Note

Share-Based Compensation

Issuance of Common Stock in exchange for payment of payables

Payment of Officer Salaries

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.

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

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

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

million shares. The number of shares available to be issued under the

2018

Plan increases automatically each

January 1

by the lesser of (a)

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

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	$	—

(

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

$0.16

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

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

$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

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

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

September

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

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	$	—

(

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

$0.16

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	$	—

(

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

$0.16

March 31, 2019.