0.00067 0.00067 50,000,000 50,000,000 0 0 0 0 0.00067 0.00067 400,000,000 400,000,000 292,945,747 292,945,747 278,462,706 278,462,706 1 2 10 10 1 1 10 24 40 113,000 113,000 71,000 6 18 0 47 1,253,000 2,364,000 6 5 5 0.27 0.27 0.18 151,000 365,000 4 97,000 401,000 4 1 10 1 10 6 5 6 5 5 4 50 15 1 161,000 3 3 5 5 0 135,000 5 5 4 394,000 10 7 7 933,000 Aggregate intrinsic value based on closing common stock price of $0.17 at December 31, 2023.

 thunderdome:item
 utr: Y
 utr: M

 FORM 10-K

 UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

 FORM 10-K

 (Mark One)

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

 For the Fiscal Year ended December 31, 2023

 OR

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

 For the Transition Period from to

 Commission File Number: 000-19709

 BIOLARGO, INC.

 (Exact Name of registrant as specified in its Charter)

 Delaware

 65-0159115

 (State or other jurisdiction
 of incorporation or organization)

 (IRS Employer
 Identification No.)

 14921 Chestnut St., Westminster, CA

 92683

 (Address of principal executive offices)

 (Zip Code)

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

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

 Title of each class

 Trading Symbol(s)

 Name of each exchange on which registered

 Common Stock

 BLGO

 OTCQB

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

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

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

 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

 Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

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

 Large accelerated filer

 Accelerated filer

 Non-accelerated filer

 Smaller reporting company

 Emerging growth company

 If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

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

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

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

 The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common stock was last sold as of the last business day of the registrant's most recently completed second fiscal quarter was $ 40,905,542.

 The number of shares outstanding of the issuer's class of common equity as of March 29, 2024, was 295,552,937. No preferred shares are issued or outstanding as of that date.

 DOCUMENTS INCORPORATED BY REFERENCE

 Information required by Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K are incorporated by reference from the Registrant's definitive Proxy Statement for its annual meeting of stockholders to be filed within 120 days of the end of the Registrant's fiscal year ended December 31, 2023.

 Page

 PART I.

 Item 1.

 Business

 Item 1A.

 Risk Factors

 Item 1B.

 Unresolved Staff Comments

 Item 1C.

 Cybersecurity

 Item 2.

 Properties

 Item 3.

 Legal Proceedings

 Item 4.

 Mine Safety Disclosures

 PART II.

 Item 5.

 Market for Registrant's Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities

 Item 6.

 Selected Financial Data

 Item 7.

 Management's Discussion and Analysis of Financial Condition and Results of Operations

 Item 7A.

 Quantitative and Qualitative Disclosures About Market Risk

 Item 8.

 Financial Statements and Supplementary Data

 Item 9.

 Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

 Item 9A.

 Controls and Procedures

 Item 9B.

 Other Information

 PART III.

 Item 10.

 Directors, Executive Officers, and Corporate Governance

 Item 11.

 Executive Compensation

 Item 12.

 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Item 13.

 Certain Relationships and Related Transactions, and Director Independence

 Item 14.

 Principal Accounting Fees and Services

 PART IV.

 Item 15.

 Exhibits, Financial Statement Schedules

 Signatures

 Index to Financial Statements

 Report of Independent Registered Public Accounting Firm

 Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022

 ITEM 1. BUSINESS

 USE OF FORWARD-LOOKING STATEMENTS IN THIS REPORT

 This annual report on Form 10-K for the year ended December 31, 2023 (the "Annual Report") contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical fact, included in this Annual Report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management are forward-looking statements. These forward-looking statements include, but are not limited to, predictions regarding:

 •

 our business plan;

 •

 the commercial viability of our technology and products incorporating our technology;

 •

 the effects of competitive factors on our technology and products incorporating our technology;

 •

 expenses we will incur in operating our business;

 •

 our liquidity and sufficiency of existing cash;

 •

 the success of our financing plans; and

 •

 the outcome of pending or threatened litigation.

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

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

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

 Our Company

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

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

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

 Our Business - Innovator and Solution Provider

 BioLargo is in the business of creating new cleantech technologies to solve tough, globally relevant problems. We invent, develop, then commercialize disruptive technologies to tackle challenges in air quality, water, environmental engineering, battery energy storage, and advanced antimicrobial medical device platforms. Our model is to invent new technologies that solve specific problems, develop them and prove they work, and then commercialize them with purpose-suited subsidiaries, identify and secure the right partnerships to increase their commercial reach, or potentially sell the intellectual property.

 Why do we do this work? Every member of our team – including PhD scientists, engineers, and entrepreneurs – has a passion for seeking new, never-before-seen innovations that can make life better around the world. We care about safeguarding the environment and human health for future generations. We care about making technologies that are affordable and flexible enough to be accessed around the world. And we care about being the best at what we do – creating best-in-class technologies to solve big, tough cleantech challenges.

 Some of our areas of focus include environmental problems like PFAS contamination (per- and polyfluoroalkyl substances), water pollution by pharmaceuticals and micropollutants, air pollution by VOCs, hard-to-treat odors from landfills and sewage plants, infection and wound healing and the creation of energy storage systems that are more affordable, efficient, safer and environmentally friendly.

 Below you'll read about the cleantech ventures and projects we are focused on commercialization today. Behind those, however, is a pipeline of other cleantech innovations in various stages of development associated with our expansive array of issued and pending patents, and that have been funded in part by over 90 government grants.

 We operate our business in distinct business segments:

 Odor and VOC control products, including consumer products, such as the Pooph-branded pet-odor control product, and our flagship industrial odor control product, CupriDyne Clean Industrial Odor Eliminator, sold by our subsidiary ONM Environmental, Inc.;

 Water treatment equipment and solutions, including our PFAS removal system the Aqueous Electrostatic Concentrator (AEC), our water reuse and recycling technology co-developed with Garratt-Callahan called AROS, and our micro-pollutant treatment and energy-efficient disinfection solution, the AOS, all sold by our subsidiary BioLargo Equipment Solutions & Technologies, Inc.;

 Battery energy storage system solutions being developed by our partially owned (96%) subsidiary BioLargo Energy Technologies, Inc.;

 Medical products based on our technologies, including the FDA-cleared Bioclynse surgical wound irrigation solution sold by our partially owned (53%) subsidiary Clyra Medical Technologies, Inc.;

 Our professional engineering services division, which, in addition to serving outside clients on a fee for service basis, supports our internal business units, through our partially owned (78%) subsidiary BioLargo Engineering, Science & Technologies, LLC ("BLEST");

 Our research and support personnel, through our wholly-owned subsidiary BioLargo Canada, Inc., located on campus at the University of Alberta, Edmonton, Canada.

 Odor Control (Consumer and Industrial)

 ONM Environmental, Inc. is BioLargo's wholly-owned subsidiary that delivers robust and comprehensive products and services to control and mitigate odor and VOCs for both industrial and consumer applications.

 Its flagship product – CupriDyne Clean – is applied to odor-emitting masses such as landfills and composting facilities by misting systems, sprayers, water trucks and similar water delivery systems designed, manufactured and installed by ONM. It is also sold to third parties under private label brands, including for consumer brands such as the "Pooph pet odor eliminator".

 Pooph - Consumer Private-Label Products

 We sell privately labeled products based on our technologies to third parties who market and sell the products under their own brand names. The most successful thus far is the Pooph branded pet odor control product sold directly to consumers and to national retailers including Walmart, Amazon, and Chewy.com by Pooph Inc. 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 year ended December 31, 2023, revenues from sales to Pooph comprised 82% of our company-wide revenue.

 The success of Pooph is an example of our goal to develop distribution channels that do not rely on our in-house sales and distribution infrastructure. We continue to explore potential partnerships and products along these lines with other parties, and to support existing private label products.

 Industrial Odor and VOC Solutions

 We believe CupriDyne Clean is the number-one performing industrial odor-control product in the market, and that it offers substantial savings to our customers compared with competing products. We have been and expect to continue selling product to municipalities and some of the largest solid waste handling companies in the country, with a portion of chemistry product sales resulting from national purchasing agreements (NPAs). ONM Environmental continues to focus on securing more contracts with existing customers and developing business with new customers. ONM Environmental holds General Engineering, Electrical, Plumbing and Low Voltage contractor licenses issued by the California Contractors State License Board, and offers a menu of services to landfills, transfer stations, wastewater treatment facilities as well as facilities in non-waste related industries. These services include engineering design, construction, installation, ongoing maintenance and on-site support services to assist our clients in the implementation and continued use of the various systems that deliver our liquid products in the field (such as misting systems).

 South Korean Joint Venture

 Prior to the Covid-19 pandemic, we partnered with a leading wastewater treatment solution provider based in South Korea in a joint venture to commercialize our CupriDyne Clean products in South Korea. We own 40% of the joint venture. Although the joint venture established manufacturing and is marketing the product, the pandemic significantly impacted the expected growth of the company. While the local management team continues to market the product to industrial clients, their efforts have struggled to gain a foothold. We are not obligated to contribute additional funds to the venture, and cannot predict its future success.

 BioLargo Equipment Solutions & Technologies – Innovative Water Treatment Solutions

 Over the years, we have developed multiple innovative technologies and equipment platforms that focus on challenging issues in the water treatment industry, including the AOS technology (developed to remove micro-pollutants), the AEC (developed to remove per- and polyfluoroalkyl substances, or PFAS), and the AROS water reuse technology (co-developed with Garratt-Callahan). As a result of increase in interest from potential customers for our PFAS solutions, we believe we will be better able to serve this market with a uniform identity and operating unit called BioLargo Equipment Solutions & Technologies, Inc. ("BEST"), which will manage the sales and distribution of our water treatment products and related services. As we transition this venture from incubation to commercialization, we are focusing staff and resources we believe necessary for success. Ultimately, BEST will be reflected as a new operating segment in our consolidated financial statements.

 In February, 2024, three respected and experienced veterans of the water industry joined BEST's board of directors to assist the company in its efforts to commercialize its innovative water treatment technologies. These are: 1) Jeffrey Kightlinger, former CEO of the Metropolitan Water District of Southern California, 2) Sally Gutierrez, retired career senior executive from the US Environmental Protection Agency, and 3) Larry Dick, former Vice Chairman of the Metropolitan Water District of Southern California and board member of the Municipal Water District of Orange County. Each brings their significant and distinctive experience from decades in the water industry to BEST's board to help the company create the necessary regulatory and industry connections that will be critical for its efforts to secure larger and more high-profile projects for its PFAS treatment and other water treatment technologies.

 Securing sales in the water and wastewater industry is a very technically intensive process, and can be long and arduous. The entirety of the sales cycle can be lengthy, in some cases even taking many months or in very large projects, multiple years. The process is also very engineering-intensive, and therefore the staff required to secure contracts for water treatment projects need to be engineers, in most cases. In our company, BLEST's engineers fill this role.

 Having secured its first contract to install an AEC system to remove PFAS from drinking water, BLEST has been actively in scoping and bidding water treatment projects for over a year and as a result has developed a substantial pipeline of potential projects in which customers indicate a high level of interest. In addition, BLEST regularly receives inquiries for new projects in development through the company's network of manufacturer's sales representatives. It is important to note that additional staffing is needed to meet what we believe is, and will continue to be a rapidly escalating level of customer interest in our solutions. Although BEST is primarily focused on AEC, AROS and AOS, discussed below, it offers comprehensive water treatment solutions, related equipment, and services, some of which may be manufactured by third parties and sold by BEST as an authorized distributor. The AEC, AROS and AOS are discussed in the following sections.

 AEC, a solution for the PFAS "fo rever- chemicals " crisis

 One of the most significant and timely innovations in our portfolio is our per- and polyfluoroalkyl substances (PFAS) removal and collection/disposal solution we call the Aqueous Electrostatic Concentrator (AEC), 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.

 In March 2023 the EPA proposed new drinking water standards that would set maximum contaminant levels for certain PFAS chemicals to four parts per trillion in drinking water – a standard our AEC can meet. We believe these proposed rules will continue to push the market to find and adopt commercially viable solutions to remove PFAS chemicals from water. A surge in environmental and health concerns surrounding PFAS is propelling market demand for PFAS waste management solutions. Shifting regulatory landscapes globally is compelling industries to adopt stringent PFAS was management practices, which include the application of innovative technologies such as our AEC. Additionally, some emerging regulations on PFAS in the U.S. are expected to skew the market toward seeking treatment technologies that produce as little PFAS-laden solid waste as possible, a favorable trend for our AEC that generates very little PFAS-laden waste. Detection of unsafe levels of PFAS around the world has given rise to a number of market opportunities, including in drinking water, industrial wastewater, municipal wastewater, solid waste, organic foods and more.

 We have successfully validated the AEC as an effective system to selectively extract and collect PFAS chemicals from contaminated water, including performance testing that shows "non-detect" levels of removal, which meets new EPA standards. We have demonstrated more than 10,000 hours of continuous operation showing no materially significant degradation of the AEC system's components or performance over time. As a modular system, we believe the AEC is scalable to small portable commercial units as well as very large commercial operations, and we believe that our engineering team has the experience to deliver systems to meet the needs of any sized commercial installation. In order to provide a full turn-key solution for our customers, we have developed an expanded offering whereby we can bundle a service package with each customer project that includes a membrane exchange program, the collection of PFAS, and transport and destruction of the PFAS.

 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.

 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.

 We are currently bidding on and/or in negotiations with multiple prospective industrial and municipal customers to treat PFAS contaminated water. These opportunities include small to medium sized municipalities, waste facilities, Air Force bases, remediation sites, and industrial sites, and we are waiting for our customers to finalize budgets and agreements with us. Currently, our bottleneck for processing additional expanding opportunities for PFAS treatment projects is staffing, and therefore we are currently working to hire additional qualified sales engineers to assist in bidding and specification efforts for new projects.

 AROS Minimal Liquid Discharge Water Treatment

 In partnership with Garratt-Callahan, one of the country's oldest privately held water treatment companies, our engineers developed a "minimal liquid discharge" wastewater treatment system called the Aqueous Reuse Optimization System (AROS) that minimizes industrial wastewater discharges and thus the regulatory fees associated with wastewater discharge, including for uses like cooling towers at data centers. Garratt-Callahan, who invented and patented the technology, is currently marketing the AROS system to its existing customer base as well as new prospective customers. BLEST will serve as the manufacturing partner and Garratt-Callahan will serve as the selling distributor to leverage their national sales force and over one hundred years of providing services and products to customers.

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

 Advanced Oxidation System (AOS)

 The Advanced Oxidation water treatment system (AOS) is our patented water treatment device that generates highly oxidative and energetic species of iodine and other molecules which allow it to eliminate pathogenic organisms and organic contaminants rapidly and effectively as water passes through the device. The key value proposition of the AOS is its ability to reduce or eliminate a wide variety of waterborne contaminants with high performance, including the normally hard-to-treat class of recalcitrant water contaminants called "micropollutants", while using very little electricity and input chemicals.

 Our proof-of-concept studies and on-site pilot projects have generated results that project the AOS will be more cost- and energy-efficient than commonly used advanced water treatment technologies such as UV, electro-chlorination, and ozonation. Furthermore, our technology has been proven capable of removing hard-to-treat organic micropollutants such as pharmaceuticals from water more quickly and energy-efficiently than other technologies. Together, these characteristics make the AOS an economical and versatile tool to enable wastewater treatment and reuse in the face of emerging water contaminants and increasing regulatory scrutiny on industrial wastewater discharge.

 The 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 the our business development efforts to secure projects for the AOS focus on development of partnerships to demonstrate the AOS for the European micropollutant market.

 The AOS has been and will continue to be included as a component of treatment trains (comprehensive systems) we scope for other projects. In addition, it is included in the catalog of offerings being sold through our independent representatives as well as channel partners. BEST will continue to attempt to cultivate sales channels in Canada, Europe and South America, where there has been more interest.

 BioLargo Energy Technologies, Inc.

 We acquired a proprietary "liquid-sodium" battery technology and formed a subsidiary to finish its development and commercialize it. The subsidiary – BioLargo Energy Technologies, Inc. ("BETI") – hopes to capitalize on the ongoing shift toward renewable energy production and the growth in global electricity demand, and the consequent drastic expansion in energy storage capacity in the US and world-wide that will be needed to accommodate increased demand and the intermittent nature of renewable energy sources like wind and solar. The growth in AI (Artificial Intelligence) based computing which spurns the demand for expanded data centers and an increased energy level to operate are occurring just as well as the already insufficient capacity of the electric grid to meet demand is clear. The need for better, safer long-duration battery energy solutions is obvious.

 During the year ended December 31, 2023, BETI 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). As a result of these sales, BioLargo owns 96% of BETI's issued and outstanding stock. The company has completed construction of a pilot-scale battery production facility in our Oak Ridge Tennessee engineering headquarters. Prototype batteries will be tested 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. 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:

 Increased safety, no runaway fire risks, and a more sustainable design – with no rare-earth elements – that is capable of being manufactured completely from a domestic supply chain

 Ability to charge and discharge completely, with no degradation of performance, ensuring virtually unlimited charge/discharge cycles, and without self-discharge and no out-gassing

 Increased energy efficiency and energy density in comparison to lithium-ion batteries, and a longer useful life expectancy of at least 10 years and expected to be up to 20 years

 Our battery technology operates at higher temperatures than lithium batteries and much lower temperature than competing sodium-based batteries, and its casing and materials when combined, are heavier than lithium-ion, making it more suitable for stationary energy storage applications like grid-scale energy storage, electric vehicle charging stations, and commercial and residential energy storage, and believed to be less suitable for placement into electric vehicles or portable electronics.

 We are exploring opportunities to commercialize our proprietary liquid sodium batteries through joint ventures with third parties. The third parties would finance the construction of independent battery manufacturing facilities designed and built under the direction of our engineers, and the joint venture would market, manufacture and distribute batteries. BioLargo would (i) receive a minority equity position in each joint venture, (ii) separately manufacture and sell at a profit to the joint venture certain proprietary battery components, and (iii) receive a royalty on the revenues of the joint venture.

 Given the global growing demand for better batteries, and, while we are witnessing a number of current examples in which battery manufacturers have secured forward-contracts to supply batteries to its customers with backlogs of orders that amount to multiple years of production capacity, we believe our offer to partner with customers to secure needed inventory provides for a clear potential pathway to access capital, and more readily scale up production to meet demand around the world. At this point, we do not intend to finance and build our own manufacturing facilities, nor would we develop in-house sales channels, although that possibility remains on the table if needed.

 Clyra Medical Technologies, Inc. - Bioclynse Wound Irrigation Solution

 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 require it 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. In first quarter 2024, Clyra placed orders for approximately $800,000 in capital equipment to support anticipated growth in sales of its Bioclynse line of products, and has secured third-party FDA compliant manufacturing capabilities, as it does intend to build a manufacturing facility. During the year ended December 31, 2023, Clyra sold $1,575,000 in preferred stock, and $35,000 in common stock, to support these efforts.

 Full Service Environmental Engineering

 BioLargo Engineering, Science & Technologies, LLC ("BLEST") offers full service environmental engineering to third parties and provides engineering support services to our internal teams to accelerate the commercialization of our technologies.

 BLEST focuses its efforts in three areas:

 providing engineering services to third-party clients as well as affiliated BioLargo entities;

 supporting internal product development; and

 advancing their own technical innovations such as the AEC PFAS treatment technology and the battery energy storage system.

 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.

 BLEST engineers generate revenue through services to third party clients, as well as for internal BioLargo projects such as the AEC and battery (revenues from internal projects are eliminated in the consolidation of our financial statements and are designed "intersegment revenue"). Third party contracts include ongoing work at U.S. Air Force bases for air quality control. Efforts to expand this work as well as with other clients are consistently ongoing.

 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 insure 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.

 Share Purchase Agreement with Lincoln Park

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

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

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

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

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

 Actual sales of shares of Common Stock to Lincoln Park will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the Company's Common Stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations. The net proceeds under the Purchase Agreement to the Company will depend on the frequency and prices at which the Company sells shares of its stock to Lincoln Park. The Company expects that any proceeds received by the Company from such sales to Lincoln Park will be used for working capital and general corporate purposes.

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

 There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement or Registration Rights Agreement other than a prohibition (with certain limited exceptions) on entering into a "Variable Rate Transaction," as defined in the Purchase Agreement. Lincoln Park has agreed not to engage in or effect, directly or indirectly, for its own principal account or for the principal account of any of its affiliates, any short sales of the Common Stock or hedging transaction that establishes a net short position in the Common Stock during the term of the Purchase Agreement.

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

 The Purchase Agreement and the Registration Rights Agreement contain customary representations, warranties, conditions and indemnification obligations of the parties. The Company has the right to terminate the Purchase Agreement at any time with one business days' notice, at no cost or penalty. During any "event of default" under the Purchase Agreement, Lincoln Park does not have the right to terminate the Purchase Agreement; however, the Company may not initiate any regular or other purchase of shares by Lincoln Park, until such event of default is cured.

 During the three months ended December 31, 2023, we sold 999,384 shares of common stock to Lincoln Park, and received $162,000 in proceeds. During the year ended December 31, 2023, we sold 3,833,230 shares of common stock to Lincoln Park, and received $995,000 in proceeds

 Intellectual Property

 We have 26 patents issued, including 22 in the United States, and multiple applications pending. We were issued three patents in the year ended December 31, 2023, and our patents have an average remaining duration of seven years. We believe these patents provide a foundation from which to continue building our patent portfolio, and we believe that our technology is sufficiently useful and novel that we have a reasonable basis upon which to rely on our patent protections. We also rely on trade secrets and technical know-how to establish and maintain additional protection of our intellectual property. As our capital resources permit, we expect to expand our patent protection as we continue to refine our inventions as well as make new discoveries. We regard our intellectual property as critical to our ultimate success. Our goal is to obtain, maintain and enforce patent protection for our products and technologies in geographic areas of commercial interest and to protect our trade secrets and proprietary information through laws and contractual arrangements.

 We incurred approximately $2,282,000 in expense related to our research and development activities in the year ended December 31, 2023, and $1,319,000 in the year ended December 31, 2022.

 Competition

 Given the fragmented nature of the specialty waste industry, environmental engineering and cleantech industry and the different segments within these industries in which we participate directly or through our subsidiaries, we compete with numerous companies. Larger companies within the hazardous materials line of business include Clean Earth, a subsidiary of Enviri Corporation, Clean Harbors, Republic Services, which acquired U.S. Ecology in 2022, Veolia and Covanta, which acquired Circon Holdings, Inc. in 2023 and also recently announced, through its parent company, EQT Infrastructure, its intent to acquire a major stake in Heritage Environmental Services in 2024. We believe we differentiate ourselves from competitors through innovation, reliability and responsiveness, our diverse operating capabilities and regulatory compliant solutions, and the value we provide through providing energy efficient, low output, environmentally superior solutions relative to other waste management, remediation and disposal alternatives in the US and Canada.

 Executive Officers

 As of December 31, 2023, and as the date of this report, our executive officers were:

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

 Charles K. Dargan II: Chief Financial Officer

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

 Our operational subsidiaries are led by:

 Subsidiary

 President

 ONM Environmental, Inc.

 Joseph L. Provenzano

 BioLargo Engineering, Science & Technologies, LLC

 Randall Moore

 BioLargo Canada, Inc.

 Richard Smith

 Clyra Medical Technologies, Inc.

 Steven V. Harrison

 BioLargo Equipment Solutions & Technologies, Inc.

 Tonya Chandler

 Employees

 As of March 29, 2024, we had 33 employees, of which 31 were full-time. Our employees including professional engineers, masters of engineering, and PhDs, as well as sales, support and administrative personnel. We also utilize consultants and independent contractors on an as-needed basis who provide certain specified services, such as professional engineers used from time to time by our engineering group in Tennessee.

 ITEM 1A. RISK FACTORS

 Our future results of operations, financial condition and liquidity and the market price for our securities are subject to numerous risks, many of which are driven by factors that we cannot control. The following cautionary discussion of risks, uncertainties and assumptions relevant to our business includes factors we believe could cause our actual results to differ materially from expected and historical results. Other factors beyond those listed below, including factors unknown to us and factors known to us which we have not currently determined to be material, could also adversely affect our business, results of operations, financial condition, prospects and cash flows. Also see "Forward-looking Statements" above.

 Risks relating to our Financial Condition

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

 We have not yet generated enough revenue or gross profit from operations to fund our expenses, and, accordingly, we have incurred net losses every year since our inception. We recorded net loss of $4,648,000 for the year ended December 31, 2023, and a net loss of $5,132,000 for the year ended December 31, 2022. At December 31, 2023, we had $3,539,000 cash and cash equivalents. We have funded the majority of our activities through the issuance of equity securities, both at corporate level and through direct third-party investments in our subsidiaries. Although we are devoting more energy and money to our sales and marketing activities, and our revenues have increased year-over-year for the last eight years, we continue to anticipate net losses and negative cash flow for the foreseeable future. Our ability to reach positive cash flow depends on many factors, including our ability to fund sales and marketing activities, the rate of client adoption of our products, and the efforts and success of third parties, such as Ikigai Marketing Works that sells an odor-control product for pets based on our technology. We may continue to incur losses and experience negative cash flows from operations for the foreseeable future. If we cannot achieve positive cash flow from operations or net income, we may need to raise additional capital on acceptable terms.

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

 Our cash requirements and expenses continue to be significant. For the year ended December 31, 2023, we 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. In order to become profitable, we must significantly increase our revenues. Although our revenues are increasing through sales of our private-label products and from our engineering division, we expect to continue to use cash for the foreseeable future as it becomes available, and expect to continue to need to sell our securities to fund operations.

 Our auditor's report for the year ended December 31, 2023, includes an explanatory paragraph in their audit opinion stating that our recurring losses from operations and working capital deficiency raise substantial doubt about our ability to continue as a going concern. We do not currently have sufficient financial resources to fund our operations or those of our subsidiaries. Therefore, we need additional financing to continue these operations.

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

 During the year ended December 31, 2023, we received net proceeds of $4,600,000 through sales of our securities, both directly and through our subsidiaries. These sales are dilutive to our existing stockholders, and the stockholders of our subsidiaries. We intend to continue these financing activities, and thus intend to continue to dilute existing and future stockholders.

 Our ability to access capital markets could be limited.

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

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

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

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

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

 We manufacture and sell private-labeled products to third parties who market those products to businesses, consumers and retailers. We have no control over the marketing budgets, sales activities or efforts of these third parties. We cannot predict if their current level of efforts will increase, decrease, or stay the same. A significant portion of our revenues - approximately 82% - comes from the sale of private label products. If they curtail their marketing efforts, currently through national television advertising, our sales to them could decrease. If they discontinue their marketing campaign, our sales to them would be significantly reduced.

 A significant portion of our revenue is concentrated with one customer selling one product line.

 In the year ended December 31, 2023, one customer selling our pet odor control products under a private label accounted for 82% of our total revenue. In the prior year, that one customer made up approximately 50% of our total revenue. A disruption in our relationship with this customer would adversely affect our results of operations. The customer's demand for our products may fluctuate due to factors beyond our control, including their willingness to spend money on advertising, the success of such advertising, their success of selling to retail accounts, and their reliance on the marketing and sale of a single line of products. Any significant reduction in orders from this customer could have a material adverse effect on our business, results of operations, or financial condition.

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

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

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

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

 Supply Chain Challenges

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

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

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

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

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

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

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

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

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

 Market acceptance may depend on many factors, including:

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

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

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

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

 our ability to overcome brand loyalties.

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

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

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

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

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

 Our internal controls are not effective.

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

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

 Our future success is substantially dependent on the efforts of our senior management, particularly Dennis P. Calvert, our president and chief executive officer. The loss of the services of Mr. Calvert or other members of our senior management may significantly delay or prevent the achievement of product development and other business objectives. Because of the scientific nature of our business, we heavily rely on our ability to attract and retain qualified marketing, scientific and technical personnel. There is intense competition among specialized and technologically-oriented companies for qualified personnel in the areas of our activities. If we lose the services of, or do not successfully recruit, key marketing, scientific and technical personnel, then the growth of our business could be substantially impaired. At present, we do not maintain key man insurance for any of our senior management, although management is evaluating the potential of securing this type of insurance in the future as may be available. As we expand the scope of our operations, we will need to obtain the full-time services of additional senior management and other personnel. Competition for highly-skilled personnel is intense, and there can be no assurance that we will be able to attract or retain qualified senior personnel. Our failure to do so could have an adverse effect on our ability to implement our business plan. As we add full-time senior personnel, our overhead expenses for salaries and related items will increase from current levels and, depending upon the number of personnel we hire and their compensation packages, these increases could be substantial.

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

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

 We may become subject to product liability claims.

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

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

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

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

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

 Our revenues and operating results are likely to continue to fluctuate from quarter to quarter.

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

 delays in product development by us or third parties;

 market acceptance of products incorporating our technology;

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

 competition and pricing pressure from competitive products; and

 fluctuations in the activities of third parties that market and sell products based on our technologies.

 Although our revenues have increased year-over-year for the past nine years, much of our revenue is dependent upon the activities of third parties, which are out of our control. We expect our operating expenses will continue to fluctuate significantly in future periods, as we continue to develop and introduce new products to market, and increase our sales, marketing and licensing efforts. Moreover, our operating results in some quarters may not meet the expectations of stock market analysts and investors; in that case, our stock price could decline.

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

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

 incur substantial monetary damages;

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

 be unable to conduct or participate in the manufacture, use or sale of product candidates or methods of treatment requiring licenses;

 lose patent protection for our inventions and products; or

 find our patents are unenforceable, invalid or have a reduced scope of protection

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

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

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

 Patents we receive may be challenged, invalidated or circumvented in the future, or the rights created by those patents may not provide a competitive advantage. We also rely on trade secrets, technical know-how and continuing invention to develop and maintain our competitive position. Others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets.

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

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

 foreign currency fluctuations;

 unstable political, economic, financial and market conditions;

 import and export license requirements;

 trade restrictions;

 increases in tariffs and taxes;

 high levels of inflation;

 restrictions on repatriating foreign profits back to the United States;

 greater difficulty collecting accounts receivable and longer payment cycles;

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

 regulatory requirements;

 unfamiliarity with foreign laws and regulations; and

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

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

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

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

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

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

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

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

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

 There may not be a market for our liquid sodium battery.

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

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

 Our operations, and those of our contractors and consultants, could be subject to pandemics, earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics, acts of terrorism, acts of war and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. We rely in part on third-party manufacturers to produce and process our products or the raw materials used to make our products. Our ability to obtain supplies of our products or raw materials could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster, pandemics, epidemics, or other business interruption. Our corporate headquarters and offices of ONM are in Southern California near major earthquake faults and fire zones. Our operations and financial condition could suffer in the event of a major earthquake, fire or other natural disaster.

 General Risks

 Increased information technology security threats and more sophisticated computer crime pose a risk to us and our subsidiaries, vendors, systems, networks, products and services.

 We rely upon information technology systems and networks in connection with a variety of business activities, some of which are managed by third parties (which we refer to collectively as our "associated third parties"). Additionally, we and our associated third parties collect and store data that is of a sensitive nature, which may include names and addresses, bank account or financial information, and other types of personally identifiable information or sensitive business information. The secure operation of these information technology systems and networks, and the processing and maintenance of this data is critical to our business operations and strategy.

 We may face attempts to gain unauthorized access to our information technology systems or products or those of our associated third parties for the purpose of improperly acquiring trade secrets or confidential business information. The theft or unauthorized use or publication of our trade secrets and other confidential business information as a result of such an incident could adversely affect our competitive position and the value of our investment in research and development.

 Threats to our systems and our associated third parties' systems can derive from human error, fraud, or malice on the part of employees or third parties, or may result from accidental technological failure. Globally, these types of threats have increased in number and severity and it is expected that these trends will continue. These threats pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. Should an attack on our or our associated third parties' information technology systems and networks succeed, it could expose us and our employees, customers, dealers and suppliers to misuse of information or systems, the compromising of confidential information, manipulation and destruction of data, production downtimes and operations disruptions.

 The occurrence of any of these events could adversely affect our reputation, competitive position, business, results of operations and cash flows. While we have a cybersecurity program expenses, damages and claims arising from cybersecurity incidents cause a material adverse effect on our business. See Part I. Item 1C. Cybersecurity for additional details on our cybersecurity program.

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

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

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

 A recession in the United States may affect our business.

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

 Risks Relating to our Common Stock

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

 On December 13, 2022, we entered into a Purchase Agreement with Lincoln Park ("LPC Agreement"), pursuant to which Lincoln Park agreed to purchase from us at our request up to an aggregate of $10,000,000 of our common stock (subject to certain limitations) from time to time over a period of three years. We generally have the right to control the timing and amount of any sales of our shares to Lincoln Park. Sales of our common stock, if any, to Lincoln Park will depend on market conditions and other factors to be determined by us. We may ultimately decide to sell to Lincoln Park all, some or none of the shares of our common stock that may be available for us to sell pursuant to the LPC Agreement. If and when we do sell shares to Lincoln Park, after Lincoln Park has acquired the shares, Lincoln Park may resell all, some or none of those shares at any time or from time to time at its discretion. Therefore, sales to Lincoln Park by us could result in substantial dilution to the interests of other holders of our common stock, as well as sales of our stock by Lincoln Park into the open market causing fluctuations or reductions in the price of our common stock. Additionally, the sale of a substantial number of shares of our common stock to Lincoln Park, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise desire to effect sales.

 Our common stock is thinly traded and largely illiquid.

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

 The market price of our stock is subject to volatility.

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

 developments with respect to patents or proprietary rights;

 announcements of technological innovations by us or our competitors;

 announcements of new products or new contracts by us or our competitors;

 actual or anticipated variations in our operating results due to the level of research and development expenses and other factors;

 changes in financial estimates by securities analysts and whether any future earnings of ours meet or exceed such estimates;

 conditions and trends in our industry;

 new accounting standards;

 the size of our public float;

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

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

 general economic, political and market conditions and other factors;

 our decision to sell our stock to Lincoln Park;

 the activities of third parties that market and distribute our products, and decisions made by them to increase or decrease such activities, resulting in increases or decreases in product purchases from us and thus our revenues;

 the occurrence of any of the risks described herein.

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

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

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

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

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

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

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

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

 Our stockholders face further potential dilution in any new financing.

 During the year ended December 31, 2023, we issued approximately 14.5 million shares of common stock. Our private securities offerings typically offer convertible securities, including notes and warrants. Those warrants often include provisions that require investors to pay for the underlying shares with cash, which if executed would generate working capital for the company. Any additional capital that we raise would dilute the interest of the current stockholders and any persons who may become stockholders before such financing. Given the price of our common stock, such dilution in any financing of a significant amount could be substantial.

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

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

 Risks Related to Privacy, Cybersecurity, and Our Technology

 Our business involves the use, transmission and storage of confidential information, and the failure to properly safeguard such information could result in significant reputational harm.

 We may at times collect, store, and transmit information of, or on behalf of, our clients that may include certain types of confidential information that may be considered personal or sensitive, and that are subject to laws that apply to data breaches. We believe that we take reasonable steps to protect the security, integrity, and confidentiality of the information we collect and store, but there is no guarantee that inadvertent or unauthorized disclosure will not occur or that third parties will not gain unauthorized access to this information despite our efforts to protect this information, including through a cyber-attack that circumvents existing security measures and compromises the data that we store. If such unauthorized disclosure or access does occur, we may be required to notify persons whose information was disclosed or accessed. Most states have enacted data breach notification laws and, in addition to federal laws that apply to certain types of information, such as financial information, federal legislation has been proposed that would establish broader federal obligations with respect to data breaches. We may also be subject to claims of breach of contract for such unauthorized disclosure or access, investigation and penalties by regulatory authorities and potential claims by persons whose information was disclosed. The unauthorized disclosure of information, or a cyber-security incident involving data that we store, may result in the termination of one or more of our commercial relationships or a reduction in client confidence and usage of our services. We may also be subject to litigation alleging the improper use, transmission, or storage of confidential information, which could damage our reputation among our current and potential clients and cause us to lose business and revenue.

 ITEM 1B. UNRESOLVED STAFF COMMENTS

 None.

 ITEM 1C. CYBERSECURITY

 The Company has processes for assessing, identifying, and managing material risks from cybersecurity threats. These processes are integrated into the Company's overall risk management systems, as overseen by the Company's chief executive officer and board of directors. The Company engages information technology "managed service providers" (MSPs) to manage the Company's computer and information systems at its three office locations and remote locations. The MSPs are responsible for evaluating and testing the Company's risk management systems and assessing and remediating potential cybersecurity incidents as appropriate.

 The executives in charge of each physical office location are responsible for assessing and managing cybersecurity risks for their locations, and the Company's chief executive officer is responsible for assessing and managing cybersecurity risks to the Company as a whole. Because none of these individuals has specific training or experience in managing cybersecurity risks, MSPs that have expertise and experience in doing so are retained and relied upon. Our chief executive officer is responsible for escalating any cybersecurity matters as appropriate, in consultation with our legal counsel. Our board of directors is ultimately responsible for oversight of cybersecurity risk management and receives regular reports from Company management.

 ITEM 2. PROPERTIES

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

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

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

 Our telephone number is (888) 400-2863.

 ITEM 3. LEGAL PROCEEDINGS

 Our company is not presently a party to any legal proceeding.

 ITEM 4. MINE SAFETY DISCLOSURES

 Not applicable.

 ITEM 5. MARKET FOR REGISTRANT ' S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES

 Market Information

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

 Holders

 As of March 27, 2024, there were approximately 600 registered holders of our common stock. This does not include beneficial owners.

 Dividends

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

 Securities Authorized for Issuance Pursuant to Equity Compensation Plans

 Equity Compensation Plan Information as of December 31, 2023

 Number of securities to be

 Weighted average

 issued upon exercise of

 exercise price of

 Number of securities

 outstanding options,

 outstanding options,

 remaining available for

 warrants and rights

 warrants and rights

 future issuance

 Plan Category

 (a)

 (b)

 (c)

 Equity compensation plans approved by security holders

 42,672,533 (1)

 $

 0.20

 9,327,467

 Equity compensation plans not approved by security holders(2)

 17,375,044

 $

 0.39

 n/a

 Total

 60,047,577

 $

 0.26

 9,327,467

 (1)

 Includes 1,564,085 shares issuable under the 2007 Equity Plan, which expired September 6, 2017; includes 41,108,448 shares issuable under the 2018 Equity Incentive Plan adopted by the Board on March 7, 2018 and subsequently approved by stockholders on May 23, 2018.

 (2)

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

 Sales of Unregistered Securities

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

 During the three months ended December 31, 2023, we issued 68,502 shares of our common stock to reduce amounts owed to a vendor in the aggregate amount of $11,000.

 During the three months ended December 31, 2023, we sold 2,894,739 shares of our common stock and received $550,000 in gross proceeds, and $495,000 in net proceeds, from fourteen accredited investors. In addition to the shares, we issued the investors six-month warrants to purchase an aggregate 2,894,739 additional shares at $0.228 per share, and five-year warrants to purchase an aggregate 2,894,739 additional shares at $0.285 per share. Commissions paid to a licensed broker included a 10% cash fee and a warrant to purchase 10% of the shares purchased.

 In December 2023, Clyra Medical began an offering of its common stock and warrants, and received $35,000 in gross and net proceeds from one accredited investor, and in exchange issued the investors 7,000 shares of its common stock and a warrant to purchase 3,500 shares of common stock at $7.50 per share.

 All of these offerings and sales were made in reliance on the exemption from registration contained in Section 4(2) of the Securities Exchange Act and/or Regulation D promulgated thereunder as not involving a public offering of securities.

 ITEM 6. SELECTED FINANCIAL DATA

 Not applicable

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

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

 This discussion contains forward-looking statements that involve risks and uncertainties. Such statements, which include statements concerning future revenue sources and concentration, selling, general and administrative expenses, research and development expenses, capital resources, additional financings and additional losses, are subject to risks and uncertainties, including, but not limited to, those discussed above in Part I, Item 1 and elsewhere in this Annual Report, particularly in "Risk Factors," that could cause actual results to differ materially from those projected. The forward-looking statements set forth in this Annual Report are as of December 31, 2023, unless expressly stated otherwise, and we undertake no duty to update this information.

 Results of Operations — Comparison of the years ended December 31, 2023 and 2022

 We operate our business in distinct business segments:

 ONM Environmental, which manufactures and sells our odor and VOC control products and services, including our flagship product, CupriDyne Clean;

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

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

 BioLargo Canada, located in Edmonton, Alberta Canada, our primary research and development activities; and

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

 Our consolidated revenue for the year ended December 31, 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.

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

 Revenue (ONM Environmental)

 ONM Environmental's revenues for the year ended December 31, 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.")

 Cost of Goods Sold (ONM Environmental)

 ONM Environmental's cost of goods sold includes costs of raw materials, contract manufacturing, and portions of depreciation, salaries and expenses related to the manufacturing and installation of its products. As a percentage of revenue, ONM Environmental's costs of goods increased 4% in 2023 to 49%. The increase was related to normal price fluctuations for raw materials.

 Selling, General and Administrative Expense (ONM Environmental)

 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.

 Operating Income (ONM Environmental)

 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.

 BLEST (engineering division)

 Revenue (BLEST)

 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.

 Cost of Goods (Services) Sold (BLEST)

 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.

 Selling, General and Administrative Expense (BLEST)

 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.

 Operating Loss (BLEST)

 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.

 Selling, General and Administrative Expense – consolidated

 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):

 Salaries and payroll related

 $

 2,746

 $

 2,754

 Professional fees

 Consulting

 1,413

 Office expense

 1,853

 1,502

 Board of director expense

 Sales and marketing

 Investor relations

 Totals

 $

 8,058

 $

 6,731

 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.

 Impairment Expense

 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).

 Research and Development

 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.

 Other Income and Expense

 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.

 Our Canadian subsidiary applied for and received a refund on our income taxes pursuant to the "Scientific Research and Experimental Development Program", a Canadian federal tax incentive program designed to encourage Canadian businesses to conduct research and development in Canada. For the years ended December 31, 2023 and 2022, we recorded an expense of $54,000 and a refund of $63,000, respectively.

 Interest expense

 Our interest expense for the year ended December 31, 2023, was $91,000, an increase of 72% compared with 2022. The significant increase in interest expense is related to the timing of when we entered into our debt obligations as there was a full year of interest during 2023 versus 2022. During 2023, $58,000 was paid in cash and $33,000 related to the amortization of debt discounts related to warrants issued in conjunction with debt instruments. During 2022, $36,000 was paid in cash. Our non-cash interest expenses were $17,000 in amortization of debt discounts related to warrants issued in conjunction with debt instruments.

 As of December 31, 2023, the total debt on our balance sheet was $258,000, not including $234,000 owed by Clyra Medical. The $258,000 is comprised of $190,000 is from SBA loans at low interest rates, and a $68,000 vehicle loan. We do not intend to take on additional debt in the current year, and expect our interest expense in 2024 to decrease as compared with 2023.

 Net Loss

 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.

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

 Year ended

 Year ended

 Net income (loss)

 $

 4,329

 $

 1,304

 BLEST

 (1,619

)

 (425

)

 (2,097

)

 (1,412

)

 (713

)

 (604

)

 BETI

 (1,179

)

 —

 (3,369

)

 (3,995

)

 Consolidated net loss

 $

 (4,648

)

 $

 (5,132

)

 In the year ended December 31, 2023, approximately 68% of our net loss was attributable to non-cash expenses, including $2,124,000 of stock option compensation expense (of which $260,000 was from options issued by Clyra Medical), $384,000 of services paid by the issuance of our common stock, and $394,000 related to the impairment of our Clyra prepaid marketing agreement. (See Note 10).

 In the year ended December 31, 2022, approximately 50% of our net loss was attributable to non-cash expenses, including $2,071,000 of stock option compensation expense (of which $408,000 was from options issued by Clyra Medical), and $291,000 of services paid by the issuance of our common stock.

 Liquidity and Capital Resources

 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.

 During the year ended December 31, 2023, we generated revenues of $12,230,000, through our subsidiaries (see Note 12). Other than ONM Environmental, our subsidiaries did not generate enough revenues or gross profits to fund their operations or fund our corporate operations or other business segments. To meet our cash obligations, during the year-ended December 31, 2023, we (i) sold $995,000 of our common stock to Lincoln Park Capital Fund, LLC ("Lincoln Park") (see Note 3), (ii) sold $1,158,000 of our common stock and warrants to accredited investors (see Notes 3 and 6), (iii) sold $1,575,000 of Clyra Medical Series A Preferred Stock and $35,000 of Clyra Medical common stock (see Note 10), and (iv) sold 1,005,000 of BETI common stock (see Note 9). If we are unable to rely on our current arrangement with Lincoln Park to fund our working capital requirements, we will have to rely on other forms of financing, and there is no assurance that we will be able to do so, or if we do so, it will be on favorable terms. To reduce our operational cash burdens, we regularly issue officers and vendors stock or options in lieu of cash, and anticipate that we will continue to be able to do so in the future. We and Clyra Medical have continued to sell common stock to Lincoln Park for working capital subsequent to December 31, 2023 (see Note 14).

 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.

 Critical Accounting Policies

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

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

 Revenue Recognition

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

 The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

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

 Step 2: Identify the performance obligations in the contract.

 Step 3: Determine the transaction price.

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

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

 We have revenue from two subsidiaries, ONM and BLEST. ONM identifies its contract with the customer through a written purchase order, in which the details of the contract are defined including the transaction price and method of shipment. The only performance obligation is to create and ship the product and each product has separate pricing. ONM recognizes revenue at a point in time when the order for its goods are shipped if its agreement with the customer is FOB ONM's warehouse facility, and when goods are delivered to its customer if its agreement with the customer is FOB destination. Revenue is recognized with a reduction for sales discounts, as appropriate and negotiated in the customer's purchase order. ONM also installs misting systems for which it bills on a time and materials basis. It identifies its contract with the customer through a written purchase order in which the details of the time to be billed and materials purchased and an estimated completion date. The performance obligation is the completion of the installation. Revenue is recognized in arrears as the work is performed.

 BLEST identifies services to be performed in a written contract, which specifies the performance obligations and the rate at which the services will be billed. Each service is separately negotiated and priced. Revenue is recognized as services are performed and completed. BLEST's contracts typically call for invoicing for time and materials incurred for that contract. A few contracts have called for milestone or fixed cost payments where BLEST bills an agreed-to amount per month for the life of the contract. In these instances, completed work, billed hourly, is recognized as revenue. If the billing amount is greater or lesser than the completed work, a receivable or payable is created. These accounts are adjusted upon additional billings as the work is completed. To date, there have been no discounts or other financing terms for the contracts.

 Warrants

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

 The warrant is first analyzed per its terms as to whether it has derivative features or not. If the warrant is determined to be a derivative and not qualify for equity treatment, then it is measured at fair value using the Black Scholes option model, and recorded as a liability on the balance sheet. The warrant is re-measured at its then current fair value at each subsequent reporting date (it is "marked-to-market").

 If the warrant is determined to not have derivative features, it is recorded into equity at its fair value using the Black Scholes option model, however, limited to a relative fair value based upon the percentage of its fair value to the total fair value including the fair value of the convertible note.

 The warrant relative fair values are also recorded as a discount to the convertible promissory notes. At present, these equity features of the convertible promissory notes have recorded a discount to the convertible notes that is substantially equal to the proceeds received.

 Share-based Payments

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

 Fair Value Measurement

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

 Management believes the carrying amounts of the Company's financial instruments as of December 31, 2023 and 2022, approximate their respective fair values because of the short-term nature of these instruments. Such instruments include cash, accounts receivable, prepaid assets, accounts payable, line of credit, and other assets and liabilities. The carrying amount of debt instruments are believed to approximate fair value as the stated interest rates are reflective of the prevailing market rates.

 Recent Accounting Pronouncements

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

 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

 Not applicable.

 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 Our consolidated financial statements as of and for the years ended December 31, 2023 and 2022 are presented in a separate section of this report following Item 14 and begin with the index on page F-1.

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

 None.

 ITEM 9A. CONTROLS AND PROCEDURES

 Evaluation of Disclosure Controls and Procedures

 We conducted an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Annual Report.

 Our procedures have been designed to ensure that the information relating to our company, including our consolidated subsidiaries, required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow for timely decisions regarding required disclosure. However, our Company is continuing to grow and evolve. The volume of our product sales continues to grow, increasing strain on our accounting systems. And, our operations do not yet generate enough cash to fund operations, and thus we rely on financing activities to maintain our level of operations and fund our anticipated growth. In combination, these activities put stress on our overall controls and procedures. Based on this evaluation, our chief executive officer and chief financial officer concluded that as of the evaluation date our disclosure controls and procedures were not effective, due to the material weakness identified below.

 It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

 Management ' s Report on Internal Control over Financial Reporting

 Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

 Under the supervision and with the participation of our management, including our chief executive officer and the chief financial officer, we have established internal control procedures in accordance with the guidelines established in the 2013 Framework —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Management evaluated the effectiveness of our internal controls, and concluded that due to our limited financial and personnel resources, and the fact that we operate our business in three distinct locations in the U.S. and Canada, we continue to have a material weakness in our internal controls with respect to the closing our financial statements. Until the Company has the financial resources to implement more robust automated systems, or to hire additional dedicated accounting personnel, we expect this material weakness to continue. In reaching this conclusion, management considered that despite this weakness, and others identified in past years, the company has not identified material misstatements in prior financial statements, and believes that the material weakness identified herein is not likely to lead to a material misstatement in the financial statements contained within this report.

 Management has concluded that its internal controls over financial reporting are not effective. Management identified a material weakness with respect to deficiencies in its financial closing and reporting procedures. Management believes this is due to a lack of resources. Management intends to add accounting personnel and operating staff and more sophisticated systems in order to improve its reporting procedures and internal controls, subject to available capital. A material weakness is a significant deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected. While management has recognized the material weakness, nothing additionally has changed in internal controls over financial reporting in the fourth quarter or the fiscal year ended December 31, 2023.

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

 Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls or our internal control over financial reporting, or any system we design or implement in the future, will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 Changes in Internal Control over Financial Reporting

 There were no changes in the Company's internal control over financial reporting during the fourth quarter of 2023, which were identified in connection with management's evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

 ITEM 9B. OTHER INFORMATION

 None.

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

 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

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

 ITEM 11. EXECUTIVE COMPENSATION

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

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

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

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

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

 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

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

 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

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

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

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

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

 Exhibit Index

 Incorporated by
 Reference Herein

 Exhibit
 Number

 Exhibit Description

 Form

 File Date

 3.1

 Bylaws of BioLargo, Inc., as amended and restated

 Form 10-KSB

 5/23/2003

 3.2

 Amended and Restated Certificate of Incorporation for BioLargo, Inc. filed March 16, 2007

 Form 10-KSB

 5/4/2007

 3.3

 Certificate of Amendment to Certificate of Incorporation, filed May 25, 2018

 Pos Am

 3.4

 Certificate of Amendment to Certificate of Incorporation, filed August 30, 2022

 Form 10-Q

 11/14/2022

 4.1

 BioLargo, Inc. 2007 Equity Incentive Plan

 Form 10-QSB

 11/19/2007

 4.2

 Amendment No. 1 to BioLargo 2007 Equity Incentive Plan

 Def 14C
 (Exhibit A)

 5/2/2011

 4.3

 Form of Stock Options issued in exchange for reduction in accounts payable.

 3/31/2015

 4.4

 2018 Equity Incentive Plan

 4.5

 Stock Option Award Agreement under 2018 Equity Incentive Plan

 4.6

 Notice of Stock Option Grant under 2018 Equity Incentive Plan

 4.7

 Restricted Stock Unit Award Agreement under 2018 Equity Incentive Plan

 4.8

 Notice of Restricted Stock Unit Award under 2018 Equity Incentive Plan

 4.9

 Revolving Line of Credit Agreement dated June 30, 2020, between Clyra Medical and Vernal Bay

 7/7/2020

 4.10

 Security Agreement dated June 30, 2020, between Clyra Medical and Vernal Bay

 7/7/2020

 4.11

 Revolving Line of Credit Note issued by Clyra Medical to Vernal Bay on June 30, 2020

 7/7/2020

 4.12

 Warrant issued in BioLargo Unit Offerings

 Form 10-Q

 8/14/2020

 4.13

 Amendment to March 2018 $50,000 Convertible Note, dated March 1, 2021

 3/30/2021

 4.14

 Warrant issued to $50,000 Convertible Noteholder on March 1, 2020

 3/30/2021

 4.15

 Satisfaction of March 2018 $50,000 Convertible Note, dated March 6, 2023

 3/31/2023

 10.1

 BioLargo license to Clyra Medical Technologies, Inc., dated March 1, 2024

 10.2

 Clyra Medical Technologies, Inc. license to BioLargo dated March 1, 2024

 10.3

 Consulting Agreement dated December 30, 2015 with Beach House Consulting LLC

 1/6/2016

 10.4

 Commercial Office Lease Agreement for Westminster California

 8/24/2016

 10.5

 Employment Agreement with Dennis P. Calvert dated May 2, 2017.

 5/4/2017

 10.6

 Lock-Up Agreement with Dennis P. Calvert dated April 30, 2017

 5/4/2017

 10.7

 Lock-Up Agreement with Dennis P. Calvert dated May 2, 2017.

 5/4/2017

 10.8

 Commercial Office Lease Agreement for Oak Ridge Tennessee

 9/8/2017

 10.9

 Form of Employment Agreement for Engineering subsidiary employee (BLEST)

 9/8/2017

 10.10

 Form of Option issued to founding employees of Engineering subsidiary (BLEST)

 9/8/2017

 10.11

 Joseph L. Provenzano Employment Agreement dated May 28, 2019

 6/24/2019

 10.12

 Purchase Agreement, dated as of March 30, 2020 by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC.

 3/31/2020

 10.13

 Amendment dated June 30, 2020 to Consulting Agreement dated December 30, 2015 between Clyra Medical and Beach House Consulting LLC

 7/7/2020

 10.14

 2022 Engagement Extension Agreement with CFO

 3/24/2022

 10.15

 Registration Rights Agreement, dated as of December 13, 2022, by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC

 12/19/2022

 10.16

 Purchase Agreement, dated as of December 13, 2022, by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC.

 12/19/2022

 10.17

 Form of indemnity agreement between the Company at its officers and directors

 3/31/2022

 10.18

 2023 Engagement Extension Agreement with CFO

 3/27/2023

 10.19

 Form of Share Exchange Agreement between BioLargo, Inc., and purchasers of Clyra Medical Series A Preferred Stock

 Form 10-Q

 5/17/2023

 10.20

 Form of Share Exchange Agreement between BioLargo, Inc., and purchasers of BioLargo Energy Technologies, Inc. common stock

 Form 10-Q

 5/17/2023

 14.1

 Code of Ethics

 Form 10-KSB

 11/16/2004

 21.1*

 List of Subsidiaries of the Registrant

 23.1*

 Consent of Hacker Johnson & Smith PA

 23.2*

 Consent of Haskell & White LLP

 31.1*

 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rules 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934

 31.2*

 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rules 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934

 32*

 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

 101.INS**

 101.SCH**

 101.CAL**

 101.DEF**

 101.LAB**

 101.PRE**

 * Filed herewith

 ** Furnished herewith

 Management contract or compensatory plan, contract or arrangement

 SIGNATURES

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

 BIOLARGO, INC.

 Date: April 1, 2024

 By:

 /s/ Dennis P. Calvert

 Dennis P. Calvert
 President and Chief Executive Officer

 POWER OF ATTORNEY

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

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

 Name

 Title

 Date

 /s/ Dennis P. Calvert

 Chairman of the Board, Chief

 Dennis P. Calvert

 Executive Officer and President

 /s/ Charles K. Dargan II

 Chief Financial Officer

 Charles K. Dargan II

 (principal financial officer and principal accounting officer)

 /s/ Kenneth R. Code

 Chief Science Officer and Director

 Kenneth R. Code

 /s/ Joseph L. Provenzano

 Executive Vice President, Corporate

 Joseph L. Provenzano

 Secretary and Director

 /s/ Jack B. Strommen

 Director

 Jack B. Strommen

 /s/ Dennis E. Marshall

 Director

 Dennis E. Marshall

 /s/ Linda Park

 Director

 Linda Park

 /s/Christina Bray

 Director

 Christina Bray

 INDEX TO FINANCIAL STATEMENTS

 Report of Independent Registered Public Accounting Firm (PCAOB name: HACKER JOHNSON & SMITH PA and PCAOB ID: 400)

 Report of Independent Registered Public Accounting Firm (PCAOB name: HASKELL & WHITE LLP and PCAOB ID: 200)

 Consolidated Balance Sheets as of December 31, 2023 and 2022

 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2023 and 2022

 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2023 and 2022

 Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022

 Notes to Consolidated Financial Statements

 Report of Independent Registered Public Accounting Firm

 To the Stockholders and the Board of Directors BioLargo, Inc.

 Westminster, California:

 Opinion on the Consolidated Financial Statements

 We have audited the accompanying consolidated balance sheets of BioLargo, Inc. and Subsidiaries (the "Company"), as of December 31, 2023 and the related consolidated statements of operations and comprehensive loss, stockholders' equity and cash flows for the year then ended and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

 Going Concern

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

 Basis for Opinion

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

 To the Stockholders and the Board of Directors BioLargo, Inc.

 Page Two

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

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

 Critical Audit Matters

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

 Fair Value of Stock Options - Critical Audit Matter Description

 As more fully described in Notes 2, 5 and 10 to the consolidated financial statements, the Company issues options from both BioLargo, Inc. as well as its partially-owned subsidiary, Clyra Medical. Management uses the Black-Scholes option-pricing model to estimate the fair value of its stock options. The Black-Scholes option-pricing model involves the use of significant estimates, including the following:

 -

 Risk-free interest rate

 -

 Expected stock price volatility

 -

 Expected dividend yield and

 -

 Expected life of the award.

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

 To the Stockholders and the Board of Directors BioLargo, Inc.

 Page Three

 How the Critical Audit Matter was Addressed in the Audit

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

 -

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

 -

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

 -

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

 -

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

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

 HACKER, JOHNSON & SMITH PA

 Tampa, Florida

 We have served as the Company's auditor since 2023.

 Report of Independent Registered Public Accounting Firm

 To the Board of Directors and Stockholders

 BioLargo, Inc. and Subsidiaries

 Opinion on the Financial Statements

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

 Going Concern

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

 Basis for Opinion

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

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

 Report of Independent Registered Public Accounting Firm (continued)

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

 Critical Audit Matters

 The critical audit matters communicated below are matters arising from the 2022 audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 Fair Value of Stock Options — Refer to Notes 2, 5 and 10 to the Consolidated Financial Statements

 Critical Audit Matter Description

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

 Risk-free interest rate;

 Expected share price volatility;

 Expected dividend yield; and

 Expected life of the award.

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

 Report of Independent Registered Public Accounting Firm (continued)

 How the Critical Audit Matter was Addressed in the Audit

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

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

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

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

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

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

 Impairment of Long-lived Asset – Refer to Notes 2 and 9 to the Consolidated Financial Statements

 Critical Audit Matter Description

 As reflected in the Company's consolidated financial statements at December 31, 2022, the Company's net carrying amount of Clyra Medical prepaid marketing is $394,000. As disclosed in Note 2 to the consolidated financial statements, long-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. As a result of these assessments, management concluded that there was an impairment to the Company's prepaid marketing asset during the year ended December 31, 2022.

 Report of Independent Registered Public Accounting Firm (continued)

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

 How the Critical Audit Matter was Addressed in the Audit

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

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

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

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

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

 HASKELL & WHITE LLP

 We have served as the Company's auditor from 2011 to 2023.

 Irvine, California

 March 31, 2023

 CONSOLIDATED BALANCE SHEETS

 (in thousands, except for per share data)

 DECEMBER 31,

 2023

 2022

 Assets

 Current assets:

 Cash and cash equivalents

 $
 3,539

 $
 1,851

 Accounts receivable, net of allowance

 2,612

 1,064

 Inventories, net of allowance

 Prepaid expenses and other current assets

 Total current assets

 6,362

 3,153

 Equipment and leasehold improvements, net of depreciation

 Other non-current assets

 Investment in South Korean joint venture

 Right of use, operating lease, net of amortization

 1,092

 Clyra Medical prepaid marketing (Note 10)

 —

 Total assets

 $
 8,205

 $
 4,858

 Liabilities and stockholders' equity

 Current liabilities:

 Accounts payable and accrued expenses

 $
 1,488

 $

 Clyra Medical accounts payable and accrued expenses

 Clyra Medical debt obligations (Note 10)

 —

 Debt obligations, net of discount (Note 4)

 Contract liabilities

 Lease liabilities

 Deposits

 Total current liabilities

 2,710

 1,576

 Long-term liabilities:

 Debt obligations, net of current (Note 4)

 Lease liability, net of current

 1,004

 Clyra Medical debt obligations (Note 10)

 —

 Total long-term liabilities

 1,293

 1,271

 Total liabilities

 4,003

 2,847

 CONTINGENCIES (Note 1)

 STOCKHOLDERS' EQUITY:

 Preferred Series A, $ 0.00067 par value, 50,000,000 shares authorized, no shares issued and outstanding, at December 31, 2023 and December 31, 2022

 —

 —

 Common stock, $ 0.00067 par value, 400,000,000 shares authorized, 292,945,747 and 278,462,706 shares issued and outstanding, at December 31, 2023 and December 31, 2022

 Additional paid-in capital

 154,023

 148,435

 Accumulated deficit

 ( 147,098
)

 ( 143,594
)

 Accumulated other comprehensive loss

 ( 277
)

 ( 149
)

 Total BioLargo Inc. and subsidiaries stockholders' equity

 6,844

 4,878

 Non-controlling interest (Note 9, 10 and 11)

 ( 2,642
)

 ( 2,867
)

 Total stockholders' equity

 4,202

 2,011

 Total liabilities and stockholders' equity

 $
 8,205

 $
 4,858

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

 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 (in thousands, except for per share data)

 Year ended December 31,

 2023

 2022

 Revenue

 Product revenue

 $
 11,460

 $
 4,434

 Service revenue

 1,450

 Total revenue

 12,230

 5,884

 Cost of revenue

 Cost of goods sold

 ( 5,681
)

 ( 2,177
)

 Cost of service

 ( 395
)

 ( 850
)

 Total cost of revenue

 ( 6,076
)

 ( 3,027
)

 Gross profit

 6,154

 2,857

 Operating expenses:

 Selling, general and administrative expenses

 8,058

 6,731

 Research and development

 2,282

 1,319

 Impairment expense

 Total operating expenses

 10,734

 8,247

 Operating loss

 ( 4,580
)

 ( 5,390
)

 Other income (expense):

 PPP forgiveness

 —

 Grant income

 Tax credit (expense) income

 ( 13
)

 Interest expense

 ( 91
)

 ( 53
)

 Total other income

 ( 68
)

)

)

 Net loss attributable to noncontrolling interest

 ( 1,144
)

 ( 659
)

 Net loss attributable to common stockholders

 $
 ( 3,504
)

 $
 ( 4,473
)

 Net loss per share attributable to common stockholders:

 Loss per share attributable to stockholders – basic and diluted

 $
 ( 0.02
)

 $
 ( 0.02
)

 Weighted average number of shares of common stock outstanding:

 285,956,852

 268,302,234

 Comprehensive loss attributable to common stockholders:

 $
)

 $
)

 Foreign currency translation adjustment

 ( 128
)

 ( 34
)

 Comprehensive loss

 ( 4,776
)

 ( 5,166
)

 Comprehensive loss attributable to noncontrolling interest

 ( 1,144
)

 ( 659
)

 Comprehensive loss attributable to common stockholders

 $
 ( 3,632
)

 $
 ( 4,507
)

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

 CONSOLIDATED STATEMENTS OF STOCKHOLDERS ' EQUITY

 YEARS ENDED DECEMBER 31, 2023 AND 2022

 (in thousands, except for share data)

 Accumulated

 Additional

 other

 Non-

 Total

 Common stock

 paid-in

 Accumulated

 comprehensive

 controlling

 stockholders'

 Shares

 Amount

 capital

 deficit

 Loss

 interest

 equity

 255,893,726

 $

 $
 143,718

 $
 ( 139,121
)

 $
 ( 115
)

 $
 ( 3,720
)

 $

 Sale of stock for cash

 19,580,225

 3,604

 —

 —

 —

 3,617

 Stock issued as commitment fee

 1,250,000

 ( 1
)

 —

 —

 —

 —

 Issuance of common stock for services

 1,448,512

 —

 —

 —

 Stock option exercise

 290,243

 —

 —

 —

 —

 Stock option expense

 —

 —

 1,663

 —

 —

 —

 1,663

 Noncontrolling interest allocation

 —

 —

 ( 1,287
)

 —

 —

 1,287

 —

 Clyra stock option expense

 —

 —

 —

 —

 —

 Clyra preferred stock offering

 —

 —

 —

 —

 —

 —

 —

 —

 ( 4,473
)

 —

 ( 659
)

)

 Foreign currency translation

 —

 —

 —

 —

 ( 34
)

 —

 ( 34
)

 278,462,706

 $

 $
 148,435

 $
 ( 143,594
)

 $
 ( 149
)

 $
 ( 2,867
)

 $
 2,011

 Stock for cash

 12,003,517

 2,145

 —

 —

 —

 2,153

 Stock for service

 1,951,541

 —

 —

 —

 Stock share exchange - VB

 527,983

 —

 —

 —

 —

 —

 —

 Warrant Interest

 —

 —

 —

 —

 —

 Stock option expense

 —

 —

 1,864

 —

 —

 —

 1,864

 Clyra stock option expense

 —

 —

 —

 —

 —

 Clyra stock option exercise

 —

 —

 —

 —

 —

 Clyra preferred stock offering

 —

 —

 —

 —

 —

 1,575

 1,575

 Clyra common unit offering

 —

 —

 —

 —

 —

 Clyra Preferred Series A dividend

 —

 —

 —

 —

 —

 ( 242
)

 ( 242
)

 BETI common stock offering

 —

 —

 —

 —

 —

 Noncontrolling interest allocation

 —

 —

 —

 —

 ( 904
)

 —

 —

 —

 —

 ( 3,504
)

 —

 ( 1,144
)

)

 Foreign currency translation

 —

 —

 —

 —

 ( 128
)

 —

 ( 128
)

 292,945,747

 $

 $
 154,023

 $
 ( 147,098
)

 $
 ( 277
)

 $
 ( 2,642
)

 $
 4,202

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

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 (in thousands, except for per share data)

 YEAR ENDED DECEMBER 31,

 2023

 2022

 Cash flows from operating activities:

 $
)

 $
)

 Adjustments to reconcile net loss to net cash used in operating activities:

 Stock option compensation expense

 2,124

 2,071

 Common stock issued for services

 Impairment expense

 Inventory reserve

 Amortization of right-of-use operating lease assets

 —

 Interest expense related to amortization of the discount on convertible notes payable

 Fair value of warrants issued for interest

 —

 Loss on investment in South Korean joint venture

 PPP forgiveness

 —

 ( 174
)

 Amortization and depreciation expense

 Bad debt expense

 —

 Changes in assets and liabilities:

 Accounts receivable

 ( 1,633
)

 ( 551
)

 Inventories

 ( 89
)

 ( 35
)

 Accounts payable and accrued expenses

 Clyra accounts payable and accrued expenses

 ( 83
)

 Contract liabilities

 ( 72
)

 Prepaid expenses and other assets

 ( 90
)

 Lease liability, net

 ( 155
)

 Deposits

 ( 67
)

 Net cash used in operating activities

 ( 2,365
)

 ( 2,762
)

 Cash flows from investing activities:

 Equipment purchases

 ( 478
)

 ( 271
)

 Net cash used in investing activities

 ( 478
)

 ( 271
)

 Cash flows from financing activities:

 Proceeds from sale of common stock

 2,153

 3,617

 Proceeds from Clyra Medical stock option exercise

 —

 Proceeds from BioLargo stock option exercise

 —

 Proceeds from debt obligation, net

 —

 Repayment by Clyra Medical on debt obligation

 ( 27
)

 ( 26
)

 Proceeds from sale of preferred stock in Clyra Medical

 1,575

 Proceeds from sale of common stock in Clyra Medical

 —

 Proceeds from Clyra Medical note payable

 —

 Proceeds from sale of BETI common stock

 —

 Net cash provided by financing activities

 4,659

 3,956

 Net effect of foreign currency translation

 ( 128
)

 ( 34
)

 Net change in cash

 1,688

 Cash and cash equivalent at beginning of year

 1,851

 Cash and cash equivalent at end of year

 $
 3,539

 $
 1,851

 Supplemental disclosures of cash flow information

 Cash paid during the year for:

 Interest

 $

 $

 Income taxes

 $
 —

 $

 Short-term lease payments not included in lease liability

 $

 $

 Non-cash investing and financing activities:

 Clyra preferred series A dividend

 $

 $
 —

 BioLargo debt obligations exchanged for BETI noncontrolling interest

 $

 $
 —

 Fair value of common stock issued to Lincoln Park as finance fee

 $
 —

 $

 Present value of new operating right of use and lease liability

 $

 $

 Allocation of stock option expense within noncontrolling interest

 $

 $
 1,287

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

 Note 1. 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 Note 12), 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 did not 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 Note 3), (ii) sold $ 1,158,000 of our common stock and warrants to accredited investors (see Notes 3 and 6), (iii) sold $ 1,575,000 of Clyra Medical Series A Preferred Stock and $ 35,000 of Clyra common stock (see Note 10), 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 Note 4). 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 is no assurance that we will be able to do so, or if we do so, it will be on favorable terms.

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

 F-

 Organization

 We are a Delaware corporation formed in 1991. We have five wholly-owned subsidiaries: BioLargo Life Technologies, Inc., organized under the laws of the State of California in 2006; ONM Environmental, Inc., organized under the laws of the State of California in 2009; BioLargo Equipment Solutions & Technologies, Inc., organized under the laws of the State of California in 2022; BioLargo Canada, Inc., organized under the laws of Canada in 2014; and BioLargo Development Corp., organized under the laws of the State of California in 2016. Additionally, we own 96 % (see Note 9) of BioLargo Energy Solutions Technologies, Inc. ("BETI") organized under the laws of the State of California in 2019, 53 % (see Note 10) of Clyra Medical Technologies, Inc. ("Clyra" or "Clyra Medical"), organized under the laws of the State of California in 2012 and redomiciled to Delaware in 2023, and 82 % (see Note 11) of BioLargo Engineering Science and Technologies, LLC ("BLEST"), organized under the laws of the State of Tennessee in 2017. We consolidate the financial statements of our partially owned subsidiaries (see Note 2, subheading "Principles of Consolidation").

 Note 2. 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 of three months or less when acquired to be cash equivalents. Substantially all cash equivalents are held in short-term money market accounts at one of the largest financial institutions in the United States. From time to time, our cash account balances are greater than the Federal Deposit Insurance Corporation insurance limit of $250,000 per owner per bank, and during such times, we are exposed to credit loss for amounts in excess of insured limits in the event of non-performance by the financial institution. We do not anticipate non-performance by our financial institution.

 As of December 31, 2023 and 2022, our cash balances were made up of the following (in thousands):

 BioLargo, Inc. and subsidiaries

 $
 3,142

 $
 1,685

 Clyra Medical Technologies, Inc.

 Total

 $
 3,539

 $
 1,851

 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 and no longer actively pursues collection of the receivable. The Company does not 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-

 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 was one customer that accounted for more than 10 % of consolidated revenues, and during the year ended December 31, 2022, there were two customers that each accounted for more than 10 % of consolidated revenues, as follows:

 Customer A

 %

 %

 Customer B

 <10
 %

 %

 We had one customer that accounted for more than 10 % of consolidated accounts receivable at December 31, 2023 and 2022, as follows:

 Customer A

 %

 %

 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, 2023 and 2022 was $ 212,000 and $ 158,000, respectively. Inventories consisted of (in thousands):

 Raw material

 $

 $

 Finished goods

 Total

 $

 $

 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 in 2022 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 in 2022 was reversed in 2023, as it was determined during 2023, that our Canadian subsidiary would not be eligible for the credit as it did not generate taxable income.

 Patents

 $

 $

 Security deposits

 Tax credit receivable

 —

 Total

 $

 $

 F-

 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 do not control the joint venture or are otherwise involved in managing the entity and we own less than a majority of the equity. Therefore, we record the asset on our consolidated balance sheet and record an increase or decrease the recorded balance by our percentage ownership of the profits or losses in the joint venture. During the years ended December 31, 2023 and 2022, 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 Note 10). Impairment expense related to Clyra's prepaid marketing asset for the years ended December 31, 2023 and 2022 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, 2023 and 2022, 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-

 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, 2023 and 2022:

 2023

 2022

 Non Plan

 2018 Plan

 Non Plan

 2018 Plan

 Risk free interest rate

 3.48 - 3.58
 %

 3.48 - 4.45
 %

 2.32 - 3.83
 %

 2.32 - 3.83
 %

 Expected volatility

 %

 102 - 114
 %

 114 - 117
 %

 114 - 117
 %

 Expected dividend yield

 —

 —

 —

 —

 Forfeiture rate

 —

 —

 —

 —

 Life in years

 Expected price volatility is the measure by which our stock price is expected to fluctuate during the expected term of an option. Expected volatility is derived from the historical daily change in the market price of our common stock, as we believe that historical volatility is the best indicator of future volatility.

 The risk-free interest rate used in the Black-Scholes calculation is based on the prevailing U.S. Treasury yield as determined by the U.S. Federal Reserve. We have never paid any cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future.

 Warrants

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

 The warrant is first analyzed per its terms as to whether it has derivative features or not. If the warrant is determined to be a derivative and not qualify for equity treatment, then it is measured at fair value using the Black Scholes option model, and recorded as a liability on the 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 to not have derivative features, it is recorded into equity at its fair value using the Black Scholes option model, however, limited to a relative fair value based upon the percentage of its fair value to the total fair value including the fair value of the convertible note.

 Convertible debt instruments are recorded at fair value, limited to a relative fair value based upon the percentage of its fair value to the total fair value including the fair value of the warrant.

 The warrant relative fair values are also recorded as a discount to the convertible promissory notes. As present, these equity features of the convertible promissory notes have recorded a discount to the convertible notes that is substantially equal to the proceeds received.

 F-

 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 ASC 606, "Revenue from Contacts with Customers". The guidance focuses on the core principle for revenue recognition, which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the guidance provides that an entity should apply the following steps:

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

 Step 2: Identify the performance obligations in the contract.

 Step 3: Determine the transaction price.

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

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

 The Company's products are sold through a contract with the customer and a written purchase order, in which the details of the contract are defined including the transaction price and method of shipment. The only performance obligation is to create and ship the product, and each product has separate pricing. Revenue is recognized at a point in time when the goods are shipped if the agreement is FOB manufacturer, and when goods are delivered if FOB destination. Revenue is recognized with a reduction for sales discounts, as appropriate and negotiated in the customer's purchase order.

 Service contracts are performed through a written contract, which specifies the performance obligations and the rate at which the services will be billed, typically by time and materials. Each service is separately negotiated and priced. Revenue is recognized as services are performed and completed, or, for services related to product installations, at the completion of the installation. A few contracts have called for milestone or fixed cost payments, where we invoice an agreed-to amount per month for the life of the contract. In these instances, completed work, billed hourly, is recognized as revenue. If the billing amount is greater or lesser than the completed work, a receivable or payable is created. These accounts are adjusted upon additional billings as the work is completed. To date, there have been no discounts or other financing terms for the contracts.

 The Company has outstanding contract liability obligations of $ 303,000 and $ 17,000 as of December 31, 2023, and 2022, 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, and 2022, 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, and 2022, totaling $ 4,000 and $71,000, related to customer purchase orders not yet fulfilled.

 As we generate revenues from royalties or license fees from our intellectual property, a licensee will pay a license fee in one or more installments and ongoing royalties based on their sales of products incorporating or using our licensed intellectual property. 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 to third 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 over 80 grants since our first in 2 015. Some of the funds from these grants are given directly to third parties (such as the University of Alberta or a third -party research scientist) to support research on our technology. The grants have terms generally ranging between six and eighteen months and support a majority, but not all, of the related research budget costs. This cooperative research allows us to utilize (i) a depth of resources and talent to accomplish highly skilled work, (ii) financial aid to support research and development costs, (iii) independent and credible validation of our technical claims.

 F-

 The grants typically provide for (i) recurring monthly amounts, (ii) reimbursement of costs for research talent for which we invoice to request payment, and (iii) ancillary cost reimbursement for research talent travel related costs. All awarded grants have specific requirements on how the money is spent, typically to employ researchers. None of the funds may be used for general administrative expenses or overhead in the United States. These grants have substantially increased our level of research and development activities in Canada. We continue to apply for Canadian government and agency grants to fund research and development activities. Not all of our grant applications have been awarded, and no assurance can be made that any pending grant application, or any future grant applications, will be awarded.

 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 is not considered "more-likely-than- not" to be sustained, then no benefits of the position are recognized. Management believes there are no unrecognized tax benefits or uncertain tax positions as of December 31, 2023 and 2022.

 The Company assessed its earnings history, trends and estimates of future earnings and determined that the deferred tax asset could not be realized as of December 31, 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, 2023 and 2022 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 does not have taxable income in a reporting period, we will not receive tax refund from the Canadian Revenue Authority.

 F-

 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 does not meet any of these criteria. We have no 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 will not 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 elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less. The effect of short-term leases on our right-of-use asset and lease liability was not material. As of December 31, 2023 and 2022, the right-of-use assets totaled $ 1,092,000, and $ 867,000, respectively. As of December 31, 2023 and 2022, 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 entity not 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 equity not held by the Company. In accordance with ASC 810 - 10 - 20, "Noncontrolling Interests" BioLargo consolidates three non-wholly owned subsidiaries - Clyra, BLEST and BETI. Noncontrolling interest of Clyra represents 47 % as of December 31, 2023 and 2022. Noncontrolling interest of BLEST represents 23 % and 18 % as of December 31, 2023, and 2022, respectively. Noncontrolling interest of BETI represents 4 % as of December 31, 2023. BETI started operations in 2023.

 Recent Accounting Pronouncements

 In November 2023, the FASB issued ASU 2023 - 07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The main provisions are:

 1.

 Require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss (collectively referred to as the "significant expense principle").

 2.

 Require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss.

 3.

 Require that a public entity provide all annual disclosures about a reportable segment's profit or loss and assets currently required by Topic 280 in interim periods.

 4.

 Clarify that if the CODM uses more than one measure of a segment's profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit

 5.

 Require that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.

 6.

 Require that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this Update and all existing segment disclosures in Topic 280.

 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, 2023 and future reporting periods. This adoption had no significant impact on our consolidated financial statements. Management has made the additional disclosures in our segment note (see Note 12), required by this ASU.

 Note 3. 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 of three years. The agreement allows us, at our sole discretion, to direct Lincoln Park to purchase shares of our common stock, subject to limitations in both volume and dollar amount. The purchase price of the shares that may be sold to Lincoln Park under the agreement is the lower of (i) the lowest sale price on the date of purchase, or (ii) the average of the three lowest closing prices in the prior 12 business days. There are no restrictions on future financings, rights of first refusal, participation rights, penalties, or liquidated damages other than a prohibition on entering into a "Variable Rate Transaction," as defined in the agreement. Concurrently with the 2022 LPC Purchase Agreement, we entered into a Registration Rights Agreement, pursuant to which we filed a registration statement on Form S- 1 with the SEC on December 23, 2022. This registration statement was declared effective on January 19, 2023. Pursuant to the 2022 LPC Purchase Agreement, we issued 1,250,000 shares to Lincoln Park as a commitment fee, valued at $ 240,000 and recorded as additional-paid-in-capital on our consolidated statement of stockholders' equity.

 During the years ended December 31, 2023 and 2022, 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, and 2022 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 a six -month and a five -year warrant to purchase additional shares. (See Note 6, "Warrants Issued in Unit Offering".)

 F-

 Note 4. Debt Obligations

 The following table summarizes our debt obligations outstanding as of December 31, 2023 and 2022 (in thousands). The table does not include debt obligations of our partially owned subsidiary Clyra Medical (see Note 10, "Debt Obligations of Clyra Medical").

 December 31,

 2023

 2022

 Current portion of debt:

 SBA Paycheck Protection Program loan

 $

 $

 Vehicle loan, current portion

 —

 Convertible note payable, matures March 1, 2023

 —

 SBA EIDL Loan, matures July 2053, current portion

 Debt discount, net of amortization

 —

 ( 3
)

 Total current portion of debt

 $

 $

 Long-term debt:

 SBA Paycheck Protection Program loans, matures May 2025

 $

 $

 Vehicle loan, matures March 2029

 —

 SBA EIDL Loan, matures July 2053

 Total long-term debt, net of current

 $

 $

 Total

 $

 $

 For the years ended December 31, 2023 and 2022, 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-

 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 Note 6).

 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.

 Note 5. Share-Based Compensation

 Issuance of Common Stock in exchange for Services

 During the years ended December 31, 2023, and 2022, we issued 1,951,541 and 1,448,512 shares, respectively, to officers, consultants, and other third 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-

 Payment of Consultant Fees

 During 2023, 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.

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

 All of these offerings and sales were made in reliance on the exemption from registration contained in Section 4 ( 2) of the Securities Exchange Act and/or Regulation D promulgated thereunder as not involving a public offering of securities.

 Stock Option Expense

 During the years ended December 31, 2023 and 2022, 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 our 2018 Equity Incentive Plan, and outside of this plan. Of the aggregate amount issued during the years ended December 31, 2023, and 2022, $ 260,000 and $ 408,000, respectively, were issued by our subsidiary Clyra Medical (see Note 10).

 2018 Equity Incentive Plan

 On June 22, 2018, our stockholders adopted the BioLargo 2018 Equity Incentive Plan ( "2018 Plan") as a means of providing our directors, key employees and consultants additional incentive to provide services. Both stock options and stock grants may be issued under this plan for a period of 10 years. It is set to expire on its terms on June 22, 2028. Our Board of Director's Compensation Committee administers this plan. As plan administrator, the Compensation Committee has sole discretion to set the price of the options. The plan authorizes the following types of awards: (i) incentive and non-qualified stock options, (ii) restricted stock awards, (iii) stock bonus awards, (iv) stock appreciation rights, (v) restricted stock units, and (vi) performance awards. The total number of shares reserved and available for awards pursuant to this Plan as of the date of adoption of this 2018 Plan by the Board is 40 million shares. The number of shares available to be issued under the 2018 Plan increases automatically each January 1 st 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-

 Activity for our stock options under the 2018 Plan during the year ended December 31, 2023, and the year ended December 31, 2022, is as follows:

 Aggregate

 Options

 exercise price per

 intrinsic

 share

 Term

 value(1)

 23,186,142

 $
 0.19

 6,322,233

 $
 0.22

 Exercised

 ( 290,243
)
 $
 0.16

 ( 733,583
)
 $
 0.33

 28,484,549

 $
 0.19

 12,623,899

 $
 0.17

 41,108,448

 $
 0.19

 7.7

 Non-vested

 ( 5,067,958
)
 $
 0.18

 Vested, December 31, 2023

 36,040,490

 $
 0.19

 7.7

 $
 287,000

 ( 1) – Aggregate intrinsic value based on closing common stock price of $ 0.17 at December 31, 2023.

 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 additional one -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 of 12 months). The Option vests over the period of the Extended Term, with 25,000 shares having vested as of March 21, 2023, and the remaining shares to vest 25,000 shares monthly beginning March 31, 2023, and each month thereafter, so long as the agreement is in full force and effect. The Option is exercisable at $ 0.20 per share, the closing price of BioLargo's common stock on the March 21, 2023, grant date, expires ten years from the grant date, and was issued pursuant to the Company's 2018 Equity Incentive Plan.

 On March 22, 2022, we and our Chief Financial Officer Charles K. Dargan, II formally agreed to extend the engagement agreement dated February 1, 2008 ( the "Engagement Agreement", which had been previously extended multiple times), pursuant to which Mr. Dargan has been and continues to serve as the Company's Chief Financial Officer. The Engagement Extension Agreement dated as of March 22, 2022 ( the "Engagement Extension Agreement") provides for an additional one -year term through January 31, 2023 ( the "Extended Term"). As the sole compensation for the Extended Term, Mr. Dargan was issued an option ("Option") to purchase 25,000 shares of the Company's common stock for each month during the Extended Term (thus, an option to purchase 300,000 shares reflecting an extended term of 12 months). The Option vests over the period of the Extended Term, with 25,000 shares having vested as of March 22, 2022, and the remaining shares to vest 25,000 shares monthly beginning March 22, 2022, and each month thereafter, so long as the agreement is in full force and effect. The Option is exercisable at $ 0.24 per share, the closing price of BioLargo's common stock on March 22, 2022, the grant date, expires ten years from the grant date, and was issued pursuant to the Company's 2018 Equity Incentive Plan.

 F-

 2007 Equity Incentive Plan

 On September 7, 2007, and as amended April 29, 2011, the BioLargo, Inc. 2007 Equity Incentive Plan ( "2007 Plan") was adopted as a means of providing our directors, key employees and consultants additional incentive to provide services. Both stock options and stock grants may be made under this plan for a period of 10 years, which expired on September 7, 2017. The Board's Compensation Committee administers this plan. As plan administrator, the Compensation Committee has sole discretion to set the price of the options. As of September 2017, the Plan was closed to further stock option grants.

 Activity for our stock options under the 2007 Plan for the years ended December 31, 2023 and 2022 is as follows:

 Aggregate

 Options

 exercise price

 intrinsic

 per share

 term

 value(1)

 2,879,246

 $
 0.49

 ( 975,161
)

 0.36

 1,904,085

 $
 0.56

 ( 340,000
)

 0.30

 1,564,085

 $
 0.61

 1.1

 $
 —

 ( 1) – Aggregate intrinsic value based on closing common stock price of $ 0.17 at December 31, 2023.

 Non-Plan Options issued

 Activity of our non-plan stock options issued for the years ended December 31, 2023 and 2022 is as follows:

 Non-plan

 Aggregate

 options

 exercise price

 intrinsic

 per share

 term

 value(1)

 20,119,207

 $
 0.39

 571,358

 $
 0.19

 ( 1,666,736
)
 $
 0.31

 19,023,829

 $
 0.39

 60,040

 $
 0.20

 ( 1,708,825
)
 $
 0.30

 17,375,044

 $
 0.39

 3.2

 Unvested

 ( 437,500
)
 $
 0.45

 Vested and outstanding, December 31, 2023

 16,937,544

 $
 0.39

 3.2

 $
 28,000

 ( 1) – Aggregate intrinsic value based on closing common stock price of $ 0.17 at December 31, 2023.

 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-

 Note 6. Warrants

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

 Aggregate

 Warrants

 price per

 intrinsic

 share

 term

 value (1)

 36,765,562

 $
 0.27

 27,137,048

 $
 0.23

 ( 14,879,152
)
 $
 0.24

 49,023,458

 $
 0.26

 16,459,374

 $
 0.26

 ( 13,892,532
)
 $
 0.23

 51,590,300

 $
 0.27

 2.16

 $
 18,000

 ( 1) – Aggregate intrinsic value based on closing common stock price of $ 0.17 at December 31, 2023.

 Warrants issued in Unit Offerings

 During the year ended December 31, 2023, pursuant to our Unit Offerings (see Note 3), we issued six -month stock purchase warrants to purchase an aggregate 8,129,687 shares of our common stock at prices at $ 0.23 per share, and five -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 Note 3), we issued six -month stock purchase warrants to purchase an aggregate 13,568,524 shares of our common stock at prices from $ 0.19 - $ 0.26 per share, and five -year stock purchase warrants to purchase an aggregate 13,568,524 shares of our common stock at prices from $ 0.24 - $ 0.33 per share.

 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 Note 4, "Convertible note payable, matures March 1, 2023") to convert that note into common stock of BETI. As payment for interest, a warrant to purchase 200,000 shares of BioLargo common stock at $ 0.21 was issued to the investor, expiring five years from the grant date. The fair value of this warrant totaled $ 30,000 and was recorded as interest expense on our consolidated statements of operations.

 F-

 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:

 2023

 2022

 Risk free interest rate

 3.38 – 4.45
 %

 3.69 – 3.88
 %

 Expected volatility

 %

 %

 Expected dividend yield

 —

 —

 Forfeiture rate

 —

 —

 Expected life in years

.5 – 5

 The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant. Expected volatilities are based on historical volatility of our common stock. The expected life in years is based on the contract term of the warrant.

 Note 7. Accounts Payable and Accrued Expenses

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

 Intercompany

 Category

 ONM

 BLEST

 Canada

 BETI

 amounts

 Totals

 Accounts payable

 $

 $

 $

 $

 $

 $
 ( 82
)

 $
 1,212

 Accrued payroll

 —

 —

 Accrued interest

 —

 —

 —

 —

 Total

 $
 1,488

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

 Intercompany

 Category

 ONM

 BLEST

 Canada

 amounts

 Totals

 Accounts payable

 $

 $

 $

 $

 $
 ( 82
)

 $

 Accrued payroll

 —

 —

 Accrued interest

 —

 —

 —

 —

 Total

 $

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

 Note 8. Provision for Income Taxes

 Given our historical losses from operations, income tax obligations have been limited to the minimum franchise tax assessed by the State of California. Since 2016, we have not consolidated for tax purposes with our subsidiary Clyra Medical, as our ownership interest was less than 80%. Our subsidiary BLEST is a Tennessee limited liability company and as a pass-through entity does not pay federal taxes. However, the state of Tennessee charges franchise and excise taxes for limited liability companies, and thus BLEST will incur a nominal franchise tax and will not pay an excise tax unless and until it is profitable. The Company's losses before income taxes consist primarily of losses from domestic operations, but also included relatively nominal losses from foreign operations.

 F-

 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:

 2023

 2022

 Rate

 Rate

 Statutory U.S. federal tax rate

 ( 21.0

 %)

 ( 21.0
 %)

 Permanent differences:

 State and local income taxes, net of federal benefit

 0.0

 %

 0.0

 %

 Stock compensation

 10.0
 %

 11.0
 %

 Other

 1.4
 %

 1.0
 %

 Valuation Allowance

 9.6

 %

 9.0

 %

 Total

 0.0
 %

 0.0
 %

 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 and 2022 are comprised of the following:

 2023

 2022

 Net operating loss carryforwards

 $
 22,255,079

 $
 21,314,069

 Valuation allowance

 ( 22,255,079
)

 ( 21,314,069
)

 Total net deferred tax assets

 $
 —

 $
 —

 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 than not that the Company will not 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 and 2022, 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 to 2003 have expired. Utilization of the U.S. federal and state net operating loss may be subject to a substantial annual limitation under Section 382 and Section 383 of the Internal Revenue Code of 1986, 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 may limit the amount of net operating loss that can be utilized annually to offset future taxable income and tax liabilities, respectively. The Company has not 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 after 2019. The Company currently is not under examination by any tax authority.

 Note 9. 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 Note 4). Each investor also entered into an agreement with BioLargo whereby the investor may exchange 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 the 20 trading days prior to the election to exchange. Elections must be made during calendar year 2024.

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

 F-

 Note 10. Noncontrolling Interest – Clyra Medical

 As discussed in Note 2 above, we consolidate the operations of our partially owned subsidiary Clyra Medical, of which we owned 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 each one 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 foregoing 1 -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 of four years. On June 30, 2020, at Clyra's request, Beach House Consulting agreed to accept 3,639 shares of Clyra common stock valued at $ 788,000, in lieu of cash, as full prepayment of the consulting fee. The obligation to provide the consulting services is dependent on Clyra generating an average of $ 250,000 in monthly sales over three consecutive months, which has not been met. The value of the shares issued to Beach House totaled $ 788,000, and the obligation is recorded as a non-current asset on our consolidated balance sheet.

 During 2023, Clyra Medical's revenue did not 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.

 During 2022, 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 of one -half of principal outstanding on the line of credit, and $ 200,000. The line of credit note bears interest at 15%, matures in one year, and requires Clyra pay interest and principal from gross product sales. For the first 180 days, on a monthly basis, Clyra 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 the 30 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, from one 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-

 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 from 35 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 under no 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 for one 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 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 may exchange some or all of its Series A Preferred stock, plus accrued dividends, into shares of BioLargo common stock, at a price equal to a 20% discount of the volume weighted average price over the 30 prior trading days. Elections may be 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, from two 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 for one 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 may exchange some or all of its Series A Preferred stock, plus accrued dividends, into shares of BioLargo common stock, at a price equal to a 20% discount of the volume weighted average price over the 30 prior trading days. Elections may made 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

 options

 exercise price

 per share

 term

 1,400,421

 $
 0.01

 182,908

 $
 0.40

 1,583,329

 $
 0.06

 191,981

 $
 0.01

 Exercised

 ( 296,389
)

 $
 1.97

 1,478,921

 $
 0.31

 7.0

 Unvested

 ( 21,525
)

 $
 2.71

 1,457,396

 $
 0.28

 7.0

 Clyra issues options to its employees and consultants in lieu of compensation owed on a regular basis. During the years ended December 31, 2023 and 2022, 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, and 2022 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 with no 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, 2023 and 2022, Clyra had the following accounts payable and accrued expenses (in thousands):

 Category

 Accounts payable

 $

 $

 Accrued payroll

 Accrued dividend

 —

 Accrued interest

 Total

 $

 $

 F-

 Note 11. BioLargo Engineering, Science and Technologies, LLC

 In September 2017, we commenced a full-service environmental engineering firm and formed a Tennessee entity named BioLargo Engineering, Science & Technologies, LLC ("BLEST"). In conjunction with the start of this subsidiary, we entered into a three -year office lease in the Knoxville, Tennessee area, and entered into employment agreements with six scientists and engineers. (See Note 12 "Business Segment Information".) BLEST was capitalized with two classes of membership units: Class A, 100 % owned by BioLargo, and Class B, held by management of BLEST, and which initially have no "profit interest," as that term is defined in Tennessee law. However, over the succeeding five years, the Class B members can earn up to a 30 % profit interest. They also have been granted options to purchase up to an aggregate 1,750,000 shares of BioLargo, Inc. common stock. The profit interest and option shares are subject to a five year vesting schedule tied to the performance of the subsidiary, including gross revenue targets that increase over time, obtaining positive cash flow by March 31, 2018 ( which was not met), collecting 90 % of its account receivables, obtaining a profit of 10 % in its first year (and increasing in subsequent years), making progress in the scale-up and commercialization of our AOS system, and using BioLargo research scientists (such as our Canadian team) for billable work on client projects. These criteria are to be evaluated annually by BLEST's compensation committee (which includes BioLargo's president, CFO, and BLEST's president), beginning September 2018. Given the significant performance criteria, the Class B units and the stock options will only be recognized in compensation expense if or when the criteria are satisfied.

 The BLEST Compensation Committee has met regularly since the subsidiary commenced operations. In 2018, it reviewed the operating performance and determined that the performance metrics were not met and as a result, did not award any Class B units or stock options. In 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 additional one -half and one -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, and 2022, 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.

 Note 12. Business Segment Information

 For the years ended December 31, 2023 and 2022, BioLargo had five operating business segments, plus its corporate entity which is responsible for general corporate operations, including administrative functions, finance, human resources, marketing, legal, etc. The four operational business segments are:

 1.

 ONM Environmental -- which sells odor and volatile organic control products and services, located in Westminster, California;

 2.

 BLEST - which provides professional engineering services on a time and materials basis for outside clients and supports our internal operations as needed., located in Oak Ridge, Tennessee;

 3.

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

 4.

 BioLargo Energy Technologies, Inc. ("BETI") - which is developing our proprietary battery technology; and

 5.
 BioLargo Canada (formerly named BioLargo Water) -- the main hub of our scientists researching and developing our technologies, located in Edmonton, Alberta Canada.

 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 by third 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-

 The segment information for the years December 31, 2023 and 2022, is as follows (in thousands):

 2023

 2022

 Revenues

 $
 —

 $

 11,440

 4,374

 BLEST

 2,397

 1,943

 Intersegment revenue

 ( 1,657
)

 ( 495
)

 Total

 $
 12,230

 $
 5,884

 Research and development

 $
 ( 764
)

 $
 ( 674
)

 ( 15
)

 —

 BLEST

 ( 1,256
)

 ( 469
)

 ( 335
)

 ( 110
)

 BETI

 ( 1,043
)

 —

 ( 526
)

 ( 565
)

 Intersegment research and development

 1,657

 Total

 $
 ( 2,282
)

 $
 ( 1,319
)

 Depreciation expense

 $

 $

 BLEST

 Total

 $

 $

 Stock option expense

 $
 1,864

 $
 1,663

 $
 2,124

 $
 2,071

 Total

 Operating income (loss)

 $
 ( 3,320
)

 $
 ( 3,971
)

 4,335

 1,130

 BLEST

 ( 1,619
)

 ( 452
)

 ( 2,102
)

 ( 1,383
)

 BETI

 ( 1,179
)

 —

 ( 695
)

 ( 714
)

 Total

 $
 ( 4,580
)

 $
 ( 5,390
)

 Interest expense

 $
 ( 49
)

 $
 ( 24
)

 $
 ( 6
)

 —

 ( 36
)

 ( 29
)

 Total

 $
 ( 91
)

 $
 ( 53
)

 Net income (loss)

 $
 ( 3,369
)

 $
 ( 3,995
)

 4,329

 1,304

 BLEST

 ( 1,619
)

 ( 425
)

 ( 2,097
)

 ( 1,412
)

 BETI

 ( 1,179
)

 —

 ( 713
)

 ( 604
)

 Consolidated net loss

 $
)

 $
)

 As of December 31, 2023

 ONM

 Clyra

 BLEST

 BETI

 Canada

 Elimination

 Total

 Tangible assets

 $

 $
 4,624

 $

 $
 1,083

 $

 $
 ( 41
)

 $
 7,094

 Right of use

 —

 —

 —

 —

 —

 1,092

 Investment in South Korean joint venture

 —

 —

 —

 —

 —

 —

 Total

 $
 1,355

 $
 4,624

 $

 $
 1,781

 $

 $

 $
 ( 41
)

 $
 8,205

 As of December 31, 2022

 ONM

 Clyra

 BLEST

 BETI

 Canada

 Elimination

 Total

 Tangible assets

 $

 $
 2,064

 $

 $

 —

 $

 $
 ( 41
)

 $
 3,958

 Right of use

 —

 —

 —

 —

 —

 Investment in South Korean joint venture

 —

 —

 —

 —

 —

 —

 Total

 $

 $
 2,064

 $

 $
 1,172

 $
 —

 $

 $
 ( 41
)

 $
 4,858

 F-

 Note 13. 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 than one -year are not included in our analysis. For the years ended December 31, 2023 and 2022, rental expense was $ 335,000 and $ 316,000, respectively. The lease of our Westminster facility expires August 2024. Management intends to extend this lease for four years. The four -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 for ten years. The ten -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 than one year. None of our leases have additional terms related to the payments or mechanics of the lease. The leases have no additional payment terms such as common area maintenance payments, tax sharing payments or other allocable expenses. Likewise, the leases do not contain other terms and conditions of use, such as variable lease payments, residual value guaranties or other restrictive financial terms. Since there is no explicit interest rate in our leases, management used its incremental borrowing rate, which is estimated to be 18 % to determine lease liability. As of December 31, 2023, the weighted average remaining lease term for our operating leases was seven years.

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

 Year ending

 Corp / ONM

 BLEST

 Total

 December 31, 2024

 122,000

 154,000

 276,000

 December 31, 2025

 125,000

 157,000

 282,000

 December 31, 2026

 129,000

 160,000

 289,000

 December 31, 2027

 133,000

 163,000

 296,000

 December 31, 2028

 79,000

 166,000

 245,000

 Thereafter

 —

 654,000

 654,000

 Total minimum lease payments

 $
 588,000

 $
 1,454,000

 $
 2,042,000

 Less imputed interest

 (933,000
)

 Total operating lease liability

 $
 1,109,000

 Note 14. Subsequent Events.

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

 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 the 2022 LPC Purchase Agreement (see Note 3), and received $ 260,000 in gross and net proceeds. These sales were registered with the SEC on Form S- 1 (file number 333 - 268973). (See Note 3.)

 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, from five accredited investors. In addition to the shares, we issued each investor a six -month and a five -year warrant to purchase additional shares. (See Note 3 and Note 6 "Warrants Issued in Unit Offering".) Commissions paid to a licensed broker included a 10% cash fee and a warrant to purchase 10% of the shares purchased.

 Warrants

 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.

 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, from four accredited investors. In exchange, it received $ 475,000 in gross and net proceeds.