation allowance was recorded against the net deferred tax asset.

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

Fair Value of Financial Instruments

Management believes the carrying amounts of the Company’s financial instruments as of* December 31, 2023and2022* approximate their respective fair values because of the short-term nature of these instruments. Such instruments consist of cash, accounts receivable, 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.

Tax Credits

Our research and development activities in Canada* may** entitle our Canadian subsidiary to claim benefits under the “Scientific Research and Experimental Development Program”, a Canadian federal tax incentive program designed to encourage Canadian businesses of all sizes and in all sectors to conduct research and development in Canada. Benefits under the program include credits to taxable income. If our Canadian subsidiary doesnot* have taxable income in a reporting period, we willnot receive tax refund from the Canadian Revenue Authority.

F-19

Leases

At inception of a lease contract, we assess whether the contract is, or contains, a lease. Our assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period of the contract, and (3) whether we have the right to direct the use of the asset during such time period. At inception of a lease, we allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. Leases are classified as either finance leases or operating leases. A lease must be classified as a finance lease if any of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it doesnot meet any of these criteria. We haveno leases classified as finance leases. For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, management estimates the incremental borrowing rate, which currently is estimated to be 18%. Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease willnot be terminated early. Lease components are included in the measurement of the initial lease liability. Additional payments based on a change in our portion of the operating expenses, including real estate taxes and insurance, are recorded as a period expense when incurred. Lease modifications result in remeasurement of the lease liability. Lease expense for operating leases consists of the lease payments plus any initial direct costs, primarily brokerage commissions, and is recognized on a straight-line basis over the lease term. We have electednot to recognize right-of-use assets and lease liabilities for short-term leases that have a term of12 months or less. The effect of short-term leases on our right-of-use asset and lease liability wasnot material. As of* December 31, 2023* and2022, the right-of-use assets totaled $1,092,000, and $867,000, respectively. As of* December 31, 2023and2022,* the lease liability totaled $1,109,000 and $870,000, respectively, on our consolidated balance sheets related to our operating leases.

Equipment

Equipment and leasehold improvements 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 -10 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.

Noncontrolling Interest

A noncontrolling interest is defined as the portion of the equity in an entitynot attributable, directly or indirectly, to the primary beneficiary. Noncontrolling interests are required to be presented as a separate component of equity on a consolidated balance sheets. Accordingly, the presentation of net income (loss) is modified to present the income (loss) attributed to controlling and non-controlling interests. The noncontrolling interest on the Company’s consolidated balance sheets represents equitynot held by the Company. In accordance with ASC810-10-20, “Noncontrolling Interests” BioLargo consolidatesthree non-wholly owned subsidiaries - Clyra, BLEST and BETI. Noncontrolling interest of Clyra represents 47% as of* December 31, 2023and2022.* Noncontrolling interest of BLEST represents 23% and 18% as of* December 31, 2023,and2022,* respectively. Noncontrolling interest of BETI represents 4% as of* December 31, 2023.BETI started operations in2023.*

Recent Accounting Pronouncements

In* November 2023,the FASB issued ASU2023*-07, Segment Reporting (Topic280), Improvements to Reportable Segment Disclosures. The main provisions are:

This Update is effective for fiscal years beginning after* December 15, 2023,and interim periods within fiscal years beginning after December 15, 2024.Management has evaluated the update and has adopted it for the year ended December 31, 2023and future reporting periods. This adoption hadno* significant impact on our consolidated financial statements. Management has made the additional disclosures in our segment note (see Note12), required by this ASU.

Note3.**** Sale of Stock for Cash**

Lincoln Park Financing

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 ofthree 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* maybe 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 thethree* lowest closing prices in the prior12 business days. There areno restrictions on future financings, rights offirst 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 the2022 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 the2022* 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 consolidated statement of stockholders' equity.

During the years ended* December 31, 2023and2022,* we sold 3,833,230 and 6,011,701 shares of our common stock to Lincoln Park, and received $995,000 and$1,253,000, respectively, in gross and net proceeds.

Unit Offerings

During the year ended* December 31, 2023,and2022* we sold 8,170,287 and 13,568,524 shares of our common stock and received $1,158,000 and$2,364,000, respectively, in gross and net proceeds from accredited investors. In addition to the shares, we issued each investor asix-month and afive-year warrant to purchase additional shares. (See Note6, “Warrants Issued in Unit Offering”.)

F-20

Note4.**** Debt Obligations**

The following table summarizes our debt obligations outstanding as of* December 31, 2023and2022* (in thousands). The table doesnot include debt obligations of our partially owned subsidiary Clyra Medical (see Note10**, “Debt Obligations of Clyra Medical”).

For the years ended* December 31, 2023and2022**,* we recorded $91,000 and $53,000 of interest expense related to the amortization of discounts on convertible notes payable and coupon interest from our convertible notes and lines of credit.

F-21

Convertible note payable, matures *** March 1, 2023***

On* March 6, 2023,we entered into an agreement with the holder of a $50,000 note to convert that note into common stock of BETI. As payment for interest, a warrant to purchase 200,000 shares of BioLargo common stock at $0.21 was issued to the investor, expiring five years from the grant date. (See Note6*).

SBA Program Loans

On* February 7, 2022,we received notice that the SBA had forgiven $174,000 of the ONM Environmental $217,000 Paycheck Protection Program (PPP) loan. As of December 31, 2023,*the outstanding balance on this loan totals $43,000. The partial forgiveness decision has been appealed, and during such time, loan payments are deferred.

On* May 12, 2022,we received notice that the SBA had denied the forgiveness application of BLEST’s $97,000 PPP loan. We successfully appealed that decision, and are awaiting formal notification from the SBA of its reversal and full forgiveness of the loan. The maturity date of this loan was officially extended on our request to May 2025.*

In* July 2020,ONM Environmental received an Economic Injury Disaster Loan from the SBA in the amount of $150,000. The note has a 3.75% annual interest rate, requires monthly payments of $700, and matures July 2053.*

Note5.**** Share-Based Compensation**

Issuance of Common Stock in exchange for Services

During the years ended* December 31, 2023,and2022,* we issued 1,951,541 and 1,448,512 shares, respectively, to officers, consultants, and otherthird parties as payment of amounts owed for services provided to our company, and recorded an aggregate $384,000 and $291,000, respectively, in selling general and administrative expense related to these issuances.

Payment of Officer Salaries

During the year ended* December 31, 2023,certain of our officers agreed to convert an aggregate $48,000 of accrued and unpaid salary into 292,029 shares of our common stock. The unpaid salary is converted on the last day of each quarter as follows: on December 31, 2023,we issued 123,178 shares of our common stock at $0.17 per share; on September 30, 2023,we issued 69,563 shares of our common stock at $0.17 per share; on June 30, 2023,we issued 68,541 shares of our common stock at $0.18 per share; on March 31, 2023,*we issued 30,747 shares of our common stock at $0.20 per share.

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 268,330 shares 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.

F-22

Payment of Consultant Fees

During2023, certain of our consultants agreed to convert an aggregate $336,000 accrued and unpaid obligations into 1,659,512 shares of our common stock. The unpaid obligations were converted on the last day of each quarter as follows: on* December 31, 2023,we issued 261,276 shares of our common stock at $0.17 per share; on September 30, 2023,we issued 146,123 shares of our common stock at $0.17 per share; on June 30, 2023,we issued 352,370 shares of our common stock at $0.18 per share; on March 31, 2023,*we issued 899,743 shares of our common stock at $0.20 per share.

During2022**, 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.

All of these offerings and sales were made in reliance on the exemption from registration contained in Section4(2) of the Securities Exchange Act and/or Regulation D promulgated thereunder asnot involving a public offering of securities.

Stock Option Expense

During the years ended* December 31, 2023and2022**,* we recorded an aggregate $2,124,000 and $2,071,000, respectively, in selling general and administrative expense related to the granting of stock options. We issued options through our2018 Equity Incentive Plan, and outside of this plan. Of the aggregate amount issued during the years ended* December 31, 2023,and2022,* $260,000 and $408,000, respectively, were issued by our subsidiary Clyra Medical (see Note10).

2018 Equity Incentive Plan

On* June 22, 2018**,our stockholders adopted the BioLargo2018* 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 issued under this plan for a period of 10 years. It is set to expire on its terms on June22,* 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 this2018 Plan by the Board is 40 million shares. The number of shares available to be issued under the2018 Plan increases automatically each* January 1st by the lesser of (a)2 million shares, or (b) such number of shares determined by our Board. As of December 31, 2023*,*50,000,000 shares are authorized under the plan.

F-23

Activity for our stock options under the2018 Plan during the year ended* December 31, 2023**,and the year ended December 31, 2022**,*is as follows:

The options granted to purchase 12,623,899 shares during the year ended* December 31, 2023* with an aggregate fair value of $2,058,000 were issued to officers, board of directors, employees and consultants: (i) we issued options to purchase 560,435 shares of our common stock at an exercise price on the respective grant date ranging between $0.17 - $0.20 per share to our officers to replace options that had expired and resulted in a fair value of$151,000; (ii) we issued options to purchase 2,213,180 shares of our common stock at an exercise price on the respective grant date ranging between $0.17 – $0.20 per share to members of our board of directors for services performed, in lieu of cash; the fair value of these options totaled$365,000; (iii) we issued options to purchase 4,080,138 shares of our common stock to employees as part of an employee retention plan at an exercise price on the respective date ranging between $0.17 – $0.20 per share; the fair value of employee retention plan options totaled $658,000 and will vest quarterly over four years as long as they are retained as employees; (iv) we issued options to purchase 5,470,146 shares of our common stock to consultants in lieu of cash for expiring options and per agreement totaling $884,000, and (v) we issued 300,000 options to our Chief Financial Officer with a fair value of $56,000 (see “Chief Financial Officer Contract Extension” see below). All stock option expense is recorded on our consolidated statements of operations as selling, general and administrative expense.

As of* December 31, 2023,*there remains $918,000 of stock option expense to be expensed over the next 4 years.

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” see below). All stock option expense is recorded on our consolidated statements of operations as selling, general and administrative expense.

Chief Financial Officer Contract Extension

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 additionalone-year term to expire January 31, 2024 (the “Extended Term”), after which Mr. Dargan will continue to serve as CFO, unless and until either party terminates the agreement. As the sole compensation for the Extended Term, Mr. Dargan was issued an option (“Option”) to purchase 25,000 shares of the Company’s common stock for each month during the Extended Term (thus, an option to purchase 300,000 shares reflecting an extended term of12* 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, expiresten years from the grant date, and was issued pursuant to the Company’s2018* Equity Incentive Plan.

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 additionalone-year term through January 31, 2023** (the “Extended Term”). 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 of12* 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, expiresten years from the grant date, and was issued pursuant to the Company’s2018 Equity Incentive Plan.

F-24

2007 Equity Incentive Plan

On* September7,* 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 the2007 Plan for the years ended* December 31, 2023and2022* is as follows:

Non-Plan Options issued

Activity of our non-plan stock options issued for the years ended* December 31, 2023and2022* is as follows:

During the year ended* December 31, 2023**,we issued options to purchase an aggregate 60,040 shares of our common stock at exercise prices ranging between $0.18 – $0.20 per share to vendors for fees for services. The fair value of the options issued totaled an aggregate $11,000 and is recorded in our selling, general and administrative expense. As of December 31, 2023,*there is a total of $109,000 unvested fair value that will expense in the next 3 years.

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.

F-25

Note6.**** Warrants**

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

Warrants issued in Unit Offerings

During the year ended* December 31, 2023**,pursuant to our Unit Offerings (see Note3*), we issuedsix-month stock purchase warrants to purchase an aggregate 8,129,687 shares of our common stock at prices at $0.23 per share, andfive-year stock purchase warrants to purchase an aggregate 8,129,687 shares of our common stock at $0.29 per share.

During the year ended* December 31, 2022**,* pursuant to our Unit Offering (see Note3), we issuedsix-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, andfive-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.

Warrant issued in conjunction with amendment to note payable

On* March 6, 2023,we entered into an agreement with the holder of a $50,000 note (see Note4,* “Convertible note payable, matures* March 1, 2023”)*to convert that note into common stock of BETI. As payment for interest, a warrant to purchase 200,000 shares of BioLargo common stock at $0.21 was issued to the investor, expiring five years from the grant date. The fair value of this warrant totaled $30,000 and was recorded as interest expense on our consolidated statements of operations.

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Fair Value–*** Interest Expense***

To determine interest expense related to our outstanding warrants issued in conjunction with debt offerings, the fair value of each award grant is estimated on the date of grant using the Black-Scholes option pricing model and the relative fair values are amortized over the life of the warrant. For the determination of expense of warrants issued for services, extinguishment of debt and settlement management also uses the option-pricing model. The principal assumptions we used in applying this model were as follows:

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.

Note7.**** Accounts Payable and Accrued Expenses**

As of* December 31, 2023**,*accounts payable and accrued expenses included the following (in thousands):

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

See Note10**, “Accounts Payable and Accrued Expenses”, for the accounts payable and accrued expenses of Clyra Medical.

Note8.**** 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. Since2016**, we havenot consolidated for tax purposes with our subsidiary Clyra Medical, as our ownership interest was less than80%**. Our subsidiary BLEST is a Tennessee limited liability company and as a pass-through entity doesnot 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 willnot pay an excise tax unless and until it is profitable. The Company’s losses before income taxes consist primarily of losses from domestic operations, but also included relatively nominal losses from foreign operations.

F-27

A reconciliation of income tax expense (benefit) computed at the statutory federal tax rates to income taxes as reflected in the financial statements is as follows:

Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets and liabilities as of* December**31,* 2023 and2022 are comprised of the following:

The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets, which are comprised primarily of net operating loss carryforwards. Management has considered the Company’s history of cumulative net losses in the United States, estimated future taxable income and prudent and feasible tax planning strategies and has concluded that it is more likely thannot that the Company willnot realize the benefits of its U.S. federal and state deferred tax assets. Accordingly, a full valuation allowance has been established against these net deferred tax assets as of* December**31,* 2023 and2022, respectively. The Company reevaluates the positive and negative evidence at each reporting period.

At* December 31, 2023,the Company had utilizable federal net operating loss carry forwards of approximately $95 million. The federal operating losses prior to2003* have expired. Utilization of the U.S. federal and state net operating loss* maybe subject to a substantial annual limitation under Section382* and Section383 of the Internal Revenue Code of1986, as amended, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes* maylimit the amount of net operating loss that can be utilized annually to offset future taxable income and tax liabilities, respectively. The Company hasnot* completed a study to assess whether a change of ownership has occurred, or whether there have been multiple ownership changes since its formation. Any limitation* may*result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization.

The Company is subject to tax in the United States (“U.S.”) and files income tax returns in the U.S. Federal jurisdiction and several states and local jurisdictions where the Company has determined it has tax nexus. The Company is subject to U.S. Federal, state and local income tax examinations by tax authorities for periods after2019. The Company currently isnot under examination by any tax authority.

Note9. Noncontrolling Interest–BioLargo Energy Technologies, Inc. (BETI)

BioLargo Energy Technologies, Inc. (“BETI”) was formed for the purpose of commercializing a liquid sodium battery technology. BioLargo purchased 9,000,000 shares of BETI common stock upon its formation, and was initially its sole stockholder. During the year ended* December 31, 2023,BETI sold 467,000 shares of its common stock and received $1,005,000. Of that amount, $100,000 in shares were purchased by BioLargo and $50,000 related to a conversion of BioLargo debt. (See Note4*). Each investor also entered into an agreement with BioLargo whereby the investor* mayexchange some or all of its shares of BETI common stock into shares of BioLargo common stock, at a price equal to a 20% discount of the volume weighted average price over the20* trading days prior to the election to exchange. Elections must be made during calendar year2024.

As of* December 31, 2023,*BETI had 9,467,000 issued and outstanding shares, of which BioLargo holds 9,050,000.

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Note10.**** Noncontrolling Interest**–** Clyra Medical**

As discussed in Note2 above, we consolidate the operations of our partially owned subsidiary Clyra Medical, of which we owned 53% of its outstanding shares as of* December 31, 2023*.

On* December 15, 2023,Clyra filed a Certificate of Conversion with the Delaware Secretary of State, formally changing its corporate domicile from California to Delaware. In association with the change, for eachone* share of common stock of the California corporation,100 shares of the Delaware corporation were issued. All share numbers stated herein, regardless of date, reflect the foregoing1-for-100 stock split.

Impairment of Other Asset, Prepaid Marketing

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 offour 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 overthree* consecutive months, which hasnot 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.

During2023, Clyra Medical's revenue didnot improve, and it continues to pursue surgical wash product opportunities, Management determined as of* December 31, 2023**,*to impair the remaining asset balance totaling $394,000.

During2022, in light of Clyra's small revenue and its shift of focus to a surgical wash product, Management determined to impair a portion of the prepaid marketing asset by $197,000. The impairment amount was charged to impairment expense on our consolidated statements of operations.

Debt Obligations of Clyra Medical

Promissory Note

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

Line of Credit

On* June 30, 2020**,Clyra Medical entered into a Revolving Line of Credit Agreement whereby Vernal Bay Capital Group, LLC ("Vernal") 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 ofone-half of principal outstanding on the line of credit, and $200,000. The line of credit note bears interest at 15%, matures inone year, and requires Clyra pay interest and principal from gross product sales. For thefirst* 180 days, on a monthly basis, Clyra was required to pay 30% of gross product sales to reduce amounts owed, and thereafter 60% of gross sales. Clyra issued Vernal Bay 32,200 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**,Clyra and Vernal 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 32,200 shares of Clyra common stock it received as consideration for the line of credit into shares of BioLargo common stock based on the volume weighted average price of BioLargo common stock for the30* business days preceding the election. Vernal Bay elected to convert these shares into 527,983 shares of BioLargo common stock in* January 2023.*

As of* December 31, 2023**,the balance outstanding on this line of credit totals $134,000. As of December 31, 2022**,*the balance outstanding on this line of credit totaled$161,000.

Equity Transactions

As of* December 31, 2023**,*Clyra had an aggregate 10,000,749 shares outstanding, of which 746,418 were Series A Preferred shares. Of that amount, BioLargo owned 5,322,775 shares, of which 165,765 were Series A Preferred shares.

Sales of Common Stock

During the year ended* December 31, 2023**,Clyra sold 7,000 shares of its common stock, and issued a warrant to purchase 3,500 shares of its common stock at $7.50 per share, expiring February 28, 2027,fromone* accredited investor. In exchange, it received $35,000 in gross and net proceeds. The fair value of this warrant issued total $4,000 and is 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 Clyra stock.

On* March 2, 2022**,*BioLargo converted $633,000 owed to it by Clyra into 204,223 shares of Clyra common stock.

F-29

Sales of Series A Preferred Stock

During the year ended* December 31,2023, Clyra sold 508,072 shares of its Series A Preferred Stock, and in exchange received $1,575,000 in gross and net proceeds from35 accredited investors. Purchasers of the Series A Preferred Stock also received a 3-year warrant to purchase the same number of additional shares of common stock for $3.72 per share. The fair value of the warrants issued totaled $410,000 and is 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 Series A Preferred Stock. Shares of Series A Preferred Stock earn a dividend of 15% each year, compounding annually; the company is underno obligation to pay such dividends in cash, and such dividends automatically convert to common stock upon conversion of the Series A Preferred Stock to common stock. Each share of Series A Preferred stock can be converted by the holder at any time forone share of common stock, and automatically convert upon the completion of a public offering of shares in which at least $5,000,000 of gross proceeds is received by the company. Accrued dividends maybe converted to common stock at a conversion rate of $3.10 per share. Each investor also entered into an agreement with BioLargo whereby the investor mayexchange some or all of its Series A Preferred stock, plus accrued dividends, into shares of BioLargo common stock, at a price equal to a20%* discount of the volume weighted average price over the30 prior trading days. Elections* maybe made during the period beginning January 1, 2025,and ending on June 30, 2026.*

On* December 20, 2022**,Clyra sold 72,581 shares of its Series A Preferred Stock, and in exchange received $225,000 in gross and net proceeds, fromtwo* accredited investors. Each investor also received a 3-year warrant to purchase the same number of additional shares of common stock for $3.72 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 forone share of common stock. Accrued dividends* may** be converted to common stock at a conversion rate of $3.10 per share. Each investor also entered into an agreement with BioLargo whereby the investor mayexchange some or all of its Series A Preferred stock, plus accrued dividends, into shares of BioLargo common stock, at a price equal to a20%* discount of the volume weighted average price over the30 prior trading days. Elections* maymade during the period beginning January 1, 2025,and ending on June 30, 2026.*

On* July 20, 2023,BioLargo converted $96,000 owed to it by Clyra into 30,833 shares of Clyra Series A preferred common stock. On December 31, 2022,*BioLargo converted $418,000 owed to it by Clyra into 134,932 shares of Clyra Series A preferred stock.

Stock Options

Clyra issues options to its employees and consultants in lieu of compensation owed on a regular basis. During the years ended* December 31, 2023and2022**,* Clyra issued options to purchase 191,981 and 182,908 shares of its common stock, respectively. Each option vests upon issuance and has an expiration date 10 years from the date of grant. Of the 191,981 options granted during the year ended* December 31, 2023**,** the exercise price of 52,700 are$0.01* per share, and the remainder are $2.71 per share. Of the 182,908 options granted in the year ended* December 31, 2022,** the exercise price of 159,700 are$0.01* per share, and the remainder are $3.10 per share. The fair value of the options issued in the year ended* December 31, 2023,and2022* totaled $260,000 and $408,000, respectively; we used the Black-Scholes model to calculate the initial fair value, assuming a stock price on date of grant of $2.70 and $3.10 per share, respectively. Because Clyra is a private company withno secondary market for its common stock, the resulting fair value was discounted by 30%. During the year ended* December 31, 2023,we used a risk-free rate ranging between 3.48% -4.45% compared to the year-ended December 31, 2022,risk free rate ranging between 2.32% -3.83%,* a volatility of 49% and an expected life of 10 years.

Accounts Payable and Accrued Expenses

At* December 31, 2023and2022**,* Clyra had the following accounts payable and accrued expenses (in thousands):

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Note11.**** 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 athree*-year office lease in the Knoxville, Tennessee area, and entered into employment agreements withsix scientists and engineers. (See Note12 “Business Segment Information”.) BLEST was capitalized withtwo classes of membership units: Class A,100% owned by BioLargo, and Class B, held by management of BLEST, and which initially haveno “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 afive 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 wasnot* met), collecting 90% of its account receivables, obtaining a profit of 10% in itsfirst 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. In2018**, it reviewed the operating performance and determined that the performance metrics werenot met and as a result, didnot award any Class B units or stock options.* In December 2022**,the committee again reviewed the operating performance and determined that a portion of the performance metrics were met. In December 2023**,the committee again reviewed the operating performance and determined that a portion of the performance metrics were met. It was agreed that an additionalone*-half andone-quarter of the eligible profits interests would be vested (22.5% in the aggregate), and therefore an additional half of the option interests would be vested (1,750,500 options shares in the aggregate). The vesting of option shares during the year ended* December 31, 2023,and2022,* resulted in a fair value totaling $17,000 and$135,000 and is recorded on our consolidated statement of operations as selling, general and administrative expense*.*

Note12.**** Business Segment Information**

For the years ended* December 31, 2023and2022,* BioLargo hadfive operating business segments, plus its corporate entity which is responsible for general corporate operations, including administrative functions, finance, human resources, marketing, legal, etc. Thefour operational business segments are:

Other than ONM Environmental,none of our operating business units have operated at a profit, 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 and BETI have been funded bythird party investors who invest directly in in these entities in exchange for equity ownership in that entity.

The Chief Operating Decision Makers for the segments are: Joseph Provenzano, President of ONM, Randall Moore, President of BLEST, Steven Harrison, President of Clyra Medical, Dennis Calvert, President of BETI, and Richard Smith, President of BioLargo Canada.

F-31

The segment information for the years* December 31, 2023and2022**,* is as follows (in thousands):

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Note13.**** Leases**

We have long-term operating leases for office, industrial and laboratory space in Westminster, California, Oak Ridge, Tennessee, and Alberta, Canada. Payments made under operating leases are charged to the Consolidated Statement of Operations and Comprehensive Loss on a straight-line basis over the term of the operating lease agreement. Short-term leases less thanone-year arenot included in our analysis. For the years ended* December 31, 2023and2022**,* rental expense was $335,000 and $316,000, respectively. The lease of our Westminster facility expires* August** 2024.* Management intends to extend this lease forfour years. Thefour-year lease extension added $394,000 to our right of use and lease liability as of* December 31, 2023.In September 2022**,* the lease of our Oak Ridge, Tennessee facility was extended forten years. Theten-year lease added $443,000 to our right of use and lease liability as of* December 31, 2022.The lease of our Canadian facility is less thanone* year.None of our leases have additional terms related to the payments or mechanics of the lease. The leases haveno additional payment terms such as common area maintenance payments, tax sharing payments or other allocable expenses. Likewise, the leases donot contain other terms and conditions of use, such as variable lease payments, residual value guaranties or other restrictive financial terms. Since there isno 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, 2023,*the weighted average remaining lease term for our operating leases wasseven years.

As of* December 31, 2023**,our weighted average remaining lease term isseven years and the total remaining operating lease payments is $2,042,000. Our minimum lease payments over the nextfive* years are as follows:

Note14.**** Subsequent Events.**

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

Sales of Common Stock

From* January 1, 2024,through March 29, 2024,we sold 806,175 shares of our common stock to Lincoln Park pursuant to the2022* LPC Purchase Agreement (see Note3), and received $260,000 in gross and net proceeds. These sales were registered with the SEC on Form S-1 (file number333-268973). (See Note3.)

From* January 1, 2024,through March 29, 2024,we sold 1,394,737 shares of our common stock and received $265,000 and $239,000, respectively, in gross and net proceeds, fromfive* accredited investors. In addition to the shares, we issued each investor asix-month and afive-year warrant to purchase additional shares. (See Note3 and Note6 “Warrants Issued in Unit Offering”.) Commissions paid to a licensed broker included a10% cash fee and a warrant to purchase10% of the shares purchased.

From* January 1, 2024,through March 29, 2024,*we issued 406,278 shares of our common stock pursuant to the exercise of stock purchase warrants and received $75,000 in gross and net proceeds.

Clyra Medical

From* January 1, 2024,through March 29, 2024,** Clyra Medical sold 95,000 shares of its common stock, and issued warrants to purchase an aggregate 47,500 shares of its common stock at $7.50 per share, expiring February 28, 2027,fromfour* accredited investors. In exchange, it received $475,000 in gross and net proceeds.