10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2019.

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)	(I.R.S. Employer Identification No.)

14921 Chestnut St.

Westminster, CA 92683

(Address of principal executive offices)

(888) 400-2863

(Registrant’s telephone number, including area code)

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	OTC Markets (OTCQB)

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, a smaller reporting company, or emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of shares of the Registrant’s Common Stock outstanding as of May 10, 2019 was 144,953,058 shares.

BIOLARGO, INC.

FORM 10-Q

INDEX

Item 1	Financial Statements
Item 2	Management's Discussion and Analysis and Financial Condition and Results of Operations
Item 4	Controls and Procedures

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds
Item 5	Other Information
Item 6	Exhibits
	Signatures
	Exhibit Index

i.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

BIOLARGO, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2018 AND MARCH 31, 2019

(in thousands, except for per share data)

	DECEMBER 31, 2018			MARCH 31, 2019 (unaudited)
Assets
Current assets:
Cash and cash equivalents	$	655		$	512
Accounts receivable		257			210
Inventories, net of allowance		26			26
Prepaid expenses and other current assets		17			34
Total current assets		955			782
In-process research and development (Note 8)		1,893			1,893
Equipment, net of depreciation		126			110
Other non-current assets		35			35
Right-of-use, operating lease, net of amortization		—			399
Deferred offering cost		176			176
Total assets	$	3,185		$	3,395
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable and accrued expenses	$	501		$	631
Notes payable		400			490
Line of credit		430			430
Convertible notes payable		1,365			2,072
Discount on convertible notes payable, and line of credit, net of amortization		(205	)		(646	)
Lease liability		—			116
Customer deposit		—			32
Total current liabilities		2,491			3,125
Long-term liabilities:
Convertible notes and note payable		285			235
Clyra Medical note payable (Note 8)		1,007			1,007
Liability to Clyra Medical shareholder (Note 8)		643			643
Discount on convertible notes payable, net of amortization		(118	)		(105	)
Lease liability		—			283
Total long-term liabilities		1,817			2,063
Total liabilities		4,308			5,188
COMMITMENTS, CONTINGENCIES (Note 11)
STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred Series A, $.00067 Par Value, 50,000,000 Shares Authorized, -0- Shares Issued and Outstanding, at December 31, 2018 and March 31, 2019, respectively.		—			—
Common stock, $.00067 Par Value, 400,000,000 Shares Authorized, 141,466,071 and 144,473,453 Shares Issued, at December 31, 2018 and March 31, 2019, respectively.		95			97
Additional paid-in capital		110,222			112,556
Accumulated other comprehensive loss		(90	)		(94	)
Accumulated deficit		(111,723	)		(114,641	)
Total BioLargo Inc. and Subsidiaries stockholders’ equity (deficit)		(1,496	)		(2,082	)
Non-controlling interest (Note 8)		373			289
Total stockholders’ equity (deficit)		(1,123	)		(1,793	)
Total liabilities and stockholders’ equity (deficit)	$	3,185		$	3,395

The accompanying notes are an integral part of these unaudited consolidated financial statements.

1

BIOLARGO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2019

(in thousands, except for share and per share data)

(unaudited)

	MARCH 31, 2018			MARCH 31, 2019
Revenue
Product revenue	$	224		$	301
Service revenue		39			63
Total revenue		263			364
Cost of revenue
Cost of goods sold		(134	)		(140	)
Cost of service		(29	)		(52	)
Total cost of revenue		(163	)		(192	)
Gross profit		100			172
Operating expenses:
Selling, general and administrative expenses		1,170			1,392
Research and development		522			426
Depreciation and amortization		10			16
Total operating expenses		1,702			1,834
Operating loss		(1,602	)		(1,662	)
Other income (expense):
Grant income		5			82
Interest expense		(832	)		(985	)
Loss on extinguishment of debt		—			(184	)
Total other (expense) income		(827	)		(1,087	)
Net loss		(2,429	)		(2,749	)
Net loss attributable to noncontrolling interest		(107	)		(173	)
Net loss attributable to common shareholders	$	(2,322	)	$	(2,576	)
Net loss per share attributable to common stockholders:
Loss per share attributable to shareholders – basic and diluted	$	(0.02	)	$	(0.02	)
Weighted average number of common shares outstanding:		104,695,818			142,246,766
Comprehensive loss attributable to common shareholders
Net loss	$	(2,429	)	$	(2,749	)
Foreign translation adjustment		8			(4	)
Comprehensive loss		(2,421	)		(2,753	)
Comprehensive loss attributable to noncontrolling interest		(107	)		(1,793	)
Comprehensive loss attributable to shareholders	$	(2,314	)	$	(2,580	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

2

BIOLARGO, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2019

(in thousands, except for share data)

(unaudited)

	Common stock				Additional paid-in		Accumulated			Accumulated other comprehensive			Non- controlling			Total stockholders’
	Shares		Amount		capital		deficit			Loss			interest			equity (deficit)
Balance, December 31, 2017		104,164,465	$	70	$	97,093	$	(101,205	)	$	(62	)	$	695		$	(3,409	)
Issuance of common stock for service		714,436		1		196		—			—			—			197
Issuance of common stock for interest		617,072		—		165		—			—			—			165
Financing fee in stock		252,385		—		85		—			—			—			85
Sale of stock for cash		658,226		—		168		—			—			—			168
Stock option compensation expense		—		—		320		—			—			—			320
Warrants and conversion feature issued as discount on convertible notes payable		—		—		282		—			—			—			282
Deemed dividend for the change in accounting for derivative liability		—		—		297		(297	)		—			—			—
Net loss		—		—		—		(2,323	)		—			(107	)		(2,430	)
Foreign currency translation		—		—		—		—			8			—			8
Balance, March 31, 2018		106,406,584	$	71	$	98,606	$	(103,825	)	$	(54	)	$	588		$	(4,614	)

	Common stock				Additional paid-in		Accumulated			Accumulated other comprehensive			Non- controlling			Total stockholders’
	Shares		Amount		capital		deficit			Loss			interest			equity (deficit)
Balance, December 31, 2018		141,466,071	$	95	$	110,222	$	(111,723	)	$	(90	)	$	373		$	(1,123	)
Conversion of notes		1,638,479		1		218		—			—			—			219
Issuance of common stock for service		1,229,541		1		205		—			—			—			206
Issuance of common stock for interest		139,362		—		25		—			—			—			25
Stock option compensation expense		—		—		352		—			—			—			352
Warrants and conversion feature issued as discount on convertible notes payable and line of credit		—		—		1,115		—			—			—			1,115
Issuance of Clyra Medical common stock		—		—		21		—			—			89			110
Fair value of warrants for extension of debt		—		—		56		—			—			—			56
Deemed dividend for the change in accounting for derivative liability		—		—		342		(342	)		—			—			—
Net loss		—		—		—		(2,576	)		—			(173	)		(2,749	)
Foreign currency translation		—		—		—		—			(4	)		—			(4	)
Balance, March 31, 2019		144,473,453	$	97	$	112,556	$	(114,641	)	$	(94	)	$	289		$	(1,793	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3

BIOLARGO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2019

(in thousands, except for per share data)

(unaudited)

	MARCH 31, 2018			MARCH 31, 2019
Cash flows from operating activities
Net loss	$	(2,429	)	$	(2,749	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock option compensation expense		320			352
Common stock issued in lieu of salary to officers and fees for services from vendors		196			206
Common stock issued for interest		165			25
Interest expense related to amortization of the discount on convertible notes payable and line of credit and deferred financing costs		635			851
Interest expense related to the fair value of warrants issued as consent for variable debt		—			54
Loss on extinguishment of debt		—			184
Deferred offering expense		4			—
Amortization and depreciation expense		10			16
Changes in assets and liabilities:
Accounts receivable		(8	)		47
Inventories		(3	)		—
Accounts payable and accrued expenses		127			129
Prepaid expenses and other current assets		(13	)		(16	)
Customer deposits		—			32
Net cash used in operating activities		(996	)		(869	)
Cash flows from investing activities
Equipment purchases		(19	)		—
Net cash used in investing activities		(19	)		—
Cash flows from financing activities
Proceeds from convertible notes payable		380			750
Proceeds from the sale of stock in Clyra Medical		—			110
Repayment of note payable		—			(300	)
Proceeds from sale of stock to Lincoln Park Capital		168			—
Proceeds from notes payable		—			170
Proceeds from line of credit		390			—
Net cash provided by financing activities		938			730
Net effect of foreign currency translation		8			(4	)
Net change in cash		(69	)		(143	)
Cash at beginning of year		990			655
Cash at end of period	$	921		$	512
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest	$	—		$	32
Income taxes	$	—		$	3
Non-cash investing and financing activities
Fair value of warrants issued with convertible notes	$	282		$	1,061
Conversion of convertible notes payable into common stock	$	—		$	220
Convertible Notes issued with Original Issue Discount	$	—		$	217
Fair value of stock issued for financing fees	$	85		$	—
Right of use, operating lease and liability	$	—		$	399
Deemed dividend	$	297		$	342

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Business and Organization

Description of Business 

BioLargo, Inc. delivers innovative and sustainable technology-based products and services, as well as environmental engineering expertise, across a broad range of industries with an overriding mission to “make life better” with a focus on clean water, clean air, and advanced wound care. 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. For the three months ended March 31, 2019, we had a net loss of $2,749,000, used $869,000 cash in operations, and at March 31, 2019, we had a working capital deficit of $2,343,000, and current assets of $782,000. We do not believe gross profits will be sufficient to fund our current level of operations or pay our debt due prior to December 31, 2019, and will have to obtain further investment capital to continue to fund operations and seek to refinance our existing debt. We have been, and anticipate that we will continue to be, limited in terms of our capital resources. During the year ended December 31, 2018, and the three months ended March 31, 2019, we generated revenues of $1,364,000 and $364,000 through two business segments (Odor-No-More and BLEST – see Note 10, “Business Segment Information”). Neither generated enough revenues to fund their operations. Our cash position as of date hereof is insufficient to pay our debt obligations due in the next 12 months (see Note 4), which include (i) $2,072,000 in convertible notes, (ii) $440,000 notes due June 6, 2019, that we may extend to September 2019, and (iii) a line of credit in the amount of $430,000 due September 1, 2019. We must either refinance or renegotiate these obligations. Our cash position is insufficient to maintain our current level of operations and research/development, and thus we will be required to raise additional capital to continue to fund our operations in 2019, as well as our future business plans. We continue to raise money through private securities offerings, and continue to negotiate for more substantial financings from private and institutional investors. During the three months ended March 31, 2019, we received $730,000 cash provided by financing activities, and at March 31, 2019 had cash and cash equivalents of $512,000. No assurance can be made of our success at raising money through private or public offerings.

The foregoing factors raise substantial doubt about our ability to continue as a going concern. Ultimately, our ability to continue as a going concern is dependent upon our ability to attract significant new sources of capital, 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.

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; Odor-No-More, Inc., organized under the laws of the State of California in 2009; BioLargo Water, Inc., organized under the laws of Canada in 2014; BioLargo Development Corp., organized under the laws of the State of California in 2016; and BioLargo Engineering Science and Technologies, LLC, organized under the laws of the State of Tennessee in 2017 (“BLEST”). Additionally, we own 42.0% of Clyra Medical Technologies, Inc. (“Clyra Medical”), organized under the laws of the State of California in 2012, and consolidate their financial statements (see Notes 2 and 8).

The unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to Rule 8-03 of Regulation S-X under the Securities Act of 1933, as amended. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for annual financial statements.  In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. For some of our activities, we are still operating in the early stages of the sales and distribution process, and therefore our operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019, or for any other period. These unaudited consolidated financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2019, as amended.

5

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 2. Summary of Significant Accounting Policies

In the opinion of management, the accompanying balance sheet and related statements of operations, cash flows, and stockholders’ deficit include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and Clyra Medical. Management believes Clyra Medical’s financial statements are appropriately consolidated with that of the Company after reviewing the guidance of ASC Topic 810, “Consolidation”, and concluding that BioLargo controls Clyra Medical. While BioLargo does not have voting interest control through a majority stock ownership of Clyra Medical (it owns 42% of the outstanding voting stock), it does exercise control under the “Variable Interest Model”: there is substantial board overlap, BioLargo is the primary beneficiary since it has the power to direct Clyra Medical’s activities that most significantly impact Clyra Medical’s performance, and it has the obligation to absorb losses or receive benefits (through royalties and licensing) that could be potentially significant to Clyra Medical. BioLargo has consolidated Clyra Medical’s operations for all periods presented. 

All intercompany accounts and transactions have been eliminated (see Note 8). 

Foreign Currency

The Company has designated the functional currency of BioLargo Water, Inc., our Canadian subsidiary, to be the Canadian dollar. Therefore, translation gains and losses resulting from differences in exchange rates are recorded in accumulated other comprehensive income.

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, 2018 and March 31, 2019, our cash balances were made up of the following (in thousands):

	December 31, 2018		March 31, 2019
BioLargo, Inc. and wholly owned subsidiaries	$	193	$	183
Clyra Medical Technologies, Inc.		462		329
Total	$	655	$	512

Accounts Receivable

Trade accounts receivable are recorded net of allowances for doubtful accounts. Estimates for allowances for doubtful accounts are determined based on payment history and individual customer circumstances. The allowance for doubtful accounts as of December 31, 2018 and March 31, 2019 was zero.

6

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Credit Concentration

We have a limited number of customers that account for significant portions of our revenue. During the three months ended March 31, 2018 and 2019, we had three customers that each accounted for more than 10% of consolidated revenues in the respective periods, as follows:

	March 31, 2018			March 31, 2019
Customer A		39	%		43	%
Customer B		18	%		10	%
Customer C		<10	%		26	%
Customer D		18	%		<10	%

We had two customers that each accounted for more than 10% of consolidated accounts receivable at December 31, 2018 and at March 31, 2019 as follows:

	December 31, 2018			March 31, 2019
Customer X		12	%		25	%
Customer Y		31	%		<10	%
Customer Z		<10	%		11	%

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, 2018 and March 31, 2019 was $3,000. As of December 31, 2018 and March 31, 2019, inventories consisted of (in thousands):

	December 31, 2018		March 31, 2019
Raw material	$	14	$	14
Finished goods		12		12
Total	$	26	$	26

Other Assets

Other Assets consisted of security deposits of $35,000 related to our business offices.

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. As of December 31, 2018 and March 31, 2019, management determined that there was no impairment of its long-lived assets.

Earnings (Loss) Per Share

We report basic and diluted earnings (loss) per share (“EPS”) for common and common share equivalents. Basic EPS is computed by dividing reported earnings by the weighted average shares outstanding. Diluted EPS is computed by adding to the weighted average shares the dilutive effect if stock options and warrants were exercised into common stock. For the three months ended March 31, 2018 and 2019, the denominator in the diluted EPS computation is the same as the denominator for basic EPS due to the anti-dilutive effect of the warrants and stock options on the Company’s net loss.

7

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements, and revenues and expenses during the period 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, 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 financial statements.

Share-Based Compensation Expense

We recognize compensation expense for stock option awards on a straight-line basis for employees over the applicable service period of the award, which is the vesting period. We recognize compensation expense for stock option awards for non-employees at the fair value on the grant date. Generally, the options issued to non-employees have been earned upon issuance. For the instances that options are issued to non-employees with a vesting schedule, the fair value is recorded on each vesting 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 three months ended March 31, 2018 and 2019:

	2018					2019
	Non Plan			2018 Plan		Non Plan			2018 Plan
Risk free interest rate		2.43	%		n/a		2.65	%		2.65	%
Expected volatility		252	%		n/a		152	%		152	%
Expected dividend yield		—			n/a		—			—
Forfeiture rate		—			n/a		—			—
Life in years		7			n/a		7			7

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.

Historically, we have not had significant forfeitures of unvested stock options granted to employees and Directors. A significant number of our stock option grants are fully vested at issuance or have short vesting provisions. Therefore, we have estimated the forfeiture rate of our outstanding stock options as zero.

8

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Warrants

Warrants issued with our convertible promissory notes, note payables, line of credit 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 convertible note issued with the warrant is recorded at its 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. Further, the convertible promissory note is examined for any intrinsic beneficial conversion feature (“BCF”) of which the convertible price of the note is less than the closing common stock price on date of issuance. If the relative fair value method is used to value the convertible promissory note and there is an intrinsic BCF, a further analysis is undertaken of the BCF using an effective conversion price which assumes the conversion price is the relative fair value divided by the number of shares the convertible debt is converted into by its terms. The BCF value is accounted for as equity.

The warrant and BCF 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.

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 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, Odor-No-More and BLEST. Odor-No-More 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. Odor-No-More recognizes revenue at a point in time when the order for its goods are shipped if its agreement with the customer is FOB Odor-No-More’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.

9

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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. To date, there have been no discounts or other financing terms for the contracts.

In the future, we may generate revenues from royalties or license fees from our intellectual property. In the event we do so, we anticipate a licensee would 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. Upon entering into a licensing agreement, we will determine the appropriate method of recognizing the royalty and license fees.

Government Grants

We have been awarded multiple research grants from governmental and quasi-governmental institutions. The grants received are considered “other income” and are included in our Consolidated Statements of Operations. We received our first grant in 2015 and have been awarded over 60 grants totaling over $3.6 million. 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.

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 income in the period 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 generally accepted accounting principles (“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.

Fair Value of Financial Instruments

Management believes the carrying amounts of the Company’s financial instruments (excluding debt and equity instruments) as of December 31, 2018 and March 31, 2019 approximate their respective fair values because of the short-term nature of these instruments. Such instruments consist of cash, accounts receivable, prepaid assets, accounts payable, lines of credit, and other assets and liabilities.

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 instead receive a tax refund from the Canadian Revenue Authority. Those refunds are classified in Other Income on our Consolidated Statement of Operations and Comprehensive Loss.

10

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Recent Accounting Pronouncements

In August 2018, the FASB issued Accounting Standards Update No. 2018-13, “Fair Value Measurement (Topic 820), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Management has not concluded its evaluation of the guidance. Its initial analysis is that it does not believe the new guidance will substantially impact the Company’s financial statements.

In June 2018, The FASB issued Accounting Standards Update No. 2018-07, “Compensation – Stock Compensation (topic 718): Improvements to Nonemployee Share-Based Payment Accounting”. The amendments in this update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts and Customers.  The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. This new guidance did not materially impact our stock compensation expense.

In February 2016, the FASB issued ASU Update No. 2016-02, “Leases,” which will require lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability, and lessors to recognize a net lease investment. Additional qualitative and quantitative disclosures will also be required. We adopted this standard effective January 1, 2019 using the modified retrospective transition method approved by the FASB in July 2018. The adoption of the new standard resulted in a $399,000 gross up of assets and liabilities; this balance may fluctuate over time as we enter into new leases, extend or terminate current leases.

Note 3. Lincoln Park Financing

On August 25, 2017, we entered into a stock purchase agreement (“LPC Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park agreed to purchase from us at our request up to an aggregate of $10 million of our common stock (subject to certain limitations) from time to time over a period of three years. The LPC Purchase Agreement allows us, from time to time and 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 Purchase 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 in the LPC Purchase Agreement or LPC RRA other than a prohibition on entering into a “Variable Rate Transaction,” as defined in the Purchase Agreement. Lincoln Park may not assign or transfer its rights and obligations under the Purchase Agreement.

We did not sell any shares to Lincoln Park during the three months ended March 31, 2019. During the three months ended March 31, 2018, we elected to sell to Lincoln Park 650,000 shares of our common stock for which we received $168,220. Additionally, we issued Lincoln Park 8,226 “additional commitment” shares.

We record stock sales in our equity statement and the additional commitment shares issued reduce the deferred offering costs on our balance sheet.

11

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 4. Debt Obligations

The following table summarizes our debt obligations outstanding as of December 31, 2018 and as of March 31, 2019 (in thousands).

	December 31, 2018		March 31, 2019
Current liabilities:
Notes payable, mature June 6, 2019	$	400	$	440
Note payable, matures on demand 60 days’ notice (or March 8, 2023)		—		50
Line of credit, matures September 1, 2019 or later (on 30-day demand)		430		430
Convertible notes payable:
Convertible notes, mature December 31, 2019(1)		75		75
Convertible note, matured January 11, 2019		300		—
Convertible note, matures July 15, 2019		550		420
Convertible note, matures July 20, 2019(1)		440		440
Convertible note, matures October 7, 2019		—		370
Convertible note, matures November 5, 2019 and December 7, 2019		—		554
Convertible nine-month notes, due October, November 2019		—		213
Total convertible notes payable	$	1,365	$	2,072
Total current liabilities	$	2,195	$	2,992
Long-term liabilities:
Note payable issued by Clyra Medical to Scion, matures June 17, 2020 (See Note 8)		1,007		1,007
Convertible notes payable, mature June 20, 2020(1)		25		25
Convertible notes payable, mature April 20, 2021(1)		100		100
Convertible notes, mature June 15, 2021(1)		110		110
Note payable, matures March 8, 2023 (or on demand 60 days’ notice)		50		—
Total long-term liabilities	$	1,292	$	1,242
Total	$	3,487	$	4,234

⁽¹⁾ These notes are convertible at our option at maturity.

For the three months ended March 31, 2018 and 2019 we recorded $832,000 and $985,000 of interest expense related to the amortization of discounts on convertible notes payable and coupon interest from our convertible notes and line of credit.

The following discussion includes debt instruments to which amendments were made or included other activity that management deemed appropriate to disclose. Each of the debt instruments contained in the above table are disclosed more fully in the financial statements contained in the Company’s Annual Report filed March 29, 2019, as amended.

Notes payable, mature June 6, 2019

On September 19, 2018, we received $400,000 and issued promissory notes originally due January 5, 2019 and incurring interest at an annual rate of 12%, and stock purchase warrants (see Note 6), to two investors (the first held by Vernal Bay Investments, LLC (“Vernal”) in the original principal amount of $280,000, and the second held by Chappy Bean, LLC (“Chappy Bean”) in the original principal amount of $120,000). By letter dated January 3, 2019, we notified the holders of the two notes in the aggregate principal amount of $400,000 of our election to extend the maturity date of the notes by 60 days, to March 6, 2019. As provided in the notes, our election to extend increased the principal amount of each note by 10%, such that the aggregate principal balance of the two notes increased to $440,000 as of January 5, 2019.

On March 5, 2019, we executed amendments to these two notes that (i) extended the maturity dates to June 6, 2019, and (ii) provide that we may further extend the maturity dates to September 6, 2019 by giving written notice of such extension and increasing the principal due on the notes at that time by 10%. As consideration of the extension of the maturity dates reflected in the March 5, 2019 amendments, we (i) increased the annual percentage rate of interest from 12% to 18%, effective as of March 7, 2019, and (ii) lowered the exercise price, and increased the number of shares available, on warrants that had been previously issued to the two investors (at the time of their original investment).

12

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Convertible note payable, matures January 11, 2019 (Triton)

On October 16, 2018, we entered into a Securities Purchase Agreement (“Triton Purchase Agreement”) with Triton Fund, LP (“Triton”) for a $225,000 bridge loan, and issued a promissory note in the principal amount of $300,000 (the “Triton Note”). The Triton Note incurred interest at an annual rate of 5%, and was scheduled to mature January 11, 2019. The $75,000 original issue discount was recorded as a discount on our convertible note and was amortized to interest expense in the three-month ended March 31, 2019.

On January 8, 2019, we paid the Triton Note in full.

Convertible Note, matures July 15, 2019 (Vista Capital)

On January 7, 2019, we and Vista Capital agreed to amend the convertible promissory note originally issued December 14, 2017 (“Vista 2017 Note”) and extend its maturity date to April 15, 2019. The principal amount of the note was increased to $605,100. The note will continue to earn interest at the rate of five percent per annum. The amendment re-defined the conversion price to equal 80% of the lowest closing bid price of the Company’s common stock during the 25 consecutive trading days immediately preceding the conversion date. The amendment also reduced the prepayment penalty from 20% to 15%, such that a prepayment requires the payment of an additional 15% of the then outstanding balance, and reduced the penalty for a default from 30% to 25% of the outstanding balance.   The intrinsic value of the beneficial conversion feature resulted in a fair value totaling $487,000, all of which was recorded as interest expense during the three months ended March 31, 2019.

On March 28, 2019, we and Vista agreed to further extend the maturity date of the Vista 2017 Note, to July 15, 2019. In consideration for the extension, we agreed to increase the principal balance of the note by 10 percent, to $420,000. The increase in principal totaling $38,000 was recorded as a loss on debt extinguishment during on our statement of operations for the three months ended March 31, 2019.

During the three months ended March 31, 2019, Vista Capital elected to convert $225,000 of the outstanding principal and interest of the Vista 2017 Note and we issued 1,679,248 shares of our common stock. Of that amount, 1,638,479 shares were issued as payment of principal, and 40,769 shares as payment of interest. As of March 31, 2019, the outstanding balance on the Vista Note totaled $420,000.

Convertible Note, matures October 7, 2019 (Vista Capital)

On January 7, 2019, Vista Capital invested an additional $300,000 and we issued a convertible promissory note (the “Vista 2019 Note”) in the principal amount of $330,000, maturing nine months from the date of issuance (October 7, 2019). The Vista 2019 Note earned a one-time interest charge of 12%, recorded as a discount on convertible notes and will be amortized over the term of the note. The Vista 2019 Note allows Vista Capital to convert the note to our common stock at any time at a price equal to 65% of the lowest closing bid price of the Company’s common stock during the 25 consecutive trading days immediately preceding the conversion date. The Vista 2019 Note contains standard provisions of default, and precludes the issuance of shares to the extent that Vista Capital would beneficially own more than 4.99% of our common stock. We may pre-pay the Vista 2019 Note within 90 days of the issuance date by giving 10 business day notice of the intent to pre-pay, and then tendering 120% of the outstanding balance of the note. Vista Capital has the option to convert the note to common stock during the 10-day period. The Vista 2019 Note also includes a term that allows Vista Capital to adopt any term of a future financing more favorable than what is provided in the note. For example, these provisions could include a more favorable interest rate, conversion price, or original issue discount. The Vista 2019 Note also requires that we include the shares underlying conversion of the note on the next registration statement we file with the SEC (but not the registration statement filed November 6, 2018). The intrinsic value of the beneficial conversion feature resulted in a fair value totaling $300,000, and is recorded as a discount on convertible notes on our balance sheet. This discount will be amortized over the term of the note as interest expense, all of which will be recorded in 2019.

With respect to the above transactions with Vista Capital, Lincoln Park Capital Fund, LLC agreed to waive the provisions of the Purchase Agreement dated August 25, 2017, prohibiting variable rate transactions. As consideration for this waiver, we issued to Lincoln Park a warrant to purchase 250,000 shares of our common stock at $0.25 per share, expiring five years from the date of grant. In the event the shares underlying the warrant are not registered, the warrant allows the holder to do a “cashless” exercise. (See Note 6).

13

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Convertible Notes, due November 5, 2019 and December 7, 2019 (Tangiers Global)

On January 31, 2019, we issued a 12% Convertible Promissory Note to Tangiers Global, LLC (“Tangiers”) in the aggregate principal amount of up to $495,000 (the “Tangiers Note”). The note allows for two payments, each due in nine months after receipt, and incurs a guaranteed interest of 12% at inception. - The initial payment of $300,000 was received on February 5, 2019, representing a $330,000 principal amount and 10% original issue discount. It is due November 5, 2019. We received the second payment, in the amount of $150,000, on March 7, 2019, increasing the principal amount due under the note to $495,000. This second amount, plus guaranteed interest, is due December 7, 2019. In the aggregate, the principal amount of the note, plus guaranteed interest, totals $554,000.

The Tangiers Note is convertible at the option of Tangiers at a conversion price equal to 75% of the lowest closing bid price of the Company’s common stock during the 25 consecutive trading days prior to the conversion date. The intrinsic value of the beneficial conversion feature resulted in a fair value totaling $185,000, and is recorded as a discount on convertible notes on our balance sheet. This discount will be amortized over the term of the note as interest expense, all of which will be recorded in 2019.

We may prepay the Tangiers Note up to 180 days after the effective date. If a prepayment is made within 90 days, we must pay a prepayment penalty of 25%; from 91 to 180 days, we must pay a prepayment penalty of 30%. We may pay such prepayment penalties, if we so choose, by issuing common stock at the conversion price. If such shares are not eligible for removal of restrictions pursuant to a registration statement or Rule 144 within 10 trading days following the six-month anniversary of the effective date, Tangiers may rescind the stock issuance and force the Company to pay the prepayment penalty in cash. Upon the occurrence of an event of default, as such term is defined under the Tangiers Note, additional interest will accrue from the date of the event of default at a rate equal to the lower of 22% per annum or the highest rate permitted by law, and an additional 25% shall be added to the principal amount of the note.

In connection with the Tangiers Note, the Company caused its transfer agent to reserve 3,000,000 shares of the Company’s common stock, in the event that the Tangiers Note is converted.

With respect to the above transaction with Tangiers, Lincoln Park consented to waive the provisions of the Purchase Agreement dated August 25, 2017 prohibiting variable rate transactions. As consideration for the consent, we agreed to issue Lincoln Park a stock purchase warrant allowing for the purchase of 50,000 shares of our common stock at $0.25 per share, expiring five years from the date of grant. In the event the shares underlying the warrant are not registered, the warrant allows the holder to do a “cashless” exercise. (See Note 6).

Nine-month Notes payable

During the three months ended March 31, 2019, we issued convertible promissory notes (each, an “OID Note”) in the aggregate principal amount of $212,500, with a 25% original issue discount. These notes are convertible into shares of the Company’s common stock at a conversion price of $0.25 per share, and mature nine months from the date of issuance. On January 14, 2019, we received $50,000 and issued an OID Note in the principal amount of $62,500. On January 22, 2019, we received $20,000 and issued an OID Note in the principal amount of $25,000. On February 4, 2019, we received $100,000 and issued an OID Note in the principal amount of $125,000. The original issuance discount totaled $42,500, recorded as a discount on convertible notes payable on our balance sheet. The discount will be amortized and recorded to interest expense over the term of the notes.

Each OID Note is convertible by the investor at any time at $0.25 per share. This initial conversion price shall be adjusted downward in the event the Company subsequently issues a convertible promissory note at a lower conversion rate (with this lower conversion rate becoming the adjusted conversion rate under the OID Note), or conducts an equity offering at a per-share price less than $0.25. The Note earns interest at five percent (5%) per annum, due at maturity. The Company may prepay an OID Note only upon 10 days’ notice to the investor, during which time the investor may exercise his/her right to convert the note to stock.

The Company must prepay the OID Notes upon the conclusion of a “qualifying offering” (an offering raising $3.5 million or more); in the event a qualified offering is not concluded prior to the maturity date, or the Note is otherwise not paid in full, the Company shall redeem the notes by issuing the number of shares of common stock equal to the outstanding balance divided by the lower of (i) the current conversion price and (ii) seventy percent (70%) of the lowest daily volume weighted average price (“VWAP”) during the 25 trading days immediately preceding the conversion.

In addition to the note, each OID investor will receive a warrant to purchase common stock for $0.25 per share, expiring 5 years from the date of issuance (the “Warrant”). The number of shares purchasable under the warrant is equal to the 75% of the principal balance of the note divided by $0.25 (thus, a $100,000 investment would yield a note with principal balance of $125,000, and a warrant allowing for the purchase of up to 375,000 shares). The warrant will allow for cashless exercise so long as the shares underlying the warrant are not registered. The Company does not have the obligation to register the shares underlying the warrant (or the OID Notes). (See Note 6).

14

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 5. Share-Based Compensation

Issuance of Common Stock in exchange for payment of payables

Payment of Officer Salaries

On March 29, 2019, we issued 579,996 shares of our common stock at $0.16 per share in lieu of $93,000 of accrued and unpaid salary to our officers.

On March 31, 2018, we issued 323,030 shares of our common stock at $0.26 per share in lieu of $84,000 of accrued and unpaid obligations to our officers.

Payment of Consultant Fees and Accrued Interest

During the three months ended March 31, 2019, we issued 788,907 shares of our common stock at a range of $0.16 – $0.23 per share in lieu of $138,000 of accrued interest and accrued and unpaid obligations to consultants.

During the three months ended March 31, 2018, we issued 1,008,478 shares of our common stock at a range of $0.25 – $0.41 per share in lieu of $277,000 of accrued interest and accrued and unpaid obligations to consultants.

Stock Option Expense

During the three months ended March 31, 2018 and 2019, we recorded an aggregate $320,000 and $352,000, respectively, in selling general and administrative expense related to the issuance and vesting of stock options. We issued options through our 2018 Equity Incentive Plan, our (now expired) 2007 Equity Incentive Plan, and outside of these plans.

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 made under this plan for a period of 10 years. 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.

Activity for our stock options under the 2018 Plan from December 31, 2018, through the year ended March 31, 2019, is as follows: (The 2018 Plan inception was June 2018, therefore there is no activity through March 31, 2018).

						Weighted
						Average		Aggregate
	Options		Exercise			Price per		intrinsic
As of March 31, 2019:	Outstanding		Price per share			share		Value(1)
Balance, December 31, 2018		1,318,517	$0.22	–	0.43	$	0.30
Granted		890,280	0.16	–	0.22		0.19
Expired		—		—			—
Balance, March 31, 2019		2,208,797	$0.16	–	0.43	$	0.25	$	—

(1) – Aggregate intrinsic value based on closing common stock price of $0.16 at March 31, 2019.

15

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The options to purchase 890,280 shares granted during the three months ended March 31, 2019 are comprised of options issued to employees, consultants, officers, and directors: (i) we issued options to purchase 300,000 shares of our common stock at an exercise price on the respective grant date of $0.22 per share to our CFO as described below. We also issued options to purchase 168,404 shares of our common stock to employees in lieu of salary at an exercise price on the respective date ranging between $0.16 - $0.25 per share. The fair value of these options totaled $36,000 and is recorded as selling, general and administrative expense. We issued options to purchase 421,876 shares of our common stock at an exercise price on the respective grant date of $0.16 per share to members of our board of directors for services performed, in lieu of cash. The fair value of these options totaled $68,000 and is recorded as selling, general and administrative expenses.

Chief Financial Officer Contract Extension

On January 16, 2019, we agreed to extend the engagement agreement dated February 1, 2008 (the “Engagement Agreement”, which had been previously extended multiple times) with our Chief Financial Officer, Charles K. Dargan, II. The Engagement Extension Agreement dated as of January 16, 2019 (the “Engagement Extension Agreement”) provides for an additional term to expire September 30, 2019 (the “Extended Term”), and is retroactively effective to the termination of the prior extension on September 30, 2018. Mr. Dargan has been serving as the Company’s Chief Financial Officer since such termination pursuant to the terms of the December 31, 2018 extension.

For the Extended Term, Mr. Dargan was issued an option (“Option”) to purchase 300,000 shares of the Company’s common stock, at a strike price equal to the closing price of the Company’s common stock on January 16, 2019 of $0.22, to expire January 16, 2029, and to vest over the term of the engagement with 75,000 shares having vested as of March 31, 2019, and the remaining shares to vest 25,000 shares monthly beginning January 31, 2019, and each month thereafter, so long as the Engagement Agreement is in full force and effect. The Option was issued pursuant to the Company’s 2018 Equity Incentive Plan. The fair value of the option totaled $67,000, of which $17,000 was recorded as selling, general and administrative expense during the three months ended March 31, 2019.

The issuance of the Option is Mr. Dargan’s sole source of compensation for the Extended Term. As was the case in all prior terms of his engagement, there is no cash component of his compensation for this term. Mr. Dargan is eligible to be reimbursed for business expenses he incurs in connection with the performance of his services as the Company’s Chief Financial Officer (although he has made no such requests for reimbursement in the past). All other provisions of the Engagement Agreement not expressly amended pursuant to the Engagement Extension Agreement remain the same, including provisions regarding indemnification and arbitration of disputes.

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 three months ended March 31, 2018 and 2019 is as follows:

								Weighted
								Average		Aggregate
	Options			Exercise				Price per		intrinsic
As of March 31, 2018:	Outstanding			price per share				share		Value(1)
Balance, December 31, 2017		9,831,586			$0.23	–	1.89	$	0.44
Expired		(50,000	)			1.89			0.91
Balance, March 31, 2018		9,781,586			$0.23	–	1.65	$	0.43	$	—
As of March 31, 2019:
Balance, December 31, 2018		9,691,586			$0.23	–	0.94	$	0.43
Expired		(30,000	)		0.38	–	0.70		0.50
Balance, March 31, 2019		9,661,586			$0.23	–	1.65	$	0.43	$	—

(1) – Aggregate intrinsic value based on closing common stock price of $0.16 at March 31, 2019.

16

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Non-Plan Options issued

During the three months ended March 31, 2019, we issued options to purchase 731,250 shares of our common stock at exercise prices ranging between $0.16 – $0.25 per share to vendors for fees for service. The fair value of the options issued totaled $139,000, is recorded in our selling, general and administrative expense.

During the three months ended March 31, 2018, we issued options to purchase 619,435 shares of our common stock at exercise prices ranging between $0.26 – $0.28 per share to members of our board of directors and vendors for fees for services totaling $158,000.

Activity of our non-plan stock options issued for the three months ended March 31, 2018 and 2019 is as follows:

								Weighted
	Non-plan							average		Aggregate
	Options			Exercise				price per		intrinsic
As of March 31, 2018:	outstanding			price per share				share		value(1)
Balance, December 31, 2017		20,018,408			$0.25	–	1.00	$	0.51
Granted		619,435			0.26	–	0.28		0.26
Expired		(2,400,000	)			0.99			0.99
Balance, March 31, 2018		18,237,843			$0.25	–	1.00	$	0.45	$	—
As of March 31, 2019:
Balance, December 31, 2018		19,319,496			$0.23	–	1.00	$	0.43
Granted		731,250			0.16	–	0.25		0.19
Balance, March 31, 2019		20,050,746			$0.25	–	1.00	$	0.42	$	—

(1) – Aggregate intrinsic value based on closing common stock price of $0.16 at March 31, 2019.

Note 6. Warrants

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

							Weighted
							average		Aggregate
	Warrants		Exercise				price per		intrinsic
As of March 31, 2018:	outstanding		price per share				share		value(1)
Balance, December 31, 2017		22,104,817		$0.125	–	1.00	$	0.45
Issued		2,611,513		0.25	–	0.48		0.35
Balance, March 31, 2018		24,716,330		$0.125	–	1.00	$	0.44	$	—
As of March 31, 2019:
Balance, December 31, 2018		26,872,430		$0.25	–	1.00	$	0.42
Issued		3,861,041		$0.16	–	0.25	$	0.24
Balance, March 31, 2019		30,733,471		$0.20	–	1.00	$	0.40	$	—

17

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Warrants issued as part of debt extension

On March 5, 2019, we executed amendments extending the maturity dates issued to Vernal Bay and Chappy Bean to June 6, 2019 (see Note 4). As consideration for this extension, we agreed to reduce the exercise price, and increase the number of shares purchasable, by the warrants held by Vernal Bay and Chappy Bean. Vernal Bay had been issued a warrant to purchase 1,387,500 shares at $0.25 per share, expiring September 19, 2023. We agreed to lower the exercise price to $0.20 per share, and proportionately increase the number of shares in the warrant to 1,734,375. By doing so, the maximum investment amount under the warrant of $346,875 remained the same. Chappy Bean’s warrant to purchase 600,000 shares was similarly modified, such that it now allows for the purchase of 750,000 shares at $0.20 per share. The reduction in warrant exercise price resulted in a fair value of $56,000 recorded as loss on debt extinguishment in the three months ended March 31, 2019.

Warrants issued as consent for variable rate debt

On January 7 and January 31, 2019, Lincoln Park Capital Fund, LLC agreed to waive the provisions of the Purchase Agreement dated August 25, 2017, prohibiting variable rate transactions. As consideration for the waivers, we issued to Lincoln Park a warrant to purchase 300,000 shares of our common stock at $0.25 per share, expiring five years from the date of grant. In the event the shares underlying the warrant are not registered, the warrant allows the holder to do a “cashless” exercise. The fair value of these warrants totaled $54,000 and was recorded as a discount on note payable on our consolidated balance sheet and will amortize to interest expense in 2019 over the term of the notes. (See Note 4).

Warrants Issued concurrently with the Nine-month note payable

Pursuant to the terms of the OID Offering, in addition to the Note, the investor will receive a warrant to purchase common stock for $0.25 per share, expiring 5 years from the date of issuance (the “Warrant”). The number of shares purchasable under the warrant is equal to the 75% of the principal balance of the note divided by $0.25 (thus, a $100,000 investment would yield a note with principal balance of $125,000, and a warrant allowing for the purchase of up to 375,000 shares). We issued warrants to purchase 637,500 shares of our common stock. The warrant will allow for cashless exercise so long as the shares underlying the warrant are not registered. The Company does not have the obligation to register the shares underlying the warrant. The fair value of these warrants totaled $89,000 and was recorded as a discount on note payable on our consolidated balance sheet and will amortize to interest expense in 2019 over the term of the notes. (See Note 4).

Warrants Issued to One-Year Noteholders

In conjunction with three separate investments of one-year convertible notes, we issued three sets of warrants to purchase an aggregate 400,000 shares to two investors. These warrants were issued July 8, 2016 (400,000 shares at $0.65 exercise price) and December 30, 2016 (400,000 shares at $0.75 exercise price).   

Each of these warrants contained provisions that required a reduction to the exercise price and increase to the number of warrant shares in the event that we sold our common stock at a lower price than the exercise price (subject to some exceptions). During the three months ended March 31, 2019, we adjusted downward the warrant exercise price three times to $0.12, resulting in an increase of 2,426,666 warrants available for exercise. The increase in warrants resulted in a fair value totaling $342,000, recorded as a deemed dividend in our statement of stockholders’ equity. 

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:

	March 31, 2018				March 31, 2019
Risk free interest rate			2.54%			2.18	–	2.62%
Expected volatility			252%			86	–	110%
Expected dividend yield			—				—
Forfeiture rate			—				—
Expected life in years		5	–	10		2	–	5

18

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Accounts payable and accrued expenses included the following (in thousands):

	December 31, 2018		March 31, 2019
Accounts payable and accrued expense	$	302	$	370
Accrued interest		122		151
Accrued payroll		77		110
Total accounts payable and accrued expenses	$	501	$	631

Note 8. Noncontrolling Interest – Clyra Medical

We consolidate the operations of our partially owned subsidiary Clyra Medical (see Note 2).

Acquisition of In-process Research and Development

On September 26, 2018, Clyra Medical entered into a transaction with Scion Solutions, LLC, for the purchase of its intellectual property, including its SkinDisc. The consideration provided to Scion is subject to an escrow agreement (“Escrow Agreement”) and earn out provisions and includes: (i) 21,000 shares of the Clyra Medical common stock; (ii) 10,000 shares of Clyra Medical common stock redeemable for 7,142,858 BioLargo common shares (detailed below); and (iii) a promissory note in the principal amount of $1,250,000 to be paid through new capital investments and revenue, as detailed below. This consideration was initially held in escrow pending Clyra Medical raising $1 million “base capital” to fund its business operations.

On December 17, 2018, the parties entered into a closing agreement (“Closing Agreement”) reflecting the satisfaction of the obligation to raise $1 million “base capital”; at that time, one-half of the shares of Clyra Medical common stock exchanged for the Scion assets were released to Scion. The remaining Clyra Medical common shares (a total of 15,500 shares) remain subject to the Escrow Agreement’s performance metrics, each vesting one-fifth of the remaining shares of common stock: (a) notification of FDA premarket clearance of certain orthopedics products, or recognition by Clyra Medical of $100,000 gross revenue; (b) the recognition by Clyra Medical of $100,000 in aggregate gross revenue; (c) the granting of all or any part of the patent application for the SkinDisc product, or recognition by Clyra Medical of $500,000 in gross revenue; (d) recognition by Clyra Medical of $1 million in aggregate gross revenue; and (e) recognition by Clyra Medical of $2 million in gross revenue.

Scion Solutions – Note Payable and Clyra Liability

The promissory note in the principal amount of $1,250,000 issued by Clyra Medical to Scion on September 26, 2018 (“Clyra-Scion Note”) accrues interest at the rate of 5%. Principal and interest due under the note are to be paid periodically at a rate of 25% of investment proceeds received by Clyra Medical. If the note is not paid off within 18 months after the date of issuance, it is automatically extended for additional 12-month periods until the note is repaid in full. Payments after the initial 18-month maturity date are required to be made in annual installments in an amount equal to the greater of (i) 25% of investment proceeds received during the 12-month period, and (ii) 5% of Clyra Medical’s gross revenues.

Non-Controlling Interest

As of March 31, 2019, Clyra had raised $1,110,000 at a price of $200 per share.  During the three months ended March 31, 2019, Clyra raised $110,000 and issued 550 shares of Clyra. At March 31, 2019, the balance due on the Clyra-Scion Note equaled $1,007,000. The shares of BioLargo common stock held by Clyra for the benefit of Scion (the redemption shares) are recorded on our balance sheet as a liability to “Clyra Medical Shareholder”.

19

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

As of March 31, 2019, Clyra Medical had the following common and preferred shares outstanding:

Shareholder	Shares		Percent
BioLargo, Inc.		28,053		42.0	%
Sanatio Capital(1)		11,520		17.4	%
Scion Solutions(2)		15,500		23.4	%
Other		11,772		17.2	%
Total		66,845

Notes:

(1) Includes 9,830 Series A Preferred shares (see below), and 1,690 common shares.

(2) Does not include an additional 15,500 shares held in escrow subject to performance metrics.

Sanatio Capital purchased Series A Preferred shares in 2015. Sanatio Capital is owned by Jack B. Strommen, who subsequently joined BioLargo’s board of directors. Preferred Shares accrue an annual dividend of 8% for a period of five years. Although the dividends began to accrue immediately, Clyra Medical has no obligation to declare a dividend until a product of the company has received a premarket approval by the United States Federal Drug Administration (“FDA”), or for which a premarket notification pursuant to form 510(k) has been submitted and for which the FDA has given written clearance to market the product in the United States (either, “FDA Approval”). After FDA Approval, annually on December 20, and unless prohibited by California law governing distributions to shareholders, Clyra Medical is required to declare and pay any accruing dividends to holders of Preferred Shares then accrued but unpaid. As the declaration and payment of such dividends is contingent on an uncertain future event, no liability has been recorded for the dividends. The accumulated and undeclared dividend balance as of March 31, 2019 is $200,000.

Holders of Preferred Shares are entitled to preferential payments in the event of a liquidation, dissolution or winding up of the company, in an amount equal to any accrued and unpaid dividends. After such preference, any remaining assets are distributed pro-rata between holders of Clyra Medical common stock and Preferred Shares as if the Preferred Shares had converted to Clyra Medical common stock. Holders of Preferred Shares may convert the shares to Clyra Medical common stock initially on a one-to-one basis. The conversion formula is subject to change in the event Clyra Medical sells stock at a lower price than the price paid by Sanatio.

Preferred shares may be converted to common shares on a one-to-one basis, and have voting rights equal to common shares on a one-to-one basis.

Note 9. 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 seven scientists and engineers. (See Note 10 “Business Segment Information”.) The company 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 2 million 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. The details of these transactions were reported on a Form 8-K filed with the SEC on September 8, 2017. 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 Compensation Committee met on September 26, 2018 and reviewed the operating performance of the engineering subsidiary and determined that the performance metrics were not met and as a result, did not award any Class B units or stock options. The Committee decided to roll forward one additional year to the time allowed for the performance metrics to be met and for the Class B units and stock options to be awarded.

20

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 10. Business Segment Information

BioLargo currently has four 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. Odor-No-More (“ONM”) -- which is selling odor and volatile organic control products and services (located in Westminster, California);

2. Clyra Medical (“Clyra”) -- which is engaged in developing medical products and preparing launch into commercial activity with approval of its FDA 510 (K) application in process;  

3. 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);

4. BioLargo Water  (“Water”) -- which historically focused entirely on R&D, and has now shifted its focus to commercializing the AOS technology (located in Edmonton, Alberta Canada); and

Historically, none of our operating business units operated at a profit and therefore each required additional cash to meet its monthly expenses. The additional sources of the cash to fund the shortfall from operations of Odor-No-More, BLEST and BioLargo Water have been provided by BioLargo’s sales of debt or equity, research grants, and tax credits. Clyra Medical has been funded by third party investors who invest directly in Clyra Medical in exchange for equity ownership in that entity. For example, during the year ended December 31, 2018, we provided Odor-No-More with approximately $417,000 in cash to supplement its operations. As this subsidiary’s sales have increased (from approximately $500,000 in calendar year 2017 to over $1 million in calendar year 2018), and its gross margins have improved, it has generated more cash for its operations and relied less on corporate to supplement its cash to pay its bills.

The segment information for the three months ended March 31, 2018 and 2019, is as follows (in thousands):

As of March 31, 2019	BioLargo			ONM			Clyra			BLEST			Water			Elimination			Total
Revenue	$	—		$	301		$	—		$	183		$	—		$	(120	)	$	364
Intersegment revenue		—			—			—			(120	)		—			—			—
Operating loss		(948	)		(90	)		(287	)		(110	)		(227	)		—			(1,662	)
Grant income		—			—			—			—			82			—			82
Interest expense		(632	)		—			(12	)		—			—			—			(985	)
Depreciation		—			(4	)		—			(12	)		—			—			(16	)
Research and development		(172	)		—			(49	)		(122	)		(209	)		126			(426	)
Loss on extinguishment		(184	)		—			—			—			—			—			(184	)
Net loss		(2,105	)		(90	)		(299	)		(110	)		(145	)		—			(2,749	)

As of March 31, 2018	BioLargo			ONM			Clyra			BLEST			Water			Elimination			Total
Revenue	$	—		$	224		$	—		$	189		$	—		$	(120	)	$	364
Intersegment revenue		—			—			—			(150	)		—			—			—
Operating loss		(1,093	)		(109	)		(199	)		(45	)		(156	)		—			(1,602	)
Grant income		—			—			—			—			5			—			5
Interest expense		(830	)		—			—			(2	)		—			—			(832	)
Depreciation		—			(4	)		—			(6	)		—			—			(10	)
Research and development		(343	)		—			(87	)		(100	)		(142	)		150			(522	)
Net loss		(1,924	)		(109	)		(199	)		(46	)		(151	)		—			(2,429	)

As of March 31, 2019	BioLargo		ONM		Clyra		BLEST		Water		Elimination			Total
Tangible assets	$	673	$	182	$	277	$	329	$	48	$	(6	)	$	1,503
Intangible assets		1,893		—		—		—		—		—			1,893

As of December 31, 2018	BioLargo		ONM		Clyra		BLEST		Water		Elimination			Total
Tangible assets	$	353	$	220	$	462	$	230	$	33	$	(6	)	$	1,292
Intangible assets		1,893		—		—		—		—		—			1,893

21

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 11. Commitments and Contingencies

Calvert Employment Agreement

On May 2, 2017, the Company entered into an employment agreement with its President and Chief Executive Officer Dennis P. Calvert (the “Calvert Employment Agreement”), replacing in its entirety the previous employment agreement with Mr. Calvert dated April 30, 2007.

The Calvert Employment Agreement provides that Mr. Calvert will continue to serve as our President and Chief Executive Officer and receive base compensation equal to his current rate of pay of $289,000 annually. In addition to this base compensation, the agreement provides that he is eligible to participate in incentive plans, stock option plans, and similar arrangements as determined by the Company’s Board of Directors, health insurance premium payments for himself and his immediate family, a car allowance, paid vacation of four weeks per year, and bonuses in such amount as the Compensation Committee may determine from time to time.

Pursuant to the Calvert Employment Agreement, we granted Mr. Calvert a non-qualified stock option (the “Option”) to purchase 3,731,322 shares of our common stock, exercisable at $0.45 per share, which represented the market price of the Company’s common stock as of the date of the agreement, exercisable for ten years from the date of grant and vesting in equal increments over five years (see Note 6). The Option provides that any portion of the Option which has not yet vested shall be immediately vested in the event of, and prior to, a change of control, as defined in the Calvert Employment Agreement. The Calvert Employment Agreement also provides for a grant of 1,500,000 shares of common stock, subject to the execution of a “lock-up agreement” whereby the shares remain unvested unless and until the earlier of (i) a sale of the Company, (ii) the successful commercialization of the Company’s products or technologies as demonstrated by its receipt of at least $3 million in cash, or the recognition of $3 million in revenue, over a 12-month period from the sale of products and/or the license of technology, and (iii) the Company’s breach of the employment agreement resulting in his termination. The Option contains the other terms standard in option agreements issued by the Company, including provisions for a cashless exercise.

The Calvert Employment Agreement has a term of five years, unless earlier terminated in accordance with its terms. The Calvert Employment Agreement provides that Mr. Calvert’s employment may be terminated by the Company due to his death or disability, for cause, or upon a merger, acquisition, bankruptcy or dissolution of the Company. “Disability” as used in the Calvert Employment Agreement means physical or mental incapacity or illness rendering Mr. Calvert unable to perform his duties on a long-term basis (i) as evidenced by his failure or inability to perform his duties for a total of 120 days in any 360-day period, or (ii) as determined by an independent and licensed physician whom Company selects, or (iii) as determined without recourse by the Company’s disability insurance carrier. “Cause” means that Mr. Calvert has (i) engaged in willful misconduct in connection with the Company’s business; or (ii) been convicted of, or plead guilty or nolo contendre in connection with, fraud or any crime that constitutes a felony or that involves moral turpitude or theft. If Mr. Calvert’s employment is terminated due to merger or acquisition, then he will be eligible to receive the greater of (i) one year’s compensation plus an additional one-half year for each year of service since the effective date of the employment agreement or (ii) one year’s compensation plus an additional one-half year for each year remaining in the term of the agreement. Otherwise, he is only entitled to receive compensation due through the date of termination.

The Calvert Employment Agreement requires Mr. Calvert to keep certain information confidential, not to solicit customers or employees of the Company or interfere with any business relationship of the Company, and to assign all inventions made or created during the term of the Calvert Employment Agreement as “work made for hire”.

Office 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. For the three months ended March 31, 2018 and 2019, total rental expense was $49,000 and $51,000, respectively. On January 1, 2019, we adopted ASC 842 which resulted in a right-of-use asset and lease liability, the adoption resulted in an immaterial cumulative effect of an accounting change that was not recorded. Our right-of-use asset and lease liability operating leases included our office space BioLargo/ONM and BLEST. Our BioLargo/ONM lease has a 4-year extension and we included this extension in the net present value of our lease payments, which used the incremental borrowing cost to BioLargo of 18%. Water operations lease is considered short-term and not included.

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.

22

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Clyra Medical Consulting Agreement

Our partially owned subsidiary Clyra Medical (see Note 8) entered into a consulting agreement with Beach House Consulting, LLC, through which Jack B. Strommen will be providing consulting services to Clyra Medical related to its sales and marketing activities once it has received FDA Approval (as defined in Note 8 and the associated agreement) on a product, at which point the agreement provides that Mr. Strommen is to receive $23,000 per month for a period of four years. This agreement has not started, and the total cash obligation related to the agreement would be $1.1 million.

Note 12. Subsequent Events.

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

Bellridge Capital Investment

On April 18, 2019, we received $188,000 and issued a 10% Convertible Note to Bellridge Capital, LP (“Bellridge”) in the principal amount of $220,000 (the “Bellridge Note”), representing a 10% original issue discount, and a deduction of $10,000 for legal fees paid to the investor. The note is due April 18, 2020. We and Bellridge concurrently entered into a Securities Purchase Agreement through which, upon our mutual consent, Bellridge may invest up to an additional $400,000 (in two tranches) that would be reflected in two additional 10% notes, each of which would mature one year from the date of issuance.

The Bellridge Note is convertible at the option of Bellridge at a conversion price equal to 70% of the lowest closing bid price of the Company’s common stock during the 25 trading days prior to the conversion date. We may prepay the Bellridge Note at any time. If we do so up to 90 days after the effective date, the amount due is equal to 125% of the unpaid principal amount of the note along with any accrued interest, and thereafter, the amount due is 130% of the unpaid principal amount of the note along with any accrued interest. Upon the occurrence of an event of default, as such term is defined under the Bellridge Note, additional interest will accrue from the date of the event of default at a rate equal to the lesser of 24% per annum or the highest rate permitted by law.

Crossover Capital Investment

On May 14, 2019, we received $95,000 and issued a Convertible Note to Crossover Capital Fund I, LP (“Crossover Capital”) in the principal amount of $110,000 (the “Crossover Capital Note”), representing a 10% original issue discount, and a deduction of $5,000 for legal fees and due diligence. The note is due nine months from the date of issuance. We and Crossover Capital concurrently entered into a Securities Purchase Agreement. The Crossover Capital Note is convertible at the option of the holder at a conversion price equal to 70% of the lowest closing bid price of the Company’s common stock during the 25 trading days prior to the conversion date. We may prepay the Crossover Capital Note up to 180 days after issuance, by paying a prepayment penalty that increases from 5% within the first 30 days, to 30% during the last 30. Upon the occurrence of an event of default, as such term is defined under the note, additional interest will accrue from the date of the event of default at a rate equal to the lesser of 24% per annum or the highest rate permitted by law.

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Item 2.          Management’s Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report on Form 10-Q contains forward-looking statements. These forward-looking statements involve risks and uncertainties, including statements regarding BioLargo’s capital needs, business plans and expectations. Such forward-looking statements involve risks and uncertainties regarding BioLargo’s ability to carry out its planned development and production of products. Forward-looking statements are made, without limitation, in relation to BioLargo’s operating plans, BioLargo’s liquidity and financial condition, availability of funds, operating and exploration costs and the market in which BioLargo competes. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks outlined in our Form most recent annual report on Form 10-K, and, from time to time, in other reports BioLargo files with the SEC. These factors may cause BioLargo’s actual results to differ materially from any forward-looking statement. BioLargo disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. The information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Unless otherwise expressly stated herein, all statements, including forward-looking statements, set forth in this Form 10-Q are as of March 31, 2019, unless expressly stated otherwise, and we undertake no duty to update this information.

As used in this report, “we” and “Company” refers to (i) BioLargo, Inc., a Delaware corporation; (ii) its wholly-owned subsidiaries BioLargo Life Technologies, Inc., a California corporation, Odor-No-More, Inc., a California corporation, BioLargo Development Corp., a California corporation, BioLargo Engineering, Science & Technologies, LLC, a Tennessee limited liability company, and Canadian subsidiary BioLargo Water, Inc.; and (iii) Clyra Medical Technologies, Inc. (“Clyra”), a partially owned subsidiary.

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

Our Business- A Sustainable Products, Technology and Solutions Provider

BioLargo, Inc. is an innovative technology developer and environmental engineering company driven by a mission to “make life better” by delivering robust, sustainable solutions for a broad range of industries and applications, with a focus on clean water, clean air, and advanced wound care. We develop and commercialize disruptive technologies by providing the capital, support, and expertise to expedite them from “cradle” to “maturity”. Our business strategy is straightforward: we invent or acquire technologies that we believe have the potential to be disruptive in large commercial markets; we incubate and develop these technologies to advance them 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. We seek to unlock the value of our portfolio of underlying technologies to both advance our purposeful mission while we create value for our stockholders.

Our first significant commercial success is currently unfolding in our subsidiary, Odor-No-More, Inc., which is focused on odor and volatile organic compound (“VOC”) control products sold under the brands CupriDyne Clean and Nature’s Best Science. We are gearing up for rapid growth as our products are experiencing more widespread market adoption in the waste handling industry through national purchasing agreements with four of the largest industry members. To this end, we have recently begun to offer a menu of services to our clients including engineering design, construction, and installation of misting systems and related equipment used to deliver our liquid chemistry products, as well as ongoing maintenance services for installed systems. We have also begun expanding with early adopters into new vertical segments such as wastewater treatment, the cannabis industry and various industrial facilities like steel manufacturing and livestock processing operations. We recently executed a five-year white-label distribution agreement with Cannabusters, Inc. a company organized and owned by Mabre Corporation to feature our odor and VOC control technology to the cannabis industry in combination with their air handling and air quality systems. We believe this to be an important opportunity for BioLargo’s odor and VOC control products, as the cannabis and hemp industries are predicted to grow significantly in the US in the coming years and are known to contend with significant odor and VOC challenges (read more under Emerging High-Growth Opportunity in Cannabis / Hemp Industry).

Our second commercial operation, BioLargo Engineering, Science & Technologies, LLC (“BLEST”), provides professional engineering and consulting services to third party clients on a fee-for-service basis, and also serves as our in-house engineering team to advance our proprietary technologies and complement service offerings of our other business segments.

24

In addition to our two operating subsidiaries, we have technologies and products in the development pipeline progressing towards commercialization, including our water treatment system for decontamination and disinfection (our “Advanced Oxidation System”, or “AOS” – see Pilot Projects discussion below), and our medical products focused on healing chronic wounds, including our recently acquired stem cell therapy called the SkinDisc^TM, which is focused on regenerative tissue management and is licensed to our subsidiary Clyra Medical Technologies, Inc. (“Clyra Medical”).

We believe our current success with our industrial odor and VOC control products serves to validate our overall business strategy which is focused on technology-based products and services capable of disrupting the status quo in their applicable industry market segment. We believe that the future of our medical and clean water technologies has similar and also very large market opportunities ahead as they are introduced commercially.

Odor-No-More Industrial Odor and VOC Solutions

Our CupriDyne Clean industrial products reduce and eliminate tough odors and VOC’s in various industrial settings, delivered through misting systems, sprayers, water trucks and similar water delivery systems. We believe the product is the number one performing odor-control product in the market, and offers substantial savings to our customers compared with competing products.

Waste Handling

Our customer base for our odor and VOC business is expanding. We are now selling product to four of the largest solid waste handling companies in the country, and also have secured multiple flagship clients in the wastewater treatment industry, which we expect to become a priority market. We are also expanding with early adopters into new industrial markets, including steel manufacturing, paper production, construction, building and facilities management, livestock production, the cannabis industry. Opportunities for our products are available internationally. To that end, we participated in the China InnoStars Semi Finals competition in China in early November, gaining exposure for both our company and our products to stakeholders in China’s air quality and odor control market as well as potential strategic investors. We have in the past and plan to continue marketing these products through industry associations like the “Technology Approval Group” program offered by Isle Utilities that serves the wastewater treatment industry. We also have a number of potential partners actively engaged in commercial trials around the globe and we are actively in discussion with a number of groups to leverage our commercial focus through distribution partnerships.

Many of our customers have adopted CupriDyne Clean as a replacement for a non-performing competitive products, some of which have been in use by customers for as many as 30 years. Upon using CupriDyne Clean, the majority of customers have expressed a very high degree of satisfaction with its performance compared to prior solutions. Because of this, we are realizing systematic adoption by our very large corporate customers and expect to serve these customers for years to come. Our experience has helped refine our value proposition and assemble a comprehensive menu of products and services. Our success in this market has validated the market opportunity for our products and services and encourages us to continue investing in infrastructure and sales and marketing to increase revenues. We estimate there are approximately 2,000 active landfills¹, 8,000 transfer stations², and 15,000 waste water treatment agencies³ in the United States. While all may not have ongoing odor problems or neighbor complaints, we believe many of the facilities have need for a disruptive odor solution like CupriDyne Clean.

The total addressable market for the waste handling and wastewater treatment industries is greater than $1.3 billion.  While we are still assessing the size of the cannabis, agriculture and steel manufacturing industries, we believe they could readily double the market opportunities for our product CupriDyne Clean.

¹ “Municipal Solid Waste Landfills - Economic Impact Analysis for the Proposed New Subpart to the New Source Performance Standards” (2014), by U.S. Environmental Protection Agency Office of Air and Radiation and Office of Air Quality Planning and Standards.

² The top 5 Waste Management companies in the US, as of 2011, operated 624 transfer stations, and 565 landfills. “Municipal Solid Waste Landfills - Economic Impact Analysis for the Proposed New Subpart to the New Source Performance Standards” (2014), by U.S. Environmental Protection Agency Office of Air and Radiation and Office of Air Quality Planning and Standards. This is a ratio of 1:4 (landfill to transfer stations). The estimated number of transfer stations is this ratio multiplied by the approximate 1,900 total landfills, and rounded.

^{3 1}“Failure to Act, The Economic Impact of Current Investment Trends in Water and Wastewater Treatment Infrastructure” (2011), by American Society of Civil Engineers and Economic Development Research Group. Figure includes treatment facilities owned and operated by municipalities, as well as those owned and/or operated by private entities contracting with municipalities.

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Turn-key Full-service Solutions

At the request of our clients, we have begun offering a menu of services to landfills, transfer stations, and wastewater treatment facilities. These services include ongoing maintenance and on-site support services to assist our clients in the design and continued use of the various systems that deliver our liquid products in the field (such as misting systems). We have recently expanded these serves to engineering design, construction and installation. Our engineering team at BLEST has been instrumental in supporting these operations. During late 2018 we were awarded and completed more than 15 projects and we currently have more than 10 “design build” bids out to clients for CupriDyne Clean delivery systems.

Regional Adoption

Sales of our CupriDyne Clean products and related services were initially made at the local level, on a per-location/facility basis. We would demonstrate our product to the manager of operations at a transfer station or landfill, and he or she ultimately would decide whether to use our products. If owned by a national company, in some instances before the operations manager could buy our products, we were required to obtain official “vendor” status with the company and sign a “national purchasing agreement” (“NPA”). Doing so required a tremendous amount of effort and time. These agreements typically include the addition of our line of products which will be offered through an online purchasing portal to the members around the nation. The process of integrating the data is often delayed by months from the start date of our agreements given their very technical nature. As an example, we just completed work to finish this portion of the startup process with our fourth national agreement account. These processes establish an easy and familiar selling and purchasing process for the ongoing and long-term relationships we seek to develop. We now have NPAs with four of the largest solid waste handling companies in the United States. Some of these accounts are now introducing us to regional managers around the country who have the ability to direct the facilities in their region to use our product. Because of our continued success with our existing clients, our national accounts are expanding their support for, and expanding resources to encourage increased awareness and broad adoption of our products and services. It is also important to note that we are often replacing companies that have served these customers for 20 to 30 years giving support for our claim of ‘disruption’ to an industry.

We believe that “regional adoption” is a scalable approach for the larger solid waste handling companies that, with sufficient resources, we can implement nationwide. Our current national accounts represent the opportunity to serve more than 3,000 local operations around North America. Because of our success serving the transfer stations, material transfer facilities, and landfills, these very large companies are also evaluating the use of CupriDyne Clean in various transportation segments as well.

New Product Expansion with Existing Customers

In line with our mandate as an innovator and full services solution provider, Odor-No-More was recently asked by one of its national customers to expand the use of its CupriDyne based products to include a wash out and odor control product for transportation devices, compactors and containers. While this work is still early, our first trials demonstrate that the new product saves our customers money and labor costs. Although sales for this new product have just begun, we believe the opportunity for this product is significant.

Emerging High-Growth Opportunity in Cannabis / Hemp Industry

Odor-No-More recently entered into a 5-year “white-label” distribution agreement with Cannabusters, Inc., a sister company to Mabre Air Systems, to sell its CupriDyne Clean odor and VOC control products to Cannabis and Hemp grow and production facilities, which represent a target market that management’s research indicates is in sore need of new odor control products and services. Cannabusters has decades of experience with air quality management through their sister company Mabre Air Systems, a leader in air quality control systems in Italy. Cannabusters has committed to a comprehensive marketing program that includes more than 25 trade show events over the next two years to quickly introduce the Cannabusters product to the cannabis and hemp industries. BioLargo's subsidiary Odor-No-More has committed to manufacture and supply its products containing the patented CupriDyne Clean formula to be distributed under the "Cannabusters^TM" brand.

The cannabis industry is facing increased scrutiny by regulators to better control of hazardous air pollutants called terpenes that are a natural part of production and processing. These gases can also cause malodors that demand attention and can be problematic as these companies seek to maintain good community relations and avoid legal entanglements or lawsuits over nuisance odors. Odor abatement operating procedures are part and parcel to the permitting processes for companies involved in the industry and have typically included traditional carbon filters. With the growth and concentration of cannabis related operators, the industry has come to recognize that the volume of terpenes and air flow in a typical operation are often more than the traditional carbon filter-based systems can manage effectively. Odor complaints persist. We have been able to successfully demonstrate that our products are effective as eliminating these VOC’s and related odors, just as we have done in the waste handling industry. As a result, we have had a number of experts in the cannabis industry tell us that our products could become part of the ‘best practices’ operating procedures for this industry and are working toward that goal.

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The global legal cannabis market is expected to grow to $146.4B in 2025 at an astounding 34.6% annual growth rate. Some call cannabis the 21st century’s gold rush. With an estimated 15,000 companies operating in our California alone, we believe the opportunity for our product is significant. A number of recent examples have surfaced with leading companies in this industry that highlight the nuisance odor issue and their inability to adequately manage the volume of terpenes escaping the operations. To that end, we are organizing a series of strategic relationships within the Cannabis industry to capture the opportunity quickly. We are working to finalize agreements with equipment manufacturers, regulatory consultants, key opinion leaders, and marketing partners.  Our value proposition is unmatched for odor and VOC control and this is another great example how our platform continues to expand in high value markets. 

Wastewater Treatment

We have begun selling products and services to wastewater treatment facilities in our local markets. Our clients are prominent municipal agencies and have indicated a desire to expand the use of our products and services to additional locations in their service areas. As a result of our success in the field, a client featured our product as an example of ‘Best Practices’ for the waste water treatment industry at a national water quality conference hosted by the Water Environment Federation. We anticipate overall longer selling cycles given the technical sophistication of the customers in this market, and believe that channel partnerships with leading companies that already sell and service this highly technical market will be required for our ultimate success. We are encouraged and are evaluating various strategies to maximize our marketing and selling proposition into this mature and well-established market. We are actively engaged in discussions with potential distribution partners and leading engineering firms with well established relationships to the clients in order to service this very large market.

Infrastructure and Capital Needs for Odor-No-More

We recognize the scope of the opportunity for CupriDyne Clean and related services, and understand the task of building the personnel and infrastructure to become a disruptive company in the waste handling industry. In the United States, we currently operate out of two locations – Southern California and Tennessee. As of now, our manufacturing facilities are located in California. However, we expect to expand our manufacturing and staffing in our Tennessee operation as we achieve critical mass in that region. We are also contemplating the opportunity to establish a manufacturing facility in Canada to serve the Canadian odor and VOC control market. In the meantime, as a result of the rapid adoption we are experiencing in our local Southern California market, we want to focus on adding staff and infrastructure to meet the obvious need for our products and services. Since January 1, 2018, we have added five people in both sales and support roles. We believe that we need to invest in qualified sales and support personnel to properly focus our energies on capturing the client opportunities already under contract with our national accounts and expand revenues accordingly.

We believe that a significant number of personnel will be required to fully service the solid waste handling and wastewater treatment industries. We plan to expand as adequate capital to fund these needs becomes available. 

Full Service Environmental Engineering

In September 2017, we formed a subsidiary (BioLargo Engineering, Science & Technologies, LLC, or “BLEST”), for the purpose of offering full service environmental engineering to third parties, and to provide engineering support services to our internal teams to accelerate the commercialization of our AOS technologies. Its website is found at www.BioLargoEngineering.com.

BLEST focuses its efforts in three areas:

● Providing engineering services to third party client;

● Supporting the AOS development efforts by working with our Canadian subsidiary, BioLargo Water; and

● Supporting our team at Odor-No-More to provide engineering and design of the CupriDyne Clean delivery systems.

The subsidiary, opened its office in Oak Ridge (a suburb of Knoxville, Tennessee), and entered into employment agreements with seven scientists and engineers who collectively have over two hundred years of experience in diverse engineering fields. 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. The other team members are also former employees of CB&I and Shaw. The team is highly experienced across multiple industries and they 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.

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Business Development at BLEST

BLEST has had success in several noteworthy areas in the past months. The company is increasing its customer base and executing more and larger projects than in its first year. Additionally, BLEST has made strides toward creating lucrative new opportunities through development of new processes, which BioLargo intend to seek new IP for where possible.

Notably, BLEST recently begun work to develop a new process by which to manage and mitigate Legionella contamination in the water distribution systems of large buildings including hospitals, office buildings, condos, and more. BioLargo recently filed a patent for this new process, which is referenced below in the Intellectual Property section. BLEST intends to leverage this patented process to offer Legionella mitigation services to customers.

BLEST was recently awarded an SBIR Phase I Competitive Grant by the Environmental Protection Agency in the amount of $100,000 to investigate solutions for the removal of per- and polyfluoroalkyl substances (PFAS) from water. PFAS have been linked to cancer, fertility problems, asthma, and more, and are present in a vast range of manufactured goods including food, common household products (e.g., cleaning products, cookware), and electronics. PFAS also pose widespread and serious water safety problems around the world, with governments and industry actively seeking new technologies and processes to eliminate PFAS from groundwater and drinking water.

BLEST has recently been notified that as a result of its recent audit work on assisting a leading healthcare products company in transitioning to the 2015 revision of the ISO 14001 standard for environmental management systems (EMS) it is being awarded another small project from the client. The new time and materials project involved preparing a detailed GAP analysis, and subsequently updating the client’s EMS procedures to reflect the significant changes to the new EMS standard which places new emphasis on upper management involvement, the life cycle of products and services, emergency preparedness and response, and sustainability. There is also a new focus on evaluating risks and opportunities and integrating this assessment into the EMS program. 

BLEST recently began a time and materials contract of work approaching $100,000 to plan and test to demonstrate that emissions from an energetic materials incinerator at a large U.S. military installation on the East coast are meeting EPA regulatory standards. An “energetic materials incinerator” allows the military to safely dispose propellants, explosives, and munitions that have aged beyond their shelf life. This facility must meet numerous emission standards including regulations that limit emissions of chemical compounds called “dioxins” and “furans”, which are tightly regulated chemicals in nearly every developed country. BLEST, having submitted the draft report for the dioxin test, has been awarded a contract for 2019 to prepare a test plan for the 2020 trial burn of the incineration system at the site. This effort combined with a contract to conduct an environmental audit and conduct training of site personnel will exceed $30,000 for calendar 2019. The anticipated contract for the 2020 test, to be awarded January/February of 2020 will exceed $300,000.

BLEST has now performed seven separate projects for HAVCO Wood Products, totaling over $35,000 with two additional projects scheduled for the second quarter of 2019. We anticipate extending the current Professional Services Agreement into an overall environmental services annual contact with specific annual tasks that will convert this repeat client into a perpetual source of revenue.

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The formation of BLEST was predicated on the concept that 60% of the revenue would be provided by external clients and the remaining 40% would be provided by internal clients (i.e. BioLargo Water or Odor-No-More). By reaching this goal, BLEST will provide direct positive cash flow to the BioLargo, Inc. while fulfilling its mission to provide professional engineering services to the internal client base. For calendar 2018, the ratio was approximately 40% of revenue provided by external clients and 60% provided by internal sources. The ratio for 2018 was driven by significant need from the internal client base and circumstances related to the first full year of operation for BLEST. BLEST anticipates the original target ratios to be met or exceeded in calendar 2019. This is based on an increasing number of perpetual contracts including Citizens Gas Utility District, HAVCO, Powell Valley Utilities, and APTIM/Picatinny Arsenal. These perpetual contracts, which are renewed annually, will provide a steady base load of outside client revenue that is reasonably predictable and secure.

In addition to continued organic growth in the external client base, BLEST has developed several business development initiatives including water pollution control services and equipment specifically designed for the microbrewery sector. They have developed a bundle of services and technology-based products to offer a total solution for legionella prevention in public buildings. They are evaluating similar approaches for the cannabis industry as well. These markets are expanding in areas across the United States and represent significant opportunities for BLEST.

BLEST management believes the company can expect growth in several additional areas. For one, BLEST is under contract to design, build, and install wastewater treatment equipment and “treatment trains” for clients in collaboration with BioLargo’s water technology subsidiary BioLargo Water. Not only does this represent important synergy between two BioLargo business units, but it offers BLEST the opportunity to become a total water treatment solutions provider for customers in the widely under-served small industrial wastewater treatment sector. Another area of predicted growth is the conduct of environmental engineering and permitting work for large industrial facilities such as fuel conversion plants, an area in which BLEST has experienced an increasing number of contracts in the past quarter.

BioLargo Water and the Advanced Oxidation System - AOS

BioLargo Water is our wholly owned subsidiary located on campus at the University of Alberta, Canada, that has been primarily engaged in the research and development of our Advanced Oxidation System (AOS).  The AOS is our patented water treatment device that generates a series of highly oxidative species of iodine and other molecules that, because of its proprietary configuration and inner constituents, allow it to eliminate pathogenic organisms and organic contaminants as water passes through the device and it performs with extreme efficacy while consuming very little electricity. Its key application is extremely efficient decontamination and the disinfection of various waste waters. The AOS recently began its first pre-commercial pilot project, wherein an AOS and treatment train has been installed on-site at Sunworks Farm, a poultry farm in Alberta. This pilot project is discussed in more detail in the Pre-commercial Pilot Projects section below.

The key value proposition of the AOS is its ability to eliminate a wide variety of contaminants with high performance while consuming extremely low levels of input electricity and extremely low levels of chemistry inputs – a trait made possible by the complex set of highly oxidative iodine compounds generated within the AOS reactor. Our proof-of-concept studies and case studies 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. This value proposition sets the AOS technology above other water treatment options, as we believe the AOS may allow safe and reliable water treatment for significantly lower cost compared to its competitors and may even enable advanced water treatment in applications where it otherwise would have been prohibitively costly.

The AOS has the potential to allow reliable and cost-effective water treatment in numerous industries and applications where high-level disinfection or elimination of hard-to-treat organic contaminants is required. We believe the total serviceable market for our AOS is $10.75 billion for the poultry processing, food & beverage, and storm water segments with a target beachhead market for poultry processing in North America at an estimated $240 million.

Our AOS was the result of breakthroughs in both advanced iodine electrochemistry and advances in materials engineering, and its invention led to BioLargo’s co-founding of a multi-year industrial research chair whose goal was to solve the contaminated water issues associated with the Canadian Oil Sands at the University of Alberta Department of Engineering in conjunction with the top five oil companies in Canada, the regional water district, and various environmental agencies of the Canadian government. Based on recovering oil prices and our ongoing work in Canada, we recently reinitiated discussions with a number of stakeholders in the oil sands industry to support the completion of AOS development for oil and gas water treatment and to discuss the initiation of pre-commercial and commercial pilots for our AOS to help treat and remediate oil sands process-affected water (“OSPW”) found in tailings ponds in the Canadian oil sands, an application that currently has no good economically viable solution. We continue to apply for significant grant funding to re-initiate our work to help treat OSPW and other oil and gas wastewaters using the AOS. We believe that this opportunity requires substantial grant support to be viable for our company and, therefore we will continue to focus on energies on other markets until such time as resources are available.

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Our AOS is an award-winning invention that is supported by science and engineering financial support and highly competitive grants (66 and counting) from various federal and provincial funding agencies in Canada such as NSERC, NRC- IRAP, and Alberta Innovates and in the United States by the Metropolitan Water District of Southern California and National Water Research Institute.

Our immediate goals for the development and commercialization of the AOS are: 1) to secure direct investment into the BioLargo Water subsidiary to empower its staff to complete its development cycle, 2) complete the ongoing pre-commercial field pilot studies which are necessary to generate the techno-economic data required to secure commercial trials, entice future customers, and commence traversal of necessary regulatory pathways, 3) conduct the first commercial trials with the AOS, and 4) secure first sale of the AOS. It is our belief that once pre-commercial pilots have concluded with the AOS, our ability to entice major water industry players to partner with BioLargo Water to accelerate market adoption of the AOS will be increased dramatically.

Recent AOS Milestones

The most important advances in AOS development in recent months have been 1) recent validation of the AOS as an effective tool to eliminate hard-to-treat “micropollutants” from wastewater; 2) design and engineering advances and changes to the AOS in preparation for piloting and scale-up for industrial flow-rates and conditions; and 3) the planning and design of pre-commercial field pilot projects.

One recent and important AOS milestone was the demonstration that it eliminated or reduced the toxicity of certain high-concern pharmaceutical byproducts (micropollutants) common in some municipal wastewater (“MWW”) streams. Currently, there are no economically viable solutions to remove these compounds from MWW, and incumbent technologies fall short. We believe that the value proposition for our AOS for use as a tool for the municipal water treatment industry to efficiently remove micropollutants could increase our total serviceable market to 5% or more of the total industry which is recognized at + $700 billion globally or approximately $35 billion.

Several advances and improvements to the AOS have also been made in recent months with the purpose of preparing the technology for pre-commercial piloting, commercial piloting, and subsequent mass production, as well as to prepare it for scale-up to allow industrial flow rates. These advancements have largely been proprietary physical improvements to the AOS, including the transitioning of the AOS to using inner substrates more amenable to mass-production and greater flow rates and pressures. Management believes it will continue to advance the scale-up to higher volume throughputs of water flow and enhances the AOS ability to be more compact and longer lasting in the field.  This work is not complete, but management believes it does represent a significant step forward to achieving high throughput quality results. Importantly, we have also designed and begun assembling our own proprietary water treatment train that will be used in pilots for the AOS and that will pave the way for complete wastewater treatment in industrial settings.

Pre-commercial Pilot Projects for AOS

We are now underway on multiple pre-commercial field pilot projects. The first project involves treating poultry wastewater on-site at a poultry producer’s facility in Alberta Canada, with support from the Poultry Growers Association, where the AOS is being assessed for its ability to eliminate bacteria and other contaminants from the wastewater effectively and cost-efficiently and to establish operating costs (OPEX) and capital costs (CAPEX) in a field setting. Importantly, in this pilot, BioLargo Water built and installed a complete “treatment train” with equipment to address all aspects of the client’s water treatment needs, including organic contaminants, suspended solids, and biological organisms. Therefore, this pilot also represents BioLargo’s first assessment as a “total solutions provider”, which could open the door for a wider array of future water treatment market opportunities. Recently, the BioLargo Water team finishing installing the full AOS treatment train on-site at Sunworks Farm, the location for the pilot. Work is now underway to begin treating the facility’s wastewater.

In the second pilot, the AOS will be used on-site at a Californian brewery as a polishing (final) step in an Aquacycl treatment train to eliminate bacteria and enable wastewater discharge in compliance with Californian regulatory standards. Aquacycl is an emerging waste-water treatment technology company based in the San Diego area that was introduced to our company by The Maritime Alliance, a trade organization in San Diego committed to fostering maritime business and technology innovation. We are a member organization, and our president has recently joined its board of directors. This pilot will help establish the efficacy of the AOS in a field setting, the OPEX and CAPEX of the system, and the AOS’ ability to “plug and play” in the context of diverse supporting equipment and logistics.

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In addition to the poultry and brewery pilots, we are negotiating to begin a pilot to treat captured storm water for recycling and reuse that will be backed by a Canadian government grant and will include a leading city planning consultant in Southern California, a leading engineering firm dedicated to the water industry, and a prominent city based in Southern California. Storm water capture and reuse is an emerging market backed by the State of California pursuant to Measure W which sets aside an estimated $300 million a year from a tax to be used for public agencies to invest in related storm water capture and treatment infrastructure. Also, we were recently invited to participate in a pre-commercial pilot treating municipal wastewater in order to remove micropollutants which is organized by one of the leading engineering firms in the water industry in conjunction with prominent water treatment agency in the Pacific Northwest. Finally, we and a Chinese partner were awarded a grant co-funded by the governments of Canada and China to install an AOS pilot unit on-site at a petrochemical plant in Tianjin City, China, where the AOS would be used to eliminate hard-to-treat organic contaminants to new standards set by the Chinese government. However, we have not yet been able to verify the funding to be provided by the Chinese government to our collaborating partner, and thus are not yet fully committed to this project as it may require capital contributions that we are unwilling to commit to provide without additional funding.

All of these pilot projects represent an important step for our AOS technology, as well as for our company. We are confident in our disruptive water treatment technology and have proven its treatment capabilities in the lab ad nauseum. However, pilot projects for the AOS, as with any technology, are crucial to prove its reliability to industry stakeholders as well the capital cost and operating costs of our technology at-scale. These data will be critical to pave the way for future market adoption. As a reminder, we have many other pilots in evaluation to support this same cause.

We believe that our current designs for the AOS are cost-effective, commercially viable and should be ready for their first commercial launch in late 2019 or early 2020. We secured a patent on the AOS in 2018, and another in March 2019. We intend to continue refining and improving the AOS continually to accomplish a series of goals: expanded patent coverage, extended useful life, lower capital costs, lower energy costs, optimized performance, precise configurations for specific industry challenges, portability, and identifying its performance limits. Our current and most pressing goal for the AOS, as evidenced by the pilot projects described above, is to demonstrate its efficacy in field settings, which is a crucial and necessary step for the commercialization of any water treatment system.

Advanced Wound Care - Clyra Medical

We initially formed Clyra Medical to commercialize our technology in the medical products industry, which we believe can be disruptive to many competing product lines. Our initial product designs focus in the “advanced wound care” field, which includes traumatic injury, diabetic ulcers, and chronic hard-to-heal wounds. We also have designs for products focused on preventing or controlling infections. In late 2018, we also acquired our second technology, a stem cell therapy technology, SkinDisc, that is both complementary to our antimicrobial product designs and it also presents a high value proposition to offer stand-alone products to the advanced wound care industry to assist in regenerating tissue. With the addition of highly skilled team members with extensive experience and proven track record of success in the medical industry and, the addition of the SkinDisc, we have expanded our plans to focus and build out a complete line of products to deliver state of the art solutions to assist in healing wounds. Therefore, we are also presently evaluating a number of additional licensing opportunities to add complementary technologies and products to our medical products portfolio with the goal of offering a complete menu of proprietary and patent protected products to better serve the advanced wound care patient population with state-of-the-art medical products. We are presently seeking pre-market clearance for our first advanced wound care product (application in process), from the U.S. Food & Drug Administration (“FDA”) under Section 510(k) of the Food, Drug, and Cosmetic Act.

We believe the total addressable market for Clyra Medical’s existing product designs in the advanced wound care market, dental, orthopedics and regenerative tissue markets will exceed $2.5 billion by 2022.

Our first and original advanced wound care product combines the broad-spectrum antimicrobial capabilities of iodine in a platform complex that promotes and facilitates wound healing. Our products are highly differentiated from existing antimicrobials in multiple ways - by the gentle nature in which they perform, extremely low dosing of active ingredients, reduced product costs, extended antimicrobial activity, and biofilm efficacy. In addition, iodine has no known acquired microbial resistance, unlike many competing products. We believe the future markets for some of our product designs may also include infection control and wound therapy in orthopedics, dental and veterinary markets. We also intend to pursue and study the use of our technology as a complimentary and synergistic platform for use with regenerative tissue therapy.

We have three patent applications pending for medical products, and are preparing additional applications. While these patent applications are pending, we intend to continue expanding patent coverage as we refine and expand our medical products.

We are in the process of obtaining regulatory approval (pre-market clearance) from the FDA for our first advanced wound care product. These efforts are ongoing as of the date of this report. Although the process has taken considerable time and money, and we have faced a number of delays as a result of the FDA’s requirements of us, we remain highly encouraged by our current interactions with the FDA staff and our current position. The process has confirmed that our product design falls in the scope of the 510(k) process and the pathway to clearance has now been better defined by senior staff at FDA. Having had a second in-person meeting with the FDA just prior to filing this report, in order to obtain further clarifications on the data needed, we are preparing to commence a 30-day animal study to confirm that the Clyra product has no adverse effects on wound healing. Our preliminary study (using the same animal and testing protocol required by FDA) confirmed no adverse effects, and thus we are confident that the data generated by this formal study will meet the FDA’s requirements. This animal study is the last material item asked of us by FDA staff, and we believe we can submit this new data and have a response back from the FDA within 90 to 120 days. While we remain confident that we will ultimately receive premarket clearance for this product, and we continue to invest substantial recourses in anticipation of our ultimate success, we are continually reminded by legal counsel that we can make no assurance or prediction as to success of these efforts, or whether additional information will be requested after this animal study, and must wait patiently for the process with the FDA to conclude. Notwithstanding these disclosures, having spent a significant amount of time and money, including two trips to Washington D.C., we are confident we will see a successful conclusion.

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We believe this product’s future role in the advanced wound care industry will be disruptive to many incumbent competing products like silver, hypochlorous acid and even other iodine-based products and therefore our extraordinary investment of time and money will have significant opportunity to generate a considerable return on investment as the products find their way through the FDA process for clearance and then to market adoption. Simply stated, we believe it is worth it and that we will succeed.

Our second technology and its related products center around the SkinDisc technology which we acquired in late 2018 from Scion Solutions, LLC (“Scion”). Scion is led by Spencer Brown, a medical device industry veteran with more than 35 years’ experience in sales, account management, and distribution in the medical device industry. The SkinDisc product was developed by Dr. Brock Liden, a renowned medical podiatrist and expert in wound care and diabetic limb salvage. The SkinDisc is a therapy product that uses a patient’s own bone marrow and plasma in a unique mixture to generate a cell-rich bio gel for use with chronic wounds. It has been tested in over 250 patient cases with no adverse effects, and has successfully aided in the salvage of limbs that otherwise would have been amputated. The regenerative tissue therapy technique has been shown to assist in successful wound closure in time frames as short at 4 to 7 weeks with one or two applications and is patent pending.

Clyra Medical also continues to actively work on the development of new products.

Clyra is currently successfully recruiting Key Opinion Leaders from the medial field to join Clyra’s Medical Advisory Board and is actively evaluating a number of technologies and products to add to its product portfolio in anticipation of its near-term plans to launch its commercial sales efforts.

We are committed to see these advanced wound care products go to market and we believe they will make a positive impact for a greater good around the world and generate meaningful financial results for our stockholders.

Scion Solutions Acquisition – SkinDisc^TM

On September 26, 2018, we and Clyra Medical agreed to a transaction whereby we would acquire the intangible assets of Scion Solutions, LLC (“Scion”), and in particular its stem cell-based technology, the SkinDisc, and the know-how of key team members to support further research as well as the sale and distribution of Clyra Medical’s products based on our BioLargo technologies.

The parties entered into a Stock Purchase Agreement and Plan of Reorganization (“Purchase Agreement”) whereby Clyra Medical acquired (and then sold to BioLargo) the Scion intangible assets, including the SkinDisc. The consideration provided to Scion is subject to an escrow agreement and earn out provisions and includes: (i) 21,000 shares of the Clyra Medical common stock; (ii) 10,000 shares of Clyra Medical common stock redeemable for BioLargo common shares (detailed below); and (iii) a promissory note in the principal amount of $1,250,000 to be paid through new capital investments and revenue, as detailed below. The Clyra Medical common stock was initially held in escrow subject to the new entity raising $1,000,000 “base capital” to fund its business operations, which was raised effective December 17, 2018 (see below). One-half of the common stock was released to scion, and the second half remains subject to the following performance metrics, each vesting one-fifth of the remaining shares of common stock: (a) notification of FDA premarket clearance of certain orthopedics products, or recognition by Clyra Medical of $100,000 gross revenue; (b) the recognition by Clyra Medical of $100,000 in aggregate gross revenue; (c) the granting of all or any part of the patent application for the SkinDisc product, or recognition by Clyra Medical of $500,000 in gross revenue; (d) recognition by Clyra Medical of $1,000,000 in aggregate gross revenue; and (e) recognition by Clyra Medical of $2,000,000 in gross revenue. In addition, Clyra and Scion entered into the $1,250,000 promissory note called for by the Purchase Agreement. The promissory note accrues interest at the rate of 5%. Principal and interest due under the note are to be paid periodically at a rate of 25% of investment proceeds received. If the note is not paid off within 18 months after the date of issuance, it is automatically extended for additional 12-month periods until the note is repaid in full. Payments after the initial 18-month maturity date are required to be made as investment proceeds are received, at a rate of 25% of such proceeds, and 5% of Clyra Medical’s gross revenues.

Immediately following Clyra Medical’s purchase of Scion’s assets, Clyra Medical sold to BioLargo the assets, along with 12,755 Clyra Medical common shares. In exchange, BioLargo issued Clyra Medical 7,142,858 shares of BioLargo common stock. Concurrently, BioLargo licensed back to Clyra Medical the Scion assets. Scion may exchange its 10,000 Clyra Medical common shares for the 7,142,858 shares of BioLargo common stock issued to Clyra Medical, subject to the escrow and earn-out provisions described above. As of December 31, 2018, per the Closing Agreement, one-half of these shares have been earned and thus may be redeemed, and one-half remain subject to the earn-out provisions.

On December 17, 2018, we entered into a closing agreement (“Closing Agreement”) reflecting the satisfaction of the obligation to raise $1,000,000 “base capital” established under the Purchase Agreement. With the satisfaction of the obligation to raise $1,000,000 in base capital, Clyra Medical agreed to release to Scion one-half of the shares of Clyra common stock exchanged for the Scion assets. The remaining Clyra Medical common shares remain subject to the Escrow Agreement dated September 26, 2018, subject to the metrics identified above. We were initially introduced to the SkinDisc product and Scion Solutions through Dr. Liden and Tanya Rhodes’s consulting work with Clyra Medical (both Dr. Liden and Ms. Rhodes have ownership interest in Scion). Prior to the execution of the above-described agreements, BioLargo did not have any material relationship with Scion’s founder Spencer Brown.

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Results of Operations

We operate our business in distinct business segments:

● Odor-No-More, which manufactures and sells our odor and VOC control products and services, including our flagship product, CupriDyne Clean;

● BLEST, our professional engineering services division supporting our internal business units and serving outside clients on a fee for service basis;

● BioLargo Water, our Canadian division that has been historically pure research and development, and is now transitioning to focus on commercializing our AOS system;

● Clyra Medical, our partially owned subsidiary focused on the Advanced Wound Care industry; and

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

We invest cash into each of these segments on a regular basis, as none of the segments yet generates enough cash to fund their operations. However, both Odor-No-More and BLEST are trending towards cash-flow positive, and we expect each of those two segments to begin to generate positive cash for BioLargo in 2019.

Revenue for the three months ended March 31, 2019 was $364,000, which is a $101,000 increase over the same period in 2018 and a $133,000 decrease over the three months ended December 31, 2018. We generated revenue from two of our operating divisions – Odor-No-More and BLEST. Our business segments obtain cash to support operations in different ways. Odor-No-More and BLEST generate revenues from third parties, and receive funding as needed from their parent corporation, BioLargo. Our Canadian team, BioLargo Water, receives funds from government research grants (reported on our financial statements as “Other income – Grant income”), and receives funding as needed from BioLargo. Clyra Medical, however, relies on direct investment from third parties for 100% of its operating costs and is not supported with capital from BioLargo’s corporate budget or fundraising.

Odor-No-More

Our wholly owned subsidiary Odor-No-More 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 odor absorption products to the U.S. Government.

Revenue (Odor-No-More)

Odor-No-More’s revenues for the three months ended March 31, 2019, increased $76,000 or 34% from the same period in 2018, and decreased $36,000 or 11% from the prior three months ended December 31, 2018. The fluctuation in our revenues is due to timing of orders out of our control, weather at customer facilities (such as rain and snow), and delays in shipping our pouch products due to delays from our contract manufacturer. For example, we had approximately $68,000 of orders in process as of March 31, 2019, which are not recorded to revenue until the products are properly delivered to our customers. Approximately 79% of revenue is from sales of CupriDyne Clean products, and the remaining mostly from sales to the U.S. military.

Sales of our CupriDyne Clean products increased 54% in the three months ended March 31, 2019, as compared to same period in 2018, due to the acquisition of more clients and client locations, and the sale and delivery of more products. Of our CupriDyne Clean sales, approximately one-half were made pursuant to “national purchasing agreements” (“NPA”) with the four largest waste handling companies in the United States. We expect our sales to NPA clients to continue to increase in 2019 as we expect to continue to add new service locations for those customers.

Sales to the U.S. military are primarily our Specimen Transport Solidifier pouches, and are made to the U.S. Defense Logistics Agency through our distributor Downeast Logistics. These sales decreased by 38% in the three months ended March 31, 2019 as compared with 2018. The vast majority of these sales are made through a bid process in response to a request for bids to which any qualified government vendor can respond, and our decreased revenue in 2019 is due to a reduced number of opportunities from the government for our products. We cannot know in advance the frequency or size of such requests from the US Government, or whether our bids will be successful, and as such we are uncertain as to our future revenues through this system.

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Cost of Goods Sold (Odor-No-More)

Odor-No-More’s cost of goods sold includes costs of raw materials, contract manufacturing, and portions of salaries and expenses related to the manufacturing of our products. As a percentage of gross sales, Odor-No-More’s costs of goods was 47% in the three months ended March 31, 2019 versus 60% in the same period in 2018. In mid-2018, because of higher volumes, Odor-No-More was able to decrease its costs by purchasing raw materials directly from manufacturers at more favorable prices, resulting in the year-to-year cost of goods decrease.

Selling, General and Administrative Expense (Odor-No-More)

Odor-No-More’s Selling, General and Administrative (“SG&A”) expenses include both cash and non-cash expense related to its operations. Odor-No-More’s SG&A expenses increased to $247,000 in the three months ended March 31, 2019, as compared with $135,000 in 2018, an increase of 27%. These expenses have increased alongside Odor-No-More’s efforts to increase revenues by hiring additional sales and support staff. We expect its SG&A expenses to increase in 2019 as it continues to add sales and support personnel as its number of customers and revenues increase.

Net Loss (Odor-No-More)

Odor-No-More generated $301,000 in revenue, a gross margin of $160,000, and had total costs and expenses of $251,000, resulting in a net loss of $94,000. Odor-No-More is trending toward profitability. Its gross margin from product sales continues to increase, and its loss from operations is trending downward. We believe these trends will continue. The loss from operations is trending downward for two reasons. First, Odor-No-More was able to reduce its product costs as a result of its increased volume (purchasing power). Second, increased sales resulted in increased gross margin contributing to the company’s operational costs.

We expect that Odor-No-More’s sales will continue to increase, and thus its gross margin will continue to increase. By the end of 2019, assuming the company is properly capitalized with a marketing budget and additional salespeople, we expect that Odor-No-More will no longer require a cash subsidy to operate, but will be contributing cash to our corporate operations.

BLEST (engineering division)

Revenue (BLEST)

Our engineering segment (BLEST) generated $63,000 of revenues from third party clients in the three months ended March 31, 2019, versus $39,000 in revenue in comparable period in 2018.  The increase is due to an increase in the number of client contracts being serviced.  BLEST revenues do not include work performed on internal BioLargo projects, such as its further engineering and development of the AOS water filtration system, which if billed to third party clients exceeded $120,000 in the first quarter. Our engineers are performing a critical role in the AOS pilot projects, some of which are supported by third-party research grants and has been instrumental in developing and supporting a professional engineered design service for misting systems being sold by our Odor-No-More operating unit.

Cost of Goods (Services) Sold (BLEST)

BLEST’s cost of services includes employee labor as well as subcontracted labor costs. In the three months ended March 31, 2019, its cost of services were 83% of its revenues, versus 74% in the three months ended March 31, 2018. We expect the cost of services to remain stable in 2019. Costs were higher as we utilized sub-contractors with lower margins.

Selling, General and Administrative Expense (BLEST)

BLEST’S SG&A expenses include both cash and non-cash expense related to its operations, although because it primarily delivers services to its clients, most of its labor costs are included in its cost of services (for third party clients), and research and development for its work on BioLargo technologies. BLEST selling, general and administrative expenses during the three months ended March 31, 2019 totaled $106,000 compared to $98,000 for the three months ended March 31, 2018.

Net Loss (BLEST)

BLEST generated $63,000 in revenue, a gross margin of $11,000, and had total costs and expenses of $240,000, resulting in a net loss of $108,000 because intracompany services are eliminated in consolidation.

While we are unable to record revenues generated from intracompany services by the engineering group to other operating divisions, it is important to note that the net loss would be eliminated if BLEST were an outside contract for hire services company selling services to our water company or our industrial odor and VOC control operating unit.

Because the subsidiary had a net loss, we invested cash during the year to allow it to maintain operations. BLEST’s need for a cash subsidy to support its operations decreased considerably towards the end of calendar year 2018. We expect this trend to continue, and expect that in 2019 its sales will continue to increase, and thus its gross profit will continue to increase. By the end of 2019, we expect that it will no longer require a cash subsidy to operate, but will be contributing cash to our corporate operations.

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Other Income

Our wholly owned Canadian subsidiary has been awarded more than 65 research grants over the years from various Canadian 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. We continued to win grants and it is important to note that amounts paid directly to third parties are not included as income in our financial statements. Our grant income increased significantly in the three months ended March 31, 2019, compared with the prior year period. This increase is due to timing and the number of grants awarded in prior periods.

Although we are continuing to apply for government and industry grants, and indications from the various grant agencies is highly encouraging, we cannot be certain of continuing those successes in the future.

Selling, General and Administrative Expense – company wide

Our SG&A expenses include both cash expenses (for example, salaries to employees) and non-cash expenses (for example, stock option compensation expense). Our SG&A expenses increased by 20% ($235,000) in the three months ended March 31, 2019 compared to the three months ended March 31, 2018. Our non-cash expenses (through the issuance of stock and stock options) increased $42,000 for the three months ended March 31, 2019 compared to the three months ended March 31, 2018. Our employees, vendors and consultants chose to receive a greater number of stock and stock options in lieu of cash owed. The largest components of our SG&A expenses included (in thousands):

	March 31, 2018		March 31, 2019
Salaries and payroll related	$	451	$	494
Professional fees		192		196
Consulting		162		291
Office expense		210		240
Board of director expense		68		68
Sales and marketing		54		58
Investor relations		33		45

Consulting expense increased as we’ve engaged more consultants to identify business opportunities for our various ventures. The company increased its investor relations expense to continue to develop and spread the word about the BioLargo opportunity.

Research and Development

In the three months ended March 31, 2019, we spent approximately $426,000 in the research and development of our technologies and products. This was a decrease of 20% ($98,000) compared to the three months ended March 31, 2018.

As we transition our Canadian operations from pure research and development towards a focus on commercializing the AOS system, we expect their contribution to our total research and development expenses to decrease in 2019. We expect this to be offset by increased research and development at Clyra Medical, which we fully expect to be funded from its own resources or direct third-party investment.

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Interest expense 

Our interest expense for the three months ended March 31, 2019 was $985,000, an increase of $153,000 compared with the three months ended March 31, 2018, of which $32,000 was paid in cash, and the remaining $953,000 is non-cash expense. Our interest expense increased due to the issuance and extensions of convertible notes and associated warrants. We record the relative fair value of the warrants and the intrinsic value of the beneficial conversion feature sold with the convertible notes payable which typically results in a full discount on the proceeds from the convertible notes. This discount is being amortized as interest expense over the term of the convertible notes. We expect our interest expense to decrease in 2019 because the total amount we amortize (the line item on our balance sheet “Discount on convertible notes payable and line of credit, net of amortization”) has decreased. However, any decrease would be offset if we issue new debt instruments in 2019 that are combined with warrants, or if we issue new warrants as consideration to extend maturity dates on existing debt instruments. 

Loss on extinguishment of debt

In the three months ended On March 31, 2019, we recorded a loss on extinguishment of debt related to transactions with prior investors to extend the maturity dates of promissory notes. As consideration, we increased principal amounts, modified conversion terms, and/or issued stock purchase warrants. We had no such activities in the comparable period in 2018. We extended the maturity dates of the promissory notes due to a lack of sufficient cash to satisfy the obligations at maturity. Unless our cash position changes substantially, we anticipate we will continue to do so as additional notes come due.

Net Loss

Net loss for the three months ended March 31, 2019 was $2,749,000 a loss of $0.02 per share, compared to a net loss for the three months ended March 31, 2018 of $2,429,000 a loss of $0.02 per share. Our net loss this year was somewhat offset by an increase in revenue; nevertheless, the net loss increased mainly due to the increased payroll and related office expenses, and the increase in financing costs and non-cash interest expense to obtain capital. 

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

Net loss	March 31, 2018			March 31, 2019
Odor-No-More	$	(200	)	$	(90	)
BLEST		(47	)		(110	)
Clyra Medical		(199	)		(299	)
BioLargo Water		(151	)		(145	)
Corporate		(1,832	)		(2,105	)
Consolidated net loss	$	(2,429	)	$	(2,749	)

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 three months ended March 31, 2019, we had a net loss of $2,749,000, used $869,000 cash in operations, and at March 31, 2019, we had a working capital deficit of $2,343,000, and current assets of $782,000. We do not believe gross profits will be sufficient to fund our current level of operations or pay our debt due prior to December 31, 2019, and will have to obtain further investment capital to continue to fund operations and seek to refinance our existing debt. We have been, and anticipate that we will continue to be, limited in terms of our capital resources. During the year ended December 31, 2018, and the three months ended March 31, 2019, we generated revenues of $1,364,000 and $364,000 through two business segments (Odor-No-More and BLEST – see Note 10, “Business Segment Information”). Neither generated enough revenues to fund their operations. Our cash position as of date hereof is insufficient to pay our debt obligations due in the next 12 months (see Note 4), which include (i) $2,072,000 in convertible notes, (ii) $440,000 notes due June 6, 2019, that we may extend to September 2019, and (iii) a line of credit in the amount of $430,000 due September 1, 2019. We must either refinance or renegotiate these obligations. Our cash position is insufficient to maintain our current level of operations and research/development, and thus we will be required to raise additional capital to continue to fund our operations in 2019, as well as our future business plans. We continue to raise money through private securities offerings, and continue to negotiate for more substantial financings from private and institutional investors. During the three months ended March 31, 2019, we received $730,000 cash provided by financing activities, and at March 31, 2019 had cash and cash equivalents of $512,000. No assurance can be made of our success at raising money through private or public offerings.

Clyra Medical is unique in that it funds its operations through third party investments. We do not intend to subsidize its operations in the future.

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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, Odor-No-More and BLEST. Odor-No-More 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. Odor-No-More recognizes revenue at a point in time when the order for its goods are shipped if its agreement with the customer is FOB Odor-No-More’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.

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. To date, there have been no discounts or other financing terms for the contracts.

In the future, we may generate revenues from royalties or license fees from our intellectual property. In the event we do so, we anticipate a licensee would 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. Upon entering into a licensing agreement, we will determine the appropriate method of recognizing the royalty and license fees.

Warrants and Conversion Features

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.

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. Further, the convertible debt instrument is examined for any intrinsic beneficial conversion feature (“BCF”) of which the conversion price is less than the closing common stock price on date of issuance. If the relative fair value method is used to value the convertible debt instrument and there is an intrinsic BCF, a further analysis is undertaken of the BCF using an effective conversion price which assumes the conversion price is the relative fair value divided by the number of shares the convertible debt is converted into by its terms. The BCF value is accounted for as equity.

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The warrant and BCF 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.

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, 2018 and March 31, 2019 approximate their respective fair values because of the short-term nature of these instruments. Such instruments consist of cash, accounts receivable, prepaid assets, accounts payable, convertible notes, and other assets and liabilities.

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 4.             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 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 in 2018, as we have added a new accounting manager for Odor-No-More and the engineering division and implemented more detailed reviews of the accounting records. In late 2017, we added an engineering division operating in Tennessee. 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. These activities put stress on our overall controls and procedures. Although we have made some improvements, our chief executive officer and chief financial officer have 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.

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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”). Recognizing the dynamic nature and growth of the Company’s business during the prior 12 months, including the addition of an engineering division, growth of the core operations, and the increase in the number of employees, management has recognized the strain on the overall internal control environment. As a result, 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. Although management believes progress was made related to remediating the material weakness noted at December 31, 2017 by adding a new accounting manager and implementing more detailed reviews of the accounting records, it believes additional changes will be necessary to alleviate its concerns as the company grows. There was no further change in our internal control over financial reporting that occurred during the nine-month period covered by this Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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.

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PART II

OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following is a report of the sales of unregistered securities during the period covered by this report not previously reported in an annual report on Form 10-K, a Quarterly Report on Form 10-Q, or a Current Report on Form 8-K.

Stock

On January 15 and March 20, 2019, we issued 44,288 and 54,305 shares, respectively, of our common stock for $20,000 of interest due to our note and line of credit holders.

On March 11 and March 29, 2019, we issued 100,000 and 138,252 shares, respectively, of our common stock pursuant to consulting agreements totaling $47,000 for services to our company.

On January 24, February 13, March 6 and March 26, 2019, we issued a total of 1,679,248 shares of our common stock to Vista Capital upon its election to convert $215,000 of the Vista 2017 Note. Of that amount, 1,638,479 shares were issued as payment of principal, and 40,769 shares as payment of interest.

Options

During the three months ended March 31, 2019, we issued options to purchase 731,250 shares of our common stock at exercise prices ranging between $0.16 – $0.25 per share to vendors for fees for service, and an aggregate 138,252 shares of our common stock to a consultant for fees for service at $0.22 per share.

Promissory Notes

During the three months ended March 31, 2019, certain investors converted promissory notes to our common stock (see Note 4 to our Consolidated Financial Statements titled “Debt Obligations”, and specifically the subsection titled “Conversion of Debt Obligations”).

During the three months ended March 31, 2019, we incurred new debt obligations (see Note 4 to our Consolidated Financial Statements titled “Debt Obligations”, and specifically the subsections titled “Notes payable, mature January 5, 2019,” “Convertible Note, matures June 15, 2021 (OID Note),” and “Line of credit, matures September 1, 2019.” We also extended a debt obligation that had been due on September 18, 2018 (see Note 4, subsection titled “Convertible Note, matures December 18, 2018 (Vista Capital)”.)

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 5. Other Information

Crossover Capital Investment

On May 13, 2019, we received $95,000 and issued a Convertible Note to Crossover Capital Fund I, LP (“Crossover Capital”) in the principal amount of $110,000 (the “Crossover Capital Note”), representing a 10% original issue discount, and a deduction of $5,000 for legal fees and due diligence. The note is due nine months from the date of issuance. We and Crossover Capital concurrently entered into a Securities Purchase Agreement. The Crossover Capital Note is convertible at the option of the holder at a conversion price equal to 70% of the lowest closing bid price of the Company’s common stock during the 25 trading days prior to the conversion date. We may prepay the Crossover Capital Note up to 180 days after issuance, by paying a prepayment penalty that increases from 5% within the first 30 days, to 30% during the last 30. Upon the occurrence of an event of default, as such term is defined under the note, additional interest will accrue from the date of the event of default at a rate equal to the lesser of 24% per annum or the highest rate permitted by law.

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Item 6. Exhibits

See the Exhibit Index for a list of exhibits filed as part of this report and incorporated herein by reference.

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	Amended and Restated Articles of Incorporation of Clyra Medical Technologies, Inc.	Form 8-K	1/6/2016
3.4	Certificate of Amendment to Certificate of Incorporation, filed May 25, 2018	Pos Am	6/22/2018
4.1	Form of Convertible Promissory Note issued in 2015 Unit Offering	Form 10-K	3/31/2015
4.2	Form of Series A Stock Purchase Warrant issued in 2015 Unit Offering	Form 10-K	3/31/2015
4.3	Form of Stock Options issued in exchange for reduction in accounts payable.	Form 10-K	3/31/2015
4.4	BioLargo, Inc. Investors’ Rights Agreement dated December 30, 2015, as a shareholder of Clyra Medical Technologies, Inc.	Form 8-K	1/6/2016
4.5	Stock purchase warrant issued with Line of Credit in June 2016	Form 10-Q	8/15/2016
4.6	Form of Note issued to One Year Note holder dated December 30, 2016	Form S-1	1/25/2017
4.7	Form of Warrant issued to One Year Note holder dated December 30, 2016	Form S-1	1/25/2017
4.8	Stock Option dated February 10, 2017 issued to Chief Financial Officer Charles K. Dargan II.	Form 8-K	2/14/2017
4.9	Form of Note issued in Summer 2017 Offering	Form 10-Q	8/14/2017
4.10	Form of Warrant issued in Summer 2017 Offering	Form 10-Q	8/14/2017
4.11	Form of One-Year Note issued July 2017	Form 10-Q	8/14/2017
4.12	Form of Warrant issued to One-Year Noteholder July 2017	Form 10-Q	8/14/2017
4.13	Two-year Note in face amount of $440,000 issued July 2017	Form 10-Q	8/14/2017
4.14	Purchase Agreement, dated as of August 25, 2017 by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC	Form 8-K	8/31/2017
4.15	Securities Purchase Agreement, dated as of December 14, 2017 by and between BioLargo, Inc. and Vista Capital Investments, LLC.	Form 8-K	12/22/2017
4.16	Registration Rights Agreement, dated as of December 14, 2017, by and between BioLargo, Inc. and Vista Capital Investments, LLC.	Form 8-K	12/22/2017
4.17	Convertible Promissory Note issued to Vista Capital Investments LLC dated December 14, 2017	Form 8-K	12/22/2017

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4.18	December 18, 2017, amendment to Promissory Note dated December 14, 2017 issued to Vista Capital Investments, LLC.	Form 8-K	12/22/2017
4.19	Stock Option dated December 31, 2017, issued to Chief Financial Officer Charles K. Dargan II	Form 8-K	1/3/2018
4.20	Promissory Note dated January 16, 2018, by and between BioLargo, Inc. and FirstFire Global Opportunity Fund, LLC.	S-1	1/17/2018
4.21	Line of credit, matures September 1, 2019	Form 10-Q	5/14/2018
4.22	Warrant issued with Line of credit that matures September 1, 2019	Form 10-Q	5/14/2018
4.23	$50,000 convertible note, matures March 8, 2020	Form 10-Q	5/14/2018
4.24	Form of convertible notes that mature April 20, 2021 (Spring 2018 Offering)	Form 10-Q	5/14/2018
4.25	Form of warrant issued with convertible notes that mature April 20, 2021 (Spring 2018 Offering)	Form 10-Q	5/14/2018
4.26	Amendment to $440,000 convertible notes that matures July 20, 2019	Form 10-Q	5/14/2018
4.27	2018 Equity Incentive Plan	Form S-8	6/22/2018
4.28	Stock Option Award Agreement under 2018 Equity Incentive Plan	Form S-8	6/22/2018
4.29	Notice of Stock Option Grant under 2018 Equity Incentive Plan	Form S-8	6/22/2018
4.30	Restricted Stock Unit Award Agreement under 2018 Equity Incentive Plan	Form S-8	6/22/2018
4.31	Notice of Restricted Stock Unit Award under 2018 Equity Incentive Plan	Form S-8	6/22/2018
4.32	September 2018 Amendment to Promissory Note dated December 14, 2017 issued to Vista Capital Investments, LLC.	Form 8-K	9/18/2018
4.33	Promissory Note issued to Vernal Bay Investments, LLC on September 19, 2018	Form 8-K	9/24/2018
4.34	Promissory Note issued to Chappy Bean, LLC on September 19, 2018	Form 8-K	9/24/2018
4.35	Stock Purchase Agreement and Plan of Reorganziation dated September 26, 2018, with Scion Solutions, LLC	Form 8-K	10/2/2018
4.36	Promissory note issued by Clyra Medical Technologies dated September 26, 2018	Form 8-K	10/2/2018
4.37	Convertible Promissory Note issued to Triton Funds LP dated October 12, 2018	Form 8-K	10/22/2018
4.38	January 2019 Amendment to Promissory Note dated December 14, 2017, by and between BioLargo, Inc. and Vista Capital Investments, LLC.	Form 8-K	1/11/2019
4.39	Convertible Promissory Note issued to Vista Capital Investments LLC dated January 7, 2019	Form 8-K	1/11/2019
4.40	Convertible Promissory Note issued to Tangiers Global, LLC dated January 31, 2019	Form 8-K	2/11/2019
4.41	Stock Purchase Warrant Issued to Lincoln Park Capital on January 31, 2019	Form 8-K	2/11/2019
4.42	Amendment dated March 5, 2019 to Convertible Promissory Note issued to Tangiers Global, LLC dated January 31, 2019	Form 8-K	3/8/2019
4.43	Amendment dated March 5, 2019 to Promissory Note issued to Vernal Bay Investments, LLC on September 19, 2018	Form 8-K	3/8/2019
4.44	Amendment dated March 5, 2019 to Promissory Note issued to Chappy Bean, LLC on September 19, 2018	Form 8-K	3/8/2019

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10.1†	Engagement Agreement dated February 1, 2008 between BioLargo, Inc. and Charles K. Dargan, II	Form 8-K	2/4/2008
10.2	License Agreement between Clyra Medical Technologies, Inc., dated December 17, 2012	Form 8-K	1/6/2016
10.3	December 30, 2015 amendment to License Agreement with Clyra Medical Technologies, Inc.	Form 8-K	1/6/2016
10.4	Consulting Agreement dated December 30, 2015 with Beach House Consulting LLC	Form 8-K	1/6/2016
10.5	Commercial Office Lease Agreement for 14921 Chestnut St., Westminster, CA 92683	Form 8-K	8/24/2016
10.6†	February 10, 2017 extension to Engagement Extension Agreement with Charles K. Dargan, II.	Form 8-K	2/14/2017
10.7†	Employment Agreement with Dennis P. Calvert dated May 2, 2017.	Form 8-K	5/4/2017
10.8†	Lock-Up Agreement with Dennis P. Calvert dated April 30, 2017	Form 8-K	5/4/2017
10.9†	Lock-Up Agreement with Dennis P. Calvert dated May 2, 2017.	Form 8-K	5/4/2017
10.10	Commercial Office Lease Agreement for Oak Ridge Tennessee	Form 8-K	9/8/2017
10.11	Escrow Agreement dated September 26, 2018 regarding Clyra/Scion transaction	Form 8-K	10/2/2018
10.12	Closing Agreement dated December 17, 2018 between Clyra Medical and Scion Solutions	Form 8-K	12/19/2018
10.13†	January 16, 2019 Engagment Extension Agreement by and between BioLargo, Inc. and Charles K. Dargan	Form 8-K	1/18/2019
10.14	Securities Purchase Agreement by and between BioLargo, Inc., and Bellridge Capital, LP dated April 18, 2019	Form 8-K
10.15	10% Convertible Promissory Note issued to Bellridge Capital, LP dated April 18, 2019	Form 8-K
10.16*	Securities Purchase Agreement by and between BioLargo, Inc., and Crossover Capital dated May 10, 2019
10.17*	Convertible Promissory Note issued to Crossover Capital dated May 10, 2019
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**	XBRL Instance
101.SCH**	XBRL Taxonomy Extension Schema
101.CAL**	XBRL Taxonomy Extension Calculation
101.DEF**	XBRL Taxonomy Extension Definition
101.LAB**	XBRL Taxonomy Extension Labels
101.PRE**	XBRL Taxonomy Extension Presentation

* Filed herewith

** Furnished herewith

† Management contract or compensatory plan, contract or arrangement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 15, 2019	BIOLARGO, INC. By: /s/ DENNIS P. CALVERT
	Dennis P. Calvert Chief Executive Officer
Date: May 15, 2019	By: /s/ CHARLES K. DARGAN, II
	Chief Financial Officer

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EX-10.16

Exhibit 10.16

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of May 10, 2019, by and between BIOLARGO, INC., a Delaware corporation, with headquarters located at 14921 Chestnut St., Westminster, CA 92683 (the “Company”), and CROSSOVER CAPITAL FUND I, LLC, a Washington limited liability company, with its address at 365 Ericksen Ave., NE #315, Bainbridge Island, WA 98110 (the “Buyer”).

WHEREAS:

A.     The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);

B.     Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement, the 11% convertible note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of US$110,000.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note; and

C.     The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth immediately below its name on the signature pages hereto.

NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:

1. PURCHASE AND SALE OF NOTE.

a.     Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto, subject to the express terms of the Note.

b.     Form of Payment. On or around the Closing Date (as defined below), the Buyer shall pay the purchase price for Note, which is equal to $100,000.00 (the “Purchase Price”) by wire transfer of immediately available funds, in accordance with the Company’s written wiring instructions, against delivery of the Note, and (i) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer.

c.     Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be 5:00 P.M., Eastern Standard Time on or about May 10, 2019, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.

2. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants to the Company that:

a.     Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note (including, without limitation, such additional shares of Common Stock, if any, as are issuable (i) on account of interest on the Note or (ii) as a result of the events described in Sections 1.3 and 1.4(g) of the Note, such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.

b.     Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

c.     Information. The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company's representations and warranties made herein.

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d.     Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

e.     Transfer or Re-sale. The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

f.     Legends. The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

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The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

g.     Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.

h.     Residency. The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.

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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Buyer that:

a.     Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. Schedule 3(a) sets forth a list of all of the Subsidiaries of the Company and the jurisdiction in which each is incorporated. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

b.     Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

c.     Capitalization. Except as disclosed in the SEC Documents, no shares are reserved for issuance pursuant to the Company’s stock option plans, no shares are reserved for issuance pursuant to securities (other than the Note) exercisable for, or convertible into or exchangeable for shares of Common Stock and sufficient shares are reserved for issuance upon conversion of the Note (as required by the Note and transfer agent share reserve letter). All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. Except as disclosed in the SEC Documents, as of the effective date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Note or the Conversion Shares. The Company has filed in its SEC Documents true and correct copies of the Company’s Certificate of Incorporation as in effect on the date hereof (“Certificate of Incorporation”), the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto. Upon request, the Company shall provide the Buyer with a written update of this representation signed by the Company’s Chief Executive on behalf of the Company as of the Closing Date.

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d.     Issuance of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

e.     Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

f.     No Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement, the Note in accordance with the terms hereof or thereof or to issue and sell the Note in accordance with the terms hereof and to issue the Conversion Shares upon conversion of the Note. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the Over-the- Counter Bulletin Board (the “OTCBB”), the OTCQB or any similar quotation system, and does not reasonably anticipate that the Common Stock will be delisted by the OTCBB, the OTCQB or any similar quotation system, in the foreseeable future. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

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g.     SEC Documents; Financial Statements. The Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). The Company has delivered to the Buyer true and complete copies of the SEC Documents, except for such exhibits and incorporated documents. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business, and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company. The Company is subject to the reporting requirements of the 1934 Act. For the avoidance of doubt, filing of the documents required in this Section 3(g) via the SEC’s Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”) shall satisfy all delivery requirements of this Section 3(g).

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h.     Absence of Certain Changes. There have been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.

i.     Absence of Litigation. There is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. Schedule 3(i) contains a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

j.     Patents, Copyrights, etc. The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); Except as disclosed in the SEC Documents, there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property or other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual Property.

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k.     No Materially Adverse Contracts, Etc. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.

l.     Tax Status. The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing authority.

m.     Certain Transactions. Except as disclosed in the SEC documents and for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

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n.     Disclosure. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement and provided to the Buyer pursuant to Section 2(d) hereof and otherwise in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the 1933 Act).

o.     Acknowledgment Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

p.     No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

q.     No Brokers. The Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.

r.     Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.

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s. [Intentionally Omitted].

t.     Title to Property. Except as disclosed in the SEC Documents the Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects or such as would not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.

u.     Internal Accounting Controls. Except as disclosed in the SEC Documents the Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

v.     Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

w.     [Intentionally Omitted]

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x.     No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.

y.     Insurance. Upon written request the Company will provide to the Buyer true and correct copies of all policies relating to directors’ and officers’ liability coverage, errors and omissions coverage, and commercial general liability coverage, if any.

z.     Bad Actor. No officer or director of the Company would be disqualified under Rule 506(d) of the Securities Act as amended on the basis of being a "bad actor" as that term is established in the September 19, 2013 Small Entity Compliance Guide published by the Securities and Exchange Commission.

aa.     Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of default under Section 3.4 of the Note.

4. COVENANTS

a.     Best Efforts. The parties shall use their commercially reasonable best efforts to satisfy timely each of the conditions described in Section 6 and 7 of this Agreement.

b.     Use of Proceeds. The Company shall use the proceeds from the sale of the Note for working capital and other general corporate purposes and shall not, directly or indirectly, use such proceeds for any loan to or investment in any other corporation, partnership, enterprise or other person (except in connection with its currently existing direct or indirect Subsidiaries).

c.     Financial Information. The Company agrees to send or make available the following reports to the Buyer until the Buyer transfers, assigns, or sells all of the Securities: (i) within ten (10) days after the filing with the SEC, a copy of its Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within one (1) day after release, copies of all press releases issued by the Company or any of its Subsidiaries; and (iii) contemporaneously with the making available or giving to the shareholders of the Company, copies of any notices or other information the Company makes available or gives to such shareholders. For the avoidance of doubt, filing the documents required in (i) above via EDGAR or releasing any documents set forth in (ii) above via a recognized wire service shall satisfy the delivery requirements of this Section 4(f).

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d.     Listing. The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCBB, OTCQB, OTC Pink or any equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange (“NYSE”), or the NYSE MKT and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any material notices it receives from the OTCBB, OTCQB and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.

e.     Corporate Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the OTCBB, OTCQB, OTC Pink, Nasdaq, NasdaqSmallCap, NYSE or AMEX.

f.     No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

g.     Failure to Comply with the 1934 Act. So long as the Buyer beneficially owns the Note, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act.

h.     Trading Activities. Neither the Buyer nor its affiliates has an open short position (or other hedging or similar transactions) in the common stock of the Company and the Buyer agree that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the common stock of the Company.

i.     Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under Section 3.3 of the Note.

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5.     Transfer Agent Instructions. Prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that: (i) no stop transfer instructions to give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold), will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for Conversion Shares to be issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; and (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement. Nothing in this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 2(g) hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides the Company, at the cost of the Buyer, with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

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6.           CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS TO SELL. The obligation of the Company hereunder to issue and sell the Note to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

a.     The Buyer shall have executed this Agreement and delivered the same to the Company.

b. The Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.

c.     The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.

d.     No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

7.           CONDITIONS PRECEDENT TO THE BUYER’S OBLIGATION TO PURCHASE. The obligation of the Buyer hereunder to purchase the Note at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:

a.     The Company shall have executed this Agreement and delivered the same to the Buyer.

b.     The Company shall have delivered to the Buyer duly executed Note (in such denominations as the Buyer shall request) in accordance with Section 1(b) above.

c.     The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited to certificates with respect to the Company’s Certificate of Incorporation, By-laws and Board of Directors’ resolutions relating to the transactions contemplated hereby.

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d.     No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

e.     No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.

f.     The Conversion Shares shall have been authorized for quotation on the OTCBB, OTCQB or any similar quotation system and trading in the Common Stock on the OTCBB, OTCQB or any similar quotation system shall not have been suspended by the SEC or the OTCBB, OTCQB or any similar quotation system.

g.     The Buyer shall have received an officer’s certificate described in Section 3(c) above, dated as of the Closing Date.

8. GOVERNING LAW; MISCELLANEOUS.

a.     Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts or federal courts located in New York, NY. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

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b.     Counterparts; Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

c.     Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

d.     Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

e.     Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.

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f.     Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, facsimile, or electronic mail, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile or electronic mail, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

If to the Company, to:

BIOLARGO, INC.

14921 Chestnut St.

Westminster, CA 92683

e-mail: info@biolargo.com

If to the Holder, to:

CROSSOVER CAPITAL FUND I, LLC

365 Ericksen Ave., NE #315

Bainbridge Island, WA 98110

e-mail: ken@crossovercap.com

Each party shall provide notice to the other party of any change in address.

g.     Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, subject to Section 2(f), the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.

h.     Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

i.     Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

j.     Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

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k.     No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

l. Remedies.

(i)     The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

(ii)     In addition to any other remedy provided herein or in any document executed in connection herewith, Borrower shall pay Holder for all costs, fees and expenses in connection with any litigation, contest, dispute, suit or any other action to enforce any rights of Holder against Borrower in connection herewith, including, but not limited to, costs and expenses and attorneys' fees, and costs and time charges of counsel to Holder.

m.     Publicity. The Company, and the Buyer shall have the right to review a reasonable period of time before issuance of any press releases, SEC, OTCQB (or other applicable trading market), or FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or SEC, OTCQB (or other applicable trading market) or FINRA filings with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof).

[ - signature page follows - ]

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IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.

BIOLARGO, INC.

By:                                                        

Name: Dennis P. Calvert

Title: Chief Executive Officer

Date signed: ________________

CROSSOVER CAPITAL FUND I, LLC

By:                                                                   

Name: Kenneth Lustig

Title: Manager

Date signed: ________________

AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Note:	US$110,000.00
Aggregate Purchase Price:	US$100,000.00*

*The $100,000.00 purchase price shall be paid within a reasonable amount of time after the full execution of the Note and all related transaction documentation.

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EX-10.17

Exhibit 10.17

NEITHER THE ISSUANCE NOR SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

Principal Amount: $110,000.00	Issue Date: May 10, 2019
Purchase Price: $100,000.00
Original Issue Discount: $10,000.00

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, BIOLARGO, INC., a Delaware corporation (hereinafter called the “Borrower”) (Trading Symbol: BLGO), hereby promises to pay to the order of CROSSOVER CAPITAL FUND I, LLC, a Washington limited liability company, or registered assigns (the “Holder”) the principal sum of $110,000.00 (the “Principal Amount”), together with a one-time interest charge of eleven percent (11%), at maturity or upon acceleration or otherwise, as set forth herein (the “Note”). The consideration to the Borrower for this Note is $100,000.00 (the “Consideration”). At the closing, the outstanding principal amount under this Note shall be $110,000.00, consisting of the Consideration plus the OID (as defined herein). The maturity date shall be nine (9) months from the Issue Date (the “Maturity Date”), and is the date upon which the principal sum, as well as any accrued and unpaid interest and other fees shall be due and payable. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note, which is not paid by the Maturity Date, shall bear interest at the rate of the lesser of (i) twenty four percent (24%) per annum and (ii) the maximum amount permitted by applicable law from the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 360-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into the Borrower’s common stock (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed.

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This Note carries an original issue discount of $10,000.00 (the “OID”), to cover the Holder’s accounting fees, due diligence fees, monitoring, and/or other transactional costs incurred in connection with the purchase and sale of the Note, which is included in the principal balance of this Note. Thus, the purchase price of this Note shall be $100,000.00, computed as follows: the Principal Amount minus the OID.

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following additional terms shall also apply to this Note:

ARTICLE I. CONVERSION RIGHTS

1.1                                   Conversion Right. The Holder shall have the right at any time on or after the Issue Date to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived (up to a maximum of 9.99%) by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

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1.2 Conversion Price.

(a)     Calculation of Conversion Price. The Conversion Price shall be the Variable Conversion Price (as defined herein) (subject, in each case, to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events) (also subject to adjustment as further described herein). The "Variable Conversion Price" shall mean 70% multiplied by the Market Price (as defined herein) (representing a discount rate of 30%). “Market Price” means the lowest one (1) Trading Price (as defined below) for the Common Stock during the twenty-five (25) Trading Day period ending on the last complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the lowest closing bid price on the Over-the- Counter Pink Marketplace, OTCQB, or applicable trading market (the “OTCQB”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. www.Nasdaq.com) or, if the OTCQB is not the principal trading market for such security, on the principal securities exchange or trading market where such security is listed or traded or, if the lowest intraday trading price of such security is not available in any of the foregoing manners, the lowest intraday price of any market makers for such security that are quoted on the OTC Markets. If the Trading Prices cannot be calculated for such security on such date in the manner provided above, the Trading Prices shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Prices are required in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCQB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. If at any time while this Note is outstanding, the Borrower’s Common Stock are not deliverable via DWAC, an additional 5% discount shall be factored into the Variable Conversion Price until this Note is no longer outstanding. If the Borrower fails to maintain its status as “DTC Eligible” for any reason, an additional 5% discount shall be factored into the Variable Conversion Price until this Note is no longer outstanding.

Each time, while this Note is outstanding, the Borrower enters into a Section 3(a)(9) transaction (including but not limited to the issuance of new promissory notes or of a replacement promissory note), or Section 3(a)(10) transaction, in which any 3^rd party has the right to convert monies owed to that 3^rd party (or receive shares pursuant to a settlement or otherwise) at a discount to market greater than the Variable Conversion Price in effect at that time (prior to all other applicable adjustments in the Note), then the Variable Conversion Price shall be automatically adjusted to such greater discount percentage (prior to all applicable adjustments in this Note) until this Note is no longer outstanding. Each time, while this Note is outstanding, the Borrower enters into a Section 3(a)(9) transaction (including but not limited to the issuance of new promissory notes or of a replacement promissory note), or Section 3(a)(10) transaction, in which any 3^rd party has a look back period greater than the look back period in effect under the Note at that time, then the Holder’s look back period shall automatically be adjusted to such greater number of days until this Note is no longer outstanding. The adjustments in this paragraph, with respect to Section 3(a)(9) transactions, shall not take effect unless the holder of the note with more favorable terms is eligible to convert. The Borrower shall give written notice to the Holder, with the adjusted Variable Conversion Price and/or adjusted look back period (each adjustment that is applicable due to the triggering event), within one (1) business day of an event that requires any adjustment described in the two immediately preceding sentences.

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All expenses incurred by Holder with respect to the Borrower’s transfer agent, for the issuance of the Common Stock into which this Note is convertible into, shall immediately and automatically be added to the balance of the Note at such time as the expenses are incurred by Holder.

If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the Holder, the Conversion Price hereunder may equal such par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the Conversion Price not been adjusted by the Holder to the par value price.

1.3                                   Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note. The Borrower is required at all times to have authorized and reserved five (5) times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations hereunder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

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1.4 Method of Conversion.

(a)     Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part, at any time on or after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

(b)     Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

(c)     Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

(d)     Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof.

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(e)     Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

(f)     Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

(g)     Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.

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1.5                                  Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor. Except as otherwise provided (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Borrower so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Borrower does not accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

1.6     [Intentionally Omitted].

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1.7                               Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower’s failure to convert this Note.

ARTICLE II. CERTAIN COVENANTS

2.1                                   Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.

2.2                                   Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.

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ARTICLE III. EVENTS OF DEFAULT

If any of the following events of default (each, an “Event of Default”) shall occur:

3.1                                   Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise, and such breach continues for a period of five (5) days.

3.2                                  Conversion and the Shares. The Borrower fails to reserve a sufficient amount of shares of common stock as required under the terms of this Note (including Section 1.3 of this Note), fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for two (2) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent.

3.3                                   Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder.

3.4                                Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith, shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note.

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3.5                            Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

3.6                               [Intentionally Omitted].

3.7                               Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower.

3.8                               Delisting of Common Stock. The Borrower shall fail to maintain the listing or quotation of the Common Stock on the OTCQB or an equivalent replacement exchange, the Nasdaq Global Market, the Nasdaq Capital Market, the New York Stock Exchange, or the NYSE American.

3.9                               Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act (including but not limited to becoming delinquent in its filings), and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

3.10                             Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

3.11                            Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

3.12                            Financial Statement Restatement. The Borrower replaces its auditor, or any restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note.

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3.13                             Replacement of Transfer Agent. In the event that the Borrower replaces its transfer agent, and the Borrower fails to provide prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

3.14                              [Intentionally Omitted].

3.15                              Inside Information. Any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date.

3.16                               No bid. At any time while this Note is outstanding, the lowest Trading Prices on the OTCQB or other applicable principal trading market for the Common Stock is equal to or less than $0.0001.

Upon the occurrence of any Event of Default specified in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, and/or 3.16 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to 125% multiplied by the then outstanding entire balance of the Note (including principal and accrued and unpaid interest), plus Default Interest, if any, plus any amounts owed to the Holder pursuant to Sections 1.4(g) hereof (collectively, in the aggregate of all of the above, the “Default Sum”), and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

The Holder shall have the right at any time to require the Borrower to issue the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect, subject to issuance in tranches due to the beneficial ownership limitations contained in this Note.

ARTICLE IV. MISCELLANEOUS

4.1                              Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

11

4.2                            Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, facsimile, or electronic mail addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery, upon electronic mail delivery, or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

If to the Borrower, to:

BIOLARGO, INC.

14921 Chestnut St.

Westminster, CA 92683

e-mail: info@biolargo.com

If to the Holder:

CROSSOVER CAPITAL FUND I, LLC

365 Ericksen Ave., NE #315 Bainbridge Island, WA 98110

e-mail: ken@crossovercap.com

4.3                            Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4                           Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Neither the Borrower nor the Holder shall assign this Note or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

12

4.5                                Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

4.6                             Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state and/or federal courts of New York, NY. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

4.7                               Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

4.8                               Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

13

4.9                             Prepayment. Notwithstanding anything to the contrary contained in this Note, the Borrower may prepay this Note, during the initial 30 calendar day period after the issuance of this Note, by making a payment to the Holder of an amount in cash equal to 105% multiplied by the total amount outstanding under the Note. Further, the Borrower may prepay this Note, from the 31^st calendar day through the 60^th calendar day after the issuance of this Note, by making a payment to the Holder of an amount in cash equal to 110% multiplied by the total amount outstanding under the Note. Further, the Borrower may prepay this Note, from the 61^st calendar day through the 90^th calendar day after the issuance of this Note, by making a payment to the Holder of an amount in cash equal to 115% multiplied by the total amount outstanding under the Note. Further, the Borrower may prepay this Note, from the 91^st calendar day through the 120^th calendar day after the issuance of this Note, by making a payment to the Holder of an amount in cash equal to 120% multiplied by the total amount outstanding under the Note. Further, the Borrower may prepay this Note, from the 121^st calendar day through the 150^th calendar day after the issuance of this Note, by making a payment to the Holder of an amount in cash equal to 125% multiplied by the total amount outstanding under the Note. Further, the Borrower may prepay this Note, from the 151^st calendar day through the 180^th calendar day after the issuance of this Note, by making a payment to the Holder of an amount in cash equal to 130% multiplied by the total amount outstanding under the Note. The Borrower may not prepay this Note after the 180^th calendar day after the issuance of this Note.

4.10                            Usury. To the extent it may lawfully do so, the Borrower hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Holder in order to enforce any right or remedy under this Note.  Notwithstanding any provision to the contrary contained in this Note, it is expressly agreed and provided that the total liability of the Borrower under this Note for payments which under the applicable law are in the nature of interest shall not exceed the maximum lawful rate authorized under the law applicable to this Note (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under the law applicable to this Note in the nature of interest that the Borrower may be obligated to pay under this Note exceed such Maximum Rate.  It is agreed that if the maximum contract rate of interest allowed by the law applicable to this Note is increased or decreased by statute or any official governmental action subsequent to the Issue Date, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Note from the effective date thereof forward, unless such application is precluded by applicable law.  If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Borrower to the Holder with respect to indebtedness evidenced by this the Note, such excess shall be applied by the Holder to the unpaid principal balance of any such indebtedness or be refunded to the Borrower, the manner of handling such excess to be at the Holder’s election.

4.11                           Section 3(a)(10) Transactions. If at any time while this Note is outstanding, the Borrower enters into a transaction structured in accordance with, based upon, or related or pursuant to, in whole or in part, Section 3(a)(10) of the Securities Act (a “3(a)(10) Transaction”), then a liquidated damages charge of 25% of the outstanding principal balance of this Note at that time, will be assessed and will become immediately due and payable to the Holder, either in the form of cash payment or as an addition to the balance of the Note, as determined by mutual agreement of the Borrower and Holder.

14

4.12                                 [Intentionally Omitted].

4.13                                 [Intentionally Omitted]..

4.14                                 Terms of Future Financings.  So long as this Note is outstanding, upon any issuance by the Borrower of a convertible promissory note with (i) a conversion price discount greater than the Variable Conversion Price, or (ii) an original issue discount and interest rate that in the aggregate is greater than the original issue discount and interest rate (22%) herein, then the Borrower shall notify the Holder of such fact and such term, at Holder’s option, shall replace the Variable Conversion Price, or increase the OID and/or interest rate, herein, effective at the then-current principal balance.

[signature page to follow]

15

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this May 10, 2019.

BIOLARGO, INC.

By:                                                  

Name: Dennis P. Calvert

Title: Chief Executive Officer

Security number: 33213

Principal amount: $110,000

Investor: Crossover Capital

16

EXHIBIT A -- NOTICE OF CONVERSION

The undersigned hereby elects to convert $                               principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of BIOLARGO, INC., a Delaware corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of April 15, 2019 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

[  ] The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

Name of DTC Prime

Broker: Account Number:

[  ] The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

___________________________

___________________________

Date of Conversion:                                                                          

Applicable Conversion Price:                            $                          

Number of Shares of Common Stock to be Issued

Pursuant to Conversion of the Notes:                                     

Amount of Principal Balance Due remaining

Under the Note after this conversion:                                     

CROSSOVER CAPITAL FUND I, LLC

By:                                                          

Name:                                                     

Title:                                                       

Date:                                                       

Security number: 33213

17

EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Dennis P. Calvert, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of BioLargo, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2019	By:	/s/ DENNIS P. CALVERT
		Dennis P. Calvert
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Charles K. Dargan II, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of BioLargo, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2019	By:	/s/ CHARLES K. DARGAN II
		Charles K. Dargan II
		Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Dennis P. Calvert, Chief Executive Officer of BioLargo, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that the Quarterly Report of BioLargo, Inc. on Form 10-Q for the quarter ended March 31, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of BioLargo, Inc.

Dated: May 15, 2019	By:	/s/ DENNIS P. CALVERT
		Dennis P. Calvert
		President and Chief Executive Officer

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to BioLargo, Inc. and will be retained by BioLargo, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

I, Charles K. Dargan II, Chief Financial Officer of BioLargo, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge that the Quarterly Report of BioLargo, Inc. on Form 10-Q for the quarter ended March 31, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of BioLargo, Inc.

Dated: May 15, 2019	By:	/s/ CHARLES K. DARGAN II
		Charles K. Dargan II
		Chief Financial Officer

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to BioLargo, Inc. and will be retained by BioLargo, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2019	May 10, 2019
Document Information [Line Items]
Entity Registrant Name	BIOLARGO, INC.
Entity Central Index Key	0000880242
Trading Symbol	blgo
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		144,953,058
Document Type	10-Q
Document Period End Date	Mar. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 512,000	$ 655,000
Accounts receivable	210,000	257,000
Inventories, net of allowance	26,000	26,000
Prepaid expenses and other current assets	34,000	17,000
Total current assets	782,000	955,000
In-process research and development (Note 8)	1,893,000	1,893,000
Equipment, net of depreciation	110,000	126,000
Other non-current assets	35,000	35,000
Right-of-use, operating lease, net of amortization	399,000
Deferred offering cost	176,000	176,000
Total assets	3,395,000	3,185,000
Current liabilities:
Accounts payable and accrued expenses	631,000	501,000
Notes payable	490,000	400,000
Line of credit	430,000	430,000
Convertible notes payable	2,072,000	1,365,000
Discount on convertible notes payable, and line of credit, net of amortization	(646,000)	(205,000)
Lease liability	116,000
Customer deposit	32,000
Total current liabilities	3,125,000	2,491,000
Long-term liabilities:
Convertible notes and note payable	235,000	285,000
Clyra Medical note payable (Note 8)	1,242,000	1,292,000
Discount on convertible notes payable, net of amortization	(105,000)	(118,000)
Lease liability	283,000
Total long-term liabilities	2,063,000	1,817,000
Total liabilities	5,188,000	4,308,000
COMMITMENTS, CONTINGENCIES (Note 11)
STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred Series A, $.00067 Par Value, 50,000,000 Shares Authorized, -0- Shares Issued and Outstanding, at December 31, 2018 and March 31, 2019, respectively.
Common stock, $.00067 Par Value, 400,000,000 Shares Authorized, 141,466,071 and 144,473,453 Shares Issued, at December 31, 2018 and March 31, 2019, respectively.	97,000	95,000
Additional paid-in capital	112,556,000	110,222,000
Accumulated other comprehensive loss	(94,000)	(90,000)
Accumulated deficit	(114,641,000)	(111,723,000)
Total BioLargo Inc. and Subsidiaries stockholders’ equity (deficit)	(2,082,000)	(1,496,000)
Non-controlling interest (Note 8)	289,000	373,000
Total stockholders’ equity (deficit)	(1,793,000)	(1,123,000)
Total liabilities and stockholders’ equity (deficit)	3,395,000	3,185,000
Scion Acquisition [Member] | Clyra Acquisition, Common Stock Redeemable for BioLargo Common Shares [Member]
Long-term liabilities:
Liability to Clyra Medical shareholder (Note 8)	643,000	643,000
Convertible Notes Issued by Clyra Medical Maturing on June 17, 2020 [Member]
Long-term liabilities:
Clyra Medical note payable (Note 8)	1,007,000	$ 1,007,000
Convertible Notes Issued by Clyra Medical Maturing on June 17, 2020 [Member] | Scion Acquisition [Member]
Long-term liabilities:
Clyra Medical note payable (Note 8)	$ 1,007,000

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Mar. 31, 2019	Dec. 31, 2018
Convertible Preferred Stock, Par Value (in dollars per share)	$ 0.00067	$ 0.00067
Convertible Preferred Stock, Shares Authorized (in shares)	50,000,000	50,000,000
Convertible Preferred Stock, Shares Issued (in shares)	0	0
Convertible Preferred Stock, Shares Outstanding (in shares)	0	0
Common Stock, Par Value (in dollars per share)	$ 0.00067	$ 0.00067
Common Stock, Shares Authorized (in shares)	400,000,000	400,000,000
Common Stock, Shares Issued (in shares)	144,473,453	141,466,071

XML

Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenue:
Revenue	$ 364,000	$ 364,000
Cost of revenue
Cost of Goods and Services Sold	(192,000)	(163,000)
Gross profit	172,000	100,000
Operating expenses:
Selling, general and administrative expenses	1,392,000	1,170,000
Research and development	426,000	522,000
Depreciation and amortization	16,000	10,000
Total operating expenses	1,834,000	1,702,000
Operating loss	(1,662,000)	(1,602,000)
Grant income	82,000	5,000
Interest expense	(985,000)	(832,000)
Gain (Loss) on Extinguishment of Debt, Total	(184,000)
Total other (expense) income	(1,087,000)	(827,000)
Net loss	(2,749,000)	(2,429,000)
Net loss attributable to noncontrolling interest	(173,000)	(107,000)
Net loss attributable to common shareholders	$ (2,576,000)	$ (2,322,000)
Net loss per share attributable to common stockholders:
Loss per share attributable to shareholders – basic and diluted (in dollars per share)	$ (0.02)	$ (0.02)
Weighted average number of common shares outstanding: (in shares)	142,246,766	104,695,818
Comprehensive loss attributable to common shareholders
Net loss	$ (2,749,000)	$ (2,429,000)
Foreign translation adjustment	(4,000)	8,000
Comprehensive loss	(2,753,000)	(2,421,000)
Comprehensive loss attributable to noncontrolling interest	(1,793,000)	(107,000)
Comprehensive loss attributable to shareholders	(2,580,000)	(2,314,000)
Product [Member]
Revenue:
Revenue	301,000	224,000
Cost of revenue
Cost of Goods and Services Sold	(140,000)	(134,000)
Service [Member]
Revenue:
Revenue	63,000	39,000
Cost of revenue
Cost of Goods and Services Sold	$ (52,000)	$ (29,000)

XML

Consolidated Statement of Stockholders' Equity (Deficit) (Unaudited) - USD ($)	Stock Issued for Financing Fee [Member] Common Stock [Member]	Stock Issued for Financing Fee [Member] Additional Paid-in Capital [Member]	Stock Issued for Financing Fee [Member]	Extension of Convertible Note Maturity Date, Vista Capital [Member] Additional Paid-in Capital [Member]	Extension of Convertible Note Maturity Date, Vista Capital [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Noncontrolling Interest [Member]	Total
Balance (in shares) at Dec. 31, 2017						104,164,465
Balance at Dec. 31, 2017						$ 70,000	$ 97,093,000	$ (101,205,000)	$ (62,000)	$ 695,000	$ (3,409,000)
Issuance of common stock for service (in shares)						714,436
Issuance of common stock for service						$ 1,000	196,000				197,000
Issuance of common stock for interest (in shares)						617,072
Issuance of common stock for interest							165,000				165,000
Financing fee in stock (in shares)	252,385
Financing fee in stock		$ 85,000	$ 85,000
Sale of stock for cash (in shares)						658,226
Sale of stock for cash							168,000				168,000
Stock option compensation expense							320,000				320,000
Warrants and conversion feature issued as discount on convertible notes payable							282,000				282,000
Deemed dividend for the change in accounting for derivative liability							297,000	(297,000)
Net loss								(2,323,000)		(107,000)	(2,429,000)
Foreign currency translation									8,000		8,000
Balance (in shares) at Mar. 31, 2018						106,406,584
Balance at Mar. 31, 2018						$ 71,000	98,606,000	(103,825,000)	(54,000)	588,000	(4,614,000)
Balance (in shares) at Dec. 31, 2018						141,466,071
Balance at Dec. 31, 2018						$ 95,000	110,222,000	(111,723,000)	(90,000)	373,000	(1,123,000)
Issuance of common stock for service (in shares)						1,229,541
Issuance of common stock for service						$ 1,000	205,000				206,000
Issuance of common stock for interest (in shares)						139,362
Issuance of common stock for interest							25,000				25,000
Stock option compensation expense							352,000				352,000
Warrants and conversion feature issued as discount on convertible notes payable				$ 56,000	$ 56,000		1,115,000				1,115,000
Deemed dividend for the change in accounting for derivative liability							342,000	(342,000)
Net loss								(2,576,000)		(173,000)	(2,749,000)
Foreign currency translation									(4,000)		(4,000)
Balance (in shares) at Mar. 31, 2019						144,473,453
Balance at Mar. 31, 2019						$ 97,000	112,556,000	(114,641,000)	(94,000)	289,000	(1,793,000)
Conversion of notes (in shares)						1,638,479
Conversion of notes						$ 1,000	218,000				219,000
Issuance of Clyra Medical common stock							$ 21,000			$ 89,000	$ 110,000

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flows from operating activities
Net loss	$ (2,749,000)	$ (2,429,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock option compensation expense	352,000	320,000
Common stock issued in lieu of salary to officers and fees for services from vendors	206,000	196,000
Common stock issued for interest	25,000	165,000
Interest expense related to amortization of the discount on convertible notes payable and line of credit and deferred financing costs	851,000	635,000
Interest expense related to the fair value of warrants issued as consent for variable debt	54,000
Loss on extinguishment of debt	184,000
Deferred offering expense		4,000
Amortization and depreciation expense	16,000	10,000
Changes in assets and liabilities:
Accounts receivable	47,000	(8,000)
Inventories		(3,000)
Accounts payable and accrued expenses	129,000	127,000
Prepaid expenses and other current assets	(16,000)	(13,000)
Customer deposits	32,000
Net cash used in operating activities	(869,000)	(996,000)
Cash flows from investing activities
Equipment purchases		(19,000)
Net cash used in investing activities		(19,000)
Cash flows from financing activities
Proceeds from convertible notes payable	750,000	380,000
Proceeds from the sale of stock in Clyra Medical	110,000
Repayment of note payable	(300,000)
Proceeds from sale of stock to Lincoln Park Capital		168,000
Proceeds from notes payable	170,000
Proceeds from line of credit		390,000
Net cash provided by financing activities	730,000	938,000
Net effect of foreign currency translation	(4,000)	8,000
Net change in cash	(143,000)	(69,000)
Cash at beginning of year	655,000	990,000
Cash at end of period	512,000	921,000
Supplemental disclosures of cash flow information
Interest	32,000
Income taxes	3,000
Non-cash investing and financing activities
Fair value of warrants issued with convertible notes	1,061,000	282,000
Right of use, operating lease and liability	399,000
Deemed dividend	342,000	297,000
Conversion of Convertible Notes Payable into Common Stock [Member]
Non-cash investing and financing activities
Conversion of debt	220,000
Conversion of Convertible Notes Issued with Original Issue Discount [Member]
Non-cash investing and financing activities
Conversion of debt	217,000
Stock Issued for Financing Fee [Member]
Non-cash investing and financing activities
Fair value of stock issued		$ 85,000

XML

Note 1 - Business and Organization

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note

1.

Business and Organization

Description of Business

BioLargo, Inc. delivers innovative and sustainable technology-based products and services, as well as environmental engineering expertise, across a broad range of industries with an overriding mission to “make life better” with a focus on clean water, clean air, and advanced wound care. 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. For the

three

months ended

March 31, 2019,

we had a net loss of

$2,749,000,

used

$869,000

cash in operations, and at

March 31, 2019,

we had a working capital deficit of

$2,343,000,

and current assets of

$782,000.

We do

not

believe gross profits will be sufficient to fund our current level of operations or pay our debt due prior to

December 31, 2019,

and will have to obtain further investment capital to continue to fund operations and seek to refinance our existing debt. We have been, and anticipate that we will continue to be, limited in terms of our capital resources. During the year ended

December 31, 2018,

and the

three

months ended

March 31, 2019,

we generated revenues of

$1,364,000

and

$364,000

through

two

 business segments (Odor-

No

-More and BLEST – see Note

10,

“Business Segment Information”). Neither generated enough revenues to fund their operations. Our cash position as of date hereof is insufficient to pay our debt obligations due in the next

12

months (see Note

4

), which include (i)

$2,072,000

in convertible notes, (ii)

$440,000

notes due

June 6, 2019,

that we

may

extend to

September 2019,

and (iii) a line of credit in the amount of

$430,000

due

September 1, 2019.

We must either refinance or renegotiate these obligations. Our cash position is insufficient to maintain our current level of operations and research/development, and thus we will be required to raise additional capital to continue to fund our operations in

2019,

as well as our future business plans. We continue to raise money through private securities offerings, and continue to negotiate for more substantial financings from private and institutional investors. During the

three

months ended

March 31, 2019,

we received

$730,000

cash provided by financing activities, and at

March 31, 2019

had cash and cash equivalents of

$512,000.

No

assurance can be made of our success at raising money through private or public offerings.

The foregoing factors raise substantial doubt about our ability to continue as a going concern. Ultimately, our ability to continue as a going concern is dependent upon our ability to attract significant new sources of capital, 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.

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;

Odor-

No

-More, Inc., organized under the laws of the State of California in

2009;

BioLargo Water, Inc., organized under the laws of Canada in

2014;

BioLargo Development Corp., organized under the laws of the State of California in

2016;

and BioLargo Engineering Science and Technologies, LLC, organized under the laws of the State of Tennessee in

2017

(“BLEST”). Additionally, we own

42.0%

of Clyra Medical Technologies, Inc. (“Clyra Medical”), organized under the laws of the State of California in

2012,

and consolidate their financial statements (see Notes

2

and

8

).

The unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to Rule

8

-

03

of Regulation S-

X

under the Securities Act of

1933,

as amended. Accordingly, they do

not

include all of the information and notes required by generally accepted accounting principles for annual financial statements.  In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. For some of our activities, we are still operating in the early stages of the sales and distribution process, and therefore our operating results for the

three

months ended

March 31, 2019

are

not

necessarily indicative of the results that

may

be expected for the year ending

December 

31,

 

2019,

or for any other period. These unaudited consolidated financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Annual Report on Form

10

-K for the year ended

December 31, 2018

filed with the Securities and Exchange Commission (the “SEC”) on

March 29, 2019,

as amended.

XML

Note 2 - Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Significant Accounting Policies [Text Block]

Note

2.

Summary of Significant Accounting Policies

In the opinion of management, the accompanying balance sheet and related statements of operations, cash flows, and stockholders’ deficit include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and Clyra Medical. Management believes Clyra Medical’s financial statements are appropriately consolidated with that of the Company after reviewing the guidance of ASC Topic 

810,

 “Consolidation”, and concluding that BioLargo controls Clyra Medical. While BioLargo does

not

have voting interest control through a majority stock ownership of Clyra Medical (it owns

42%

of the outstanding voting stock), it does exercise control under the “Variable Interest Model”: there is substantial board overlap, BioLargo is the primary beneficiary since it has the power to direct Clyra Medical’s activities that most significantly impact Clyra Medical’s performance, and it has the obligation to absorb losses or receive benefits (through royalties and licensing) that could be potentially significant to Clyra Medical. BioLargo has consolidated Clyra Medical’s operations for all periods presented. 

All intercompany accounts and transactions have been eliminated (see Note

8

). 

Foreign Currency

The Company has designated the functional currency of BioLargo Water, Inc., our Canadian subsidiary, to be the Canadian dollar. Therefore, translation gains and losses resulting from differences in exchange rates are recorded in accumulated other comprehensive income.

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, 2018

and

March 31, 2019,

our cash balances were made up of the following (in thousands):

	December 31, 2018		March 31, 2019
BioLargo, Inc. and wholly owned subsidiaries	$	193	$	183
Clyra Medical Technologies, Inc.		462		329
Total	$	655	$	512

Accounts Receivable

Trade accounts receivable are recorded net of allowances for doubtful accounts. Estimates for allowances for doubtful accounts are determined based on payment history and individual customer circumstances. The allowance for doubtful accounts as of 

December 31, 2018 

and

March 31, 2019

was zero.

Credit Concentration

We have a limited number of customers that account for significant portions of our revenue. During the

three

months ended

March 31, 2018

and

2019,

we had

three

customers that each accounted for more than

10%

of consolidated revenues in the respective periods, as follows:

	March 31, 201 8			March 31, 201 9
Customer A		39	%		43	%
Customer B		18	%		10	%
Customer C		<10	%		26	%
Customer D		18	%		<10	%

We had

two

customers that each accounted for more than

10%

of consolidated accounts receivable at

December 31, 2018

and at

March 31, 2019

as follows:

	December 31, 201 8			March 31, 201 9
Customer X		12	%		25	%
Customer Y		31	%		<10	%
Customer Z		<10	%		11	%

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, 2018

and

March 31, 2019

was

$3,000.

 As of

December 31, 2018

and

March 31, 2019,

inventories consisted of (in thousands):

	December 31, 201 8		March 31, 201 9
Raw material	$	14	$	14
Finished goods		12		12
Total	$	26	$	26

Other Assets

Other Assets consisted of security deposits of

$35,000

related to our business offices.

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. As of

December 31, 2018

and

March 31, 2019,

management determined that there was

no

impairment of its long-lived assets.

Earnings (Loss) Per Share

We report basic and diluted earnings (loss) per share (“EPS”) for common and common share equivalents. Basic EPS is computed by dividing reported earnings by the weighted average shares outstanding. Diluted EPS is computed by adding to the weighted average shares the dilutive effect if stock options and warrants were exercised into common stock. For the

three

months ended

March 31, 2018

and

2019,

the denominator in the diluted EPS computation is the same as the denominator for basic EPS due to the anti-dilutive effect of the warrants and stock options on the Company’s net loss.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements, and revenues and expenses during the period 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, 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 financial statements.

Share-Based Compensation Expense

We recognize compensation expense for stock option awards on a straight-line basis for employees over the applicable service period of the award, which is the vesting period. We recognize compensation expense for stock option awards for non-employees at the fair value on the grant date. Generally, the options issued to non-employees have been earned upon issuance. For the instances that options are issued to non-employees with a vesting schedule, the fair value is recorded on each vesting 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

three

months ended

March 31, 2018

and

2019:

	2018					2019
	Non Plan			2018 Plan		Non Plan			20 18 Plan
Risk free interest rate		2.43	%		n/a		2.65	%		2.65	%
Expected volatility		252	%		n/a		152	%		152	%
Expected dividend yield		—			n/a		—			—
Forfeiture rate		—			n/a		—			—
Life in years		7			n/a		7			7

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.

Historically, we have

not

had significant forfeitures of unvested stock options granted to employees and Directors. A significant number of our stock option grants are fully vested at issuance or have short vesting provisions. Therefore, we have estimated the forfeiture rate of our outstanding stock options as zero.

Warrants

Warrants issued with our convertible promissory notes, note payables, line of credit 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 convertible note issued with the warrant is recorded at its 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. Further, the convertible promissory note is examined for any intrinsic beneficial conversion feature (“BCF”) of which the convertible price of the note is less than the closing common stock price on date of issuance. If the relative fair value method is used to value the convertible promissory note and there is an intrinsic BCF, a further analysis is undertaken of the BCF using an effective conversion price which assumes the conversion price is the relative fair value divided by the number of shares the convertible debt is converted into by its terms. The BCF value is accounted for as equity.

The warrant and BCF 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.

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 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, Odor-

No

-More and BLEST. Odor-

No

-More 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. Odor-

No

-More recognizes revenue at a point in time when the order for its goods are shipped if its agreement with the customer is FOB Odor-

No

-More’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.

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. To date, there have been

no

discounts or other financing terms for the contracts.

In the future, we

may

generate revenues from royalties or license fees from our intellectual property. In the event we do so, we anticipate a licensee would 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. Upon entering into a licensing agreement, we will determine the appropriate method of recognizing the royalty and license fees.

Government Grants

We have been awarded multiple research grants from governmental and quasi-governmental institutions. The grants received are considered “other income” and are included in our Consolidated Statements of Operations. We received our

first

grant in

2015

and have been awarded over

60

 grants totaling over

$3.6

million. 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.

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 income in the period 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 generally accepted accounting principles (“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.

Fair Value of Financial Instruments

Management believes the carrying amounts of the Company’s financial instruments (excluding debt and equity instruments) as of

December 31, 2018

and

March 31, 2019

approximate their respective fair values because of the short-term nature of these instruments. Such instruments consist of cash, accounts receivable, prepaid assets, accounts payable, lines of credit, and other assets and liabilities.

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 instead receive a tax refund from the Canadian Revenue Authority. Those refunds are classified in Other Income on our Consolidated Statement of Operations and Comprehensive Loss.

Recent Accounting Pronouncements

In

August 2018,

the FASB issued Accounting Standards Update

No.

2018

-

13,

“Fair Value Measurement (Topic

820

), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” The amendments in this update modify the disclosure requirements on fair value measurements in Topic

820,

Fair Value Measurement. The amendments in this update are effective for public business entities for fiscal years beginning after

December 15, 2019,

including interim periods within that fiscal year. Management has

not

concluded its evaluation of the guidance. Its initial analysis is that it does

not

believe the new guidance will substantially impact the Company’s financial statements.

In

June 2018,

The FASB issued Accounting Standards Update

No.

2018

-

07,

“Compensation – Stock Compensation (topic

718

): Improvements to Nonemployee Share-Based Payment Accounting”. The amendments in this update expand the scope of Topic

718

to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic

718

to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic

718

applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic

718

does

not

apply to share-based payments used to effectively provide (

1

) financing to the issuer or (

2

) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic

606,

Revenue from Contracts and Customers.  The amendments in this update are effective for public business entities for fiscal years beginning after

December 15, 2018,

including interim periods within that fiscal year. This new guidance did

not

materially impact our stock compensation expense.

In

February 2016,

the FASB issued ASU Update

No.

2016

-

02,

“Leases,” which will require lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability, and lessors to recognize a net lease investment. Additional qualitative and quantitative disclosures will also be required. We adopted this standard effective

January 1, 2019

using the modified retrospective transition method approved by the FASB in

July 2018.

The adoption of the new standard resulted in a

$399,000

gross up of assets and liabilities; this balance

may

fluctuate over time as we enter into new leases, extend or terminate current leases.

XML

Note 3 - Lincoln Park Financing

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Stock Purchase Agreement [Text Block]

Note

3.

Lincoln Park Financing

On

August 25, 2017,

we entered into a stock purchase agreement (“LPC Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park agreed to purchase from us at our request up to an aggregate of

$10

million of our common stock (subject to certain limitations) from time to time over a period of

three

years. The LPC Purchase Agreement allows us, from time to time and 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 Purchase 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 in the LPC Purchase Agreement or LPC RRA other than a prohibition on entering into a “Variable Rate Transaction,” as defined in the Purchase Agreement. Lincoln Park

may

not

assign or transfer its rights and obligations under the Purchase Agreement.

We did

not

sell any shares to Lincoln Park during the

three

months ended

March 31, 2019.

During the

three

months ended

March 31, 2018,

we elected to sell to Lincoln Park

650,000

shares of our common stock for which we received

$168,220.

Additionally, we issued Lincoln Park

8,226

“additional commitment” shares.

We record stock sales in our equity statement and the additional commitment shares issued reduce the deferred offering costs on our balance sheet.

XML

Note 4 - Debt Obligations

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

4.

Debt Obligations

The following table summarizes our debt obligations outstanding as of

December 31, 2018

and as of

March 31, 2019 (

in thousands).

	December 31, 201 8		March 31, 201 9
C urrent liabilities:
Notes payable, mature June 6, 2019	$	400	$	440
Note payable, matures on demand 60 days’ notice (or March 8, 2023)		—		50
Line of credit, matures September 1, 2019 or later (on 30-day demand)		430		430
Convertible notes payable:
Convertible notes, mature December 31, 2019 ( 1 )		75		75
Convertible note, matured January 11, 2019		300		—
Convertible note, matures July 15, 2019		550		420
Convertible note, matures July 20, 2019 ( 1 )		440		440
Convertible note, matures October 7, 2019		—		370
Convertible note, matures November 5, 2019 and December 7, 2019		—		554
Convertible nine-month notes, due October, November 2019		—		213
Total convertible notes payable	$	1,365	$	2,072
Total current liabilities	$	2,195	$	2,992
L ong-term liabilities :
Note payable issued by Clyra Medical to Scion, matures June 17, 2020 (See Note 8)		1,007		1,007
Convertible notes payable, mature June 20, 2020 (1)		25		25
Convertible notes payable, mature April 20, 2021 (1)		100		100
Convertible notes, mature June 15, 2021 (1)		110		110
Note payable, matures March 8, 2023 (or on demand 60 days’ notice)		50		—
Total long-term liabilities	$	1,292	$	1,242
Total	$	3,487	$	4,234

(

1

)

These notes are convertible at our option at maturity.

For the

three

months ended

March 31, 2018

and

2019

we recorded

$832,000

and

$985,000

of interest expense related to the amortization of discounts on convertible notes payable and coupon interest from our convertible notes and line of credit.

The following discussion includes debt instruments to which amendments were made or included other activity that management deemed appropriate to disclose. Each of the debt instruments contained in the above table are disclosed more fully in the financial statements contained in the Company’s Annual Report filed

March 29, 2019,

as amended.

Notes payable, mature

June 6, 2019

On

September 19, 2018,

we received

$400,000

and issued promissory notes originally due

January 5, 2019

and incurring interest at an annual rate of

12%,

and stock purchase warrants (see Note

6

), to

two

investors (the

first

held by Vernal Bay Investments, LLC (“Vernal”) in the original principal amount of

$280,000,

and the

second

held by Chappy Bean, LLC (“Chappy Bean”) in the original principal amount of

$120,000

). By letter dated

January 3, 2019,

we notified the holders of the

two

notes in the aggregate principal amount of

$400,000

of our election to extend the maturity date of the notes by

60

days, to

March 6, 2019.

As provided in the notes, our election to extend increased the principal amount of each note by

10%,

such that the aggregate principal balance of the

two

notes increased to

$440,000

as of

January 5, 2019.

On

March 5, 2019,

we executed amendments to these

two

notes that (i) extended the maturity dates to

June 6, 2019,

and (ii) provide that we

may

further extend the maturity dates to

September 6, 2019

by giving written notice of such extension and increasing the principal due on the notes at that time by

10%.

As consideration of the extension of the maturity dates reflected in the

March 5, 2019

amendments, we (i) increased the annual percentage rate of interest from

12%

to

18%,

effective as of

March 7, 2019,

and (ii) lowered the exercise price, and increased the number of shares available, on warrants that had been previously issued to the

two

investors (at the time of their original investment).

Convertible note payable, matures

January 11, 2019 (

Triton)

On

October 16, 2018,

we entered into a Securities Purchase Agreement (“Triton Purchase Agreement”) with Triton Fund, LP (“Triton”) for a

$225,000

bridge loan, and issued a promissory note in the principal amount of

$300,000

(the “Triton Note”). The Triton Note incurred interest at an annual rate of

5%,

and was scheduled to mature

January 11, 2019.

The

$75,000

original issue discount was recorded as a discount on our convertible note and was amortized to interest expense in the

three

-month ended

March 31, 2019.

On

January 8, 2019,

we paid the Triton Note in full.

Convertible Note, matures

July 15, 2019 (

Vista Capital)

On

January 7, 2019,

we and Vista Capital agreed to amend the convertible promissory note originally issued

December 14, 2017 (

“Vista

2017

Note”) and extend its maturity date to

April 15, 2019.

The principal amount of the note was increased to

$605,100.

The note will continue to earn interest at the rate of

five

percent per annum. The amendment re-defined the conversion price to equal

80%

of the lowest closing bid price of the Company’s common stock during the

25

consecutive trading days immediately preceding the conversion date. The amendment also reduced the prepayment penalty from

20%

to

15%,

such that a prepayment requires the payment of an additional

15%

of the then outstanding balance, and reduced the penalty for a default from

30%

to

25%

of the outstanding balance.   The intrinsic value of the beneficial conversion feature resulted in a fair value totaling

$487,000,

all of which was recorded as interest expense during the

three

months ended

March 31, 2019.

On

March 28, 2019,

we and Vista agreed to further extend the maturity date of the Vista

2017

Note, to

July 15, 2019.

In consideration for the extension, we agreed to increase the principal balance of the note by

10

percent, to

$420,000.

The increase in principal totaling

$38,000

was recorded as a loss on debt extinguishment during on our statement of operations for the

three

months ended

March 31, 2019.

During the

three

months ended

March 31, 2019,

Vista Capital elected to convert

$225,000

of the outstanding principal and interest of the Vista

2017

Note and we issued

1,679,248

shares of our common stock. Of that amount,

1,638,479

shares were issued as payment of principal, and

40,769

shares as payment of interest. As of

March 31, 2019,

the outstanding balance on the Vista Note totaled

$420,000.

Convertible Note, matures

October 7, 2019 (

Vista Capital)

On

January 7, 2019,

Vista Capital invested an additional

$300,000

and we issued a convertible promissory note (the “Vista

2019

Note”) in the principal amount of

$330,000,

maturing

nine

months from the date of issuance (

October 7, 2019).

The Vista

2019

Note earned a

one

-time interest charge of

12%,

recorded as a discount on convertible notes and will be amortized over the term of the note. The Vista

2019

Note allows Vista Capital to convert the note to our common stock at any time at a price equal to

65%

of the lowest closing bid price of the Company’s common stock during the

25

consecutive trading days immediately preceding the conversion date. The Vista

2019

Note contains standard provisions of default, and precludes the issuance of shares to the extent that Vista Capital would beneficially own more than

4.99%

of our common stock. We

may

pre-pay the Vista

2019

Note within

90

days of the issuance date by giving

10

business day notice of the intent to pre-pay, and then tendering

120%

of the outstanding balance of the note. Vista Capital has the option to convert the note to common stock during the

10

-day period. The Vista

2019

Note also includes a term that allows Vista Capital to adopt any term of a future financing more favorable than what is provided in the note. For example, these provisions could include a more favorable interest rate, conversion price, or original issue discount. The Vista

2019

Note also requires that we include the shares underlying conversion of the note on the next registration statement we file with the SEC (but

not

the registration statement filed

November 6, 2018).

The intrinsic value of the beneficial conversion feature resulted in a fair value totaling

$300,000,

and is recorded as a discount on convertible notes on our balance sheet. This discount will be amortized over the term of the note as interest expense, all of which will be recorded in

2019.

With respect to the above transactions with Vista Capital, Lincoln Park Capital Fund, LLC agreed to waive the provisions of the Purchase Agreement dated

August 25, 2017,

prohibiting variable rate transactions. As consideration for this waiver, we issued to Lincoln Park a warrant to purchase

250,000

shares of our common stock at

$0.25

per share, expiring

five

years from the date of grant. In the event the shares underlying the warrant are

not

registered, the warrant allows the holder to do a “cashless” exercise. (See Note

6

).

Convertible Notes, due

November 5, 2019

and

December 7, 2019 (

Tangiers Global)

On

January 31, 2019,

we issued a

12%

Convertible Promissory Note to Tangiers Global, LLC (“Tangiers”) in the aggregate principal amount of up to

$495,000

(the “Tangiers Note”). The note allows for

two

payments, each due in

nine

months after receipt, and incurs a guaranteed interest of

12%

at inception. - The initial payment of

$300,000

was received on

February 5, 2019,

representing a

$330,000

principal amount and

10%

original issue discount. It is due

November 5, 2019.

We received the

second

payment, in the amount of

$150,000,

on

March 7, 2019,

increasing the principal amount due under the note to

$495,000.

This

second

amount, plus guaranteed interest, is due

December 7, 2019. 

In the aggregate, the principal amount of the note, plus guaranteed interest, totals

$554,000.

The Tangiers Note is convertible at the option of Tangiers at a conversion price equal to

75%

of the lowest closing bid price of the Company’s common stock during the

25

consecutive trading days prior to the conversion date. The intrinsic value of the beneficial conversion feature resulted in a fair value totaling

$185,000,

and is recorded as a discount on convertible notes on our balance sheet. This discount will be amortized over the term of the note as interest expense, all of which will be recorded in

2019.

We

may

prepay the Tangiers Note up to

180

days after the effective date. If a prepayment is made within

90

days, we must pay a prepayment penalty of

25%;

from

91

to

180

days, we must pay a prepayment penalty of

30%.

We

may

pay such prepayment penalties, if we so choose, by issuing common stock at the conversion price. If such shares are

not

eligible for removal of restrictions pursuant to a registration statement or Rule

144

within

10

trading days following the

six

-month anniversary of the effective date, Tangiers

may

rescind the stock issuance and force the Company to pay the prepayment penalty in cash. Upon the occurrence of an event of default, as such term is defined under the Tangiers Note, additional interest will accrue from the date of the event of default at a rate equal to the lower of

22%

per annum or the highest rate permitted by law, and an additional

25%

shall be added to the principal amount of the note.

In connection with the Tangiers Note, the Company caused its transfer agent to reserve

3,000,000

shares of the Company’s common stock, in the event that the Tangiers Note is converted.

With respect to the above transaction with Tangiers, Lincoln Park consented to waive the provisions of the Purchase Agreement dated

August 25, 2017

prohibiting variable rate transactions. As consideration for the consent, we agreed to issue Lincoln Park a stock purchase warrant allowing for the purchase of

50,000

shares of our common stock at

$0.25

per share, expiring

five

years from the date of grant. In the event the shares underlying the warrant are

not

registered, the warrant allows the holder to do a “cashless” exercise. (See Note

6

).

Nine-month Notes payable

During the

three

months ended

March 31, 2019,

we issued convertible promissory notes (each, an “OID Note”) in the aggregate principal amount of

$212,500,

with a

25%

original issue discount. These notes are convertible into shares of the Company’s common stock at a conversion price of

$0.25

per share, and mature

nine

months from the date of issuance. On

January 14, 2019,

we received

$50,000

and issued an OID Note in the principal amount of

$62,500.

On

January 22, 2019,

we received

$20,000

and issued an OID Note in the principal amount of

$25,000.

On

February 4, 2019,

we received

$100,000

and issued an OID Note in the principal amount of

$125,000.

The original issuance discount totaled

$42,500,

recorded as a discount on convertible notes payable on our balance sheet. The discount will be amortized and recorded to interest expense over the term of the notes.

Each OID Note is convertible by the investor at any time at

$0.25

per share. This initial conversion price shall be adjusted downward in the event the Company subsequently issues a convertible promissory note at a lower conversion rate (with this lower conversion rate becoming the adjusted conversion rate under the OID Note), or conducts an equity offering at a per-share price less than

$0.25.

The Note earns interest at

five

percent (

5%

) per annum, due at maturity. The Company

may

prepay an OID Note only upon

10

days’ notice to the investor, during which time the investor

may

exercise his/her right to convert the note to stock.

The Company must prepay the OID Notes upon the conclusion of a “qualifying offering” (an offering raising

$3.5

million or more); in the event a qualified offering is

not

concluded prior to the maturity date, or the Note is otherwise

not

paid in full, the Company shall redeem the notes by issuing the number of shares of common stock equal to the outstanding balance divided by the lower of (i) the current conversion price and (ii)

seventy

percent (

70%

) of the lowest daily volume weighted average price (“VWAP”) during the

25

trading days immediately preceding the conversion.

In addition to the note, each OID investor will receive a warrant to purchase common stock for

$0.25

per share, expiring

5

years from the date of issuance (the “Warrant”). The number of shares purchasable under the warrant is equal to the

75%

of the principal balance of the note divided by

$0.25

(thus, a

$100,000

investment would yield a note with principal balance of

$125,000,

and a warrant allowing for the purchase of up to

375,000

shares). The warrant will allow for cashless exercise so long as the shares underlying the warrant are

not

registered. The Company does

not

have the obligation to register the shares underlying the warrant (or the OID Notes). (See Note

6

).

XML

Note 5 - Share-based Compensation

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Compensation and Employee Benefit Plans [Text Block]

Note

5.

Share-Based Compensation

Issuance of Common Stock in exchange for payment of payables

Payment of Officer Salaries

On

March 29, 2019,

we issued

579,996

shares of our common stock at

$0.16

per share in lieu of

$93,000

of accrued and unpaid salary to our officers.

On

March 31, 2018,

we issued

323,030

shares of our common stock at

$0.26

per share in lieu of

$84,000

of accrued and unpaid obligations to our officers.

Payment of Consultant Fees and Accrued Interest

During the

three

months ended

March 31, 2019,

we issued

788,907

shares of our common stock at a range of

$0.16

–

$0.23

per share in lieu of

$138,000

of accrued interest and accrued and unpaid obligations to consultants.

During the

three

months ended

March 31, 2018,

we issued

1,008,478

shares of our common stock at a range of

$0.25

–

$0.41

per share in lieu of

$277,000

of accrued interest and accrued and unpaid obligations to consultants.

Stock Option Expense

During the

three

months ended

March 31, 2018

and

2019,

we recorded an aggregate

$320,000

and

$352,000,

respectively, in selling general and administrative expense related to the issuance and vesting of stock options. We issued options through our

2018

Equity Incentive Plan, our (now expired)

2007

Equity Incentive Plan, and outside of these plans.

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 made under this plan for a period of

10

years. 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.

Activity for our stock options under the

2018

Plan from

December 31, 2018,

through the year ended

March 31, 2019,

is as follows: (The

2018

Plan inception was

June 2018,

therefore there is

no

activity through

March 31, 2018).

						Weighted
						Average		Aggregate
	Options		Exercise			Price per		intrinsic
As of March 31, 2019 :	Outstanding		Price per share			share		Value (1)
Balance, December 31, 2018		1,318,517	$0.22	–	0.43	$	0.30
Granted		890,280	0.16	–	0.22		0.19
Expired		—		—			—
Balance, March 31, 2019		2,208,797	$0.16	–	0.43	$	0.25	$	—

(

1

) – Aggregate intrinsic value based on closing common stock price of

$0.16

at

March 31, 2019.

The options to purchase

890,280

shares granted during the

three

months ended

March 31, 2019

are comprised of options issued to employees, consultants, officers, and directors: (i) we issued options to purchase

300,000

shares of our common stock at an exercise price on the respective grant date of

$0.22

per share to our CFO as described below. We also issued options to purchase

168,404

shares of our common stock to employees in lieu of salary at an exercise price on the respective date ranging between

$0.16

-

$0.25

per share. The fair value of these options totaled

$36,000

and is recorded as selling, general and administrative expense. We issued options to purchase

421,876

shares of our common stock at an exercise price on the respective grant date of

$0.16

per share to members of our board of directors for services performed, in lieu of cash. The fair value of these options totaled

$68,000

and is recorded as selling, general and administrative expenses.

Chief Financial Officer Contract Extension

On

January 16, 2019,

we agreed to extend the engagement agreement dated

February 1, 2008 (

the “Engagement Agreement”, which had been previously extended multiple times) with our Chief Financial Officer, Charles K. Dargan, II. The Engagement Extension Agreement dated as of

January 16, 2019 (

the “Engagement Extension Agreement”) provides for an additional term to expire

September 30, 2019 (

the “Extended Term”), and is retroactively effective to the termination of the prior extension on

September 30, 2018. 

Mr. Dargan has been serving as the Company’s Chief Financial Officer since such termination pursuant to the terms of the

December 31, 2018

extension.

For the Extended Term, Mr. Dargan was issued an option (“Option”) to purchase

300,000

shares of the Company’s common stock, at a strike price equal to the closing price of the Company’s common stock on

January 16, 2019

of

$0.22,

to expire

January 16, 2029,

and to vest over the term of the engagement with

75,000

shares having vested as of

March 31, 2019,

and the remaining shares to vest

25,000

shares monthly beginning

January 31, 2019,

and each month thereafter, so long as the Engagement Agreement is in full force and effect. The Option was issued pursuant to the Company’s

2018

Equity Incentive Plan. The fair value of the option totaled

$67,000,

of which

$17,000

was recorded as selling, general and administrative expense during the

three

months ended

March 31, 2019.

The issuance of the Option is Mr. Dargan’s sole source of compensation for the Extended Term. As was the case in all prior terms of his engagement, there is

no

cash component of his compensation for this term. Mr. Dargan is eligible to be reimbursed for business expenses he incurs in connection with the performance of his services as the Company’s Chief Financial Officer (although he has made

no

such requests for reimbursement in the past). All other provisions of the Engagement Agreement

not

expressly amended pursuant to the Engagement Extension Agreement remain the same, including provisions regarding indemnification and arbitration of disputes.

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

three

months ended

March 31, 2018

and

2019

is as follows:

								Weighted
								Average		Aggregate
	Options			Exercise				Price per		intrinsic
As of March 31, 2018 :	Outstanding			p rice per share				share		Value (1)
Balance, December 31, 2017		9,831,586			$0.23	–	1.89	$	0.44
Expired		(50,000	)			1.89			0.91
Balance, March 31, 2018		9,781,586			$0.23	–	1.65	$	0.43	$	—
As of March 31, 2019 :
Balance, December 31, 2018		9,691,586			$0.23	–	0.94	$	0.43
Expired		(30,000	)		0.38	–	0.70		0.50
Balance, March 31, 2019		9,661,586			$0.23	–	1.65	$	0.43	$	—

(

1

) – Aggregate intrinsic value based on closing common stock price of

$0.16

at

March 31, 2019.

Non-Plan Options issued

During the

three

months ended

March 31, 2019,

we issued options to purchase

731,250

shares of our common stock at exercise prices ranging between

$0.16

–

$0.25

per share to vendors for fees for service. The fair value of the options issued totaled

$139,000,

is recorded in our selling, general and administrative expense.

During the

three

months ended

March 31, 2018,

we issued options to purchase

619,435

shares of our common stock at exercise prices ranging between

$0.26

–

$0.28

per share to members of our board of directors and vendors for fees for services totaling

$158,000.

Activity of our non-plan stock options issued for the

three

months ended

March 31, 2018

and

2019

is as follows:

								Weighted
	Non-plan							a verage		Aggregate
	Options			Exercise				p rice per		intrinsic
As of March 31, 2018 :	o utstanding			p rice per share				share		value (1)
Balance, December 31, 2017		20,018,408			$0.25	–	1.00	$	0.51
Granted		619,435			0.26	–	0.28		0.26
Expired		(2,400,000	)			0.99			0.99
Balance, March 31, 2018		18,237,843			$0.25	–	1.00	$	0.45	$	—
As of March 31, 2019 :
Balance, December 31, 2018		19,319,496			$0.23	–	1.00	$	0.43
Granted		731,250			0.16	–	0.25		0.19
Balance, March 31, 2019		20,050,746			$0.25	–	1.00	$	0.42	$	—

(

1

) – Aggregate intrinsic value based on closing common stock price of

$0.16

at

March 31, 2019.

XML

Note 6 - Warrants

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Warrants [Text Block]

Note

6.

Warrants

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

							Weighted
							a verage		Aggregate
	Warrants		Exercise				p rice per		intrinsic
As of March 31, 2018 :	o utstanding		p rice per share				share		value (1)
Balance, December 31, 2017		22,104,817		$0.125	–	1.00	$	0.45
Issued		2,611,513		0.25	–	0.48		0.35
Balance, March 31, 2018		24,716,330		$0.125	–	1.00	$	0.44	$	—
As of March 31, 2019 :
Balance, December 31, 2018		26,872,430		$0.25	–	1.00	$	0.42
Issued		3,861,041		$0.16	–	0.25	$	0.24
Balance, March 31, 2019		30,733,471		$0.20	–	1.00	$	0.40	$	—

Warrants issued as part of debt extension

On

March 5, 2019,

we executed amendments extending the maturity dates issued to Vernal Bay and Chappy Bean to

June 6, 2019 (

see Note

4

). As consideration for this extension, we agreed to reduce the exercise price, and increase the number of shares purchasable, by the warrants held by Vernal Bay and Chappy Bean. Vernal Bay had been issued a warrant to purchase

1,387,500

shares at

$0.25

per share, expiring

September 19, 2023.

We agreed to lower the exercise price to

$0.20

per share, and proportionately increase the number of shares in the warrant to

1,734,375.

By doing so, the maximum investment amount under the warrant of

$346,875

remained the same. Chappy Bean’s warrant to purchase

600,000

shares was similarly modified, such that it now allows for the purchase of

750,000

shares at

$0.20

per share. The reduction in warrant exercise price resulted in a fair value of

$56,000

recorded as loss on debt extinguishment in the

three

months ended

March 31, 2019.

Warrants issued as consent for variable rate debt

On

January 7

and

January 31, 2019,

Lincoln Park Capital Fund, LLC agreed to waive the provisions of the Purchase Agreement dated

August 25, 2017,

prohibiting variable rate transactions. As consideration for the waivers, we issued to Lincoln Park a warrant to purchase

300,000

shares of our common stock at

$0.25

per share, expiring

five

years from the date of grant. In the event the shares underlying the warrant are

not

registered, the warrant allows the holder to do a “cashless” exercise. The fair value of these warrants totaled

$54,000

and was recorded as a discount on note payable on our consolidated balance sheet and will amortize to interest expense in

2019

over the term of the notes. (See Note

4

).

Warrants Issued concurrently with the Nine-month note payable

Pursuant to the terms of the OID Offering, in addition to the Note, the investor will receive a warrant to purchase common stock for

$0.25

per share, expiring

5

years from the date of issuance (the “Warrant”). The number of shares purchasable under the warrant is equal to the

75%

of the principal balance of the note divided by

$0.25

(thus, a

$100,000

investment would yield a note with principal balance of

$125,000,

and a warrant allowing for the purchase of up to

375,000

shares). We issued warrants to purchase

637,500

shares of our common stock. The warrant will allow for cashless exercise so long as the shares underlying the warrant are

not

registered. The Company does

not

have the obligation to register the shares underlying the warrant. The fair value of these warrants totaled

$89,000

and was recorded as a discount on note payable on our consolidated balance sheet and will amortize to interest expense in

2019

over the term of the notes. (See Note

4

).

Warrants Issued to One-Year Noteholders

In conjunction with

three

separate investments of

one

-year convertible notes, we issued

three

sets of warrants to purchase an aggregate

400,000

shares to

two

investors. These warrants were issued

July 8, 2016 (

400,000

shares at

$0.65

exercise price) and

December 30, 2016 (

400,000

shares at

$0.75

exercise price).   

Each of these warrants contained provisions that required a reduction to the exercise price and increase to the number of warrant shares in the event that we sold our common stock at a lower price than the exercise price (subject to some exceptions). During the

three

months ended

March 31, 2019,

we adjusted downward the warrant exercise price

three

times to

$0.12,

resulting in an increase of

2,426,666

warrants available for exercise. The increase in warrants resulted in a fair value totaling

$342,000,

recorded as a deemed dividend in our statement of stockholders’ equity. 

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:

	March 31, 2018				March 31, 2019
Risk free interest rate			2.54%			2.18	–	2.62%
Expected volatility			252%			86	–	110%
Expected dividend yield			—				—
Forfeiture rate			—				—
Expected life in years		5	–	10		2	–	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.

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Note 7 - Accounts Payable and Accrued Expenses

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

Note

7.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses included the following (in thousands):

	December 31, 2018		March 31, 2019
Accounts payable and accrued expense	$	302	$	370
Accrued interest		122		151
Accrued payroll		77		110
Total accounts payable and accrued expenses	$	501	$	631

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Note 8 - Noncontrolling Interest - Clyra Medical

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Noncontrolling Interest Disclosure [Text Block]

Note

8.

Noncontrolling Interest – Clyra Medical

We consolidate the operations of our partially owned subsidiary Clyra Medical (see Note

2

).

Acquisition of In-process Research and Development

On

September 26, 2018,

Clyra Medical entered into a transaction with Scion Solutions, LLC, for the purchase of its intellectual property, including its SkinDisc. The consideration provided to Scion is subject to an escrow agreement (“Escrow Agreement”) and earn out provisions and includes: (i)

21,000

shares of the Clyra Medical common stock; (ii)

10,000

shares of Clyra Medical common stock redeemable for

7,142,858

BioLargo common shares (detailed below); and (iii) a promissory note in the principal amount of

$1,250,000

to be paid through new capital investments and revenue, as detailed below. This consideration was initially held in escrow pending Clyra Medical raising

$1

million “base capital” to fund its business operations.

On

December 17, 2018,

the parties entered into a closing agreement (“Closing Agreement”) reflecting the satisfaction of the obligation to raise

$1

million “base capital”; at that time,

one

-half of the shares of Clyra Medical common stock exchanged for the Scion assets were released to Scion. The remaining Clyra Medical common shares (a total of

15,500

shares) remain subject to the Escrow Agreement’s performance metrics, each vesting

one

-

fifth

of the remaining shares of common stock: (a) notification of FDA premarket clearance of certain orthopedics products, or recognition by Clyra Medical of

$100,000

gross revenue; (b) the recognition by Clyra Medical of

$100,000

in aggregate gross revenue; (c) the granting of all or any part of the patent application for the SkinDisc product, or recognition by Clyra Medical of

$500,000

in gross revenue; (d) recognition by Clyra Medical of

$1

million in aggregate gross revenue; and (e) recognition by Clyra Medical of

$2

million in gross revenue.

Scion Solutions – Note Payable and Clyra Liability

The promissory note in the principal amount of

$1,250,000

issued by Clyra Medical to Scion on

September 26, 2018 (

“Clyra-Scion Note”) accrues interest at the rate of

5%.

Principal and interest due under the note are to be paid periodically at a rate of

25%

of investment proceeds received by Clyra Medical. If the note is

not

paid off within

18

months after the date of issuance, it is automatically extended for additional

12

-month periods until the note is repaid in full. Payments after the initial

18

-month maturity date are required to be made in annual installments in an amount equal to the greater of (i)

25%

of investment proceeds received during the

12

-month period, and (ii)

5%

of Clyra Medical’s gross revenues.

Non-Controlling Interest

As of

March 31, 2019,

Clyra had raised

$1,110,000

at a price of

$200

per share.  During the

three

months ended

March 31, 2019,

Clyra raised

$110,000

and issued

550

shares of Clyra. At

March 31, 2019,

the balance due on the Clyra-Scion Note equaled

$1,007,000.

The shares of BioLargo common stock held by Clyra for the benefit of Scion (the redemption shares) are recorded on our balance sheet as a liability to “Clyra Medical Shareholder”.

As of

March 31, 2019,

Clyra Medical had the following common and preferred shares outstanding:

Shareholder	Shares		Percent
BioLargo, Inc.		28,053		42.0	%
Sanatio Capital (1)		11,520		17.4	%
Scion Solutions (2)		15,500		23.4	%
Other		11,772		17.2	%
Total		66,845

Notes:

(

1

) Includes

9,830

Series A Preferred shares (see below), and

1,690

common shares.

(

2

) Does

not

include an additional

15,500

shares held in escrow subject to performance metrics.

Sanatio Capital purchased Series A Preferred shares in

2015.

Sanatio Capital is owned by Jack B. Strommen, who subsequently joined BioLargo’s board of directors. Preferred Shares accrue an annual dividend of

8%

for a period of

five

years. Although the dividends began to accrue immediately, Clyra Medical has

no

obligation to declare a dividend until a product of the company has received a premarket approval by the United States Federal Drug Administration (“FDA”), or for which a premarket notification pursuant to form

510

(k) has been submitted and for which the FDA has given written clearance to market the product in the United States (either, “FDA Approval”). After FDA Approval, annually on

December 20,

and unless prohibited by California law governing distributions to shareholders, Clyra Medical is required to declare and pay any accruing dividends to holders of Preferred Shares then accrued but unpaid. As the declaration and payment of such dividends is contingent on an uncertain future event,

no

liability has been recorded for the dividends. The accumulated and undeclared dividend balance as of

March 31, 2019

is

$200,000.

Holders of Preferred Shares are entitled to preferential payments in the event of a liquidation, dissolution or winding up of the company, in an amount equal to any accrued and unpaid dividends. After such preference, any remaining assets are distributed pro-rata between holders of Clyra Medical common stock and Preferred Shares as if the Preferred Shares had converted to Clyra Medical common stock. Holders of Preferred Shares

may

convert the shares to Clyra Medical common stock initially on a

one

-to-

one

basis. The conversion formula is subject to change in the event Clyra Medical sells stock at a lower price than the price paid by Sanatio.

Preferred shares

may

be converted to common shares on a

one

-to-

one

basis, and have voting rights equal to common shares on a

one

-to-

one

basis.

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Note 9 - BioLargo Engineering, Science and Technologies, LLC

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Wholly-Owned Subsidiary [Text Block]

Note

9.

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

seven

scientists and engineers. (See Note

10

“Business Segment Information”.) The company 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

2

million 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.

The details of these transactions were reported on a Form

8

-K filed with the SEC on

September 8, 2017.

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 Compensation Committee met on

September 26, 2018

and reviewed the operating performance of the engineering subsidiary and determined that the performance metrics were

not

met and as a result, did

not

award any Class B units or stock options. The Committee decided to roll forward

one

additional year to the time allowed for the performance metrics to be met and for the Class B units and stock options to be awarded.

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Note 10 - Business Segment Information

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

10.

Business Segment Information

BioLargo currently has

four

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. Odor- No -More (“ONM”) -- which is selling odor and volatile organic control products and services (located in Westminster, California);

2. Clyra Medical (“Clyra”) -- which is engaged in developing medical products and preparing launch into commercial activity with approval of its FDA 510 (K) application in process;  

3. 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);

4. BioLargo Water  (“Water”) -- which historically focused entirely on R&D, and has now shifted its focus to commercializing the AOS technology (located in Edmonton, Alberta Canada); and

Historically,

none

of our operating business units operated at a profit and therefore each required additional cash to meet its monthly expenses. The additional sources of the cash to fund the shortfall from operations of Odor-

No

-More, BLEST and BioLargo Water have been provided by BioLargo’s sales of debt or equity, research grants, and tax credits. Clyra Medical has been funded by

third

party investors who invest directly in Clyra Medical in exchange for equity ownership in that entity. For example, during the year ended

December 31, 2018,

we provided Odor-

No

-More with approximately

$417,000

in cash to supplement its operations. As this subsidiary’s sales have increased (from approximately

$500,000

in calendar year

2017

to over

$1

million in calendar year

2018

), and its gross margins have improved, it has generated more cash for its operations and relied less on corporate to supplement its cash to pay its bills.

The segment information for the

three

months ended

March 31, 2018

and

2019,

is as follows (in thousands):

As of March 31, 2019	BioLargo			ONM			Clyra			BLEST			Water			Elimination			Total
Revenue	$	—		$	301		$	—		$	183		$	—		$	(120	)	$	364
Intersegment revenue		—			—			—			(120	)		—			—			—
Operating loss		(948	)		(90	)		(287	)		(110	)		(227	)		—			(1,662	)
Grant income		—			—			—			—			82			—			82
Interest expense		(632	)		—			(12	)		—			—			—			(985	)
Depreciation		—			(4	)		—			(12	)		—			—			(16	)
Research and development		(172	)		—			(49	)		(122	)		(209	)		126			(426	)
Loss on extinguishment		(184	)		—			—			—			—			—			(184	)
Net loss		(2,105	)		(90	)		(299	)		(110	)		(145	)		—			(2,749	)

As of March 31, 2018	BioLargo			ONM			Clyra			BLEST			Water			Elimination			Total
Revenue	$	—		$	224		$	—		$	189		$	—		$	(120	)	$	364
Intersegment revenue		—			—			—			(150	)		—			—			—
Operating loss		(1,093	)		(109	)		(199	)		(45	)		(156	)		—			(1,602	)
Grant income		—			—			—			—			5			—			5
Interest expense		(830	)		—			—			(2	)		—			—			(832	)
Depreciation		—			(4	)		—			(6	)		—			—			(10	)
Research and development		(343	)		—			(87	)		(100	)		(142	)		150			(522	)
Net loss		(1,924	)		(109	)		(199	)		(46	)		(151	)		—			(2,429	)

As of March 31, 2019	BioLargo		ONM		Clyra		BLEST		Water		Elimination			Total
Tangible assets	$	673	$	182	$	277	$	329	$	48	$	(6	)	$	1,503
Intangible assets		1,893		—		—		—		—		—			1,893

As of December 31, 2018	BioLargo		ONM		Clyra		BLEST		Water		Elimination			Total
Tangible assets	$	353	$	220	$	462	$	230	$	33	$	(6	)	$	1,292
Intangible assets		1,893		—		—		—		—		—			1,893

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Note 11 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

11.

Commitments and Contingencies

Calvert Employment Agreement

On

May 2, 2017,

the Company entered into an employment agreement with its President and Chief Executive Officer Dennis P. Calvert (the “Calvert Employment Agreement”), replacing in its entirety the previous employment agreement with Mr. Calvert dated

April 30, 2007.

The Calvert Employment Agreement provides that Mr. Calvert will continue to serve as our President and Chief Executive Officer and receive base compensation equal to his current rate of pay of

$289,000

annually. In addition to this base compensation, the agreement provides that he is eligible to participate in incentive plans, stock option plans, and similar arrangements as determined by the Company’s Board of Directors, health insurance premium payments for himself and his immediate family, a car allowance, paid vacation of

four

weeks per year, and bonuses in such amount as the Compensation Committee

may

determine from time to time.

Pursuant to the Calvert Employment Agreement, we granted Mr. Calvert a non-qualified stock option (the “Option”) to purchase

3,731,322

shares of our common stock, exercisable at

$0.45

per share, which represented the market price of the Company’s common stock as of the date of the agreement, exercisable for

ten

years from the date of grant and vesting in equal increments over

five

years (see Note

6

). The Option provides that any portion of the Option which has

not

yet vested shall be immediately vested in the event of, and prior to, a change of control, as defined in the Calvert Employment Agreement. The Calvert Employment Agreement also provides for a grant of

1,500,000

shares of common stock, subject to the execution of a “lock-up agreement” whereby the shares remain unvested unless and until the earlier of (i) a sale of the Company, (ii) the successful commercialization of the Company’s products or technologies as demonstrated by its receipt of at least

$3

million in cash, or the recognition of

$3

million in revenue, over a

12

-month period from the sale of products and/or the license of technology, and (iii) the Company’s breach of the employment agreement resulting in his termination. The Option contains the other terms standard in option agreements issued by the Company, including provisions for a cashless exercise.

The Calvert Employment Agreement has a term of

five

years, unless earlier terminated in accordance with its terms. The Calvert Employment Agreement provides that Mr. Calvert’s employment

may

be terminated by the Company due to his death or disability, for cause, or upon a merger, acquisition, bankruptcy or dissolution of the Company. “Disability” as used in the Calvert Employment Agreement means physical or mental incapacity or illness rendering Mr. Calvert unable to perform his duties on a long-term basis (i) as evidenced by his failure or inability to perform his duties for a total of

120

days in any

360

-day period, or (ii) as determined by an independent and licensed physician whom Company selects, or (iii) as determined without recourse by the Company’s disability insurance carrier. “Cause” means that Mr. Calvert has (i) engaged in willful misconduct in connection with the Company’s business; or (ii) been convicted of, or plead guilty or nolo contendre in connection with, fraud or any crime that constitutes a felony or that involves moral turpitude or theft. If Mr. Calvert’s employment is terminated due to merger or acquisition, then he will be eligible to receive the greater of (i) 

one

year’s compensation plus an additional

one

-half year for each year of service since the effective date of the employment agreement or (ii) 

one

year’s compensation plus an additional

one

-half year for each year remaining in the term of the agreement. Otherwise, he is only entitled to receive compensation due through the date of termination.

The Calvert Employment Agreement requires Mr. Calvert to keep certain information confidential,

not

to solicit customers or employees of the Company or interfere with any business relationship of the Company, and to assign all inventions made or created during the term of the Calvert Employment Agreement as “work made for hire”.

Office 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. For the

three

months ended

March 31, 2018

and

2019,

total rental expense was

$49,000

and

$51,000,

respectively. On

January 1, 2019,

we adopted ASC

842

which resulted in a right-of-use asset and lease liability, the adoption resulted in an immaterial cumulative effect of an accounting change that was

not

recorded. Our right-of-use asset and lease liability operating leases included our office space BioLargo/ONM and BLEST. Our BioLargo/ONM lease has a

4

-year extension and we included this extension in the net present value of our lease payments, which used the incremental borrowing cost to BioLargo of

18%.

Water operations lease is considered short-term and

not

included.

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.

Clyra Medical Consulting Agreement

Our partially owned subsidiary Clyra Medical (see Note

8

) entered into a consulting agreement with Beach House Consulting, LLC, through which Jack B. Strommen will be providing consulting services to Clyra Medical related to its sales and marketing activities once it has received FDA Approval (as defined in Note

8

and the associated agreement) on a product, at which point the agreement provides that Mr. Strommen is to receive

$23,000

per month for a period of

four

years. This agreement has

not

started, and the total cash obligation related to the agreement would be

$1.1

 million.

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Note 12 - Subsequent Events

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Subsequent Events [Text Block]

Note

12.

Subsequent Events.

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

Bellridge Capital Investment

On

April 18, 2019,

we received

$188,000

and issued a

10%

Convertible Note to Bellridge Capital, LP (“Bellridge”) in the principal amount of

$220,000

(the “Bellridge Note”), representing a

10%

original issue discount, and a deduction of

$10,000

for legal fees paid to the investor. The note is due

April 18, 2020.

We and Bellridge concurrently entered into a Securities Purchase Agreement through which, upon our mutual consent, Bellridge

may

invest up to an additional

$400,000

(in

two

tranches) that would be reflected in

two

additional

10%

notes, each of which would mature

one

year from the date of issuance.

The Bellridge Note is convertible at the option of Bellridge at a conversion price equal to

70%

of the lowest closing bid price of the Company’s common stock during the

25

trading days prior to the conversion date. We

may

prepay the Bellridge Note at any time. If we do so up to

90

days after the effective date, the amount due is equal to

125%

of the unpaid principal amount of the note along with any accrued interest, and thereafter, the amount due is

130%

of the unpaid principal amount of the note along with any accrued interest. Upon the occurrence of an event of default, as such term is defined under the Bellridge Note, additional interest will accrue from the date of the event of default at a rate equal to the lesser of

24%

per annum or the highest rate permitted by law.

Crossover Capital Investment

On

May 14, 2019,

we received

$95,000

and issued a Convertible Note to Crossover Capital Fund I, LP (“Crossover Capital”) in the principal amount of

$110,000

(the “Crossover Capital Note”), representing a

10%

original issue discount, and a deduction of

$5,000

for legal fees and due diligence. The note is due

nine

months from the date of issuance. We and Crossover Capital concurrently entered into a Securities Purchase Agreement. The Crossover Capital Note is convertible at the option of the holder at a conversion price equal to

70%

of the lowest closing bid price of the Company’s common stock during the

25

trading days prior to the conversion date. We

may

prepay the Crossover Capital Note up to

180

days after issuance, by paying a prepayment penalty that increases from

5%

within the

first

30

days, to

30%

during the last

30.

Upon the occurrence of an event of default, as such term is defined under the note, additional interest will accrue from the date of the event of default at a rate equal to the lesser of

24%

per annum or the highest rate permitted by law.

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and Clyra Medical. Management believes Clyra Medical’s financial statements are appropriately consolidated with that of the Company after reviewing the guidance of ASC Topic 

810,

 “Consolidation”, and concluding that BioLargo controls Clyra Medical. While BioLargo does

not

have voting interest control through a majority stock ownership of Clyra Medical (it owns

42%

of the outstanding voting stock), it does exercise control under the “Variable Interest Model”: there is substantial board overlap, BioLargo is the primary beneficiary since it has the power to direct Clyra Medical’s activities that most significantly impact Clyra Medical’s performance, and it has the obligation to absorb losses or receive benefits (through royalties and licensing) that could be potentially significant to Clyra Medical. BioLargo has consolidated Clyra Medical’s operations for all periods presented. 

All intercompany accounts and transactions have been eliminated (see Note

8

). 

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency

The Company has designated the functional currency of BioLargo Water, Inc., our Canadian subsidiary, to be the Canadian dollar. Therefore, translation gains and losses resulting from differences in exchange rates are recorded in accumulated other comprehensive income.

Cash and Cash Equivalents, Policy [Policy Text Block]

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, 2018

and

March 31, 2019,

our cash balances were made up of the following (in thousands):

	December 31, 2018		March 31, 2019
BioLargo, Inc. and wholly owned subsidiaries	$	183	$	183
Clyra Medical Technologies, Inc.		462		329
Total	$	655	$	512

Receivable [Policy Text Block]

Accounts Receivable

Trade accounts receivable are recorded net of allowances for doubtful accounts. Estimates for allowances for doubtful accounts are determined based on payment history and individual customer circumstances. The allowance for doubtful accounts as of 

December 31, 2018 

and

March 31, 2019

was 

zero

.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Credit Concentration

We have a limited number of customers that account for significant portions of our revenue. During the

three

months ended

March 31, 2018

and

2019,

we had

three

customers that each accounted for more than

10%

of consolidated revenues in the respective periods, as follows:

	March 31, 201 8			March 31, 201 9
Customer A		39	%		43	%
Customer B		18	%		10	%
Customer C		<10	%		26	%
Customer D		18	%		<10	%

We had

two

customers that each accounted for more than

10%

of consolidated accounts receivable at

December 31, 2018

and at

March 31, 2019

as follows:

	December 31, 201 8			March 31, 201 9
Customer X		12	%		25	%
Customer Y		31	%		<10	%
Customer Z		<10	%		11	%

Inventory, Policy [Policy Text Block]

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, 2018

and

March 31, 2019

was

$3,000

.

 As of

December 31, 2018

and

March 31, 2019,

inventories consisted of (in thousands):

	December 31, 201 8		March 31, 201 9
Raw material	$	14	$	14
Finished goods		12		12
Total	$	26	$	26

Intangible Assets, Finite-Lived, Policy [Policy Text Block]

Other Assets

Other Assets consisted of security deposits of

$35,000

related to our business offices.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

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. As of

December 31, 2018

and

March 31, 2019,

management determined that there was

no

impairment of its long-lived assets.

Earnings Per Share, Policy [Policy Text Block]

Earnings (Loss) Per Share

We report basic and diluted earnings (loss) per share (“EPS”) for common and common share equivalents. Basic EPS is computed by dividing reported earnings by the weighted average shares outstanding. Diluted EPS is computed by adding to the weighted average shares the dilutive effect if stock options and warrants were exercised into common stock. For the

three

months ended

March 31, 2018

and

2019,

the denominator in the diluted EPS computation is the same as the denominator for basic EPS due to the anti-dilutive effect of the warrants and stock options on the Company’s net loss.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements, and revenues and expenses during the period 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, 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 financial statements.

Share-based Payment Arrangement [Policy Text Block]

Share-Based Compensation Expense

We recognize compensation expense for stock option awards on a straight-line basis for employees over the applicable service period of the award, which is the vesting period. We recognize compensation expense for stock option awards for non-employees at the fair value on the grant date. Generally, the options issued to non-employees have been earned upon issuance. For the instances that options are issued to non-employees with a vesting schedule, the fair value is recorded on each vesting 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

three

months ended

March 31, 2018

and

2019:

	2018					2019
	Non Plan			2018 Plan		Non Plan			20 18 Plan
Risk free interest rate		2.43	%		n/a		2.65	%		2.65	%
Expected volatility		252	%		n/a		152	%		152	%
Expected dividend yield		—			n/a		—			—
Forfeiture rate		—			n/a		—			—
Life in years		7			n/a		7			7

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.

Historically, we have

not

had significant forfeitures of unvested stock options granted to employees and Directors. A significant number of our stock option grants are fully vested at issuance or have short vesting provisions. Therefore, we have estimated the forfeiture rate of our outstanding stock options as zero.

Warrant Policy [Policy Text Block]

Warrants

Warrants issued with our convertible promissory notes, note payables, line of credit 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 convertible note issued with the warrant is recorded at its 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. Further, the convertible promissory note is examined for any intrinsic beneficial conversion feature (“BCF”) of which the convertible price of the note is less than the closing common stock price on date of issuance. If the relative fair value method is used to value the convertible promissory note and there is an intrinsic BCF, a further analysis is undertaken of the BCF using an effective conversion price which assumes the conversion price is the relative fair value divided by the number of shares the convertible debt is converted into by its terms. The BCF value is accounted for as equity.

The warrant and BCF 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.

Non Cash Transactions [Policy Text Block]

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 from Contract with Customer [Policy Text Block]

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, Odor-

No

-More and BLEST. Odor-

No

-More 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. Odor-

No

-More recognizes revenue at a point in time when the order for its goods are shipped if its agreement with the customer is FOB Odor-

No

-More’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.

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. To date, there have been

no

discounts or other financing terms for the contracts.

In the future, we

may

generate revenues from royalties or license fees from our intellectual property. In the event we do so, we anticipate a licensee would 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. Upon entering into a licensing agreement, we will determine the appropriate method of recognizing the royalty and license fees.

Government Grants [Policy Text Block]

Government Grants

We have been awarded multiple research grants from governmental and quasi-governmental institutions. The grants received are considered “other income” and are included in our Consolidated Statements of Operations. We received our

first

grant in

2015

and have been awarded over

60

 grants totaling over

$3.6

million. 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.

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 Tax, Policy [Policy Text Block]

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 income in the period 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 generally accepted accounting principles (“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.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

Management believes the carrying amounts of the Company’s financial instruments (excluding debt and equity instruments) as of

December 31, 2018

and

March 31, 2019

approximate their respective fair values because of the short-term nature of these instruments. Such instruments consist of cash, accounts receivable, prepaid assets, accounts payable, lines of credit, and other assets and liabilities.

Tax Credits [Policy Text Block]

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 instead receive a tax refund from the Canadian Revenue Authority. Those refunds are classified in Other Income on our Consolidated Statement of Operations and Comprehensive Loss.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In

August 2018,

the FASB issued Accounting Standards Update

No.

2018

-

13,

“Fair Value Measurement (Topic

820

), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” The amendments in this update modify the disclosure requirements on fair value measurements in Topic

820,

Fair Value Measurement. The amendments in this update are effective for public business entities for fiscal years beginning after

December 15, 2019,

including interim periods within that fiscal year. Management has

not

concluded its evaluation of the guidance. Its initial analysis is that it does

not

believe the new guidance will substantially impact the Company’s financial statements.

In

June 2018,

The FASB issued Accounting Standards Update

No.

2018

-

07,

“Compensation – Stock Compensation (topic

718

): Improvements to Nonemployee Share-Based Payment Accounting”. The amendments in this update expand the scope of Topic

718

to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic

718

to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic

718

applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic

718

does

not

apply to share-based payments used to effectively provide (

1

) financing to the issuer or (

2

) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic

606,

Revenue from Contracts and Customers.  The amendments in this update are effective for public business entities for fiscal years beginning after

December 15, 2018,

including interim periods within that fiscal year. This new guidance did

not

materially impact our stock compensation expense.

In

February 2016,

the FASB issued ASU Update

No.

2016

-

02,

“Leases,” which will require lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability, and lessors to recognize a net lease investment. Additional qualitative and quantitative disclosures will also be required. We adopted this standard effective

January 1, 2019

using the modified retrospective transition method approved by the FASB in

July 2018.

The adoption of the new standard resulted in a

$399,000

gross up of assets and liabilities; this balance

may

fluctuate over time as we enter into new leases, extend or terminate current leases.

XML

Note 2 - Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Cash and Cash Equivalents [Table Text Block]

	December 31, 2018		March 31, 2019
BioLargo, Inc. and wholly owned subsidiaries	$	193	$	183
Clyra Medical Technologies, Inc.		462		329
Total	$	655	$	512

Schedules of Concentration of Risk, by Risk Factor [Table Text Block]

	March 31, 201 8			March 31, 201 9
Customer A		39	%		43	%
Customer B		18	%		10	%
Customer C		<10	%		26	%
Customer D		18	%		<10	%

	December 31, 201 8			March 31, 201 9
Customer X		12	%		25	%
Customer Y		31	%		<10	%
Customer Z		<10	%		11	%

Schedule of Inventory, Current [Table Text Block]

	December 31, 201 8		March 31, 201 9
Raw material	$	14	$	14
Finished goods		12		12
Total	$	26	$	26

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	2018					2019
	Non Plan			2018 Plan		Non Plan			20 18 Plan
Risk free interest rate		2.43	%		n/a		2.65	%		2.65	%
Expected volatility		252	%		n/a		152	%		152	%
Expected dividend yield		—			n/a		—			—
Forfeiture rate		—			n/a		—			—
Life in years		7			n/a		7			7

XML

Note 4 - Debt Obligations (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Debt [Table Text Block]

	December 31, 201 8		March 31, 201 9
C urrent liabilities:
Notes payable, mature June 6, 2019	$	400	$	440
Note payable, matures on demand 60 days’ notice (or March 8, 2023)		—		50
Line of credit, matures September 1, 2019 or later (on 30-day demand)		430		430
Convertible notes payable:
Convertible notes, mature December 31, 2019 ( 1 )		75		75
Convertible note, matured January 11, 2019		300		—
Convertible note, matures July 15, 2019		550		420
Convertible note, matures July 20, 2019 ( 1 )		440		440
Convertible note, matures October 7, 2019		—		370
Convertible note, matures November 5, 2019 and December 7, 2019		—		554
Convertible nine-month notes, due October, November 2019		—		213
Total convertible notes payable	$	1,365	$	2,072
Total current liabilities	$	2,195	$	2,992
L ong-term liabilities :
Note payable issued by Clyra Medical to Scion, matures June 17, 2020 (See Note 8)		1,007		1,007
Convertible notes payable, mature June 20, 2020 (1)		25		25
Convertible notes payable, mature April 20, 2021 (1)		100		100
Convertible notes, mature June 15, 2021 (1)		110		110
Note payable, matures March 8, 2023 (or on demand 60 days’ notice)		50		—
Total long-term liabilities	$	1,292	$	1,242
Total	$	3,487	$	4,234

XML

Note 5 - Share-based Compensation (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Share-based Payment Arrangement, Option, Activity [Table Text Block]

						Weighted
						Average		Aggregate
	Options		Exercise			Price per		intrinsic
As of March 31, 2019 :	Outstanding		Price per share			share		Value (1)
Balance, December 31, 2018		1,318,517	$0.22	–	0.43	$	0.30
Granted		890,280	0.16	–	0.22		0.19
Expired		—		—			—
Balance, March 31, 2019		2,208,797	$0.16	–	0.43	$	0.25	$	—

								Weighted
								Average		Aggregate
	Options			Exercise				Price per		intrinsic
As of March 31, 2018 :	Outstanding			p rice per share				share		Value (1)
Balance, December 31, 2017		9,831,586			$0.23	–	1.89	$	0.44
Expired		(50,000	)			1.89			0.91
Balance, March 31, 2018		9,781,586			$0.23	–	1.65	$	0.43	$	—
As of March 31, 2019 :
Balance, December 31, 2018		9,691,586			$0.23	–	0.94	$	0.43
Expired		(30,000	)		0.38	–	0.70		0.50
Balance, March 31, 2019		9,661,586			$0.23	–	1.65	$	0.43	$	—

								Weighted
	Non-plan							a verage		Aggregate
	Options			Exercise				p rice per		intrinsic
As of March 31, 2018 :	o utstanding			p rice per share				share		value (1)
Balance, December 31, 2017		20,018,408			$0.25	–	1.00	$	0.51
Granted		619,435			0.26	–	0.28		0.26
Expired		(2,400,000	)			0.99			0.99
Balance, March 31, 2018		18,237,843			$0.25	–	1.00	$	0.45	$	—
As of March 31, 2019 :
Balance, December 31, 2018		19,319,496			$0.23	–	1.00	$	0.43
Granted		731,250			0.16	–	0.25		0.19
Balance, March 31, 2019		20,050,746			$0.25	–	1.00	$	0.42	$	—

XML

Note 6 - Warrants (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

							Weighted
							a verage		Aggregate
	Warrants		Exercise				p rice per		intrinsic
As of March 31, 2018 :	o utstanding		p rice per share				share		value (1)
Balance, December 31, 2017		22,104,817		$0.125	–	1.00	$	0.45
Issued		2,611,513		0.25	–	0.48		0.35
Balance, March 31, 2018		24,716,330		$0.125	–	1.00	$	0.44	$	—
As of March 31, 2019 :
Balance, December 31, 2018		26,872,430		$0.25	–	1.00	$	0.42
Issued		3,861,041		$0.16	–	0.25	$	0.24
Balance, March 31, 2019		30,733,471		$0.20	–	1.00	$	0.40	$	—

Schedule Of Assumptions Used To Determine Fair Value Of Warrants [Table Text Block]

	March 31, 2018				March 31, 2019
Risk free interest rate			2.54%			2.18	–	2.62%
Expected volatility			252%			86	–	110%
Expected dividend yield			—				—
Forfeiture rate			—				—
Expected life in years		5	–	10		2	–	5

XML

Note 7 - Accounts Payable and Accrued Expenses (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Accounts Payable and Accrued Liabilities [Table Text Block]

	December 31, 2018		March 31, 2019
Accounts payable and accrued expense	$	302	$	370
Accrued interest		122		151
Accrued payroll		77		110
Total accounts payable and accrued expenses	$	501	$	631

XML

Note 8 - Noncontrolling Interest - Clyra Medical (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Other Ownership Interests [Table Text Block]

Shareholder	Shares		Percent
BioLargo, Inc.		28,053		42.0	%
Sanatio Capital (1)		11,520		17.4	%
Scion Solutions (2)		15,500		23.4	%
Other		11,772		17.2	%
Total		66,845

XML

Note 10 - Business Segment Information (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

As of March 31, 2019	BioLargo			ONM			Clyra			BLEST			Water			Elimination			Total
Revenue	$	—		$	301		$	—		$	183		$	—		$	(120	)	$	364
Intersegment revenue		—			—			—			(120	)		—			—			—
Operating loss		(948	)		(90	)		(287	)		(110	)		(227	)		—			(1,662	)
Grant income		—			—			—			—			82			—			82
Interest expense		(632	)		—			(12	)		—			—			—			(985	)
Depreciation		—			(4	)		—			(12	)		—			—			(16	)
Research and development		(172	)		—			(49	)		(122	)		(209	)		126			(426	)
Loss on extinguishment		(184	)		—			—			—			—			—			(184	)
Net loss		(2,105	)		(90	)		(299	)		(110	)		(145	)		—			(2,749	)

As of March 31, 2018	BioLargo			ONM			Clyra			BLEST			Water			Elimination			Total
Revenue	$	—		$	224		$	—		$	189		$	—		$	(120	)	$	364
Intersegment revenue		—			—			—			(150	)		—			—			—
Operating loss		(1,093	)		(109	)		(199	)		(45	)		(156	)		—			(1,602	)
Grant income		—			—			—			—			5			—			5
Interest expense		(830	)		—			—			(2	)		—			—			(832	)
Depreciation		—			(4	)		—			(6	)		—			—			(10	)
Research and development		(343	)		—			(87	)		(100	)		(142	)		150			(522	)
Net loss		(1,924	)		(109	)		(199	)		(46	)		(151	)		—			(2,429	)

As of March 31, 2019	BioLargo		ONM		Clyra		BLEST		Water		Elimination			Total
Tangible assets	$	673	$	182	$	277	$	329	$	48	$	(6	)	$	1,503
Intangible assets		1,893		—		—		—		—		—			1,893

As of December 31, 2018	BioLargo		ONM		Clyra		BLEST		Water		Elimination			Total
Tangible assets	$	353	$	220	$	462	$	230	$	33	$	(6	)	$	1,292
Intangible assets		1,893		—		—		—		—		—			1,893

XML

Note 1 - Business and Organization (Details Textual)		3 Months Ended		12 Months Ended
		Mar. 31, 2019 USD ($)	Mar. 31, 2018 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest, Total		$ (2,749,000)	$ (2,429,000)
Net Cash Provided by (Used in) Operating Activities, Total		(869,000)	(996,000)
Working Capital		2,343,000
Assets, Current, Total		782,000		$ 955,000
Revenue from Contract with Customer, Including Assessed Tax		$ 364,000	364,000	1,364,000
Number of Reportable Segments		2
Convertible Notes Payable, Current		$ 2,072,000		1,365,000
Cash Provided by Financing Activities		730,000
Cash and Cash Equivalents, at Carrying Value, Ending Balance		$ 512,000	$ 921,000	655,000	$ 990,000
Number of Wholly-Owned Subsidiaries		5
Clyra Medical Technology Inc [Member] | Biolargo [Member]
Noncontrolling Interest, Ownership Percentage by Parent		42.00%
Notes Payable, Maturing June 6, 2019 [Member]
Convertible Notes Payable, Current		$ 440,000
Line of Credit, Maturing September 1, 2019 [Member]
Long-term Line of Credit, Total	[1]	430,000		$ 430,000
Convertible Notes Payable [Member]
Short-term Debt, Total		$ 2,072,000

[1] See Note 14 "Subsequent Events"

XML

Note 2 - Summary of Significant Accounting Policies (Details Textual)	3 Months Ended		12 Months Ended
	Mar. 31, 2019 USD ($)	Mar. 31, 2018	Dec. 31, 2018 USD ($)
Cash, FDIC Insured Amount	$ 250,000
Inventory Valuation Reserves, Ending Balance	3,000		$ 3,000
Security Deposit	35,000
Impairment of Long-Lived Assets Held-for-use	$ 0		0
Number of Grants Received	60
Operating Lease, Right-of-Use Asset	$ 399,000
Accounts Receivable, Allowance for Credit Loss, Ending Balance	0		0
Accounting Standards Update 2016-02 [Member]
Operating Lease, Right-of-Use Asset	399,000
Operating Lease, Liability, Total	$ 399,000
Canadian Government Grants [Member]
Grants Receivable			$ 3,600,000
Canadian Government Grants [Member] | Minimum [Member]
Grant Term	180 days
Canadian Government Grants [Member] | Maximum [Member]
Grant Term	1 year 180 days
Customer Concentration Risk [Member] | Revenue from Contract with Customer Benchmark [Member]
Number of Major Customers		3
Customer Concentration Risk [Member] | Accounts Receivable [Member]
Number of Major Customers	2
Clyra Medical Technology Inc [Member] | Biolargo [Member]
Noncontrolling Interest, Ownership Percentage by Parent	42.00%

XML

Note 2 - Summary of Significant Accounting Policies - Summary of Cash Balances (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Cash and Cash Equivalents, at Carrying Value, Ending Balance	$ 512,000	$ 655,000	$ 921,000	$ 990,000
Parent Company [Member]
Cash and Cash Equivalents, at Carrying Value, Ending Balance	183,000	193,000
Noncontrolling Interest [Member]
Cash and Cash Equivalents, at Carrying Value, Ending Balance	$ 329,000	$ 462,000

XML

Note 2 - Summary of Significant Accounting Policies - Credit Concentration (Details) - Customer Concentration Risk [Member]	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Customer A [Member] | Revenue from Contract with Customer Benchmark [Member]
Credit concentration	43.00%	39.00%
Customer X [Member] | Accounts Receivable [Member]
Credit concentration	25.00%	12.00%
Customer B [Member] | Revenue from Contract with Customer Benchmark [Member]
Credit concentration		18.00%
Customer B [Member] | Revenue from Contract with Customer Benchmark [Member] | Maximum [Member]
Credit concentration	10.00%
Customer Y [Member] | Accounts Receivable [Member]
Credit concentration	10.00%	31.00%
Customer C [Member] | Revenue from Contract with Customer Benchmark [Member]
Credit concentration		10.00%
Customer C [Member] | Revenue from Contract with Customer Benchmark [Member] | Maximum [Member]
Credit concentration	26.00%
Customer Z [Member] | Accounts Receivable [Member]
Credit concentration	11.00%	10.00%
Customer D [Member] | Revenue from Contract with Customer Benchmark [Member]
Credit concentration	10.00%	18.00%

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Note 2 - Summary of Significant Accounting Policies - Inventory (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Raw material	$ 14	$ 14
Finished goods	12	12
Total	$ 26	$ 26

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Note 2 - Summary of Significant Accounting Policies - Stock Options, Valuation Assumptions (Details)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Non Plan [Member]
Risk free interest rate	2.65%	2.43%
Expected volatility	152.00%	252.00%
Expected dividend yield
Life in years (Year)	7 years	7 years
2018 Equity Incentive Plan [Member]
Risk free interest rate	2.65%
Expected volatility	152.00%
Expected dividend yield
Life in years (Year)	7 years

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Note 3 - Lincoln Park Financing (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Aug. 25, 2017
Proceeds from Issuance of Common Stock		$ 168,000
Lincoln Park Capital Fund, LLC [Member]
Stock Purchase Agreement, Maximum Amount of Common Stock			$ 10,000,000
Stock Issued During Period, Shares, New Issues		650,000
Proceeds from Issuance of Common Stock		$ 168,220

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Note 4 - Debt Obligations (Details Textual) - USD ($)											1 Months Ended	3 Months Ended
	Mar. 07, 2019	Feb. 05, 2019	Feb. 04, 2019	Jan. 31, 2019	Jan. 22, 2019	Jan. 14, 2019	Jan. 07, 2019	Jan. 03, 2019	Sep. 19, 2018	Mar. 01, 2018	Jan. 31, 2019	Mar. 31, 2019	Mar. 31, 2018	Mar. 28, 2019	Mar. 05, 2019	Jan. 06, 2019	Jan. 05, 2019	Dec. 31, 2018	Oct. 16, 2018	Dec. 31, 2017
Interest Expense, Debt, Total												$ 985,000	$ 832,000
Proceeds from Notes Payable, Total												170,000
Gain (Loss) on Extinguishment of Debt, Total												$ (184,000)
Class of Warrant or Right, Exercise Price of Warrants or Rights												$ 1	$ 1					$ 1		$ 1
Common Stock, Shares Authorized												400,000,000						400,000,000
Lincoln Park Capital Fund, LLC [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights				50,000			250,000				50,000
Class of Warrant or Right, Exercise Price of Warrants or Rights				$ 0.25			$ 0.25				$ 0.25
Class of Warrant or Right, Expiration Term							5 years				5 years
Conversion of Principal Amount into Common Stock [Member]
Debt Conversion, Converted Instrument, Shares Issued												1,638,479
Conversion of Accrued Interest into Common Stock [Member]
Debt Conversion, Converted Instrument, Shares Issued												40,769
Convertible Notes Payable [Member]
Short-term Debt, Total												$ 2,072,000
Convertible Notes Payable [Member] | Tangiers Global [Member]
Debt Instrument, Face Amount		$ 330,000
Debt Instrument, Convertible, Conversion Price, Percentage of Lowest Closing Bid Price				75.00%							75.00%
Debt Instrument, Convertible, Number of Consecutive Trade Days Prior to Conversion Date				25 days
Debt Instrument, Convertible, Default Penalty				22.00%							22.00%
Debt Instrument, Convertible, Beneficial Conversion Feature				$ 185,000
Short-term Debt, Total												554,000
Proceeds from Convertible Debt	$ 150,000	300,000
Debt Instrument, Convertible, Interest Rate on Remaining Principal				12.00%							12.00%
Debt Instrument, Convertible, Aggregate Principal Amount				$ 495,000							$ 495,000
Debt Instrument, Unamortized Discount, Total		$ 10
Debt Instrument, Convertible, Days to Prepay Following Effective Date				180 days
Debt Instrument, Default, Percentage of Principal				25.00%							25.00%
Common Stock, Shares Authorized				3,000,000							3,000,000
Convertible Notes Payable [Member] | Tangiers Global [Member] | Tangiers Global Convertible Note, Prepayment Period First 90 Days [Member]
Debt Instrument, Convertible, Prepayment Penalty				25.00%							25.00%
Convertible Notes Payable [Member] | Tangiers Global [Member] | Tangiers Global Convertible Note Prepayment Period Second 90 Days [Member]
Debt Instrument, Convertible, Prepayment Penalty				30.00%							30.00%
Notes Payable, Maturing January 5, 2019 [Member]
Proceeds from Notes Payable, Total									$ 400,000
Debt Instrument, Interest Rate, Stated Percentage									12.00%
Debt Instrument, Face Amount								$ 400,000
Debt Instrument, Period of Extension								60 days
Debt Instrument Extension Option Increase In Principal Percentage								10.00%
Debt Instrument, Face Value, After Increase from Maturity Date Extension																	$ 440,000
Debt Instrument, Interest Rate After Maturity Date Extension															18.00%
Notes Payable, Maturing January 5, 2019 [Member] | Vernal Bay Investments, LLC [Member]
Debt Instrument, Face Amount									$ 280,000
Notes Payable, Maturing January 5, 2019 [Member] | Chappy Bean, LLC [Member]
Debt Instrument, Face Amount									$ 120,000
Triton Fund Investment [Member]
Debt Instrument, Interest Rate, Stated Percentage																			5.00%
Debt Instrument, Face Amount																			$ 300,000
Bridge Loan																			225,000
Discount On Convertible Note Payable																			$ 75,000
Vista Capital 2017 Note [Member]
Debt Instrument Extension Option Increase In Principal Percentage										10.00%
Gain (Loss) on Extinguishment of Debt, Total												(38,000)
Debt Conversion, Original Debt, Amount												$ 225,000
Debt Conversion, Converted Instrument, Shares Issued												1,679,248
Vista Capital 2017 Note [Member] | Convertible Notes Payable [Member]
Short-term Debt, Total												$ 420,000
Vista Capital 2017 Note [Member] | Convertible Notes Payable [Member] | Vista Capital [Member]
Debt Instrument, Interest Rate, Stated Percentage							5.00%
Debt Instrument, Face Value, After Increase from Maturity Date Extension							$ 605,100							$ 420,000
Debt Instrument, Convertible, Conversion Price, Percentage of Lowest Closing Bid Price							80.00%
Debt Instrument, Convertible, Number of Consecutive Trade Days Prior to Conversion Date							25 days
Debt Instrument, Convertible, Prepayment Penalty							15.00%									20.00%
Debt Instrument, Convertible, Default Penalty							25.00%									30.00%
Debt Instrument, Convertible, Beneficial Conversion Feature							$ 487,000
Vista Capital 2019 Note [Member] | Convertible Notes Payable [Member] | Vista Capital [Member]
Debt Instrument, Interest Rate, Stated Percentage							12.00%
Debt Instrument, Face Amount							$ 330,000
Debt Instrument, Convertible, Conversion Price, Percentage of Lowest Closing Bid Price							65.00%
Debt Instrument, Convertible, Number of Consecutive Trade Days Prior to Conversion Date							25 days
Debt Instrument, Convertible, Beneficial Conversion Feature							$ 300,000
Proceeds from Convertible Debt							$ 300,000
Common Stock, Limit on Ownership Interest, Percent							4.99%
Debt Instrument, Convertible, Number of Business Days Notice of Prepayment							10 days
Debt Instrument, Convertible, Outstanding Balance Including Prepayment Penalty, Percent							120.00%
OID Note [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 0.25
Warrants and Rights Outstanding, Term			5 years
Class of Warrant or Right, Percentage of Principal Value of Note, Numerator Value of Calculation			75.00%
Class of Warrant or Right, Denominator Value of Calculation			$ 0.25
OID Note [Member] | Convertible Notes Payable [Member]
Proceeds from Notes Payable, Total			$ 100,000		$ 20,000	$ 50,000
Debt Instrument, Interest Rate, Stated Percentage			5.00%
Debt Instrument, Face Amount			$ 125,000		$ 25,000	$ 62,500						$ 212,500
Debt Instrument, Unamortized Discount, Total			42,500
Original Issue Discount, Percentage												25.00%
Debt Instrument, Convertible, Conversion Price												$ 0.25
Amount of Qualifying Offering Needed to Trigger Note Prepayment			$ 3,500,000

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Note 4 - Debt Obligations - Schedule of Debt (Details) - USD ($)		Mar. 31, 2019	Dec. 31, 2018
Notes payable		$ 490,000	$ 400,000
Convertible Notes Payable, Current		2,072,000	1,365,000
Total current liabilities		2,992,000	2,195,000
Long-term Debt, Excluding Current Maturities, Total		1,242,000	1,292,000
Total		4,234,000	3,487,000
Notes Payable, Maturing June 6, 2019 [Member]
Notes payable		440,000	400,000
Convertible Notes Payable, Current		440,000
Note Payable, Maturing March 8, 2023 [Member]
Notes payable		50,000
Line of Credit, Maturing September 1, 2019 [Member]
Long-term Line of Credit, Total	[1]	430,000	430,000
Convertible Notes Maturing on December 31, 2019 [Member]
Convertible Notes Payable, Current		75,000	75,000
Convertible Notes Maturing January 11, 2019 [Member]
Convertible Notes Payable, Current			300,000
Convertible Note, Maturing on July 15, 2019 [Member]
Convertible Notes Payable, Current	[1]	420,000	550,000
Convertible Notes, Maturing July 20, 2019 [Member]
Convertible Notes Payable, Current	[2]	440,000	440,000
Convertible Note, Maturing October 7, 2019 [Member]
Convertible Notes Payable, Current		370,000
Convertible Note, Maturing November 5, 2019 [Member]
Convertible Notes Payable, Current		554,000
Convertible Nine Month Notes, due October, November 2019 [Member]
Convertible Notes Payable, Current		213,000
Convertible Notes Issued by Clyra Medical Maturing on June 17, 2020 [Member]
Long-term Debt, Excluding Current Maturities, Total		1,007,000	1,007,000
Convertible Notes, Maturing on June 20, 2020 [Member]
Long-term Debt, Excluding Current Maturities, Total		25,000	25,000
Convertible Notes, Maturing April 20, 2021 [Member]
Long-term Debt, Excluding Current Maturities, Total	[1]	100,000	100,000
Convertible Notes, Mature June 15, 2021 [Member]
Long-term Debt, Excluding Current Maturities, Total		110,000	110,000
Convertible Note, Maturing On March 8, 2023 [Member]
Long-term Debt, Excluding Current Maturities, Total			$ 50,000

[1] See Note 14 "Subsequent Events"

[2] These notes are convertible at our option at maturity.

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Note 5 - Share-based Compensation (Details Textual) - USD ($)						3 Months Ended
	Mar. 31, 2019	Mar. 29, 2019	Jan. 16, 2019	Jun. 22, 2018	Sep. 07, 2017	Mar. 31, 2019	Mar. 31, 2018
Stock Issued During Period, Value, Issued for Services						$ 206,000	$ 197,000
Share Price			$ 0.22
2018 Equity Incentive Plan [Member]
Shares Issued, Price Per Share	$ 0.16					$ 0.16
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period				10 years
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized				40,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized Per Year				2,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						890,280
The 2007 Equity Incentive Plan [Member]
Shares Issued, Price Per Share	0.16					$ 0.16
Non Plan [Member]
Shares Issued, Price Per Share	$ 0.16					$ 0.16
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						731,250	619,435
Selling, General and Administrative Expenses [Member]
Share-based Payment Arrangement, Expense						$ 352,000	$ 320,000
Maximum [Member] | The 2007 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period					10 years
Officer [Member]
Stock Issued During Period, Shares, Issued for Services	323,030	579,996
Shares Issued, Price Per Share	$ 0.26	$ 0.16				$ 0.26
Stock Issued During Period, Value, Issued for Services	$ 84,000	$ 93,000
Consultants [Member]
Stock Issued During Period, Shares, Issued for Services						788,907	1,008,478
Stock Issued During Period, Value, Issued for Services						$ 138,000	$ 277,000
Consultants [Member] | Minimum [Member]
Shares Issued, Price Per Share	$ 0.16					$ 0.16	$ 0.25
Consultants [Member] | Maximum [Member]
Shares Issued, Price Per Share	0.23					0.23	$ 0.41
Chief Financial Officer [Member] | 2018 Equity Incentive Plan [Member]
Shares Issued, Price Per Share	0.22					$ 0.22
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						300,000
Chief Financial Officer [Member] | Equity Incentive Plan 2007 [Member]
Share-based Payment Arrangement, Expense						$ 67,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			300,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares			75,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Remaining Number of Shares to Vest Each Month			25,000
Chief Financial Officer [Member] | Selling, General and Administrative Expenses [Member] | Equity Incentive Plan 2007 [Member]
Share-based Payment Arrangement, Expense						$ 17,000
Employees [Member] | 2018 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						168,404
Employees [Member] | Minimum [Member] | 2018 Equity Incentive Plan [Member]
Shares Issued, Price Per Share	0.16					$ 0.16
Employees [Member] | Maximum [Member] | 2018 Equity Incentive Plan [Member]
Shares Issued, Price Per Share	0.25					$ 0.25
Employees and CFO [Member] | Selling, General and Administrative Expenses [Member] | 2018 Equity Incentive Plan [Member] | Share-based Payment Arrangement, Option [Member]
Share-based Payment Arrangement, Expense						$ 36,000
Board Of Directors [Member] | 2018 Equity Incentive Plan [Member]
Shares Issued, Price Per Share	0.16					$ 0.16
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						421,876
Board Of Directors [Member] | Selling, General and Administrative Expenses [Member] | 2018 Equity Incentive Plan [Member] | Share-based Payment Arrangement, Option [Member]
Share-based Payment Arrangement, Expense						$ 68,000
Vendors [Member] | Non Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						731,250
Vendors [Member] | Selling, General and Administrative Expenses [Member] | Non Plan [Member]
Share-based Payment Arrangement, Expense						$ 139,000
Vendors [Member] | Minimum [Member] | Non Plan [Member]
Shares Issued, Price Per Share	0.16					$ 0.16
Vendors [Member] | Maximum [Member] | Non Plan [Member]
Shares Issued, Price Per Share	$ 0.25					$ 0.25
Board of Directors and Vendors [Member] | Non Plan [Member]
Stock Issued During Period, Value, Issued for Services							$ 158,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross						619,435
Board of Directors and Vendors [Member] | Minimum [Member] | Non Plan [Member]
Shares Issued, Price Per Share							$ 0.26
Board of Directors and Vendors [Member] | Maximum [Member] | Non Plan [Member]
Shares Issued, Price Per Share							$ 0.28

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Note 5 - Share-based Compensation - Stock Options (Details) - USD ($)		3 Months Ended
		Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
2018 Equity Incentive Plan [Member]
Options outstanding, balance (in shares)		1,318,517
Weighted average price per share, balance (in dollars per share)		$ 0.30		$ 0.25	$ 0.30
Aggregate intrinsic value, balance	[1]
Options outstanding, granted (in shares)		890,280
Weighted average price per share, granted (in dollars per share)		$ 0.19
Options outstanding, balance (in shares)		2,208,797
Weighted average price per share, balance (in dollars per share)		$ 0.30
Weighted average price per share, balance (in dollars per share)		0.25
2018 Equity Incentive Plan [Member] | Minimum [Member]
Exercise price per share, balance (in dollars per share)		0.22
Exercise price per share, granted (in dollars per share)		0.16
Exercise price per share, balance (in dollars per share)		0.16
2018 Equity Incentive Plan [Member] | Maximum [Member]
Exercise price per share, balance (in dollars per share)		0.43
Exercise price per share, granted (in dollars per share)		0.22
Exercise price per share, balance (in dollars per share)		$ 0.43
Equity Incentive Plan 2007 [Member]
Options outstanding, balance (in shares)		9,691,586	9,831,586
Weighted average price per share, balance (in dollars per share)		$ 0.43	$ 0.44	$ 0.43	$ 0.43	$ 0.43
Aggregate intrinsic value, balance	[1]
Options outstanding, balance (in shares)		9,661,586	9,781,586
Weighted average price per share, balance (in dollars per share)		$ 0.43	$ 0.44
Options outstanding, expired (in shares)		(30,000)	(50,000)
Exercise price per share, expired (in dollars per share)			$ 1.89
Weighted average price per share, expired (in dollars per share)		$ 0.50	0.91
Weighted average price per share, balance (in dollars per share)		0.43	0.43
Equity Incentive Plan 2007 [Member] | Minimum [Member]
Exercise price per share, balance (in dollars per share)		0.23	0.23
Exercise price per share, balance (in dollars per share)		0.23	0.23
Exercise price per share, expired (in dollars per share)		0.38
Equity Incentive Plan 2007 [Member] | Maximum [Member]
Exercise price per share, balance (in dollars per share)		0.94	1.89
Exercise price per share, balance (in dollars per share)		1.65	$ 1.65
Exercise price per share, expired (in dollars per share)		$ 0.70
Non Plan [Member]
Options outstanding, balance (in shares)		19,319,496	20,018,408
Weighted average price per share, balance (in dollars per share)		$ 0.43	$ 0.51	$ 0.42	$ 0.43	$ 0.45
Aggregate intrinsic value, balance	[1]
Options outstanding, granted (in shares)		731,250	619,435
Weighted average price per share, granted (in dollars per share)		$ 0.19	$ 0.26
Options outstanding, balance (in shares)		20,050,746	18,237,843
Weighted average price per share, balance (in dollars per share)		$ 0.43	$ 0.51
Options outstanding, expired (in shares)			(2,400,000)
Exercise price per share, expired (in dollars per share)			$ 0.99
Weighted average price per share, expired (in dollars per share)			0.99
Weighted average price per share, balance (in dollars per share)		0.42	0.45
Non Plan [Member] | Minimum [Member]
Exercise price per share, balance (in dollars per share)		0.23	0.25
Exercise price per share, granted (in dollars per share)		0.16	0.26
Exercise price per share, balance (in dollars per share)		0.25	0.25
Non Plan [Member] | Maximum [Member]
Exercise price per share, balance (in dollars per share)		1	1
Exercise price per share, granted (in dollars per share)		0.25	0.28
Exercise price per share, balance (in dollars per share)		$ 1	$ 1

[1] Aggregate intrinsic value based on closing common stock price of $0.16 at March 31, 2019.

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Note 6 - Warrants (Details Textual) - USD ($)			3 Months Ended
	Dec. 30, 2016	Jul. 08, 2016	Mar. 31, 2019	Mar. 31, 2018	Mar. 05, 2019	Mar. 04, 2019	Jan. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 1	$ 1				$ 1	$ 1
Gain (Loss) on Extinguishment of Debt, Total			$ (184,000)
Class of Warrant or Right, Issued During Period			3,861,041	2,611,513
Deemed Dividends			$ 342,000	$ 297,000
Warrants Issued as Part of Debt Extension [Member]
Gain (Loss) on Extinguishment of Debt, Total			$ (56,000)
Warrants Issued Concurrently with the Nine-month Note Payable [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights			637,500
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 0.25
Warrants and Rights Outstanding, Term			5 years
Discount On Convertible Note Payable			$ 89,000
Class of Warrant or Right, Percentage of Principal Value of Note, Numerator Value of Calculation			75.00%
Class of Warrant or Right, Denominator Value of Calculation			$ 0.25
Warrants Issued Concurrently With One Year Convertible Note [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 0.75	$ 0.65	$ 0.12
Class of Warrant or Right, Issued During Period	400,000	400,000
Increase (Decrease) Warrants Available for Exercise			2,426,666
Deemed Dividends			$ 342,000
Vernal Bay Investments, LLC [Member] | Warrants Issued as Part of Debt Extension [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					1,734,375	1,387,500
Class of Warrant or Right, Exercise Price of Warrants or Rights					$ 0.20	$ 0.25
Maximum Investment Amount under Warrant					$ 346,875
Chappy Bean, LLC [Member] | Warrants Issued as Part of Debt Extension [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					750,000	600,000
Class of Warrant or Right, Exercise Price of Warrants or Rights					$ 0.20
Lincoln Park Capital Fund, LLC [Member] | Warrants Issued as Consent for Variable Rate Date [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights							300,000
Class of Warrant or Right, Exercise Price of Warrants or Rights							$ 0.25
Warrants and Rights Outstanding, Term							5 years
Discount On Convertible Note Payable							$ 54,000

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Note 6 - Warrants - Warrants Outstanding (Details) - $ / shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Balance, outstanding (in shares)	26,872,430	22,104,817
Balance, outstanding, price range (in dollars per share)	$ 1	$ 1
Issued (in shares)	3,861,041	2,611,513
Issued, price range (in dollars per share)	$ 0.25	$ 0.48
Balance, outstanding (in shares)	30,733,471	24,716,330
Balance, outstanding, price range (in dollars per share)	$ 1	$ 1
Balance, weighted average price per share (in dollars per share)
Minimum [Member]
Balance, outstanding, price range (in dollars per share)	0.25	0.125
Issued, price range (in dollars per share)	0.16	0.25
Balance, outstanding, price range (in dollars per share)	0.20	0.125
Maximum [Member]
Balance, outstanding, price range (in dollars per share)	0.42	0.45
Issued, price range (in dollars per share)	0.24	0.35
Balance, outstanding, price range (in dollars per share)	$ 0.40	$ 0.44

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Note 6 - Warrants - Assumptions Used to Determine Fair Value of Warrants (Details)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Risk free interest rate		2.54%
Expected volatility		252.00%
Minimum [Member]
Risk free interest rate	2.18%
Expected volatility	86.00%
Expected life (Year)	2 years	5 years
Maximum [Member]
Risk free interest rate	2.62%
Expected volatility	110.00%
Expected life (Year)	5 years	10 years

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Note 7 - Accounts Payable and Accrued Expenses - Summary of Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Accounts payable and accrued expense	$ 370	$ 302
Accrued interest	151	122
Accrued payroll	110	77
Total accounts payable and accrued expenses	$ 631	$ 501

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Note 8 - Noncontrolling Interest - Clyra Medical (Details Textual) - USD ($)		3 Months Ended		12 Months Ended
	Sep. 26, 2018	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Proceeds from Issuance of Common Stock			$ 168,000
Long-term Debt, Excluding Current Maturities, Total		$ 1,242,000		$ 1,292,000
Preferred Stock, Shares Outstanding, Ending Balance		0		0
Convertible Notes Issued by Clyra Medical Maturing on June 17, 2020 [Member]
Long-term Debt, Excluding Current Maturities, Total		$ 1,007,000		$ 1,007,000
Clyra [Member]
Proceeds from Issuance of Common Stock		$ 110,000
Shares Issued, Price Per Share		$ 550
Clyra Medical Technology Inc [Member] | Sanatio [Member]
Common Stock, Shares, Outstanding, Ending Balance		1,690
Preferred Stock, Dividend Rate, Percentage		8.00%
Preferred Shares Dividend, Period		5 years
Dividends Payable, Current		$ 200,000
Clyra Medical Technology Inc [Member] | Sanatio [Member] | Preferred Class A [Member]
Preferred Stock, Shares Outstanding, Ending Balance		9,830
Scion Acquisition [Member]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares	21,000
Business Combination, Consideration Transferred, Liabilities Incurred	$ 1,250,000
Business Acquisition, Base Capital Requirement for Escrow Release	1,000,000
Business Acquisition, Gross Revenue, Tranche One	100,000
Business Acquisition, Gross Revenue, Tranche Two	100,000
Business Acquisition, Gross Revenue, Tranche Three	500,000
Business Acquisition, Gross Revenue, Tranche Five	2,000,000
Scion Acquisition [Member] | Convertible Notes Issued by Clyra Medical Maturing on June 17, 2020 [Member]
Long-term Debt, Excluding Current Maturities, Total		$ 1,007,000
Scion Acquisition [Member] | Clyra [Member]
Debt Instrument, Face Amount	$ 1,250,000
Debt Instrument, Interest Rate, Stated Percentage	5.00%
Debt Instrument, Percent of Investment Proceeds	25.00%
Debt Instrument, Extension Period	1 year
Debt Instrument, Term	1 year 180 days
Debt Instrument, Percent of Gross Revenue	5.00%
Scion Acquisition [Member] | Clyra Medical Technology Inc [Member]
Proceeds from Issuance of Common Stock		$ 1,110,000
Shares Issued, Price Per Share		$ 200
Scion Acquisition [Member] | Clyra Acquisition, Common Stock [Member]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares	10,000	15,500		15,500
Scion Acquisition [Member] | Clyra Acquisition, Common Stock Redeemable for BioLargo Common Shares [Member]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares	7,142,858

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Note 8 - Noncontrolling Interest - Clyra Medical Common and Preferred Shares Outstanding (Details) - Clyra Medical Technology Inc [Member]	Mar. 31, 2019 shares
Shares, Outstanding (in shares)	66,845
Biolargo [Member]
Shares, Outstanding (in shares)	28,053
Percent	42.00%
Sanatio [Member]
Shares, Outstanding (in shares)	11,520	[1]
Percent	17.40%	[1]
Scion Solutions [Member]
Shares, Outstanding (in shares)	15,500	[2]
Percent	23.40%	[2]
Other [Member]
Shares, Outstanding (in shares)	11,772
Percent	17.20%

[1] Includes 9,830 Series A Preferred shares (see below), and 1,690 common shares.

[2] Does not include an additional 15,500 shares held in escrow subject to performance metrics.

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Note 9 - BioLargo Engineering, Science and Technologies, LLC (Details Textual) shares in Millions	1 Months Ended
	Sep. 30, 2017 shares
Seven Employees Working at BioLargo Engineering, Science & Technologies, LLC [Member]
Deferred Compensation Arrangement with Individual, Requisite Service Period	5 years
Potential Ownership Percentage of Subsidiary Held by Subsidiary Employees Based on Performance	30.00%
Incentive Issuance Stipulations for Subsidiary Employees, Accounts Receivable Collected by Year One of Operation	90.00%
Incentive Issuance Stipulations for Subsidiary Employees, Profit Earned in Year One of Operation	10.00%
Seven Employees Working at BioLargo Engineering, Science & Technologies, LLC [Member] | Non-Qualified Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	2
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
BioLargo Engineering, Science & Technologies, LLC [Member]
Noncontrolling Interest, Ownership Percentage by Parent	100.00%
Leased Property in Knoxville, Tennessee for BioLargo Engineering, Science & Technologies, LLC [Member]
Lessee, Operating Lease, Term of Contract	3 years

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Note 10 - Business Segment Information (Details Textual)	3 Months Ended		12 Months Ended
	Mar. 31, 2019 USD ($)	Mar. 31, 2018 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Number of Operating Segments	4
Payments of Distributions to Affiliates			$ 417,000
Revenue from Contract with Customer, Including Assessed Tax	$ 364,000	$ 364,000	1,364,000
Odor-No-More [Member]
Revenue from Contract with Customer, Including Assessed Tax	$ 301,000	$ 224,000	$ 1,000,000	$ 500,000

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Note 10 - Business Segment Information - Segment Information (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018	Dec. 31, 2017
Revenue	$ 364,000	$ 364,000	$ 1,364,000
Intersegment revenue
Operating loss	(1,662,000)	(1,602,000)
Grant income	82,000	5,000
Interest expense	(985,000)	(832,000)
Depreciation	(16,000)	(10,000)
Research and development	(426,000)	(522,000)
Loss on extinguishment	(184,000)
Net loss	(2,749,000)	(2,429,000)
Tangible assets	1,503,000		1,292,000
Intangible assets	1,893,000		1,893,000
Consolidation, Eliminations [Member]
Revenue	(120,000)	(120,000)
Intersegment revenue
Operating loss
Grant income
Interest expense
Depreciation
Research and development	126,000	150,000
Loss on extinguishment
Net loss
Tangible assets	(6,000)		(6,000)
Intangible assets
Biolargo [Member]
Revenue
Intersegment revenue
Operating loss	(948,000)	(1,093,000)
Grant income
Interest expense	(632,000)	(830,000)
Depreciation
Research and development	(172,000)	(343,000)
Loss on extinguishment	(184,000)
Net loss	(2,105,000)	(1,924,000)
Tangible assets	673,000		353,000
Intangible assets	1,893,000		1,893,000
Odor-No-More [Member]
Revenue	301,000	224,000	1,000,000	$ 500,000
Intersegment revenue
Operating loss	(90,000)	(109,000)
Grant income
Interest expense
Depreciation	(4,000)	(4,000)
Research and development
Loss on extinguishment
Net loss	(90,000)	(109,000)
Tangible assets	182,000		220,000
Intangible assets
Clyra [Member]
Revenue
Intersegment revenue
Operating loss	(287,000)	(199,000)
Grant income
Interest expense	(12,000)
Depreciation
Research and development	(49,000)	(87,000)
Loss on extinguishment
Net loss	(299,000)	(199,000)
Tangible assets	277,000		462,000
Intangible assets
BLEST [Member]
Revenue	183,000	189,000
Intersegment revenue	(120,000)	(150,000)
Operating loss	(110,000)	(45,000)
Grant income
Interest expense		(2,000)
Depreciation	(12,000)	(6,000)
Research and development	(122,000)	(100,000)
Loss on extinguishment
Net loss	(110,000)	(46,000)
Tangible assets	329,000		230,000
Intangible assets
BioLargo Water [Member]
Revenue
Intersegment revenue
Operating loss	(227,000)	(156,000)
Grant income	82,000	5,000
Interest expense
Depreciation
Research and development	(209,000)	(142,000)
Loss on extinguishment
Net loss	(145,000)	$ (151,000)
Tangible assets	48,000		33,000
Intangible assets

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Note 11 - Commitments and Contingencies (Details Textual) - USD ($)		3 Months Ended
	May 02, 2017	Mar. 31, 2019	Mar. 31, 2018
Operating Leases, Rent Expense, Total		$ 51,000	$ 49,000
Lessee, Operating Lease, Renewal Term		4 years
Lessee, Operating Lease, Discount Rate		18.00%
Consulting Services, Monthly Payment		$ 23,000
Consulting Services, Period of Services		4 years
Contractual Obligation, Total		$ 1,100,000
President and Chief Executive Officer [Member]
Employment Agreement, Annual Base Compensation	$ 289,000
Employment Agreement, Option, Number of Shares, Expected to Grant	3,731,322
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
Employment Agreement, Common Stock, Expect to Grant, Subject to Lock-Up Agreement	1,500,000
Employment Agreement, Lock-up Agreement, Successful Commercialization, Minimum Cash Receipt	$ 3,000,000
Employment Agreement, Lock-up Agreement, Minimum Revenue Recognized	$ 3,000,000
Employment Agreement, Term	5 years
President and Chief Executive Officer [Member] | Non-Qualified Stock Option [Member]
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price	$ 0.45

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Note 12 - Subsequent Events (Details Textual) - Convertible Notes Payable [Member] - USD ($)	May 14, 2019	Apr. 18, 2019
Subsequent Event [Member] | Convertible Note to Crossover Capital Fund I, LP [Member]
Debt Instrument, Face Amount	$ 110,000
Original Issue Discount, Percentage	10.00%
Debt Instrument, Convertible, Conversion Price, Percentage of Lowest Closing Bid Price	70.00%
Proceeds from Short-term Debt, Total	$ 95,000
Payments of Debt Issuance Costs	$ 5,000
Debt Instrument, Term	270 days
Debt Instrument, Repayment Period	180 days
Debt Instrument, Convertible, Prepayment Penalty, First 30 Days	5.00%
Debt Instrument, Convertible, Prepayment Penalty, Last 30 Days	30.00%
Debt Instrument, Convertible, Default Penalty	24.00%
Bellridge Capital, LP [Member] | Forecast [Member]
Debt Instrument, Convertible, Interest Rate on Remaining Principal		10.00%
Additional Proceeds From Convertible Debt		$ 400,000
Bellridge Capital, LP [Member] | Subsequent Event [Member]
Proceeds from Convertible Debt		$ 188,000
Debt Instrument, Convertible, Interest Rate on Remaining Principal		10.00%
Debt Instrument, Face Amount		$ 220,000
Original Issue Discount, Percentage		10.00%
Debt Instrument, Fee Amount		$ 10,000
Debt Instrument, Convertible, Conversion Price, Percentage of Lowest Closing Bid Price		70.00%
Debt Instrument, Convertible, Number of Consecutive Trade Days Prior to Conversion Date		25 days
Bellridge Capital, LP [Member] | Subsequent Event [Member] | Maximum [Member]
Debt Instrument, Default, Interest Rate		24.00%
Bellridge Capital, LP [Member] | Subsequent Event [Member] | Convertible Note, Prepayment Period, First 90 Days [Member]
Debt Instrument, Convertible, Prepayment Penalty		125.00%
Bellridge Capital, LP [Member] | Subsequent Event [Member] | Convertible Note Prepayment Period, Second 90 Days [Member]
Debt Instrument, Convertible, Prepayment Penalty		130.00%