Note 5 - Share-based Compensation

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Compensation and Employee Benefit Plans [Text Block]

Note 5. Share-Based Compensation

Issuance of Common Stock in exchange for Services

Payment of Officer Salaries

On  September 30, 2024, an officer agreed to convert an aggregate $9,000 of accrued and unpaid salary into 41,087 shares of our common stock at $0.23 per share.  There were no shares of our common stock issued in exchange for unpaid salary during the three months ended June 30, 2024, or March 31, 2024. 

On  September 30, 2023, two officers agreed to convert an aggregate $12,000 of accrued and unpaid salary into 69,563 shares of our common stock at $0.17 per share. On  June 30, 2023, an officer agreed to convert an aggregate $12,000 of accrued and unpaid salary into 68,541 shares of our common stock at $0.18 per share.  On  March 31, 2023, an officer agreed to convert an aggregate $6,000 of accrued and unpaid salary into 30,747 shares of our common stock at $0.20 per share.

Payment of Consultant and Vendor Fees

On September 30, 2024, we issued 219,816 shares of our common stock at $0.23 per share in lieu of $54,000 of accrued and unpaid obligations to consultants and vendors. On  June 30, 2024, we issued 446,989 shares of our common stock at $0.26 per share in lieu of $116,000 of accrued and unpaid obligations to consultants and vendors. On  March 31, 2024, we issued 288,997 shares of our common stock at $0.35 per share in lieu of $83,000 of accrued and unpaid obligations to consultants and vendors.

On  September 30, 2023, we issued 146,123 shares of our common stock at $0.17 per share in lieu of $25,000 of accrued and unpaid obligations to consultants and vendors. On   June 30, 2023, we issued 352,370 shares of our common stock at $0.18 per share in lieu of $63,000 of accrued and unpaid obligations to consultants and vendors. On  March 31, 2023, we issued 899,743 shares of our common stock at $0.20 per share in lieu of $201,000 of accrued and unpaid obligations to consultants and vendors.

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.

Stock Option Expense

During the three and nine months ended September 30, 2024, we recorded an aggregate $237,000 and $1,264,000, and during the three and nine months ended September 30, 2023, we recorded an aggregate $725,000 and $1,269,000, in selling general and administrative expense related to the issuance of stock options. We issued options through our 2024 Equity Incentive Plan, our 2018 Equity Incentive Plan, and outside of these plans. Included in these totals is option expense related to issuances by our subsidiary, Clyra, totaling $43,000 and $165,000 in the three and nine months ended September 30, 2024, and $45,000 and $172,000 in the three and nine months ended September 30, 2023. (See Note 8.)

2024 Equity Incentive Plan

On June 13, 2024, our stockholders adopted the BioLargo 2024 Equity Incentive Plan (“2024 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. It is set to expire on its terms on June 13, 2034. 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 number of shares available to be issued under the 2024 Plan increases automatically on January 1 of each year by the lesser of (a) 2 million shares, or (b) such number of shares determined by our Board. As of September 30, 2024, 50,000,000 shares are authorized under the plan, and 46,517,730 remain available for grant.

Activity for our stock options under the 2024 Plan during the nine months ended September 30, 2024, is as follows:

	Options outstanding			Weighted average price per share		Weighted average remaining life		Aggregate intrinsic Value(1)
Balance, December 31, 2023		—		$	—
Granted		3,482,270		$	0.25
Balance, September 30, 2024		3,482,270		$	0.25		9.9	$	—
Unvested		(1,261,982	)	$	0.24
Vested, September 30, 2024		2,220,288		$	0.25		9.9	$	—

(1) – Aggregate intrinsic value based on closing common stock price of $0.23 at September 30, 2024.

The options granted to purchase 3,482,270 shares during the nine months ended September 30, 2024 with an aggregate fair value of $782,000 were issued to board of directors, employees and consultants: (i) we issued options to purchase 771,180 shares of our common stock to members of our board of directors for services performed, in lieu of cash; the fair value of these options totaled $171,000; (ii) we issued options to purchase 1,013,474 shares of our common stock to employees as part of employee retention plans; the fair value of employee retention plan options totaled $154,000 and vest over time or based on performance metrics; (iii) we issued options to purchase 697,616 shares of our common stock to consultants in lieu of cash for expiring options and for services performed; the fair value of these options totaled $223,000 and (iv) we issued options to purchase 1,000,000 shares of our common stock to our Chief Financial Officer with a fair value of $234,000 for expiring options. All stock option expense is recorded on our condensed consolidated statement of operations as selling, general and administrative expense.

As of September 30, 2024, there remains $276,000 of stock option expense to be expensed over the next four years.

Extension of Agreement with Chief Financial Officer

On  August 13, 2024, we and our Chief Financial Officer Charles K. Dargan, II agreed to extend the term of his 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 our Chief Financial Officer. The Engagement Extension Agreement dated as  August 13, 2024 (the “Engagement Extension Agreement”) expires  January 31, 2025 (the “Extended Term”), at which time the agreement will automatically renew for subsequent one-year periods.

As the sole compensation for the Extended Term, Mr. Dargan was issued an option (“Option”) to purchase 300,000 shares of the Company’s common stock (this issuance is included in the total identified in (iv) above). The Option vests over the period of the Extended Term in monthly installments of 25,000 shares, so long as the agreement is in full force and effect. The Option is exercisable at $0.24 per share, the closing price of BioLargo’s common stock on the  August 13, 2024 grant date, expires ten years from the grant date, and was issued pursuant to the Company’s 2024 Equity Incentive Plan. 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. Upon each renewal of the agreement, Mr. Dargan will be issued an option to purchase 300,000 shares, at an exercise price equal to the closing price of the Company's common stock on the prior business day, vesting over one year.

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. It is set to expire on its terms on June 22, 2028. 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 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. As of September 30, 2024, the 2018 Plan is closed to further stock option grants.  The 2018 Plan closed with 9,343,614 shares unissued.

Activity for our stock options under the 2018 Plan during the nine months ended September 30, 2024, and 2023, is as follows:

	Options outstanding			Weighted average price per share		Weighted average remaining life		Aggregate intrinsic Value(1)
Balance, December 31, 2023		41,108,448		$	0.19
Granted		1,547,938		$	0.30
Exercised		(485,000	)	$	0.15
Balance, September 30, 2024		42,171,386		$	0.19		7.0	$	1,991,000
Unvested		(3,623,430	)	$	0.22
Vested, September 30, 2024		38,547,956		$	0.19		6.3	$	1,866,000
Balance, December 31, 2022		28,484,549		$	0.19
Granted		8,219,920		$	0.18
Balance, September 30, 2023		36,704,469		$	0.19
Unvested		(4,648,922	)	$	0.15
Vested Balance, September 30, 2023		32,055,547		$	0.19		8.0

(1) – Aggregate intrinsic value based on closing common stock price of $0.23 at September 30, 2024.

The options granted to purchase 1,547,938 shares during the nine months ended September 30, 2024 with an aggregate fair value of $418,000 were issued to board of directors, employees and consultants: (i) we issued options to purchase 267,746 shares of our common stock to members of our board of directors for services performed, in lieu of cash; the fair value of these options totaled $85,000; (ii) we issued options to purchase 735,351 shares of our common stock to employees as part of employee retention plans; the fair value of employee retention plan options totaled $160,000 and vest over time or based on performance metrics; and (iii) we issued options to purchase 544,841 shares of our common stock to replace expiring options; the fair value of these options totaled $173,000.  All stock option expense is recorded on our condensed consolidated statement of operations as selling, general and administrative expense.

As of September 30, 2024, there remains $626,000 of stock option expense to be expensed over the next four years.

The options granted to purchase 8,219,920 shares during the nine months ended  September 30, 2023 with an aggregate fair value of $1,370,000 were issued to an officer, board of directors, employees and a consultant. The exercise price for all options were issued on their respective grant date of  March 31, 2023 ($0.20 per share) and  June 30, 2023 ($0.18 per share) and  September 30, 2023 ($0.17 per share): (i) we issued options to purchase 1,565,858 shares of our common stock to members of our board of directors for services performed, in lieu of cash; the fair value of these options totaled $266,000; (ii) we issued options to purchase 1,784,140 shares of our common stock to employees as part of an employee retention plan; the fair value of employee retention plan options totaled $306,000 and will vest quarterly over four years as long as they are retained as employees; (iii) we issued options to purchase 4,069,922 shares of our common stock to consultants in lieu of cash and for expiring options totaling $657,000, and (iv) we issued 800,000 options to our Chief Financial Officer with a fair value of $141,000 (see “Chief Financial Officer Contract Extension” immediately below). Of the 800,000 issued to the CFO, 500,000 were issued for expiring options. All stock option expense is recorded on our condensed consolidated statement of operations as selling, general and administrative expense.

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 nine months ended September 30, 2024 and 2023 is as follows:

	Options Outstanding			Weighted average price per share		Weighted average remaining life		Aggregate intrinsic Value(1)
Balance, December 31, 2023		1,564,085		$	0.61
Expired		(406,585	)	$	0.61
Vested Balance, September 30, 2024		1,157,500		$	0.61		1.3	$	—
Balance, December 31, 2022		1,904,085		$	0.56
Expired		(340,000	)	$	0.30
Vested Balance, September 30, 2023		1,564,085		$	0.61		2.3

⁽¹⁾ – Aggregate intrinsic value based on closing common stock price of $0.23 at September 30, 2024.

Non-Plan Options

Activity of our non-plan stock options issued for the nine months ended September 30, 2024 and 2023 is as follows:

	Non-plan Options outstanding			Weighted average price per share		Weighted average remaining life		Aggregate intrinsic Value(1)
Balance, December 31, 2023		17,375,044		$	0.39
Granted		85,251		$	0.23
Expired		(865,199	)	$	0.51
Exercised		(463,882	)	$	0.17
Balance, September 30, 2024		16,131,214		$	0.39		2.6	$	130,000
Unvested		(437,500	)	$	0.45
Vested, September 30, 2024		15,693,714		$	0.39		2.3	$	130,000
Balance, December 31, 2022		19,023,829		$	0.39
Granted		60,040		$	0.20
Expired		(1,205,550	)	$	0.30
Balance, September 30, 2023		17,878,319		$	0.39
Unvested		(507,500	)	$	0.45
Vested Balance, September 30, 2023		17,370,819		$	0.39		3.6

(1) – Aggregate intrinsic value based on closing common stock price of $0.23 at September 30, 2024.

During the nine months ended September 30, 2024, we issued options to purchase an aggregate 85,251 shares of our common stock to vendors for fees for services.  The fair value of the options issued totaled an aggregate $18,000 and is recorded in our selling, general and administrative expense.  As of September 30, 2024, there remains $109,000 of stock option expense to be expensed over the next three years.

During the nine months ended September 30, 2024, investors exercised stock options and we received $153,000 of proceeds and issued 463,882 shares of our common stock.

During the nine months ended  September 30, 2023, we issued options to purchase an aggregate 60,040 shares of our common stock at $0.20 per share to vendors for fees for services. The fair value of the options issued totaled an aggregate $11,000 and is recorded in our selling, general and administrative expense.