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Note 7 - Warrants

12 Months Ended

Dec. 31, 2013

Note 7. Warrants

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

	Number of Shares			Price Range
Outstanding as of December 31, 2011		5,077,086		$0.125	–	$ 1.00
Issued		6,398,813	⁽¹⁾		$0.50
Exercised		—			—
Expired		(2,870,871	)	$0.75	–	$2.00
Outstanding as of December 31, 2012		8,390,741		$0.125	–	$1.00
Issued		3,503,328		$0.25	–	$0.50
Exercised		—			—
Expired		(1,275,298	)	$0.50	–	$1.00
Outstanding as of December 31, 2013		10,618,771		$0.125	–	$1.00

⁽¹⁾

During 2012, an adjustment was made to the timing of the issuance of warrants to purchase an aggregate 214,287 shares.

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 calculated value is amortized over the life of the warrant. The determination of expense of warrants issued for services or settlement also uses the option-pricing model. The principal assumptions we used in applying this model were as follows:

	2012			2013
Risk free interest rate	0.15%	–	0.57%	0.15%	–	0.78%
Expected volatility	120%	–	489%	112%	–	262%
Expected dividend yield		—			—
Forfeiture rate		—			—
Expected life in years	0.75	–	5.00	1.00	–	3.00

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 presumed to be the mid-point between the vesting date and the end of the contractual term.

We recorded $509,940 and $247,412 of interest expense related to the amortization of the discount on convertible notes, for the extension of warrants set to expire, and for the fair value of warrants issued for services for the years ended December 31, 2012 and 2013, respectively.

Summer 2013 Warrants

Pursuant to the terms of our Summer 2013 Offering (see Note 5), since inception in June 2013 we issued warrants to purchase up to an aggregate 260,000 shares of our common stock to the investors in the Summer 2013 Offering at an exercise price of $0.30 per share. These warrants are set to expire October 15, 2015.

Winter 2013 Warrants

Pursuant to the terms of our Winter 2013 Offering (see Note 5), during 2013 we issued warrants to purchase up to an aggregate 2,333,329 shares of our common stock to the investors in the Winter 2013 Offering at an exercise price of $0.55 per share. These warrants are set to expire June 15, 2015.

Clyra 2012 Warrants

In April 2013, Clyra modified the terms of its offering, such that, in addition to shares of Clyra common stock, each Clyra investor would receive a warrant (“Clyra 2012 Warrants”) to purchase an additional number of shares of Clyra common stock as originally purchased by the investor, at a price of $1,833 per share, until July 30, 2015. The offering terms were also modified to increase the number of shares of BioLargo common stock into which the Clyra investor could convert his or her Clyra shares, from 2,858 to 3,333 and 1/3 shares of BioLargo common stock. We have issued warrants to purchase up to an aggregate 799,999 shares of our common stock to the investors in the Clyra Winter 2012 private securities offering. (See Note 5). The date until which the investor may tender Clyra shares to BioLargo for conversion was extended to July 30, 2015.

Summer 2012 Warrants

Pursuant to the terms of our Summer 2012 Offering (see Note 5), during 2012 we issued warrants to purchase up to an aggregate 2,771,671 shares of our common stock to the investors in the Offering. On October 23, 2012, we amended the terms of the Summer 2012 Offering by reducing the exercise price from $0.55 to $0.50 per share. These warrants are set to expire on March 31, 2014 and have an exercise price of $0.50 per share.

Winter 2012 Warrants Extension

Pursuant to the terms of our Winter 2012 Offering (see Note 5), during 2012 we issued warrants to purchase up to an aggregate 3,127,914 shares of our common stock to the investors in the Offering. The Winter 2012 warrants were set to expire on June 30, 2013 and have an exercise price of $0.50 per share. On June 30, 2013, the expiration date of these warrants was extended by a period of one year, such that the warrants now expire on June 30, 2014. During the nine-month period ended June 30, 2013 we recorded $233,000 of interest expense related to the fair value of the one-year extension for our Winter 2012 Warrants.

Other Warrants

On December 31, 2013, the noteholder of our note payable (see Note 11) agreed to extend the maturity date to January 14, 2015. As consideration for the extension, we issued a warrant to purchase 60,000 shares of common stock at $0.30 cents per share, resulting in a fair value of $14,412 recorded as interest expense upon issuance. The warrant expires on June 15, 2017.

On December 28, 2012, the noteholder of our note payable (see Note 11) agreed to extend the maturity date of the note by a period of one year to December 3, 2013. As consideration for the extension, we issued a warrant to purchase 50,000 shares of common stock at $0.50 cents per share, resulting in a fair value of $6,805 recorded as interest expense. The warrant expires on June 3, 2014.

On July 23, 2012, we issued a warrant to a consultant for services provided to purchase up to an aggregate 250,000 shares of our common stock at an exercise price of $0.40 per share, resulting in a fair value of $67,500, of which $62,100 was recorded as selling, general and administrative expense during the year ended December 31, 2012 and the remaining $5,400 was expensed in 2013. This warrant expires on July 23, 2017.