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 June 30, 2018.

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, including zip code, of principal executive offices)

(949) 643-9540

(Registrant’s telephone number, including area code)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes  ☒ No      ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer     ☐                       Non-accelerated filer       ☐      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 August 10, 2018 was 130,545,731 shares.

BIOLARGO, INC.

FORM 10-Q

INDEX

Item 1	Financial Statements	1
Item 2	Management's Discussion and Analysis and Financial Condition and Results of Operations	28
Item 4	Controls and Procedures	38

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 5	Other Information	40
Item 6	Exhibits	41
	Signatures	41
	Exhibit Index	42

i.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

BIOLARGO, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2017 AND JUNE 30, 2018

	DECEMBER 31, 2017			JUNE 30, 2018 (Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	990,457		$	651,061
Accounts receivable, net of allowance of $2,500 and $3,500, at December 31, 2017 and June 30, 2018		94,413			89,977
Inventories		53,973			25,639
Prepaid expenses and other current assets		20,000			56,625
Total current assets		1,158,843			823,302
Leasehold improvements and equipment, net of depreciation		108,865			122,362
Other non-current assets		32,530			35,213
Deferred offering cost		195,182			186,731
Total assets	$	1,495,420		$	1,167,608
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable and accrued expenses	$	224,105		$	254,657
Convertible notes payable		5,248,847			782,214
Discount on convertible notes payable, net of amortization		(1,257,182	)		(93,382	)
Total current liabilities		4,215,770			943,489
Long-term liabilities:
Line of credit		—			390,000
Convertible notes and note payable		1,539,271			872,500
Discount on convertible notes and note payable and line of credit, net of amortization		(850,000	)		(393,930	)
Total liabilities		4,905,041			1,812,059
COMMITMENTS, CONTINGENCIES (Note 11)
STOCKHOLDERS’ EQUITY (DEFICIT):
Convertible Preferred Series A, $.00067 Par Value, 50,000,000 Shares Authorized, no Shares Issued and Outstanding, at December 31, 2017 and June 30, 2018		—			—
Common stock, $.00067 Par value, 200,000,000 and 400,000,000 shares authorized, 104,164,465 and 128,359,007 shares issued, at December 31, 2017 and June 30, 2018		69,871			86,150
Additional paid-in capital		97,093,144			106,167,819
Accumulated deficit		(101,204,846	)		(107,329,788	)
Accumulated other comprehensive loss		(62,489	)		(61,356	)
Total Biolargo, Inc. and Subsidiaries stockholders’ equity (deficit)		(4,104,320	)		(1,137,175	)
Non-controlling interest (Note 9)		694,699			492,724
Total stockholders’ equity (deficit)		(3,409,621	)		(644,451	)
Total liabilities and stockholders’ equity (deficit)	$	1,495,420		$	1,167,608

See accompanying notes to unaudited consolidated financial statements.

1

BIOLARGO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2018

(UNAUDITED)

	THREE-MONTHS						SIX-MONTHS
	JUNE 30, 2017			JUNE 30, 2018			JUNE 30, 2017			JUNE 30, 2018
Revenues
Product revenue	$	99,978		$	315,553		$	145,995		$	539,950
Service revenue		—			11,185			—			49,817
Total revenue		99,978			326,738			145,995			589,767
Cost of revenue
Cost of goods sold		(73,399	)		(194,000	)		(95,929	)		(328,464	)
Cost of service		—			(6,912	)		—			(35,640	)
Gross profit		26,579			125,826			50,066			225,663
Selling, general and administrative expenses		1,162,018			1,316,605			2,217,073			2,486,218
Research and development		324,280			425,576			715,616			947,306
Amortization and depreciation		6,515			12,536			14,439			22,859
Operating loss:		(1,466,234	)		(1,628,891	)		(2,897,062	)		(3,230,720	)
Other (expense) income:
Interest expense		(1,119,273	)		(1,728,799	)		(2,072,829	)		(2,561,207	)
Debt conversion expense		—			(275,534	)		—			(275,534	)
Grant income		11,361			33,314			70,149			37,983
Total other expense:		(1,107,912	)		(1,971,019	)		(2,002,680	)		(2,798,758	)
Net loss		(2,574,146	)		(3,599,910	)		(4,899,742	)		(6,029,478	)
Net loss attributable to noncontrolling interest		(173,911	)		(95,331	)		(237,167	)		(201,975	)
Net loss attributable to common shareholders	$	(2,400,235	)	$	(3,504,579	)	$	(4,662,575	)	$	(5,827,503	)
Net loss per share attributable to common shareholders:
Loss per share attributable to shareholders – basic and diluted	$	(0.03	)	$	(0.03	)	$	(0.05	)	$	(0.05	)
Weighted average number of common shares outstanding:		97,770,161			118,748,451			94,718,273			111,760,954
Comprehensive loss:
Net loss	$	(2,574,146	)	$	(3,599,910	)	$	(4,899,742	)	$	(6,029,478	)
Foreign currency translation		32,150			13,325			(15,986	)		1,133
Comprehensive loss		(2,541,966	)		(3,586,585	)		(4,915,728	)		(6,028,345	)
Comprehensive loss attributable to noncontrolling interest		(173,911	)		(95,331	)		(237,167	)		(201,975	)
Comprehensive loss attributable to common stockholders	$	(2,368,085	)	$	(3,491,254	)	$	(4,678,561	)	$	(5,826,370	)

See accompanying notes to unaudited consolidated financial statements.

2

BIOLARGO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 2018

(UNAUDITED)

	Common stock				Additional paid-in		Accumulated			Accumulated other comprehensive			Non- controlling
	Shares		Amount		capital		deficit			loss			interest			Total
Balance, December 31, 2017		104,164,465	$	69,871	$	97,093,144	$	(101,204,846	)	$	(62,489	)	$	694,699		$	(3,409,621	)
Conversion of principal due on notes		19,298,723		12,939		6,215,280		—			—			—			6,228,219
Issuance of common stock for services		1,448,257		976		445,512		—			—			—			446,488
Issuance of common stock for interest		1,919,806		1,341		492,486		—			—			—			493,827
Financing fee in stock		252,385		168		84,905		—			—			—			85,073
Sale of stock for cash		1,275,371		855		379,948		—			—			—			380,803
Warrant exercise price reduction for cash		—		—		148,853		—			—			—			148,853
Stock option compensation expense		—		—		696,001		—			—			—			696,001
Warrants and beneficial conversion feature issued as discount on convertible notes payable, note payable and line of credit		—		—		314,251		—			—			—			314,251
Deemed dividend		—		—		297,439		(297,439	)		—			—			—
Net loss		—		—		—		(5,827,503	)		—			(201,975	)		(6,029,478	)
Foreign currency translation		—		—		—		—			1,133			—			1,133
Balance, June 30, 2018		128,359,007	$	86,150	$	106,167,819	$	(107,329,788	)	$	(61,356	)	$	492,724		$	(644,451	)

See accompanying notes to unaudited consolidated financial statements.

3

BIOLARGO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018

(UNAUDITED)

	JUNE 30, 2017			JUNE 30, 2018
Cash flows from operating activities
Net loss	$	(4,899,742	)	$	(6,029,478	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock option compensation expense		515,959			696,001
Common stock issued for interest and fees for services from consultants		504,263			930,315
Interest expense related to amortization of the discount on convertible notes payable		1,723,396			2,019,193
Debt conversion expense		—			275,534
Deferred offering cost expense		—			8,451
Bad debt expense		15,000			1,000
Depreciation and amortization expense		14,439			22,859
Changes in assets and liabilities:
Accounts receivable		(25,111	)		3,436
Inventory		(2,461	)		28,334
Prepaid expenses and other current assets		(8,706	)		(39,308	)
Accounts payable and accrued expenses		144,335			30,552
Officer bonus		(80,000	)		—
Deposit		50,000			—
Net cash used in operating activities	$	(2,048,628	)	$	(2,053,111	)
Cash flows from investing activities
Leasehold improvements	$	—		$	(26,356	)
Net cash used in investing activities	$	—		$	(26,356	)
Cash flows from financing activities
Proceeds from line of credit	$	250,000		$	390,000
Proceeds from convertible notes		225,000			462,500
Proceeds from conversion inducement		—			356,781
Proceeds from warrant exercise-price reduction		—			148,854
Proceeds from sale of stock to Lincoln Park Capital		—			380,803
Purchase of Clyra shares		(40,000	)		—
Proceeds from exercise of warrants		153,000			—
Net cash provided by financing activities	$	588,000		$	1,738,938
Effect of foreign currency translation		(15,986	)		1,113
Net change in cash and cash equivalents	$	(1,476,614	)	$	(339,396	)
Cash and cash equivalents at beginning of period	$	1,910,153		$	990,457
Cash and cash equivalents at end of period	$	433,539		$	651,061
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	4,487		$	5,489
Income taxes	$	5,350		$	5,719
Non-cash investing and financing activities:
Fair value of common stock issued for financing commitments	$	—		$	85,073
Fair value of warrants issued in conjunction with convertible notes payable	$	225,000		$	314,251
Deemed dividend	$	—		$	297,439
Fair value of stock issued for equipment	$	—		$	10,000
Exercise of stock options	$	1,677		$	—
Conversion of notes into shares of common stock	$	530,000		$	5,595,904

See accompanying notes to unaudited consolidated financial statements

4

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Business and Liquidity

Description of Business

We are an innovation company driven by our mission to “make life better” by developing breakthrough platform technologies, nurturing and building businesses around the intellectual property, while providing capital and support along the journey from “cradle” to “maturity”. We currently have two segments generating operational revenue: (i) Odor-No-More, selling odor and volatile organic compound (“VOC”) control products and services, and (ii) BioLargo Engineering, Science & Technologies, LLC (“BLEST”), providing professional engineering services to third party clients as well as working on our product development projects. We have a research and development facility in Canada, and consolidate our financials with our partially owned subsidiary, Clyra Medical Technologies, Inc., a company focused on commercializing our technologies in the medical field (see Note 9).

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. As reflected in the accompanying consolidated financial statements, for the six months ended June 30, 2018 we had a net loss of $6,029,478, and used $2,053,111 cash in operations, and at June 30, 2018, had negative working capital of $120,187, current assets of $823,302, and an accumulated stockholders’ deficit of $107,329,788. 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.

We have been, and anticipate that we will continue to be, limited in terms of our capital resources. Our total cash balance was $651,061 at June 30, 2018. We had revenues of $589,767 in the six months ended June 30, 2018, which amount was not sufficient to fund our operations. We believe our current cash position is insufficient to maintain our current level of operations and research/development, and that we will be required to raise substantial additional capital to continue our operations and fund our future business plans. We intend to continue to raise money through private securities offerings for the foreseeable future, and through our agreement with Lincoln Park (see Note 4).

At times in the past we have not had enough cash or sources of capital to pay our accounts payable and expenses as they arise, and have relied on the issuance of stock options and common stock, as well as extended payment terms with our vendors, to continue to operate. We will be required to raise substantial additional capital to expand our operations, including without limitation, hiring additional personnel, additional scientific and third-party testing, costs associated with obtaining regulatory approvals and filing additional patent applications to protect our intellectual property, and possible strategic acquisitions or alliances, as well as to meet our liabilities as they become due for the next 12 months.

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 six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018, 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, 2017 filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2018.

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 majority owned subsidiaries, and Clyra. Management believes Clyra’s financial statements are appropriately consolidated with that of the Company after reviewing the guidance of ASC Topic 810, “Consolidation”, because the Company owns 46.3% of its outstanding voting stock at June 30, 2018, and two members of BioLargo’s board of directors are two of three members of Clyra’s board of directors (see Note 9). All intercompany accounts and transactions have been eliminated.

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. Our cash account balances are typically 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.

Clyra Medical is not a wholly owned subsidiary. Our cash balance held in Clyra and BioLargo and other subsidiaries are reflected in the following table:

	December 31, 2017		June 30, 2018
Biolargo, Inc. and wholly owned subsidiaries	$	461,914	$	467,258
Clyra Medical Technologies, Inc.		528,543		183,803
Total	$	990,457	$	651,061

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, 2017 and June 30, 2018 was $2,500 and $3,500, respectively.

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 six months ended June 30, 2017 and 2018, we had three and two customers that each accounted for more than 10% of consolidated revenues in the respective periods, as follows:

	June 30, 2017			June 30, 2018
Customer A		17	%		43	%
Customer B		16	%		15	%
Customer C		14	%		<10	%

In addition, our customers include many of the largest solid waste handling companies in the United States. We generally do business with these companies through “national purchasing agreements” entered into with the company, and then sell our products and services to their local operations such as transfer stations and landfills. Although none of those individual locations arose to more than 10% of our consolidated revenues during the six months ended June 30, 2018, two of these national companies accounted for 37% of our total revenues.

We had five customers that each accounted for more than 10% of consolidated accounts receivable at December 31, 2017 and three customers at June 30, 2018 as follows:

	December 31, 2017			June 30, 2018
Customer A		12	%		<10	%
Customer B		19	%		<10	%
Customer C		12	%		<10	%
Customer D		10	%		<10	%
Customer E		10	%		<10	%
Customer F		<10	%		13	%
Customer G		<10	%		12	%
Customer H		<10	%		10	%

Inventory

Inventory is stated at the lower of cost and net realizable value using the average cost method. All inventory is related to our Odor-No-More business segment. Inventory consisted of:

	December 31, 2017		June 30, 2018
Raw material	$	34,104	$	23,515
Finished goods		19,869		2,124
Total	$	53,973	$	25,639

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, deemed dividends, 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 consolidated financial statements.

7

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Share-based Payments

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.

For equity instruments issued and outstanding where performance is not complete, but the instrument has been recorded, those instruments are measured again at their then current fair market values at each of the reporting dates (they are “marked-to market”) until the performance and the contract are complete.

Warrants

The Unit Offerings of our convertible promissory note and a Series A stock purchase warrant 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, 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 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 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 adjusted 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.

8

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 purchase order whether in writing or verbal, 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 over a period of time as services are performed and completed. BLEST’s contracts typically call for invoicing on a time and materials basis. 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 the Canadian National Research Institute – Industrial Research Assistance Program (NRC-IRAP) and the National Science and Engineering Research Council of Canada (NSERC). 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 50 grants totaling approximately $1,600,000. 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.

While the FASB has issued a proposed Accounting Standards Update, Not-for-Profit Entities - (Topic 958): “Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made”, there has been no guidance related to for profit entities such as BioLargo. In reviewing Topic 606, “Revenue from Contracts with Customers”, and its potential application to the Canadian government grants, the Management concluded that these grants do not meet the requirements for revenue recognition. Specifically, these grants typically provide reimbursement for research personnel working on the BioLargo technology. For some grants, funds are given directly to third parties for research on our technology and are not controlled by the Company. In this structure, the grants are not revenue, but rather a reimbursement.

Business Segment Information

In 2017, the Company operated with three business segments. In 2018, given the increased operations of the engineering division formed in late 2017, we determined that it should be considered our fourth business segment. This decision was based on the manner in which the chief operating decision maker now manages the engineering division, including resource allocation and performance assessment.

9

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Our four business segments include: (i) Odor-No-More, which is engaged in developing and selling odor and VOC control products and services; (ii) BLEST, which is provides professional engineering services; (iii) Clyra, which is engaged in developing medical products utilizing our technology, with an emphasis in the medical field and advanced wound care; and (iv) our corporate operations (labeled in the below table as “BioLargo/Other”), which includes certain functional roles that do not engage in revenue generating activities, such as general corporate and administrative functions, including finance, human resources, marketing, legal, and research and development.

The segment information for the three and six months ended June 30, 2017 and 2018, is as follows:

	Three months June 30,						Six months June 30,
	2017			2018			2017			2018
Revenues
Odor-No-More	$	99,978		$	315,553		$	145,995		$	539,950
BLEST		—			11,185			—			49,817
Consolidated revenue	$	99,978		$	326,738		$	145,995		$	589,767
Cost of goods/services
Odor-No-More	$	(73,399	)	$	(194,000	)	$	(95,929	)	$	(328,464	)
BLEST		—			(6,912	)		—			(35,640	)
Consolidated costs of goods/services	$	(73,399	)	$	(200,912	)	$	(95,929	)	$	(364,104	)
Net loss
Odor-No-More	$	(100,000	)	$	(53,688	)	$	(275,000	)	$	(253,688	)
BLEST		—			(70,339	)		—			(116,726	)
Clyra		(347,490	)		(177,641	)		(484,572	)		(376,362	)
BioLargo/Other		(2,126,656	)		(3,298,242	)		(4,140,170	)		(5,282,702	)
Consolidated net loss	$	(2,574,146	)	$	(3,599,910	)	$	(4,899,742	)	$	(6,029,478	)

The segment information as of December 31, 2017 and June 30, 2018, is as follows:

	December		June
		31, 2017		30, 2018
Assets, net
Odor-No-More	$	210,725	$	260,421
BLEST		—		131,558
Clyra		528,543		183,803
BioLargo/Other		726,152		591,826
Consolidated assets, net	$	1,495,420	$	1,167,608

10

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 six months ended June 30, 2017 and 2018, 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.

Recent Accounting Pronouncements

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. Management has not concluded its evaluation of the guidance. Its initial analysis is that it does not believe the new guidelines will substantially impact the company’s financial statements.

In May 2017, the FASB issued Accounting Standards Update No. 2017-09, “Compensation – Stock Compensation (topic 718): Scope of Modification Accounting”. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all the following are met: (i) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified, (ii) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and (iii) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Management has analyzed the new guideline and it has not substantially impacted its accounting for stock compensation awards upon adoption in the current period.

Note 3. Change in Derivative Liability Treatment

Biolargo adopted Accounting Standards Update (“ASU”) No. 2017-11 as of July 1, 2017. With this adoption, we eliminated the derivative liability, and the changes in the fair value of the derivative liability, related to negative covenants in multiple warrants issued that required a reduction of warrant exercise price under certain circumstances. The Company made a cumulative effect adjustment to the consolidated balance sheet as of January 1, 2017, which adjusted the beginning balance in the accumulated deficit account by $663,560. The comparable unaudited prior year periods for the three and six months ended June 30, 2017 are being presented to reflect the adoption of this ASU for all interim periods in 2017.

11

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 4. 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 $10,000,000 of our common stock (subject to certain limitations) from time to time over a period of three years. Concurrently, we entered into a registration rights agreement with Lincoln Park (“LPC RRA”), pursuant to which we were required to file with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-1 to register for resale under the Securities Act of 1933, as amended, the shares of common stock that have been or may be issued to Lincoln Park under the LPC Purchase Agreement. The registration statement was filed, and on September 22, 2017, it was deemed effective by the SEC. 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 volume of shares is limited to a maximum of 50,000 shares if our stock closes at less than $0.50 per share, 75,000 if it closes from $0.50 to $0.74 per share, 100,000 if it closes from $0.75 to $1.24 per share, and 200,000 if it closes at or above $1.25 per share. The maximum dollar amount for any single purchase is $500,000. There are no trading volume requirements under the LPC Purchase Agreement, and we alone control the timing and amount of any sales of our common stock to Lincoln Park. 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. The purchase price per share will be equitably adjusted for any reorganization, recapitalization, non-cash dividend, stock split, or other similar transaction occurring during the business days used to compute such price. We may at any time in our sole discretion terminate the LPC Purchase Agreement without fee, penalty or cost upon one business day notice. 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.

In consideration for entering into the LPC Purchase Agreement, on August 25, 2017, we issued to Lincoln Park 488,998 shares of common stock as an “initial commitment fee.” For no additional consideration, when and if Lincoln Park purchases (at the Company’s discretion) any portion of the $10,000,000 aggregate commitment, we are required to issue up to 488,998 shares, pro-rata, as “additional commitment shares”. For example, if we elect, at our sole discretion, to require Lincoln Park to purchase $25,000 of our stock, then we would issue 1,222 additional commitment shares, which is the product of $25,000 (the amount we have elected to sell) divided by $10,000,000 (total amount we can sell Lincoln Park pursuant to the LPC Purchase Agreement) multiplied by 488,998 (the total number of additional commitment shares). The additional commitment shares will only be issued pursuant to this formula as and when we elect at our discretion to sell stock to Lincoln Park.

From inception of the contract in August 2017 through June 30, 2018, we elected to sell Lincoln Park shares of our common stock for which we received $891,888, and issued Lincoln Park 2,431,751 shares, and 43,611 “additional commitment shares”. We recorded the stock sale in our equity statement and the additional shares issued as a fee for the transaction was offset against the shares issued.

During the six-months ended June 30, 2018, we elected to sell to Lincoln Park 1,256,751 shares of our common stock for which we received $380,803 in gross and net proceeds. As a result of these purchases, we issued Lincoln Park 18,260 “additional commitment” shares pursuant to the LPC Purchase Agreement.

12

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 5. Debt Obligations

The following table summarizes our debt obligations outstanding as of December 31, 2017 and June 30, 2018.

	December 31, 2017		June 30, 2018
Current liabilities
Convertible notes payable
One-year convertible notes, mature July 18, 2018 *	$	280,000	$	280,000
Convertible notes, mature June 1, 2018		4,468,847		—
Nine-month convertible note, matures September 18, 2018		500,000		447,975
Nine-month convertible note, matures October 16, 2018 *		—		54,239
Total convertible notes payable	$	5,248,847	$	782,214
Long-term liabilities:
Line of credit, matures September 1, 2019	$	—	$	390,000
Convertible notes payable
Convertible note, matures July 20, 2019	$	440,000	$	440,000
Convertible notes, mature June 17, 2019		283,571		—
Convertible notes, mature December 31, 2019		292,000		75,000
Note payable, matures March 8, 2023 (or on demand 60 days’ notice)		—		50,000
Convertible notes, mature June 20, 2020		523,700		125,000
Convertible notes, mature April 20, 2021				100,000
Convertible notes, mature June 15, 2021		—		82,500
Total convertible notes payable	$	1,539,271	$	872,500
Total	$	6,788,118	$	2,044,714

* Subsequent to June 30, 2018 these notes were converted to common stock (see Note 12 “Subsequent Events”).

See our Annual Report on Form 10-K for the year ended December 31, 2017, for a complete description of the debt obligations set forth in the above table.

Early Conversion of Unit Notes

Prior to their maturity dates, we issued 17,255,811 shares of our common stock in satisfaction of $4,626,238 of convertible promissory notes issued in our “unit” offerings at varying conversion prices, maturing on the following dates:

	Debt converted to stock
Current liabilities
Convertible notes, mature June 1, 2018	$	3,646,967
Long-term liabilities
Convertible notes, mature June 17, 2019		283,571
Convertible notes, mature December 31, 2019		217,000
Convertible notes, mature June 20, 2020		478,700
Total debt converted May 2018	$	4,626,238

13

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

These conversions were voluntary on the part of the noteholders and prior to the various maturity dates on notes that were issued in prior “unit” offerings conducted by the Company (2015 Unit Offering, Winter 2016 Unit Offering, and Summer 2017 Unit Offering). We offered these noteholders incentives to convert their notes early.  Noteholders with conversion prices of $0.25 and $0.30 were offered incentive shares equal to one and one-half times the number of shares issuable for the payment of interest that would accrue from the last interest payment date of March 20, 2018, through the maturity of the note, at a fixed price of $0.25 per share (for example, a note that would have yielded $1,000 in interest, would receive 1,000 times 1.5 divided by 0.25 equals 6,000 incentive shares). We offered holders of notes with conversion prices higher than $0.30 the ability to reduce their conversion price to $0.30 by paying additional funds equal to six or twenty percent of their original investment (6% for notes with original conversion prices of $0.35, and 20% for notes with original conversion prices of $0.55 and $0.57). The additional funds did not increase the amount of the note payable, nor did the reduced conversion price affect the number of shares purchasable under the warrant issued with their “unit” investment. Holders of 40 notes elected to pay an aggregate $356,781 to reduce the conversion prices of their notes to $0.30. As a result of the reduction in conversion prices, an additional 2,749,197 shares were issuable pursuant to the notes upon conversion. The fair value of these additional shares was $632,315.  Additional interest expense of $275,534 is recorded as part of the debt conversion and is the amount by which the fair value of the additional shares exceeded the cash received by the Company. Holders of 41 notes with original conversion prices of $0.30 and $0.25 elected to convert early and received 966,318 additional “incentive shares” for their agreement to do so.

Conversion of Unit Notes

On June 1, 2018, we (BioLargo, Inc., the “Company”) elected to convert the $821,880 outstanding promissory notes remaining in our 2015 Unit Offering on their June 1, 2018 maturity date into 2,488,819 shares of our common stock. Of the shares issued, 2,411,004 were issued in satisfaction of principal amounts due on notes with conversion prices of $0.25, $0.35, and $0.55, and 77,815 were issued in satisfaction of $19,725 of accrued and unpaid interest.

Convertible Note, matures September 18, 2018 (Vista Capital)

On December 18, 2017, we received $500,000 pursuant to a securities purchase agreement (the “Vista Purchase Agreement”) and a registration rights agreement (the “Vista RRA”) with Vista Capital Investments, LLC (“Vista Capital”), and issued a Note (the “Vista Note”) in the aggregate principal amount of $500,000 at 5% annual interest, which was originally convertible into shares of common stock of the Company at $0.394 per share, subject to the terms, and certain limitations and conditions, set forth in the Vista Purchase Agreement and Vista Note. The Vista Note matures on September 18, 2018. The Company reserved 1,269,036 shares of common stock for issuance upon conversion of the Vista Note.

Pursuant to the Vista Purchase Agreement, the Company issued 250,000 shares of common stock to Vista Capital as a commitment fee at $0.39 per share and $98,500 is recorded as a discount on convertible notes and will amortize to interest expense over the term of the note.

Pursuant to the Vista RRA, the Company agreed to file a registration statement with the SEC registering all shares of common stock into which the Vista Note is convertible, and the 250,000 shares issued as a commitment fee. The Vista Purchase Agreement requires additional shares be issued for the commitment fee in the event the closing price of our common stock on the date the registration statement is deemed effective is lower than the closing price on December 18, 2017, (which was $0.41). In such event, additional shares would be issued such that the aggregate shares issued have the same value as the 250,000 shares issued on December 18, 2017. The beneficial conversion feature resulted in a $20,305 relative fair value recorded as a discount. The discount will be amortized monthly to interest expense through September 18, 2018.

Vista Capital represented to the Company, among other things, that it was an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended). The Vista Note, Vista Purchase Agreement, and Vista RRA contain customary representations, warranties, agreements and conditions including indemnification rights and obligations of the parties. The Vista Note contains a price protection provision such that if we issue a security with any term more favorable to the holder of such security that was not similarly provided in the Vista Note, then we shall notify Vista Capital of such additional or more favorable term and such term, at its option, shall become a part of the Vista Note. As a result of our sale of common stock at $0.25, the conversion price of the Vista Note was reduced from $0.394 to $0.25.

14

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In June 2018, Vista Capital elected to convert $52,025 of the outstanding principal balance of the Vista Note and we issued 208,100 shares, plus shares for interest that had accrued through the date of conversion. As of June 30, 2018, the outstanding balance on the Vista Note is $447,975.

FirstFire Investment (was scheduled to mature October 16, 2018)

On January 16, 2018, we entered into a securities purchase agreement (the “FirstFire Purchase Agreement”) and a registration rights agreement (the “FirstFire RRA”) with FirstFire Global Opportunity Fund, LLC (“FirstFire”), and issued a convertible promissory note (the “FirstFire Note”) in the aggregate principal amount of $150,000 at 5% annual interest, which is convertible into shares of common stock of the Company at $0.394 per share, subject to the terms, and certain limitations and conditions set forth in the FirstFire Purchase Agreement and FirstFire Note. FirstFire may convert the FirstFire Note at any time. The FirstFire Note was scheduled to mature on October 16, 2018. In June 2018, FirstFire elected to convert $95,761 of the outstanding principal balance of the FirstFire Note and we issued 383,047 shares. As of June 30, 2018, the FirstFire Note outstanding balance is $54,239. Subsequent to June 30, 2018, FirstFire elected to convert the remaining amount due on its note (see Note 12).

Pursuant to the FirstFire Purchase Agreement, the Company issued 75,000 shares of common stock to FirstFire as a commitment fee (the “FirstFire Commitment Shares”) at $0.39 per share and $29,250 is recorded as a discount on convertible notes and will amortize to interest expense over the term of the note.

Under the Note and FirstFire Purchase Agreement, the Company has reserved 394,949 shares of common stock for issuance upon conversion of the Note. Pursuant to the FirstFire RRA, the Company agreed to file a registration statement with the SEC registering all shares of common stock into which the FirstFire Note is convertible, and the FirstFire Commitment Shares. The FirstFire Purchase Agreement allows for an adjustment to the number of FirstFire Commitment Shares in the event the closing price of our common stock, on the earlier of the date the registration statement is deemed effective and 20 trading days following the six-month anniversary of the FirstFire Note, is lower than the closing price on January 16, 2018 (which was $0.39). In such event, additional shares would be issued to FirstFire such that the aggregate FirstFire Commitment Shares issued have the same value as the shares issued on January 16, 2018.

Pursuant to the requirements set forth in the registration rights agreements, we filed a registration statement with the SEC which was deemed effective as of February 8, 2018. On February 8, 2018, our common stock last traded at $0.3147 per share. Because the last traded price of our common stock on the date the registration statement was deemed effective was less than the price of our common stock on the dates of the FirstFire Purchase Agreements, at their option, we are required to issue additional “commitment shares”. FirstFire exercised that right, and we issued 36,536 additional shares of our common stock and $11,498 is recorded as additional discount on convertible notes and will amortize to interest expense over the term of the note. 

FirstFire represented to the Company, among other things, that it was an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended). The FirstFire Note, FirstFire Purchase Agreement, and the FirstFire RRA contain customary representations, warranties, agreements and conditions including indemnification rights and obligations of the parties. The FirstFire Note contains a price protection provision such that if we issue a security with any term more favorable to the holder of such security that was not similarly provided in the FirstFire Note, then the Company shall notify FirstFire of such additional or more favorable term and such term, at its option, shall become a part of the FirstFire Note. As a result of our sale of common stock at $0.25, the conversion price of the FirstFire Note was reduced from $0.394 to $0.25.

15

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Line of credit, matures September 1, 2019

On March 1, 2018, we received $390,000 pursuant to a line of credit, accruing interest at a rate of 18% per annum, for which we have pledged our inventory and accounts receivable as collateral. Interest is paid quarterly, and, at the option of the holder, payable in either (i) cash, (ii) our common stock, calculated based on the 20-day average closing price, or (iii) options to purchase our common stock, priced at the 20-day average closing price, the number of shares doubled, and expiring 10 years from the date of grant. The holder of the line of credit has the right to call due the outstanding principal amount on 30-days’ notice at any time after September 1, 2019.

Each investor, for no additional consideration, received a warrant to purchase our common stock. (See Note 7). The warrant allows for the purchase of the number of common shares equal to the investment amount (e.g., one warrant share for each dollar invested).

Two-Year Convertible Note, matures July 20, 2019

On July 20, 2017, the Company accepted $400,000 and issued a promissory note with a 10% original issue discount in the principal amount of $440,000, matures July 20, 2019 and accrues interest at 12%. The note originally provided that interest was to be paid quarterly beginning October 1, 2017, in either cash, common stock, or an option to purchase common stock, in the holder’s discretion. On January 25, 2018, the interest provisions in the note were modified such that the 12% annual simple interest is due at maturity.

At maturity, the principal amount of the note and any accrued and unpaid interest automatically converts, at the holder’s option, into either BioLargo common shares at $0.42 per share, 2,000 shares of Clyra Medical Technologies common stock held by BioLargo, or any combination thereof. The fair value of the beneficial conversion feature resulted in a $171,429 recorded on our consolidated balance sheet as a discount on convertible notes payable, net of current portion. The discount will be amortized monthly as interest expense through July 20, 2019.

Note payable, matures March 8, 2020

On March 8, 2018, we received $50,000 and entered into a note payable. The note is due on upon demand from the noteholder, with sixty days’ notice. The demand may not be made before June 30, 2018, and in the absence of the demand, the maturity date is March 8, 2023. In lieu of interest, we issued the note holder a warrant to purchase 150,000 shares of our common stock at an exercise price of $0.35. The warrant expires February 28, 2023. The shares available for purchase vest in increments of 6,250 shares per month. (See Note 7.)

Convertible Notes, mature June 20, 2020 (Summer 2017 Unit Offering)

On May 24, 2017, we commenced a private securities offering (titled the “Summer 2017 Unit Offering”) which offered the sale of $1,500,000 of “Units,” each Unit consisting of a convertible promissory note and stock purchase warrant. Concurrently, we issued Pricing Supplement No. 1 setting the initial unit/conversion price at $0.42 per share, and the initial warrant exercise price at $0.65 per share. The promissory notes issued to investors mature June 20, 2020, and bear interest at the rate of 12% per annum on the amount invested. Any interest due will be paid quarterly in arrears in cash or shares of common stock. If paid by the issuance of common stock, interest is paid at a conversion price equal to the average closing price of the Company’s common stock over the 20 trading days prior to the interest payment due date. The principal amount of the note may be paid by the issuance of shares of common stock, or cash, upon maturity at the Company’s election. Promissory notes may be converted at any time by the investor, at maturity by the Company, or by the Company prior to maturity, so long as the following conditions are met: (i) the Shares issued as payment are registered with the SEC; and (ii) the Company’s common stock closes for ten consecutive trading days at or above three times the Unit price.

In addition to the convertible promissory note, each investor received a warrant allowing for the purchase of the number of shares of BioLargo common stock equal to the investment amount divided by the unit/conversion price (e.g., one warrant share for each share of common stock which the investor is eligible to receive through conversion of the note). (See Note 7.) The warrants expire on June 20, 2022. The Company may “call” the warrants, requiring the investor to exercise their warrants within 30 days or forever lose the rights to do so, only if the following conditions have been met: (i) the underlying Shares are registered with the SEC and (ii) the Company’s common stock closes for 10 consecutive trading days at or above two times the exercise price.

16

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Through December 31, 2017, we had received $523,700 in investments in the Summer 2017 Unit Offering, from ten accredited investors, all pursuant to Pricing Supplement No. 1. No investments were received pursuant to a second pricing supplement issued on December 11, 2017, setting the unit price at $0.394 per share. On February 22, 2018, we issued Pricing Supplement No. 3, setting the Unit price to $0.30 and the warrant exercise price at $0.48. Prior to the offering’s termination on March 26, 2018, we received $80,000 in investments from two accredited investors pursuant to this third pricing supplement.

The offering documents assured the investors that in the event a subsequent pricing supplement offered a lower conversion or exercise price, prior investors would be given those favorable terms. Because we issued a third pricing supplement lowering the Unit price to $0.30 per share, the unit price for the prior investors was lowered to $0.30. As a result, the number of warrant shares available for purchase by each investor increased. (See Note 7.)

Convertible Note, matures April 20, 2021 (Spring 2018 Unit Offering)

On March 26, 2018, we commenced a private securities offering (titled the “Spring 2018 Unit Offering”) which offered the sale of $1,500,000 of “Units,” each Unit consisting of a convertible promissory note and stock purchase warrant. Concurrently, we issued Pricing Supplement No. 1 setting the initial unit/conversion price at $0.30 per share, and the initial warrant exercise price at $0.48 per share. The promissory notes issued to investors mature April 20, 2021, and incurs interest at the rate of 12% per annum on the amount invested. Interest due will be paid quarterly in arrears in cash or shares of common stock. If paid by the issuance of common stock, interest is paid at a conversion price equal to the average closing price of the Company’s common stock over the 20 trading days prior to the interest payment due date. The principal amount of the note may be paid by the issuance of shares of common stock, or cash, upon maturity at the Company’s election. Promissory notes may be converted at any time by the investor, at maturity by the Company, or by the Company prior to maturity, so long as the following conditions are met: (i) the shares issued as payment are registered with the SEC; and (ii) the Company’s common stock closes for ten consecutive trading days at or above three times the Unit price.

In addition to the convertible promissory note, each investor will receive a warrant allowing for the purchase of the number of shares of BioLargo common stock equal to the investment amount divided by the unit/conversion price (e.g., one warrant share for each share of common stock which the investor is eligible to receive through conversion of the note). (See Note 7.)

Through March 31, 2018, we had received one investment for $100,000, and issued a warrant to purchase 333,333 shares. This investment was received from an entity owned/controlled by a member of our board of directors. We did not receive any investments in this offering during the three months ended June 30, 2018.

Convertible Note, matures June 15, 2021 (OID Note)

On June 15, 2018, we received $75,000 and we issued a convertible promissory note (titled the “OID Note”) for 100% of the funds received, or $82,500. The convertible promissory note is convertible into shares of the company’s common stock at a conversion price of $0.30 per share. The original issuance discount totaled $7,500, recorded as a discount on convertible notes on our balance sheet. The discount will be amortized and recorded to interest expense over the term of the note. The convertible promissory note matures June 15, 2021 and incurs interest at the rate of 15% per annum on the OID Note. Interest due will be paid quarterly in arrears in shares of common stock, paid at a conversion price equal to the average closing price of the Company’s common stock over the 20 trading days prior to the interest payment due date. The OID Note is convertible by the investor at any time, and convertible by the Company (i) at maturity, (ii) in the event the Company’s stock price closes at two times the conversion price for 20 consecutive days, provided that either the shares underlying the convertible note are registered with the SEC, or more than six months has elapsed since the date of the investment.

17

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 6. Share-Based Compensation

Common Stock

On May 2, 2017, pursuant to an employment agreement with the Company’s president, Dennis Calvert (see Note 12), we issued Mr. Calvert 1,500,000 shares of common stock, subject to 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 $3,000,000 in cash, or the recognition of $3,000,000 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 Company will expense the fair value of the stock if and when it is probable that any of the conditions above are met.

Stock Options

During the six months ended June 30, 2017 and 2018, we recorded an aggregate $515,959 and $696,001, respectively, in selling general and administrative expense related to the issuance of stock options.

2018 Equity Incentive Plan

On June 22, 2018, the BioLargo, Inc. 2018 Equity Incentive Plan (“2018 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. 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 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 forty million shares. The number of shares available under the 2018 Plan can increase up to 5% each year at the discretion of the board.

On June 29, 2018, we issued options to purchase 296,976 shares of our common stock at an exercise price of $0.43 per share to members of our board of directors for services, to employees in lieu of salary, and to consultants for services, pursuant to the 2018 Plan. The fair value of these options totaled $127,700 and is recorded as selling, general and administrative expenses.

Activity for our stock options under the 2018 Plan for the six months ended June 30, 2018 is as follows:

As of June 30, 2018:	Options Outstanding		Exercise Price per share		Weighted Average Price per share
Inception, June 22, 2018
Granted		296,976	$	0.43	$	0.43
Expired		—		—		—
Balance, June 30, 2018		296,976	$	0.43	$	0.43

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 were made under this plan for a period of 10 years. It expired on its terms 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.

18

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

On June 19, 2017, the date of our annual stockholders’ meeting, we recorded the issuance of options to purchase an aggregate 40,000 shares of our common stock to the non-employee members of our Board of Directors, pursuant to the terms of the 2007 Equity Plan which calls for an annual automatic issuance. The exercise price of $0.43 equals the price of our common stock on the grant date. The fair value of these options totaled $15,600 and was recorded as selling, general and administrative expense.

On February 10, 2017, we extended the engagement agreement with our Chief Financial Officer, retroactive to October 1, 2016. The sole consideration for the one-year extension was the issuance of an option to purchase 300,000 shares of our common stock, at an exercise price of $0.69 per share which was equal to the closing price of our common stock on the date of grant. The option expires February 10, 2027, and vests over the term of the engagement with 125,000 shares having vested as of February 10, 2017, and the remaining shares to vest 25,000 shares monthly beginning March 1, 2017, and each month thereafter, so long as his agreement is in full force and effect. The fair value of the option totaled $207,000. During the six months ended June 30, 2017, we recorded $155,250 as selling, general and administrative expense on our statement of operations. The remaining fair value balance vested monthly through September 30, 2017.

Activity for our stock options under the 2007 Plan for the six months ended June 30, 2017 and 2018 is as follows:

						Weighted
						Average
As of June 30, 2017:	Options		Exercise			Price per
	Outstanding		Price per share			share
Balance, December 31, 2016		9,916,586	$0.23	–	1.89	$	0.44
Granted		340,000	0.39	–	0.69		0.65
Expired		—		—			—
Balance, June 30, 2017		10,256,586	$0.23	–	1.89	$	0.44

							Weighted Average
As of June 30, 2018:	Options			Exercise			Price per
	Outstanding			Price per share			share
Balance, December 31, 2017		9,831,586		$0.23	–	1.89	$	0.44
Granted		—			—			—
Expired		(70,000	)	1.45	–	1.89		1.79
Balance, June 30, 2018		9,761,586		$0.23	–	1.65	$	0.43

Options issued Outside of the 2007 Equity Incentive Plan

During the six-months ended June 30, 2018, we issued options to purchase 1,008,268 shares of our common stock at exercise prices ranging between $0.23 – $0.43 per share to vendors and to members of our board of directors in exchange for unpaid obligations for their services. The fair value of the options totaled $260,671 and is recorded as selling, general and administrative expenses.

During the six-months ended June 30, 2017, we issued options to purchase 820,879 shares of our common stock at exercise prices ranging between $0.43 – $0.67 per share to vendors and to members of our board of directors in exchange for unpaid obligations for their services. The fair value of the options totaled $277,074 and is recorded as selling, general and administrative expenses.

19

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

On May 2, 2017, pursuant to his employment agreement, we granted to Mr. Calvert, an option (the “Option”) to purchase 3,731,322 shares of the Company’s common stock. The Option shall be a non-qualified stock option, exercisable at $0.45 per share, which represents 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 on the anniversary of the agreement for five years. Notwithstanding the foregoing, 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 Option contains the other terms standard in option agreements issued by the Company, including provisions for a cashless exercise. The fair value of this option totaled $1,679,095 and will be amortized monthly through May 2, 2022. During the six months ended June 30, 2017, we recorded $27,985 and during the six months ended June 30, 2018 we recorded $167,910 of selling, general and administrative expense.

Exercise of Stock Option 

On April 30, 2017, the Company’s president, Dennis Calvert, delivered a notice of exercise of 3,866,630 shares pursuant to his stock option agreement dated April 30, 2007. The exercise price was $0.18 per share, and the Company issued 2,501,937 shares, calculated by multiplying the difference between the market price of $0.51 and the exercise price of $0.18 with the number of shares exercised, and dividing that amount by the market price. No cash consideration was tendered with respect to the exercise. The remaining 3,866,629 shares available for purchase under the option agreement expired unexercised.

Pursuant to a “lock-up agreement” dated April 30, 2017, Mr. Calvert agreed to restrict the sales of the shares received until the earlier of (i) the consummation of a sale (in a single transaction or in a series of related transactions) of the Company by means of a sale of (a) a majority of the then outstanding common stock (whether by merger, consolidation, sale or transfer of common stock, reorganization, recapitalization or otherwise) or (b) all or substantially all of its assets; and (ii) the successful commercialization of the Company’s products or technologies as demonstrated by its receipt of at least $3,000,000 in cash, or the recognition of $3,000,000 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 between the Company and Calvert dated May 2, 2017 and resulting in Calvert’s termination.

Activity of our stock options issued outside of the 2007 Equity Incentive Plan for the six months ended June 30, 2017 and 2018 is as follows:

							Weighted
							Average
As of June 30, 2017:	Options			Exercise			Price per
	Outstanding			Price per share			share
Balance, December 31, 2016		20,148,766		$0.18	–	1.00	$	0.43
Granted		4,552,201		0.43	–	0.67		0.47
Expired		3,866,629			0.18			0.18
Exercised		(3,866,630	)		0.18			0.18
Balance, June 30, 2017		16,967,708		$0.18	–	1.00	$	0.41

							Weighted
							Average
As of June 30, 2018:	Options			Exercise			Price per
	Outstanding			Price per share			share
Balance, December 31, 2017		20,018,408		$0.25	–	1.00	$	0.51
Granted		1,008,268		0.23	–	0.43		0.26
Expired		(2,400,000	)		0.99			0.99
Balance, June 30, 2018		18,626,676		$0.25	–	1.00	$	0.45

20

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

For employees, we recognize compensation expense for stock option awards on a straight-line basis over the applicable service period of the award, which is the vesting period. Share-based compensation expense is based on the grant date fair value estimated using the Black-Scholes Option Pricing Model. The following methodology and assumptions were used to calculate share-based compensation for the six months ended June 30:

	2017						2018
	Non Plan			2007 Plan			Non Plan			2018 Plan
Risk free interest rate	2.29	-	2.40%	2.31	-	2.40%	2.43	–	2.91%		2.91	%
Expected volatility	578	-	601%	578	-	601%	548	–	563%		548	%
Expected dividend yield		—			—			—			—
Forfeiture rate		—			—			—			—
Expected life in years		7			7			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. 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.

Note 7. Warrants

Reduction of Warrant Exercise Price

During the three months ended June 30, 2018, certain holders of outstanding warrants to purchase common stock received in prior unit offerings paid us cash in exchange for a reduction of the exercise price in their warrant(s).  In the aggregate, we received $148,854 from holders of 37 warrants which allow for the purchase of an aggregate 4,326,358 shares of our common stock. Exercise prices of these warrants were reduced to $0.30. Management determined that the appropriate accounting treatment for the reduction in the exercise price of the warrants was a capital transaction rather than a contract modification treatment analogous to changes in stock option contracts. As such, the fair market value was equal to the cash received, $148,854.

Warrants Issued Concurrently with Spring 2018 Unit Offering

During the three months ended March 31, 2018, pursuant to the terms of our Spring 2018 Unit Offering (see Note 5), we issued a warrant to purchase up to 333,333 shares of our common stock at an exercise price of $0.48 per share to the investor in the Spring 2018 Offering. The warrant expires April 20, 2023. The relative fair value of the warrant resulted in $49,306 recorded as a discount on our convertible notes on our consolidated balance sheet in the period issued.

The Company may “call” the warrants issued in the Spring 2018 Offering, requiring the holder to exercise their warrant within 30 days or forever lose the rights to do so, if the following conditions have been met: (i) the shares of common stock underlying the warrants are registered with the SEC and (ii) the Company’s common stock closes for 10 consecutive trading days at or above two times the exercise price.

21

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Warrants Issued Concurrently with Line of Credit Offering

During the three months ended March 31, 2018, pursuant to the terms of our Line of Credit (see Note 5, “Line of Credit, matures September 1, 2019”), we issued warrants to purchase up to an aggregate 390,000 shares of our common stock at an exercise price of $0.35 per share. These warrants expire March 1, 2023. The relative fair value of these warrants resulted in $85,002 recorded as a discount on our “convertible notes payable and line of credit” on our consolidated balance sheet in the period issued.

The Company may “call” these warrants, requiring the holder to exercise their warrants within 30 days or forever lose the rights to do so, if the following conditions have been met: (i) the shares of common stock underlying the warrants are registered with the SEC and (ii) the Company’s common stock closes for 10 consecutive trading days at or above two times the exercise price.

Warrants Issued Concurrently with Note Payable

During the three months ended March 31, 2018, pursuant to the terms of the note payable. (see Note 5, “Note payable, matures March 8, 2020”), we issued warrants to purchase up to an aggregate 150,000 shares of our common stock at an exercise price of $0.35 per share. At the end of each month 6,250 warrants vest as long as the note payable is outstanding. Although the note matures March 8, 2020, the investor may call the note at any time after June 30, 2018. Thus, a minimum of 25,000 warrants will vest, and the fair value of these warrants totaled $6,500. Of this amount $1,625 was recorded as interest expense and the remaining $4,875 is recorded as a discount on our consolidated balance sheet in the period issued. These warrants expire February 28, 2023.

Warrants Issued to Summer 2017 Unit Offering Investors

Pursuant to the Summer 2017 Unit Offering, we issued warrants to purchase the number of shares of stock equal to each investor’s investment amount, divided by the “unit price” set forth in a “pricing supplement”. The offering documents assured the investors that in the event a subsequent pricing supplement offered a lower conversion or exercise price, prior investors would be given those favorable terms. On February 12, 2018, we issued a third pricing supplement, lowering the unit price to $0.30. As a result of this reduction, the number of shares purchasable pursuant to warrants issued to prior investors increased by an aggregate 416,478 shares. Additionally, during the three months ended March 31, 2018, we accepted two final investments in the aggregate amount of $80,000, pursuant to the third pricing supplement, and issued these investors warrants to purchase an aggregate 266,667 shares. The relative fair value of these warrants, including the increase in purchasable shares, resulted in $103,322 recorded as a discount on our consolidated balance sheet in the period issued.

Warrants Issued Concurrently with One Year Convertible Notes

We have accepted $250,000 investments and issued one-year OID convertible notes on three occasions: July 8, 2016, December 30, 2016, and July 17, 2017. In addition to the notes, the investors received warrants on each of those three dates to purchase an aggregate 400,000 shares of our common stock. These warrants were initially exercisable at $0.65 per share (for July 2016 warrants), $0.70 per share (for December 2016 warrants), and $0.65 per share (for July 2017 warrants), and expire five years from the date of grant. Each of the warrants contain a provision that the exercise price may be reduced in the event we sell our common stock or issue warrants to third parties at a lower prices, with particular exclusions, the details of which are available in our Form 10-K. The exercise price of these warrants has decreased, and the number of shares increased, on multiple occasions prior to December 31, 2017, most recently on December 11, 2017, at which time the exercise price was reduced to $0.394 per share, and the number of shares issuable pursuant to the warrants, in the aggregate, increased from the original 1,200,000 shares, to 2,081,216.

On February 22, 2018, we sold shares of our common stock at $0.25 per share (see Note 4). Since these securities were sold at less that the then previously adjusted $0.394 warrant exercise price, the exercise price of the warrants were decreased from $0.394 to $0.25 per share, and the number of shares issuable pursuant to the warrants increased by an aggregate 1,198,784 shares. The fair value of the warrants issued totaled $297,439 and is recorded as a deemed dividend in our equity statement for the six months ended June 30, 2018.

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

	Number of
	Shares			Price Range
As of June 30, 2017
Outstanding as of December 31, 2016		20,035,114		$0.125	–	1.00
Issued		990,727		$0.42	–	0.70
Exercised		(510,000	)		$0.30
Outstanding as of June 30, 2017		20,515,841		$0.125	–	1.00

22

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

As of June 30, 2018
Outstanding as of December 31, 2017	22,104,817		$0.125	–	1.00
Issued	2,611,513		$0.25	–	0.48
Exercised	—			—
Expired	(2,683,400	)		$0.40
Outstanding as of June 30, 2018	22,032,930		$0.125	–	1.00

The fair value of each award grant is estimated on the date of grant using the Black-Scholes option-pricing model. The determination of expense of warrants issued for services or settlement also uses the option-pricing model. The principal assumptions we used in applying this model were as follows for the six months ended June 30:

	2017			2018
Risk free interest rate	1.83	–	1.93%		2.54%
Expected volatility	293	–	297%		252%
Expected dividend yield		—			—
Forfeiture rate		—			—
Expected life in years		5		5	-	10

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.

Note 8. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses included the following: 

	December		June
		31, 2017		30, 2018
Accounts payable and accrued expenses	$	88,381	$	149,338
Accrued interest		50,748		72,926
Accrued payroll		84,976		32,393
Total accounts payable and accrued expenses	$	224,105	$	254,657

Issuance of Common Stock in exchange for payment of payables

Payment of Officer Salaries

On March 31, 2018, we issued 323,030 shares of our common stock at $0.26 per share in lieu of $83,665 of accrued and unpaid obligations to two of our officers. The price-per-share was based on the closing price of our common stock on the last day of the month.

On June 29, 2018, we issued 176,947 shares of our common stock at $0.43 per share in lieu of $75,968 of accrued and unpaid obligations to two of our officers. The price-per-share was based on the closing price of our common stock on the last day of the month.

Payment of Consultant Fees

During the six months ended June 30, 2018, we issued 948,280 shares of our common stock, at prices ranging between $0.23 - $0.41 per share, in lieu of $246,966 of accrued and unpaid obligations to consultants.

During the six months ended June 30, 2017, we issued 307,829 shares of our common stock, at prices ranging between $0.43 - $0.52, in lieu of $493,827 of accrued and unpaid obligations to consultants.

23

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Payment of Accrued Interest

During the six months ended June 30, 2018, we issued 1,919,806 shares of our common stock, at prices ranging between $0.31 – 0.42 per share, in lieu of accrued interest totaling $493,783.

During the six months ended June 30, 2017, we issued 683,875 shares of our common stock, at prices ranging between, $0.41 – $0.70 per share, in lieu of accrued interest totaling $337,246.

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.

Note 9. Noncontrolling Interest

Clyra Medical Technologies

Our subsidiary Clyra Medical Technologies, Inc. (“Clyra”) was formed to develop and sell medical products containing our technology,. Although we initially owned 100% of this subsidiary, we have issued shares to management and to investors. As of June 30, 2018, we own 46.3% of Clyra’s outstanding shares. Clyra’s three-member board of directors includes BioLargo president Dennis P. Calvert, BioLargo board member (and also an owner of Clyra’s Series A preferred shares) Jack B. Strommen, and Clyra’s president.

Clyra’s Series A preferred shares (“Preferred Shares”) accrue an annual dividend of 8% for a period of five years. Although the dividends began to accrue immediately, Clyra 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 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 June 30, 2018 is $150,000.

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 common stock and Preferred Shares as if the Preferred Shares had converted to Clyra common stock. Holders of Preferred Shares may convert the shares to Clyra common stock initially on a one-to-one basis. The conversion formula is subject to change in the event Clyra sells stock at a lower price than the price paid by Sanatio.

On March 31, 2017, Clyra obtained a $250,000 line of credit from Sanatio Capital LLC, accruing interest at a rate of 10% per annum and a 5% original issue discount. The line of credit was scheduled to mature on March 31, 2019, but was subsequently converted to Clyra stock in full payment (see below).

In April 2017, BioLargo purchased 500 shares of Clyra common stock from a former member of Clyra’s management for $40,000.

In August 2017, Clyra commenced a private offering of its common shares at a price of $160 per share, and accepted $1,000,000 in subscriptions. It issued 6,250 shares of its common stock to two investors. Of that amount, BioLargo invested $250,000 and was issued 1,562.5 shares. On August 4, 2017, Clyra issued 1,690 shares of its common stock at $160 per share to Sanatio in exchange for payment of the $270,400 principal and interest outstanding under the line of credit held by Sanatio (see above). Subsequent to the issuance of shares to investors in the offering, and to Sanatio for the conversion of the line of credit, BioLargo owned 15,297.5 shares of Clyra common stock, which is 46.3% of the outstanding stock at Clyra. Two members of BioLargo’s board of directors (Dennis P. Calvert and Jack B. Strommen) comprise a majority of the three-member Clyra board of directors. Management has determined that BioLargo does control Clyra after reviewing the guidance of ASC Topic 810, “Consolidation”. While BioLargo does not have voting interest control through 50% ownership of Clyra, it does exercise control under the Variable Interest Model. BioLargo is the primary beneficiary since it has the power to direct Clyra’s activities that most significantly impact Clyra’s performance and it has the obligation to absorb losses or receive benefits (through royalties and licensing) that could be potentially significant to Clyra. BioLargo has consolidated Clyra’s operations through June 30, 2018.

24

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 10. 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. These agreements and related operational obligations add approximately $100,000 to our monthly budget for payroll, taxes, benefits, insurance, and other related obligations. 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 2,000,000 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 a committee of the company (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. It is still too early to make a determination as to whether BLEST will meet some of the performance criteria. Through June 30, 2018 and as of the end of 2017, BLEST has not met any of the criteria and therefore no portion of the Class B Units and stock options have been earned or vested.

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 $288,603 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 of $800 per month, paid vacation of four weeks per year, and bonuses in such amount as the Compensation Committee may determine from time to time.

The Calvert Employment Agreement provides that Mr. Calvert will be granted an option (the “Option”) to purchase 3,731,322 shares of the Company’s common stock. The Option shall be a non-qualified stock option, exercisable at $0.45 per share, which represents 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. Notwithstanding the foregoing, 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 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 $3,000,000 in cash, or the recognition of $3,000,000 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.

25

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 pled guilty or nolo contendere 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”.

Clyra Consulting Agreement

Our partially owned subsidiary Clyra (see Note 9) entered into a consulting agreement with Beach House Consulting, LLC, through which Jack B. Strommen will be providing consulting services to Clyra related to its sales and marketing activities once it has received FDA Approval (as defined in Note 9 and the associated agreement) on a product, at which point the agreement provides that Mr. Strommen is to receive $23,438 per month for a period of four years. This agreement has not started, and the total cash obligation related to the agreement would be $1,125,024 over four years.

Note 12. Subsequent Events.

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

Conversion of Debt Obligations

One-year convertible notes, mature July 18, 2018

On July 2, 2018, the holders of two one-year notes in the aggregate principal amount of $280,000, which were due to mature on July 18, 2018, tendered an offer to the Company to convert 100% of the balance due on the outstanding notes into shares of our common stock in lieu of receiving cash. We accepted the offer and agreed to convert the principal balance of $280,000 and $8,400 outstanding interest into an aggregate 1,153,600 shares of our common stock, at $0.25 per share. The notes were issued July 18, 2017, and originally provided for a conversion price of $0.42 per share.

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BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Nine-month convertible note, matures October 16, 2018

On July 16, 2018, the holder of a nine-month note with an original principal amount of $150,000 maturing October 16, 2018 submitted a notice to convert the remaining principal due on the note of $54,239. We issued an aggregate 217,960 shares at $0.25 per share, consisting of 216,950 shares for payment of principal, and 1,010 for payment of accrued interest. As of the date of this Report, this note is paid in full.

Subsequent to these conversions our outstanding debt obligations are as follows:

	June 30, 2018		August 14, 2018
Current liabilities
Convertible notes payable
One-year convertible notes, mature July 18, 2018 *	$	280,000	$	—
Convertible notes, mature June 1, 2018		—		—
Nine-month convertible note, matures September 18, 2018		447,975		447,975
Nine-month convertible note, matures October 16, 2018 *		54,239		—
Total convertible notes payable	$	782,214	$	447,975
Long-term liabilities:
Line of credit, matures September 1, 2019	$	390,000	$	390,000
Convertible notes payable
Convertible note, matures July 20, 2019		440,000		440,000
Convertible notes, mature December 31, 2019		75,000		75,000
Note payable, matures March 8, 2023 (or on demand 60 days’ notice)		50,000		50,000
Convertible notes, mature June 20, 2020		125,000		125,000
Convertible notes, mature April 20, 2021		100,000		100,000
Convertible notes, mature June 15, 2021		82,500		82,500
Total convertible notes payable	$	872,500	$	872,500
Total	$	2,044,714	$	1,710,475

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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 June 30, 2018, 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 Water USA, Inc., a California corporation, BioLargo Development Corp., a California corporation, BioLargo Maritime Solutions, Inc., 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 Technology Incubator

BioLargo, Inc. is an innovation company driven by our mission is to “make life better” by developing breakthrough platform technologies, nurturing and building businesses around the intellectual property, while providing capital and support along the journey 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 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.  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 for our CupriDyne Clean odor and volatile organic compound (“VOC”) control products, sold through our subsidiary, Odor No More, Inc. Sales are increasing as we focus on serving the solid waste handling and wastewater treatment industries. We are gearing up for rapid growth as the product is experiencing more widespread market adoption.  

Our second commercial operation provides professional engineering services, through our subsidiary BioLargo Engineering, Science & Technologies, LLC (“BLEST”). Through BLEST, we provide a menu of professional engineering and consulting services to compliment and nurture our technologies as well as serve clients on a fee-for-service basis.

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In addition to our two operating subsidiaries, we have technologies and products in the development pipeline progressing towards commercialization, including our Advanced Oxidation System (“AOS”), that we target to have commercially ready in 2019, and our medical products, which will be ready for commercialization as soon as we pass Food and Drug Administration (“FDA”) clearance.

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.  

Industrial Odor and VOC Control – CupriDyne Clean

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 we offer substantial savings to our customers when they use our product and services.

Market Opportunity Validated

Revenues from sales of our CupriDyne Clean products continue to expand. 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.

Many of our customers have adopted CupriDyne Clean as a replacement for a non-performing competitive product. We are realizing systematic adoption by our very large corporate customers. 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 in these very large markets. We estimate there are approximately 2,000 active landfills¹ and 8,000 transfer stations² in the United States and 15,000 waste water treatment agencies³. While all may not have ongoing odor problems or neighbor complaints, many of the facilities have needed for a disruptive odor solution like 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 product in the field (such as misting systems at landfills, transfer stations, and wastewater treatment facilities). We have recently begun providing engineering design, construction and installation services related to the various water-based delivery systems used to deploy our products. Our engineering team at BLEST has been instrumental in supporting these operations. We have applied for licensure from the California Contractors State License Board (“CSLB”). We currently have more than 30 “design build” bids out to clients for CupriDyne Clean delivery systems.

We have recently hired two employees that hold licenses from the California Contractors State License Board (“CSLB”) and are in the process of transferring these licenses to our Odor-No-More subsidiary. Upon completion we will hold a General Contractors license, a Plumbing Contractors license and a Low Voltage Electrical Contractors license. We plan to test for and secure a High Voltage Electrical Contractors license in the near term. These licenses will allow us to offer a full-service solution to our current and future customers within the state of California.

Regional Adoption

Sales of our CupriDyne Clean products and related services were initially made at the local level. We would demonstrate our product to the manager of operations at a particular transfer station or landfill, and he or she would ultimately decide whether to use our products. If owned by a national company, in some instances we have been required to obtain official “vendor” status with the company and sign a “national purchasing agreement”. Doing so required a tremendous amount of effort and time. Some of these accounts are now introducing us to their regional managers who have the ability to direct the facilities in their region to use our product. In the second quarter of 2018, we received direction from one such regional manager to begin servicing all the locations within his region. We are in advanced discussions with six additional area managers for the same client and anticipate we will begin servicing these additional regions prior to the end of the year.

We believe that “regional adoption” is a scalable approach for the larger solid waste handling companies that, with sufficient resources, we can implement nationwide. Based on our experience that trend will continue and we need to invest in more personnel to meet these expanding and very large market opportunities.

Wastewater Treatment Facilities

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 significant capital and high levels of service will be required for our ultimate success.  We are highly encouraged and are evaluating various strategies to maximize our marketing and selling proposition into this mature and well-established 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 solid waste industry. In the United States, we currently operate out of two locations – Southern California, and Tennessee. We expect to expand our manufacturing and staffing in our Tennessee operation as we achieve critical mass in that region. In the meantime, as a result of the rapid adoption we are experiencing in our local Southern California market, we are focused 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 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 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.

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The subsidiary, BioLargo Engineering, Science & Technologies, LLC (“BLEST”), 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, marine engineering, AutoCAD, bench chemistry, continuous emission monitoring system operator, data handling and evaluation and decommissioning and decontamination of radiological and chemical contaminated facilities.

Our engineering team has focused its efforts in two areas. First, servicing third party clients in similar roles as to what they did at CB&I and Shaw, and throughout their well-established careers. Second, they are working to scale-up, engineer and commercialize our AOS water treatment technologies, as well as support other technology and product development efforts within the BioLargo family of companies, including our industrial odor control solutions (CupriDyne Clean). By way of example, the team has recently engineered and designed a portable misting system requested by a large waste handling company. BLEST will also pursue new inventions and be available to provide engineering support where needed for any commercial opportunities that are presented by and through any and all operating units of BioLargo.

Business Development at BLEST

The selling cycle for BLEST to new outside clients can be anywhere from a few months up to nine months or longer. The nature of their work with outside clients is highly constrained by relationships, reputation, budgeting, bidding and client timing. In light of the long selling cycle that is prevalent in this industry, we are highly encouraged by the most recent developments that have taken months to mature and now appear to be well in process to begin generating financial results. A few noteworthy examples are:

During the first quarter of 2018, BLEST secured a new relationship and was retained to serve as “Owner’s Engineer” for a proposed $687 million integrated biofuels production project to be built on the east coast. The proposed facility would convert hundreds of tons per day of municipal solid wastes and plastics into high-grade fuels and paraffin waxes, while diverting hundreds of thousands of tons of waste from landfills per year. Our team’s initial role in this project is to provide the project’s ownership team with consulting engineering support as the project becomes finalized. BLEST is now under contract to be paid for approximately $195,000 of engineering services rendered for the pre-project phase. We expect our role to expand once the client acquires a final piece of real property necessary for the project and additional funding. Assuming it moves ahead, we anticipate that the scope of our services will significantly expand to an important multi-year role in the project’s overall engineering management. We believe this project will require rapid and detailed response and require that we increase of our Oak Ridge staff to fully meet the demands of the project.

BLEST has recently secured a time and materials contract to perform a compliance review of a leading natural gas utility in Tennessee’s operating, maintenance, and emergency response activities, and to ensure the overall integrity of the facilities review relating to new rules established by the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration (PMMSA) regulation pertaining to the use of natural underground storage of national gas. The BLEST effort will involve preparing a program implementation plan, conducting a risk assessment, and preparing operational and maintenance procedures to prevent and mitigate facility natural gas leaks and failures caused by corrosion, chemical damage, mechanical damage, or other material deficiencies in piping, tubing, casing, valves, and associated facilities. The work is estimated not to exceed $35,000.

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BLEST has recently been notified that as a result of its recent audit work on to assist 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 involves 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 estimated not to exceed $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 has recently been notified that it is to receive a time and materials contract to provide regulatory analysis of the ongoing plant expansion for a chemical company based in the port areas west of Houston, Texas.

BLEST has expanded its services offering as a direct result of a recently acquired new equipment called a custom-fabricated Rotary Thermal Apparatus (“RTA”) which expands the capabilities of the company to outside clients and creates host of new business opportunities. The RTA has proven indispensable in providing data directly applicable to the design of thermal treatment systems (i.e. incinerators, thermal desorbers, catalytic oxidation units, etc.). The RTA can also prove useful in the development of various chemical production processes and optimization of process reactions. And last but not least, the RTA can be used by BLEST to conduct treatability studies (more on that below) on contaminated solids (i.e. soils, sludges, slurries) for its clients, providing design data to engineers to develop procedures, predict outcomes and control costs for remediation projects (including soil remediation). The RTA opens up an area of practice for BLEST that includes an entire subset of remediation technologies, including thermal oxidation, thermal desorption, thermal vitrification and thermally enhanced chemical fixation. We expect the acquisition of this equipment to result in new contracts that we otherwise would not be able to execute effectively.

BioLargo Water and the Advanced Oxidation System - AOS

BioLargo Water is our wholly owned subsidiary located on campus at the University of Alberta that has been primarily engaged in the research and development of our Advanced Oxidation System (AOS).  The AOS is a water treatment device in development that generates a series of highly oxidative species of iodine and other molecules that, because of the proprietary configuration and inner constituents of the AOS, allow the AOS to eliminate pathogenic organisms and organic contaminants with extreme efficacy while consuming very little electricity.

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 – 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 are first targeting commercialization of the AOS in three key industries: 1) livestock processing wastewater treatment and reuse; 2) municipal wastewater tertiary treatment; 3) oil and gas process affected water treatment, remediation, and/or reuse. These industries were chosen as a result of extensive market research which highlighted them as areas where current water treatment technologies fall short of industry needs, and/or where the AOS has the potential to provide economic advantages over incumbent water treatment technologies.

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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 have recently applied for significant grant funding to re-initiate our work to help treat OSPW and other oil and gas wastewaters using the AOS, and we will be notified about the status of our funding application in the coming months.

Our work is continually progressing to support a number of commercial applications, with a key focus on wastewater treatment, food processing, agriculture, and oil and gas. We are also at the early stages of evaluating opportunities in in the storm drain recapture/recycling, and drinking water. Our AOS is an award-winning invention that is supported by science and engineering financial support and grants from various federal and provincial funding agencies in Canada such as NSERC, NRC- IRAP, and Alberta Innovates and in the USA by the Metropolitan Water District and National Water Research Institute.

Recent AOS Milestones

The most important advances in AOS development in recent months have been 1) the planning and design of two confirmed pre-commercial field pilot projects, and 2) design and engineering advances and changes to the AOS in preparation for piloting and scale-up for industrial flow-rates and conditions. Two pre-commercial pilots have been confirmed and are planned to take place in Fall of 2018. The first is a pre-commercial pilot to treat poultry wastewater on-site at a poultry producer’s facility in Alberta, where the AOS will be 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. The pilot is intended to demonstrate the AOS’ ability to disinfect and decontaminate water at high flow-rates, allowing for recycling, reuse, and/or safe water discharge.  Moreover, continuous treatment and recycling of the processed water in this pilot project will allow for a comprehensive assessment of the long-term economic advantage (both operating and capital costs) and conservation benefits of the AOS for both energy and water, in comparison with conventional wastewater treatment technologies. Ultimately, we expect the results of this pilot to lay an important foundation for the technical and business case that convinces future customers to purchase the AOS. The second is a pre-commercial pilot where the AOS will be used on-site at a Californian brewery as a polishing step treatment regimen to eliminate bacteria and enable wastewater discharge in compliance with Californian regulatory standards. Again, this pilot will help establish not only the efficacy of the AOS in a field setting, but also the OPEX and CAPEX of the system which will be used in preparation of future pilots, trials, and sales of the AOS. 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.

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.

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To support the planned pilots for the AOS, BioLargo Water has secured public funding from the Government of Canada, including a CA$235,000 grant from the Industrial Research Assistance Program (NRC-IRAP) to fund our first on-site pilot project in the Canadian poultry industry. We have also submitted and are currently submitting applications for a series of substantial government grants (totaling more than $4M USD) to fund all our development and piloting efforts in wastewater, food processing and oil and gas applications.

Our engineering team in Tennessee is actively preparing a process engineering package for the AOS system. Major components of the package will include: design basis, process flow diagrams, piping and instrumentation diagrams, process control strategy document and materials of construction specifications. This work is underway.

Advanced Wound Care - Clyra Medical

We formed Clyra Medical Technologies, Inc. (“Clyra”) 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 are presently seeking approval for an advanced wound care product and have recently filed an application with the U.S. Food & Drug Administration (“FDA”) premarket notification of a medical device under Section 510(k) of the Food, Drug, and Cosmetic Act.

Our advanced wound care products combine broad-spectrum antimicrobial capabilities with iodine’s natural and well-understood metabolic pathway to promote healing. Our products are highly differentiated from existing antimicrobials in multiple ways - by the gentle nature in which they can perform, 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 for chronic wounds. We also intend to pursue and study the use of our technology as a compliment to 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 our medical products.

In late 2017, Clyra completed product development on its first design with its advanced wound care technology, and retained Emergo, a global leader in the medical device regulatory field, to prepare and submit to the U.S. Food & Drug Administration (“FDA”) premarket notification of a medical device under Section 510(k) of the Food, Drug, and Cosmetic Act. The 510(k) notification was submitted to the FDA’s Center for Devices and Radiological Health (“CDRH”). The submission was subsequently referred by the CDRH to the FDA Office of Combination Products (“OCP”), which has jurisdiction to classify a product as a drug, device, biological product, or combination product. We asked the OCP for a determination whether our product should be regulated as a medical device, drug, or combination product, and the OCP replied requesting significant additional information. The responses required to respond to the OCP requests for additional information would have required a substantial investment of time and money and as a consequence, we are not presently pursuing approval of this first product. Rather than proceed with premarket clearance for the product at this time, we chose to submit a second product for premarket notification under Section 510(k) in late June of 2018. While we remain confident that we will ultimately receive premarket clearance for this second product, we can make no assurance or prediction as to success of these efforts, and must wait patiently for the process with the FDA to conclude. The company has numerous medical device product designs that it intends to pursue as resources permit.

Clyra’s management is actively engaged in arranging for clinical work and is in discussions with a number of potential strategic partners. It also continues to actively work on the development of new products. It recently added Julian Bejarano, PhD to its executive team as an expert scientific researcher with more than 11 years of experience leading fundamental and applied research projects related to materials science and nanotechnology. In particular, Dr. Bejarano has six years of experience in projects related to biomaterials for regenerative medicine and multifunctional nanoparticles for controlled drug delivery. He holds a Materials Engineering degree and a Masters in Materials Engineering from the Universidad del Valle, Colombia. He also holds a PhD in Engineering Sciences with emphasis in Materials Science from the Universidad de Chile, Chile. Dr. Bejarano was a visiting researcher during his PhD studies at the Institute of Biomaterials at the University of Erlangen-Nuremberg, Germany. Following his doctorate studies, Dr. Bejarano was a postdoctoral fellow at the Advanced Center for Chronic Diseases in Chile for three years and Research Advisor for the Group of Polymer Engineering at the Universidad de Chile. Moreover, he has outstanding skills in project management, R&D, and innovation. His projects have been focused on the development and characterization of composites materials based on metals, polymers and ceramics, synthesis of multifunctional nanoparticles, encapsulation of therapeutic agents, and biological evaluation of materials. His findings in materials research have been published by prestigious international journals and he has presented at several international events related to biomaterials and materials science.

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Community

We believe it is part and parcel to our mission to make life better by supporting various socially important causes and events, and believe that doing so is a great way to help share our vision and purpose behind BioLargo, as well as our technologies. In addition to our sponsorship of scholarships with the Environmental Research and Education Foundation (EREF.org) and the National Water Research Institute (NWRI), we are often invited to be presenters and have even enjoyed recognition as award winners at multiple industry-related conferences. These include recent events such as the Metropolitan Water District of Southern California's Agriculture and Industry Relations Committee meeting; Bluetech Week in San Diego sponsored by The Maritime Alliance; an international trade mission hosted by the Canadian Embassy and Consulate in Beijing and Guangzhou that was sponsored by NRC-IRAP (National Research Council of Canada). We are honored to be the title sponsor along with Metropolitan Water District of Southern California at Sustain OC's upcoming Water Solutions 2 conference held at UC Irvine's Applied Innovation Center in Irvine, California. We have also hosted a seminar at Fresno State to share with their community the latest developments of our AOS for the treatment of livestock processing water as well as the advances of CupriDyne Clean for livestock odor control. We are also honored to provide sponsorship support at the EREF Fall Classic Fund Raising Event to further their mission to fund and direct scientific research and educational initiatives for waste management practices to benefit industry participants and the communities they serve. We were honored guests at this year’s Clarke Prize Awards event sponsored by the National Water Research Institute. a highly prestigious event where NWRI honors the outstanding individual residing in the U.S. who has implemented exceptional water science research/and or policy development to solve real-world water challenges. We recently co-sponsored a Water Environment & Reuse Foundation ("WERF") onsite technical symposium where more than 80 technical leaders from around the United States joined together to discuss the current events and technical guidelines for water reuse, a growing trend in drought burdened and densely populated urban areas. 

Results of Operations—Comparison of the three and six months ended June 30, 2017 and 2018

Revenue

Our revenue from product sales for the three and six months ended June 30, 2018 increased by 216% and 270%, respectively, compared with the three and six months ended June 30, 2017. Our $315,553 in revenues from product sales for the three months ended June 30, 2018 was a 41% increase in revenue over the prior three-month period. These increases are due to increased client adoption of our CupriDyne Clean Industrial Odor Control products and an increase in volume of sales of our Specimen Transport Solidifier pouches to the U.S. military.

Sales of our CupriDyne Clean products generated approximately 60% and 57% of our revenue from product sales in the three and six months ended June 30, 2018, which is a comparable percentage to our year ended December 31, 2017 results. The majority of these sales are to leading waste handling companies with whom we have “National Purchasing Agreements”. Our CupriDyne Clean sales revenue increased due to an increase in the volume of sales resulting from continued market penetration and ongoing marketing and sales efforts. We continue to receive extremely positive feedback from our customers about our service, our product’s effectiveness, and its cost savings. To meet this demand, we are continuing to hire sales and support staff. Given the continued expansion with our national accounts, we continue to expect higher sales volume for the remainder of 2018. We do not yet have enough history or sales volume to identify trends or uncertainties related to our CupriDyne Clean sales, although we are discovering that landfills and transfer stations in colder climates generally have less of a need for odor control products during winter months. We suspect that this fact will affect our product sales during colder months, although the extent of that effect is yet unknown and difficult to predict given the continued increase in market adoption we are experiencing.

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Sales of our Specimen Transport Solidifier pouches to the U.S. Defense Logistics Agency generated approximately 40% and 43% of our revenue in the three and six months ended June 30, 2018. Sales of this product increased by approximately $114,000 and $200,000 for the three and six months ended June 30, 2018 compared to the same period for 2017. These sales were primarily through our distributor Downeast Logistics. The vast majority of sales of our Specimen Transport Solidifier pouches are made through a bid process in response to a request for bids to which any qualified government vendor can respond. Although the number of these bids was higher in the six months ended June 30, 2018 as compared with the same period in 2017, we do not know if this trend will continue, and cannot know in advance the frequency or size of such requests from the U.S. Government, or whether our bids will be successful. As such, we are uncertain as to our future revenues of this product through this system.

Our engineering segment generated approximately $11,000 in revenue for the three months ended June 30, 2018. As this division started in the fourth quarter of 2017, the six months ended June 30, 2017 does not provide a comparison. For the six months ended June 30, 2018, revenue totaled approximately $50,000. Our engineering division is working closely with our odor control division to submit proposals for the design, build and installation of misting odor control systems at client transfer station and landfills. As of the date of this Report, dozens of such proposals are outstanding. In addition to these proposals, our engineer division has multiple proposals out with other third parties to provide engineering and other services. Although we expect our engineering division to increase revenues in the future, we are unable to predict if they will have success in winning client contracts.

Cost of Goods Sold and Services

Our cost of goods sold includes costs of raw materials, contract manufacturing, and other direct expenses related to the manufacturing of our products. As a percentage of gross sales, our costs of goods was 61% in the three and six months ended June 30, 2018, versus 73% and 66% in the three and six months ended June 30, 2017. The decrease in our cost of goods is primarily attributed to our higher volume of sales and the resulting increased purchasing power with our component suppliers.

Our cost of services includes costs of employee time, a portion of overhead, and, when applicable, cost of subcontractors.

Selling, General and Administrative Expense

Our Selling, General and Administrative (“SG&A”) expenses include both cash and non-cash expenses. Our SG&A increased approximately $115,000 (10%) and $230,000 (10%) in the three and six months ended June 30, 2018 compared to the same periods in 2017. The largest components of our selling, general and administrative expenses included:

	Three months ended June 30,				Six months ended June 30,
	2017		2018		2017		2018
Salaries and payroll related	$	394,412	$	562,298	$	720,605	$	971,562
Professional fees		133,776		185,694		327,194		377,670
Consulting		276,925		191,685		474,255		354,385
Office expense		157,996		260,646		346,867		470,334
Sales and marketing		49,861		63,310		91,517		117,415

Our SG&A expenses are increasing due primarily to the expansion of our business, both in terms of product sales and market adoption, and through the increase of service offerings. For example, the formation of our engineering subsidiary and hiring of associated personnel in the second half of 2017 resulted in increased legal and accounting fees, additional office expense related to the new office in Tennessee, and additional salaries and payroll, reflected in the three and six months ended June 30, 2018, but not for the same periods in 2017. As sales increase, we have added sales and support personnel. Our consulting fees decreased in the three and six months ended June 30, 2018 due a reduction in the use of outside business development firms during that period.

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Research and Development

Research and development expenses increased $101,297 (31%) and $231,690 (32%) for the three and six months ended June 30, 2018, as compared to the same periods in 2017. These expenses increased in part as a result of the formation of our engineering subsidiary, where we have accelerated the work related to the scale-up, engineering and testing of our AOS technology.

Interest expense 

Interest expense increased $1,046,912 (94%) and $925,764 (45%) for the three and six months ended June 30, 2018, as compared to the same periods in 2017. Our interest expense increased for primarily two reasons. First, from June 30, 2017 through June 30, 2018, our outstanding debt balance increased by approximately $2,000,000. Second, during the three months ended June 30, 2018, we recorded $275,534 interest expense related to the early conversion of promissory notes.

We recently have reduced our liabilities by over $5,800,000 through the conversion of debt to common stock, and thus in future periods we expect our interest expense to decrease significantly (by approximately $150,000 per quarter, assuming no new additional debt).

Net Loss

Net loss increased $1,147,727 (45%) and $1,251,699 (26%) for the three and six months ended June 30, 2018, as compared to the same periods in 2017. The net loss was somewhat offset by an increase in revenue, nevertheless, the net loss increased mainly due to the increased interest expense and to increased research and development expense. The net loss per share did not change as the increase in net loss was offset by the increase in common shares outstanding. Although our sales continue to increase, we expect to continue to incur a net loss for the foreseeable future. (See Part I, Item II, “Our Business”, above.)

Liquidity and Capital Resources

We have been, and anticipate that we will continue to be, limited in terms of our capital resources. Our total cash and cash equivalents was $651,061 at June 30, 2018, a decrease of approximately $339,000 since December 31, 2017. We had revenues of $589,767 in the six months ended June 30, 2018. Our gross profits are not sufficient to fund our operations. We have been required to financially support the operations of our subsidiaries, none of which are operating at a positive cash flow.

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. As reflected in the accompanying consolidated financial statements, for the six months ended June 30, 2018 we had a net loss of $6,029,478, used $2,053,111 cash in operations, and at June 30, 2018 had negative working capital of $120,187, current assets of $823,302, and an accumulated stockholders’ deficit of $107,329,788. As of June 30, 2018, we had $2,044,714 in principal amounts due on various debt obligations, of which $334,239 was subsequently converted to common stock, and one note, in the amount of $447,975, is scheduled to mature September 18, 2018. At our current stock prices, we cannot compel the conversion of the note into stock and are examining alternatives to refinance the obligation. 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.

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Only one subsidiary, Clyra, has financing in place to fund operations for the immediate future. It is important to note that Clyra intends to pursue direct investment to support its further product development and go to market strategy. Sales of our CupriDyne Clean products are increasing, and our engineering subsidiary has begun generating revenue, but we do not expect those divisions to support the general corporate overhead in the immediate future. As such, we will be required to raise substantial additional capital to continue our operations and fund our future business plans. We are continuing our efforts to raise capital through our purchase agreement with Lincoln Park (see Note 4, of the Notes to the Consolidated Financial Statements), a current private securities offering (see Note 5, of the Notes to the Consolidated Financial Statements), and in association with our plan to uplist our stock to Nasdaq. We are reluctant to utilize the Lincoln Park instrument when our stock price is below $0.25 because doing so would trigger the reduction of warrant exercise prices on some outstanding warrants. During the six months ended June 30, 2018, we received $380,803 from sales of stock to Lincoln Park, and an aggregate $852,500 net proceeds from our private securities offerings (including Lincoln Park).

In addition to our financing arraignment with Lincoln Park, and the private securities offerings discussed above, we are continuing to explore alternatives for our current and longer-term financial requirements, including additional raises of capital from investors in the form of convertible debt or equity, a fully underwritten public offering associated with our plan to uplist our stock to Nasdaq, and significant grant funding from government sources. It is unlikely that we will be able to qualify for bank or other financial institutional debt financing until such time as our operations are considerably more advanced and we are able to demonstrate the financial strength to provide confidence for a lender, which we do not currently believe is likely to occur for at least the next 12 months or more.

If we are unable to raise sufficient capital, we may be required to curtail some of our operations, including efforts to develop, test, market, evaluate and license our technologies and products. If we were forced to curtail aspects of our operations, there could be a material adverse impact on our financial condition and results of operations.

Critical Accounting Policies  

Our unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Preparation of these statements requires management to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in these financial statements. A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 14, 2018, in the Notes to the Consolidated Financial Statements and the Critical Accounting Estimates sections. In addition, refer to Note 2 to the consolidated interim consolidated financial statements included in Part I, Item 1 of this report.

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 consolidated financial statements.

It the Company’s policy to expense share based payments as of the date of grant in accordance with Auditing Standard 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. As a result, the actual impact of adoption on future earnings could differ significantly from our current estimate.

Recent Accounting Pronouncements

See Note 2, “Recent Accounting Pronouncements”, to the Consolidated Financial Statements.

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.

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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.

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 six-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

Stock Issued for Services

During the three months ended June 30, 2018, we issued 733,821 shares of common stock in lieu of fees for service provided by consultants, resulting in a grant date fair value of $210,548. Of the shares issued, 309,390 were issued under the Company’s 2018 Equity Incentive Plan and registered with the SEC on Form S-8.

During the three months ended June 30, 2018, we issued 1,302,734 shares of common stock as payment for interest due on unit offering notes, resulting in a grant date fair value of $328,760.

FirstFire Global Opportunity Fund Investment

On January 16, 2018, we entered into a securities purchase agreement (the “FirstFire Purchase Agreement”) and a registration rights agreement (the “FirstFire RRA”) with FirstFire Global Opportunity Fund, LLC (“FirstFire”), and issued a convertible promissory note (the “FirstFire Note”) in the aggregate principal amount of $150,000 at 5% annual interest, which is convertible into shares of common stock of the Company at $0.394 per share, subject to the terms, and certain limitations and conditions set forth in the FirstFire Purchase Agreement and FirstFire Note.

 Pursuant to the FirstFire Purchase Agreement, the Company issued 75,000 shares of common stock to FirstFire as a commitment fee (the “FirstFire Commitment Shares”).

We filed a registration statement with the SEC on February 8, 2018, that was deemed effective on February 8, 2018, registering 394,949 shares to be sold by FirstFire. In June 2018, FirstFire elected to convert $95,761 of the outstanding principal balance of the FirstFire Note and we issued 383,047 shares as payment of principal, and an additional 11,902 in payment of interest. Subsequent to June 30, 2018, FirstFire elected to convert the remainder of its note to stock, and we issued 217,960 shares as payment of principal and interest to satisfy that obligation. The 217,960 shares were not registered with the SEC.

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

Uplist of Common Stock to NADSAQ

On July 25, 2018, we submitted an application for listing on The Nasdaq Capital Market, commonly known as NASDAQ. We believe that listing our common stock on a national exchange will offer a series of benefits to both the company and our stockholders, including making our stock more attractive to a larger pool of investors, removing restrictions that currently prohibit many investors from purchasing our stock (because it is currently traded on the OTCQB), increasing liquidity for our stockholders, and through increased financial and governance requirements, by enhancing the Company’s profile to potential investors. If successful, the company’s stockholders will also benefit from expanded awareness by inclusion in a number of indexes that are tracked by buy-side institutions and that will increase the likelihood of analyst coverage.

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We do not currently meet certain Nasdaq listing requirements, including $5,000,000 in stockholder equity and a minimum bid price of $4.00 per share. We have engaged a New York based investment banking firm to underwrite a public offering to raise the capital necessary for us to meet the stockholder equity requirement, and have scheduled a special meeting of our stockholders on September 26, 2018 to approve an amendment to our Certificate of Incorporation that would effectively raise the price of our common stock to meet the minimum bid price requirement. We intend to work on these requirements in tandem with our listing application. There is no assurance that Nasdaq will approve our listing application even if we meet all of its initial listing requirements, and we will not proceed with the contemplated underwritten offering or reverse stock split if we are not assured that our stock will be listed on a national exchange.

Issuance of Stock Options in exchange for payment of payables

During the three months ended June 30, 2018, we issued options to purchase 685,809 shares of our common stock at exercise prices ranging between $0.23 – $0.43 per share to employees, vendors and to members of our board of directors in exchange for unpaid obligations for their services. The fair value of the options totaled $226,807 and is recorded as selling, general and administrative expenses.

Sales of Registered Stock to Lincoln Park

During the three months ended June 30, 2018, we sold to Lincoln Park (see Note 4) 606,751 shares of our common stock, and received $212,583 in proceeds. Associated with these sales, we issued Lincoln Park 10,394 “additional commitment shares.”

Convertible Note, matures June 15, 2021 (OID Note)

On June 15, 2018, we received $75,000 and we issued a convertible promissory note (titled the “OID Note”) for 100% of the funds received, or $82,500. The convertible promissory note is convertible into shares of the company’s common stock at a conversion price of $0.30 per share. The original issuance discount totaled $7,500, recorded as a discount on convertible notes on our balance sheet. The discount will be amortized and recorded to interest expense over the term of the note. The convertible promissory note matures June 15, 2021 and incurs interest at the rate of 15% per annum on the OID Note. Interest due will be paid quarterly in arrears in shares of common stock, paid at a conversion price equal to the average closing price of the Company’s common stock over the 20 trading days prior to the interest payment due date. The OID Note is convertible by the investor at any time, and convertible by the Company (i) at maturity, (ii) in the event the Company’s stock price closes at two times the conversion price for 20 consecutive days, provided that either the shares underlying the convertible note are registered with the SEC, or more than six months has elapsed since the date of the investment.

Amendment to Bylaws

On August 14, 2018, our board of directors amended our bylaws to modify Section 1.4 such that the holders of one-third of the Company’s outstanding shares of each class of stock entitled to vote at a stockholder meeting shall be present in person or by proxy in order to constitute a quorum. Prior to the amendment, Section 1.4 required holders of one-half the outstanding shares of each class of stock entitled to vote at a stockholder meeting be present in person or by proxy in order to constitute a quorum.

Item 6. Exhibits

The exhibits listed in the Exhibit Index following the signature pages of this Quarterly Report on Form 10-Q are filed with, or furnished with, or incorporated by reference in, this Quarterly Report on Form 10-Q.

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: August 14, 2018	BIOLARGO, INC. By: /s/ DENNIS P. CALVERT
	Dennis P. Calvert Chief Executive Officer
Date: August 14, 2018	By: /s/ CHARLES K. DARGAN, II
	Charles K. Dargan II
	Chief Financial Officer

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EXHIBIT INDEX

		Incorporated by Reference Herein
Exhibit Number	Exhibit Description	Form	File Date
3.1	Amended and Restated Certificate of Incorporation for BioLargo, Inc. filed March 16, 2007	Form 10-KSB	5/4/2007
3.2	Certificate of Amendment to Certificate of Incorporation, filed May 25, 2018	Pos Am	6/22/2018
3.3	Bylaws of BioLargo, Inc., as amended and restated	Form 10-KSB	5/23/2003
3.4*	Amendment to bylaws	N/A	N/A
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	Amended and Restated Articles of Incorporation of Clyra Medical Technologies, Inc.	Form 8-K	1/6/2016
4.5	Form of Warrant issued to One Year Note holder in July 2016	Form 10-Q	8/15/2016
4.6	Form of Note Issued in Winter 2016 Unit Offering	Form S-1	1/25/2017
4.7	Form of Warrant Issued in Winter 2016 Unit Offering	Form S-1	1/25/2017
4.8	Form of Warrant issued to One Year Note holder dated December 30, 2016	Form S-1	1/25/2017
4.9	Option to purchase common stock issued to Dennis P. Calvert dated May 2, 2017	Form 8-K	5/4/2017
4.10	Form of Note issued in Summer 2017 Offering	Form 10-Q	8/14/2017
4.11	Form of Warrant issued in Summer 2017 Offering	Form 10-Q	8/14/2017
4.12	Form of One-Year Note issued July 2017	Form 10-Q	8/14/2017
4.13	Form of Warrant issued to One-Year Noteholder July 2017	Form 10-Q	8/14/2017
4.14	$440,000 convertible note, matures July 20, 2019	Form 10-Q	8/14/2017
4.15	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
4.16	Registration Rights Agreement, dated as of August 25, 2017, by and between BioLargo, Inc. and Lincoln Park Capital Fund, LLC	Form 8-K	8/31/2017
4.17	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
4.18	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
4.19	Note, dated as of December 14, 2017, by and between BioLargo, Inc. and Vista Capital Investments, LLC.	Form 8-K	12/22/2017
4.20	Amendment, dated as of December 18, 2017, by and between BioLargo, Inc. and Vista Capital Investments, LLC.	Form 8-K	12/22/2017
4.21	Stock Option dated December 31, 2017, issued to Chief Financial Officer Charles K. Dargan II	Form 8-K	1/3/2018

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4.22	Line of credit, matures September 1, 2019	Form 10-Q	5/14/2018
4.23	Warrant issued with Line of credit that matures September 1, 2019	Form 10-Q	5/14/2018
4.24	$50,000 convertible note, matures March 8, 2020	Form 10-Q	5/14/2018
4.25	Form of convertible notes that mature April 20, 2021 (Spring 2018 Offering)	Form 10-Q	5/14/2018
4.26	Form of warrant issued with convertible notes that mature April 20, 2021 (Spring 2018 Offering)	Form 10-Q	5/14/2018
4.27	Amendment to $440,000 convertible notes that matures July 20, 2019	Form 10-Q	5/14/2018
4.28	2018 Equity Incentive Plan	Form S-8	6/22/2018
4.29	Notice of Restricted Stock Unit Award 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 Stock Option Grant under 2018 Equity Incentive Plan	Form S-8	6/22/2018
4.32	Stock Option Award Agreement under 2018 Equity Incentive Plan	Form S-8	6/22/2018
10.1†	February 10, 2017 extension to Engagement Extension Agreement with Charles K. Dargan, II.	Form 8-K	2/14/2017
10.2†	Employment Agreement with Dennis P. Calvert dated May 2, 2017.	Form 8-K	5/4/2017
10.3†	Lock-Up Agreement with Dennis P. Calvert dated April 30, 2017	Form 8-K	5/4/2017
10.4†	Lock-Up Agreement with Dennis P. Calvert dated May 2, 2017.	Form 8-K	5/4/2017
10.5†	Engagement Agreement extension dated December 31, 2017, between BioLargo, Inc. and Charles K. Dargan, II	Form 8-K	1/3/2018
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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EX-3.4

Exhibit 3.4

AMENDMENT TO THE BYLAWS OF

BIOLARGO INC.

The bylaws of BioLargo Inc. (“Bylaws”) are hereby amended as follows:

Article I, Section 1.4, titled “Quorum”, is hereby deleted in its entirety and replaced with the following:

“Section 1.4 Quorum. Except as otherwise provided by law or in the Certificate of Incorporation or these By-Laws, at any meeting of stockholders, the holders of one-third (1/3) of the outstanding shares of each class of stock entitled to vote at the meeting shall be present or represented by proxy in order to constitute a quorum for the transaction of any business. In the absence of a quorum, a majority in interest of the stockholders present who are entitled at the time to vote or the chairman of the meeting may adjourn the meeting from time to time in the manner provided in Section 1.5 of these By-Laws until a quorum shall attend.”

Except as herein amended, the provisions of the Bylaws shall remain in full force and effect.

AS APPROVED BY THE BOARD OF DIRECTORS EFFECTIVE: August 13, 2018.

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: August 14, 2018	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: August 14, 2018	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 June 30, 2018 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: August 14, 2018	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 June 30, 2018 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: August 14, 2018	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	6 Months Ended
	Jun. 30, 2018	Aug. 10, 2018
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	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		130,545,731
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 651,061	$ 990,457
Accounts receivable, net of allowance of $2,500 and $3,500, at December 31, 2017 and June 30, 2018	89,977	94,413
Inventories	25,639	53,973
Prepaid expenses and other current assets	56,625	20,000
Total current assets	823,302	1,158,843
Leasehold improvements and equipment, net of depreciation	122,362	108,865
Other non-current assets	35,213	32,530
Deferred offering cost	186,731	195,182
Total assets	1,167,608	1,495,420
Current liabilities:
Accounts payable and accrued expenses	254,657	224,105
Convertible notes payable	782,214	5,248,847
Discount on convertible notes payable, net of amortization	(93,382)	(1,257,182)
Total current liabilities	943,489	4,215,770
Long-term liabilities:
Line of credit	390,000
Convertible notes and note payable	872,500	1,539,271
Discount on convertible notes and note payable and line of credit, net of amortization	(393,930)	(850,000)
Total liabilities	1,812,059	4,905,041
COMMITMENTS, CONTINGENCIES (Note 11)
STOCKHOLDERS’ EQUITY (DEFICIT):
Convertible Preferred Series A, $.00067 Par Value, 50,000,000 Shares Authorized, no Shares Issued and Outstanding, at December 31, 2017 and June 30, 2018
Common stock, $.00067 Par value, 200,000,000 and 400,000,000 shares authorized, 104,164,465 and 128,359,007 shares issued, at December 31, 2017 and June 30, 2018	86,150	69,871
Additional paid-in capital	106,167,819	97,093,144
Accumulated deficit	(107,329,788)	(101,204,846)
Accumulated other comprehensive loss	(61,356)	(62,489)
Total Biolargo, Inc. and Subsidiaries stockholders’ equity (deficit)	(1,137,175)	(4,104,320)
Non-controlling interest (Note 9)	492,724	694,699
Total stockholders’ equity (deficit)	(644,451)	(3,409,621)
Total liabilities and stockholders’ equity (deficit)	$ 1,167,608	$ 1,495,420

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Allowance of accounts receivable	$ 3,500	$ 2,500
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)	200,000,000	200,000,000
Common stock, shares issued (in shares)	128,359,007	104,164,465

XML

Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenues
Revenue	$ 326,738	$ 99,978	$ 589,767	$ 145,995
Cost of Goods and Services Sold	(200,912)	(73,399)	(364,104)	(95,929)
Gross profit	125,826	26,579	225,663	50,066
Selling, general and administrative expenses	1,316,605	1,162,018	2,486,218	2,217,073
Research and development	425,576	324,280	947,306	715,616
Amortization and depreciation	12,536	6,515	22,859	14,439
Operating loss:	(1,628,891)	(1,466,234)	(3,230,720)	(2,897,062)
Other (expense) income:
Interest expense	(1,728,799)	(1,119,273)	(2,561,207)	(2,072,829)
Debt conversion expense	(275,534)		(275,534)
Grant income	33,314	11,361	37,983	70,149
Total other expense:	(1,971,019)	(1,107,912)	(2,798,758)	(2,002,680)
Net loss	(3,599,910)	(2,574,146)	(6,029,478)	(4,899,742)
Net loss attributable to noncontrolling interest	(95,331)	(173,911)	(201,975)	(237,167)
Net loss attributable to common shareholders	$ (3,504,579)	$ (2,400,235)	$ (5,827,503)	$ (4,662,575)
Net loss per share attributable to common shareholders:
Loss per share attributable to shareholders – basic and diluted (in dollars per share)	$ (0.03)	$ (0.03)	$ (0.05)	$ (0.05)
Weighted average number of common shares outstanding: (in shares)	118,748,451	97,770,161	111,760,954	94,718,273
Comprehensive loss:
Net loss	$ (3,599,910)	$ (2,574,146)	$ (6,029,478)	$ (4,899,742)
Foreign currency translation	13,325	32,150	1,133	(15,986)
Comprehensive loss	(3,586,585)	(2,541,966)	(6,028,345)	(4,915,728)
Comprehensive loss attributable to noncontrolling interest	(95,331)	(173,911)	(201,975)	(237,167)
Comprehensive loss attributable to common stockholders	(3,491,254)	(2,368,085)	(5,826,370)	(4,678,561)
Product [Member]
Revenues
Revenue	315,553	99,978	539,950	145,995
Cost of Goods and Services Sold	(194,000)	(73,399)	(328,464)	(95,929)
Service [Member]
Revenues
Revenue	11,185		49,817
Cost of Goods and Services Sold	$ (6,912)		$ (35,640)

XML

Consolidated Statement of Stockholders' Deficit (Unaudited) - 6 months ended Jun. 30, 2018 - USD ($)	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	$ 69,871	$ 97,093,144	$ (101,204,846)	$ (62,489)	$ 694,699	$ (3,409,621)
Conversion of principal due on notes (in shares)	19,298,723
Conversion of principal due on notes	$ 12,939	6,215,280				6,228,219
Issuance of common stock for services (in shares)	1,448,257
Issuance of common stock for services	$ 976	445,512				446,488
Issuance of common stock for interest (in shares)	1,919,806
Issuance of common stock for interest	$ 1,341	492,486				493,827
Financing fee in stock (in shares)	252,385
Financing fee in stock	$ 168	84,905				85,073
Sale of stock for cash (in shares)	1,275,371
Sale of stock for cash	$ 855	379,948				380,803
Warrant exercise price reduction for cash		148,853				148,853
Stock option compensation expense		696,001				696,001
Warrants and beneficial conversion feature issued as discount on convertible notes payable, note payable and line of credit		314,251				314,251
Deemed dividend		297,439	(297,439)
Net loss			(5,827,503)		(201,975)	(6,029,478)
Foreign currency translation				1,133		1,133
Balance (in shares) at Jun. 30, 2018	128,359,007
Balance at Jun. 30, 2018	$ 86,150	$ 106,167,819	$ (107,329,788)	$ (61,356)	$ 492,724	$ (644,451)

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash flows from operating activities
Net loss	$ (6,029,478)	$ (4,899,742)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock option compensation expense	696,001	515,959
Common stock issued for interest and fees for services from consultants	930,315	504,263
Interest expense related to amortization of the discount on convertible notes payable	2,019,193	1,723,396
Debt conversion expense	275,534
Deferred offering cost expense	8,451
Bad debt expense	1,000	15,000
Depreciation and amortization expense	22,859	14,439
Changes in assets and liabilities:
Accounts receivable	3,436	(25,111)
Inventory	28,334	(2,461)
Prepaid expenses and other current assets	(39,308)	(8,706)
Accounts payable and accrued expenses	30,552	144,335
Officer bonus		(80,000)
Deposit		50,000
Net cash used in operating activities	(2,053,111)	(2,048,628)
Cash flows from investing activities
Leasehold improvements	(26,356)
Net cash used in investing activities	(26,356)
Cash flows from financing activities
Proceeds from line of credit	390,000	250,000
Proceeds from convertible notes	462,500	225,000
Proceeds from conversion inducement	356,781
Proceeds from warrant exercise-price reduction	148,854
Proceeds from sale of stock to Lincoln Park Capital	380,803
Purchase of Clyra shares		(40,000)
Proceeds from exercise of warrants		153,000
Net cash provided by financing activities	1,738,938	588,000
Effect of foreign currency translation	1,113	(15,986)
Net change in cash and cash equivalents	(339,396)	(1,476,614)
Cash and cash equivalents at beginning of period	990,457	1,910,153
Cash and cash equivalents at end of period	651,061	433,539
Supplemental disclosures of cash flow information
Interest	5,489	4,487
Income taxes	5,719	5,350
Non-cash investing and financing activities:
Fair value of warrants issued in conjunction with convertible notes payable	314,251	225,000
Deemed dividend	297,439
Common Stock Issued for Financing Commitments [Member]
Non-cash investing and financing activities:
Fair value of stock issued	85,073
Stock Issued for Equipment [Member]
Non-cash investing and financing activities:
Fair value of stock issued	10,000
Stock Issued for Exercise of Stock Options [Member]
Non-cash investing and financing activities:
Fair value of stock issued		1,677
Conversion of Convertible Notes Payable into Common Stock [Member]
Non-cash investing and financing activities:
Fair value of stock issued	$ 5,595,904	$ 530,000

XML

Note 1 - Business and Liquidity

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

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

Note

1.

Business and Liquidity

Description of Business

We are an innovation company driven by our mission to “make life better” by developing breakthrough platform technologies, nurturing and building businesses around the intellectual property, while providing capital and support along the journey from “cradle” to “maturity”. We currently have

two

segments generating operational revenue: (i) Odor-

No

-More, selling odor and volatile organic compound (“VOC”) control products and services, and (ii) BioLargo Engineering, Science & Technologies, LLC (“BLEST”), providing professional engineering services to

third

party clients as well as working on our product development projects. We have a research and development facility in Canada, and consolidate our financials with our partially owned subsidiary, Clyra Medical Technologies, Inc., a company focused on commercializing our technologies in the medical field (see Note

9

).

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. As reflected in the accompanying consolidated financial statements, for the

six

months ended

June 30, 2018

we had a net loss of

$6,029,478,

and used

$2,053,111

cash in operations, and at

June 30, 2018,

had negative working capital of

$120,187,

current assets of

$823,302,

and an accumulated stockholders’ deficit of

$107,329,788.

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.

We have been, and anticipate that we will continue to be, limited in terms of our capital resources. Our total cash balance was

$651,061

at

June 30, 2018.

We had revenues of

$589,767

in the

six

months ended

June 30, 

2018,

which amount was

not

sufficient to fund our operations. We believe our current cash position is insufficient to maintain our current level of operations and research/development, and that we will be required to raise substantial additional capital to continue our operations and fund our future business plans. We intend to continue to raise money through private securities offerings for the foreseeable future, and through our agreement with Lincoln Park (see Note 

4

).

At times in the past we have

not

had enough cash or sources of capital to pay our accounts payable and expenses as they arise, and have relied on the issuance of stock options and common stock, as well as extended payment terms with our vendors, to continue to operate. We will be required to raise substantial additional capital to expand our operations, including without limitation, hiring additional personnel, additional scientific and

third

-party testing, costs associated with obtaining regulatory approvals and filing additional patent applications to protect our intellectual property, and possible strategic acquisitions or alliances, as well as to meet our liabilities as they become due for the next

12

 months.

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

six

months ended

June 30, 2018

are

not

necessarily indicative of the results that

may

be expected for the year ending

December 31, 2018,

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, 2017

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

March 14, 2018.

XML

Note 2 - Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2018

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 majority owned subsidiaries, and Clyra. Management believes Clyra’s financial statements are appropriately consolidated with that of the Company after reviewing the guidance of ASC Topic 

810,

 “Consolidation”, because the Company owns

46.3%

of its outstanding voting stock at

June 30, 2018,

and

two

members of BioLargo’s board of directors are

two

of

three

members of Clyra’s board of directors (see Note

9

). All intercompany accounts and transactions have been eliminated.

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. Our cash account balances are typically 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.

Clyra Medical is

not

a wholly owned subsidiary. Our cash balance held in Clyra and BioLargo and other subsidiaries are reflected in the following table:

	D ecember 31, 201 7		J une 3 0 , 201 8
Biolargo, Inc. and wholly owned subsidiaries	$	461,914	$	467,258
Clyra Medical Technologies, Inc.		528,543		183,803
Total	$	990,457	$	651,061

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, 2017 

and

June 30, 2018

was 

$2,500

and

$3,500,

respectively.

Credit Concentration

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

six

months ended

June 30, 2017

and

2018,

we had

three

and

two

customers that each accounted for more than

10%

of consolidated revenues in the respective periods, as follows:

	June 30 , 2017			June 30 , 2018
Customer A		17	%		43	%
Customer B		16	%		15	%
Customer C		14	%		<10	%

In addition, our customers include many of the largest solid waste handling companies in the United States. We generally do business with these companies through “national purchasing agreements” entered into with the company, and then sell our products and services to their local operations such as transfer stations and landfills. Although

none

of those individual locations arose to more than

10%

of our consolidated revenues during the

six

months ended

June 30, 2018,

two

of these national companies accounted for

37%

of our total revenues.

We had

five

customers that each accounted for more than

10%

of consolidated accounts receivable at

December 

31,

2017

and

three

customers at

June 30, 2018

as follows:

	December 31, 2017			June 30 , 2018
Customer A		12	%		<10	%
Customer B		19	%		<10	%
Customer C		12	%		<10	%
Customer D		10	%		<10	%
Customer E		10	%		<10	%
Customer F		<10	%		13	%
Customer G		<10	%		12	%
Customer H		<10	%		10	%

Inventory

Inventory is stated at the lower of cost and net realizable value using the average cost method. All inventory is related to our Odor-

No

-More business segment. Inventory consisted of:

	D ecember 31, 2017		J une 3 0 , 2018
Raw material	$	34,104	$	23,515
Finished goods		19,869		2,124
Total	$	53,973	$	25,639

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, deemed dividends, 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 consolidated financial statements.

Share-based Payments

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.

For equity instruments issued and outstanding where performance is

not

complete, but the instrument has been recorded, those instruments are measured again at their then current fair market values at each of the reporting dates (they are “marked-to market”) until the performance and the contract are complete.

Warrants

The Unit Offerings of our convertible promissory note and a Series A stock purchase warrant 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, 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 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 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 adjusted 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 purchase order whether in writing or verbal, 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 over a period of time as services are performed and completed. BLEST’s contracts typically call for invoicing on a time and materials basis. 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 the Canadian National Research Institute – Industrial Research Assistance Program (NRC-IRAP) and the National Science and Engineering Research Council of Canada (NSERC). 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

50

 grants totaling approximately

$1,600,000.

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.

While the FASB has issued a proposed Accounting Standards Update,

Not

-for-Profit Entities - (Topic

958

): “Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made”, there has been

no

guidance related to for profit entities such as BioLargo. In reviewing Topic

606,

“Revenue from Contracts with Customers”, and its potential application to the Canadian government grants, the Management concluded that these grants do

not

meet the requirements for revenue recognition. Specifically, these grants typically provide reimbursement for research personnel working on the BioLargo technology. For some grants, funds are given directly to

third

parties for research on our technology and are

not

controlled by the Company. In this structure, the grants are

not

revenue, but rather a reimbursement.

Business

S

egment

I

nformation

In

2017,

the Company operated with

three

business segments. In

2018,

given the increased operations of the engineering division formed in late

2017,

we determined that it should be considered our

fourth

business segment. This decision was based on the manner in which the chief operating decision maker now manages the engineering division, including resource allocation and performance assessment.

Our

four

business segments include: (i) Odor-

No

-More, which is engaged in developing and selling odor and VOC control products and services; (ii) BLEST, which is provides professional engineering services; (iii) Clyra, which is engaged in developing medical products utilizing our technology, with an emphasis in the medical field and advanced wound care; and (iv) our corporate operations (labeled in the below table as “BioLargo/Other”), which includes certain functional roles that do

not

engage in revenue generating activities, such as general corporate and administrative functions, including finance, human resources, marketing, legal, and research and development.

The segment information for the

three

and

six

months ended

June 30, 2017

and

2018,

is as follows:

	T hree months June 30,						Six months June 30,
	2017			2018			2017			2018
Revenues
Odor-No-More	$	99,978		$	315,553		$	145,995		$	539,950
BLEST		—			11,185			—			49,817
Consolidated revenue	$	99,978		$	326,738		$	145,995		$	589,767
Cost of goods/services
Odor-No-More	$	(73,399	)	$	(194,000	)	$	(95,929	)	$	(328,464	)
BLEST		—			(6,912	)		—			(35,640	)
Consolidated costs of goods/services	$	(73,399	)	$	(200,912	)	$	(95,929	)	$	(364,104	)
Net loss
Odor-No-More	$	(100,000	)	$	(53,688	)	$	(275,000	)	$	(253,688	)
BLEST		—			(70,339	)		—			(116,726	)
Clyra		(347,490	)		(177,641	)		(484,572	)		(376,362	)
BioLargo/Other		(2,126,656	)		(3,298,242	)		(4,140,170	)		(5,282,702	)
Consolidated net loss	$	(2,574,146	)	$	(3,599,910	)	$	(4,899,742	)	$	(6,029,478	)

The segment information as of

December 31, 2017

and

June 30, 2018,

is as follows:

	December		June
		31, 2017		30, 2018
Assets, net
Odor-No-More	$	210,725	$	260,421
BLEST		—		131,558
Clyra		528,543		183,803
BioLargo/Other		726,152		591,826
Consolidated assets, net	$	1,495,420	$	1,167,608

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

six

months ended

June 30, 2017

and

2018,

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.

Recent Accounting Pronouncements

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. Management has

not

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

not

believe the new guidelines will substantially impact the company’s financial statements.

In

May 2017,

the FASB issued Accounting Standards Update

No.

2017

-

09,

“Compensation – Stock Compensation (topic

718

): Scope of Modification Accounting”. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic

718.

An entity should account for the effects of a modification unless all the following are met: (i) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified, (ii) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and (iii) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after

December 15, 2017.

Management has analyzed the new guideline and it has

not

substantially impacted its accounting for stock compensation awards upon adoption in the current period.

XML

Note 3 - Change in Derivative Liability Treatment

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Accounting Changes [Text Block]

Note

3.

Change in Derivative Liability Treatment

Biolargo adopted Accounting Standards Update (“ASU”)

No.

2017

-

11

as of

July 1, 2017.

With this adoption, we eliminated the derivative liability, and the changes in the fair value of the derivative liability, related to negative covenants in multiple warrants issued that required a reduction of warrant exercise price under certain circumstances. The Company made a cumulative effect adjustment to the consolidated balance sheet as of

January 1, 2017,

which adjusted the beginning balance in the accumulated deficit account by

$663,560.

The comparable unaudited prior year periods for the

three

and

six

months ended

June 30, 2017

are being presented to reflect the adoption of this ASU for all interim periods in

2017.

XML

Note 4 - Lincoln Park Financing

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Stock Purchase Agreement [Text Block]

Note

4.

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

$10,000,000

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

three

years. Concurrently, we entered into a registration rights agreement with Lincoln Park (“LPC RRA”), pursuant to which we were required to file with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-

1

to register for resale under the Securities Act of

1933,

as amended, the shares of common stock that have been or

may

be issued to Lincoln Park under the LPC Purchase Agreement. The registration statement was filed, and on

September 22, 2017,

it was deemed effective by the SEC. 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 volume of shares is limited to a maximum of

50,000

shares if our stock closes at less than

$0.50

per share,

75,000

if it closes from

$0.50

to

$0.74

per share,

100,000

if it closes from

$0.75

to

$1.24

per share, and

200,000

if it closes at or above

$1.25

per share. The maximum dollar amount for any single purchase is

$500,000.

There are

no

trading volume requirements under the LPC Purchase Agreement, and we alone control the timing and amount of any sales of our common stock to Lincoln Park. 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. The purchase price per share will be equitably adjusted for any reorganization, recapitalization, non-cash dividend, stock split, or other similar transaction occurring during the business days used to compute such price. We

may

at any time in our sole discretion terminate the LPC Purchase Agreement without fee, penalty or cost upon

one

business day notice. 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.

In consideration for entering into the LPC Purchase Agreement, on

August 25, 2017,

we issued to Lincoln Park

488,998

shares of common stock as an “initial commitment fee.” For

no

additional consideration, when and if Lincoln Park purchases (at the Company’s discretion) any portion of the

$10,000,000

aggregate commitment, we are required to issue up to

488,998

shares, pro-rata, as “additional commitment shares”. For example, if we elect, at our sole discretion, to require Lincoln Park to purchase

$25,000

of our stock, then we would issue

1,222

additional commitment shares, which is the product of

$25,000

(the amount we have elected to sell) divided by

$10,000,000

(total amount we can sell Lincoln Park pursuant to the LPC Purchase Agreement) multiplied by

488,998

(the total number of additional commitment shares). The additional commitment shares will only be issued pursuant to this formula as and when we elect at our discretion to sell stock to Lincoln Park.

From inception of the contract in

August 2017

through

June 30, 2018,

we elected to sell Lincoln Park shares of our common stock for which we received

$891,888,

and issued Lincoln Park

2,431,751

shares, and

43,611

“additional commitment shares”. We recorded the stock sale in our equity statement and the additional shares issued as a fee for the transaction was offset against the shares issued.

During the

six

-months ended

June 30, 2018,

we elected to sell to Lincoln Park

1,256,751

shares of our common stock for which we received

$380,803

in gross and net proceeds. As a result of these purchases, we issued Lincoln Park

18,260

“additional commitment” shares pursuant to the LPC Purchase Agreement.

XML

Note 5 - Debt Obligations

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

5.

Debt Obligations

The following table summarizes our debt obligations outstanding as of

December 31, 2017

and

June 30, 2018.

	December 31, 201 7		June 30 , 201 8
C urrent liabilities
Convertible notes payable
One-year convertible notes, mature July 18, 2018 *	$	280,000	$	280,000
Convertible notes, mature June 1, 2018		4,468,847		—
Nine-month convertible note, matures September 18, 2018		500,000		447,975
Nine-month convertible note, matures October 16, 2018 *		—		54,239
Total convertible notes payable	$	5,248,847	$	782,214
L ong-term liabilities :
Line of credit, matures September 1, 2019	$	—	$	390,000
Convertible notes payable
Convertible note, matures July 20, 2019	$	440,000	$	440,000
Convertible notes, mature June 17, 2019		283,571		—
Convertible notes, mature December 31, 2019		292,000		75,000
Note payable, matures March 8, 2023 (or on demand 60 days’ notice)		—		50,000
Convertible notes, mature June 20, 2020		523,700		125,000
Convertible notes, mature April 20, 2021				100,000
Convertible notes, mature June 15, 2021		—		82,500
Total convertible notes payable	$	1,539,271	$	872,500
Total	$	6,788,118	$	2,044,714

* Subsequent to

June 30, 2018

these notes were converted to common stock (see Note

12

“Subsequent Events”).

See our Annual Report on Form

10

-K for the year ended

December 31, 2017,

for a complete description of the debt obligations set forth in the above table.

Early Conversion of Unit Notes

Prior to their maturity dates, we issued

17,255,811

shares of our common stock in satisfaction of

$4,626,238

of convertible promissory notes issued in our “unit” offerings at varying conversion prices, maturing on the following dates:

	Debt converted to stock
Current liabilities
Convertible notes, mature June 1, 2018	$	3,646,967
Long-term liabilities
Convertible notes, mature June 17, 2019		283,571
Convertible notes, mature December 31, 2019		217,000
Convertible notes, mature June 20, 2020		478,700
Total debt converted May 2018	$	4,626,238

These conversions were voluntary on the part of the noteholders and prior to the various maturity dates on notes that were issued in prior “unit” offerings conducted by the Company (

2015

Unit Offering, Winter

2016

Unit Offering, and Summer

2017

Unit Offering). We offered these noteholders incentives to convert their notes early.  Noteholders with conversion prices of

$0.25

and

$0.30

were offered incentive shares equal to

one

and

one

-half times the number of shares issuable for the payment of interest that would accrue from the last interest payment date of

March 20, 2018,

through the maturity of the note, at a fixed price of

$0.25

per share (for example, a note that would have yielded

$1,000

in interest, would receive

1,000

times

1.5

divided by

0.25

equals

6,000

incentive shares). We offered holders of notes with conversion prices higher than

$0.30

the ability to reduce their conversion price to

$0.30

by paying additional funds equal to

six

or

twenty

percent of their original investment (

6%

for notes with original conversion prices of

$0.35,

and

20%

for notes with original conversion prices of

$0.55

and

$0.57

). The additional funds did

not

increase the amount of the note payable, nor did the reduced conversion price affect the number of shares purchasable under the warrant issued with their “unit” investment. Holders of

40

notes elected to pay an aggregate

$356,781

to reduce the conversion prices of their notes to

$0.30.

As a result of the reduction in conversion prices, an additional

2,749,197

shares were issuable pursuant to the notes upon conversion. The fair value of these additional shares was

$632,315.

 Additional interest expense of

$275,534

is recorded as part of the debt conversion and is the amount by which the fair value of the additional shares exceeded the cash received by the Company. Holders of

41

notes with original conversion prices of

$0.30

and

$0.25

elected to convert early and received

966,318

additional “incentive shares” for their agreement to do so.

Conversion of Unit Note

s

On

June 1, 2018,

we (BioLargo, Inc., the “Company”) elected to convert the

$821,880

outstanding promissory notes remaining in our

2015

Unit Offering on their

June 1, 2018

maturity date into

2,488,819

shares of our common stock. Of the shares issued,

2,411,004

were issued in satisfaction of principal amounts due on notes with conversion prices of

$0.25,

$0.35,

and

$0.55,

and

77,815

were issued in satisfaction of

$19,725

of accrued and unpaid interest.

Convertible Note, matures

September 18,

2018

(Vista Capital)

On

December 18, 2017,

we received

$500,000

pursuant to a securities purchase agreement (the “Vista Purchase Agreement”) and a registration rights agreement (the “Vista RRA”) with Vista Capital Investments, LLC (“Vista Capital”), and issued a Note (the “Vista Note”) in the aggregate principal amount of

$500,000

at

5%

annual interest, which was originally convertible into shares of common stock of the Company at

$0.394

per share, subject to the terms, and certain limitations and conditions, set forth in the Vista Purchase Agreement and Vista Note. The Vista Note matures on

September 18, 2018.

The Company reserved

1,269,036

shares of common stock for issuance upon conversion of the Vista Note.

Pursuant to the Vista Purchase Agreement, the Company issued

250,000

shares of common stock to Vista Capital as a commitment fee at

$0.39

per share and

$98,500

is recorded as a discount on convertible notes and will amortize to interest expense over the term of the note.

Pursuant to the Vista RRA, the Company agreed to file a registration statement with the SEC registering all shares of common stock into which the Vista Note is convertible, and the

250,000

shares issued as a commitment fee. The Vista Purchase Agreement requires additional shares be issued for the commitment fee in the event the closing price of our common stock on the date the registration statement is deemed effective is lower than the closing price on

December 18, 2017, (

which was

$0.41

). In such event, additional shares would be issued such that the aggregate shares issued have the same value as the

250,000

shares issued on

December 18, 2017.

The beneficial conversion feature resulted in a

$20,305

relative fair value recorded as a discount. The discount will be amortized monthly to interest expense through

September 18, 2018.

Vista Capital represented to the Company, among other things, that it was an “accredited investor” (as such term is defined in Rule

501

(a) of Regulation D under the Securities Act of

1933,

as amended). The Vista Note, Vista Purchase Agreement, and Vista RRA contain customary representations, warranties, agreements and conditions including indemnification rights and obligations of the parties. The Vista Note contains a price protection provision such that if we issue a security with any term more favorable to the holder of such security that was

not

similarly provided in the Vista Note, then we shall notify Vista Capital of such additional or more favorable term and such term, at its option, shall become a part of the Vista Note. As a result of our sale of common stock at

$0.25,

the conversion price of the Vista Note was reduced from

$0.394

to

$0.25.

In

June 2018,

Vista Capital elected to convert

$52,025

of the outstanding principal balance of the Vista Note and we issued

208,100

shares, plus shares for interest that had accrued through the date of conversion. As of

June 30, 2018,

the outstanding balance on the Vista Note is

$447,975.

FirstFire Investment (was scheduled to mature

October 16, 2018)

On

January 16, 2018,

we entered into a securities purchase agreement (the “FirstFire Purchase Agreement”) and a registration rights agreement (the “FirstFire RRA”) with FirstFire Global Opportunity Fund, LLC (“FirstFire”), and issued a convertible promissory note (the “FirstFire Note”) in the aggregate principal amount of

$150,000

at

5%

annual interest, which is convertible into shares of common stock of the Company at

$0.394

per share, subject to the terms, and certain limitations and conditions set forth in the FirstFire Purchase Agreement and FirstFire Note. FirstFire

may

convert the FirstFire Note at any time. The FirstFire Note was scheduled to mature on

October 16, 2018.

In

June 2018,

FirstFire elected to convert

$95,761

of the outstanding principal balance of the FirstFire Note and we issued

383,047

shares. As of

June 30, 2018,

the FirstFire Note outstanding balance is

$54,239.

Subsequent to

June 30, 2018,

FirstFire elected to convert the remaining amount due on its note (see Note

12

).

Pursuant to the FirstFire Purchase Agreement, the Company issued

75,000

shares of common stock to FirstFire as a commitment fee (the “FirstFire Commitment Shares”) at

$0.39

per share and

$29,250

is recorded as a discount on convertible notes and will amortize to interest expense over the term of the note.

Under the Note and FirstFire Purchase Agreement, the Company has reserved

394,949

shares of common stock for issuance upon conversion of the Note. Pursuant to the FirstFire RRA, the Company agreed to file a registration statement with the SEC registering all shares of common stock into which the FirstFire Note is convertible, and the FirstFire Commitment Shares. The FirstFire Purchase Agreement allows for an adjustment to the number of FirstFire Commitment Shares in the event the closing price of our common stock, on the earlier of the date the registration statement is deemed effective and

20

trading days following the

six

-month anniversary of the FirstFire Note, is lower than the closing price on

January 16, 2018 (

which was

$0.39

). In such event, additional shares would be issued to FirstFire such that the aggregate FirstFire Commitment Shares issued have the same value as the shares issued on

January 16, 2018.

Pursuant to the requirements set forth in the registration rights agreements, we filed a registration statement with the SEC which was deemed effective as of

February 8, 2018.

On

February 8, 2018,

our common stock last traded at

$0.3147

per share. Because the last traded price of our common stock on the date the registration statement was deemed effective was less than the price of our common stock on the dates of the FirstFire Purchase Agreements, at their option, we are required to issue additional “commitment shares”. FirstFire exercised that right, and we issued

36,536

additional shares of our common stock and

$11,498

is recorded as additional discount on convertible notes and will amortize to interest expense over the term of the note. 

FirstFire represented to the Company, among other things, that it was an “accredited investor” (as such term is defined in Rule

501

(a) of Regulation D under the Securities Act of

1933,

as amended). The FirstFire Note, FirstFire Purchase Agreement, and the FirstFire RRA contain customary representations, warranties, agreements and conditions including indemnification rights and obligations of the parties. The FirstFire Note contains a price protection provision such that if we issue a security with any term more favorable to the holder of such security that was

not

similarly provided in the FirstFire Note, then the Company shall notify FirstFire of such additional or more favorable term and such term, at its option, shall become a part of the FirstFire Note. As a result of our sale of common stock at

$0.25,

the conversion price of the FirstFire Note was reduced from

$0.394

to

$0.25.

Line of credit, matures

September 1, 2019

On

March 1, 2018,

we received

$390,000

pursuant to a line of credit, accruing interest at a rate of

18%

per annum, for which we have pledged our inventory and accounts receivable as collateral. Interest is paid quarterly, and, at the option of the holder, payable in either (i) cash, (ii) our common stock, calculated based on the

20

-day average closing price, or (iii) options to purchase our common stock, priced at the

20

-day average closing price, the number of shares doubled, and expiring

10

years from the date of grant. The holder of the line of credit has the right to call due the outstanding principal amount on

30

-days’ notice at any time after

September 1, 2019.

Each investor, for

no

additional consideration, received a warrant to purchase our common stock. (See Note

7

). The warrant allows for the purchase of the number of common shares equal to the investment amount (e.g.,

one

warrant share for each dollar invested).

Two-Year Convertible Note, matures

July 20, 2019

On

July 20, 2017,

the Company accepted

$400,000

and issued a promissory note with a

10%

original issue discount in the principal amount of

$440,000,

matures

July 20, 2019

and accrues interest at

12%.

The note originally provided that interest was to be paid quarterly beginning

October 1, 2017,

in either cash, common stock, or an option to purchase common stock, in the holder’s discretion. On

January 25, 2018,

the interest provisions in the note were modified such that the

12%

annual simple interest is due at maturity.

At maturity, the principal amount of the note and any accrued and unpaid interest automatically converts, at the holder’s option, into either BioLargo common shares at

$0.42

per share,

2,000

shares of Clyra Medical Technologies common stock held by BioLargo, or any combination thereof. The fair value of the beneficial conversion feature resulted in a

$171,429

recorded on our consolidated balance sheet as a discount on convertible notes payable, net of current portion. The discount will be amortized monthly as interest expense through

July 20, 2019.

Note payable, matures

March 8, 2020

On

March 8, 2018,

we received

$50,000

and entered into a note payable. The note is due on upon demand from the noteholder, with

sixty

days’ notice. The demand

may

not

be made before

June 30, 2018,

and in the absence of the demand, the maturity date is

March 8, 2023.

In lieu of interest, we issued the note holder a warrant to purchase

150,000

shares of our common stock at an exercise price of

$0.35.

The warrant expires

February 28, 2023.

The shares available for purchase vest in increments of

6,250

shares per month. (See Note

7.

)

Convertible Notes, mature

June 20, 2020 (

Summer

2017

Unit Offering)

On

May 24, 2017,

we commenced a private securities offering (titled the “Summer

2017

Unit Offering”) which offered the sale of

$1,500,000

of “Units,” each Unit consisting of a convertible promissory note and stock purchase warrant. Concurrently, we issued Pricing Supplement

No.

1

setting the initial unit/conversion price at

$0.42

per share, and the initial warrant exercise price at

$0.65

per share. The promissory notes issued to investors mature

June 20, 2020,

and bear interest at the rate of

12%

per annum on the amount invested. Any interest due will be paid quarterly in arrears in cash or shares of common stock. If paid by the issuance of common stock, interest is paid at a conversion price equal to the average closing price of the Company’s common stock over the

20

trading days prior to the interest payment due date. The principal amount of the note

may

be paid by the issuance of shares of common stock, or cash, upon maturity at the Company’s election. Promissory notes

may

be converted at any time by the investor, at maturity by the Company, or by the Company prior to maturity, so long as the following conditions are met: (i) the Shares issued as payment are registered with the SEC; and (ii) the Company’s common stock closes for

ten

consecutive trading days at or above

three

times the Unit price.

In addition to the convertible promissory note, each investor received a warrant allowing for the purchase of the number of shares of BioLargo common stock equal to the investment amount divided by the unit/conversion price (e.g.,

one

warrant share for each share of common stock which the investor is eligible to receive through conversion of the note). (See Note

7.

) The warrants expire on

June 20, 2022. 

The Company

may

“call” the warrants, requiring the investor to exercise their warrants within

30

days or forever lose the rights to do so, only if the following conditions have been met: (i) the underlying Shares are registered with the SEC and (ii) the Company’s common stock closes for

10

consecutive trading days at or above

two

times the exercise price.

Through

December 31, 2017,

we had received

$523,700

in investments in the Summer

2017

Unit Offering, from

ten

accredited investors, all pursuant to Pricing Supplement

No.

1.

No

investments were received pursuant to a

second

pricing supplement issued on

December 11, 2017,

setting the unit price at

$0.394

per share. On

February 22, 2018,

we issued Pricing Supplement

No.

3,

setting the Unit price to

$0.30

and the warrant exercise price at

$0.48.

Prior to the offering’s termination on

March 26, 2018,

we received

$80,000

in investments from

two

accredited investors pursuant to this

third

pricing supplement.

The offering documents assured the investors that in the event a subsequent pricing supplement offered a lower conversion or exercise price, prior investors would be given those favorable terms. Because we issued a

third

pricing supplement lowering the Unit price to

$0.30

per share, the unit price for the prior investors was lowered to

$0.30.

As a result, the number of warrant shares available for purchase by each investor increased. (See Note

7.

)

Convertible Note, matures

April 20, 2021 (

Spring

2018

Unit Offering)

On

March 26, 2018,

we commenced a private securities offering (titled the “Spring

2018

Unit Offering”) which offered the sale of

$1,500,000

of “Units,” each Unit consisting of a convertible promissory note and stock purchase warrant. Concurrently, we issued Pricing Supplement

No.

1

setting the initial unit/conversion price at

$0.30

per share, and the initial warrant exercise price at

$0.48

per share. The promissory notes issued to investors mature

April 20, 2021,

and incurs interest at the rate of

12%

per annum on the amount invested. Interest due will be paid quarterly in arrears in cash or shares of common stock. If paid by the issuance of common stock, interest is paid at a conversion price equal to the average closing price of the Company’s common stock over the

20

trading days prior to the interest payment due date. The principal amount of the note

may

be paid by the issuance of shares of common stock, or cash, upon maturity at the Company’s election. Promissory notes

may

be converted at any time by the investor, at maturity by the Company, or by the Company prior to maturity, so long as the following conditions are met: (i) the shares issued as payment are registered with the SEC; and (ii) the Company’s common stock closes for

ten

consecutive trading days at or above

three

times the Unit price.

In addition to the convertible promissory note, each investor will receive a warrant allowing for the purchase of the number of shares of BioLargo common stock equal to the investment amount divided by the unit/conversion price (e.g.,

one

warrant share for each share of common stock which the investor is eligible to receive through conversion of the note). (See Note

7.

)

Through

March 31, 2018,

we had received

one

investment for

$100,000,

and issued a warrant to purchase

333,333

shares. This investment was received from an entity owned/controlled by a member of our board of directors. We did

not

receive any investments in this offering during the

three

months ended

June 30, 2018.

Convertible Note, matures

June 15, 2021 (

OID Note)

On

June 15, 2018,

we received

$75,000

and we issued a convertible promissory note (titled the “OID Note”) for

100%

of the funds received, or

$82,500.

The convertible promissory note is convertible into shares of the company’s common stock at a conversion price of

$0.30

per share. The original issuance discount totaled

$7,500,

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

June 15, 2021

and incurs interest at the rate of

15%

per annum on the OID Note. Interest due will be paid quarterly in arrears in shares of common stock, paid at a conversion price equal to the average closing price of the Company’s common stock over the

20

trading days prior to the interest payment due date. The OID Note is convertible by the investor at any time, and convertible by the Company (i) at maturity, (ii) in the event the Company’s stock price closes at

two

times the conversion price for

20

consecutive days, provided that either the shares underlying the convertible note are registered with the SEC, or more than

six

months has elapsed since the date of the investment.

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Note 6 - Share-based Compensation

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Compensation and Employee Benefit Plans [Text Block]

Note

6.

Share-Based Compensation

Common Stock

On

May 2, 2017,

pursuant to an employment agreement with the Company’s president, Dennis Calvert (see Note

12

), we issued Mr. Calvert

1,500,000

shares of common stock, subject to 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

$3,000,000

in cash, or the recognition of

$3,000,000

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 Company will expense the fair value of the stock if and when it is probable that any of the conditions above are met.

Stock Options

During the

six

months ended

June 30, 2017

and

2018,

we recorded an aggregate

$515,959

and

$696,001,

respectively, in selling general and administrative expense related to the issuance of stock options.

2018

Equity Incentive Plan

On

June 22, 2018,

the BioLargo, Inc.

2018

Equity Incentive Plan (

“2018

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. 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 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

forty million

shares. The number of shares available under the

2018

Plan can increase up to

5%

each year at the discretion of the board.

On

June 29, 2018,

we issued options to purchase

296,976

shares of our common stock at an exercise price of

$0.43

per share to members of our board of directors for services, to employees in lieu of salary, and to consultants for services, pursuant to the

2018

Plan. The fair value of these options totaled

$127,700

and is recorded as selling, general and administrative expenses.

Activity for our stock options under the

2018

Plan for the

six

months ended

June 30, 2018

is as follows:

As of June 30, 2018:	Options Outstanding		Exercise Price per share		Weighted Average Price per share
Inception, June 22, 2018
Granted		296,976	$	0.43	$	0.43
Expired		—		—		—
Balance, June 30, 2018		296,976	$	0.43	$	0.43

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 were made under this plan for a period of

10

years. It expired on its terms 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.

On

June 19, 2017,

the date of our annual stockholders’ meeting, we recorded the issuance of options to purchase an aggregate

40,000

shares of our common stock to the non-employee members of our Board of Directors, pursuant to the terms of the

2007

Equity Plan which calls for an annual automatic issuance. The exercise price of

$0.43

equals the price of our common stock on the grant date. The fair value of these options totaled

$15,600

and was recorded as selling, general and administrative expense.

On

February 10, 2017,

we extended the engagement agreement with our Chief Financial Officer, retroactive to

October 1, 2016.

The sole consideration for the

one

-year extension was the issuance of an option to purchase

300,000

shares of our common stock, at an exercise price of

$0.69

per share which was equal to the closing price of our common stock on the date of grant. The option expires

February 10, 2027,

and vests over the term of the engagement with

125,000

shares having vested as of

February 10, 2017,

and the remaining shares to vest

25,000

shares monthly beginning

March 1, 2017,

and each month thereafter, so long as his agreement is in full force and effect. The fair value of the option totaled

$207,000.

During the

six

months ended

June 30, 2017,

we recorded

$155,250

as selling, general and administrative expense on our statement of operations. The remaining fair value balance vested monthly through

September 

30,

2017.

Activity for our stock options under the

2007

Plan for the

six

months ended

June 30, 2017

and

2018

is as follows:

						Weighted
						Average
As of June 30 , 2017 :	Options		Exercise			Price per
	Outstanding		Price per share			share
Balance, December 31, 2016		9,916,586	$0.23	–	1.89	$	0.44
Granted		340,000	0.39	–	0.69		0.65
Expired		—		—			—
Balance, June 30, 2017		10,256,586	$0.23	–	1.89	$	0.44

							Weighted Average
As of June 30 , 2018 :	Options			Exercise			Price per
	Outstanding			Price per share			share
Balance, December 31, 2017		9,831,586		$0.23	–	1.89	$	0.44
Granted		—			—			—
Expired		(70,000	)	1.45	–	1.89		1.79
Balance, June 30, 2018		9,761,586		$0.23	–	1.65	$	0.43

Options issued Outside of the

2007

Equity Incentive Plan

During the

six

-months ended

June 30, 2018,

we issued options to purchase

1,008,268

shares of our common stock at exercise prices ranging between

$0.23

–

$0.43

per share to vendors and to members of our board of directors in exchange for unpaid obligations for their services. The fair value of the options totaled

$260,671

and is recorded as selling, general and administrative expenses.

During the

six

-months ended

June 30, 2017,

we issued options to purchase

820,879

shares of our common stock at exercise prices ranging between

$0.43

–

$0.67

per share to vendors and to members of our board of directors in exchange for unpaid obligations for their services. The fair value of the options totaled

$277,074

and is recorded as selling, general and administrative expenses.

On

May 2, 2017,

pursuant to his employment agreement, we granted to Mr. Calvert, an option (the “Option”) to purchase

3,731,322

shares of the Company’s common stock. The Option shall be a non-qualified stock option, exercisable at

$0.45

per share, which represents 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 on the anniversary of the agreement for

five

years. Notwithstanding the foregoing, 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 Option contains the other terms standard in option agreements issued by the Company, including provisions for a cashless exercise. The fair value of this option totaled

$1,679,095

and will be amortized monthly through

May 2, 2022.

During the

six

months ended

June 30, 2017,

we recorded

$27,985

and during the

six

months ended

June 30, 2018

we recorded

$167,910

of selling, general and administrative expense.

Exercise of Stock Option 

On

April 30, 2017,

the Company’s president, Dennis Calvert, delivered a notice of exercise of

3,866,630

shares pursuant to his stock option agreement dated

April 30, 2007.

The exercise price was

$0.18

per share, and the Company issued

2,501,937

shares, calculated by multiplying the difference between the market price of

$0.51

and the exercise price of

$0.18

with the number of shares exercised, and dividing that amount by the market price.

No

cash consideration was tendered with respect to the exercise. The remaining

3,866,629

shares available for purchase under the option agreement expired unexercised.

Pursuant to a “lock-up agreement” dated

April 30, 2017,

Mr. Calvert agreed to restrict the sales of the shares received until the earlier of (i) the consummation of a sale (in a single transaction or in a series of related transactions) of the Company by means of a sale of (a) a majority of the then outstanding common stock (whether by merger, consolidation, sale or transfer of common stock, reorganization, recapitalization or otherwise) or (b) all or substantially all of its assets; and (ii) the successful commercialization of the Company’s products or technologies as demonstrated by its receipt of at least

$3,000,000

in cash, or the recognition of

$3,000,000

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 between the Company and Calvert dated

May 2, 2017

and resulting in Calvert’s termination.

Activity of our stock options issued outside of the

2007

Equity Incentive Plan for the

six

months ended

June 30, 2017

and

2018

is as follows:

							Weighted
							Average
As of June 30, 2017:	Options			Exercise			Price per
	Outstanding			Price per share			share
Balance, December 31, 2016		20,148,766		$0.18	–	1.00	$	0.43
Granted		4,552,201		0.43	–	0.67		0.47
Expired		3,866,629			0.18			0.18
Exercised		(3,866,630	)		0.18			0.18
Balance, June 30, 2017		16,967,708		$0.18	–	1.00	$	0.41

							Weighted
							Average
As of June 30 , 2018 :	Options			Exercise			Price per
	Outstanding			Price per share			share
Balance, December 31, 2017		20,018,408		$0.25	–	1.00	$	0.51
Granted		1,008,268		0.23	–	0.43		0.26
Expired		(2,400,000	)		0.99			0.99
Balance, June 30, 2018		18,626,676		$0.25	–	1.00	$	0.45

For employees, we recognize compensation expense for stock option awards on a straight-line basis over the applicable service period of the award, which is the vesting period. Share-based compensation expense is based on the grant date fair value estimated using the Black-Scholes Option Pricing Model. The following methodology and assumptions were used to calculate share-based compensation for the

six

months ended

June 30:

	2017						2018
	Non Plan			2007 Plan			Non Plan			2018 Plan
Risk free interest rate	2.29	-	2.40%	2.31	-	2.40%	2.43	–	2.91%		2.91	%
Expected volatility	578	-	601%	578	-	601%	548	–	563%		548	%
Expected dividend yield		—			—			—			—
Forfeiture rate		—			—			—			—
Expected life in years		7			7			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. 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

.

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Note 7 - Warrants

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Warrants [Text Block]

Note

7.

Warrants

Reduction of Warrant

Exercise Price

During the

three

months ended

June 30, 2018,

certain holders of outstanding warrants to purchase common stock received in prior unit offerings paid us cash in exchange for a reduction of the exercise price in their warrant(s).  In the aggregate, we received

$148,854

from holders of

37

warrants which allow for the purchase of an aggregate

4,326,358

shares of our common stock. Exercise prices of these warrants were reduced to

$0.30.

Management determined that the appropriate accounting treatment for the reduction in the exercise price of the warrants was a capital transaction rather than a contract modification treatment analogous to changes in stock option contracts. As such, the fair market value was equal to the cash received,

$148,854.

Warrants Issued Concurrently with

Spring

201

8

Unit Offering

During the

three

months ended

March 31, 2018,

pursuant to the terms of our Spring

2018

Unit Offering (see Note

5

), we issued a warrant to purchase up to

333,333

shares of our common stock at an exercise price of

$0.48

per share to the investor in the Spring

2018

Offering. The warrant expires

April 20, 2023. 

The relative fair value of the warrant resulted in

$49,306

recorded as a discount on our convertible notes on our consolidated balance sheet in the period issued.

The Company

may

“call” the warrants issued in the Spring

2018

Offering, requiring the holder to exercise their warrant within

30

days or forever lose the rights to do so, if the following conditions have been met: (i) the shares of common stock underlying the warrants are registered with the SEC and (ii) the Company’s common stock closes for

10

consecutive trading days at or above

two

times the exercise price.

Warrants Issued Concurrently with Line of Credit Offering

During the

three

months ended

March 31, 2018,

pursuant to the terms of our Line of Credit (see Note

5,

“Line of Credit, matures

September 1, 2019”),

we issued warrants to purchase up to an aggregate

390,000

shares of our common stock at an exercise price of

$0.35

per share. These warrants expire

March 1, 2023.

The relative fair value of these warrants resulted in

$85,002

recorded as a discount on our “convertible notes payable and line of credit” on our consolidated balance sheet in the period issued.

The Company

may

“call” these warrants, requiring the holder to exercise their warrants within

30

days or forever lose the rights to do so, if the following conditions have been met: (i) the shares of common stock underlying the warrants are registered with the SEC and (ii) the Company’s common stock closes for

10

consecutive trading days at or above

two

times the exercise price.

Warrants Issued Concurrently with Note Payable

During the

three

months ended

March 31, 2018,

pursuant to the terms of the note payable. (see Note

5,

“Note payable, matures

March 8, 2020”),

we issued warrants to purchase up to an aggregate

150,000

shares of our common stock at an exercise price of

$0.35

per share. At the end of each month

6,250

warrants vest as long as the note payable is outstanding. Although the note matures

March 8, 2020,

the investor

may

call the note at any time after

June 30, 2018.

Thus, a minimum of

25,000

warrants will vest, and the fair value of these warrants totaled

$6,500.

Of this amount

$1,625

was recorded as interest expense and the remaining

$4,875

is recorded as a discount on our consolidated balance sheet in the period issued. These warrants expire

February 28, 2023.

Warrants Issued to Summer

2017

Unit Offering Investors

Pursuant to the Summer

2017

Unit Offering, we issued warrants to purchase the number of shares of stock equal to each investor’s investment amount, divided by the “unit price” set forth in a “pricing supplement”. The offering documents assured the investors that in the event a subsequent pricing supplement offered a lower conversion or exercise price, prior investors would be given those favorable terms. On

February 12, 2018,

we issued a

third

pricing supplement, lowering the unit price to

$0.30.

As a result of this reduction, the number of shares purchasable pursuant to warrants issued to prior investors increased by an aggregate

416,478

shares. Additionally, during the

three

months ended

March 31, 2018,

we accepted

two

final investments in the aggregate amount of

$80,000,

pursuant to the

third

pricing supplement, and issued these investors warrants to purchase an aggregate

266,667

shares. The relative fair value of these warrants, including the increase in purchasable shares, resulted in

$103,322

recorded as a discount on our consolidated balance sheet in the period issued.

Warrants Issued Concurrently with One Year Convertible Notes

We have accepted

$250,000

investments and issued

one

-year OID convertible notes on

three

occasions:

July 8, 2016,

December 30, 2016,

and

July 17, 2017.

In addition to the notes, the investors received warrants on each of those

three

dates to purchase an aggregate

400,000

shares of our common stock. These warrants were initially exercisable at

$0.65

per share (for

July 2016

warrants),

$0.70

per share (for

December 2016

warrants), and

$0.65

per share (for

July 2017

warrants), and expire

five

years from the date of grant. Each of the warrants contain a provision that the exercise price

may

be reduced in the event we sell our common stock or issue warrants to

third

parties at a lower prices, with particular exclusions, the details of which are available in our Form

10

-K. The exercise price of these warrants has decreased, and the number of shares increased, on multiple occasions prior to

December 31, 2017,

most recently on

December 11, 2017,

at which time the exercise price was reduced to

$0.394

per share, and the number of shares issuable pursuant to the warrants, in the aggregate, increased from the original

1,200,000

shares, to

2,081,216.

On

February 22, 2018,

we sold shares of our common stock at

$0.25

per share (see Note

4

). Since these securities were sold at less that the then previously adjusted

$0.394

warrant exercise price, the exercise price of the warrants were decreased from

$0.394

to

$0.25

per share, and the number of shares issuable pursuant to the warrants increased by an aggregate

1,198,784

shares. The fair value of the warrants issued totaled

$297,439

and is recorded as a deemed dividend in our equity statement for the

six

months ended

June 30, 2018.

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

	Number of
	Shares			Price Range
As of June 30 , 201 7
Outstanding as of December 31, 2016		20,035,114		$0.125	–	1.00
Issued		990,727		$0.42	–	0.70
Exercised		(510,000	)		$0.30
Outstanding as of June 30, 2017		20,515,841		$0.125	–	1.00

As of June 30 , 2018
Outstanding as of December 31, 2017	22,104,817		$0.125	–	1.00
Issued	2,611,513		$0.25	–	0.48
Exercised	—			—
Expired	(2,683,400	)		$0.40
Outstanding as of June 30, 2018	22,032,930		$0.125	–	1.00

The fair value of each award grant is estimated on the date of grant using the Black-Scholes option-pricing model. The determination of expense of warrants issued for services or settlement also uses the option-pricing model. The principal assumptions we used in applying this model were as follows for the

six

months ended

June 30:

	2017			201 8
Risk free interest rate	1.83	–	1.93%		2.54%
Expected volatility	293	–	297%		252%
Expected dividend yield		—			—
Forfeiture rate		—			—
Expected life in years		5		5	-	10

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.

XML

Note 8 - Accounts Payable and Accrued Expenses

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

Note

8.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses included the following: 

	December		June
		31, 2017		30, 2018
Accounts payable and accrued expenses	$	88,381	$	149,338
Accrued interest		50,748		72,926
Accrued payroll		84,976		32,393
Total accounts payable and accrued expenses	$	224,105	$	254,657

Issuance of Common Stock in exchange for payment of payables

Payment of Officer Salaries

On

March 31, 2018,

we issued

323,030

shares of our common stock at

$0.26

per share in lieu of

$83,665

of accrued and unpaid obligations to

two

of our officers. The price-per-share was based on the closing price of our common stock on the last day of the month.

On

June 29, 2018,

we issued

176,947

shares of our common stock at

$0.43

per share in lieu of

$75,968

of accrued and unpaid obligations to

two

of our officers. The price-per-share was based on the closing price of our common stock on the last day of the month.

Payment of Consultant Fees

During the

six

months ended

June 30, 2018,

we issued

948,280

shares of our common stock, at prices ranging between

$0.23

-

$0.41

per share, in lieu of

$246,966

of accrued and unpaid obligations to consultants.

During the

six

months ended

June 30, 2017,

we issued

307,829

shares of our common stock, at prices ranging between

$0.43

-

$0.52,

in lieu of

$493,827

of accrued and unpaid obligations to consultants.

Payment of Accrued Interest

During the

six

months ended

June 30, 2018,

we issued

1,919,806

shares of our common stock, at prices ranging between

$0.31

–

0.42

per share, in lieu of accrued interest totaling

$493,783.

During the

six

months ended

June 30, 2017,

we issued

683,875

shares of our common stock, at prices ranging between,

$0.41

–

$0.70

per share, in lieu of accrued interest totaling

$337,246.

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.

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Note 9 - Noncontrolling Interest

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Noncontrolling Interest Disclosure [Text Block]

Note

9

.

Noncontrolling

Interest

Clyra Medical Technologies

Our subsidiary Clyra Medical Technologies, Inc. (“Clyra”) was formed to develop and sell medical products containing our technology,. Although we initially owned 

100%

 of this subsidiary, we have issued shares to management and to investors. As of

June 30, 2018,

we own

46.3%

of Clyra’s outstanding shares. Clyra’s

three

-member board of directors includes BioLargo president Dennis P. Calvert, BioLargo board member (and also an owner of Clyra’s Series A preferred shares) Jack B. Strommen, and Clyra’s president.

Clyra’s Series A preferred shares (“Preferred Shares”) accrue an annual dividend of 

8%

 for a period of 

five

 years. Although the dividends began to accrue immediately, Clyra 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 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 

June 30, 2018 

is 

$150,000.

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 common stock and Preferred Shares as if the Preferred Shares had converted to Clyra common stock. Holders of Preferred Shares 

may 

convert the shares to Clyra common stock initially on a 

one

-to-

one

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

On 

March 31, 2017, 

Clyra obtained a 

$250,000

 line of credit from Sanatio Capital LLC, accruing interest at a rate of 

10%

 per annum and a 

5%

 original issue discount. The line of credit was scheduled to mature on 

March 31, 2019, 

but was subsequently converted to Clyra stock in full payment (see below).

In 

April 2017, 

BioLargo purchased 

500

 shares of Clyra common stock from a former member of Clyra’s management for 

$40,000.

In 

August 2017, 

Clyra commenced a private offering of its common shares at a price of 

$160

 per share, and accepted 

$1,000,000

 in subscriptions. It issued 

6,250

 shares of its common stock to 

two

 investors. Of that amount, BioLargo invested 

$250,000

 and was issued 

1,562.5

 shares. On 

August 4, 2017, 

Clyra issued 

1,690

 shares of its common stock at 

$160

 per share to Sanatio in exchange for payment of the 

$270,400

 principal and interest outstanding under the line of credit held by Sanatio (see above). Subsequent to the issuance of shares to investors in the offering, and to Sanatio for the conversion of the line of credit, BioLargo owned 

15,297.5

 shares of Clyra common stock, which is 

46.3%

 of the outstanding stock at Clyra. Two members of BioLargo’s board of directors (Dennis P. Calvert and Jack B. Strommen) comprise a majority of the 

three

-member Clyra board of directors. Management has determined that BioLargo does control Clyra after reviewing the guidance of ASC Topic 

810,

 “Consolidation”. While BioLargo does 

not

 have voting interest control through 

50%

 ownership of Clyra, it does exercise control under the Variable Interest Model. BioLargo is the primary beneficiary since it has the power to direct Clyra’s activities that most significantly impact Clyra’s performance and it has the obligation to absorb losses or receive benefits (through royalties and licensing) that could be potentially significant to Clyra. BioLargo has consolidated Clyra’s operations through 

June 30, 2018.

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Note 10 - BioLargo Engineering, Science and Technologies, LLC

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Wholly-Owned Subsidiary [Text Block]

Note

10.

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. These agreements and related operational obligations add approximately

$100,000

to our monthly budget for payroll, taxes, benefits, insurance, and other related obligations. 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

2,000,000

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 a committee of the company (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. It is still too early to make a determination as to whether BLEST will meet some of the performance criteria. Through

June 30, 2018

and as of the end of

2017,

BLEST has

not

met any of the criteria and therefore

no

portion of the Class B Units and stock options have been earned or vested.

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Note 11 - Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

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

$288,603

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 of

$800

per month, paid vacation of

four

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

may

determine from time to time.

The Calvert Employment Agreement provides that Mr. Calvert will be granted an option (the “Option”) to purchase

3,731,322

shares of the Company’s common stock. The Option shall be a non-qualified stock option, exercisable at

$0.45

per share, which represents 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. Notwithstanding the foregoing, 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 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

$3,000,000

in cash, or the recognition of

$3,000,000

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 pled guilty or nolo contendere 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”.

Clyra Consulting Agreement

Our partially owned subsidiary Clyra (see Note

9

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

9

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

$23,438

per month for a period of

four

years. This agreement has

not

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

$1,125,024

over

four

years.

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Note 12 - Subsequent Events

6 Months Ended

Jun. 30, 2018

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 Quarterly Report and management noted the following for disclosure.

Conversion of

Debt Obligations

One-year convertible notes, mature

July 18, 2018

On

July 2, 2018,

the holders of

two one

-year notes in the aggregate principal amount of

$280,000,

which were due to mature on

July 18, 2018,

tendered an offer to the Company to convert

100%

of the balance due on the outstanding notes into shares of our common stock in lieu of receiving cash. We accepted the offer and agreed to convert the principal balance of

$280,000

and

$8,400

outstanding interest into an aggregate

1,153,600

shares of our common stock, at

$0.25

per share. The notes were issued

July 18, 2017,

and originally provided for a conversion price of

$0.42

per share.

Nine-month convertible note, matures

October 16, 2018

On

July 16, 2018,

the holder of a

nine

-month note with an original principal amount of

$150,000

maturing

October 16, 2018

submitted a notice to convert the remaining principal due on the note of

$54,239.

We issued an aggregate

217,960

shares at

$0.25

per share, consisting of

216,950

shares for payment of principal, and

1,010

for payment of accrued interest. As of the date of this Report, this note is paid in full.

Subsequent to these conversions our outstanding debt obligations are as follows:

	June 30, 201 8		August  14, 201 8
C urrent liabilities
Convertible notes payable
One-year convertible notes, mature July 18, 2018 *	$	280,000	$	—
Convertible notes, mature June 1, 2018		—		—
Nine-month convertible note, matures September 18, 2018		447,975		447,975
Nine-month convertible note, matures October 16, 2018 *		54,239		—
Total convertible notes payable	$	782,214	$	447,975
L ong-term liabilities :
Line of credit, matures September 1, 2019	$	390,000	$	390,000
Convertible notes payable
Convertible note, matures July 20, 2019		440,000		440,000
Convertible notes, mature December 31, 2019		75,000		75,000
Note payable, matures March 8, 2023 (or on demand 60 days’ notice)		50,000		50,000
Convertible notes, mature June 20, 2020		125,000		125,000
Convertible notes, mature April 20, 2021		100,000		100,000
Convertible notes, mature June 15, 2021		82,500		82,500
Total convertible notes payable	$	872,500	$	872,500
Total	$	2,044,714	$	1,710,475

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

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

810,

 “Consolidation”, because the Company owns

46.3%

of its outstanding voting stock at

June 30, 2018,

and

two

members of BioLargo’s board of directors are

two

of

three

members of Clyra’s board of directors (see Note

9

). All intercompany accounts and transactions have been eliminated.

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. Our cash account balances are typically 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.

Clyra Medical is

not

a wholly owned subsidiary. Our cash balance held in Clyra and BioLargo and other subsidiaries are reflected in the following table:

	D ecember 31, 201 7		J une 3 0 , 201 8
Biolargo, Inc. and wholly owned subsidiaries	$	461,914	$	467,258
Clyra Medical Technologies, Inc.		528,543		183,803
Total	$	990,457	$	651,061

Receivables, Policy [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, 2017 

and

June 30, 2018

was 

$2,500

and

$3,500,

respectively.

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

six

months ended

June 30, 2017

and

2018,

we had

three

and

two

customers that each accounted for more than

10%

of consolidated revenues in the respective periods, as follows:

	June 30 , 2017			June 30 , 2018
Customer A		17	%		43	%
Customer B		16	%		15	%
Customer C		14	%		<10	%

In addition, our customers include many of the largest solid waste handling companies in the United States. We generally do business with these companies through “national purchasing agreements” entered into with the company, and then sell our products and services to their local operations such as transfer stations and landfills. Although

none

of those individual locations arose to more than

10%

of our consolidated revenues during the

six

months ended

June 30, 2018,

two

of these national companies accounted for

37%

of our total revenues.

We had

five

customers that each accounted for more than

10%

of consolidated accounts receivable at

December 

31,

2017

and

three

customers at

June 30, 2018

as follows:

	December 31, 2017			June 30 , 2018
Customer A		12	%		<10	%
Customer B		19	%		<10	%
Customer C		12	%		<10	%
Customer D		10	%		<10	%
Customer E		10	%		<10	%
Customer F		<10	%		13	%
Customer G		<10	%		12	%
Customer H		<10	%		10	%

Inventory, Policy [Policy Text Block]

Inventory

Inventory is stated at the lower of cost and net realizable value using the average cost method. All inventory is related to our Odor-

No

-More business segment. Inventory consisted of:

	D ecember 31, 2017		J une 3 0 , 2018
Raw material	$	34,104	$	23,515
Finished goods		19,869		2,124
Total	$	53,973	$	25,639

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, deemed dividends, 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 consolidated financial statements.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Share-based Payments

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.

For equity instruments issued and outstanding where performance is

not

complete, but the instrument has been recorded, those instruments are measured again at their then current fair market values at each of the reporting dates (they are “marked-to market”) until the performance and the contract are complete.

Warrant Policy [Policy Text Block]

Warrants

The Unit Offerings of our convertible promissory note and a Series A stock purchase warrant 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, 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 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 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 adjusted 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 Recognition, Policy [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 purchase order whether in writing or verbal, 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 over a period of time as services are performed and completed. BLEST’s contracts typically call for invoicing on a time and materials basis. 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 the Canadian National Research Institute – Industrial Research Assistance Program (NRC-IRAP) and the National Science and Engineering Research Council of Canada (NSERC). 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

50

 grants totaling approximately

$1,600,000.

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.

While the FASB has issued a proposed Accounting Standards Update,

Not

-for-Profit Entities - (Topic

958

): “Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made”, there has been

no

guidance related to for profit entities such as BioLargo. In reviewing Topic

606,

“Revenue from Contracts with Customers”, and its potential application to the Canadian government grants, the Management concluded that these grants do

not

meet the requirements for revenue recognition. Specifically, these grants typically provide reimbursement for research personnel working on the BioLargo technology. For some grants, funds are given directly to

third

parties for research on our technology and are

not

controlled by the Company. In this structure, the grants are

not

revenue, but rather a reimbursement.

Segment Reporting, Policy [Policy Text Block]

Business

S

egment

I

nformation

In

2017,

the Company operated with

three

business segments. In

2018,

given the increased operations of the engineering division formed in late

2017,

we determined that it should be considered our

fourth

business segment. This decision was based on the manner in which the chief operating decision maker now manages the engineering division, including resource allocation and performance assessment.

Our

four

business segments include: (i) Odor-

No

-More, which is engaged in developing and selling odor and VOC control products and services; (ii) BLEST, which is provides professional engineering services; (iii) Clyra, which is engaged in developing medical products utilizing our technology, with an emphasis in the medical field and advanced wound care; and (iv) our corporate operations (labeled in the below table as “BioLargo/Other”), which includes certain functional roles that do

not

engage in revenue generating activities, such as general corporate and administrative functions, including finance, human resources, marketing, legal, and research and development.

The segment information for the

three

and

six

months ended

June 30, 2017

and

2018,

is as follows:

	T hree months June 30,						Six months June 30,
	2017			2018			2017			2018
Revenues
Odor-No-More	$	99,978		$	315,553		$	145,995		$	539,950
BLEST		—			11,185			—			49,817
Consolidated revenue	$	99,978		$	326,738		$	145,995		$	589,767
Cost of goods/services
Odor-No-More	$	(73,399	)	$	(194,000	)	$	(95,929	)	$	(328,464	)
BLEST		—			(6,912	)		—			(35,640	)
Consolidated costs of goods/services	$	(73,399	)	$	(200,912	)	$	(95,929	)	$	(364,104	)
Net loss
Odor-No-More	$	(100,000	)	$	(53,688	)	$	(275,000	)	$	(253,688	)
BLEST		—			(70,339	)		—			(116,726	)
Clyra		(347,490	)		(177,641	)		(484,572	)		(376,362	)
BioLargo/Other		(2,126,656	)		(3,298,242	)		(4,140,170	)		(5,282,702	)
Consolidated net loss	$	(2,574,146	)	$	(3,599,910	)	$	(4,899,742	)	$	(6,029,478	)

The segment information as of

December 31, 2017

and

June 30, 2018,

is as follows:

	December		June
		31, 2017		30, 2018
Assets, net
Odor-No-More	$	210,725	$	260,421
BLEST		—		131,558
Clyra		528,543		183,803
BioLargo/Other		726,152		591,826
Consolidated assets, net	$	1,495,420	$	1,167,608

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

six

months ended

June 30, 2017

and

2018,

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.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

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. Management has

not

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

not

believe the new guidelines will substantially impact the company’s financial statements.

In

May 2017,

the FASB issued Accounting Standards Update

No.

2017

-

09,

“Compensation – Stock Compensation (topic

718

): Scope of Modification Accounting”. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic

718.

An entity should account for the effects of a modification unless all the following are met: (i) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified, (ii) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and (iii) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after

December 15, 2017.

Management has analyzed the new guideline and it has

not

substantially impacted its accounting for stock compensation awards upon adoption in the current period.

XML

Note 2 - Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Cash and Cash Equivalents [Table Text Block]

	D ecember 31, 201 7		J une 3 0 , 201 8
Biolargo, Inc. and wholly owned subsidiaries	$	461,914	$	467,258
Clyra Medical Technologies, Inc.		528,543		183,803
Total	$	990,457	$	651,061

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

	June 30 , 2017			June 30 , 2018
Customer A		17	%		43	%
Customer B		16	%		15	%
Customer C		14	%		<10	%

	December 31, 2017			June 30 , 2018
Customer A		12	%		<10	%
Customer B		19	%		<10	%
Customer C		12	%		<10	%
Customer D		10	%		<10	%
Customer E		10	%		<10	%
Customer F		<10	%		13	%
Customer G		<10	%		12	%
Customer H		<10	%		10	%

Schedule of Inventory, Current [Table Text Block]

	D ecember 31, 2017		J une 3 0 , 2018
Raw material	$	34,104	$	23,515
Finished goods		19,869		2,124
Total	$	53,973	$	25,639

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

	T hree months June 30,						Six months June 30,
	2017			2018			2017			2018
Revenues
Odor-No-More	$	99,978		$	315,553		$	145,995		$	539,950
BLEST		—			11,185			—			49,817
Consolidated revenue	$	99,978		$	326,738		$	145,995		$	589,767
Cost of goods/services
Odor-No-More	$	(73,399	)	$	(194,000	)	$	(95,929	)	$	(328,464	)
BLEST		—			(6,912	)		—			(35,640	)
Consolidated costs of goods/services	$	(73,399	)	$	(200,912	)	$	(95,929	)	$	(364,104	)
Net loss
Odor-No-More	$	(100,000	)	$	(53,688	)	$	(275,000	)	$	(253,688	)
BLEST		—			(70,339	)		—			(116,726	)
Clyra		(347,490	)		(177,641	)		(484,572	)		(376,362	)
BioLargo/Other		(2,126,656	)		(3,298,242	)		(4,140,170	)		(5,282,702	)
Consolidated net loss	$	(2,574,146	)	$	(3,599,910	)	$	(4,899,742	)	$	(6,029,478	)

	December		June
		31, 2017		30, 2018
Assets, net
Odor-No-More	$	210,725	$	260,421
BLEST		—		131,558
Clyra		528,543		183,803
BioLargo/Other		726,152		591,826
Consolidated assets, net	$	1,495,420	$	1,167,608

XML

Note 5 - Debt Obligations (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Debt [Table Text Block]

	December 31, 201 7		June 30 , 201 8
C urrent liabilities
Convertible notes payable
One-year convertible notes, mature July 18, 2018 *	$	280,000	$	280,000
Convertible notes, mature June 1, 2018		4,468,847		—
Nine-month convertible note, matures September 18, 2018		500,000		447,975
Nine-month convertible note, matures October 16, 2018 *		—		54,239
Total convertible notes payable	$	5,248,847	$	782,214
L ong-term liabilities :
Line of credit, matures September 1, 2019	$	—	$	390,000
Convertible notes payable
Convertible note, matures July 20, 2019	$	440,000	$	440,000
Convertible notes, mature June 17, 2019		283,571		—
Convertible notes, mature December 31, 2019		292,000		75,000
Note payable, matures March 8, 2023 (or on demand 60 days’ notice)		—		50,000
Convertible notes, mature June 20, 2020		523,700		125,000
Convertible notes, mature April 20, 2021				100,000
Convertible notes, mature June 15, 2021		—		82,500
Total convertible notes payable	$	1,539,271	$	872,500
Total	$	6,788,118	$	2,044,714

Convertible Debt [Table Text Block]

	Debt converted to stock
Current liabilities
Convertible notes, mature June 1, 2018	$	3,646,967
Long-term liabilities
Convertible notes, mature June 17, 2019		283,571
Convertible notes, mature December 31, 2019		217,000
Convertible notes, mature June 20, 2020		478,700
Total debt converted May 2018	$	4,626,238

XML

Note 6 - Share-based Compensation (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Share-based Compensation, Stock Options, Activity [Table Text Block]

As of June 30, 2018:	Options Outstanding		Exercise Price per share		Weighted Average Price per share
Inception, June 22, 2018
Granted		296,976	$	0.43	$	0.43
Expired		—		—		—
Balance, June 30, 2018		296,976	$	0.43	$	0.43

						Weighted
						Average
As of June 30 , 2017 :	Options		Exercise			Price per
	Outstanding		Price per share			share
Balance, December 31, 2016		9,916,586	$0.23	–	1.89	$	0.44
Granted		340,000	0.39	–	0.69		0.65
Expired		—		—			—
Balance, June 30, 2017		10,256,586	$0.23	–	1.89	$	0.44

							Weighted Average
As of June 30 , 2018 :	Options			Exercise			Price per
	Outstanding			Price per share			share
Balance, December 31, 2017		9,831,586		$0.23	–	1.89	$	0.44
Granted		—			—			—
Expired		(70,000	)	1.45	–	1.89		1.79
Balance, June 30, 2018		9,761,586		$0.23	–	1.65	$	0.43

							Weighted
							Average
As of June 30, 2017:	Options			Exercise			Price per
	Outstanding			Price per share			share
Balance, December 31, 2016		20,148,766		$0.18	–	1.00	$	0.43
Granted		4,552,201		0.43	–	0.67		0.47
Expired		3,866,629			0.18			0.18
Exercised		(3,866,630	)		0.18			0.18
Balance, June 30, 2017		16,967,708		$0.18	–	1.00	$	0.41

							Weighted
							Average
As of June 30 , 2018 :	Options			Exercise			Price per
	Outstanding			Price per share			share
Balance, December 31, 2017		20,018,408		$0.25	–	1.00	$	0.51
Granted		1,008,268		0.23	–	0.43		0.26
Expired		(2,400,000	)		0.99			0.99
Balance, June 30, 2018		18,626,676		$0.25	–	1.00	$	0.45

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

	2017						2018
	Non Plan			2007 Plan			Non Plan			2018 Plan
Risk free interest rate	2.29	-	2.40%	2.31	-	2.40%	2.43	–	2.91%		2.91	%
Expected volatility	578	-	601%	578	-	601%	548	–	563%		548	%
Expected dividend yield		—			—			—			—
Forfeiture rate		—			—			—			—
Expected life in years		7			7			7			7

XML

Note 7 - Warrants (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

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

	Number of
	Shares			Price Range
As of June 30 , 201 7
Outstanding as of December 31, 2016		20,035,114		$0.125	–	1.00
Issued		990,727		$0.42	–	0.70
Exercised		(510,000	)		$0.30
Outstanding as of June 30, 2017		20,515,841		$0.125	–	1.00

As of June 30 , 2018
Outstanding as of December 31, 2017	22,104,817		$0.125	–	1.00
Issued	2,611,513		$0.25	–	0.48
Exercised	—			—
Expired	(2,683,400	)		$0.40
Outstanding as of June 30, 2018	22,032,930		$0.125	–	1.00

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

	2017			201 8
Risk free interest rate	1.83	–	1.93%		2.54%
Expected volatility	293	–	297%		252%
Expected dividend yield		—			—
Forfeiture rate		—			—
Expected life in years		5		5	-	10

XML

Note 8 - Accounts Payable and Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

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

	December		June
		31, 2017		30, 2018
Accounts payable and accrued expenses	$	88,381	$	149,338
Accrued interest		50,748		72,926
Accrued payroll		84,976		32,393
Total accounts payable and accrued expenses	$	224,105	$	254,657

XML

Note 12 - Subsequent Events (Tables)

6 Months Ended

Jun. 30, 2018

Notes Tables

Schedule of Debt Obligations [Table Text Block]

	June 30, 201 8		August  14, 201 8
C urrent liabilities
Convertible notes payable
One-year convertible notes, mature July 18, 2018 *	$	280,000	$	—
Convertible notes, mature June 1, 2018		—		—
Nine-month convertible note, matures September 18, 2018		447,975		447,975
Nine-month convertible note, matures October 16, 2018 *		54,239		—
Total convertible notes payable	$	782,214	$	447,975
L ong-term liabilities :
Line of credit, matures September 1, 2019	$	390,000	$	390,000
Convertible notes payable
Convertible note, matures July 20, 2019		440,000		440,000
Convertible notes, mature December 31, 2019		75,000		75,000
Note payable, matures March 8, 2023 (or on demand 60 days’ notice)		50,000		50,000
Convertible notes, mature June 20, 2020		125,000		125,000
Convertible notes, mature April 20, 2021		100,000		100,000
Convertible notes, mature June 15, 2021		82,500		82,500
Total convertible notes payable	$	872,500	$	872,500
Total	$	2,044,714	$	1,710,475

XML

Note 1 - Business and Liquidity (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Dec. 31, 2016
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest, Total	$ (3,599,910)	$ (2,574,146)	$ (6,029,478)	$ (4,899,742)
Net Cash Provided by (Used in) Operating Activities, Total			(2,053,111)	(2,048,628)
Working Capital	(120,187)		(120,187)
Assets, Current, Total	823,302		823,302		$ 1,158,843
Retained Earnings (Accumulated Deficit), Ending Balance	(107,329,788)		(107,329,788)		(101,204,846)
Cash and Cash Equivalents, at Carrying Value, Ending Balance	651,061	433,539	651,061	433,539	$ 990,457	$ 1,910,153
Revenue from Contract with Customer, Including Assessed Tax	$ 326,738	$ 99,978	$ 589,767	$ 145,995

XML

Note 2 - Summary of Significant Accounting Policies (Details Textual)	6 Months Ended	12 Months Ended
	Jun. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)	Aug. 04, 2017
Cash, FDIC Insured Amount	$ 250,000
Allowance for Doubtful Accounts Receivable, Current, Ending Balance	$ 3,500	$ 2,500
Number of Operating Segments	4	3
Customer Concentration Risk [Member] | Revenue from Contract with Customer [Member] | Two National Companies [Member]
Number of Major Customers	2
Concentration Risk, Percentage	37.00%
Clyra [Member]
Noncontrolling Interest, Ownership Percentage by Parent	46.30%		46.30%
Canadian Government Grants [Member]
Number of Grants Received	50
Grants Receivable	$ 1,600,000
Canadian Government Grants [Member] | Minimum [Member]
Grant Term	180 days
Canadian Government Grants [Member] | Maximum [Member]
Grant Term	1 year 180 days

XML

Note 2 - Summary of Significant Accounting Policies - Summary of Cash Balances (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Cash and Cash Equivalents, at Carrying Value, Ending Balance	$ 651,061	$ 990,457	$ 433,539	$ 1,910,153
Parent Company [Member]
Cash and Cash Equivalents, at Carrying Value, Ending Balance	467,258	461,914
Noncontrolling Interest [Member]
Cash and Cash Equivalents, at Carrying Value, Ending Balance	$ 183,803	$ 528,543

XML

Note 2 - Summary of Significant Accounting Policies - Credit Concentration (Details) - Customer Concentration Risk [Member]	6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Customer A [Member] | Revenue from Contract with Customer [Member]
Credit concentration	43.00%	17.00%
Customer A [Member] | Accounts Receivable [Member]
Credit concentration			12.00%
Customer A [Member] | Accounts Receivable [Member] | Maximum [Member]
Credit concentration	10.00%
Customer B [Member] | Revenue from Contract with Customer [Member]
Credit concentration		16.00%
Customer B [Member] | Revenue from Contract with Customer [Member] | Maximum [Member]
Credit concentration	15.00%
Customer B [Member] | Accounts Receivable [Member]
Credit concentration			19.00%
Customer B [Member] | Accounts Receivable [Member] | Maximum [Member]
Credit concentration	10.00%
Customer C [Member] | Revenue from Contract with Customer [Member]
Credit concentration		14.00%
Customer C [Member] | Revenue from Contract with Customer [Member] | Maximum [Member]
Credit concentration	10.00%
Customer C [Member] | Accounts Receivable [Member]
Credit concentration			12.00%
Customer C [Member] | Accounts Receivable [Member] | Maximum [Member]
Credit concentration	10.00%
Customer D [Member] | Accounts Receivable [Member]
Credit concentration			10.00%
Customer D [Member] | Accounts Receivable [Member] | Maximum [Member]
Credit concentration	10.00%
Customer E [Member] | Accounts Receivable [Member]
Credit concentration			10.00%
Customer E [Member] | Accounts Receivable [Member] | Maximum [Member]
Credit concentration	10.00%
Customer F [Member] | Accounts Receivable [Member]
Credit concentration	13.00%
Customer F [Member] | Accounts Receivable [Member] | Maximum [Member]
Credit concentration			10.00%
Customer G [Member] | Accounts Receivable [Member]
Credit concentration	12.00%
Customer G [Member] | Accounts Receivable [Member] | Maximum [Member]
Credit concentration			10.00%
Customer H [Member] | Accounts Receivable [Member]
Credit concentration	10.00%
Customer H [Member] | Accounts Receivable [Member] | Maximum [Member]
Credit concentration			10.00%

XML

Note 2 - Summary of Significant Accounting Policies - Inventory (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Raw material	$ 23,515	$ 34,104
Finished goods	2,124	19,869
Total	$ 25,639	$ 53,973

XML

Note 2 - Summary of Significant Accounting Policies - Segment Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Revenue	$ 326,738	$ 99,978	$ 589,767	$ 145,995
Cost of Goods and Services Sold	(200,912)	(73,399)	(364,104)	(95,929)
Net loss	(3,599,910)	(2,574,146)	(6,029,478)	(4,899,742)
Assets, net	1,167,608		1,167,608		$ 1,495,420
Odor-No-More [Member]
Revenue	315,553	99,978	539,950	145,995
Cost of Goods and Services Sold	(194,000)	(73,399)	(328,464)	(95,929)
Net loss	(53,688)	(100,000)	(253,688)	(275,000)
Assets, net	260,421		260,421		210,725
BioLargo Engineering, Science & Technologies, LLC [Member]
Revenue	11,185		49,817
Cost of Goods and Services Sold	(6,912)		(35,640)
Net loss	(70,339)		(116,726)
Assets, net	131,558		131,558
Clyra Segment [Member]
Net loss	(177,641)	(347,490)	(376,362)	(484,572)
Assets, net	183,803		183,803		528,543
BioLargo/Other [Member]
Net loss	(3,298,242)	$ (2,126,656)	(5,282,702)	$ (4,140,170)
Assets, net	$ 591,826		$ 591,826		$ 726,152

XML

Note 3 - Change in Derivative Liability Treatment (Details Textual)	Jan. 01, 2017 USD ($)
Accounting Standards Update 2017-11 [Member]
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets	$ 663,560

XML

Note 4 - Lincoln Park Financing (Details Textual) - USD ($)		6 Months Ended		11 Months Ended
	Aug. 25, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018
Proceeds from Issuance of Common Stock		$ 380,803
Lincoln Park Capital Fund, LLC [Member]
Stock Purchase Agreement, Maximum Amount of Common Stock	$ 10,000,000
Stock Purchase Agreement, Maximum Shares of Common Stock to be Sold in a Single Business Day, Tier One	50,000
Stock Purchase Agreement, Maximum Shares of Common Stock to be Sold in a Single Business Day, Tier Two	75,000
Stock Purchase Agreement, Maximum Shares of Common Stock to be Sold in a Single Business Day, Tier Three	100,000
Stock Purchase Agreement, Maximum Shares of Common Stock to be Sold in a Single Business Day, Tier Four	200,000
Stock Purchase Agreement, Maximum Value of Total Common Stock to be Sold in a Single Business Day	$ 500,000
Stock Issued During Period, Shares, New Issues	488,998	1,256,751		2,431,751
Pro Forma Information, Stock Purchase Agreement, Stock Purchase Requested	$ 25,000
Pro Forma Information, Stock Purchase Agreement, Stock Purchase Requested, Additional Commitment Common Stock Issued	1,222
Pro Forma Information, Stock Purchase Agreement, Additional Commitment Shares, Numerator Value of Total Shares Calculation	$ 25,000
Pro Forma Information, Stock Purchase Agreement, Additional Commitment Shares, Denominator Value of Total Shares Calculation	$ 10,000,000
Pro Forma Information, Stock Purchase Agreement, Additional Commitment Shares, Multiplier of Total Shares Calculation	488,998
Proceeds from Issuance of Common Stock		$ 380,803		$ 891,888
Stock Issued During Period, Additional Commitment Shares, New Issues		18,260		43,611
Lincoln Park Capital Fund, LLC [Member] | Maximum [Member]
Stock Purchase Agreement, Share Price, Tier One	$ 0.50
Stock Purchase Agreement, Share Price, Tier Two	0.74
Stock Purchase Agreement, Share Price, Tier Three	1.24
Lincoln Park Capital Fund, LLC [Member] | Minimum [Member]
Stock Purchase Agreement, Share Price, Tier Two	0.50
Stock Purchase Agreement, Share Price, Tier Three	0.75
Stock Purchase Agreement, Share Price, Tier Four	$ 1.25

XML

Note 5 - Debt Obligations (Details Textual)										1 Months Ended		3 Months Ended			6 Months Ended		7 Months Ended
	Jun. 15, 2018 USD ($) $ / shares	Jun. 01, 2018 USD ($) shares	Mar. 08, 2018 USD ($) $ / shares shares	Mar. 01, 2018 USD ($) $ / shares shares	Feb. 08, 2018 USD ($) $ / shares shares	Jan. 16, 2018 USD ($) $ / shares shares	Dec. 18, 2017 USD ($) $ / shares shares	Jul. 20, 2017 USD ($) $ / shares	May 24, 2017 USD ($) $ / shares shares	Jun. 30, 2018 USD ($) $ / shares shares	May 31, 2018 USD ($) $ / shares shares	Jun. 30, 2018 USD ($) $ / shares	Mar. 31, 2018 USD ($) $ / shares shares	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($) $ / shares	Jun. 30, 2017 USD ($)	Dec. 31, 2017 USD ($) $ / shares	Feb. 22, 2018 $ / shares	Feb. 12, 2018 $ / shares	Dec. 11, 2017 $ / shares
Debt Conversion, Original Debt, Amount											$ 4,626,238
Proceeds from Conversion Inducement															$ 356,781
Induced Conversion of Convertible Debt Expense												$ 275,534			275,534
Interest Expense, Total												$ 1,728,799		$ 1,119,273	$ 2,561,207	2,072,829
Shares Issued, Price Per Share | $ / shares										$ 0.25		$ 0.25			$ 0.25
Share Price | $ / shares					$ 0.3147	$ 0.39	$ 0.41
Proceeds from Lines of Credit, Total															$ 390,000	$ 250,000
Warrants Issued Concurrently to the Summer 2017 Unit Offering [Member]
Proceeds from Convertible Debt													$ 80,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares																			$ 0.30
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right | shares									1
Class of Warrant or Right, Exercise Period									30 days
Class of Warrant or Right, Exercise Period Condition, Number of Trading Days Common Stock Closes at or above 2 Times the Exercise Price									10 days
Proceeds from Issuance of Units																	$ 523,700
Line of Credit, Maturing September 1, 2019 [Member]
Proceeds from Lines of Credit, Total				$ 390,000
Line of Credit Facility, Interest Rate During Period				18.00%
Number of Trading Days Prior to Interest Payment Due Date if Paid by Issuance of Common Stock				20 days
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period				10 years
Debt Instrument, Call Notice Period				30 days
Two Year Convertible Note [Member]
Debt Instrument, Convertible, Conversion Price | $ / shares								$ 0.42
Debt Instrument, Face Amount								$ 440,000
Debt Instrument, Interest Rate, Stated Percentage								12.00%
Debt Instrument, Convertible, Number of Equity Instruments								2,000
Proceeds from Convertible Debt								$ 400,000
Debt Instrument, Discount Percent								10.00%
Debt Instrument, Unamortized Discount, Total								$ 171,429
Note Payable, Maturing March 8, 2020 [Member]
Proceeds from Notes Payable, Total			$ 50,000
Debt Instrument, Call Notice Period			60 days
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares			150,000
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares			$ 0.35
Incremental Monthly Shares Vested Per Month as Part of Warrants | shares			6,250
Summer 2017 Unit Offering [Member]
Debt Instrument, Convertible, Conversion Price | $ / shares									$ 0.42									$ 0.30		$ 0.394
Debt Instrument, Interest Rate, Stated Percentage									12.00%
Number of Trading Days Prior to Interest Payment Due Date if Paid by Issuance of Common Stock									20 days
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares									$ 0.65				$ 0.48
Proceeds from Issuance of Private Placement									$ 1,500,000
Debt Conversion before Maturity, Number of Trading Days Common Stock Closes at or above 3 Times the Unit Price									10 days
Proceeds from Issuance of Units													$ 80,000
Convertible Notes, Maturing April 20, 2021 [Member]
Debt Instrument, Convertible, Conversion Price | $ / shares				$ 0.30
Debt Instrument, Interest Rate, Stated Percentage				12.00%
Number of Trading Days Prior to Interest Payment Due Date if Paid by Issuance of Common Stock				20 days
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares													333,333
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares				$ 0.48
Proceeds from Issuance of Private Placement				$ 1,500,000
Debt Conversion before Maturity, Number of Trading Days Common Stock Closes at or above 3 Times the Unit Price				10 days
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right | shares				1
Proceeds from Issuance of Units													$ 100,000
OID Note [Member]
Debt Instrument, Convertible, Conversion Price | $ / shares	$ 0.30
Debt Instrument, Face Amount	$ 82,500
Debt Instrument, Interest Rate, Stated Percentage	15.00%
Proceeds from Convertible Debt	$ 75,000
Debt Instrument, Unamortized Discount, Total	$ 7,500
Vista Purchase Agreement [Member]
Stock Issued During Period, Shares, Commitment Fee | shares							250,000
Shares Issued, Price Per Share | $ / shares							$ 0.39
Vista Purchase Agreement [Member] | Additional Paid-in Capital [Member]
Stock Issued During Period, Value, Commitment Fee							$ 98,500
FirstFire Purchase Agreement [Member]
Stock Issued During Period, Value, Commitment Fee					$ 11,498	$ 29,250
Share Price | $ / shares						$ 0.39
Stock Issued During Period, Shares, Commitment Shares | shares						75,000
Number of Trading Days, Conditional Requirements, Additional Shares						20 days
Stock Issued During Period, Additional Commitment Shares, New Issues | shares					36,536
Convertible Notes Payable [Member] | Vista Capital [Member]
Debt Instrument, Convertible, Conversion Price | $ / shares							$ 0.394			$ 0.25		$ 0.25			$ 0.25		$ 0.394
Proceeds from Notes Payable, Total							$ 500,000
Debt Instrument, Face Amount							$ 500,000
Debt Instrument, Interest Rate, Stated Percentage							5.00%
Debt Instrument, Convertible, Beneficial Conversion Feature							$ 20,305
Short-term Debt, Total										$ 447,975		$ 447,975			$ 447,975
Convertible Debt [Member] | First Fire [Member]
Debt Instrument, Convertible, Conversion Price | $ / shares						$ 0.394				$ 0.25		$ 0.25			$ 0.25		$ 0.394
Debt Instrument, Face Amount						$ 150,000
Debt Instrument, Interest Rate, Stated Percentage						5.00%
Short-term Debt, Total										$ 54,239		$ 54,239			$ 54,239
Early Conversion of Unit Notes [Member]
Debt Conversion, Converted Instrument, Shares Issued | shares											17,255,811
Debt Conversion, Original Debt, Amount											$ 4,626,238
Maximum Conversion Price Available for Conversion Option of a Convertible Debt Instrument For Holders With Debt Instruments With a Conversion Price Over $0.30 | $ / shares											$ 0.30
Debt Conversion, Conversion Incentive, Conversion Price Reduced, Additional Shares Issued | shares											966,318
Early Conversion of Unit Notes with 0.25 Conversion Prices [Member]
Debt Instrument, Convertible, Conversion Price | $ / shares											$ 0.25
Debt Conversion, Converted Instrument, Incentive Shares Issuable for Payment of Interest, Calculated Price | $ / shares											$ 0.25
Debt Conversion, Conversion Incentive, Input, Interest											$ 1,000
Debt Conversion, Converted Instrument, Incentive Shares Issuable for Payment of Interest | $ / shares											$ 1.50
Debt Conversion, Conversion Incentive, Output, Number of Incentive Shares | shares											6,000
Early Conversion of Unit Notes with 0.30 Conversion Prices [Member]
Debt Instrument, Convertible, Conversion Price | $ / shares											$ 0.30
Convertible Notes With Original Conversion Prices of $0.35 [Member]
Debt Instrument, Convertible, Conversion Price | $ / shares											$ 0.35
Debt Instrument, Convertible, Conversion Option, Percentage of Additional Funding Required, Holders With a Conversion Price Over $0.30											6.00%
Convertible Notes with Original Conversion Prices of $0.55 and $0.57 [Member]
Debt Instrument, Convertible, Conversion Option, Percentage of Additional Funding Required, Holders With a Conversion Price Over $0.30											20.00%
Convertible Notes With Original Conversion Prices of $0.55 [Member]
Debt Instrument, Convertible, Conversion Price | $ / shares											$ 0.55
Convertible Notes With Original Conversion Prices of $0.57 [Member]
Debt Instrument, Convertible, Conversion Price | $ / shares											$ 0.57
Unit Notes Reduced Conversion Price to 0.30 [Member]
Proceeds from Conversion Inducement											$ 356,781
Debt Conversion, Conversion Incentive, Conversion Price Reduce, Additional Share Issue Upon Conversion | shares											2,749,197
Induced Conversion of Convertible Debt Expense											$ 632,315
Interest Expense, Total											$ 275,534
Conversion of Unit Notes [Member]
Debt Conversion, Converted Instrument, Shares Issued | shares		2,488,819
Debt Conversion, Original Debt, Amount		$ 821,880
Conversion of Unit Notes, Principal, With Conversion Price 0.25, 0.35 and 0.55 [Member]
Debt Conversion, Converted Instrument, Shares Issued | shares		2,411,004
Conversion of Unit Notes, Unpaid Interest [Member]
Debt Conversion, Converted Instrument, Shares Issued | shares		77,815
Debt Conversion, Original Debt, Accrued Interest Amount		$ 19,725
Vista Note [Member]
Debt Conversion, Converted Instrument, Shares Issued | shares										208,100
Debt Conversion, Original Debt, Amount										$ 52,025
Debt Instrument, Convertible, Number of Equity Instruments							1,269,036
FirstFire Note [Member]
Debt Conversion, Converted Instrument, Shares Issued | shares										383,047
Debt Conversion, Original Debt, Amount										$ 95,761
FirstFire Note [Member] | FirstFire Purchase Agreement [Member]
Debt Instrument, Convertible, Number of Equity Instruments						394,949

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Note 5 - Debt Obligations - Schedule of Debt (Details) - USD ($)		Jun. 30, 2018	Dec. 31, 2017
Convertible notes, Current		$ 782,214	$ 5,248,847
Convertible notes		872,500	1,539,271
Total		2,044,714	6,788,118
Convertible Notes Maturing on July 8, 2017 [Member]
Convertible notes, Current	[1]	280,000	280,000
Convertible Notes Maturing on June 1, 2018 [Member]
Convertible notes, Current			4,468,847
Convertible Note Payable, Matures September 18, 2018 [Member]
Convertible notes, Current		447,975	500,000
Convertible Note Maturing October 16, 2018 [Member]
Convertible notes, Current	[1]	54,239
Line of Credit, Maturing September 1, 2019 [Member]
Line of credit		390,000
Convertible Notes Maturing on July 20, 2019 [Member]
Convertible notes		440,000	440,000
Convertible Notes Maturing on June 17, 2019 [Member]
Convertible notes			283,571
Convertible Notes Maturing on December 31, 2019 [Member]
Convertible notes		75,000	292,000
Note Payable, Maturing March 8, 2023 [Member]
Convertible notes		50,000
Convertible Notes, Maturing on June 20, 2020 [Member]
Convertible notes		125,000	523,700
Convertible Notes, Maturing April 20, 2021 [Member]
Convertible notes		100,000
Convertible Notes, Mature June 15, 2021 [Member]
Convertible notes		$ 82,500

[1] Subsequent to June 30, 2018 these notes were converted to common stock (see Note 12 "Subsequent Events").

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Note 5 - Debt Obligations - Early Conversion of Unit Notes (Details)	1 Months Ended
	May 31, 2018 USD ($)
Debt Conversion, Original Debt, Amount	$ 4,626,238
Convertible Notes Maturing on June 1, 2018 [Member]
Debt Conversion, Original Debt, Amount	3,646,967
Convertible Notes Maturing on June 17, 2019 [Member]
Debt Conversion, Original Debt, Amount	283,571
Convertible Notes Maturing on December 31, 2019 [Member]
Debt Conversion, Original Debt, Amount	217,000
Convertible Notes, Maturing on June 20, 2020 [Member]
Debt Conversion, Original Debt, Amount	$ 478,700

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Note 6 - Share-based Compensation (Details Textual) - USD ($)									6 Months Ended
	Jun. 30, 2018	Jun. 29, 2018	Jun. 22, 2018	Sep. 07, 2017	Jun. 19, 2017	May 02, 2017	Apr. 30, 2017	Feb. 10, 2017	Jun. 30, 2018	Jun. 30, 2017	Feb. 08, 2018	Jan. 16, 2018	Dec. 18, 2017
Share Price											$ 0.3147	$ 0.39	$ 0.41
Share Based Compensation Arrangementby Share Based Payment Award Fair Value Assumptions Forfeiture Rate									0.00%
2018 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period			10 years
Common Stock, Capital Shares Reserved for Future Issuance			40,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant, Increase Each Year, Maximum Percentage		5.00%
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	296,976	296,976
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price	$ 0.43	$ 0.43
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period
The 2007 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross										340,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price										$ 0.65
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period									70,000
The 2007 Equity Incentive Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period				10 years
Outside of the 2007 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross									1,008,268	4,552,201
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price									$ 0.26	$ 0.47
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period									2,400,000	3,866,629
Selling, General and Administrative Expenses [Member]
Allocated Share-based Compensation Expense, Total									$ 696,001	$ 515,959
Selling, General and Administrative Expenses [Member] | 2018 Equity Incentive Plan [Member] | Employee Stock Option [Member]
Allocated Share-based Compensation Expense, Total		$ 127,700
President and Chief Executive Officer [Member]
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
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period						10 years
Employment Agreement, Option, Number of Shares, Expected to Grant						3,731,322
Employment Agreement, Term						5 years
President and Chief Executive Officer [Member] | Non-Qualified Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period						10 years
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price						$ 0.45
Sharebased Compensation Arrangement by Sharebased Payment Award Options Granted in Period, Fair Value						$ 1,679,095
President and Chief Executive Officer [Member] | 2007 Stock Option [Member]
Stock Issued During Period, Shares, New Issues							3,866,630
Investment Options, Exercise Price							$ 0.18
Share Price							$ 0.51
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period							3,866,629
President and Chief Executive Officer [Member] | Shares Issued for the Exercise of 2007 Stock Option [Member]
Stock Issued During Period, Shares, New Issues							2,501,937
President and Chief Executive Officer [Member] | Selling, General and Administrative Expenses [Member] | Non-Qualified Stock Option [Member]
Allocated Share-based Compensation Expense, Total									$ 167,910	27,985
Non-employee Members of the Board of Directors [Member] | The 2007 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross					40,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price					$ 0.43
Non-employee Members of the Board of Directors [Member] | Selling, General and Administrative Expenses [Member] | The 2007 Equity Incentive Plan [Member]
Allocated Share-based Compensation Expense, Total					$ 15,600
Chief Financial Officer [Member] | The 2007 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross								300,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price								$ 0.69
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares								125,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Remaining Number of Shares to Vest Each Month								25,000
Sharebased Compensation Arrangement by Sharebased Payment Award Options Granted in Period, Fair Value								$ 207,000
Chief Financial Officer [Member] | Selling, General and Administrative Expenses [Member] | The 2007 Equity Incentive Plan [Member]
Allocated Share-based Compensation Expense, Total										$ 155,250
Board Of Directors [Member] | Outside of the 2007 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross									1,008,268	820,879
Board Of Directors [Member] | Outside of the 2007 Plan [Member] | Maximum [Member]
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price									$ 0.43	$ 0.67
Board Of Directors [Member] | Outside of the 2007 Plan [Member] | Minimum [Member]
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price									$ 0.23	$ 0.43
Board Of Directors [Member] | Selling, General and Administrative Expenses [Member] | Outside of the 2007 Plan [Member]
Allocated Share-based Compensation Expense, Total									$ 260,671	$ 277,074

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Note 6 - Share-based Compensation - Stock Options (Details) - $ / shares			6 Months Ended
	Jun. 30, 2018	Jun. 29, 2018	Jun. 30, 2018	Jun. 30, 2017
2018 Equity Incentive Plan [Member]
Options outstanding, beginning balance (in shares)
Exercise price per share, beginning balance (in dollars per share)
Weighted average price per share, beginning balance (in dollars per share)
Options outstanding, granted (in shares)	296,976	296,976
Exercise price per share, granted (in dollars per share)	$ 0.43
Weighted average price per share, granted (in dollars per share)	$ 0.43	$ 0.43
Options outstanding, expired (in shares)
Exercise price per share, expired (in dollars per share)
Weighted average price per share, expired (in dollars per share)
Options outstanding, ending balance (in shares)	296,976		296,976
Exercise price per share, ending balance (in dollars per share)	$ 0.43		$ 0.43
Weighted average price per share, ending balance (in dollars per share)	0.43		0.43
Exercise price per share, Balance (in dollars per share)			0.43
Weighted average price per share, Balance (in dollars per share)			$ 0.43
The 2007 Equity Incentive Plan [Member]
Options outstanding, beginning balance (in shares)			9,831,586	9,916,586
Exercise price per share, beginning balance (in dollars per share)
Weighted average price per share, beginning balance (in dollars per share)			$ 0.44	$ 0.44
Options outstanding, granted (in shares)				340,000
Exercise price per share, granted (in dollars per share)
Weighted average price per share, granted (in dollars per share)				$ 0.65
Options outstanding, expired (in shares)			(70,000)
Exercise price per share, expired (in dollars per share)
Weighted average price per share, expired (in dollars per share)			$ 1.79
Options outstanding, ending balance (in shares)	9,761,586		9,761,586	10,256,586
Exercise price per share, ending balance (in dollars per share)
Weighted average price per share, ending balance (in dollars per share)	$ 0.43		$ 0.43	0.44
Exercise price per share, Balance (in dollars per share)
Weighted average price per share, Balance (in dollars per share)	0.43		0.44	0.44
The 2007 Equity Incentive Plan [Member] | Minimum [Member]
Exercise price per share, beginning balance (in dollars per share)			0.23	0.23
Exercise price per share, granted (in dollars per share)				0.39
Exercise price per share, expired (in dollars per share)			1.45
Exercise price per share, ending balance (in dollars per share)	0.23		0.23	0.23
Exercise price per share, Balance (in dollars per share)	0.23		0.23	0.23
The 2007 Equity Incentive Plan [Member] | Maximum [Member]
Exercise price per share, beginning balance (in dollars per share)			1.89	1.89
Exercise price per share, granted (in dollars per share)				0.69
Exercise price per share, expired (in dollars per share)			1.89
Exercise price per share, ending balance (in dollars per share)	1.65		1.65	1.89
Exercise price per share, Balance (in dollars per share)	$ 1.65		$ 1.89	$ 1.89
Outside of the 2007 Plan [Member]
Options outstanding, beginning balance (in shares)			20,018,408	20,148,766
Weighted average price per share, beginning balance (in dollars per share)			$ 0.51	$ 0.43
Options outstanding, granted (in shares)			1,008,268	4,552,201
Weighted average price per share, granted (in dollars per share)			$ 0.26	$ 0.47
Options outstanding, expired (in shares)			(2,400,000)	(3,866,629)
Weighted average price per share, expired (in dollars per share)			$ 0.99	$ 0.18
Options outstanding, ending balance (in shares)	18,626,676		18,626,676	16,967,708
Weighted average price per share, ending balance (in dollars per share)	$ 0.45		$ 0.45	$ 0.41
Weighted average price per share, Balance (in dollars per share)	0.45		0.51	$ 0.43
Options outstanding, exercised (in shares)				(3,866,630)
Weighted average price per share, exercised (in dollars per share)				$ 0.18
Outside of the 2007 Plan [Member] | Minimum [Member]
Exercise price per share, beginning balance (in dollars per share)			0.25	0.18
Exercise price per share, granted (in dollars per share)			0.23	0.43
Exercise price per share, expired (in dollars per share)
Exercise price per share, ending balance (in dollars per share)	0.25		0.25	0.18
Exercise price per share, Balance (in dollars per share)	0.25		0.25	0.18
Exercise price per share, exercised (in dollars per share)
Outside of the 2007 Plan [Member] | Maximum [Member]
Exercise price per share, beginning balance (in dollars per share)			1	1
Exercise price per share, granted (in dollars per share)			0.43	0.67
Exercise price per share, expired (in dollars per share)
Exercise price per share, ending balance (in dollars per share)	1		1	1
Exercise price per share, Balance (in dollars per share)	$ 1		$ 1	1
Exercise price per share, exercised (in dollars per share)

XML

Note 6 - Share-based Compensation - Stock Options, Valuation Assumptions (Details)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Non Plan [Member]
Risk free interest rate
Expected volatility
Expected life in years (Year)	7 years	7 years
Non Plan [Member] | Minimum [Member]
Risk free interest rate	2.43%	2.29%
Expected volatility	548.00%	578.00%
Expected life in years (Year)
Non Plan [Member] | Maximum [Member]
Risk free interest rate	2.91%	2.40%
Expected volatility	563.00%	601.00%
Expected life in years (Year)
The 2007 Equity Incentive Plan [Member]
Risk free interest rate
Expected volatility
Expected life in years (Year)		7 years
The 2007 Equity Incentive Plan [Member] | Minimum [Member]
Risk free interest rate		2.31%
Expected volatility		578.00%
Expected life in years (Year)
The 2007 Equity Incentive Plan [Member] | Maximum [Member]
Risk free interest rate		2.40%
Expected volatility		601.00%
Expected life in years (Year)
2018 Equity Incentive Plan [Member]
Risk free interest rate	2.91%
Expected volatility	548.00%
Expected life in years (Year)	7 years

XML

Note 7 - Warrants (Details Textual) - USD ($)				3 Months Ended			6 Months Ended		12 Months Ended
	Feb. 22, 2018	Feb. 12, 2018	May 24, 2017	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jul. 17, 2017	Feb. 21, 2018	Dec. 11, 2017	Dec. 10, 2017	Dec. 30, 2016	Jul. 08, 2016
Proceeds from Adjustment of Warrant				$ 148,854			$ 148,854
Interest Expense, Total				$ 1,728,799		$ 1,119,273	$ 2,561,207	$ 2,072,829
Class of Warrant or Right, Issued During Period							2,611,513	990,727
Shares Issued, Price Per Share				$ 0.25			$ 0.25
Deemed Dividends							$ 297,439
Lincoln Park Capital Fund, LLC [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights	1,198,784
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 0.25									$ 0.394	$ 0.394
Shares Issued, Price Per Share	$ 0.25
Deemed Dividends	$ 297,439
Warrants, Exercise Price Reduced [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights				4,326,358			4,326,358
Class of Warrant or Right, Exercise Price of Warrants or Rights				$ 0.30			$ 0.30
Warrants Issued Concurrently to the Spring 2018 Unit Offering [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					333,333
Class of Warrant or Right, Exercise Price of Warrants or Rights					$ 0.48
Discount On Convertible Note Payable					$ 49,306
Class of Warrant or Right, Exercise Period Condition, Number of Trading Days Common Stock Closes at or above 2 Times the Exercise Price					30 days
Warrant Subject to Call provision, Threshold Consecutive Trading Days					10 days
Warrants Issued Concurrently with Line of Credit [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					390,000
Class of Warrant or Right, Exercise Price of Warrants or Rights					$ 0.35
Discount On Convertible Note Payable					$ 85,002
Class of Warrant or Right, Exercise Period Condition, Number of Trading Days Common Stock Closes at or above 2 Times the Exercise Price					30 days
Warrant Subject to Call provision, Threshold Consecutive Trading Days					10 days
Warrants Issued Concurrently with Note Payable [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					150,000
Class of Warrant or Right, Exercise Price of Warrants or Rights					$ 0.35
Discount On Convertible Note Payable					$ 4,875
Warrants Vested Monthly Contingent That Outstanding Note Payable is Present					6,250
Minimum Number of Warrants Vested For the Life of the Outstanding Note Payable					25,000
Minimum Number of Warrants Vested For the Life of the Outstanding Note Payable, Fair Value Amount					$ 6,500
Interest Expense, Total					$ 1,625
Warrants Issued Concurrently to the Summer 2017 Unit Offering [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights		$ 0.30
Discount On Convertible Note Payable		$ 103,322
Class of Warrant or Right, Exercise Period Condition, Number of Trading Days Common Stock Closes at or above 2 Times the Exercise Price			10 days
Class of Warrant or Right, Issued During Period		416,478			266,667
Proceeds from Convertible Debt					$ 80,000
Warrants Issued Concurrently With One Year Convertible Note [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights											2,081,216	1,200,000
Class of Warrant or Right, Exercise Price of Warrants or Rights									$ 0.65		$ 0.394		$ 0.70	$ 0.65
Class of Warrant or Right, Issued During Period									400,000
Proceeds from Convertible Debt									$ 250,000
Warrant Term									5 years

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Note 7 - Warrants - Warrants Outstanding (Details) - $ / shares	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Balance, outstanding (in shares)	22,104,817	20,035,114
Balance, outstanding, price range (in dollars per share)
Issued (in shares)	2,611,513	990,727
Issued, price range (in dollars per share)
Exercised (in shares)		(510,000)
Exercised, price range (in dollars per share)		$ 0.30
Balance, outstanding (in shares)	22,032,930	20,515,841
Balance, outstanding, price range (in dollars per share)
Expired (in shares)	(2,683,400)
Expired, price range (in dollars per share)	$ 0.40
Minimum [Member]
Balance, outstanding, price range (in dollars per share)	0.125	0.125
Issued, price range (in dollars per share)	0.25	0.42
Exercised, price range (in dollars per share)
Balance, outstanding, price range (in dollars per share)	0.125	0.125
Expired, price range (in dollars per share)
Maximum [Member]
Balance, outstanding, price range (in dollars per share)	1	1
Issued, price range (in dollars per share)	0.48	0.70
Exercised, price range (in dollars per share)
Balance, outstanding, price range (in dollars per share)	1	$ 1
Expired, price range (in dollars per share)

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Note 7 - Warrants - Assumptions Used to Determine Fair Value of Warrants (Details)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Risk free interest rate	2.54%
Expected volatility	252.00%
Expected life in years (Year)		5 years
Minimum [Member]
Risk free interest rate		1.83%
Expected volatility		293.00%
Expected life in years (Year)	5 years
Maximum [Member]
Risk free interest rate		1.93%
Expected volatility		297.00%
Expected life in years (Year)	10 years

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Note 8 - Accounts Payable and Accrued Expenses (Details Textual) - USD ($)			6 Months Ended
	Jun. 29, 2018	Mar. 31, 2018	Jun. 30, 2018	Jun. 30, 2017
Shares Issued, Price Per Share			$ 0.25
Stock Issued During Period, Value, Issued for Services			$ 446,488
Stock Issued During Period, Value, Paid for Interest			493,827
Unit Offering [Member]
Stock Issued During Period, Value, Issued for Services			$ 493,783
Stock Issued During Period, Share, Paid for Interest			1,919,806	683,875
Stock Issued During Period, Value, Paid for Interest				$ 337,246
Minimum [Member] | Unit Offering [Member]
Shares Issued, Price Per Share			$ 0.31	$ 0.41
Maximum [Member] | Unit Offering [Member]
Shares Issued, Price Per Share			$ 0.42	$ 0.70
Officer [Member]
Stock Issued During Period, Shares, Issued for Services	176,947	323,030
Shares Issued, Price Per Share	$ 0.43	$ 0.26
Stock Issued During Period, Value, Issued for Services	$ 75,968	$ 83,665
Consultants [Member]
Stock Issued During Period, Shares, Issued for Services			948,280	307,829
Stock Issued During Period, Value, Issued for Services			$ 246,966	$ 493,827
Consultants [Member] | Minimum [Member]
Shares Issued, Price Per Share			$ 0.23	$ 0.43
Consultants [Member] | Maximum [Member]
Shares Issued, Price Per Share			$ 0.41	$ 0.52

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Note 8 - Accounts Payable and Accrued Expenses - Summary of Accounts Payable and Accrued Expenses (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Accounts payable and accrued expenses	$ 149,338	$ 88,381
Accrued interest	72,926	50,748
Accrued payroll	32,393	84,976
Total accounts payable and accrued expenses	$ 254,657	$ 224,105

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Note 9 - Noncontrolling Interest (Details Textual) - USD ($)			1 Months Ended		6 Months Ended
	Aug. 04, 2017	Dec. 30, 2015	May 31, 2018	Apr. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Mar. 31, 2017	May 31, 2012
Payments to Noncontrolling Interests						$ 40,000
Shares Issued, Price Per Share					$ 0.25
Debt Conversion, Original Debt, Amount			$ 4,626,238
Clyra [Member]
Minority Interest Decrease From Redemption, Shares Purchased				500
Payments to Noncontrolling Interests				$ 40,000
Stock Issued During Period, Shares, New Issues	1,562.5
Noncontrolling Interest, Increase from Subsidiary Equity Issuance	$ 250,000
Common Stock, Shares Owned	15,297.5
Noncontrolling Interest, Ownership Percentage by Parent	46.30%				46.30%
Clyra Medical Technology Inc [Member]
Equity Method Investment, Ownership Percentage								100.00%
Preferred Stock, Dividend Rate, Percentage		8.00%
Preferred Shares Dividend, Period		5 years
Dividends Payable					$ 150,000
Shares Issued, Price Per Share	$ 160
Proceeds from Issuance of Private Placement	$ 1,000,000
Stock Issued During Period, Shares, New Issues	6,250
Clyra Medical Technology Inc [Member] | Sanatio [Member]
Shares Issued, Price Per Share	$ 160
Stock Issued During Period, Shares, New Issues	1,690
Clyra Medical Technology Inc [Member] | Sanatio [Member]
Line of Credit Facility, Maximum Borrowing Capacity							$ 250,000
Debt Instrument, Interest Rate, Stated Percentage							10.00%
Original Issue Discount, Percentage							5.00%
Debt Conversion, Original Debt, Amount	$ 270,400
Clyra Medical Technology Inc [Member] | Each of 3 Individuals [Member]
Equity Method Investment, Ownership Percentage								46.30%

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Note 10 - BioLargo Engineering, Science and Technologies, LLC (Details Textual)	1 Months Ended
	Sep. 30, 2017 USD ($) shares
BioLargo Engineering, Science & Technologies, LLC [Member]
Noncontrolling Interest, Ownership Percentage by Parent	100.00%
Seven Employees Working at BioLargo Engineering, Science & Technologies, LLC [Member]
Increase To Monthly Budget for Employee Related Liabilities | $	$ 100,000
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 | shares	2,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
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 11 - Commitments and Contingencies (Details Textual) - USD ($)	May 02, 2017	Dec. 30, 2015	Jun. 30, 2018
Consulting Services, Monthly Payment		$ 23,438
Consulting Services, Period of Services		4 years
Contractual Obligation, Total			$ 1,125,024
President and Chief Executive Officer [Member]
Employment Agreement, Annual Base Compensation	$ 288,603
Employment Agreement, Car Allowance Monthly	$ 800
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
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years

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Note 12 - Subsequent Events (Details Textual) - USD ($)			1 Months Ended
	Jul. 16, 2018	Jul. 02, 2018	May 31, 2018	Jun. 30, 2018
Debt Conversion, Original Debt, Amount			$ 4,626,238
Shares Issued, Price Per Share				$ 0.25
Subsequent Event [Member] | Convertible Note Maturing October 16, 2018 [Member]
Debt Instrument, Face Amount	$ 150,000
Convertible Notes Maturing on July 18, 2018 [Member] | Subsequent Event [Member]
Debt Instrument, Face Amount		$ 280,000
Debt Conversion, Original Debt, Amount		280,000
Debt Conversion, Original Debt, Accrued Interest Amount		$ 8,400
Debt Conversion, Converted Instrument, Shares Issued		1,153,600
Shares Issued, Price Per Share		$ 0.25
Debt Instrument, Convertible, Conversion Price		$ 0.42
Convertible Note Maturing October 16, 2018 [Member] | Subsequent Event [Member]
Debt Conversion, Original Debt, Amount	$ 54,239
Debt Conversion, Converted Instrument, Shares Issued	217,960
Shares Issued, Price Per Share	$ 0.25
Debt Conversion, Converted Instrument, Shares Issued for Principal	216,950
Debt Conversion, Converted Instrument, Shares Issued for Accrued Interest	1,010

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Note 12 - Subsequent Events - Schedule of Debt (Details) - USD ($)		Aug. 14, 2018	Jun. 30, 2018	Dec. 31, 2017
Convertible notes, Current			$ 782,214	$ 5,248,847
Convertible notes			872,500	1,539,271
Total			2,044,714	6,788,118
Subsequent Event [Member]
Convertible notes, Current		$ 447,975
Convertible notes		872,500
Total		1,710,475
Convertible Notes Maturing on July 8, 2017 [Member]
Convertible notes, Current	[1]		280,000	280,000
Convertible Notes Maturing on July 8, 2017 [Member] | Subsequent Event [Member]
Convertible notes, Current
Convertible Notes Maturing on June 1, 2018 [Member]
Convertible notes, Current				4,468,847
Convertible Notes Maturing on June 1, 2018 [Member] | Subsequent Event [Member]
Convertible notes, Current
Convertible Note Payable, Matures September 18, 2018 [Member]
Convertible notes, Current			447,975	500,000
Convertible Note Payable, Matures September 18, 2018 [Member] | Subsequent Event [Member]
Convertible notes, Current		447,975
Convertible Note Maturing October 16, 2018 [Member]
Convertible notes, Current	[1]		54,239
Convertible Note Maturing October 16, 2018 [Member] | Subsequent Event [Member]
Convertible notes, Current
Line of Credit, Maturing September 1, 2019 [Member]
Line of credit			390,000
Line of Credit, Maturing September 1, 2019 [Member] | Subsequent Event [Member]
Line of credit		390,000
Convertible Notes Maturing on July 20, 2019 [Member]
Convertible notes			440,000	440,000
Convertible Notes Maturing on July 20, 2019 [Member] | Subsequent Event [Member]
Convertible notes		440,000
Convertible Notes Maturing on December 31, 2019 [Member]
Convertible notes			75,000	292,000
Convertible Notes Maturing on December 31, 2019 [Member] | Subsequent Event [Member]
Convertible notes		75,000
Note Payable, Maturing March 8, 2023 [Member]
Convertible notes			50,000
Note Payable, Maturing March 8, 2023 [Member] | Subsequent Event [Member]
Convertible notes		50,000
Convertible Notes, Maturing on June 20, 2020 [Member]
Convertible notes			125,000	523,700
Convertible Notes, Maturing on June 20, 2020 [Member] | Subsequent Event [Member]
Convertible notes		125,000
Convertible Notes, Maturing April 20, 2021 [Member]
Convertible notes			100,000
Convertible Notes, Maturing April 20, 2021 [Member] | Subsequent Event [Member]
Convertible notes		100,000
Convertible Notes, Mature June 15, 2021 [Member]
Convertible notes			$ 82,500
Convertible Notes, Mature June 15, 2021 [Member] | Subsequent Event [Member]
Convertible notes		$ 82,500

[1] Subsequent to June 30, 2018 these notes were converted to common stock (see Note 12 "Subsequent Events").