BIOLARGO INC

Previous wording

ONM sells privately labeled odor-control products based on our technologies to third parties who market and sell the products under their own brand names. The most successful of these products is the "Pooph" branded pet odor control product sold by Pooph Inc. both directly to consumers and to national and regional retailers including Walmart, Amazon, Home Depot, Ace Hardware, Chewy.com, Target, Ralphs, and others. Pooph is advertised on television nationally, and is expanding its product lines to other products based on our odor technologies. In addition to purchasing product from us at an agreed-upon manufacturing margin, Pooph Inc. pays us six percent royalty on their sales in exchange for exclusive rights to our technology for pet odors. During the three and six months ended June 30, 2024, revenues from sales to Pooph comprised 70% and 78% of our company-wide revenue

Current wording

ONM sells privately labeled odor-control products based on our technologies to third parties who market and sell the products under their own brand names. The most successful of these products is the "Pooph" branded pet odor control product sold by Pooph Inc. both directly to consumers and to national and regional retailers including Walmart, Amazon, Home Depot, Ace Hardware, Chewy.com, Target, Ralphs, PetCo, PetSmart, and others. Pooph is advertised on television nationally, and is expanding its product lines to other products based on our odor technologies. In addition to purchasing product from us at an agreed-upon manufacturing margin, Pooph Inc. pays us six percent royalty on their sales in exchange for exclusive rights to our technology for pet odors. During the three and nine months ended September 30, 2024, revenues from sales to Pooph comprised 76% and 78% of our company-wide revenue.

Previous wording

One of the most significant and timely innovations in our portfolio is our per- and polyfluoroalkyl substance (PFAS) removal and collection/disposal solution we call the Aqueous Electrostatic Concentrator (AEC), a novel water treatment system that removes PFAS from water at a lower operating cost while generating only a fraction of the PFAS-laden waste of the most common currently used solutions (carbon filtration, ion exchange, and reverse osmosis). According to the Center for Disease Control, PFAS are a group of chemicals used to make fluoropolymer coatings and products that resist heat, oil, stains, grease, and water. Fluoropolymer coatings can be in a variety of products. These include clothing, furniture, adhesives, food packaging, heat-resistant non-stick cooking surfaces, and the insulation of electrical wire. PFAS are a concern because they do not break down in the environment, can move through soils and contaminate drinking water sources, and build up (bioaccumulate) in fish and wildlife. 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. Detection of unsafe levels of PFAS around the world has given rise to a number of market opportunities for treatment and remediation technologies, including in drinking water, industrial wastewater, municipal wastewater, solid waste, organic foods and more.

Current wording

One of the most significant and timely innovations in our portfolio is our per- and polyfluoroalkyl substance (PFAS) removal and collection/disposal solution we call the Aqueous Electrostatic Concentrator (AEC), a novel water treatment system that removes PFAS from water at a lower operating cost while generating only a fraction of the PFAS-laden waste of the most common currently used solutions (carbon filtration, ion exchange, and reverse osmosis). PFAS are a group of chemicals used to make fluoropolymer coatings and products that resist heat, oil, stains, grease, and water. Fluoropolymer coatings can be in a variety of products. These include clothing, furniture, adhesives, food packaging, heat-resistant non-stick cooking surfaces, and the insulation of electrical wire. PFAS are a concern because they do not break down in the environment, can move through soil and contaminate drinking water sources, and build up (bioaccumulate) in fish and wildlife. 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. Detection of unsafe levels of PFAS around the world has given rise to a number of market opportunities for treatment and remediation technologies, including in drinking water, industrial wastewater, municipal wastewater, solid waste, organic foods and more.

Previous wording

On April 19, 2024, the EPA announced it had finalized new regulations that treat two PFAS chemicals – PFOS and PFOA – as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as the Superfund law. The new rules allow the EPA to hold polluters financial responsible for contaminated sites, and will also lead to these PFAS chemicals being listed as “hazardous materials” under the Hazardous Materials Transportation Act, which will require materials containing these chemicals to be transported using special protocols. Although final rules have not been issued, in February 2024 the EPA proposed changes to the Resource Conservation and Recovery Act regulations by adding nine PFAS chemical compounds to its list of hazardous constituents in Title 40 of the Code of Federal Regulations Part 261 Appendix VIII. Combined with the new CERCLA regulations, a final RCRA regulation of PFAS may increase the costs of the handling, transport, and disposal of PFAS-containing materials including water treatment waste.

Current wording

On April 19, 2024, the EPA announced it had finalized new regulations that treat two PFAS chemicals – PFOS and PFOA – as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as the Superfund law. The new rules allow the EPA to hold polluters financial responsible for contaminated sites, and will also lead to these PFAS chemicals being listed as “hazardous materials” under the Hazardous Materials Transportation Act, which will require materials containing these chemicals to be transported using special protocols. Although final rules have not been issued, in February 2024 the EPA proposed changes to the Resource Conservation and Recovery Act regulations by adding nine PFAS chemical compounds to its list of hazardous constituents in Title 40 of the Code of Federal Regulations Part 261 Appendix VIII. Combined with the new CERCLA regulations, a final RCRA regulation of PFAS may increase the costs of the handling, transport, and disposal of PFAS-containing materials including water treatment waste. The first draft of regulations for wastewater and leachate are expected by the end of 2024.

Previous wording

Our strategy to market our PFAS treatment technology and related engineering services is as follows: 1) focus on demonstrating our technology’s efficacy in first demonstration projects, trials, and early customer deployments with the understanding that this early success can be leveraged to secure larger and more numerous subsequent projects, 2) market our PFAS expertise and our technology by presenting at industry events and conferences around the country, cultivating our status as “thought leaders” in the space, 3) use our network of manufacturer’s representatives and channel selling partners to maximize the number of potential opportunities with early adopters, and 4) engage in discussions with credible distribution partners at established water treatment technology companies.

Current wording

Our strategy to market our PFAS treatment technology and related engineering services is as follows: 1) focus on demonstrating our technology’s efficacy in first demonstration projects, trials, and early customer deployments with the understanding that this early success can be leveraged to secure larger and more numerous subsequent projects, 2) market our PFAS expertise and our technology by presenting at industry events and conferences around the country, cultivating our status as “thought leaders” in the space, 3) use our network of manufacturer’s representatives and channel selling partners to maximize the number of potential opportunities with early adopters, and 4) engage in discussions with credible distribution partners at established water treatment technology companies. Part and parcel to our strategy, we are in the early stages of developing a collaboration with the US EPA to have our AEC technology validated through a rigorous third-party pilot study whereby our technology would be operated and analyzed by EPA staff to a high degree of technical scrutiny. Such third-party validation could significantly facilitate market adoption of the AEC by effectively de-risking the technology for customers.

Previous wording

The AEC’s commercial roll-out is being 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. We have one PFAS project ongoing, in New Jersey, and expect our equipment to be installed and operational before the end of the year. We believe this project represents a key milestone for the commercialization of the AEC, as industry validation of the technology in a first municipal drinking water treatment project will play an important role in convincing additional municipalities to adopt the technology for treating PFAS-contaminated water, as the company will publish reference customer data from the project that highlights the AEC’s distinct advantages over incumbent technologies like carbon filtration and ion exchange.

Current wording

The AEC’s commercial roll-out is being 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. We have one PFAS project in New Jersey readying for installation and operation, waiting on the completion of other facilities. We believe this project represents a key milestone for the commercialization of the AEC, as industry validation of the technology in a first municipal drinking water treatment project will play an important role in convincing additional municipalities to adopt the technology for treating PFAS-contaminated water, as the company will publish reference customer data from the project that highlights the AEC’s distinct advantages over incumbent technologies like carbon filtration and ion exchange.

Previous wording

Presently, both BioLargo and Garratt-Callahan are engaged in discussions with multiple potential first customers for the AROS system.

Current wording

Presently, both BioLargo and Garratt-Callahan are engaged in pilot projects with potential customers for the AROS system, and the companies are currently engaged in discussions with multiple potential first customers for the technology.

Previous wording

The AOS has, broadly speaking, two target applications: 1) treatment of municipal or industrial wastewater to eliminate bacteria, viruses, other organisms, and regulated organic contaminants, while using less electrical energy than other technologies, and 2) treatment of water or wastewater specifically to eliminate micropollutants/pharmaceuticals, at which the AOS particularly excels at compared to existing technologies. Our work to have the AOS adopted in the US and Canada for application 1) has been met with resistance because existing technologies, while less energy efficient than our technology, are effective enough against target contaminants, and our “value-add” of also eliminating hard-to-treat micropollutants isn’t relevant unless regulations dictate that those chemicals must be removed. Similarly, application 2) is only relevant in jurisdictions where those hard-to-treat micropollutants are regulated. Unfortunately, this does not include the US or Canada, but it does include several European countries. For that reason, presently, much of our business development efforts to secure projects for the AOS focus on development of partnerships to demonstrate the AOS for the European micropollutant market.

Current wording

The AOS has, broadly speaking, two target applications: 1) treatment of municipal or industrial wastewater to eliminate bacteria, viruses, other organisms, and regulated organic contaminants, while using less electrical energy than other technologies, and 2) treatment of water or wastewater specifically to eliminate micropollutants/pharmaceuticals, at which the AOS particularly excels at compared to existing technologies. Our work to have the AOS adopted in the US and Canada for application 1) has been met with resistance because existing technologies, while less energy efficient than our technology, are effective enough against target contaminants, and our “value-add” of also eliminating hard-to-treat micropollutants isn’t relevant unless regulations dictate that those chemicals must be removed. Similarly, application 2) is only relevant in jurisdictions where those hard-to-treat micropollutants are regulated. Unfortunately, this does not include the US or Canada, but it does include several European countries. For that reason, presently, much of our business development efforts to secure projects for the AOS focus on development of partnerships to demonstrate the AOS for the European micropollutant market, or for domestic industrial or pharmaceutical wastewater treatment purposes where micropollutants are major contributors to facilities’ wastewater surcharge fees.

Previous wording

Our subsidiary BioLargo Energy Technologies, Inc. (“BETI”) was founded to commercialize a novel battery technology with the potential to help facilitate the ongoing shift toward renewable energy production by providing a safer, longer lasting, more eco-friendly, and more affordable alternative to lithium-ion batteries. Designed for long duration energy storage, also known as battery energy storage solutions (BESS), our battery, called Cellinity™, uses a novel “liquid sodium” chemistry that involves common materials that can be sourced domestically, and which has, for a variety of reasons, significant advantages over other battery chemistries for use in stationary, long-duration energy storage.

Current wording

Our subsidiary BioLargo Energy Technologies, Inc. (“BETI”) was founded to commercialize a novel battery technology with the potential to help facilitate the ongoing shift toward renewable energy production by providing a safer, longer lasting, more eco-friendly, and more affordable alternative to lithium-ion batteries. Designed for long duration energy storage, also known as "battery energy storage solutions" (BESS), our battery, called Cellinity™, uses a novel “liquid sodium” chemistry that uses common domestically sourced materials, and which has significant advantages over other battery chemistries for use in stationary, long-duration energy storage.

Previous wording

BETI has constructed a pilot-scale battery production facility in our Oak Ridge Tennessee engineering headquarters, and is currently attempting to manufacture prototype batteries for testing to confirm energy efficiency, useful life expectancy, energy density, safety profile, number of charge/discharge cycles, and other technical claims that we believe will differentiate the battery from incumbent technologies. Once prototype batteries are built and tested, and assuming such tests show the batteries have the characteristics we expect would differentiate it from other battery technologies, we will complete the design on a larger sized battery cell that would then be incorporated into battery packs and battery sizes meant for industrial facilities. Once designed, our engineers will work to develop manufacturing processes that would allow scale production to ensure costs of goods in line with market demand and conditions.

Current wording

Once prototype batteries are built and tested, and assuming such tests show the batteries have the characteristics we expect would differentiate it from other battery technologies, we will complete the design on a larger sized battery cell that would then be incorporated into battery packs and battery sizes meant for industrial facilities. Once designed, our engineers will work to develop manufacturing processes that would allow scale production to ensure costs of goods in line with market demand and conditions.

Previous wording

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, including:

Current wording

We believe our Cellinity batteries will have features that far surpass comparable lithium-ion batteries, the dominant incumbent technology in the market, including:

Previous wording

Clyra Medical Technologies, Inc. is our partially owned subsidiary creating medical products based on our technologies. Its primary product is a surgical wound irrigation solution called Bioclynse that can help manage patient care and outcomes. The first target market for this product is orthopedics, including hip and knee replacement surgeries. Management believes Bioclynse outperforms competing products as it has proven performance in biofilm disruption and inhibition, is non-toxic and non-cytotoxic, is non-sensitizing to tissue, and unlike competing products, does not need to be rinsed and/or removed from a surgical cavity. Clyra management is focused on developing partnerships with large, well-established distributors who can help rapidly accelerate the product’s access to clinicians and surgeons in hospitals around the country. It, and its manufacturing partner, Keystone Industries, have invested in manufacturing equipment to support at-scale manufacturing for the Bioclynse product's use in sterile settings, such as in surgery. In total, Clyra has committed approximately $1.5 million in equipment and related assets to support an expected national roll out of Bioclynse. During the six months ended June 30, 2024, Clyra sold $1,115,000 in common stock to support these efforts.

Current wording

Clyra Medical Technologies, Inc. is our partially owned subsidiary creating medical products based on our technologies. Its primary product is a surgical wound irrigation solution called Bioclynse that can help manage patient care and outcomes. The first target market for this product is orthopedics, including hip and knee replacement surgeries. Management believes Bioclynse outperforms competing products as it has proven performance in biofilm disruption and inhibition, is non-toxic and non-cytotoxic, is non-sensitizing to tissue, and unlike competing products, does not need to be rinsed and/or removed from a surgical cavity. Clyra management is focused on developing partnerships with large, well-established distributors who can help rapidly accelerate the product’s access to clinicians and surgeons in hospitals around the country. It, and its manufacturing partner, Keystone Industries, have invested in manufacturing equipment to support at-scale manufacturing for the Bioclynse product's use in sterile settings, such as in surgery. In total, Clyra has committed approximately $1.6 million in equipment and related assets to support the national roll out of Bioclynse. During the year ending December 31, 2024, through the date of this report, Clyra has sold $2,671,000 of its common stock, of which $741,000 was purchased by BioLargo, and financed equipment valued at $1,025,000.

Previous wording

BLEST operates out of an engineering facility in Oak Ridge, Tennessee (a suburb of Knoxville), and employs a group of scientists and engineers, many of whom are owners of the entity (BioLargo owns 82% as of December 31, 2023). 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 we believe 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.

Current wording

BLEST operates out of an engineering facility in Oak Ridge, Tennessee (a suburb of Knoxville), and employs a group of scientists and engineers, many of whom are owners of the entity (BioLargo owns 77.5% as of September 30, 2024 and December 31, 2023). 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 we believe 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.

Previous wording

The staff time devoted to supporting the AEC (PFAS) and battery related work is demanding and , at the same time, BLEST needs to hire more qualified staff to meet and expanding demand for our growing list of customers and/or expected customers. When we combine the demands of current revenue generating projects and expected growth, we are presented with an obvious challenge to manage quality, timely performance as well as access to qualified staff. We are working carefully to find balance to help ensure we meet the demands of both in a practical customer centric and capital conserving way. It may be for example, when we secure larger and larger contracts for PFAS or Garrett Callan related work, we will need to depend heavily on our contact manufactures to meet the customer demands in the near term as we scale up our infrastructure and work force capabilities.

Current wording

The staff time devoted to supporting the AEC (PFAS) and battery related work is demanding, and, BLEST needs to hire more qualified staff to meet and expanding demand for our growing list of customers and/or expected customers. When we combine the demands of current revenue generating projects and expected growth, we are presented with an obvious challenge to manage quality, timely performance as well as access to qualified staff. We are working carefully to find balance to help ensure we meet the demands of both in a practical customer centric and capital conserving way. It may be for example, when we secure larger and larger contracts for PFAS or Garrett Callan related work, we will need to depend heavily on our contact manufactures to meet the customer demands in the near term as we scale up our infrastructure and work force capabilities.

Previous wording

Our revenues increased 247% and 88% in the three and six months ended June 30, 2024, as compared with the same periods in 2023, primarily due to an increased volume of sales of our pet odor control product private labeled to a third party under the brand name “Pooph”, which comprised 70% and 78%, respectively of our company-wide revenues in such periods. Our financial statements separate revenue based on products and services. Revenues from the sale of products for the three and six months ended June 30, 2024, increased 272% and 95% over the same periods in 2023. Revenues from services for the three and six months ended June 30, 2024, decreased 5% over the same periods in 2023.

Current wording

Our revenues increased 63% and 80% in the three and nine months ended September 30, 2024, as compared with the same periods in 2023, primarily due to an increased volume of sales of our pet odor control product private labeled to a third party under the brand name “Pooph”, which comprised 76% and 78%, respectively of our company-wide revenues in such periods. Our financial statements separate revenue based on products and services. Revenues from the sale of products for the three and nine months ended September 30, 2024, increased 56% and 81% over the same periods in 2023. Revenues from services for the three and nine months ended September 30, 2024, increased 191% and 72% over the same periods in 2023.

Previous wording

ONM Environmental’s revenues increased 205% (to $4,012,000) and 77% (to $8,586,000) in the three and six months ended June 30, 2024, compared with the same periods in 2023. The increase in revenues was almost entirely due to an increase in the volume of sales of our pet odor product private labeled to a third party under the brand name "Pooph". Because ONM Environmental has no control over the marketing and sales activity or levels of the Pooph branded products, it cannot predict sales volumes related to it in future periods. Pooph management has indicated their intentions to continue advertising and expanding sales. While they have performed well in the past, their execution of those future plans has inherent risks that are out of our control.

Current wording

ONM Environmental’s revenues increased 53% (to $3,853,000) and 69% (to $12,437,000) in the three and nine months ended September 30, 2024, compared with the same periods in 2023. The increase in revenues was almost entirely due to an increase in the volume of sales of our pet odor product private labeled to a third party under the brand name "Pooph". Because ONM Environmental has no control over the marketing and sales activity or levels of the Pooph branded products, it cannot predict sales volumes related to it in future periods. Pooph management has indicated their intentions to continue advertising and expanding sales. While they have performed well in the past, their execution of those future plans has inherent risks that are out of our control.

Previous wording

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 for the three and six months ended June 30, 2024, were 55% and 54%, an increase of 41% and 14%, compared to the same period in 2023. The current period increase in cost of goods is due an increase in raw material costs.

Current wording

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 for the three and nine months ended September 30, 2024, were 55% and 54%, an increase of 8% and 7%, compared to the same period in 2023. The current period increase in cost of goods is due the introduction of new Pooph-branded product lines with lower margins for initial stocking orders.

Previous wording

ONM Environmental’s selling, general and administrative expenses increased 11% during each of the three and six months ended June 30, 2024, as compared with the same period in 2023. The increase is due to additional employees.

Current wording

ONM Environmental’s selling, general and administrative expenses decreased 6% and 9% during the three and nine months ended September 30, 2024, as compared with the same period in 2023. The decrease is due to less employees and a reduction of office expenses.

Previous wording

ONM Environmental generated operating income of $1,490,000 and $3,288,000 in the three and six months ended June 30, 2024, compared to operating income of $428,000 and $1,815,000 for the three and six months ended June 30, 2023. The generation of operating income for the three and six months ended June 30, 2024, was entirely dependent on sale of Pooph branded products.

Current wording

ONM Environmental generated operating income of $1,382,000 and $4,668,000 in the three and nine months ended September 30, 2024, compared to operating income of $969,000 and $2,786,000 for the three and nine months ended September 30, 2023. The generation of operating income for the three and nine months ended September 30, 2024, was entirely dependent on the sale of Pooph branded products.

Previous wording

Our engineering segment's (BLEST's) revenues increased 665% (to $1,002,000) and 267% (to $1,187,000), net of intersegment revenue, in the three and six months ended June 30, 2024, as compared with the same periods in 2023. The increase in revenue in thethree and six months ended June 30, 2024, as compared with prior periodsis due to $878,000 of revenue recognized in the quarter from the sale of water treatment equipment. Although we are focused on sales of water treatment equipment such as our AEC, AOS, and AROS systems, the sales cycle for municipal and industrial water treatment equipment is long, and management does not expect a to record similar level revenue from equipment sales in either the third or fourth quarter of 2024. With recent new contracts, our engineers are generating approximately $100,000 in monthly services revenues for air quality management services at U.S. Air Force bases. These ongoing contracts are expected to continue provide a monthly base revenue, in addition to regular work for other clients. In the future, equipment sales will be primarily handled through our subsidiary dedicated for that purpose - BioLargo Equipment Solutions & Technologies, Inc. (BEST).

Current wording

Our engineering segment's (BLEST's) revenues increased 243% (to $498,000) and 260% (to $1,685,000), in the three and nine months ended September 30, 2024, as compared with the same periods in 2023. The increase in revenue in thethree and nine months ended September 30, 2024, as compared with prior periodsis due to $878,000 of revenue recognized in the second quarter of 2024 from the sale of water treatment equipment. Although we are focused on sales of water treatment equipment such as our AEC, AOS, and AROS systems, the sales cycle for municipal and industrial water treatment equipment is long, and management does not expect a to record similar level revenue from equipment sales in the fourth quarter of 2024. With recent new contracts, our engineers are generating approximately$100,000 in monthly services revenues for air quality management services at U.S. Air Force bases. These ongoing contracts are expected to continue provide a monthly base revenue, in addition to regular work for other clients. In the future, equipment sales will be primarily handled through our subsidiary dedicated for that purpose - BioLargo Equipment Solutions & Technologies, Inc. (BEST).

Previous wording

In addition to providing services to third party clients, BLEST provides services for internal BioLargo projects. These services are billed internally, are considered intersegment revenue, and are eliminated in the consolidation of our financial statements. In the three and six months ended June 30, 2024, intersegment revenue for BLEST totaled $257,000 and $428,000 and for the three and six months ended June 30, 2023, intersegment revenue for BLEST totaled $408,000 and $578,000.

Current wording

In addition to providing services to third party clients, BLEST provides services for internal BioLargo projects. These services are billed internally, are considered intersegment revenue, and are eliminated in the consolidation of our financial statements. In the three and nine months ended September 30, 2024, intersegment revenue for BLEST totaled $326,000 and $754,000 and for the three and nine months ended September 30, 2023, intersegment revenue for BLEST totaled $698,000 and $1,276,000.

Previous wording

BLEST’s cost of revenues includes employee labor, subcontracted costs and cost of goods sold. In the three and six months ended June 30, 2024, costs were 67% and 63% of revenues, versus 56% and 64% in the same period in 2023. The increase is related to lower margins on equipment sales. In future periods, equipment sales are expected to be through our subsidiary BEST.

Current wording

BLEST’s cost of revenues includes employee labor, subcontracted costs and material costs. In the three and nine months ended September 30, 2024, costs were 100% and 74% of revenues, versus 46% and 59% in the same period in 2023. The increase is related to increased costs on fixed fee contracts, and work attributed to the AEC project in Lake Stockholm New Jersey. Management expects future periods to reflect a cost of revenue more in line with historical numbers.

Previous wording

BLEST’s SG&A expenses were $238,000 and $441,000, in the three and six months ended June 30, 2024, compared to $214,000 and $399,000, in the three and six months ended June 30, 2023, the increase is due to an additional employee. In June and July 2024, BLEST has hired four additional full time employees.

Current wording

BLEST’s SG&A expenses were $218,000 and $659,000, in the three and nine months ended September 30, 2024, compared to $213,000 and $612,000, in the three and nine months ended September 30, 2023, the increase is due to additional employees. In June and July 2024, BLEST hired four additional full-time employees.

Previous wording

BLEST incurred an operating loss of $247,000 and $692,000, in the three and six months ended June 30, 2024, compared to an operating loss of $450,000 and $818,000 in the three and six months ended June 30, 2023. This operating loss is reflective of the focus at BLEST on internal BioLargo projects. 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 battery, AOS and AEC technologies, it is important to note that its operating loss would be eliminated if it were selling these services to a third party at fair market value. The decrease in operating loss was due to an increase in third party-revenues. Because the subsidiary had an operating loss, we invested cash during the quarter to allow it to maintain operations.

Current wording

BLEST incurred an operating loss of $375,000 and $1,067,000 in the three and nine months ended September 30, 2024, compared to an operating loss of $568,000 and $1,388,000 in the three and nine months ended September 30, 2023. This operating loss is reflective of the focus at BLEST on advancing internal BioLargo projects such as the Cellinity battery and AEC water treatment system. Our consolidated financial statements eliminate these revenues as intercompany balances. The decrease in operating loss was due to an increase in third party-revenues. Because BLEST had an operating loss, we invested cash during the quarter to maintain operations.

Previous wording

BETI has not generated generate revenue, and for the three and six months ended June 30, 2024, had $226,000 and $381,000 in total costs and expenses, which included $133,000 and $213,000 in research and development expenses. In the same periods in 2023, had $297,000 and $384,000 in total costs and expenses, which included $271,000 and $303,000 in research and development expenses. The primary focus of BETI is the development of its battery technology. We do not expect BETI to generate revenue in the near future as it continues its research and development activities.

Current wording

BioLargo Energy Technologies, Inc., (BETI) is focused on development of our Cellinity battery, and thus has not generated generate revenue. For the three and nine months ended September 30, 2024, it incurred total costs and expenses of $194,000 and $575,000, which included $133,000 and $346,000 in research and development expenses. In the same periods in 2023, total costs and expenses were $559,000 and $943,000, which included $537,000 and $840,000 in research and development expenses. The primary focus of BETI is the development of its battery technology. We do not expect BETI to generate revenue in the near future as it continues its research and development activities.

Previous wording

Our SG&A expenses include both cash (for example, salaries to employees) and non-cash expenses (for example, stock option compensation expense). For the three and six months ended June 30, 2024 consolidated SG&A increased in the aggregate by 34% (to $2,404,000) and by 32% (to $4,629,000). The largest components of our SG&A expenses included (in thousands):

Current wording

Our SG&A expenses include both cash (for example, salaries to employees) and non-cash expenses (for example, stock option compensation expense). For the three and nine months ended September 30, 2024 consolidated SG&A decreased 8% (to $2,093,000) and increased by 16% (to $6,720,000). The largest components of our SG&A expenses included (in thousands):

Previous wording

In the three and six months ended June 30, 2024, our non-cash expenses from the issuance of stock and stock options totaled $669,000 and $1,292,000 compared to $363,000 and $826,000 for the three and six months ended June 30, 2023. This increase is due to stock option issuances for previously issued stock options that expired during the three and six months ended June 30, 2024. The majority of this stock option expense is recorded in Consulting expense. Salaries and payroll related expense increased due to the addition of new employees; company wide, there are 36 full time employees. Professional fees increased due to the addition of our BEST subsidiary, private securities offerings for BioLargo and Clyra, and other organizational needs that required professionals. Investor relation expense increased as we continue to tell the BioLargo story to the public markets through speaking events and trade shows.

Current wording

In the three and nine months ended September 30, 2024, our non-cash expenses from the issuance of stock and stock options totaled $337,000 and $1,629,000 compared to $762,000 and $1,588,000 for the three and nine months ended September 30, 2023. This decrease is due to stock option issuances for previously issued stock options that expired during the three months ended September 30, 2023. Our non-cash expenses were mostly flat for the nine months ended September 30, 2024, compared to same period is 2023. The majority of this stock option expense is recorded in Consulting expense. Salaries and payroll related expense increased due to the addition of new employees; companywide, there are 36 full time employees. Professional fees increased due to the addition of our BEST subsidiary, private securities offerings for BioLargo and Clyra, and other organizational needs that required professionals. Investor relation expense remained flat for the three months ended September 30, 2024, compared to the same period in 2023. Investor relation expense increased for the nine months ended September 30, 2024, compared to the same period in 2023, as we continue to tell the BioLargo story to the public markets through speaking events and trade shows.

Previous wording

In the three and six months ended June 30, 2024, we spent $623,000 and $1,407,000 in the research and development of our technologies and products. This was an increase of 6% and 22% compared to the three and six months ended June 30, 2023. The increase is primarily due to work related to (i) the battery project, and (ii) the AEC. As these products mature, we expect the level of research and development to decrease.

Current wording

In the three and nine months ended September 30, 2024, we spent $690,000 and $2,098,000 in the research and development of our technologies and products, of which $512,000 was through Clyra Medical. This was a decrease of 1% and an increase of 14% compared to the three and nine months ended September 30, 2023. The three months remained flat, and the nine months increase is primarily due to work related to (i) the battery project, and (ii) the AEC. As these products mature, we expect the level of research and development to decrease.

Previous wording

Our interest expense for the three and six months ended June 30, 2024, was $2,000 and $14,000 compared to $12,000 and $60,000 in the three and six months ended June 30, 2023. The decrease is due to a decrease in financing activities.

Current wording

Our interest expense for the three and nine months ended September 30, 2024, was a net interest income of $1,000 and interest expense of $12,000 compared to interest expense of $12,000 and $72,000 in the three and nine months ended September 30, 2023. We generated $13,000 of interest income, offset by $12,000 of interest expense. The decrease is due to a decrease in financing activities.

Previous wording

For the three and six months ended June 30, 2024, we had $15,000 of grant income, as compared with the $32,000 in the three and six months ended June 30, 2023. Grant income is primarily generated 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. Grant funds paid directly to third parties are not included as income in our financial statements.

Current wording

For the nine months ended September 30, 2024, we had $15,000 of grant income, as compared with the $32,000 in the nine months ended September 30, 2023. Grant income is primarily generated 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. Grant funds paid directly to third parties are not included as income in our financial statements.

Previous wording

Net loss for the three and six months ended June 30, 2024, was $780,000 and $1,555,000 a loss of $ (0.001) and $ (0.003)per share, compared to a net loss for the three and six months ended June 30, 2023, of $1,626,000 and $2,120,000, a loss of $ (0.005) and $ (0.006) per share. Our net loss for the three and six months ended June 30, 2024, decreased because of the increase in revenue offset by an increase in SG&A expense. Of the SG&A expense, $669,000 and $1,292,000 in the three and six months ended June 30, 2024, are non-cash expenses related to the issuance of stock and stock options.

Current wording

Net loss for the three and nine months ended September 30, 2024, was $1,060,000 and $2,615,000 a loss of $ (0.002) and $ (0.005) per share, compared to a net loss for the three and nine months ended September 30, 2023, of $1,508,000 and $3,628,000, a loss of $ (0.004) and $ (0.01) per share. Our net loss for the three and nine months ended September 30, 2024, decreased because of the increase in revenue.

Previous wording

For the three and six months ended June 30, 2024, we generated revenues of $5,014,000 and $9,773,000 and we had a net loss of $780,000 and $1,555,000 For the six months ended June 30, 2024, we generated $330,000 net cash from operating activities. On June 30, 2024, we had current assets of $7,110,000, of which $4,765,000 was cash and cash equivalents, had current liabilities of $3,012,000, and working capital of $4,098,000.

Current wording

For the three and nine months ended September 30, 2024, we generated revenues of $4,351,000 and $14,122,000 and had a net loss of $1,060,000 and $2,615,000. For the nine months ended September 30, 2024, we used $1,290,000 net cash used in operating activities. On September 30, 2024, we had current assets of $7,394,000, of which $3,882,000 was cash and cash equivalents, current liabilities of $3,200,000, and working capital of $4,194,000.

Previous wording

While we were able to generate net cash from operating activities during the six months ended June 30, 2024, we do not have a long history of doing so and are highly reliant upon one customer for the generation of a majority of our revenues. We also continue to use cash to invest in capital equipment, research and development, and our new technologies. For these reasons, we and our partially owned subsidiaries continue to sell securities to ensure available working capital. 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 our business plans and investments in our new technologies.

Current wording

During the nine months ended September 30, 2024, we continued to invest in capital equipment and resources preparing to launch and commercialize products and further research and development on our battery technology. We and our partially owned subsidiaries continue to sell securities to ensure available working capital. During the nine months ended September 30, 2024, we received $2,858,000 from financing activities, including sales of stock, warrant exercises, and option exercises. 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 our business plans and investments in our new technologies.

Previous wording

For these reasons, we continue to sell securities to ensure available working capital, both directly and through our subsidiaries; during the six months ended June 30, 2024, we received net proceeds of $1,789,000. Additionally during the six months ended June 30, 2024, we received $301,000 in net proceeds from the exercise of stock options and warrants. 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 our business plans and investments into our new technologies. The foregoing factors raise substantial doubt about our ability to continue as a going concern, unless we are able to (i) continue to increase revenues, generate cash from operations, and/or generate cash from financing activities, (ii) convert assets such as our $2,104,000 in accounts receivable into cash; or, (iii) if necessary, reduce ongoing cash obligations by curtailing portions of our operations.

Current wording

For these reasons, we continue to sell securities to ensure available working capital, both directly and through our subsidiaries; during the nine months ended September 30, 2024, we received net proceeds of $2,858,000. Additionally, during the nine months ended September 30, 2024, we received $909,000 in gross proceeds from the exercise of stock options and warrants. 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 our business plans and investments into our new technologies. The foregoing factors raise substantial doubt about our ability to continue as a going concern, unless we are able to (i) continue to increase revenues, generate cash from operations, and/or generate cash from financing activities, (ii) convert assets such as our $3,209,000 in accounts receivable into cash; or, (iii) if necessary, reduce ongoing cash obligations by curtailing portions of our operations.