BIOLARGO, INC.

Previous wording

Our consolidated revenue for the year ended December 31, 2023 was $12,230,000, which is a 108% increase over the same period in 2022. Services revenue decreased 47% (by $680,000), while revenue from product sales increased by 158%, $7,026,000. The decrease in service revenues was related to the focus by our subsidiary BLEST on supporting internal projects such as the AEC and battery technology, as opposed to servicing third-party clients. The increase in product revenues was almost entirely due to an increase in the volume of sales of private-label odor-control products, specifically the Pooph branded pet-odor product.

Current wording

Our consolidated revenue for the year ended December 31, 2024 was $17,779,000, which is a 45% increase over the same period in 2023. Services revenue increased 32% by $247,000, while revenue from product sales increased by 46%, $5,302,000. The increase in service revenues was related to additional engineering consulting service contracts. The increase in product revenues was almost entirely due to an increase in the volume of sales of private-label odor-control products, specifically the Pooph branded pet-odor product.

Previous wording

ONM Environmental’s revenues for the year ended December 31, 2023, were $11,440,000, an increase of $7,066,000 or 162% from the same period in 2022. The increase in revenues was almost entirely due to an increase in the volume of sales of private label odor-control products, specifically the Pooph branded pet-odor product (which increased by $6,905,000). Because ONM Environmental has no control over the marketing and sales activity or levels of Pooph, it cannot predict sales volumes related to it in future periods. Pooph management has indicated their intentions to continue their national advertising campaign as they place the product in national retail chains, including the introduction of the product in Walmart nationally. While they have performed well in the past, their execution of those future plans has inherent risks that are out of our control. (See the Risk Factor above titled “A significant portion of our revenue is concentrated with one customer.”)

Current wording

ONM Environmental’s revenues for the year ended December 31, 2024, were $15,597,000, an increase of $4,157,000 or 36% from the same period in 2023. The increase in revenues was almost entirely due to an increase in the volume of sales of private label odor-control products, specifically the Pooph branded pet-odor product (which increased by $3,976,000). Because Pooph is owned and marketed by a third party, ONM Environmental has no control over the marketing and sales activity or levels of the Pooph brand. Because the brand has only been on the market for three years, it is difficult to identify trends and uncertainties in sales volumes, especially so for longer periods of time. For the interim period ending March 31, 2025, as the first quarter of 2024 remains our highest recorded revenue period from Pooph, we expect a downturn in revenue in the comparative period. A reduction of revenue from sale of Pooph will adversely impact our company-wide revenue. (See the Risk Factor above titled “A significant portion of our revenue is concentrated with one customer.”)

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 increased 4% in 2023 to 49%. The increase was related to normal price fluctuations for raw materials.

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 increased 4% in 2024 to 53%. The increase was related to normal price fluctuations for raw materials.

Previous wording

ONM Environmental’s SG&A expenses were $1,472,000 in 2023, compared to $1,276,000 in 2022. We expect these expenses to remain approximately the same in 2024.

Current wording

ONM Environmental’s SG&A expenses were $1,357,000 in 2024, compared to $1,472,000 in 2023. We expect these expenses to remain approximately the same in 2025.

Previous wording

ONM Environmental generated operating income of $4,335,000 in 2023, compared to an operating income of $1,130,000 in 2022. The increase in operating income is due almost entirely to an increase in the sales of its Pooph branded pet odor product. As the marketing and sales of that product is in the sole control of a third party, we have no way of determining whether these sales will decrease or increase in the current year, and thus have no way to determining whether ONM Environmental will have an operating income in the current year.

Current wording

ONM Environmental generated operating income of $5,920,000 in 2024, compared to an operating income of $4,335,000 in 2023. The increase in operating income is due almost entirely to an increase in the sales of its Pooph branded pet odor product. As the marketing and sales of that product is in the sole control of a third party, we have no way of determining whether these sales will decrease or increase in the current year and thus have no way to determining whether ONM Environmental will have an operating income in the current year.

Previous wording

BLEST generated $770,000 of revenue from third parties in 2023, compared to $1,453,000 in 2022, representing a 47% decrease from the prior year. In addition to providing service to third party clients, BLEST provides services to BioLargo and its subsidiaries for internal BioLargo projects. These services are billed internally, are considered intersegment revenue, and are eliminated in the consolidation of our financial statements. In the year ended December 31, 2023, it totaled $1,627,000, primarily used to further engineer and develop our AEC PFAS treatment system and battery technology. The decrease in third party revenue in 2023 as compared to 2022 is a result of BLEST's focus on these internal projects.

Current wording

BLEST generated $2,182,000 of revenue from third parties in 2024, compared to $770,000 in 2023, representing a 183% increase from the prior year. In addition to providing service to third party clients, BLEST provides services to BioLargo and its subsidiaries for internal BioLargo projects. These services are billed internally, are considered intersegment revenue, and are eliminated in the consolidation of our financial statements. The increase in third party revenue in 2024 as compared to 2023 is a result of $878,000 of revenue recognized in the second quarter of 2024 from the sale of AEC water treatment equipment. In the year ended December 31, 2024, intersegment revenues totaled $1,015,000 compared to $1,627,000 in 2023. Intersegment revenue is primarily used to further engineer and develop our AEC PFAS treatment system and battery technology.

Previous wording

BLEST’s cost of services includes employee labor, materials, as well as subcontracted labor costs. In 2023, its cost of services were 51% of its revenues, versus 61% in 2022. This decrease is due to contracts with better margins. We expect the cost of services to remain consistent in 2024 based on the contracts currently in progress.

Current wording

BLEST’s cost of goods includes employee labor, materials, as well as subcontracted labor costs. In 2024, its cost of goods were 74% of its revenues, versus 51% in 2023. The increase is related to increased costs on fixed fee contracts, and work attributed to the AEC water treatment equipment. We expect the cost of services to remain consistent in 2025 based on the contracts currently in progress.

Previous wording

BLEST's SG&A expenses were $722,000 in 2023, compared to $549,000 in 2022, due to increased head-count related expenses. We expect these expenses to continue to increase in the current year as more resources are devoted to BLEST's operations.

Current wording

BLEST's SG&A expenses were $872,000 in 2024, compared to $722,000 in 2023, due to increased head-count related expenses. We expect these expenses remain consistent in 2025 based on the contracts currently in progress.

Previous wording

BLEST had an operating loss of $1,619,000 in 2023, compared to an operating loss of $452,000 in 2022. 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 AOS and AEC technologies, it is important to note that its net loss would be eliminated if it were selling these services to a third party at fair market value. Because the subsidiary had a net loss, we invested cash during the year to allow it to maintain operations.

Current wording

BLEST had an operating loss of $1,453,000 in 2024, compared to an operating loss of $1,619,000 in 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 AOS and AEC technologies, it is important to note that its net loss would be eliminated if it were selling these services to a third party at fair market value. Because the subsidiary had a net loss, we invested cash during the year to allow it to maintain operations.

Previous wording

Our Selling, General and Administrative expense (“SG&A”) include both cash (for example, salaries to employees) and non-cash expenses (for example, stock option compensation expense). Our consolidated SG&A increased by 20% ($1,327,000) in the year ended December 31, 2023, to $8,058,000. Our non-cash expenses (through the issuance of stock and stock options) were $2,508,000 in 2023, compared with $2,071,000 in 2022. Our SG&A expenses included (in thousands):

Current wording

Our Selling, General and Administrative expense (“SG&A”) include both cash (for example, salaries to employees) and non-cash expenses (for example, stock option compensation expense). Our consolidated SG&A increased by 15% ($1,244,000) in the year ended December 31, 2024, to $9,302,000. Our non-cash expenses (through the issuance of stock and stock options) were $2,479,000 in 2024, compared with $2,508,000 in 2023. Our SG&A expenses included (in thousands):

Previous wording

The increases in professional fees, consulting, office expense, and sales and marketing were due to increased company activities and revenues, including new company projects such as the liquid sodium battery. Office expense increased due to an increase in square footage of rented space and an increase in general office expenses related to expanded operations. Board of director expense increased due to the replacement of expired out-of-the-money options.

Current wording

The increases in salaries and payroll related is primarily due to the fair value of the stock options issued. The increase in professional fees, consulting, office expense, sales and marketing and investor relations were due to increased company activities and revenues, including new company projects such as the liquid sodium battery. Office expense increased due to an increase in square footage of rented space and an increase in general office expenses related to expanded operations. Board of director expense was consistent with prior year activity.

Previous wording

During each of the years ended December 31, 2023 and 2022, management recognized $394,000 and $197,000, respectively, impairment of Clyra’s prepaid marketing asset (see Note 10).

Current wording

During each of the years ended December 31, 2024 and 2023, management recognized $0 and $394,000, respectively, impairment of Clyra’s prepaid marketing asset (see Note 10).

Previous wording

In the year ended December 31, 2023, we spent $2,282,000 in the research and development of our technologies and products. This was an increase of 73% ($963,000) compared to 2022, due to increased activity related to development of AEC and battery products.

Current wording

In the year ended December 31, 2024, we spent $2,882,000 in the research and development of our technologies and products. This was an increase of 26% ($600,000) compared to 2023, due to increased activity related to development of Bioclynse, our AEC water filtration and Cellinity battery products.

Previous wording

Primarily through our wholly owned Canadian subsidiary, we have been awarded more than 80 research grants over the years from various public and private agencies, including the Canadian National Research Institute – Industrial Research Assistance Program (NRC-IRAP), the National Science and Engineering Research Council of Canada (NSERC), and the Metropolitan Water District of Southern California’s Innovative Conservation Program “ICP”. The research grants received are considered reimbursement grants related to costs we incur and therefore are included as Other Income. The amount of grant income decreased $38,000 in the year ended December 31, 2023, to $36,000. Grant funds paid directly to third parties are not included as income in our financial statements.

Current wording

Primarily through our wholly owned Canadian subsidiary, we have been awarded more than 90 research grants over the years from various public and private agencies, including the Canadian National Research Institute – Industrial Research Assistance Program (NRC-IRAP), the National Science and Engineering Research Council of Canada (NSERC), and the Metropolitan Water District of Southern California’s Innovative Conservation Program “ICP”. The research grants received are considered reimbursement grants related to costs we incur and therefore are included as Other Income. The amount of grant income decreased $10,000 in the year ended December 31, 2024, to $26,000. Grant funds paid directly to third parties are not included as income in our financial statements.

Previous wording

Net loss for the year ended December 31, 2023, was $4,648,000 a loss of $0.02 per share, compared to a net loss for the year ended December 31, 2022, of $5,132,000 a loss of $0.02 per share, a decrease in net loss of 13%. Our net loss this year declined because of the increase in gross margin related to our increase in revenues, offset by a smaller increase of selling, general and administrative expense.

Current wording

Net loss for the year ended December 31, 2024, was $4,347,000 a loss of $0.01 per share, compared to a net loss for the year ended December 31, 2023, of $4,648,000 a loss of $0.01 per share, a decrease in net loss of 6%. Our net loss this year declined because of the increase in gross margin related to the increase in our revenues, offset by an increase of selling, general and administrative expense.

Previous wording

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of our business. For the year ended December 31, 2023, we had a net loss of $4,648,000, used $2,295,000 cash in operations, and at December 31, 2023, we had working capital of $3,652,000, and current assets of $6,362,000. We do not believe gross profits in 2024 will be sufficient to fund our current level of operations, and therefore we will have to obtain further investment capital to continue to fund operations. We have been, and anticipate that we will continue to be, limited in terms of our capital resources. As of December 31, 2023, our cash and cash equivalents totaled $3,539,000, and our total liabilities included $492,000 in debt obligations, of which $234,000 were owed by Clyra Medical. Of the remaining amount, $66,000 is due within one year.

Current wording

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, 2024, we generated revenues of $17,779,000, had a net loss of $4,347,000, and used $3,206,000 cash in operations. At December 31, 2024, we had working capital of $4,489,000, and current assets of $7,137,000. We do not believe gross profits in the year ending December 31, 2025 will be sufficient to fund our current level of operations. We have been, and anticipate that we will continue to be, limited in terms of our capital resources. As of December 31, 2024, our cash and cash equivalents totaled $3,548,000, and our total liabilities included $1,079,000 in debt obligations, of which $838,000 were owed by Clyra Medical. Of this remaining amount, $ 552,000 is due within one year. Therefore, we intend to continue to raise investment capital through the sale of our securities and the securities of our subsidiaries. To meet our cash obligations during the year-ended December 31, 2024, we (i) sold $260,000 of our common stock to Lincoln Park Capital Fund, LLC (“Lincoln Park”) (see Note 3), (ii) sold $334,000 of our common stock and warrants to accredited investors (see Notes 3 and 6), (iii) sold $2,005,000, of Clyra Medical common stock (see Note 10), and (iv) sold $50,000 of BETI common stock (see Note 9). To reduce our operational cash burdens, we regularly issue officers and vendors stock or options in lieu of cash and anticipate that we will continue to be able to do so in the future.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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