Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

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, 2025, unless expressly stated otherwise, and we undertake no duty to update this information.

Results of Operations-Comparison of the years ended December 31, 2025 and 2024

We operate our business in distinct business segments:

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

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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;

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

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BETI, which is developing our proprietary battery technology;

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BEST, which sells equipment based on our technology; and

	●	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, 2025 was $7,765,000, which is a 56% decrease over the $17,779,000 in revenues for the year ended December 31, 2024. Services revenue increased 96% to $1,998,00, while revenue from product sales decreased 66% to $5,767,000. The increase in service revenues was related to additional engineering consulting service contracts. The decrease in product revenues was almost entirely due to the decrease in the volume of sales to our largest private-label odor-control products customer, Pooph Inc.

ONM Environmental

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

Credit Loss Expense, Pooph Litigation

Since 2021, ONM Environmental has been selling odor control products for use with pets to Ikigai Holdings LLC, who sold them to consumers and retailers under the brand name "Pooph", pursuant to a Preferred Master Manufacturing Agreement ("PMMA") and License Agreement. On June 6, 2025, the parties amended the PMMA to allow Pooph Inc. to pay past due amounts of $1,378,141 in royalties and $2,385,468 on product invoices through a weekly payment plan bearing 10% interest and maturing July 3, 2026 (the "PMMA Amendment"). These amounts were recorded on our consolidated balance sheets at June 30, 2025, as a note receivable. The PMMA Amendment also modified payment and invoicing terms on existing and future product purchase orders, and allowed BioLargo to withhold product if the payment terms were not met. On August 5, 2025, Pooph Inc. delivered a royalty report due for the second quarter of 2025, but did not pay the $463,520 in royalties due. On August 15, 2025, it failed to make the weekly payment required pursuant to the PMMA Amendment, and has not made a payment since. On September 19, 2025, it disclosed that it had been working independently on developing a new formula for Pooph-branded products to replace BioLargo's formula, and that it was terminating the PMMA, citing our refusal to deliver products. On September 24, 2025, we delivered notice to Pooph that the grant of license was immediately revoked due to Pooph's failure to pay royalties, and that we were terminating the License Agreement in its entirety with 150 days' notice. The notice further advised that Pooph is not allowed to market or sell products that incorporate, use, or are based on, in whole or in part, BioLargo's patents and proprietary information, including but not limited to know-how disclosed to Pooph, and that absent reinstatement of the grant of license, Pooph must immediately stop marketing and selling any such products in its possession, custody or control (or sold through market portals or platforms such as Amazon).

On November 11, 2025, we (BioLargo Inc. and ONM Environmental Inc.) filed a lawsuit against Pooph Inc. (and related party Ikigai Marketing Works LLC) in the United States District Court, Central District of California, alleging patent infringement (35 U.S.C. 271), false advertising (15 U.S.C. 1125), and state law claims including breach of contract, false promise, unfair and fraudulent business practices, and constructive fraud. In the suit, we seek (i) an order that the defendants have infringed on our patents, an injunction enjoining defendants from further infringing on our patents, and accounting for defendants' gains and profits; (ii) an order that defendants have violated Section 43(a) of the Lanham Act, an injunction preventing defendants from using product reviews based on our proprietary technology with their newly formulated products, and an accounting and damages for these violations; (iii) compensatory damages for unpaid royalties of $1,667,292; (iv) compensatory damages for unpaid product purchased from ONM Environmental of $2,154,110, (v) compensatory damages in an amount according to proof for false promises and unfair and fraudulent business practices; (vi) treble and/or exemplary damages; and (vii) costs and attorneys fees. Also on November 11, 2025, Pooph Inc. served ONM Environmental with a lawsuit venued in the Orange County, California Superior Court filed September 11, 2025, alleging ONM Environmental breached the terms and the implied covenant of good faith and fair dealing of the Preferred PMMA, seeking damages in an amount to be determined, as well as unjust enrichment, interest, and attorneys fees and costs, arising out of the manufacture and sale of the Pooph-branded products, and ONM Environmental's refusal to fullfil purchase orders while Pooph Inc. was in breach of contract for failure to pay past due monies. ONM Environmental disputes the allegations and intends to vigorously defend the lawsuit. While the outcomes of the lawsuits are uncertain, management believes that the resolutions of these proceedings will not have a material adverse effect on the Company's financial position, results of operations, or cash flows. However, adverse outcomes could materially impact future financial results.

During the three months ended September 30, 2025, BioLargo management determined that the note receivable and accounts receivable owed by Pooph Inc. were fully impaired, resulting in a $3,849,000 credit loss expense recorded on our consolidated statements of operations, which reduced operating income and current assets by that amount.

Revenue (ONM Environmental)

ONM Environmental's revenues for the year ended December 31, 2025, were $5,905,000 a decrease of $9,692,000 (62%) from the same period in 2024. The decrease in revenues was almost entirely due to a decrease in the volume of sales of private label odor-control products (which decreased by $9,100,000). Because Pooph is owned and marketed by a third party, ONM Environmental has no control over the marketing and sales activity or levels of the Pooph brand. Although we believe the success of the Pooph brand demonstrates the viability of our pet-odor control products, and although we are actively seeking a new partner that can capitalize on the prior success, unless a new partner is found, we expect ONM Environmental's revenues for the year ending the year ended December 31, 2026 to decrease as compared to the year ended December 31, 2025.

Cost of Goods Sold (ONM Environmental)

ONM Environmental's cost of goods sold includes costs of raw materials, contract manufacturing, and portions of depreciation, salaries and expenses related to the manufacturing and installation of its products. As a percentage of revenue, ONM Environmental's costs of goods decreased 2% in 2025 to 51%. The decrease was related to normal price fluctuations for raw materials.

Selling, General and Administrative Expense (ONM Environmental)

ONM Environmental's SG&A expenses were $1,324,000 in 2025, compared to $1,357,000 in 2024. We expect these expenses to remain approximately the same in 2026 at the current level of operations.

Operating Loss and Income (ONM Environmental)

ONM Environmental generated an operating loss of $2,317,000 in 2025, compared to operating income totaling $5,920,000 in 2024. The operating loss is primarily due to the decrease in sales volume of Pooph branded products, which has declined in 2025, the credit loss expense for uncollectible account receivables totaling $603,000, and the note receivable credit loss expense totaling $3,283,000.

BLEST (engineering division)

Revenue (BLEST)

BLEST generated $1,998,000 in third-party service revenues in the year ended December 31, 2025, a 96% increase over the $1,017,000 in third-party service revenues in the year ended December 31, 2024. This increase was due to an increased volume of services provided to existing and new clients, including increased work at U.S. Air Force bases. As BLESTs revenues in 2024 included product revenue related to the Lake Stockholm project, its overall revenues in 2025 decreased as compared to 2024. In 2025 and future periods, product sales of BioLargo proprietary technology will be through BioLargo Equipment Solutions & Technologies, Inc. - BLEST's role will be to provide supporting engineering services for such products, both at the sales and implementation cycles.

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. Intersegment revenue is primarily used to further engineer and develop our AEC PFAS treatment system and battery technology. In the year ended December 31, 2025, intersegment revenues totaled $685,000 compared to $1,015,000 in 2024.

Cost of Goods Sold (BLEST)

BLEST's cost of goods includes employee labor, materials, as well as subcontracted labor costs. In 2025, its cost of goods were 72% of its revenues, versus 74% in 2024. The decrease is related to decreased costs on fixed fee contracts. We expect the cost of services to remain consistent in 2026 based on the contracts currently in progress.

Selling, General and Administrative Expense (BLEST)

BLEST's SG&A expenses were $987,000 in 2025, compared to $872,000 in 2024, due to increased head-count related expenses. We expect these expenses remain consistent in 2026 based on the contracts currently in progress.

Operating Loss (BLEST)

BLEST had an operating loss of $1,091,000 in 2025, compared to an operating loss of $1,453,000 in 2024. 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 reduced 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.

Clyra Medical

Clyra Medical did not generate revenues in the years ended December 31, 2025 or 2024. It received a first purchase order for its ViaCLYR product in February 2026, and expects to record revenue in the three-months ending March 31, 2026. In the year ended December 31, 2025, Clyra had an operating loss totaling $6,065,000, which included $1,168,000 in research and development expenses. In the same period in 2024, the operating loss totaled $3,324,000, which included $827,000 in research and development expenses. The increases in costs and expenses is related to stock option compensation expense and product development expense related to readying for scaled commercialization.

In the year ended December 31, 2025, Clyra raised $5,745,000 in debt and equity. In the year ended December 31, 2024, Clyra raised $2,869,000, in debt and equity. From January 1, 2026, through March 4, 2026, Clyra Medical received $1,705,000 and issued unsecured promissory notes in the aggregate principal amount of $1,705,000, bearing interest at the rate of 15% per annum, which mature February 28, 2029, and require interest-only payments until maturity (titled its 2026 Guaranteed Note). Clyra Medical also issued the investors warrants allowing for the purchase of an aggregate 133,282 shares of its common stock at $7.50 per share, expiring February 28, 2031. Payment of the promissory notes are guaranteed by BioLargo Inc.

BioLargo Energy Technologies (BETI)

BioLargo Energy Technologies, Inc. (BETI) is focused on development of our Cellinity battery, which is not yet fully developed and ready for sale, and thus has not generated generate revenue. In 2025, BETI had an operating loss totaling $639,000 , which included $274,000 in research and development expenses. In the same period in 2024, the operating loss totaled $642,000, which included $379,000 in research and development expenses. We do not expect BETI to generate revenue in the year ending December 31, 2026, as it continues its research and development and pre-commercialization activities.

BioLargo Equipment, Solutions & Technologies (BEST)

BioLargo Equipment, Sciences and Technologies, Inc. (BEST), was formed in 2024 to commercialize BioLargo's proprietary water treatment equipment, including its PFAS removal device the AEC. As the first AEC sale occurred prior to the Company's formation, and the sales cycle for advanced water treatment systems is long, BEST has not yet generated revenues. We intend future water treatment projects to be contracted through BEST. BEST had an operating loss totaling $276,000 and $273,000 during 2025 and 2024.

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 27% ($2,466,000) in the year ended December 31, 2025, to $11,768,000. Our non-cash expenses (through the issuance of stock and stock options) were $3,613,000 in 2025, compared with $2,479,000 in 2024. Our SG&A expenses included (in thousands):

		December 31, 2025				December 31, 2024
Salaries and payroll related		$	4,721			$	3,276
Professional fees			1,081				944
Consulting			1,906				1,503
Office expense			1,879				1,659
Rent expense			565				377
Depreciation expense			141				150
Sales and marketing			520				494
Investor relations			399				477
Board of director expense			556				422
Total		$	11,768			$	9,302

The increases in salaries and payroll related is primarily due to increased option compensation to employees and the associated fair value, and the increased number of employees at Clyra. The increase in professional and consulting fees are primarily from Clyra as it prepares for the commercialization of its products. The increase in sales and marketing was due to increased company activities at Biolargo and at Clyra. Office expense increased due to an increase in square footage of rented space and an increase in general office expenses related to expanded operations. The increase in the Board of Director fees is due Clyra's issuance of equity to its board members.

Impairment Expense

During the years ended December 31, 2025 and 2024, management recognized an impairment expense of $14,000 and $0, respectively, related to BioLargo's noncontrolling interest in its South Korean joint venture.

Credit Loss Expense

During the year ended December 31, 2025, management recognized credit loss expense of $3,849,000 related to an ONM Environmental client (see Credit Loss Expense, Pooph Litigation, above).

Research and Development

In the year ended December 31, 2025, we spent $2,593,000 in the research and development of our technologies and products. This was a decrease of 10% or $289,000 compared to 2024, due to decreased activity by Clyra Medical as it approaches commercialization of its wound irrigation solution products. The research and development activity was related to the development of wound irrigation solution medical products, the AEC water filtration system, and the Cellinity battery products.

Other Income and Expense

Primarily through our wholly owned Canadian subsidiary, we have been awarded more than 90 research grants over the years from various public and private agencies, including the Canadian National Research Institute - Industrial Research Assistance Program (NRC-IRAP), the National Science and Engineering Research Council of Canada (NSERC), and the Metropolitan Water District of Southern California's Innovative Conservation Program "ICP". The research grants received are considered reimbursement grants related to costs we incur and therefore are included as Other Income. The amount of grant income decreased $20,000 in the year ended December 31, 2025, to $6,000. Grant funds paid directly to third parties are not included as income in our financial statements.

Interest expense

Our interest expense for the year ended December 31, 2025, was $540,000, an increase of 661% compared with 2024. The significant increase in interest expense is related to Clyra Medical debt, which increased in the year ended December 31, 2025. We expect our interest expense to increase in 2026 as compared with 2025 due to further increased debt obligations at Clyra Medical.

Net Loss

Net loss for the year ended December 31, 2025, was $15,189,000 a loss of $0.04 per share, compared to a net loss for the year ended December 31, 2024, of $4,347,000 a loss of $0.01 per share. This is a year-over-year increase in net loss of 249%. Our net loss this year increased because of the decrease in ONM Environmental revenue and the $3,849,000 credit loss expense associated with an ONM Environmental client (see Credit Loss Expense, Pooph Litigation, above). The net income (loss) per business segment is as follows (in thousands):

		Year ended				Year ended
Net income (loss)		December 31, 2025				December 31, 2024
ONM Environmental		$	(2,227	)		$	5,951
BLEST			(1,032	)			(1,356	)
Clyra Medical			(6,564	)			(3,490	)
BioLargo Canada			(528	)			(504	)
BETI			(639	)			(642	)
BEST			(276	)			(273	)
BioLargo corporate			(3,923	)			(4,033	)
Consolidated net loss		$	(15,189	)		$	(4,347	)

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. During the year ended December 31, 2025, we generated revenues of $7,765,000, had a net loss of $15,189,000, and used $8,297,000 cash in operations. At December 31, 2025, we had working capital of $51,000, and current assets of $5,114,000. We do not believe gross profits in the year ending December 31, 2026 will be sufficient to fund our current level of operations. We have been, and anticipate that we will continue to be, limited in terms of our capital resources. As of December 31, 2025, our cash and cash equivalents totaled $3,883,000, and our total liabilities included $2,079,000 debt, of which $1,814,000 was owed by Clyra Medical and of that amount, $1,395,000 is due within one year. Therefore, we intend to continue to raise investment capital through the sale of our securities and the securities of our subsidiaries. To meet our cash obligations during the year-ended December 31, 2025, we (i) sold $2,122,000 of our common stock to Lincoln Park Capital Fund, LLC ("Lincoln Park") (see "Share Purchase Agreement with Lincoln Park" above, and Note 3), (ii) sold $215,000 of our common stock and warrants to accredited investors (see Note 3 and Note 6), (iii) sold $2,339,000, of Clyra Medical common stock and sold $2,145,000 Clyra Medical Series B Preferred stock (see Note 10), and (iv) sold $425,000 of BETI common stock (see Note 9). To reduce our operational cash burdens, we regularly issue officers and vendors stock or options in lieu of cash and anticipate that we will continue to be able to do so in the future.

Since January 1, 2026, through March 4, 2026 (see Note 16, Subsequent Events), Clyra Medical has received $1,705,000 and issued three-year promissory notes in that amount, BETI has sold $462,000 of its common stock, and BioLargo Inc. sold $170,704 of common stock to Lincoln Park (prior to the February 1, 2026 expiration of our Purchase Agreement with Lincoln Park).

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

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

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

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, 2025 and 2024, 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.