Note 5 - Share-based Compensation

6 Months Ended

Jun. 30, 2021

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 31, 2021, we issued 137,364 shares of our common stock at $0.23 per share in lieu of $31,000 of accrued and unpaid salary to our officers.

On June 30, 2020, we issued 367,403 shares of our common stock at $0.16 per share in lieu of $59,000 of accrued and unpaid salary to our officers. On March 31, 2020, we issued 648,755 shares of our common stock at $0.17 per share in lieu of $110,000 of accrued and unpaid salary to our officers.

Payment of Consultant Fees

On June 30, 2021, we issued 357,132 shares of our common stock at $0.17 per share in lieu of $60,000 of accrued and unpaid obligations to consultants. On March 31, 2021, we issued 610,123 shares of our common stock at $0.23 per share in lieu of $81,000 of accrued and unpaid obligations to consultants.

On June 30, 2020, we issued 1,406,630 shares of our common stock at $0.16 per share in lieu of $213,000 of accrued and unpaid salary to consultants. On March 31, 2020, we issued 390,735 shares of our common stock at $0.17 per share in lieu of $67,000 of accrued and unpaid obligations to consultants.

Payment of Accrued Interest

During the three months ended June 30, 2021, we issued 81,777 shares of our common stock at $0.17 per share in lieu of $16,000 of accrued and unpaid interest.

On June 30, 2020, we issued 594,428 shares of our common stock at $0.16 per share in lieu of $30,000 of accrued and unpaid interest.  On March 31, 2020, we issued 19,278 shares of our common stock at $0.17 per share in lieu of $4,000 of accrued interest.

Stock Option Expense

During the six months ended June 30, 2021 and 2020, we recorded an aggregate $754,000 and $848,000, in selling general and administrative expense related to the issuance of stock options. We issued options through our 2018 Equity Incentive Plan, our now expired 2007 Equity Incentive Plan, and outside of these plans. See Note 9 for information on stock option expense for options issued by subsidiary Clyra.

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 1st 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 for the six months ended June 30, 2021 and June 30, 2020, is as follows:

							Weighted
							Average		Aggregate
	Options			Exercise			Price per		intrinsic
	Outstanding			Price per share			share		Value(1)
Balance, December 31, 2020		18,865,525		$0.16	–	0.40	$	0.19
Granted		2,483,691		0.13	–	0.23		0.19
Expired		—			—			—
Balance, June 30, 2021		21,349,216		$0.12	–	0.43	$	0.19
Non-vested		(4,218,833	)	0.12	–	0.40		0.23
Vested, June 30, 2021		17,130,383		$0.12	–	0.43	$	0.18	$	250,000
Balance, December 31, 2019		9,214,356		$0.16	–	0.43	$	0.25
Granted		8,610,689		0.17	–	0.22		0.19
Expired		(200,000	)	0.18	–	0.34		0.26
Balance, June 30, 2020		17,625,045		$0.16	–	0.43	$	0.20

(1) Aggregate intrinsic value based on closing common stock price of $0.17 at June 30, 2021.

The options granted to purchase 2,483,691 shares during the six months ended June 30, 2021 were issued to an officer, board of directors, employees and consultants: (i) we issued options to purchase 300,000 shares of our common stock at an exercise price on the respective grant date of $0.17 per share to our CFO as described below; (ii) we issued options to purchase 693,762 shares of our common stock at an exercise price on the respective grant date of $0.17 and $0.23 per share to members of our board of directors for services performed, in lieu of cash; the fair value of these options totaled $130,000, and is recorded as selling, general and administrative expenses; (iii) we issued options to purchase 1,298,411 shares of our common stock to employees as part of an employee retention and expiring options plan at exercises price on the respective date ranging between $0.17 and $0.23 per share; the fair value of employee retention plan options totaled $234,000 and will vest quarterly over four years as long as they are retained as employees; and (iv) we issued options to purchase 191,518 shares of our common stock to consultants and employees in lieu of cash for unpaid obligations totaling $35,000. All stock option expense is recorded on our consolidated statement of operations as selling, general and administrative expense.

The options granted under the 2018 Plan to purchase 8,610,689 shares during the six months ended June 30, 2020 were issued to officers, board of directors, employees and consultants: (i) we issued options to purchase 4,880,945 shares of our common stock at an exercise price of $0.14 per share to employees and consultants as a bonus during the pandemic. These options vest quarterly over one year and the fair value totaled $656,000 (ii) we issued options to purchase 457,500 shares of our common stock at an exercise price range of $0.14 – $0.21 per share to our CFO , with 177,500 shares having vested during the six months ended June 30, 2020, and the remaining shares to vest 25,000 monthly through January 31, 2021; (ii) we issued options to purchase 821,434 shares of our common stock at an exercise price on the respective grant date of $0.17 and $0.16 per share to members of our board of directors for services performed, all options vested at issuance and the fair value of these options totaled $130,000; (iii) we issued options to purchase 939,332 shares of our common stock to employees as part of an employee retention plan at an exercise price on the respective date of $0.17 and $0.16 per share; the fair value of employee retention plan options totaled $151,000 and vest quarterly over four years as long as they are retained as employees; (iv) we issued options to purchase 449,286 shares of our common stock to consultants in lieu of cash for unpaid obligations totaling $65,000; and (v) we issued options to purchase 1,062,192 shares of common stock at an exercise price ranging between $0.14 – $0.17 per share to employees to convert accrued and unpaid obligations and for previously issued options that expire. All of these options vested at issuance and the fair value totaled $145,000, All stock option expense is recorded on our consolidated statement of operations as selling, general and administrative expense.

Chief Financial Officer Contract Extension

On March 17, 2021, we and our Chief Financial Officer Charles K. Dargan, II, formally agreed to extend the engagement agreement dated February 1, 2008 (the “Engagement Agreement”, which had been previously extended multiple times), pursuant to which Mr. Dargan has been and continues to serve as the Company’s Chief Financial Officer. The Engagement Extension Agreement dated as of February 25, 2020 (the “Engagement Extension Agreement”) provides for an additional term to begin retroactively on October 1, 2019, and to expire January 31, 2021 (the “Extended Term”).

As compensation for the Extended Term, Mr. Dargan was issued an option (“Option”) to purchase 300,000 shares of our common stock. The Option vests over the period of the Extended Term, with 125,000 shares having vested as of June 30, 2021, and the remaining 175,000 shares to vest monthly through January 31, 2022, so long as the agreement is in full force and effect. The Option is exercisable at $0.23 per share, the closing price of our common stock on March 17, 2021, expires ten years from the grant date, and was issued pursuant to the 2018 Equity Incentive Plan. The fair value of these options totaled $49,000, which expense is recorded ratably over the twelve-month agreement term.

The Option is Mr. Dargan’s sole 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 the Extended 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 six months ended June 30, 2021 and 2020 is as follows:

							Weighted
							Average		Aggregate
	Options			Exercise			Price per		intrinsic
	Outstanding			price per share			share		Value(1)
Balance, December 31, 2020		5,689,363		$0.23	-	0.94	$	0.44
Expired		(1,453,855	)	0.39	-	0.51		0.40
Balance, June 30, 2021		4,235,508		$0.23	-	1.65	$	0.45	$	—
Balance, December 31, 2019		8,769,451		$0.23	–	0.94	$	0.42
Expired		(930,000	)	0.39	–	0.58		0.56
Balance, June 30, 2020		7,839,451		$0.23	–	1.65	$	0.41

(1) – Aggregate intrinsic value based on closing common stock price of $0.17 at June 30, 2021.

Non-Plan Options issued

Activity of our non-plan stock options issued for the six months ended June 30, 2021 and 2020 is as follows:

							Weighted
	Non-plan						average		Aggregate
	Options			Exercise			price per		Intrinsic
	outstanding			price per share			share		value(1)
Balance, December 31, 2020		20,749,583		$0.17	–	1.00	$	0.41
Granted		43,956			0.23			0.23
Balance, June 30, 2021		20,793,539		$0.17	–	1.00	$	0.41
Non-vested		(1,996,576	)	0.17	–	0.45		0.45
Vested, June 30, 2021		18,796,963		$0.17	–	1.00	$	0.41	$	28,000
Balance, December 31, 2019		19,604,107		$0.23	–	1.00	$	0.41
Granted		292,437		0.17	–	0.21		0.18
Balance, June 30, 2020		19,896,544		$0.17	–	1.00	$	0.41

(1) – Aggregate intrinsic value based on closing common stock price of $0.17 at June 30, 2021.

During the six months ended June 30, 2021, we issued an option to purchase 43,956 shares of our common stock at $0.23 per share to a vendor for services. The fair value of these options total $10,000 and is recorded in our selling, general and administrative expense.

During the six months ended June 30, 2020, we issued options to purchase 292,437 shares of our common stock at exercise prices ranging between $0.17 – $0.21 per share to vendors for fees for service. The fair value of the options issued totaled $50,000, is recorded in our selling, general and administrative expense.