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 September 30, 2019.

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   For the transition period from              to             

Commission File Number 000-19709

BIOLARGO, INC.

(Exact name of registrant as specified in its charter)

Delaware	65-0159115
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

14921 Chestnut St.

Westminster, CA 92683

(Address of principal executive offices)

(888) 400-2863

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock	BLGO	OTC Markets (OTCQB)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒     No  ☐

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

Large accelerated filer     ☐   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 November 8, 2019 was 163,916,660 shares.

BIOLARGO, INC.

FORM 10-Q

INDEX

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

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

i

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

BIOLARGO, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2018 AND SEPTEMBER 30, 2019

(in thousands, except for per share data)

	DECEMBER 31, 2018			SEPTEMBER 30, 2019 (unaudited)
Assets
Current assets:
Cash and cash equivalents	$	655		$	2,136
Accounts receivable		257			306
Inventories, net of allowance		26			19
Prepaid expenses and other current assets		17			105
Total current assets		955			2,566
In-process research and development (Note 8)		1,893			1,893
Equipment, net of depreciation		126			106
Other non-current assets		35			35
Right-of-use, operating lease, net of amortization		—			341
Deferred offering cost		176			163
Total assets	$	3,185		$	5,104
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable and accrued expenses	$	501		$	546
Clyra Medical note payable (Note 8)		—			1,007
Notes payable		400			50
Line of credit		430			225
Convertible notes payable		1,365			5,224
Discount on convertible notes payable, and line of credit, net of amortization		(205	)		(2,438	)
Lease liability		—			116
Customer deposit		—			27
Total current liabilities		2,491			4,757
Long-term liabilities:
Convertible notes and note payable		285			700
Clyra Medical note payable (Note 8)		1,007			—
Liability to Clyra Medical shareholder (Note 8)		643			643
Discount on convertible notes payable, net of amortization		(118	)		(211	)
Lease liability		—			225
Total long-term liabilities		1,817			1,357
Total liabilities		4,308			6,114
COMMITMENTS, CONTINGENCIES (Note 11)
STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred Series A, $.00067 Par Value, 50,000,000 Shares Authorized, -0- Shares Issued and Outstanding, at December 31, 2018 and September 30, 2019, respectively.		—			—
Common stock, $.00067 Par Value, 400,000,000 Shares Authorized, 141,466,071 and 158,671,346 Shares Issued, at December 31, 2018 and September 30, 2019, respectively.		95			106
Additional paid-in capital		110,222			119,421
Accumulated other comprehensive loss		(90	)		(91	)
Accumulated deficit		(111,723	)		(120,556	)
Total BioLargo Inc. and Subsidiaries stockholders’ equity (deficit)		(1,496	)		(1,120	)
Non-controlling interest (Note 8)		373			110
Total stockholders’ equity (deficit)		(1,123	)		(1,010	)
Total liabilities and stockholders’ equity (deficit)	$	3,185		$	5,104

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

F-3

BIOLARGO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2019

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

(unaudited)

	THREE MONTHS						NINE MONTHS
	SEPTEMBER 30, 2018			SEPTEMBER 30, 2019			SEPTEMBER 30, 2018			SEPTEMBER 30, 2019
Revenues
Product revenue	$	246		$	396		$	786		$	1,013
Service revenue		31			138			81			311
Total revenue		277			534			867			1,324
Cost of revenue
Cost of goods sold		(98	)		(171	)		(426	)		(448	)
Cost of service		(24	)		(95	)		(60	)		(238	)
Gross profit		155			268			381			638
Selling, general and administrative expenses		1,365			1,803			3,852			4,498
Research and development		442			332			1,391			1,126
Depreciation		13			17			36			48
Operating loss:		(1,665	)		(1,884	)		(4,898	)		(5,034	)
Other (expense) income:
Interest expense		(266	)		(1,289	)		(2,827	)		(2,773	)
Debt conversion expense		—			—			(276	)		—
Loss on debt extinguishment		(578	)		(801	)		(578	)		(1,029	)
Tax credit		73			62			73			62
Grant income		58			26			96			149
Total other expense:		(713	)		(2,002	)		(3,512	)		(3,591	)
Net loss		(2,378	)		(3,886	)		(8,410	)		(8,625	)
Net loss attributable to noncontrolling interest		(118	)		(207	)		(320	)		(572	)
Net loss attributable to common shareholders	$	(2,260	)	$	(3,679	)	$	(8,090	)	$	(8,053	)
Net loss per share attributable to common shareholders:
Loss per share attributable to shareholders – basic and diluted	$	(0.02	)	$	(0.02	)	$	(0.07	)	$	(0.05	)
Weighted average number of common shares outstanding:		130,445,351			156,435,220			118,057,635			148,239,912
Comprehensive loss:
Net loss	$	(2,378	)	$	(3,886	)	$	(8,410	)	$	(8,625	)
Foreign currency translation		47			(4	)		(5	)		(1	)
Comprehensive loss		(2,331	)		(3,890	)		(8,415	)		(8,626	)
Comprehensive loss attributable to noncontrolling interest		(118	)		(207	)		(320	)		(572	)
Comprehensive loss attributable to common stockholders	$	(2,213	)	$	(3,683	)	$	(8,095	)	$	(8,053	)

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

F-4

BIOLARGO, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2019

(in thousands, except for share data)

(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	$	70	$	97,093	$	(101,205	)	$	(62	)	$	695		$	(3,409	)
Issuance of common stock for services		714,436		—		196		—			—			—			196
Issuance of common stock for interest		617,072		—		165		—			—			—			165
Financing fee in stock		252,385		—		85		—			—			—			85
Sale of stock for cash		658,226		—		168		—			—			—			168
Stock option compensation expense		—		—		320		—			—			—			320
Warrants and beneficial conversion feature issued as discount on convertible notes payable, note payable and line of credit		—		—		282		—			—			—			282
Deemed dividend		—		—		297		(297	)		—			—			—
Net loss		—		—		—		(2,323	)		—			(107	)		(2,430	)
Foreign currency translation		—		—		—		—			8			—			8
Balance, March 31, 2018		106,406,584		70		98,606		(103,825	)		(54	)		588			(4,615	)
Conversion of notes		19,298,723		13		6,215		—			—			—			6,228
Issuance of common stock for services		733,821		—		250		—			—			—			250
Issuance of common stock for interest		1,302,734		1		327		—			—			—			329
Sale of stock for cash		617,145		—		212		—			—			—			212
Warrant exercise price reduction for cash		—		—		149		—			—			—			149
Stock option compensation expense		—		—		376		—			—			—			376
Warrants and beneficial conversion feature issued as discount on convertible notes payable, note payable and line of credit		—		—		32		—			—			—			33
Net loss		—		—		—		(3,505	)		—			(95	)		(3,600	)
Foreign currency translation		—		—		—		—			(7	)		—			(7	)
Balance, June 30, 2018		128,359,007		84		106,167		(107,330	)		(61	)		493			(645	)
Conversion of notes		1,336,952		1		333		—			—			—			334
Issuance of common stock for services		691,791		—		198		—			—			—			198
Issuance of common stock for interest		83,062		—		21		—			—			—			21
Sale of stock for cash		1,565,762		1		444		—			—			—			445
Stock option compensation expense		—		—		288		—			—			—			288
Warrants and beneficial conversion feature issued as discount on convertible notes payable, note payable and line of credit		—		—		256		—			—			—			256
Fair value of warrants for extension of debt		—		—		506		—			—			—			506
Net loss		—		—		—		(2,260	)		—			(118	)		(2,378	)
Foreign currency translation		—		—		—		—			(80	)		—			(80	)
Balance, September 30, 2018		132,036,574		86		108,213		(109,590	)		(141	)		375			(1,055	)

F-5

	Common stock				Additional paid-in		Accumulated			Accumulated other comprehensive			Non- controlling			Total stockholders’ equity
	Shares		Amount		capital		deficit			Loss			interest			(deficit)
Balance, December 31, 2018		141,466,071	$	95	$	110,222	$	(111,723	)	$	(90	)	$	373		$	(1,123	)
Conversion of notes		1,638,479		1		218		—			—			—			219
Issuance of common stock for service		1,229,541		1		205		—			—			—			206
Issuance of common stock for interest		139,362		—		25		—			—			—			25
Stock option compensation expense		—		—		352		—			—			—			352
Warrants and conversion feature issued as discount on convertible notes payable and line of credit		—		—		1,115		—			—			—			1,115
Issuance of Clyra Medical common stock		—		—		21		—			—			89			110
Fair value of warrants for extension of debt		—		—		56		—			—			—			56
Deemed dividend for the change in accounting for derivative liability		—		—		342		(342	)		—			—			—
Net loss		—		—		—		(2,576	)		—			(173	)		(2,749	)
Foreign currency translation		—		—		—		—			(4	)		—			(4	)
Balance, March 31, 2019		144,473,453		97		112,556		(114,641	)		(94	)		289			(1,793	)
Conversion of notes		2,767,833		2		294		—			—			—			296
Issuance of common stock for service		981,684		—		213		—			—			—			213
Issuance of common stock for interest		87,478		—		15		—			—			—			15
Warrant exercise		3,744,456		3		101		—			—			—			104
Stock issuance to officer (see note 7)		500,000		—		—		—			—			—			—
Stock option compensation expense		—		—		296		—			—			—			296
Warrants and conversion feature issued as discount on convertible notes payable and line of credit		—		—		756		—			—			—			756
Issuance of Clyra Medical common stock		—		—		74		—			—			111			185
Deemed dividend for the change in accounting for derivative liability		—		—		440		(440	)		—			—			—
Net loss		—		—		—		(1,795	)		—			(192	)		(1,987	)
Foreign currency translation		—		—		—		—			(4	)		—			(4	)
Balance, June 30, 2019		152,554,904		102		114,745		(116,876	)		(98	)		208			(1,919	)
Conversion of notes		2,791,300		2		392		—			—			—			394
Issuance of common stock for service		629,198		—		166		—			—			—			166
Issuance of common stock for interest		395,944		—		107		—			—			—			107
Warrant exercise		2,300,000		2		274		—			—			—			276
Convert BioLargo convertible note to Clyra Medical shares		—		—		440		—			—			—			440
Stock option compensation expense		—		—		552		—			—			—			552
Debt extinguishment expense		—		—		619		—			—			—			619
Warrants and conversion feature issued as discount on convertible notes payable and line of credit		—		—		2,060		—			—			—			2,060
Issuance of Clyra Medical common stock		—		—		66		—			—			109			175
Net loss		—		—		—		(3,680	)		—			(207	)		(3,887	)
Foreign currency translation		—		—		—		—			7			—			7
Balance, September 30, 2019		158,671,346	$	106	$	119,421	$	(120,556	)	$	(91	)	$	110		$	(1,010	)

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

F-6

BIOLARGO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2019

(in thousands, except for per share data)

(unaudited)

	SEPTEMBER 30, 2018			SEPTEMBER 30, 2019
Cash flows from operating activities
Net loss	$	(8,410	)	$	(8,625	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock option compensation expense		984			1,201
Common stock issued in lieu of salary to officers and fees for services from vendors		644			587
Common stock issued for interest		519			147
Interest expense related to amortization of the discount on convertible notes payable and line of credit and deferred financing costs		2,213			2,381
Interest expense related to the fair value of warrants issued as consent for variable debt		—			54
Debt conversion expense		276			—
Loss on extinguishment of debt		578			1,029
Bad debt expense		1			—
Deferred offering expense		19			13
Depreciation expense		36			48
Changes in assets and liabilities:
Accounts receivable		(19	)		(72	)
Inventories		8			7
Accounts payable and accrued expenses		143			88
Prepaid expenses and other current assets		(43	)		(66	)
Customer deposits		—			27
Net cash used in operating activities		(3,051	)		(3,181	)
Cash flows from investing activities
Leasehold improvements		(43	)		(27	)
Net cash used in investing activities		(43	)		(27	)
Cash flows from financing activities
Proceeds from convertible notes payable		880			4,335
Proceeds from conversion inducement		357			—
Proceeds from warrant exercise-price reduction		149			—
Proceeds from warrant exercise		—			380
Proceeds from the sale of stock in Clyra Medical		—			470
Repayment of notes payable		—			(495	)
Proceeds from sale of stock to Lincoln Park Capital		827			—
Proceeds from line of credit		430			—
Net cash provided by financing activities		2,643			4,690
Net effect of foreign currency translation		(5	)		(1	)
Net change in cash		(456	)		1,481
Cash at beginning of year		990			655
Cash at end of period	$	534		$	2,136
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest	$	5		$	116
Income taxes	$	6		$	3
Non-cash investing and financing activities
Fair value of warrants issued with convertible notes	$	570		$	3,931
Conversion of convertible notes payable into common stock	$	5,930		$	908
Convertible Notes issued with Original Issue Discount	$	10		$	1,008
Conversion of convertible note payable into shares of Clyra	$	—		$	440
Exercise of stock options	$	2		$	—
Fair value of stock issued for financing fees	$	85		$	—
Right of use, operating lease and liability	$	—		$	341
Deemed dividend	$	297		$	781

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

F-7

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Business and Organization

Description of Business 

BioLargo, Inc. delivers innovative and sustainable technology-based products and services, as well as environmental engineering expertise, across a broad range of industries with an overriding mission to “make life better” with a focus on clean water, clean air, and advanced wound care. Our business strategy is straightforward: we invent or acquire technologies that we believe have the potential to be disruptive in large commercial markets; we develop and validate these technologies to advance and promote their commercial success as we leverage our considerable scientific, engineering, and entrepreneurial talent; we then monetize these technical assets through a variety of business structures that may include licensure, joint venture, sale, spin off, or by deploying direct to market strategies.

Liquidity / Going concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of our business. For the nine months ended September 30, 2019, we had a net loss of $8,625,000, used $3,181,000 cash in operations, and at September 30, 2019, had a working capital deficit of $2,191,000 and current assets of $2,566,000. We have been, and anticipate that we will continue to be, limited in terms of our capital resources. During the year ended December 31, 2018, and the nine months ended September 30, 2019, we generated revenues of $1,364,000 and $1,324,000 through our business segments (Odor-No-More and BLEST – see Note 10, “Business Segment Information”). Neither generated an operating profit sufficient to fund their operations.

As of September 30, 2019, we had approximately $2.1 million cash on hand, and over $5 million current debt obligations. Subsequent to September 30, 2019, $645,000 have been satisfied through the payment of cash, and $609,000 through conversion to our common stock (see Note 12). As of the date of this Report, one debt obligation due within 12 months, in the amount of $370,000, must be paid in cash if the investor does not exercise the right to convert the note to our common stock (see Note 4, “Convertible Note, matures April 7, 2020”). Additionally, we have approximately $3.2 million in 12-month OID notes due within 12 months, which will be converted to common stock unless the Company receives at least $3.5 million in gross proceeds from a financing transaction. All other debt obligations due within 12 months are convertible at maturity. We continue to raise money through private securities offerings, and continue to negotiate for more substantial financings from private and institutional investors. During the nine months ended September 30, 2019, we received $4,690,000 net cash provided by financing activities, and at September 30, 2019 had cash of $2,136,000.

The foregoing factors raise substantial doubt about our ability to continue as a going concern. Ultimately, our ability to continue as a going concern is dependent upon our ability to attract significant new sources of capital, attain a reasonable threshold of operating efficiencies and achieve profitable operations by licensing or otherwise commercializing products incorporating our technologies. The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Organization

We are a Delaware corporation formed in 1991. We have five wholly-owned subsidiaries: BioLargo Life Technologies, Inc., organized under the laws of the State of California in 2006; Odor-No-More, Inc., organized under the laws of the State of California in 2009; BioLargo Water Investment Group Inc. organized under the laws of the State of California in 2019, which wholly owns BioLargo Water, Inc., organized under the laws of Canada in 2014; BioLargo Development Corp., organized under the laws of the State of California in 2016; and BioLargo Engineering Science and Technologies, LLC, organized under the laws of the State of Tennessee in 2017 (“BLEST”). Additionally, we own 38% of Clyra Medical Technologies, Inc. (“Clyra Medical”), organized under the laws of the State of California in 2012, and consolidate their financial statements (see Notes 2 and 8).

The unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to Rule 8-03 of Regulation S-X under the Securities Act of 1933, as amended. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for annual financial statements.  In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. For some of our activities, we are still operating in the early stages of the sales and distribution process, and therefore our operating results for the nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019, or for any other period. These unaudited consolidated financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2019, as amended.

8

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 2. Summary of Significant Accounting Policies

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

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and Clyra Medical. Management believes Clyra Medical’s financial statements are appropriately consolidated with that of the Company after reviewing the guidance of ASC Topic 810, “Consolidation”, and concluding that BioLargo controls Clyra Medical. While BioLargo does not have voting interest control through a majority stock ownership of Clyra Medical (it owns 38% of the outstanding voting stock), it does exercise control under the “Variable Interest Model”: there is substantial board overlap, BioLargo is the primary beneficiary since it has the power to direct Clyra Medical’s activities that most significantly impact Clyra Medical’s performance, and it has the obligation to absorb losses or receive benefits (through royalties and licensing) that could be potentially significant to Clyra Medical. BioLargo has consolidated Clyra Medical’s operations for all periods presented. All intercompany accounts and transactions have been eliminated (see Note 8).

Foreign Currency

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

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less when acquired to be cash equivalents. Substantially all cash equivalents are held in short-term money market accounts at one of the largest financial institutions in the United States. From time to time, our cash account balances are greater than the Federal Deposit Insurance Corporation insurance limit of $250,000 per owner per bank, and during such times, we are exposed to credit loss for amounts in excess of insured limits in the event of non-performance by the financial institution. We do not anticipate non-performance by our financial institution.

As of December 31, 2018 and September 30, 2019, our cash balances were made up of the following (in thousands):

	December 31, 2018		September 30, 2019
BioLargo, Inc. and wholly owned subsidiaries	$	193	$	2,071
Clyra Medical Technologies, Inc.		462		65
Total	$	655	$	2,136

Accounts Receivable

Trade accounts receivable are recorded net of allowances for doubtful accounts. Estimates for allowances for doubtful accounts are determined based on payment history and individual customer circumstances. The allowance for doubtful accounts as of December 31, 2018 and September 30, 2019 was zero.

Credit Concentration

During the nine months ended September 30, 2018 and 2019, we had two customers that each accounted for more than 10% of consolidated revenues in the respective periods, as follows:

	September 30, 2018			September 30, 2019
Customer A		44	%		13	%
Customer B		12	%		<10	%
Customer C		<10	%		10	%

9

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

We had two customers that accounted for more than 10% of consolidated accounts receivable at December 31, 2018 and at September 30, 2019 as follows:

	December 31, 2018			September 30, 2019
Customer W		12	%		<10	%
Customer X		31	%		<10	%
Customer Y		<10	%		17	%
Customer Z		<10	%		15	%

Inventory

Inventories are stated at the lower of cost or net realizable value using the average cost method. The allowance for obsolete inventory as of December 31, 2018 and September 30, 2019 was $3,000. As of December 31, 2018 and September 30, 2019, inventories consisted of (in thousands):

	December 31, 2018		September 30, 2019
Raw material	$	14	$	10
Finished goods		12		9
Total	$	26	$	19

Impairment

Long-lived and definite lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected future undiscounted cash flows from the use of the asset and its eventual disposition is less than the carrying amount of the asset, then an impairment loss is recognized. The impairment loss is measured based on the fair value of the asset. Any resulting impairment is recorded as a reduction in the carrying value of the related asset in excess of fair value and a charge to operating results. As of December 31, 2018 and September 30, 2019, management determined that there was no impairment of its long-lived assets.

Earnings (Loss) Per Share

We report basic and diluted earnings (loss) per share (“EPS”) for common and common share equivalents. Basic EPS is computed by dividing the loss attributable to common shareholders by the weighted average shares outstanding. Diluted EPS is computed by adding to the weighted average shares the dilutive effect if stock options and warrants were exercised into common stock. For the three and nine months ended September 30, 2018 and 2019, the denominator in the diluted EPS computation is the same as the denominator for basic EPS due to the anti-dilutive effect of the warrants and stock options on the Company’s net loss.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period reported. Actual results could differ from those estimates. Estimates are used when accounting for stock-based transactions, debt transactions, derivative liabilities, allowance for bad debt, asset depreciation and amortization, among others.

10

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The methods, estimates and judgments we use in applying these most critical accounting policies have a significant impact on the results of our financial statements.

Share-Based Compensation Expense

We recognize compensation expense for stock option awards on a straight-line basis for employees over the applicable service period of the award, which is the vesting period. We recognize compensation expense for stock option awards for non-employees at the fair value on the grant date. Generally, the options issued to non-employees have been earned upon issuance. For the instances that options are issued to non-employees with a vesting schedule, the fair value is calculated on the grant date and the expense is amortized and recorded according to the vesting schedule. Share-based compensation expense is based on the grant date fair value estimated using the Black-Scholes Option Pricing Model.

For stock and stock options issued to consultants and other non-employees for services, the Company measures and records an expense as of the earlier of the date at which either: a commitment for performance by the non-employee has been reached or the non-employee’s performance is complete. The equity instruments are measured at the current fair value, and for stock options, the instruments are measured at fair value on the grant date using the Black Scholes option model.

The following methodology and assumptions were used to calculate share-based compensation for the nine months ended September 30, 2018 and 2019:

	2018								2019
	Non Plan				2018 Plan				Non Plan				2018 Plan
Risk free interest rate	2.43	–	2.91	%			2.91	%	2.00	-	2.65	%	2.00	-	2.65	%
Expected volatility	538	-	563	%	538	-	548	%	147	-	152	%	147	-	152	%
Expected dividend yield			—				—				—				—
Forfeiture rate			—				—				—				—
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 granted to employees and Directors. A significant number of our stock option grants are fully vested at issuance or have short vesting provisions. Therefore, we have estimated the forfeiture rate of our outstanding stock options as zero.

Warrants issued with other securities

Warrants issued with our convertible promissory notes, note payables, and lines of credit are accounted for under the fair value and relative fair value method.

The warrant is first analyzed per its terms as to whether it has derivative features or not. If the warrant is determined to be a derivative and not qualify for equity treatment, then it is measured at fair value using the Black Scholes option model, and recorded as a liability on the balance sheet. The warrant is re-measured at its then current fair value at each subsequent reporting date (it is “marked-to-market”).

If the warrant is determined to not have derivative features, it is recorded into equity at its fair value using the Black Scholes option model, however, limited to a relative fair value based upon the percentage of its fair value to the total fair value including the fair value of the convertible note.

11

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

The warrant and BCF relative fair values are also recorded as a discount to the convertible promissory notes. As presented, these equity features of the convertible promissory notes have recorded a discount to the convertible notes that is substantially equal to the proceeds received.

Debt Modification and Extinguishment

Per the guidance of ASC 470-50, Debt Modifications and Extinguishments, modified terms are considered substantially different if the present value of the cash flows after modification differ by at least 10% prior to the modification. If so, it is an extinguishment of the debt. Loss on extinguishment of debt is calculated by analyzing fair value of the new debt instrument and its beneficial conversion feature, if any, plus the value of the warrant issued with the new debt instrument, if any, and comparing with the carrying value of the extinguished debt.

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.

For product revenue, we identify the contract with the customer through a written purchase order (which may be part of a national purchasing agreement), 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. We recognize revenue at a point in time when the order for its goods are shipped if the agreement with our customer is FOB our warehouse facility, and when goods are delivered to its customer if the agreement with our customer is FOB destination. Revenue is recognized with a reduction for sales discounts, as appropriate and negotiated in the customer’s purchase order.

For service revenue, we identify services to be performed in a written contract, which specifies the performance obligations and the rate at which the services will be billed. Each service is separately negotiated and priced. Revenue is recognized as services are performed and completed. Service contracts typically call for invoicing for time and materials incurred for that contract. To date, there have been no discounts or other financing terms for the contracts.

In the future, we may generate revenues from royalties or license fees from our intellectual property. In the event we do so, we anticipate a licensee would pay a license fee in one or more installments and ongoing royalties based on their sales of products incorporating or using our licensed intellectual property. Upon entering into a licensing agreement, we will determine the appropriate method of recognizing the royalty and license fees.

12

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Government Grants

We have been awarded multiple research grants from governmental and quasi-governmental institutions. The grants received are considered “other income” and are included in our Consolidated Statements of Operations and Comprehensive Loss. We received our first grant in 2015 and have been awarded over 65 grants totaling over $3.6 million. Some of the funds from these grants are given directly to third parties (such as the University of Alberta or a third-party research scientist) to support research on our technology. The grants have terms generally ranging between nine and eighteen months and support a majority, but not all, of the related research budget costs. This cooperative research allows us to utilize (i) a depth of resources and talent to accomplish highly skilled work, (ii) financial aid to support research and development costs, (iii) independent and credible validation of our technical claims.

The grants typically provide for (i) recurring monthly amounts, (ii) reimbursement of costs for research talent for which we invoice to request payment, and (iii) ancillary cost reimbursement for research talent travel related costs. All awarded grants have specific requirements on how the money is spent, typically to employ researchers. None of the funds may be used for general administrative expenses or overhead in the United States. These grants have substantially increased our level of research and development activities in Canada. We continue to apply for Canadian government and agency grants to fund research and development activities. Not all of our grant applications have been awarded, and no assurance can be made that any pending grant application, or any future grant applications, will be awarded.

Income Taxes

The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of asset and liabilities. Deferred tax assets and liabilities are determined based on the differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on deferred tax asset and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

We account for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by generally accepted accounting principles (“GAAP”). Under GAAP, the tax effects of a position are recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the position are recognized.

Fair Value of Financial Instruments

Management believes the carrying amounts of the Company’s financial instruments (excluding debt and equity instruments) as of December 31, 2018 and September 30, 2019 approximate their respective fair values because of the short-term nature of these instruments. Such instruments consist of cash, accounts receivable, prepaid assets, accounts payable, lines of credit, and other assets and liabilities.

Tax Credits

Our research and development activities in Canada may entitle our Canadian subsidiary to claim benefits under the “Scientific Research and Experimental Development Program”, a Canadian federal tax incentive program designed to encourage Canadian businesses of all sizes and in all sectors to conduct research and development in Canada. Benefits under the program include credits to taxable income. If our Canadian subsidiary does not have taxable income in a reporting period, we instead receive a tax refund from the Canadian Revenue Authority. Those refunds are classified in Other Income on our Consolidated Statement of Operations and Comprehensive Loss.

Recent Accounting Pronouncements

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

13

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

In February 2016, the FASB issued ASU Update No. 2016-02, “Leases,” which requires lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability, and lessors to recognize a net lease investment. Additional qualitative and quantitative disclosures are also required. We adopted this standard effective January 1, 2019 using the modified retrospective transition method approved by the FASB in July 2018, which resulted in a $399,000 gross up of assets and liabilities; this balance may fluctuate over time as we enter into new leases, extend or terminate current leases. As of September 30, 2019, the gross up of our balance sheet related to our operating leases totals $341,000.

Note 3. Lincoln Park Financing

On August 25, 2017, we entered into a stock purchase agreement (“LPC Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park agreed to purchase from us at our request up to an aggregate of $10 million of our common stock (subject to certain limitations) from time to time over a period of three years. The LPC Purchase Agreement allows us, from time to time and at our sole discretion, to direct Lincoln Park to purchase shares of our common stock, subject to limitations in both volume and dollar amount. The purchase price of the shares that may be sold to Lincoln Park under the Purchase Agreement is the lower of (i) the lowest sale price on the date of purchase, or (ii) the average of the three lowest closing prices in the prior 12 business days. There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the LPC Purchase Agreement or LPC RRA other than a prohibition on entering into a “Variable Rate Transaction,” as defined in the Purchase Agreement. Lincoln Park may not assign or transfer its rights and obligations under the Purchase Agreement.

We did not sell any shares to Lincoln Park during the nine months ended September 30, 2019. Since we have not used this financing option during 2019, in September 2019, we began amortizing the deferred offering cost to interest expense over the remaining term through September 30, 2020. We recorded $13,000 of interest expense during the nine months ended September 30, 2019, and we will record $13,000 of interest expense per month through September 30, 2020.

During the nine months ended September 30, 2018, we elected to sell to Lincoln Park 2,800,733 shares of our common stock for which we received $826,000. Additionally, we issued Lincoln Park 40,400 “additional commitment” shares, pursuant to the LPC Purchase Agreement. We record stock sales in our equity statement and the additional commitment shares issued reduce the deferred offering costs on our balance sheet.

14

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 4. Debt Obligations

The following table summarizes our debt obligations outstanding as of December 31, 2018 and as of September 30, 2019 (in thousands). A portion of these debt obligation have been paid or converted to our common stock (see Note 12).

	December 31, 2018		September 30, 2019
Current liabilities:
Notes payable and line of credit
Notes payable, previously due September 6, 2019	$	400	$	—
Note payable, due on demand 60 days’ notice (or March 8, 2023)		—		50
Line of credit, due on demand 30 days’ notice after September 1, 2019		430		225
Note payable issued by Clyra Medical to Scion, matures June 17, 2020 (Note 8)		—		1,007
Total notes payable and line of credit	$	830	$	1,282
Convertible notes payable:
Convertible note, matured January 11, 2019		300		—
Convertible note, matures July 20, 2019(1)		440		—
Convertible nine-month OID notes, mature beginning October 2019(2)		—		213
Convertible three-month OID note, matures November 12, 2019(2)		—		110
Convertible notes, mature December 7, 2019(2)		—		185
Convertible notes, mature December 31, 2019(1)		75		75
Convertible notes, mature February 14 and March 17, 2020(2)		—		200
Convertible note, matures February 28, 2020(2)		550		101
Convertible note, matures March 4, 2020		—		—
Convertible note, matures April 7, 2020		—		370
Convertible note, matures April 18, 2020(2)		—		220
Convertible note, matures June 20, 2020(1)		—		25
Convertible 12-month OID notes, mature beginning June 2020		—		3,175
Convertible notes, mature August 12 and 16, 2020		—		550
Total convertible notes payable	$	1,365	$	5,224
Total current liabilities	$	2,195	$	6,506
Long-term liabilities:
Convertible note payable, matures August 9, 2021		—		600
Note payable issued by Clyra Medical to Scion, matures June 17, 2020 (See Note 8)		1,007		—
Convertible notes payable, mature June 20, 2020(1)		25		—
Convertible notes payable, mature April 20, 2021(1)		100		100
Convertible notes, mature June 15, 2021(1)		110		—
Note payable, matures March 8, 2023 (or on demand 60 days’ notice)		50		—
Total long-term liabilities	$	1,292	$	700
Total	$	3,487	$	7,206

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

⁽²⁾    These notes have been paid and/or converted to common stock subsequent to September 30, 2019 (see Note 12).

15

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following discussion includes debt instruments to which amendments were made during the three months ended September 30, 2019, and includes other activity that management deemed appropriate to disclose. Each of the debt instruments contained in the above table are more fully disclosed in the financial statements contained in the Company’s Annual Report filed with the SEC on March 29, 2019.

Notes payable, mature August 12 and 16, 2020 (previously due September 6, 2019)

On June 4, 2019, we exercised our right to extend the maturity dates of two promissory notes due June 5, 2019 which were originally issued September 19, 2018 to Vernal Bay Investments, LLC (“Vernal”) and Chappy Bean, LLC (“Chappy Bean”). Our election to extend the maturity dates increased the principal amount of each note by 10%, such that the aggregate principal balance of the two notes increased to $484,000 as of June 4, 2019. The extended maturity date was September 6, 2019. On August 12, 2019, Vernal agreed to refinance the $380,000 principal and interest due September 6, 2019, through the issuance of amended and restated convertible promissory note in the principal amount of $475,000 due in 12 months, which included a 25% original issue discount, and is convertible by the holder at $0.17 per share. The interest rate was reduced from 18% to 5% per annum. Vernal also received a stock purchase warrant (see Note 6). On August 16, 2019, Chappy Bean agreed to refinance the $60,000 remaining on its note due September 6, 2019, through the issuance of amended and restated convertible promissory note in the principal amount of $75,000 due in 12 months, which included a 25% original issue discount, and is convertible by the holder at $0.17 per share. The interest rate was reduced from 18% to 5% per annum. Chappy Bean also received a stock purchase warrant (see Note 6).

The total of the fair value of the warrants and the fair value of the new notes and their beneficial conversion features exceeded the carrying value of the old notes by $422,000, resulting in a loss on debt extinguishment recorded on our statement of operations.

Line of credit, due on demand 30 days’ notice after September 1, 2019

During July and August 2019, line of credit holders in the principal amount of $205,000, agreed to satisfy the line of credit through the issuance of an amended and restated convertible promissory note totaling $256,000 due in 12 months, August 2020, including a 25% original issue discount. They also received a warrant to purchase 1,130,515 shares of our common stock (See Note 6). The amended and restated note is convertible by the holder at $0.17 per share. The interest rate was reduced from 18% to 5% per annum.

The total of the fair value of the warrant and the fair value of the new note and its beneficial conversion feature exceeded the carrying value of the old note by $315,000, resulting in a loss on debt extinguishment recorded on our statement of operations.

As of September 30, 2019, the line of credit outstanding balance totaled $225,000. Subsequent to September 30, 2019, the remaining balance of $225,000 was paid in full (see Note 12).

Convertible Notes, mature June 15, 2021 (OID Note)

During September 2019, the notes holders of the June 15, 2021 convertible notes totaling $110,000 agreed to satisfy these notes through the issuance of an amended and restated convertible promissory note totaling $125,000 due in 12 months, September 2020, including a 25% original issue discount. They also received a warrant to purchase 551,471 shares of our common stock (See Note 6). The amended and restated note is convertible by the holder at $0.17 per share. The interest rate was reduced from 18% to 5% per annum.

The total of the fair value of the warrant and the fair value of the new note and its beneficial conversion feature exceeded the carrying value of the old note by $64,000, resulting in a loss on debt extinguishment recorded on our statement of operations.

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

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

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

16

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Convertible note, matured July 20, 2019

On the July 20, 2019 maturity date, the holder of a note in the principal amount of $440,000 elected to convert the principal amount due on the note into 2,000 shares of Clyra Medical common stock held by BioLargo, and $106,600 in accrued and unpaid interest into 384,980 shares of BioLargo common stock using the 20-day closing average of $0.27 per share. (See Note 10).

Convertible Nine-Month OID Notes

During the three months ended March 31, 2019, we issued convertible promissory notes (each, an “OID Note”) in the aggregate principal amount of $213,000, with a 25% original issue discount. These notes were initially convertible into shares of the Company’s common stock at a conversion price of $0.25 per share, and mature nine months from the date of issuance. Our agreement with the investors provided that the initial conversion price may be adjusted downward in the event the Company subsequently issues a convertible promissory note at a lower conversion rate (with this lower conversion rate becoming the adjusted conversion rate under the OID Note), or conducts an equity offering at a per-share price less than $0.25. Each investor also received a stock purchase warrant equal to 75% of the principal amount, divided by the conversion price of $0.25 (see Note 6).

On June 7, 2019, we began issuing twelve-month OID notes at a lower conversion price ($0.17; see “Convertible Twelve-month OID notes”, below). As such, we reduced conversion prices of these notes to $0.17, resulting in an increase of 300,000 shares available for purchase under the warrants.

Subsequent to September 30, 2019, these notes converted to common stock (see Note 12).

Convertible Three-month OID note, matures November 12, 2019

On August 15, 2019, we received $100,000 and issued a convertible promissory note in the aggregate principal amount of $110,000, with a 10 % original issue discount, to one accredited investor. The convertible note is due November 12, 2019. The note is convertible at the holder’s option at $0.17 per share. The original issue discount totaling $10,000 and the intrinsic value of the beneficial conversion feature resulted in a fair value totaling $47,000, are both recorded as discount on convertible notes and will be amortized to interest expense over the term of the note.

Subsequent to September 30, 2019, this note was converted to common stock (see Note 12).

Convertible Notes, matures and December 7, 2019 (Tangiers)

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

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

On July 29, 2019, Tangiers Global, LLC, elected to convert $369,000 principal amount due on its promissory note issued January 31, 2019, into 2,640,000 shares of common stock. As of September 30, 2019, the outstanding note balance totals $185,000.

Subsequent to September 30, 2019, the remaining balance of the note was converted to common stock (see Note 12).

17

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Convertible notes, mature February 14 and March 17, 2020

On May 14, 2019, we received $95,000 and issued a convertible note to Crossover Capital Fund I, LP (“Crossover Capital”) in the principal amount of $110,000, representing a 10% original issue discount, and a deduction of $5,000 for legal fees and due diligence. The note is due nine months from the date of issuance, on February 14, 2020. On June 17, 2019, we received a second investment from Crossover Capital in the amount of $77,000 and issued a convertible note in the principal amount of $90,000, representing a 10% original issue discount, and a deduction of $5,000 for legal fees and due diligence. The note is due nine months from the date of issuance, March 17, 2020. The notes are convertible at the option of Crossover Capital at a conversion price equal to 70% of the lowest closing bid price of our common stock during the 25 trading days prior to the conversion date. The intrinsic value of the beneficial conversion features resulted in an aggregate fair value of $134,000 recorded as a discount on convertible notes on our balance sheet which will be amortized over the terms of the notes as interest expense.

Subsequent to September 30, 2019, we paid these notes in full (see Note 12).

Convertible Note, matures February 28, 2020 (Vista Capital)

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

On March 28, 2019, we and Vista agreed to further extend the maturity date of the Vista 2017 Note, to July 15, 2019. In consideration for the extension, we agreed to increase the principal balance of the note by 10 percent, to $420,000. The increase in principal totaling $38,000 was recorded as a loss on debt extinguishment on our statement of operations. On July 16, 2019, we and Vista further agreed to extend the maturity date to August 31, 2019 and again on August 13, 2019, we and Vista Capital agreed to extend by nine months the maturity date to February 28, 2020. No additional consideration was given for these extensions.

During the nine months ended September 30, 2019, Vista Capital elected to convert $550,000 of the outstanding principal of the Vista 2017 Note, and we issued 4,557,611 shares of our common stock to Vista pursuant to the conversions. As of September 30, 2019, the outstanding balance on the Vista Note totaled $101,000.

Subsequent to September 30, 2019, the remaining balance of the note was converted to common stock (see Note 12).

Convertible note, matures March 4, 2020

On June 4, 2019, we received $95,000 and issued a convertible note to EMA Financial, LLC (“EMA”) in the principal amount of $110,000 (the “EMA Note”), representing a 10% original issue discount, and a deduction of $5,000 for legal and diligence fees. The note is due nine-months from the date of issuance, on March 4, 2020, and earns interest at a rate of 10% per annum.

The EMA Note is convertible at the option of EMA at a conversion price equal to 70% of the lowest closing bid price of the Company’s common stock during the 25 trading days prior to the conversion date. We may prepay the EMA Note at any time. If we do so up to 90 days after the effective date, the amount due is equal to 125% of the unpaid principal amount of the note along with any accrued interest, and thereafter, the amount due is 130% of the unpaid principal amount of the note along with any accrued interest. Upon the occurrence of an event of default, as such term is defined under the EMA Note, additional interest will accrue from the date of the event of default at a rate equal to the lesser of 24% per annum or the highest rate permitted by law. The intrinsic value of the beneficial conversion feature resulted in a fair value totaling $77,000, and is recorded as a discount on convertible notes on our balance sheet. This discount will be amortized over the nine-month term of the note as interest expense.

On September 24, 2019, we paid this note in full.

18

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Convertible Note, matures April 7, 2020 (Vista Capital)

On January 7, 2019, Vista Capital invested $300,000 and we issued a convertible promissory note (the “Vista 2019 Note”) in the principal amount of $330,000, maturing nine months from the date of issuance (October 7, 2019). The Vista 2019 Note earned a one-time interest charge of 12%, recorded as a discount on convertible notes and will be amortized over the term of the note. The Vista 2019 Note allows Vista Capital to convert the note to our common stock at any time at a price equal to 65% of the lowest closing bid price of the Company’s common stock during the 25 consecutive trading days immediately preceding the conversion date. The Vista 2019 Note contains standard provisions of default, and precludes the issuance of shares to the extent that Vista Capital would beneficially own more than 4.99% of our common stock. The Vista 2019 Note also includes a term that allows Vista Capital to adopt any term of a future financing more favorable than what is provided in the note. For example, these provisions could include a more favorable interest rate, conversion price, or original issue discount. The Vista 2019 Note also requires that we include the shares underlying conversion of the note on the next registration statement we file with the SEC (but not the registration statement filed November 6, 2018). The intrinsic value of the beneficial conversion feature resulted in a fair value totaling $300,000, and is recorded as a discount on convertible notes on our balance sheet. This discount will be amortized over the term of the note as interest expense, all of which will be recorded in 2019. On August 13, 2019, we and Vista Capital amended the note extending the maturity date to April 7, 2020.

Convertible Note, matures April 18, 2020

On April 18, 2019, we received $188,000 and issued a convertible note to Bellridge Capital, LP (“Bellridge”) in the principal amount of $220,000 (the “Bellridge Note”), representing a 10% original issue discount, and a deduction of $10,000 for legal fees paid to the investor. The note is due April 18, 2020 and earns interest at 10% per annum.

The Bellridge Note is convertible at the option of Bellridge at a conversion price equal to 70% of the lowest closing bid price of the Company’s common stock during the 25 trading days prior to the conversion date. The intrinsic value of the beneficial conversion feature resulted in a fair value totaling $120,000 recorded as a discount on convertible notes on our balance sheet which will be amortized over the term of the note as interest expense.

Subsequent to September 30, 2019, we paid this note in full (see Note 12).

Convertible Twelve-month OID notes

From June 7, 2019 through September 30, 2019, we received $2,235,000 and issued convertible promissory notes (each, a “12-Month OID Note”) in the aggregate principal amount of $2,794,000, with a 25% original issue discount, to 34 accredited investors. The original issuance discount totaled $559,000 and is recorded as a discount on convertible notes payable on our balance sheet. The intrinsic value of the beneficial conversion features resulted in an aggregate fair value of $2,235,000, and is recorded as a discount on convertible notes on our balance sheet. The discounts will be amortized and recorded to interest expense over the term of the notes. These notes mature twelve months from the date of issuance.

During the three months July 1, 2019 through September 30, 2019, in exchange for $305,000 of convertible note payables that were coming due, we issued an additional $381,000 convertible promissory notes (each, a “12-Month OID Note), with a 25% original issue discount. The original issue discount totaled $76,000 and is recorded as a discount on convertible notes payable on our balance sheet. The intrinsic value of the beneficial conversion features resulted in an aggregate fair value of $381,000 and is recorded as debt extinguishment expense on our statement of operations. The discount will be amortized and recorded to interest expense over the term of the notes. These notes mature twelve months from the date of issuance.

Each Twelve-month OID Note is convertible by the investor at any time at $0.17 per share. This initial conversion price shall be adjusted downward in the event the Company subsequently issues a convertible promissory note at a lower conversion rate (with this lower conversion rate becoming the adjusted conversion rate under the note), or conducts an equity offering at a per-share price less than $0.17. The notes earn interest at a rate of five percent (5%) per annum, due at maturity. The Company may prepay the notes only upon 10 days’ notice to the investor, during which time the investor may exercise his/her right to convert the note to stock. The Company is obligated to prepay the notes in the event it receives at least $3.5 million gross proceeds in a financing transaction. At maturity, the Company may redeem the notes through the issuance of common stock at a conversion price equal to the lower of the “conversion price” (initially $0.17, as may be adjusted), and 70% of the lowest daily volume weighted average price of the Company’s common stock during the 25 trading days preceding the conversion date.

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

In addition to the note, each OID investor received a warrant to purchase a certain number of shares common stock at $0.25 per share calculated based on the amount invested (see Note 6).

19

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Convertible notes, matures August 9, 2021

On August 9, 2019, we received $600,000 from one accredited investor and issued a promissory note in the principal amount of $600,000, maturing in two years, accruing interest at 15% to be paid in cash monthly, and which converts to common stock at the holder’s option at $0.30 per share. This investor also received a warrant to purchase 1,200,000 shares of our common stock at $0.30 per share, expiring five years from the grant date.

Note 5. Share-Based Compensation

Issuance of Common Stock in exchange for payment of payables

Payment of Officer Salaries

On March 29, 2019, we issued 579,996 shares of our common stock in lieu of $93,000 of accrued salary and unreimbursed business expenses owed to two of our officers. The price-per-share of $0.16 was based on the closing price of our common stock on the last business day of the month. These shares were issued pursuant to our 2018 Equity Incentive Plan.

On June 28, 2019, we issued 465,875 shares of our common stock in lieu of $107,000 of accrued salary and unreimbursed business expenses owed to two of our officers. The price-per-share of $0.23 was based on the closing price of our common stock on the last business day of the month. These shares were issued pursuant to our 2018 Equity Incentive Plan.

On September 30, 2019, we issued 35,080 shares of our common stock in lieu of $11,000 of accrued salary and unreimbursed business expenses owed to an officer. The price-per-share of $0.31 was based on the closing price of our common stock on the last business day of the month. These shares were issued pursuant to our 2018 Equity Incentive Plan.

On March 31, 2018, we issued 323,030 shares of our common stock in lieu of $84,000 of accrued salary and unreimbursed business expenses owed to two of our officers. The price-per-share of $0.26 was based on the closing price of our common stock on the last business day of the month.

On June 29, 2018, we issued 176,947 shares of our common stock in lieu of $76,000 of accrued salary and unreimbursed business expenses owed to two of our officers. The price-per-share of $0.43 was based on the closing price of our common stock on the last business day of the month.

On September 28, 2018, we issued 249,258 shares of our common stock at $0.27 per share in lieu of $67,000 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 nine months ended September 30, 2019, we issued 1,759,472 shares of our common stock at a range of $0.16 – $0.23 per share in lieu of $376,000 accrued and unpaid obligations to consultants.

During the nine months ended September 30, 2018, we issued 1,390,813 shares of our common stock, at prices ranging between $0.23 - $0.41 per share, in lieu of $417,000 of accrued and unpaid obligations to consultants.

Payment of Interest on Notes

During the nine months ended September 30, 2019, we issued 622,784 shares of our common stock, at prices ranging between $0.10 - $0.27per share, in lieu of $147,000 of accrued interest due on promissory notes.

During the nine months ended September 30, 2018, we issued 2,002,868 shares of our common stock, at prices ranging between $0.31 – 0.42 per share, in lieu of accrued interest totaling $519,000.

Restricted Stock Units

On May 28, 2019, our Compensation Committee, in conjunction with the approval of a new employment agreement for our Vice President of Operations and President of our subsidiary Odor-No-More, granted Joseph L. Provenzano a restricted stock unit of 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.

20

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Stock Option Expense

Share-based compensation expense was $984,000 and $1,201,000 for the nine months ended September 30, 2018 and 2019, and is recorded in selling, general and administrative expense on the consolidated statements of operations.

The grant-date fair value of the stock options granted was an aggregate $526,000 and $1,486,000 for the nine months ended September 30, 2018 and 2019, respectively.

The grant-date fair value of the stock options that vested was $984,000 and $1,193,000 for the nine months ended September 30, 2018 and 2019, respectively.

As of September 30, 2019, there was $1,594,000 of unrecognized stock compensation expense related to unvested stock options issued as part of our 2018 Plan issuances.

We issued options through our 2018 Equity Incentive Plan, and outside of this plan. Our 2007 Plan is closed. Stock option activity is described below.

2018 Equity Incentive Plan

On June 22, 2018, our stockholders adopted the BioLargo 2018 Equity Incentive Plan (“2018 Plan”) as a means of providing our directors, key employees and consultants additional incentive to provide services. Both stock options and stock grants may be made under this plan for a period of 10 years. Our Board of Directors’ 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 was 40 million shares. The number of shares available to be issued under the 2018 Plan increases automatically each January 1^st by the lesser of (a) 2 million shares, or (b) such number of shares determined by our Board.

Activity for our stock options under the 2018 Plan from inception through September 30, 2018 and from December 31, 2018 through the nine months ended September 30, 2019, is as follows:

As of September 30, 2018:	Options Outstanding		Exercise Price per share				Weighted Average Exercise Price per share		Aggregate intrinsic Value(1)
Inception, June 22, 2018		—				—		—
Granted		790,087		0.25	-	0.43		0.34
Balance and vested, September 30, 2018		790,087	$	0.25	-	0.43	$	0.34	$	—

As of September 30, 2019:	Options Outstanding			Exercise Price per share				Weighted Average Exercise Price per share		Aggregate intrinsic Value(1)
Balance, December 31, 2018		1,318,517		$	0.22	–	0.43	$	0.30
Granted		7,072,342			0.16	–	0.40		0.27
Expired		—					—		—
Balance, September 30, 2019		8,390,859		$	0.16	–	0.43	$	0.27
Non-vested		(4,144,926	)		0.16	–	0.40		0.29
Vested, September 30, 2019		4,245,933		$	0.17	–	0.36	$	0.23	$	457,000

(1) – Aggregate intrinsic value based on closing common stock price of $0.31 at September 30, 2019.

21

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The options to purchase 7,072,342 shares granted during the nine months ended September 30, 2019 are comprised of options issued to employees, consultants, officers, and directors. We issued options to purchase 6,097,702 shares of our common stock employees as part of their employment agreement and as part of an employee retention program on their respective grant dates ranging between $0.16 – 0.40 per share. The vesting terms for employment agreements generally called for a portion of option to vest immediately and the remaining portion to vest over four years. Certain option issuances to our officers and employees have vesting terms that are based on metrics over a period of time, these are described in more detail below. We issued options to purchase 974,640 shares of our common stock to members of our board of directors for services performed, in lieu of cash, at an exercise price on the respective grant dates ranging between $0.16 – 0.32 per share.

Chief Financial Officer Contract Extension

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

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

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

Vice President of Operations Contract Extension

On May 28, 2019, the Compensation Committee of the Board of Directors approved the terms of an employment agreement for Joseph L. Provenzano to continue his work as Vice President of Operations and President of our subsidiary Odor-No-More, and granted to Mr. Provenzano an incentive stock option to purchase 1,000,000 shares of the Company’s common stock pursuant to the terms of our 2018 Plan. The exercise price and fair value of the option is equal to the closing price of our common stock on the May 28, 2019 grant date, at $0.17 per share. The option will vest annually in 200,000 increments over five years. The option may be exercised for up to ten years following the grant date. 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 Mr. Provenzano’s employment agreement.

Vice President of Sales

On May 28, 2019, the Compensation Committee of the Board of Directors approved the terms of an employment agreement for our Vice President of Sales and issued him options to purchase an aggregate 1,200,000 shares of the Company’s common stock pursuant to the terms of our 2018 Plan. The exercise price of the first option to purchase 200,000 shares is equal to the closing price of our common stock on the May 28 grant date, at $0.17 per share. One-third of the option vests upon grant, the next third at the first anniversary of the grant, and the final third upon the second anniversary of the grant. The remaining options to purchase an aggregate 1,000,000 shares are unvested at grant date, and contingent upon certain performance metrics based on sales of our Odor-No-More subsidiary, none of which have been met. As such, no additional fair value was recorded and we are unable to estimate at this time if these metrics will be met. Upon execution of his employment agreement on July 5, 2019, an additional option to purchase 300,000 shares was granted, with an exercise price as of July 5 ($0.25), vesting 100,000 shares on the first, second and third anniversary of the agreement.

22

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Director of Business Development for Odor-No-More

On July 23, 2019, the Compensation Committee of the Board of Directors approved the terms of an employment agreement for Odor-No-More’s Director of Business Development, who also serves as BioLargo’s Director of Corporate Development, and issued him options to purchase an aggregate 1,000,000 shares of the Company’s common stock at $0.35 per share pursuant to the terms of our 2018 Plan. The first option allows the purchase of 400,000 shares and vests 100,000 90 days after issuance, 100,000 shares on the first anniversary, and 200,000 shares on the second anniversary of the employment agreement. The remaining options to purchase an aggregate 600,000 shares are unvested at grant date, and contingent upon certain performance metrics based on sales of our Odor-No-More subsidiary, none of which have been met. As such, no additional fair value was recorded at September 30, 2019, and we are unable to estimate at this time if these metrics will be met.

2007 Equity Incentive Plan

On September 7, 2007, and as amended April 29, 2011, the BioLargo, Inc. 2007 Equity Incentive Plan (“2007 Plan”) was adopted as a means of providing our directors, key employees and consultants additional incentive to provide services. Both stock options and stock grants may be made under this plan for a period of 10 years, which expired on September 7, 2017. As of September 2017, the Plan was closed to further stock option grants.

Activity for our stock options under the 2007 Plan for the nine months ended September 30, 2018 and 2019 is as follows:

As of September 30, 2018:	Options Outstanding			Exercise price per share				Weighted Average Price per share		Aggregate intrinsic Value(1)
Balance, December 31, 2017		9,831,586		$	0.23	–	1.89	$	0.44
Expired		(110,000	)		1.45	–	1.89		1.60
Balance, September 30, 2018		9,721,586		$	0.23	–	1.65	$	0.43
As of September 30, 2019:
Balance, December 31, 2018		9,691,586		$	0.23	–	0.94	$	0.43
Expired		(902,135	)		0.28	–	0.70		0.48
Balance, September 30, 2019		8,789,451		$	0.23	–	1.65	$	0.47	$	25,000

(1) – Aggregate intrinsic value based on closing common stock price of $0.31 at September 30, 2019.

Non-Plan Options issued

Activity of our non-plan stock options issued for the nine months ended September 30, 2018 and 2019 is as follows:

As of September 30, 2018:	Non-plan Options outstanding			Exercise price per share				Weighted Average price per share		Aggregate intrinsic value(1)
Balance, December 31, 2017		20,018,408		$	0.25	–	1.00	$	0.51
Granted		1,211,527			0.23	–	0.43		0.26
Expired		(2,400,000	)				0.99		0.99
Balance, September 30, 2018		18,829,935		$	0.25	–	1.00	$	0.45
As of September 30, 2019:
Balance, December 31, 2018		19,319,496		$	0.23	–	1.00	$	0.43
Granted		1,290,222			0.16	–	0.25		0.22
Expired		(691,975	)				0.55		0.55
Balance, September 30, 2019		19,917,743		$	0.16	–	1.00	$	0.41
Non-vested		(2,202,038	)		0.25	–	0.45		0.45
Vested, September 30, 2019		17,897,705			0.16	–	1.00		0.41	$	420,000

(1) – Aggregate intrinsic value based on closing common stock price of $0.31 at September 30, 2019.

During the nine months ended September 30, 2019, we issued options to purchase 1,290,222 shares of our common stock at exercise prices ranging between $0.16 – $0.25 per share to vendors for fees for service.

23

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 6. Warrants

The amortization of our discount on convertible notes totaled $2,213,000 and $2,381,000 for the nine months ended September 30, 2018 and 2019, and is recorded in interest expense on the consolidated statements of operations.

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

								Weighted
								average		Aggregate
	Warrants			Exercise				price per		intrinsic
As of September 30, 2018:	outstanding			price per share				share		value(1)
Balance, December 31, 2017		22,104,817		$	0.125	–	1.00	$	0.45
Issued		6,451,013			0.25	–	0.48		0.23
Expired		(2,683,400	)				0.40		0.40
Balance, September 30, 2018		25,872,430		$	0.125	–	1.00	$	0.39
As of September 30, 2019:
Balance, December 31, 2018		26,872,430		$	0.25	–	1.00	$	0.42
Issued		24,321,947			0.10	–	0.30		0.21
Exercised		(7,505,746	)		0.10	–	0.12		0.11
Balance, September 30, 2019		43,688,631		$	0.10	–	1.00	$	0.35	$	1,898,000

Warrants issued as part of debt extension and extinguishment

On March 5, 2019, we executed amendments extending the maturity dates of notes issued to Vernal Bay and Chappy Bean (see Note 4, subsection titled “Notes payable, mature August 12 and 16, 2020 (previously due September 6, 2019)”). As consideration for this extension, we agreed to reduce the exercise price, and increase the number of shares purchasable, by the warrants held by Vernal Bay and Chappy Bean. Vernal Bay had been issued a warrant to purchase 1,387,500 shares at $0.25 per share, expiring September 19, 2023. We agreed to lower the exercise price to $0.20 per share, and proportionately increase the number of shares in the warrant to 1,734,375. By doing so, the maximum investment amount under the warrant of $346,875 remained the same. Chappy Bean’s warrant to purchase 600,000 shares was similarly modified, such that it now allows for the purchase of 750,000 shares at $0.20 per share. The reduction in warrant exercise price resulted in a fair value of $56,000 recorded as loss on debt extinguishment on our statement of operations. In the aggregate, the number of shares purchasable under these two warrants increased by 496,875.

In conjunction with the refinance of its debt due September 6, 2019, in additional to a convertible OID note (see Note 4), Vernal received a warrant to purchase 2,095,588 shares of our common stock. The warrant expires in five years and may be exercised at $0.25 per share.

In conjunction with the refinance of its debt due September 6, 2019, in additional to a convertible OID note (see Note 4), Chappy Bean received a warrant to purchase 330,882 shares of our common stock. The warrant expires in five years and may be exercised at $0.25 per share.

24

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Warrants issued as part of line of credit extinguishment

We issued warrants to purchase an aggregate 1,130,515 shares of our common stock to three line of credit holders who had agreed to convert their line of credit into an amended and restated note plus a warrant (see Note 4, “Line of credit, due on demand 30 days’ notice after September 1, 2019”). The warrant expires in five years and may be exercised at $0.25 per share.

Warrants issued as part of 2018 OID extinguishment

On September 12 and September 16, 2019, the holders of a convertible note in the aggregate principal amount of $100,000, agreed to satisfy the note through the issuance of an amended and restated convertible promissory note due in 12 months, September 12 and September 16, 2020, including a 25% original issue discount (see Note 4) and a warrant to purchase 551,471 shares of our common stock. The warrant expires in five years and may be exercised at $0.25 per share.

Warrants issued as consent for variable rate debt

On January 7 and January 31, 2019, Lincoln Park Capital Fund, LLC agreed to waive the provisions of the Purchase Agreement dated August 25, 2017, prohibiting variable rate transactions. As consideration for the waivers, we issued to Lincoln Park a warrant to purchase 300,000 shares of our common stock at $0.25 per share, expiring five years from the date of grant. The fair value of these warrants totaled $54,000 and was recorded as a discount on note payable on our consolidated balance sheet and will amortize to interest expense in 2019 over the term of the notes. (See Note 4).

Warrants issued concurrently with the Nine-month OID notes

In conjunction with the issuance of our nine-month OID notes (see Note 4), we issued each investor a warrant to purchase common stock for $0.25 per share, expiring 5 years from the date of issuance. During the three months ended March 31, 2019, we issued warrants to purchase 637,500 shares of our common stock to the three investors. The fair value of these warrants totaled $89,000 and was recorded as a discount on note payable on our consolidated balance sheet and will amortize to interest expense over the term of the notes. On June 7, 2019, we reduced the conversion prices of the notes from $0.25 to $0.17, and this resulted in an increase in the number of warrants purchasable by the investors by 300,000 to 937,500, which resulted our recording the fair value of $84,000, which is recorded as a deemed dividend.

Warrants Issued concurrently with Twelve-month OID notes

During the nine months ended September 30, 2019, we issued warrants to purchase 12,325,370 shares of our common stock to purchasers of our Twelve-month OID Notes (see Note 4). The warrants allow the holder to purchase common stock for $0.25 per share, expiring 5 years from the date of issuance. The number of shares purchasable under each warrant was equal to the 75% of the principal balance of the investor’s note, divided by $0.17 (thus, for example, a $300,000 investment would yield a note with principal balance of $375,000, and a warrant allowing for the purchase of up to 1,654,412 shares). The fair value and BCF of these warrants totaled $2,240,000 and was recorded as a discount on note payable on our consolidated balance sheet and will amortize to interest expense over the term of the notes.

Warrants Issued concurrently with the Convertible Note due August 9, 2021

In conjunction with the issuance of a convertible note due August 9, 2021 (see Note 4), we issued an investor a warrant to purchase 1,200,000 shares of our common stock for $0.30 per share, expiring 5 years from the date of issuance. The fair value and BCF of these warrants totaled $198,000 and was recorded as a discount on note payable on our consolidated balance sheet and will amortize to interest expense over the term of the note.

25

BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Warrants exercised

During the nine months ended September 30, 2019, we received $380,000 from the exercise of warrants to purchase 3,166,666 shares.

On June 24, 2019, Vista Capital exercised its stock purchase warrant issued September 12, 2018, electing to utilize the cashless exercise feature in the warrant. As a result, we issued Vista Capital 2,877,790 shares of common stock. The increase in available warrants was the result of downward adjustment of the exercise price, which increased the number of shares available for purchase under the warrant resulting in a fair value totaling $355,000, which is recorded as a deemed dividend in our statement of stockholders’ equity.

Fair Value

To determine interest expense related to our outstanding warrants issued in conjunction with debt offerings, the fair value of each award grant is estimated on the date of grant using the Black-Scholes option pricing model and the relative fair values are amortized over the life of the warrant. For the determination of expense of warrants issued for services, extinguishment of debt and settlement management also uses the option-pricing model. The principal assumptions we used in applying this model were as follows:

	September 30, 2018				September 30, 2019
Risk free interest rate			2.54	%	1.42	–	2.62	%
Expected volatility			252	%	86	–	110	%
Expected dividend yield		—				—
Forfeiture rate		—				—
Expected life in years	5	–	10		2	—	5

The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant. Expected volatilities are based on historical volatility of our common stock. The expected life in years is based on the contract term of the warrant.

Note 7. Accounts Payable and Accrued Expenses

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

	December 31, 2018		September 30, 2019
Accounts payable and accrued expense	$	302	$	297
Accrued interest		122		111
Accrued payroll		77		138
Total accounts payable and accrued expenses	$	501	$	546

Note 8. Noncontrolling Interest – Clyra Medical

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

Acquisition of In-process Research and Development

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

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BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Scion Solutions – Note Payable and Clyra Liability

The promissory note in the principal amount of $1,250,000 issued by Clyra Medical to Scion on September 26, 2018 (“Clyra-Scion Note”) accrues interest at the rate of 5%. Principal and interest due under the note are to be paid periodically at a rate of 25% of investment proceeds received by Clyra Medical. If the note is not paid off within 18 months after the date of issuance, it is automatically extended for additional 12-month periods until the note is repaid in full. Payments after the initial 18-month maturity date are required to be made in annual installments in an amount equal to the greater of (i) 25% of investment proceeds received during the 12-month period, and (ii) 5% of Clyra Medical’s gross revenues. At September 30, 2019, the balance due on the Clyra-Scion Note equaled $1,007,000.

Non-Controlling Interest

During the nine months ended September 30, 2019, Clyra sold 2,350 shares of its common stock for $470,000 ($200 per share).

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

As of September 30, 2019, Clyra Medical had the following common and preferred shares outstanding:

Shareholder	Shares		Percent
BioLargo, Inc.		26,053		38.0%
Sanatio Capital(1)		11,520		16.8%
Scion Solutions(2)		15,500		22.6%
Other		15,572		22.6%
Total		68,645

Notes:

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

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

Sanatio Capital purchased Series A Preferred shares in 2015. Sanatio Capital is owned by Jack B. Strommen, who subsequently joined BioLargo’s board of directors. Preferred Shares accrue an annual dividend of 8% for a period of five years. Although the dividends began to accrue immediately, Clyra Medical has no obligation to declare a dividend until a product of the company has received a premarket approval by the United States Federal Drug Administration (“FDA”), or for which a premarket notification pursuant to form 510(k) has been submitted and for which the FDA has given written clearance to market the product in the United States (either, “FDA Approval”). After FDA Approval, annually on December 20, and unless prohibited by California law governing distributions to shareholders, Clyra Medical is required to declare and pay any accruing dividends to holders of Preferred Shares then accrued but unpaid. As the declaration and payment of such dividends is contingent on an uncertain future event, no liability has been recorded for the dividends. The accumulated and undeclared dividend balance as of September 30, 2019 is $230,000.

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

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

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BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 9. BioLargo Engineering, Science and Technologies, LLC

In September 2017, we commenced a full-service environmental engineering firm and formed a Tennessee entity named BioLargo Engineering, Science & Technologies, LLC (“BLEST”). In conjunction with the start of this subsidiary, we entered into a three-year office lease in the Knoxville, Tennessee area, and entered into employment agreements with seven scientists and engineers. (See Note 10 “Business Segment Information”.) The company was capitalized with two classes of membership units: Class A, 100% owned by BioLargo, and Class B, held by management of BLEST, and which initially have no “profit interest,” as that term is defined in Tennessee law. However, over the succeeding five years, the Class B members can earn up to a 30% profit interest. They also have been granted options to purchase up to an aggregate 2 million shares of BioLargo, Inc. common stock. The profit interest and option shares are subject to a five year vesting schedule tied to the performance of the subsidiary, including gross revenue targets that increase over time, obtaining positive cash flow by March 31, 2018 (which was not met), collecting 90% of its account receivables, obtaining a profit of 10% in its first year (and increasing in subsequent years), making progress in the scale-up and commercialization of our AOS system, and using BioLargo research scientists (such as our Canadian team) for billable work on client projects. These criteria are to be evaluated annually by BLEST’s compensation committee (which includes BioLargo’s president, CFO, and BLEST’s president). 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. No such units have been issued, and no related compensation charges have been recognized.

Note 10. Business Segment Information

BioLargo currently has four operating business segments, plus its corporate entity which is responsible for general corporate operations, including administrative functions, finance, human resources, marketing, legal, etc. The four operational business segments are:

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

2. Clyra Medical (“Clyra”) -- which is engaged in developing medical products and preparing its launch into commercial activity with recent FDA 510 (K) pre-market clearance of its wound care product;

3. BioLargo Engineering, Science & Technologies, LLC (“BLEST”) -- which provides professional engineering services on a time and materials basis for outside clients, and supports our internal operations and innovation (located in Oak Ridge, Tennessee);

4. BioLargo Water (“Water”) -- which has now shifted its focus from R&D/product development to commercializing the AOS technology (located in Edmonton, Alberta Canada).

Historically, none of our operating business units operated at a profit and therefore each required additional cash to meet its monthly expenses. The additional sources of the cash to fund the shortfall from operations of Odor-No-More, BLEST and BioLargo Water have been provided by BioLargo’s sales of debt or equity, research grants, and tax credits. Clyra Medical has been funded by third party investors who invest directly in Clyra Medical in exchange for equity ownership in that entity.

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BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The segment information for the three and nine months ended September 30, 2018 and 2019, is as follows (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2018			2019			2018			2019
Revenue
Odor-No-More	$	246		$	396		$	786		$	1,012
BLEST		181			308			531			732
BLEST - Intercompany revenue		(150	)		(170	)		(450	)		(420	)
Total	$	277		$	534		$	867		$	1,324
Operating (loss) income
BioLargo corporate	$	(1,079	)	$	(1,347	)	$	(3,225	)	$	(3,250	)
Odor-No-More		(112	)		(90	)		(366	)		(231	)
Clyra		(220	)		(338	)		(596	)		(944	)
BLEST		(63	)		27			(178	)		(110	)
Water		(191	)		(136	)		(533	)		(499	)
Total	$	(1,665	)	$	(1,884	)	$	(4,898	)	$	(5,034	)
Interest expense
BioLargo Corporate	$	(266	)	$	(1,248	)	$	(2,825	)	$	(2,707	)
Odor-No-More		—			(28	)		—			(28	)
Clyra		—			(13	)		(2	)		(38	)
Total	$	(266	)	$	(1,289	)	$	(2,827	)	$	(2,773	)
Research and development expense
BioLargo Corporate	$	(279	)	$	(256	)	$	(905	)	$	(638	)
Clyra		(45	)		(58	)		(189	)		(213	)
BLEST		(97	)		(77	)		(302	)		(273	)
Water		(171	)		(111	)		(445	)		(428	)
Intersegement BioLargo corporate		150			170			450			426
Total	$	(442	)	$	(332	)	$	(1,391	)	$	(1,126	)

As of September 30, 2019	BioLargo		ONM		Clyra		BLEST		Water		Elimination			Total
Tangible assets	$	2,390	$	457	$	65	$	175	$	130	$	(6	)	$	3,211
Intangible assets		1,893		—		—		—		—		—			1,893

As of December 31, 2018	BioLargo		ONM		Clyra		BLEST		Water		Elimination			Total
Tangible assets	$	353	$	219	$	462	$	230	$	33	$	(6	)	$	1,291
Intangible assets		1,893		—		—		—		—		—			1,893

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BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 11. Commitments and Contingencies

Provenzano Employment Agreement

On June 18, 2019, we and the head of our Odor-No-More subsidiary, Joseph L. Provenzano, entered into an employment agreement (the “Provenzano Employment Agreement”), replacing in its entirety the previous employment agreement with Mr. Provenzano dated January 1, 2008.

The Provenzano Employment Agreement provides that Mr. Provenzano will serve as our Executive Vice President of Operations, as well as the President and Chief Executive Officer of our wholly owned subsidiary Odor-No-More. Mr. Provenzano’s base compensation will remain at his current rate of $170,000 annually. In addition to this base compensation, the agreement provides that he is eligible to participate in incentive plans, stock option plans, and similar arrangements as determined by the our Board of Directors, health insurance premium payments for himself and his immediate family, a car allowance covering the expenses of his personal commercial grade truck which the company uses in company operations on a continual basis, paid vacation of four weeks per year, and bonuses in such amount as the Compensation Committee may determine from time to time.

In conjunction with this agreement, our Compensation Committee awarded Mr. Provenzano an option to purchase common stock and restricted stock units under our 2018 Equity Incentive Plan (see Note 5).

The Provenzano Employment Agreement has a term of five years, unless earlier terminated in accordance with its terms. The Provenzano Employment Agreement provides that Mr. Provenzano’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 Provenzano Employment Agreement means physical or mental incapacity or illness rendering Mr. Provenzano 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. Provenzano has (i) engaged in willful misconduct in connection with the Company’s business; or (ii) been convicted of, or plead guilty or nolo contendre in connection with, fraud or any crime that constitutes a felony or that involves moral turpitude or theft. If Mr. Provenzano’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 Provenzano Employment Agreement requires Mr. Provenzano 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 Provenzano Employment Agreement as “work made for hire”.

Office Leases

We have long-term operating leases for office, industrial and laboratory space in Westminster, California, Oak Ridge, Tennessee, and Alberta, Canada. Payments made under operating leases are charged to the Consolidated Statement of Operations and Comprehensive Loss on a straight-line basis over the term of the operating lease agreement. For the nine months ended September 30, 2018 and 2019, total rental expense was $159,000 and $156,000, respectively.  On January 1, 2019, we adopted ASC 842 which resulted in a right-of-use asset and lease liability, the adoption resulted in an immaterial cumulative effect of an accounting change that was not recorded.  Our right-of-use asset and lease liability operating leases included our office space BioLargo/ONM and BLEST.  Our BioLargo/ONM lease has a 4-year extension and we included this extension in the net present value of our lease payments, which used the incremental secured borrowing cost to BioLargo of 18%.  As of September 30, 2019, the total remaining operating lease payments is $645,000.  BioLargo Water operations lease is considered short-term and not included. 

The leases have no additional payment terms such as common area maintenance payments, tax sharing payments or other allocable expenses. Likewise, the leases do not contain other terms and conditions of use, such as variable lease payments, residual value guaranties or other restrictive financial terms.

Clyra Medical Consulting Agreement

Clyra Medical (see Note 8) entered into a consulting agreement with Beach House Consulting, LLC, through which Jack B. Strommen will be providing consulting services to Clyra related to its sales and marketing activities and in exchange receive $23,000 per month for a period of four years. Clyra’s obligation to pay fees under the agreement begin the month following Clyra reception of FDA pre-market clearance on its first product, which occurred in September. The total cash obligation related to the agreement would be approximately $1.1 million.

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BIOLARGO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 12. Subsequent Events.

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

Convertible Note, matures February 28, 2020 (Vista Capital)

Subsequent to September 30, 2019, Vista Capital converted the remaining $95,452 principal and $11,089 interest due under the note into 683,108 shares of common stock.

Convertible Notes, matures and December 7, 2019 (Tangiers)

On October 2, 2019, Tangiers elected to convert the remaining $185,000 balance of its note into 1,200,000 shares of common stock.

Convertible notes, mature February 14 and March 17, 2020

Subsequent to September 30, 2019, we paid Crossover Capital $273,000 cash in full and final satisfaction of its convertible notes.

Convertible Note, matures April 18, 2020

Subsequent to September 30, 2019, we paid Bellridge $299,000 cash in full and final satisfaction of its convertible note.

Convertible note, matured November 12, 2019

On October 28, 2019, the holder of the three-month OID note due November 12, 2019, elected to convert the $110,000 principal plus outstanding interest into 660,709 shares of common stock at a conversion price of $0.17 per share.

Nine-month OID note redemptions

Subsequent to September 30, 2019, we elected to redeem an aggregate principal amount of $212,500 nine-month OID notes into an aggregate 1,340,698 shares of our common stock.

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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 September 30, 2019, unless expressly stated otherwise, and we undertake no duty to update this information.

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

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

Our Business- A Sustainable Products, Technology and Solutions Provider

BioLargo, Inc. is an innovative technology developer and environmental engineering company driven by a mission to “make life better” by delivering robust, sustainable solutions for a broad range of industries and applications, with a focus on clean water, clean air, and advanced wound care. We develop and commercialize disruptive technologies by providing the capital, support, and expertise to expedite them from “cradle” to “maturity”. Our business strategy is straightforward: we invent or acquire technologies that we believe have the potential to be disruptive in large commercial markets; we incubate and develop these technologies to advance them and promote their commercial success as we leverage our considerable scientific, engineering, and entrepreneurial talent; we then monetize these technical assets through a variety of business structures that may include licensure, joint venture, sale, spin off, or by deploying direct to market strategies. We seek to unlock the value of our portfolio of underlying technologies to both advance our purposeful mission while we create value for our stockholders.

Our first significant commercial success is currently unfolding in our subsidiary, Odor-No-More, Inc., which is focused on odor and volatile organic compound (“VOC”) control products sold under the brands CupriDyne Clean and Nature’s Best Science. We are gearing up for rapid growth as our products are experiencing more widespread market adoption in the waste handling industry through national purchasing agreements with four of the largest industry members. To this end, we have recently begun to offer a menu of services to our clients including engineering design, construction, and installation of misting systems and related equipment used to deliver our liquid chemistry products, as well as ongoing maintenance services for installed systems.

We have also begun expanding with early adopters into new vertical segments such as wastewater treatment, the cannabis industry and various industrial facilities like steel manufacturing and livestock processing operations. In 2019 we executed a five-year white-label distribution agreement with Cannabusters, Inc. a company organized and owned by Mabre Corporation to feature our odor and VOC control technology to the cannabis industry in combination with their air handling and air quality systems. We believe this to be an important opportunity for BioLargo’s odor and VOC control products, as the cannabis and hemp industries are predicted to grow significantly in the US in the coming years and are known to contend with significant odor and VOC challenges (read more under Emerging High-Growth Opportunity in Cannabis / Hemp Industry).

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

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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 water treatment system for decontamination and disinfection (our “Advanced Oxidation System”, or “AOS” – see Pilot Projects discussion below), and our medical products focused on healing chronic wounds, including our recently acquired stem cell therapy called the SkinDisc^TM, which is focused on regenerative tissue management and is licensed to our subsidiary Clyra Medical Technologies, Inc. (“Clyra Medical”).

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

Odor-No-More Industrial Odor and VOC Solutions

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

Waste Handling

Our customer base for our odor and VOC business is expanding. We are now selling product to four of the largest solid waste handling companies in the country, and also have secured multiple flagship clients in the wastewater treatment industry, which we expect to become a priority market.

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

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

Turn-key Full-service Solutions

At the request of our clients, we have begun offering a menu of services to landfills, transfer stations, and wastewater treatment facilities. These services include ongoing maintenance and on-site support services to assist our clients in the design and continued use of the various systems that deliver our liquid products in the field (such as misting systems). We have recently expanded these serves to engineering design, construction and installation. Our engineering team at BLEST has been instrumental in supporting these operations. Our system design, build and install business continues to grow. We have completed multiple installs during the last quarter and have several bids outstanding for CupriDyne Clean delivery systems.

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“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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Regional Adoption 

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

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

We now have a body of evidence that has been developed through direct work with our large national accounts that supports our product claims, namely superior performance, cost savings and service excellence. As a result, we are receiving support from the leadership of our national accounts to help expand our services within their organizations. This support has and will continue to demand that we increase our activity to deliver RFPs (requests for proposals), follow up with and make site visits as a result of introductions to local operators by regional and corporate leaders, follow up on referrals from local operators to other local operators and provide high level customer service and responsiveness to regional office requests for site visits, and offer our products and services to multiple locations with these regional operations. This activity is increasing and as a result we are focused on adding qualified staff to our team and believe that sales will continue to increase as a function of increased staffing. Our experience has shown that the cycle from identifying a new customer that wants to use our products to installing delivery systems and related equipment (if needed), to deploying our products can take from 60 to 180 days. The work is demanding but we know the up-front investment by our team will be rewarded with expanded adoption and recurring revenues. We are continually reminded that in many instances we are replacing companies that have been serving these customers for decades.

We believe that our products will become known as the odor and VOC elimination product that will become selected as a “best practices” tool for the waste handling industry. As we continue to achieve that level of recognition, we believe our large national accounts will want to modify their stance to encourage their local operators around the country to choose our product as the top performer and highest value provider. 

Odor-No-More recently hired waste handling industry veteran Mitch Noto as its Director of Corporate Development in an effort to further develop the company’s relationships and connections in the national waste handling industry and to further position CupriDyne® Clean as a key component of “best practices” for industrial odor control. With more than 28 years operations and environmental management experience at one of the largest waste handling companies in the United States, Mr. Noto brings invaluable experience and connections. He most recently spearheaded post-collection operations nationwide and trained and mentored more than 150 field leaders responsible for operational management. He is a recognized expert in waste handling operations.

Emerging High-Growth Opportunity in Cannabis / Hemp

Odor-No-More recently entered into a 5-year “white-label” distribution agreement with Cannabusters, Inc., a sister company to Mabre Air Systems, to sell its CupriDyne Clean odor and VOC control products to Cannabis and Hemp grow and production facilities, which represent a target market that management’s research indicates is in sore need of new odor control products and services. Cannabusters has decades of experience with air quality management through their sister company Mabre Air Systems, a leader in air quality control systems in Italy. Their marketing efforts into the industry are paying off, and our sales to Cannabusters are increasing.

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The cannabis industry is facing increased scrutiny by regulators to better control of hazardous air pollutants called terpenes that are a natural part of production and processing. These gases can also cause malodors that demand attention and can be problematic as these companies seek to maintain good community relations and avoid legal entanglements or lawsuits over nuisance odors. Odor abatement operating procedures are part and parcel to the permitting processes for companies involved in the industry and have typically included traditional carbon filters. With the growth and concentration of cannabis related operators, the industry has come to recognize that the volume of terpenes and air flow in a typical operation are often more than the traditional carbon filter-based systems can manage effectively. Odor complaints persist. Third party experts have tested our product and demonstrated that they eliminate the odor-causing chemicals emanating from cannabis grow and production operations. As a result, we have had a number of experts in the cannabis industry tell us that our products could become part of the ‘best practices’ operating procedures for this industry and are working toward that goal. With more than 15,000 licensed operators in California alone, we believe this is a substantial market opportunity

Wastewater Treatment

We are beginning to sell CupriDyne Clean 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 wastewater treatment industry at a national water quality conference hosted by the Water Environment Federation. We anticipate overall longer selling cycles given the technical sophistication of the customers in this market, and believe that channel partnerships with leading companies that already sell and service this highly technical market will be required for our ultimate success. We are encouraged and are evaluating various strategies to maximize our marketing and selling proposition into this mature and well-established market. We are actively engaged in discussions with potential distribution partners and leading engineering firms with well established relationships to the clients in order to service this very large market.

Recently we signed a Memorandum of Understanding (MOU) with BKT Co. Ltd, a major wastewater treatment solutions provider in South Korea and Vietnam, and its US-based subsidiary Tomorrow Water, Inc. The MOU represents the formation of a strategic alliance aimed at exploring opportunities for our technologies in the water and wastewater industry of South Korea. The MOU calls for an initial focus by the group on seeking clients to utilize our disruptive odor and VOC control product, CupriDyne® Clean, in South Korea’s wastewater treatment industry. We believe this partnership represents a successful step toward developing a market for our odor and VOC control products in South Korea by leveraging the network and distribution capabilities of an established player in the market.

Full Service Environmental Engineering

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

BLEST focuses its efforts in four areas:

● Providing engineering services to third-party clients;

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

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

● Developing new products or engineered solutions for high value targets like:

o our work on behalf of the US EPA as funded through an SBIR Phase I grant to develop potential solutions for managing PFAS contaminants in water;

o our work to refine and validate the CupriDyne Clean’s efficacy and delivery systems for managing terpenes from cannabis production;

o our work to provide initial proof of claim for CupriDyne Clean’s efficacy in high volume industrial settings for VOC and air contaminant mitigation; and

o Legionella prevention and monitoring systems.

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The subsidiary is based in Oak Ridge (a suburb of Knoxville), Tennessee, and employs seven scientists and engineers who collectively have over two hundred years of experience in diverse engineering fields. The team is led by Randall Moore, who served as Manager of Operations for Consulting and Engineering for the Knoxville office of CB&I Environmental & Infrastructure and was formerly a leader at The Shaw Group, Inc., a Fortune 500 global engineering firm. The other team members are also former employees of CB&I and Shaw. The team is highly experienced across multiple industries and they are considered experts in their respective fields, including chemical engineering, wastewater treatment (including design, operations, data gathering and data evaluation), process safety, energy efficiency, air pollution, design and control, technology evaluation, technology integration, air quality management & testing, engineering management, permitting, industrial hygiene, applied research and development, air testing, environmental permitting, HAZOP review, chemical processing, thermal design, computational fluid dynamics, mechanical engineering, mechanical design, NEPDES permitting, RCRA/TSCA compliance and permitting,  project management, storm water design & permitting, computer assisted design (CAD), bench chemistry, continuous emission monitoring system operator, data handling and evaluation and decommissioning and decontamination of radiological and chemical contaminated facilities.

Business Development at BLEST

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

BLEST was recently awarded subcontracts to do work on seven U.S. Air Force bases in Texas, Kansas, Illinois and Arizona. Primary contractor Bhate Environmental Associates, Inc. has bid multiple additional projects with BioLargo to conduct “Fence-to-Fence (F2F) environmental compliance”. The total value of the contracts awarded (split between the prime contractor Bhate and its subcontractors, including BLEST) is in excess of $15 million over five years (with one year guaranteed). BLEST is responsible for air quality compliance, one of the three major components of the services.

BLEST recently began a feasibility and placement study for 1.1 million tons of magnesium rich production tailings in Northern California for a new client, and has confirmed technical ability to convert the contents of the tailings ponds into a marketable product. BLEST is working with the client on next steps.

Water contamination – new technology to eliminate PFAS

Per- and poly-fluoroalkyl substances (“PFAS”) are a class of man-made chemicals found in a wide variety of household and commercial goods, including food, fabrics, cleaning products, electronics, and more. A growing body of evidence shows that PFAS ingestion by humans is linked to cancer, fertility problems, asthma, and more. Scientists are discovering PFAS contamination IN local municipal drinking water across the United States (and around the world), meaning that people and wildlife are likely being exposed to these contaminants daily. In the US alone, it is estimated that PFAS contamination may be threatening the drinking water supply for over 110 million people. With PFAS posing widespread and serious water safety problems, governments and industry are actively seeking new technologies and processes to eliminate PFAS from groundwater and drinking water. In response to “extensive public interest”, the U.S. Environmental Protection Agency (“EPA”) created an “action plan” to provide short- and long-term solutions, develop national research and risk-communication programs, and otherwise take a pro-active approach to what they describe as an “emerging environmental challenge.” (See https://www.epa.gov/pfas.)

In summer of 2019, the State of California’s Division of Drinking Water updated its own guidelines to set notification levels as low as 5.1 parts per trillion for certain PFAS compounds. Given these extremely stringent PFAS limits and the seriousness of failing to provide drinking water that meets these standards, municipalities have an urgent and serious need for technologies that can effectively and cost-efficiently eliminate PFAS contaminants from drinking water supplies. In 2019, BLEST management made it a priority to develop a novel technology that could realistically address this problem.

Based on a novel concept to eliminate PFAS compounds, in 2019 the EPA awarded BLEST A SBIR Phase I Competitive Grant to further investigate its solution for the removal of PFAS from water. BLEST has leveraged the grant to develop a proprietary PFAS treatment device called an “Aqueous Electrostatic Concentrator” (or “AEC”). The device, currently at a laboratory “bench” scale, has demonstrated significant capabilities in reducing PFAS contaminants in water, achieving over 99% removal in continuous water flow in many applications, with projected electrical costs below 30 cents per 1,000 gallons. BLEST engineers have determined that the AEC technology is highly scalable to the water volumes required by large municipalities.

Recently, BLEST management was invited to present on the AEC at a conference organized by prominent Southern California innovation association Sustain SoCal and The Technology Collaboration Center- Water Industry Workshop held in Houston Texas, and has also been asked to present its PFAS and other solutions at several other similar events by other organizations in 2019, including the BlueTech Week in San Diego on November 20, 2019 and the Confluence Tech Showcase in Westchester Ohio on December 11, 2019. BLEST will compete for a Phase II grant for funding to finish the product design and start a go-to-market campaign. BLEST and BioLargo management have also already been approached by potential partners and customers for the AEC, and company management will provide more information about these relationships as discussions progress.

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BioLargo Water and the Advanced Oxidation System - AOS

BioLargo Water is our wholly owned subsidiary located on campus at the University of Alberta, Canada, that has been primarily engaged in the research and development of our Advanced Oxidation System (“AOS”).  The AOS is our patented water treatment device that generates a series of highly oxidative species of iodine and other molecules that, because of its proprietary configuration and inner constituents, allow it to eliminate pathogenic organisms and organic contaminants as water passes through the device and it performs with extreme efficacy while consuming very little electricity. Its key application is rapid and efficient decontamination and disinfection of various wastewaters.

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 both input electricity and chemistry – a trait made possible by the complex set of highly oxidative iodine compounds generated within the AOS reactor. Our proof-of-concept studies and case studies have generated results that project the AOS will be more cost- and energy-efficient than commonly used advanced water treatment technologies such as UV, electro-chlorination, and ozonation. This value proposition sets the AOS technology above other water treatment options, as we believe the AOS may allow safe and reliable water treatment for significantly lower cost compared to its competitors and may even enable advanced water treatment in applications where it otherwise would have been prohibitively costly.

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

Our AOS was the result of breakthroughs in both advanced iodine electrochemistry and advances in materials engineering, and its invention led to BioLargo’s co-founding of a multi-year industrial research chair whose goal was to solve the contaminated water issues associated with the Canadian Oil Sands at the University of Alberta Department of Engineering in conjunction with the top five oil companies in Canada, the regional water district, and various environmental agencies of the Canadian government. Based on recovering oil prices and our ongoing work in Canada, in 2018 re reinitiated discussions with 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. Given the fact that there has been no regulatory mandate for compliance and industry has taken a wait and see position with regards to such mandates, we have been unsuccessful in raising grant or private funds for this project, and, therefore we will continue to focus on energies on other markets until such time as proper resources are available.

Our AOS is an award-winning invention that is supported by science and engineering financial support and highly competitive grants (over 65) from various federal and provincial funding agencies in Canada such as NSERC, NRC- IRAP, and Alberta Innovates and in the United States by the Metropolitan Water District of Southern California.

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

Pre-commercial Pilot Projects for AOS

We are now underway on multiple pre-commercial field pilot projects.

The first project involves treating poultry wastewater on-site at a facility in Alberta Canada, with support from the Poultry Growers Association. In this pilot, the AOS is being assessed for its ability to eliminate bacteria and other contaminants from poultry processing wastewater effectively and cost-efficiently and to establish operating costs (OPEX) and capital costs (CAPEX) in a field setting. BioLargo Water built and installed a complete water “treatment train” with equipment to address all aspects of the client’s water treatment needs, including organic contaminants, suspended solids, and biological organisms, in addition to the connected AOS unit. Therefore, this pilot also represents BioLargo’s first assessment as a “total solutions provider”, which could open the door for a wider array of future water treatment market opportunities. Funded in part by Canadian government grants, this system is operating successfully. The client has recently asked us to submit a proposal to install an AOS water treatment system as part of a commercial trial to manage and treat their water and wastewater farm-wide. This will be the first-ever commercial trial for the AOS technology, marking a pivotal moment in the commercialization of BioLargo’s proprietary technology.

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In another recently concluded pilot project, the AOS was used on-site at a Californian micro-brewery as a polishing (final) step in a wastewater “treatment train” whose goal is to reduce wastewater contaminant load to levels that would allow the microbrewery to reduce its wastewater discharge fines and enable water reuse. This pilot established the efficacy of the AOS in a field setting, the OPEX and CAPEX of the system, and the AOS’ ability to “plug and play” in the context of diverse supporting equipment and logistics.

In addition, we recently commenced an AOS pre-commercial pilot that to treat Southern California stormwater at our Westminster, California facility. The pilot’s goal is to demonstrate the technical and economic feasibility of deploying the AOS to enable stormwater treatment and reuse, an important and emerging water management application in the US and Canada. The pilot will also help establish the capital and operating costs of the AOS in this application, a crucial step before potential commercial pilot clients and paying customers would consider the technology in this industrial setting. The pilot project is supported in part by research and development funding of to up to $189,000 from the National Research Council of Canada Industrial Research Assistance Program (NRC IRAP). BioLargo Water is collaborating on the project with Richard Watson & Associates, Inc. and Carollo Engineers, Inc. Richard Watson has been active in stormwater quality management since 1990 and currently consults to three watershed management groups in Los Angeles County. Carollo Engineers, a leading environmental engineering firm providing cost-effective, innovative, and reliable water treatment solutions, will provide engineering and water treatment validation for the project.

These pilot projects represent an important step for our AOS technology. We are confident in our disruptive water treatment technology and have proven its treatment capabilities in the lab. 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. We have other pilots currently in evaluation to support this same cause.

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

Advanced Wound Care - Clyra Medical

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

FDA Pre-market Clearance under Section 510(k)

On September 17 2019, we received notification that Clyra Medical Technologies received pre-market clearance from the U.S. Food and Drug Administration (“FDA”) to market its Clyra Wound Irrigation Solution, designed for cleansing, irrigating, and debriding dermal wounds and burns, in addition to moistening and lubricating absorbent wound dressings under Section 510(k) of the Food, Drug, and Cosmetic Act. We believe the total addressable market for Clyra Medical’s existing product designs in the advanced wound care market, dental, orthopedics and regenerative tissue markets will exceed $2.5 billion by 2022.

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

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

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

SkinDisc

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

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

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

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

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Results of Operations

We operate our business in distinct business segments:

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

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

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

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

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

We invest in each of these segments on a regular basis, as none of the segments yet generates enough cash to fund their operations. However, both Odor-No-More and BLEST are trending towards cash-flow positive, and we expect each of those two segments to begin to generate positive cash in the final months of 2019 or 2020 (before corporate overhead allocation). Additionally, Clyra Medical raises capital directly, rather than relying on BioLargo for cash to operate.

Revenue for the three and nine months ended September 30, 2019 was $534,000 and $1,324,000, respectively. This is a 93% and 53% increase over the same periods in 2018. We generated revenue from two of our operating divisions – Odor-No-More and BLEST. Our business segments obtain cash to support operations in different ways. Odor-No-More and BLEST generate revenues from third parties, and receive funding as needed from their parent corporation, BioLargo. Our Canadian team, BioLargo Water, receives funds from government research grants (reported on our financial statements as “Other income – Grant income”), and receives funding as needed from BioLargo. Clyra Medical, however, relies on direct investment from third parties for 100% of its operating costs and is not supported with capital from BioLargo’s corporate budget or fundraising.

Odor-No-More

Our wholly owned subsidiary Odor-No-More generates revenues through sales of our flagship product CupriDyne Clean, by providing design, installation, and maintenance services on the systems that deliver CupriDyne Clean at its clients’ facilities, and through sales of odor absorption products to the U.S. Government.

Revenue (Odor-No-More)

Odor-No-More’s revenues for the nine months ended September 30, 2019 increased $227,000 (29%) from the same period in 2018. Its revenue for the three months ended September 30, 2019, increased $150,000 (61%) compared to that of the same period in 2018. Over the nine months in 2019, approximately three-quarters of its revenue was generated from sales of CupriDyne Clean products and related services, and the remaining mostly from sales to the U.S. military. The increase in revenues is due to the increases in CupriDyne Clean sales, including design and installation services, which is offset by a decrease in sales of products to the U.S. government. The decrease in sales to the U.S. government is deliberate, as margins for those products are small and selling requires maintaining a high level of inventory, and management has made a conscious decision to focus its efforts on its CupriDyne Clean products. As such, we expect our sales of products to the U.S. government to continue to decrease in future periods.

Cost of Goods Sold (Odor-No-More)

Odor-No-More’s cost of goods sold includes costs of raw materials, contract manufacturing, and portions of salaries and expenses related to the manufacturing of our products. For installation and other services, it includes labor and materials. As a percentage of gross sales, Odor-No-More’s costs of goods was 43% and 44% in the three and nine months ended September 30, 2019 versus 40% and 54% in the same periods in 2018. In mid-2018, because of higher volumes, Odor-No-More was able to decrease its costs by purchasing raw materials directly from manufacturers at more favorable prices, resulting in the year-to-year cost of goods decrease. A portion of the decrease in cost of goods is also due to a reduction of sales of lower-margin products to the U.S. government. The slight increase of cost of goods for the three months ended September 30, 2019, is due to an increased level of misting system installations.

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

Odor-No-More’s Selling, General and Administrative (“SG&A”) expenses increased $53,000 to $309,000 during the three months ended September 30, 2019, compared to the same period in 2018. The increase is related to compensation packages of salary and stock options to hire new employees. We expect future quarters SG&A to increase commensurate with our ability to increase sales and our ability to attract quality sales and support personnel.

Operating Loss (Odor-No-More)

Odor-No-More had a net operating loss of $90,000 and $231,000 for the three and nine months ended September 30, 2019.  This was a 20% and 37% improvement over the same periods in 2018.  Odor-No-More is continuing to increase sales to work toward profitability. Its gross margin is at 57% and 55% for the three and nine months ended September 30, 2019, and its loss from operations is trending downward because it was able to reduce its product costs as a result of its increased volume (purchasing power) and its increased sales resulted in increased gross margin contributing to the company’s operational costs. Although Odor-No-More is generating more revenue and gross profit, it is continuing to reinvest cash to expand its operations. Management intends to continue that expansion in future periods as resources permit.

BLEST (engineering division)

Revenue (BLEST)

BLEST generated $138,000 and $312,000 of revenues from third party clients in the three and nine months ended September 30, 2019, compared to $31,000 and $81,000 in revenue in same periods in 2018.  The increase is due to an increase in the number of client contracts being serviced. The impact of its recently signed subcontracts to service the United States Air Force began generating revenues in the third quarter of 2019.

Cost of Goods (Services) Sold (BLEST)

BLEST’s cost of services includes employee labor as well as outsourced labor costs. In the three and nine months ended September 30, 2019, its cost of services were 84% and 83% of its revenues, versus 72% and 62% in the three and nine months ended September 30, 2018. Costs were higher as we utilized sub-contractors with lower margins and we had fixed fee contracts with higher up-front labor costs.

Selling, General and Administrative Expense (BLEST)

BLEST selling, general and administrative expenses during the three and nine months ended September 30, 2019 totaled $97,000 and $295,000, which is a decrease of nine and 15% compared with the prior year periods. While our staff levels have remained consistent, S&GA in prior periods were higher due to non-cash expenses related to conversion of salary to stock options.

Operating Loss (BLEST)

BLEST had a net operating profit of $27,000 for the three months ended September 30, 2019, and net operating loss of $110,000 for the nine months ended September 30, 2019, compared to net operating loss of $63,000 and $178,000 for the same periods in 2018. We started BLEST two years ago, and as the engineering division has gained more third party clients and projects, its revenues have increased and it has approached profitability. While there’s no assurance it will generate a profit in the fourth quarter of 2019, we expect the trend towards profitability to continue.

Other Income

Our wholly owned Canadian subsidiary has been awarded more than 65 research grants over the years from various Canadian public and private agencies, including the Canadian National Research Institute – Industrial Research Assistance Program (NRC-IRAP), and the National Science and Engineering Research Council of Canada (NSERC), as well as the Metropolitan Water District of Southern California’s Innovative Conservation Program. The research grants received are considered reimbursement grants related to costs we incur and therefore are included on our Consolidated Statement of Operations as Other Income. Amounts paid directly to third parties are not included as income in our financial statements. Our grant income decreased $32,000 in the three months and increased $53,000 in the nine months ended September 30, 2019, compared with the same periods in 2018.  This increase in the nine-month period is due to additional and higher value grants awarded in 2019.

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

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Selling, General and Administrative Expense – company-wide consolidated results

Our SG&A expenses include both cash expenses and non-cash expenses related to common stock and stock option compensation. Our SG&A expenses increased by 32% ($438,000) and 17% ($646,000) during the three and nine months ended September 30, 2019 compared to same periods in 2018. The largest components of our SG&A expenses included (in thousands):

	Three months				Nine months
	September 30, 2018		September 30, 2019		September 30, 2018		September 30, 2019
Salaries and payroll related	$	497	$	624	$	1,469	$	1,594
Professional fees		211		194		590		554
Consulting		251		474		606		1,067
Office expense		234		281		702		744
Sales and marketing		54		70		171		162
Investor relations		40		63		101		145
Board of directors expense		78		97		213		232

Salaries and payroll related expenses increased in 2019 because we continue to hire additional staff to support revenue growth. Consulting expense increased in 2019 due to increased activities at Clyra Medical, and our hiring firms related to business development and brand exposure. We have also increased our investor relations expense to continue to develop and spread the word about our company.

Research and Development

Our company-wide research and development expenses decreased by 26% and 19% compared to the three and nine months ended September 30, 2018 as we have transitioned resources from research and development to commercializing products. In some areas, such as in our medical subsidiary, these expenses increased as the company was better financed and ramping up activities in anticipation of the FDA pre-market clearance for their first wound care product. In Canada, however, activities have transitioned from pure research and development towards a focus on commercializing the AOS system, decreasing their R&D expenses.

Interest expense 

Our interest expense for the three months ended September 30, 2019 increased by $1,023,000 (385%) compared with the three months ended September 30, 2018. Our interest expense for the nine months ended September 30, 2019 decreased $54,000 (2%) compared with the nine months ended September 30, 2018. Of our $2.8 million interest expense for the nine months ended September 30, 2019, $116,000 was paid in cash, and the remaining was paid through the issuance of shares of our common stock.

Our interest expense increased in the three months ended September 30, 2019 primarily because of the acceleration of amortization of discounts and new debt incurred in 2019 at higher interest rates. We expect our interest expense to increase in the remainder of 2019 due to the recent issuance of more than $3.7 million in Twelve Month OID Notes. Because these notes were issued with stock purchase warrants, the relative fair value of the warrants and the intrinsic value of the beneficial conversion feature of the notes typically results in a full discount on the proceeds from the convertible notes. This discount is then amortized as interest expense over the term of the convertible notes.

Net Loss

Net loss for the nine months ended September 30, 2019 was $8,625,000 ($0.07 per share), compared with $8,410,000 ($0.07 per share) in the comparable 2018 period. Net loss for the three months ended September 30, 2019 was $3,886,000 ($0.03 per share) compared with $2,378,000 ($0.02 per share) in the comparable 2018 period. The 2019 increases are related primarily to non-cash increases of loss on debt extinguishment and interest expenses. Of our total net loss, approximately $6.5 million 67%) was non-cash from the issuance of stock, stock options, and other equity instruments to finance operations.

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

	Three months						Nine months
	September 30, 2018			September 30, 2019			September 30, 2018			September 30, 2019
BioLargo corporate		(1,923	)		(3,393	)		(6,905	)		(6,985	)
Odor-no-more		(112	)		(119	)		(366	)		(260	)
Clyra		(220	)		(351	)		(596	)		(982	)
BLEST		(63	)		27			(180	)		(110	)
BioLargo Water		(60	)		(50	)		(363	)		(288	)
Net loss		(2,378	)		(3,886	)		(8,410	)		(8,625	)

Liquidity and Capital Resources

As of September 30, 2019, we had approximately $2.1 million cash on hand, and over $5 million current debt obligations. Subsequent to September 30, 2019, $645,000 have been satisfied through the payment of cash, and $609,000 through conversion to our common stock (see Note 12). As of the date of this Report, one debt obligation due within 12 months, in the amount of $370,000, must be paid in cash if the investor does not exercise the right to convert the note to our common stock (see Note 4, “Convertible Note, matures April 7, 2020”). Additionally, we have approximately $3.2 million in 12-month OID notes due within 12 months, which will be converted to common stock unless the Company receives at least $3.5 million in gross proceeds from a financing transaction. All other debt obligations due within 12 months are convertible at maturity.

Each of our subsidiaries continues to operate at a loss, and our current cash position is sufficient to maintain operations through the first quarter of 2020. Thus, we will be required to raise additional capital. We have continued to raise money through private securities offerings, and continue to negotiate for more substantial financings from private and institutional investors. During the nine months ended September 30, 2019, we received $4,690,000 net cash provided by financing activities. Additionally, we have issued warrants that currently allow for the purchase approximately 43 million shares of our common stock at prices ranging from $0.25 to $1.00 per share. All of the shares underlying these warrants are registered with the SEC, and some contain call provisions as low as two times the exercise price. If our stock price increases above $0.50 per share, we expect that some of these warrants will be exercised.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of our business. For the nine months ended September 30, 2019, we had a net loss of $8,625,000, used $3,181,000 cash in operations, and at September 30, 2019, had a working capital deficit of $2,191,000 and current assets of $2,566,000. During the year ended December 31, 2018, and the nine months ended September 30, 2019, we generated revenues of $1,364,000 and $1,324,000 through our business segments (Odor-No-More and BLEST – see Note 10, “Business Segment Information”).

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.

Clyra Medical is unique in that it funds its operations through third party investments, as it has done since 2016. We do not currently intend and are under no obligation to subsidize its operations in the future.

Critical Accounting Policies

Our discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, valuation of offerings of debt with equity or derivative features which include the valuation of the warrant component, any beneficial conversion feature and potential derivative treatment, and share-based payments. We base our estimates on anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results that differ from our estimates could have a significant adverse effect on our operating results and financial position. We believe that the following significant accounting policies and assumptions may involve a higher degree of judgment and complexity than others.

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The methods, estimates and judgments the Company uses in applying these most critical accounting policies have a significant impact on the results of the Company reports in its financial statements.

Revenue Recognition

We adopted ASU 2014-09, “Revenue from Contracts with Customers”, Topic 606, on January 1, 2018. The guidance focuses on the core principle for revenue recognition. 

The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: 

Step 1:   Identify the contract(s) with a customer.

Step 2:   Identify the performance obligations in the contract.

Step 3:   Determine the transaction price.

Step 4:   Allocate the transaction price to the performance obligations in the contract.

Step 5:   Recognize revenue when (or as) the entity satisfies a performance obligation.

For product revenue, we identify the contract with the customer through a written purchase order (which may be part of a national purchasing agreement), 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. We recognize revenue at a point in time when the order for its goods are shipped if the agreement with our customer is FOB our warehouse facility, and when goods are delivered to its customer if the agreement with our customer is FOB destination. Revenue is recognized with a reduction for sales discounts, as appropriate and negotiated in the customer’s purchase order.

For service revenue, we identify services to be performed in a written contract, which specifies the performance obligations and the rate at which the services will be billed. Each service is separately negotiated and priced. Revenue is recognized as services are performed and completed. Service contracts typically call for invoicing for time and materials incurred for that contract. To date, there have been no discounts or other financing terms for the contracts.

In the future, we may generate revenues from royalties or license fees from our intellectual property. In the event we do so, we anticipate a licensee would pay a license fee in one or more installments and ongoing royalties based on their sales of products incorporating or using our licensed intellectual property. Upon entering into a licensing agreement, we will determine the appropriate method of recognizing the royalty and license fees.

Warrants and Conversion Features

Warrants issued with our convertible and non-convertible debt instruments are accounted for under the fair value and relative fair value method.

The warrant is first analyzed per its terms as to whether it has derivative features or not. If the warrant is determined to be a derivative and not qualify for equity treatment, then it is measured at fair value using the Black Scholes option model, and recorded as a liability on the balance sheet. The warrant is re-measured at its then current fair value at each subsequent reporting date (it is “marked-to-market”).

If the warrant is determined to not have derivative features, it is recorded into equity at its fair value using the Black Scholes option model, however, limited to a relative fair value based upon the percentage of its fair value to the total fair value including the fair value of the convertible note.

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

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The warrant and BCF relative fair values are also recorded as a discount to the convertible promissory notes. As present, these equity features of the convertible promissory notes have recorded a discount to the convertible notes that is substantially equal to the proceeds received.

Debt Modification and Extinguishment

Per the guidance of ASC 470-50, Debt Modifications and Extinguishments, modified terms are considered substantially different if the present value of the cash flows after modification differ by at least 10% prior to the modification. If so, it is an extinguishment of the debt. Loss on extinguishment of debt is calculated by analyzing fair value of the new debt instrument and its beneficial conversion feature, if any, plus the value of the warrant issued with the new debt instrument, if any, and comparing with the carrying value of the extinguished debt.

Share-based Payments

It is the Company’s policy to expense share-based payments as of the date of grant or over the term of the vesting period in accordance with Auditing Standards Codification Topic 718 “Share-Based Payment.” Application of this pronouncement requires significant judgment regarding the assumptions used in the selected option pricing model, including stock price volatility and employee exercise behavior. Most of these inputs are either highly dependent on the current economic environment at the date of grant or forward-looking expectations projected over the expected term of the award.

Fair Value Measurement

Generally accepted accounting principles establishes a hierarchy to prioritize the inputs of valuation techniques used to measure fair value. The hierarchy gives the highest ranking to the fair values determined by using unadjusted quoted prices in active markets for identical assets (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). Observable inputs are those that market participants would use in pricing the assets based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The Company has determined the appropriate level of the hierarchy and applied it to its financial assets and liabilities.

Management believes the carrying amounts of the Company’s financial instruments as of December 31, 2018 and September 30, 2019 approximate their respective fair values because of the short-term nature of these instruments. Such instruments consist of cash, accounts receivable, prepaid assets, accounts payable, convertible notes, and other assets and liabilities. 

Recent Accounting Pronouncements

See Note 2 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies – Recent Accounting Pronouncements”, for the applicable accounting pronouncements affecting the Company.

Item 4. Controls and Procedures

We conducted an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report.

Our procedures have been designed to ensure that the information relating to our company, including our consolidated subsidiaries, required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow for timely decisions regarding required disclosure. However, as our Company continues to grow and evolve, and remains underfunded, implementing controls and procedures to ensure so can be challenging. Although we continue to improve, our chief executive officer and chief financial officer have concluded that as of the evaluation date our disclosure controls and procedures were not effective, due to the material weakness identified below.

It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

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Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Under the supervision and with the participation of our management, including our chief executive officer and the chief financial officer, we have established internal control procedures in accordance with the guidelines established in the 2013 Framework —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Recognizing the dynamic nature and growth of the Company’s business during the past two years, 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. There were no changes in our internal control over financial reporting that occurred during the quarterly period ended September 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls or our internal control over financial reporting, or any system we design or implement in the future, will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

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PART II

OTHER INFORMATION

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

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

During the three months ended September 30, 2019, we issued 513,285 shares of our common stock in exchange for a reduction of approximately $130,000 owed to vendors and consultants.

During the three months ended September 30, 2019, we issued options to purchase 390,117 shares of our common stock at prices ranging from $0.23 to $0.315 per share in exchange for a reduction of $52,000 owed to vendors and consultants.

During the three months ended September 30, 2019, we issued 19,586 shares of our common stock in lieu of accrued and unpaid interest totaling $15,000.

Promissory Notes

The discussion set forth in Part II, Item 5 “Other Information”, is incorporated herein by this reference as though fully set forth.

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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Item 5. Other Information

Twelve-month OID Notes

From June 7, 2019 through September 30, 2019, we received $2,235,000 and issued convertible promissory notes (each, a “12-Month OID Note”) in the aggregate principal amount of $2,794,000, with a 25% original issue discount, to 34 accredited investors. The original issuance discount totaled $559,000 and is recorded as a discount on convertible notes payable on our balance sheet. The intrinsic value of the beneficial conversion features resulted in an aggregate fair value of $2,235,000, and is recorded as a discount on convertible notes on our balance sheet. The discounts will be amortized and recorded to interest expense over the term of the notes. These notes mature twelve months from the date of issuance. The maturity dates range between June 7, 2020 and September 16, 2020.

Each OID note matures 12 months from the date of issuance, and accrues interest at an annual rate of 5%. It may be converted by the investor at any time at $0.17 per share, and automatically converts to equity at maturity at the lower of the fixed conversion rate and seventy percent (70%) of the lowest daily volume weighted average price during the 25 trading days immediately preceding the conversion. It must be prepaid upon conclusion of a securities offering in which we raise at least $3.5 million in a single financing. The $0.17 initial conversion rate may be adjusted downward in the event the Company issues a fixed-price convertible note at a lower conversion rate, or conducts an equity offering at a per-share price less than the conversion price. The Company may prepay the notes at any time upon 10 days’ notice to the investor, during which time they may convert the note to stock.

In addition to the note, each investor receives a warrant to purchase BioLargo common stock for $0.25 per share, expiring 5 years from the date of issuance. The number of shares purchasable under the warrant is equal to the 75% of the principal balance of the note divided by .17. Once the investments are fully processed, the Company expects to issue warrants to purchase approximately 10.2 million shares.

Two-year Convertible Note

On August 9, 2019, we received $600,000 from one accredited investor and issued a promissory note in the principal amount of $600,000, maturing in two years, accruing interest at 15% to be paid in cash monthly, and which converts to common stock at the holder’s option at $0.30 per share. This investor also received a warrant to purchase 1,200,000 shares of our common stock at $0.30 per share, expiring five years from the grant date.

Warrant Exercise

The holder of warrants issued July 2016 and December 2016, the underlying shares for which were registered with the SEC, purchased 2,300,000 shares of our common stock for $276,000.

Tangiers – Note Conversion, New Investment

On July 29, 2019, Tangiers (see Note 4, “Convertible Notes, mature November 5, 2019 and December 7, 2019 (Tangiers)”) elected to convert $330,000 principal amount and $39,600 accrued interest due on its promissory note issued January 31, 2019, into 2,640,000 shares of common stock.

Additionally, Tangiers invested $350,000 into a Twelve-Month OID Note (see Note 4) in the principal amount of $437,500, and a stock purchase with the same terms and conditions as those issued to the Twelve-Month OID Note investors, allowing for the purchase of 1,930,147 shares.

Line of Credit Refinancing

Three holders of a secured line of credit issued in 2018 elected to convert $205,000 of principal owed into Twelve-Month OID Notes in the principal amount of $256,250, and stock purchase warrants allowing for the purchase of 1,130,515 shares. The balance due on the line of credit as of the date of this report is $225,000.

Satisfaction of $440,000 Two-year Note

On the July 20, 2019 maturity date, the holder of a note in the principal amount of $440,000 elected to convert the principal amount due on the note into 2,000 shares of Clyra Medical common stock held by BioLargo, and $106,000 in accrued and unpaid interest into 384,980 shares of BioLargo common stock at $0.2743 per share (the 20-day closing average). This reduced BioLargo’s ownership in Clyra Medical to 38.0%.

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Refinance of Note due September 6, 2019

A holder of a note in the principal amount of $338,800, for which we would have been required to satisfy in cash on September 6, 2019, agreed to satisfy the note through the issuance an amended and restated convertible promissory note due in 12 months with a 25% original issue discount (see Note 4, subheading “Notes payable, mature September 6, 2019”). The entire note balance, including $41,200 in accrued and unpaid interest, was satisfied through the issuance of an amended and restated note in the principal amount of $475,000, and a warrant to purchase 2,095,588 shares of our common stock. The amended and restated note is convertible by the holder at $0.17 per share. The interest rate was reduced from 18% to 5% per annum. The warrant expires in five years and may be exercised at $0.25 per share.

Item 6. Exhibits

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

Exhibit Index

		Incorporated by Reference Herein
Exhibit Number	Exhibit Description	Form	File Date
3.1	Bylaws of BioLargo, Inc., as amended and restated	Form 10-KSB	5/23/2003
3.2	Amended and Restated Certificate of Incorporation for BioLargo, Inc. filed March 16, 2007	Form 10-KSB	5/4/2007
3.3	Amended and Restated Articles of Incorporation of Clyra Medical Technologies, Inc.	Form 8-K	1/6/2016
3.4	Certificate of Amendment to Certificate of Incorporation, filed May 25, 2018	Pos Am	6/22/2018
4.1	Form of Stock Options issued in exchange for reduction in accounts payable.	Form 10-K	3/31/2015
4.2	Form of Warrant issued to One Year Note holder in July 2016	Form 10-Q	8/15/2016
4.3	Form of Warrant issued to One Year Note holder dated December 30, 2016	Form S-1	1/25/2017
4.4	Form of Warrant issued to One-Year Noteholder July 2017	Form 10-Q	8/14/2017
4.5	Two-year Note in face amount of $440,000 issued July 2017	Form 10-Q	8/14/2017
4.6	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
4.7	Convertible Promissory Note issued to Vista Capital Investments LLC dated December 14, 2017	Form 8-K	12/22/2017
4.8	December 18, 2017, amendment to Promissory Note dated December 14, 2017 issued to Vista Capital Investments, LLC.	Form 8-K	12/22/2017
4.9	Stock Option dated December 31, 2017, issued to Chief Financial Officer Charles K. Dargan II	Form 8-K	1/3/2018
4.10	Line of credit, matures September 1, 2019	Form 10-Q	5/14/2018
4.11	Form of convertible notes that mature April 20, 2021 (Spring 2018 Offering)	Form 10-Q	5/14/2018
4.12	Form of warrant issued with convertible notes that mature April 20, 2021 (Spring 2018 Offering)	Form 10-Q	5/14/2018
4.13	Amendment to $440,000 convertible notes that matures July 20, 2019	Form 10-Q	5/14/2018
4.14	2018 Equity Incentive Plan	Form S-8	6/22/2018

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4.15	Stock Option Award Agreement under 2018 Equity Incentive Plan	Form S-8	6/22/2018
4.16	Notice of Stock Option Grant under 2018 Equity Incentive Plan	Form S-8	6/22/2018
4.17	Restricted Stock Unit Award Agreement under 2018 Equity Incentive Plan	Form S-8	6/22/2018
4.18	Notice of Restricted Stock Unit Award under 2018 Equity Incentive Plan	Form S-8	6/22/2018
4.19	September 2018 Amendment to Promissory Note dated December 14, 2017 issued to Vista Capital Investments, LLC.	Form 8-K	9/18/2018
4.20	Stock Purchase Warrant issued to Vista Capital Investments dated September 12, 2018.	Form 8-K	9/18/2018
4.21	Promissory Note issued to Vernal Bay Investments, LLC on September 19, 2018	Form 8-K	9/24/2018
4.22	Stock Purchase Warrant issued to Vernal Bay Investments, LLC on September 19, 2018	Form 8-K	9/24/2018
4.23	Promissory Note issued to Chappy Bean, LLC on September 19, 2018	Form 8-K	9/24/2018
4.24	Stock Purchase Warrant issued to Chappy Bean, LLC on September 19, 2018	Form 8-K	9/24/2018
4.25	Promissory note issued by Clyra Medical Technologies dated September 26, 2018	Form 8-K	10/2/2018
4.26	January 2019 Amendment to Promissory Note dated December 14, 2017, by and between BioLargo, Inc. and Vista Capital Investments, LLC.	Form 8-K	1/11/2019
4.27	Convertible Promissory Note issued to Vista Capital Investments LLC dated January 7, 2019	Form 8-K	1/11/2019
4.28	Stock Purchase Warrant Issued to Lincoln Park Capital on January 31, 2019	Form 8-K	2/11/2019
4.29	Amendment dated March 5, 2019 to Promissory Note issued to Vernal Bay Investments, LLC on September 19, 2018	Form 8-K	3/8/2019
4.30	Amendment dated March 5, 2019 to Promissory Note issued to Chappy Bean, LLC on September 19, 2018	Form 8-K	3/8/2019
4.31	10% Convertible Promissory Note issued to Bellridge Capital, LP dated April 18, 2019	Form 8-K	4/23/2019
4.32	Convertible Promissory Note issued to Crossover Capital dated May 10, 2019	Form 10-Q	5/15/2019
4.33	10% Convertible Promissory Note issued to EMA Financial, LP dated June 4, 2019	Form 8-K	6/7/2019
4.34	Amendment #1 to the Convertible Note issued on June 4, 2019 to EMA Capital, LP	Form 8-K	6/7/2019
4.35	OID twelve-month promissory note	Form 8-K	8/2/2019
4.36	Stock purchase warrant issued to OID twelve-month investors	Form 8-K	8/2/2019
4.37	$600,000 Promissory note dated August 9, 2019	Form 10-Q	8/14/2019
4.38	Warrant to purchase 1.2 million shares issued August 9, 2019	Form 10-Q	8/14/2019
4.39	Amendment dated August 12, 2019 to Promissory Note issued to Vernal Bay Investments, LLC on September 19, 2018	Form 10-Q	8/14/2019
4.40	Amended and restated note issued to Vernal August 12, 2019	Form 10-Q	8/14/2019
4.41	Warrant issued to Vernal August 12, 2019	Form 10-Q	8/14/2019
4.42	Warrant issued March 2018, expiring March 2023	S-1	8/29/2019
4.43	Form of warrant issued January 2019 to Lincoln Park, expiring January 2024	S-1	8/29/2019

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10.1†	January 16, 2019 Engagement Extension Agreement by and between BioLargo, Inc. and Charles K. Dargan	Form 8-K	1/18/2019
10.2†	Provenzano Employment Agreement dated May 28, 2019	Form 8-K	6/24/2019
10.3†	Lock-Up Agreement dated May 28, 2019	Form 8-K	6/24/2019
31.1*	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rules 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934
31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rules 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934
32*	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS**	XBRL Instance
101.SCH**	XBRL Taxonomy Extension Schema
101.CAL**	XBRL Taxonomy Extension Calculation
101.DEF**	XBRL Taxonomy Extension Definition
101.LAB**	XBRL Taxonomy Extension Labels
101.PRE**	XBRL Taxonomy Extension Presentation

* Filed herewith

** Furnished herewith

† Management contract or compensatory plan, contract or arrangement

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: November 14, 2019	BIOLARGO, INC.  By: /s/ DENNIS P. CALVERT
	Dennis P. Calvert Chief Executive Officer
Date: November 14, 2019	By: /s/ CHARLES K. DARGAN, II
	Chief Financial Officer

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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: November 14, 2019	By:	/s/ DENNIS P. CALVERT
		Dennis P. Calvert
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification of Chief Financial Officer

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

I, Charles K. Dargan II, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 14, 2019	By:	/s/ CHARLES K. DARGAN II
		Charles K. Dargan II
		Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

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

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Dennis P. Calvert, Chief Executive Officer of BioLargo, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that the Quarterly Report of BioLargo, Inc. on Form 10-Q for the quarter ended September 30, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of BioLargo, Inc.

Date: November 14, 2019	By:	/s/ DENNIS P. CALVERT
		Dennis P. Calvert
		President and Chief Executive Officer

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

I, Charles K. Dargan II, Chief Financial Officer of BioLargo, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge that the Quarterly Report of BioLargo, Inc. on Form 10-Q for the quarter ended September 30, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of BioLargo, Inc.

Date: November 14, 2019	By:	/s/ CHARLES K. DARGAN II
		Charles K. Dargan II
		Chief Financial Officer

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

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Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flows from operating activities
Net loss	$ (8,625,000)	$ (8,410,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock option compensation expense	1,201,000	984,000
Common stock issued in lieu of salary to officers and fees for services from vendors	587,000	644,000
Common stock issued for interest	147,000	519,000
Interest expense related to amortization of the discount on convertible notes payable and line of credit and deferred financing costs	2,381,000	2,213,000
Interest expense related to the fair value of warrants issued as consent for variable debt	54,000
Debt conversion expense		276,000
Loss on extinguishment of debt	1,029,000	578,000
Bad debt expense		1,000
Deferred offering expense	13,000	19,000
Depreciation expense	48,000	36,000
Changes in assets and liabilities:
Accounts receivable	(72,000)	(19,000)
Inventories	7,000	8,000
Accounts payable and accrued expenses	88,000	143,000
Prepaid expenses and other current assets	(66,000)	(43,000)
Customer deposits	27,000
Net cash used in operating activities	(3,181,000)	(3,051,000)
Cash flows from investing activities
Leasehold improvements	(27,000)	(43,000)
Net cash used in investing activities	(27,000)	(43,000)
Cash flows from financing activities
Proceeds from convertible notes payable	4,335,000	880,000
Proceeds from conversion inducement		357,000
Proceeds from warrant exercise-price reduction		149,000
Proceeds from warrant exercise	380,000
Repayment of notes payable	(495,000)
Proceeds from line of credit		430,000
Net cash provided by financing activities	4,690,000	2,643,000
Net effect of foreign currency translation	(1,000)	(5,000)
Net change in cash	1,481,000	(456,000)
Cash at beginning of year	655,000	990,000
Cash at end of period	2,136,000	534,000
Supplemental disclosures of cash flow information
Interest	116,000	5,000
Income taxes	3,000	6,000
Non-cash investing and financing activities
Fair value of warrants issued with convertible notes	3,931,000	570,000
Right of use, operating lease and liability	341,000
Deemed dividend	781,000	297,000
Conversion of Convertible Notes Payable into Common Stock [Member]
Non-cash investing and financing activities
Conversion of debt	908,000	5,930,000
Conversion of Convertible Notes Issued with Original Issue Discount [Member]
Non-cash investing and financing activities
Conversion of debt	1,008,000	10,000
Conversion of Convertible Note Payable into Shares of Clyra [Member]
Non-cash investing and financing activities
Conversion of debt	440,000
Stock Issued for Exercise of Stock Options [Member]
Non-cash investing and financing activities
Fair value of stock issued		2,000
Stock Issued for Financing Fee [Member]
Non-cash investing and financing activities
Fair value of stock issued		85,000
Clyra Medical Common Stock [Member]
Cash flows from financing activities
Proceeds from the sale of stock	470,000
Lincoin Park Capital Stock [Member]
Cash flows from financing activities
Proceeds from the sale of stock		$ 827,000

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Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 2,136,000	$ 655,000
Accounts receivable	306,000	257,000
Inventories, net of allowance	19,000	26,000
Prepaid expenses and other current assets	105,000	17,000
Total current assets	2,566,000	955,000
In-process research and development (Note 8)	1,893,000	1,893,000
Equipment, net of depreciation	106,000	126,000
Other non-current assets	35,000	35,000
Right-of-use, operating lease, net of amortization	341,000
Deferred offering cost	163,000	176,000
Total assets	5,104,000	3,185,000
Current liabilities:
Accounts payable and accrued expenses	546,000	501,000
Notes payable	50,000	400,000
Line of credit	225,000	430,000
Convertible notes payable	5,224,000	1,365,000
Discount on convertible notes payable, and line of credit, net of amortization	(2,438,000)	(205,000)
Lease liability	116,000
Customer deposit	27,000
Total current liabilities	4,757,000	2,491,000
Long-term liabilities:
Long-term debt	700,000	1,292,000
Discount on convertible notes payable, net of amortization	(211,000)	(118,000)
Lease liability	225,000
Total long-term liabilities	1,357,000	1,817,000
Total liabilities	6,114,000	4,308,000
COMMITMENTS, CONTINGENCIES (Note 11)
STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred Series A, $.00067 Par Value, 50,000,000 Shares Authorized, -0- Shares Issued and Outstanding, at December 31, 2018 and September 30, 2019, respectively.
Common stock, $.00067 Par Value, 400,000,000 Shares Authorized, 141,466,071 and 158,671,346 Shares Issued, at December 31, 2018 and September 30, 2019, respectively.	106,000	95,000
Additional paid-in capital	119,421,000	110,222,000
Accumulated other comprehensive loss	(91,000)	(90,000)
Accumulated deficit	(120,556,000)	(111,723,000)
Total BioLargo Inc. and Subsidiaries stockholders’ equity (deficit)	(1,120,000)	(1,496,000)
Non-controlling interest (Note 8)	110,000	373,000
Total stockholders’ equity (deficit)	(1,010,000)	(1,123,000)
Total liabilities and stockholders’ equity (deficit)	5,104,000	3,185,000
Scion Acquisition [Member] | Clyra Acquisition, Common Stock Redeemable for BioLargo Common Shares [Member]
Long-term liabilities:
Liability to Clyra Medical shareholder (Note 8)	643,000	643,000
Convertible Notes Issued by Clyra Medical Maturing on June 17, 2020 [Member]
Current liabilities:
Notes payable	1,007,000
Long-term liabilities:
Long-term debt		1,007,000
Convertible Notes Issued by Clyra Medical Maturing on June 17, 2020 [Member] | Scion Acquisition [Member]
Long-term liabilities:
Long-term debt	1,007,000
Convertible Notes and Notes Payable [Member]
Long-term liabilities:
Long-term debt	$ 700,000	$ 285,000

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Note 6 - Warrants

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Warrants [Text Block]

Note

6.

Warrants

The amortization of our discount on convertible notes totaled

$2,213,000

and

$2,381,000

for the

nine

months ended

September 30, 2018

and

2019,

and is recorded in interest expense on the consolidated statements of operations.

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

								Weighted
								a verage		Aggregate
	Warrants			Exercise				p rice per		intrinsic
As of September 30 , 2018 :	o utstanding			p rice per share				share		value (1)
Balance, December 31, 2017		22,104,817		$	0.125	–	1.00	$	0.45
Issued		6,451,013			0.25	–	0.48		0.23
Expired		(2,683,400	)				0.40		0.40
Balance, September 30, 2018		25,872,430		$	0.125	–	1.00	$	0.39
As of September 30 , 2019 :
Balance, December 31, 2018		26,872,430		$	0.25	–	1.00	$	0.42
Issued		24,321,947			0.10	–	0.30		0.21
Exercised		(7,505,746	)		0.10	–	0.12		0.11
Balance, September 30, 2019		43,688,631		$	0.10	–	1.00	$	0.35	$	1,898,000

Warrants issued as part of debt extension and extinguishment

On

March 5, 2019,

we executed amendments extending the maturity dates of notes issued to Vernal Bay and Chappy Bean (see Note

4,

subsection titled “

Notes payable, mature

August 12

and

16,

2020

(previously due

September 6, 2019)

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

1,387,500

shares at

$0.25

per share, expiring

September 19, 2023.

We agreed to lower the exercise price to

$0.20

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

1,734,375.

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

$346,875

remained the same. Chappy Bean’s warrant to purchase

600,000

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

750,000

shares at

$0.20

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

$56,000

recorded as loss on debt extinguishment on our statement of operations. In the aggregate, the number of shares purchasable under these

two

warrants increased by

496,875.

In conjunction with the refinance of its debt due

September 6, 2019,

in additional to a convertible OID note (see Note

4

), Vernal received a warrant to purchase

2,095,588

shares of our common stock. The warrant expires in

five

years and

may

be exercised at

$0.25

per share.

In conjunction with the refinance of its debt due

September 6, 2019,

in additional to a convertible OID note (see Note

4

), Chappy Bean received a warrant to purchase

330,882

shares of our common stock. The warrant expires in

five

years and

may

be exercised at

$0.25

per share.

Warrants issued as part of

line of credit extinguishment

We issued warrants to purchase an aggregate

1,130,515

shares of our common stock to

three

line of credit holders who had agreed to convert their line of credit into an amended and restated note plus a warrant (see Note

4,

“Line of credit, due on demand

30

days’ notice after

September 1, 2019”).

The warrant expires in

five

years and

may

be exercised at

$0.25

per share.

Warrants issued as part of

2018

OID extinguishment

On

September 12

and

September 16, 2019,

the holders of a convertible note in the aggregate principal amount of

$100,000,

agreed to satisfy the note through the issuance of an amended and restated convertible promissory note due in

12

months,

September 12

and

September 16, 2020,

including a

25%

original issue discount (see Note

4

) and a warrant to purchase

551,471

shares of our common stock. The warrant expires in

five

years and

may

be exercised at

$0.25

per share.

Warrants issued as consent for variable rate debt

On

January 7

and

January 31, 2019,

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

August 25, 2017,

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

300,000

shares of our common stock at

$0.25

per share, expiring

five

years from the date of grant. The fair value of these warrants totaled

$54,000

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

2019

over the term of the notes. (See Note

4

).

Warrants issued concurrently with the Nine-month OID notes

In conjunction with the issuance of our

nine

-month OID notes (see Note

4

), we issued each investor a warrant to purchase common stock for

$0.25

per share, expiring

5

years from the date of issuance. During the

three

months ended

March 31, 2019,

we issued warrants to purchase

637,500

shares of our common stock to the

three

investors. The fair value of these warrants totaled

$89,000

and was recorded as a discount on note payable on our consolidated balance sheet and will amortize to interest expense over the term of the notes. On

June 7, 2019,

we reduced the conversion prices of the notes from

$0.25

to

$0.17,

and this resulted in an increase in the number of warrants purchasable by the investors by

300,000

to

937,500,

which resulted our recording the fair value of

$84,000,

which is recorded as a deemed dividend.

Warrants Issued concurrently with Twelve-month OID notes

During the

nine

months ended

September 30, 2019,

we issued warrants to purchase

12,325,370

shares of our common stock to purchasers of our Twelve-month OID Notes (see Note

4

). The warrants allow the holder to purchase common stock for

$0.25

per share, expiring

5

years from the date of issuance. The number of shares purchasable under each warrant was equal to the

75%

of the principal balance of the investor’s note, divided by

$0.17

(thus, for example, a

$300,000

investment would yield a note with principal balance of

$375,000,

and a warrant allowing for the purchase of up to

1,654,412

shares). The fair value and BCF of these warrants totaled

$2,240,000

and was recorded as a discount on note payable on our consolidated balance sheet and will amortize to interest expense over the term of the notes.

Warrants Issued concurrently with the Convertible Note due

August 9, 2021

In conjunction with the issuance of a convertible note due

August 9, 2021 (

see Note

4

), we issued an investor a warrant to purchase

1,200,000

shares of our common stock for

$0.30

per share, expiring

5

years from the date of issuance. The fair value and BCF of these warrants totaled

$198,000

and was recorded as a discount on note payable on our consolidated balance sheet and will amortize to interest expense over the term of the note.

Warrants exercised

During the

nine

months ended

September 30, 2019,

we received

$380,000

from the exercise of warrants to purchase

3,166,666

shares.

On

June 24, 2019,

Vista Capital exercised its stock purchase warrant issued

September 12, 2018,

electing to utilize the cashless exercise feature in the warrant. As a result, we issued Vista Capital

2,877,790

shares of common stock. The increase in available warrants was the result of downward adjustment of the exercise price, which increased the number of shares available for purchase under the warrant resulting in a fair value totaling

$355,000,

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

Fair Value

To determine interest expense related to our outstanding warrants issued in conjunction with debt offerings, the fair value of each award grant is estimated on the date of grant using the Black-Scholes option pricing model and the relative fair values are amortized over the life of the warrant. For the determination of expense of warrants issued for services, extinguishment of debt and settlement management also uses the option-pricing model. The principal assumptions we used in applying this model were as follows:

	September 30 , 2018				September 30 , 2019
Risk free interest rate			2.54	%	1.42	–	2.62	%
Expected volatility			252	%	86	–	110	%
Expected dividend yield		—				—
Forfeiture rate		—				—
Expected life in years	5	–	10		2	—	5

The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant. Expected volatilities are based on historical volatility of our common stock. The expected life in years is based on the contract term of the warrant.

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Note 10 - Business Segment Information

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

10.

Business Segment Information

BioLargo currently has

four

operating business segments, plus its corporate entity which is responsible for general corporate operations, including administrative functions, finance, human resources, marketing, legal, etc. The

four

operational business segments are:

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

2. Clyra Medical (“Clyra”) -- which is engaged in developing medical products and preparing its launch into commercial activity with recent FDA 510 (K) pre-market clearance of its wound care product;

3. BioLargo Engineering, Science & Technologies, LLC (“BLEST”) -- which provides professional engineering services on a time and materials basis for outside clients, and supports our internal operations and innovation (located in Oak Ridge, Tennessee);

4. BioLargo Water (“Water”) -- which has now shifted its focus from R&D/product development to commercializing the AOS technology (located in Edmonton, Alberta Canada).

Historically,

none

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

No

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

third

party investors who invest directly in Clyra Medical in exchange for equity ownership in that entity.

The segment information for the

three

and

nine

months ended

September 30, 2018

and

2019,

is as follows (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2018			2019			2018			2019
Revenue
Odor-No-More	$	246		$	396		$	786		$	1,012
BLEST		181			308			531			732
BLEST - Intercompany revenue		(150	)		(170	)		(450	)		(420	)
Total	$	277		$	534		$	867		$	1,324
Operating ( loss ) income
BioLargo corporate	$	(1,079	)	$	(1,347	)	$	(3,225	)	$	(3,250	)
Odor-No-More		(112	)		(90	)		(366	)		(231	)
Clyra		(220	)		(338	)		(596	)		(944	)
BLEST		(63	)		27			(178	)		(110	)
Water		(191	)		(136	)		(533	)		(499	)
Total	$	(1,665	)	$	(1,884	)	$	(4,898	)	$	(5,034	)
Interest expense
BioLargo Corporate	$	(266	)	$	(1,248	)	$	(2,825	)	$	(2,707	)
Odor-No-More		—			(28	)		—			(28	)
Clyra		—			(13	)		(2	)		(38	)
Total	$	(266	)	$	(1,289	)	$	(2,827	)	$	(2,773	)
Research and development expense
BioLargo Corporate	$	(279	)	$	(256	)	$	(905	)	$	(638	)
Clyra		(45	)		(58	)		(189	)		(213	)
BLEST		(97	)		(77	)		(302	)		(273	)
Water		(171	)		(111	)		(445	)		(428	)
Intersegement BioLargo corporate		150			170			450			426
Total	$	(442	)	$	(332	)	$	(1,391	)	$	(1,126	)

As of September 30, 2019	BioLargo		ONM		Clyra		BLEST		Water		Elimination			Total
Tangible assets	$	2,390	$	457	$	65	$	175	$	130	$	(6	)	$	3,211
Intangible assets		1,893		—		—		—		—		—			1,893

As of December 31, 2018	BioLargo		ONM		Clyra		BLEST		Water		Elimination			Total
Tangible assets	$	353	$	219	$	462	$	230	$	33	$	(6	)	$	1,291
Intangible assets		1,893		—		—		—		—		—			1,893

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Note 6 - Warrants - Warrants Outstanding (Details) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Balance, outstanding (in shares)	26,872,430	22,104,817
Balance, outstanding, price range (in dollars per share)	$ 0.42	$ 0.45
Issued (in shares)	24,321,947	6,451,013
Issued, price range (in dollars per share)	$ 0.21	$ 0.23
Expired (in shares)	(7,505,746)	(2,683,400)
Expired, price range (in dollars per share)	$ 0.11	$ 0.40
Balance, outstanding (in shares)	43,688,631	25,872,430
Balance, outstanding, price range (in dollars per share)	$ 0.35	$ 0.39
Balance, aggregate intrinsic value	$ 1,898,000
Minimum [Member]
Balance, outstanding, price range (in dollars per share)	$ 0.25	0.125
Issued, price range (in dollars per share)	0.10	0.25
Expired, price range (in dollars per share)	0.10
Balance, outstanding, price range (in dollars per share)	0.10	0.125
Maximum [Member]
Balance, outstanding, price range (in dollars per share)	1	1
Issued, price range (in dollars per share)	0.30	0.48
Expired, price range (in dollars per share)	0.12	0.40
Balance, outstanding, price range (in dollars per share)	$ 1	$ 1

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Note 4 - Debt Obligations - Schedule of Debt (Details) - USD ($)		Sep. 30, 2019	Dec. 31, 2018
Notes payable		$ 50,000	$ 400,000
Total notes payable and line of credit		1,282,000	830,000
Convertible Notes Payable, Current		5,224,000	1,365,000
Total current liabilities		6,506,000	2,195,000
Long-term Debt, Excluding Current Maturities, Total		700,000	1,292,000
Total		7,206,000	3,487,000
Notes Payable, Maturing September 6, 2019 [Member]
Notes payable			400,000
Note Payable, Maturing March 8, 2023 [Member]
Notes payable		50,000
Line of Credit, Maturing September 1, 2019 [Member]
Long-term Line of Credit, Total		225,000	430,000
Convertible Notes Issued by Clyra Medical Maturing on June 17, 2020 [Member]
Notes payable		1,007,000
Long-term Debt, Excluding Current Maturities, Total			1,007,000
Convertible Notes Maturing January 11, 2019 [Member]
Convertible Notes Payable, Current			300,000
Convertible Notes, Maturing July 20, 2019 [Member]
Convertible Notes Payable, Current	[1]		440,000
Convertible Nine Month OID Note, Maturing October, 2019 [Member]
Convertible Notes Payable, Current	[2]	213,000
Convertible Three Month OID Note, Matures November 12, 2019 [Member]
Convertible Notes Payable, Current	[2]	110,000
Convertible Notes, Maturing December 7, 2019 [Member]
Convertible Notes Payable, Current	[2]	185,000
Convertible Notes Maturing on December 31, 2019 [Member]
Convertible Notes Payable, Current	[1]	75,000	75,000
Convertible Note Maturing February 14 and March 17, 2020 [Member]
Convertible Notes Payable, Current	[2]	200,000
Promissory Note Due February 28, 2020 [Member]
Convertible Notes Payable, Current	[2]	101,000	550,000
Convertible Note Maturing March 4, 2020 [Member]
Convertible Notes Payable, Current
Convertible Note, Maturing April 7, 2020 [Member]
Convertible Notes Payable, Current		370,000
Convertible Note Maturing April 18, 2020 [Member]
Convertible Notes Payable, Current	[2]	220,000
Convertible Notes, Maturing on June 20, 2020 [Member]
Convertible Notes Payable, Current	[1]	25,000
Long-term Debt, Excluding Current Maturities, Total	[1]		25,000
Convertible Twelve Months OID Notes [Member]
Convertible Notes Payable, Current		3,175,000
Convertible Notes, Maturing August 12 and 16, 2020 [Member]
Convertible Notes Payable, Current		550,000
Convertible Note, Maturing August 9, 2021 [Member]
Long-term Debt, Excluding Current Maturities, Total		600,000
Convertible Notes, Maturing April 20, 2021 [Member]
Long-term Debt, Excluding Current Maturities, Total	[1]	100,000	100,000
Convertible Notes, Mature June 15, 2021 [Member]
Long-term Debt, Excluding Current Maturities, Total	[1]		110,000
Convertible Note, Maturing On March 8, 2023 [Member]
Long-term Debt, Excluding Current Maturities, Total			$ 50,000

[1] These notes are convertible at our option at maturity.

[2] These notes have been paid and/or converted to common stock subsequent to September 30, 2019 (see Note 12).

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Note 2 - Summary of Significant Accounting Policies - Inventory (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Raw material	$ 10	$ 14
Finished goods	9	12
Total	$ 19	$ 26

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Note 10 - Business Segment Information (Details Textual)	9 Months Ended
	Sep. 30, 2019
Number of Operating Segments	4

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Note 7 - Accounts Payable and Accrued Expenses - Summary of Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Accounts payable and accrued expense	$ 297	$ 302
Accrued interest	111	122
Accrued payroll	138	77
Total accounts payable and accrued expenses	$ 546	$ 501

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Note 2 - Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Schedule of Cash and Cash Equivalents [Table Text Block]

	December 31, 2018		September 30 , 2019
BioLargo, Inc. and wholly owned subsidiaries	$	193	$	2,071
Clyra Medical Technologies, Inc.		462		65
Total	$	655	$	2,136

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

	September 30 , 201 8			September 30 , 201 9
Customer A		44	%		13	%
Customer B		12	%		<10	%
Customer C		<10	%		10	%

	December 31, 201 8			September 30 , 201 9
Customer W		12	%		<10	%
Customer X		31	%		<10	%
Customer Y		<10	%		17	%
Customer Z		<10	%		15	%

Schedule of Inventory, Current [Table Text Block]

	December 31, 201 8		September 30 , 201 9
Raw material	$	14	$	10
Finished goods		12		9
Total	$	26	$	19

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

	2018								2019
	Non Plan				2018 Plan				Non Plan				20 18 Plan
Risk free interest rate	2.43	–	2.91	%			2.91	%	2.00	-	2.65	%	2.00	-	2.65	%
Expected volatility	538	-	563	%	538	-	548	%	147	-	152	%	147	-	152	%
Expected dividend yield			—				—				—				—
Forfeiture rate			—				—				—				—
Life in years			7				7				7				7

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Note 7 - Accounts Payable and Accrued Expenses (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

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

	December 31, 2018		September 30 , 2019
Accounts payable and accrued expense	$	302	$	297
Accrued interest		122		111
Accrued payroll		77		138
Total accounts payable and accrued expenses	$	501	$	546

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Note 2 - Summary of Significant Accounting Policies (Details Textual)	9 Months Ended		12 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018	Dec. 31, 2018 USD ($)	Jan. 01, 2019 USD ($)
Inventory Valuation Reserves, Ending Balance	$ 3,000		$ 3,000
Impairment of Long-Lived Assets Held-for-use	$ 0		0
Number of Grants Received	65
Operating Lease, Right-of-Use Asset	$ 341,000
Accounts Receivable, Allowance for Credit Loss, Ending Balance	0		$ 0
Accounting Standards Update 2016-02 [Member]
Operating Lease, Right-of-Use Asset				$ 399,000
Operating Lease, Liability, Total				$ 399,000
Canadian Government Grants [Member]
Grants Receivable	$ 3,600,000
Canadian Government Grants [Member] | Maximum [Member]
Grant Term	1 year 180 days
Customer Concentration Risk [Member] | Revenue Benchmark [Member]
Number of Major Customers	2	2
Customer Concentration Risk [Member] | Accounts Receivable [Member]
Number of Major Customers	2	2
Clyra Medical Technology Inc [Member] | Biolargo [Member]
Noncontrolling Interest, Ownership Percentage by Parent	38.00%

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Note 9 - BioLargo Engineering, Science and Technologies, LLC (Details Textual) - USD ($) $ in Thousands, shares in Millions	1 Months Ended	9 Months Ended		25 Months Ended
	Sep. 30, 2017	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019
Share-based Payment Arrangement, Noncash Expense, Total		$ 1,201	$ 984
Seven Employees Working at BioLargo Engineering, Science & Technologies, LLC [Member]
Deferred Compensation Arrangement with Individual, Requisite Service Period	5 years
Potential Ownership Percentage of Subsidiary Held by Subsidiary Employees Based on Performance	30.00%
Incentive Issuance Stipulations for Subsidiary Employees, Accounts Receivable Collected by Year One of Operation	90.00%
Incentive Issuance Stipulations for Subsidiary Employees, Profit Earned in Year One of Operation	10.00%
Seven Employees Working at BioLargo Engineering, Science & Technologies, LLC [Member] | Non-Qualified Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	2
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
Share-based Payment Arrangement, Noncash Expense, Total				$ 0
BioLargo Engineering, Science & Technologies, LLC [Member]
Noncontrolling Interest, Ownership Percentage by Parent	100.00%
Leased Property in Knoxville, Tennessee for BioLargo Engineering, Science & Technologies, LLC [Member]
Lessee, Operating Lease, Term of Contract	3 years

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Note 6 - Warrants - Assumptions Used to Determine Fair Value of Warrants (Details)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Risk free interest rate		2.54%
Expected volatility		252.00%
Minimum [Member]
Risk free interest rate	1.42%
Expected volatility	86.00%
Expected life (Year)	2 years	5 years
Maximum [Member]
Risk free interest rate	2.62%
Expected volatility	110.00%
Expected life (Year)	5 years	10 years

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Note 12 - Subsequent Events (Details Textual) - USD ($)			1 Months Ended
	Oct. 28, 2019	Oct. 02, 2019	Nov. 14, 2019	Nov. 13, 2019	Sep. 30, 2019	Jun. 07, 2019	Mar. 31, 2019
Conversion of OID Notes to Common Stock [Member]
Debt Instrument, Convertible, Conversion Price					$ 0.17	$ 0.17	$ 0.25
Subsequent Event [Member]
Debt Conversion, Original Debt, Amount			$ 609,000
Subsequent Event [Member] | Convertible Note to Crossover Capital Fund I, LP [Member] | Convertible Notes Payable [Member]
Repayments of Convertible Debt			273,000
Subsequent Event [Member] | Bellridge Note [Member] | Convertible Notes Payable [Member]
Repayments of Convertible Debt			299,000
Subsequent Event [Member] | Conversion of Convertible Notes Payable Due February 28, 2020 Into Common Stock [Member]
Debt Conversion, Original Debt, Amount				$ 95,452
Debt Conversion, Original Interest, Amount				$ 11,089
Debt Conversion, Converted Instrument, Shares Issued				683,108
Subsequent Event [Member] | Conversion of Convertible Notes Payable into Common Stock [Member]
Debt Conversion, Original Debt, Amount	$ 110,000	$ 185,000
Debt Conversion, Converted Instrument, Shares Issued	660,709	1,200,000
Debt Instrument, Convertible, Conversion Price	$ 0.17
Subsequent Event [Member] | Conversion of OID Notes to Common Stock [Member]
Debt Conversion, Original Debt, Amount			$ 212,500
Debt Conversion, Converted Instrument, Shares Issued			1,340,698

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Note 2 - Summary of Significant Accounting Policies - Summary of Cash Balances (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Dec. 31, 2017
Cash and Cash Equivalents, at Carrying Value, Ending Balance	$ 2,136,000	$ 655,000	$ 534,000	$ 990,000
Parent Company [Member]
Cash and Cash Equivalents, at Carrying Value, Ending Balance	2,071,000	193,000
Noncontrolling Interest [Member]
Cash and Cash Equivalents, at Carrying Value, Ending Balance	$ 65,000	$ 462,000

XML

Note 4 - Debt Obligations (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Schedule of Debt [Table Text Block]

	December 31, 201 8		September 30 , 201 9
C urrent liabilities:
Notes payable and line of credit
Notes payable, previously due September 6, 2019	$	400	$	—
Note payable, due on demand 60 days’ notice (or March 8, 2023)		—		50
Line of credit, due on demand 30 days’ notice after September 1, 2019		430		225
Note payable issued by Clyra Medical to Scion, matures June 17, 2020 (Note 8)		—		1,007
Total notes payable and line of credit	$	830	$	1,282
Convertible notes payable:
Convertible note, matured January 11, 2019		300		—
Convertible note, matures July 20, 2019 ( 1 )		440		—
Convertible nine-month OID notes, mature beginning October 2019 ( 2 )		—		213
Convertible three-month OID note, matures November 12, 2019 ( 2 )		—		110
Convertible notes, mature December 7, 2019 ( 2 )		—		185
Convertible notes, mature December 31, 2019 ( 1 )		75		75
Convertible notes, mature February 14 and March 17, 2020 ( 2 )		—		200
Convertible note, matures February 28, 2020 ( 2 )		550		101
Convertible note, matures March 4, 2020		—		—
Convertible note, matures April 7, 2020		—		370
Convertible note, matures April 18, 2020 ( 2 )		—		220
Convertible note, matures June 20, 2020 (1)		—		25
Convertible 12-month OID notes, mature beginning June 2020		—		3,175
Convertible notes, mature August 12 and 16, 2020		—		550
Total convertible notes payable	$	1,365	$	5,224
Total current liabilities	$	2,195	$	6,506
L ong-term liabilities :
Convertible note payable, matures August 9, 2021		—		600
Note payable issued by Clyra Medical to Scion, matures June 17, 2020 (See Note 8)		1,007		—
Convertible notes payable, mature June 20, 2020 (1)		25		—
Convertible notes payable, mature April 20, 2021 (1)		100		100
Convertible notes, mature June 15, 2021 (1)		110		—
Note payable, matures March 8, 2023 (or on demand 60 days’ notice)		50		—
Total long-term liabilities	$	1,292	$	700
Total	$	3,487	$	7,206

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Note 8 - Noncontrolling Interest - Clyra Medical (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

Schedule of Other Ownership Interests [Table Text Block]

Shareholder	Shares		Percent
BioLargo, Inc.		26,053		38.0%
Sanatio Capital (1)		11,520		16.8%
Scion Solutions (2)		15,500		22.6%
Other		15,572		22.6%
Total		68,645

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Note 7 - Accounts Payable and Accrued Expenses

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

Note

7.

Accounts Payable and Accrued Expenses

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

	December 31, 2018		September 30 , 2019
Accounts payable and accrued expense	$	302	$	297
Accrued interest		122		111
Accrued payroll		77		138
Total accounts payable and accrued expenses	$	501	$	546

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Note 11 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

11.

Commitments and Contingencies

Provenzano

Employment Agreement

On

June 18, 2019,

we and the head of our Odor-

No

-More subsidiary, Joseph L. Provenzano, entered into an employment agreement (the “Provenzano Employment Agreement”), replacing in its entirety the previous employment agreement with Mr. Provenzano dated

January 1, 2008.

The Provenzano Employment Agreement provides that Mr. Provenzano will serve as our Executive Vice President of Operations, as well as the President and Chief Executive Officer of our wholly owned subsidiary Odor-

No

-More. Mr. Provenzano’s base compensation will remain at his current rate of

$170,000

annually. In addition to this base compensation, the agreement provides that he is eligible to participate in incentive plans, stock option plans, and similar arrangements as determined by the our Board of Directors, health insurance premium payments for himself and his immediate family, a car allowance covering the expenses of his personal commercial grade truck which the company uses in company operations on a continual basis, paid vacation of

four

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

may

determine from time to time.

In conjunction with this agreement, our Compensation Committee awarded Mr. Provenzano an option to purchase common stock and restricted stock units under our

2018

Equity Incentive Plan (see Note

5

).

The Provenzano Employment Agreement has a term of

five

years, unless earlier terminated in accordance with its terms. The Provenzano Employment Agreement provides that Mr. Provenzano’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 Provenzano Employment Agreement means physical or mental incapacity or illness rendering Mr. Provenzano 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. Provenzano has (i) engaged in willful misconduct in connection with the Company’s business; or (ii) been convicted of, or plead guilty or nolo contendre in connection with, fraud or any crime that constitutes a felony or that involves moral turpitude or theft. If Mr. Provenzano’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 Provenzano Employment Agreement requires Mr. Provenzano 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 Provenzano Employment Agreement as “work made for hire”.

Office Leases

We have long-term operating leases for office, industrial and laboratory space in Westminster, California, Oak Ridge, Tennessee, and Alberta, Canada. Payments made under operating leases are charged to the Consolidated Statement of Operations and Comprehensive Loss on a straight-line basis over the term of the operating lease agreement. For the

nine

months ended

September 30, 2018

and

2019,

total rental expense was

$159,000

and

$156,000,

respectively.  On

January 1, 2019,

we adopted ASC

842

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

not

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

4

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

18%.

  As of

September 30, 2019,

the total remaining operating lease payments is

$645,000.

  BioLargo Water operations lease is considered short-term and

not

included. 

The leases have

no

additional payment terms such as common area maintenance payments, tax sharing payments or other allocable expenses. Likewise, the leases do

not

contain other terms and conditions of use, such as variable lease payments, residual value guaranties or other restrictive financial terms.

Clyra Medical Consulting Agreement

Clyra Medical (see Note

8

) entered into a consulting agreement with Beach House Consulting, LLC, through which Jack B. Strommen will be providing consulting services to Clyra related to its sales and marketing activities and in exchange receive

$23,000

per month for a period of

four

years. Clyra’s obligation to pay fees under the agreement begin the month following Clyra reception of FDA pre-market clearance on its

first

product, which occurred in

September.

The total cash obligation related to the agreement would be approximately

$1.1

 million.

XML

Note 1 - Business and Organization

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

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

Note

1.

Business and Organization

Description of Business

BioLargo, Inc. delivers innovative and sustainable technology-based products and services, as well as environmental engineering expertise, across a broad range of industries with an overriding mission to “make life better” with a focus on clean water, clean air, and advanced wound care. Our business strategy is straightforward: we invent or acquire technologies that we believe have the potential to be disruptive in large commercial markets; we develop and validate these technologies to advance and promote their commercial success as we leverage our considerable scientific, engineering, and entrepreneurial talent; we then monetize these technical assets through a variety of business structures that

may

include licensure, joint venture, sale, spin off, or by deploying direct to market strategies.

Liquidity / Going concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of our business. For the

nine

months ended

September 30, 2019,

we had a net loss of

$8,625,000,

used

$3,181,000

cash in operations, and at

September 30, 2019,

had a working capital deficit of

$2,191,000

and current assets of

$2,566,000.

We have been, and anticipate that we will continue to be, limited in terms of our capital resources. During the year ended

December 31, 2018,

and the

nine

months ended

September 30, 2019,

we generated revenues of

$1,364,000

and

$1,324,000

through our business segments (Odor-

No

-More and BLEST – see Note

10,

“Business Segment Information”). Neither generated an operating profit sufficient to fund their operations.

As of

September 30, 2019,

we had approximately

$2.1

million cash on hand, and over

$5

million current debt obligations. Subsequent to

September 30, 2019,

$645,000

have been satisfied through the payment of cash, and

$609,000

through conversion to our common stock (see Note

12

). As of the date of this Report,

one

debt obligation due within

12

months, in the amount of

$370,000,

must be paid in cash if the investor does

not

exercise the right to convert the note to our common stock (see Note

4,

“Convertible Note, matures

April 7, 2020”).

Additionally, we have approximately

$3.2

million in

12

-month OID notes due within

12

months, which will be converted to common stock unless the Company receives at least

$3.5

million in gross proceeds from a financing transaction. All other debt obligations due within

12

months are convertible at maturity. We continue to raise money through private securities offerings, and continue to negotiate for more substantial financings from private and institutional investors. During the

nine

months ended

September 30, 2019,

we received

$4,690,000

net cash provided by financing activities, and at

September 30, 2019

had cash of

$2,136,000.

The foregoing factors raise substantial doubt about our ability to continue as a going concern. Ultimately, our ability to continue as a going concern is dependent upon our ability to attract significant new sources of capital, attain a reasonable threshold of operating efficiencies and achieve profitable operations by licensing or otherwise commercializing products incorporating our technologies. The consolidated financial statements do

not

include any adjustments that might be necessary if we are unable to continue as a going concern.

Organization

We are a Delaware corporation formed in

1991.

We have

five

wholly-owned subsidiaries: BioLargo Life Technologies, Inc., organized under the laws of the State of California in

2006;

Odor-

No

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

2009;

BioLargo Water Investment Group Inc. organized under the laws of the State of California in

2019,

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

2014;

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

2016;

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

2017

(“BLEST”). Additionally, we own

38%

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

2012,

and consolidate their financial statements (see Notes

2

and

8

).

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

8

-

03

of Regulation S-

X

under the Securities Act of

1933,

as amended. Accordingly, they do

not

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

nine

months ended

September 30, 2019

are

not

necessarily indicative of the results that

may

be expected for the year ending

December 

31,

 

2019,

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

10

-K for the year ended

December 31, 2018

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

March 29, 2019,

as amended.

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Sep. 30, 2019	Dec. 31, 2018
Convertible Preferred Stock, Par Value (in dollars per share)	$ 0.00067	$ 0.00067
Convertible Preferred Stock, Shares Authorized (in shares)	50,000,000	50,000,000
Convertible Preferred Stock, Shares Issued (in shares)	0	0
Convertible Preferred Stock, Shares Outstanding (in shares)	0	0
Common Stock, Par Value (in dollars per share)	$ 0.00067	$ 0.00067
Common Stock, Shares Authorized (in shares)	400,000,000	400,000,000
Common Stock, Shares Issued (in shares)	158,671,346	141,466,071

XML

Note 4 - Debt Obligations (Details Textual) - USD ($)																		1 Months Ended			2 Months Ended	3 Months Ended			4 Months Ended	9 Months Ended
	Sep. 16, 2019	Aug. 16, 2019	Aug. 15, 2019	Aug. 12, 2019	Aug. 09, 2019	Jul. 29, 2019	Jul. 20, 2019	Jun. 17, 2019	Jun. 07, 2019	Jun. 04, 2019	May 14, 2019	Apr. 18, 2019	Mar. 28, 2019	Mar. 07, 2019	Feb. 05, 2019	Jan. 31, 2019	Jan. 07, 2019	Nov. 14, 2019	Nov. 13, 2019	Sep. 30, 2019	Aug. 31, 2019	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2019	Sep. 30, 2018	Aug. 20, 2019	Jan. 06, 2019	Dec. 31, 2018	Oct. 16, 2018	Dec. 31, 2017
Class of Warrant or Right, Exercise Price of Warrants or Rights																				$ 0.35		$ 0.35		$ 0.39	$ 0.35	$ 0.35	$ 0.39			$ 0.42		$ 0.45
Gain (Loss) on Extinguishment of Debt, Total																						$ (801,000)		$ (578,000)		$ (1,029,000)	$ (578,000)
Maximum [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights																				$ 1		$ 1		$ 1	$ 1	$ 1	$ 1			$ 1		$ 1
Convertible Notes Payable [Member] | Tangiers Global [Member]
Debt Instrument, Face Amount														$ 495,000	$ 330,000
Original Issue Discount, Percentage															10.00%
Proceeds from Convertible Debt														150,000	$ 300,000
Debt Instrument, Convertible, Beneficial Conversion Feature																$ 185,000
Debt Instrument, Convertible, Interest Rate on Remaining Principal																12.00%
Debt Instrument, Convertible, Aggregate Principal Amount																$ 495,000
Short-term Debt, Total														$ 554,000						$ 185,000		$ 185,000			$ 185,000	$ 185,000
Debt Instrument, Convertible, Conversion Price, Percentage of Lowest Closing Bid Price																75.00%
Debt Instrument, Convertible, Number of Consecutive Trade Days Prior to Conversion Date																25 days
Convertible Notes Payable [Member] | Bellridge Capital, LP [Member]
Debt Instrument, Face Amount												$ 220,000
Original Issue Discount, Percentage												10.00%
Debt Instrument, Interest Rate, Stated Percentage												10.00%
Proceeds from Convertible Debt												$ 188,000
Debt Instrument, Convertible, Beneficial Conversion Feature												$ 120,000
Debt Instrument, Convertible, Conversion Price, Percentage of Lowest Closing Bid Price												70.00%
Debt Instrument, Convertible, Number of Consecutive Trade Days Prior to Conversion Date												25 days
Debt Instrument, Fee Amount												$ 10,000
Subsequent Event [Member]
Debt Conversion, Original Debt, Amount																		$ 609,000
Conversion of Secured Line of Credit to Twelve Month OID Notes [Member] | Three Holders [Member]
Debt Conversion, Original Debt, Amount																					$ 205,000
Debt Instrument, Face Amount																					$ 256,000
Original Issue Discount, Percentage																					25.00%
Gain (Loss) on Extinguishment of Debt, Total																					$ (315,000)
Conversion of Convertible Note Payable into Shares of Clyra [Member]
Debt Conversion, Original Debt, Amount							$ 440,000
Debt Conversion, Converted Instrument, Shares Issued							2,000
Conversion of OID Notes to Common Stock [Member]
Debt Instrument, Term																							270 days
Debt Instrument, Convertible, Conversion Price									$ 0.17											$ 0.17		$ 0.17	$ 0.25		$ 0.17	$ 0.17
Equity Offering Price, Conversion Price Adjustment Threshold																							$ 0.25
Stock Purchase Warrant, Percentage of Principal																							75.00%
Conversion of OID Notes to Common Stock [Member] | Subsequent Event [Member]
Debt Conversion, Original Debt, Amount																		$ 212,500
Debt Conversion, Converted Instrument, Shares Issued																		1,340,698
Conversion Debt to Equity [Member] | Tangiers Global [Member]
Debt Conversion, Original Debt, Amount						$ 369,000
Debt Conversion, Converted Instrument, Shares Issued						2,640,000
Conversion of Principal Amount into Common Stock [Member]
Debt Conversion, Original Debt, Amount																										$ 550,000
Debt Conversion, Converted Instrument, Shares Issued																										4,557,611
Conversion of Convertible Note Into Twelve Month OID Note [Member]
Debt Conversion, Original Debt, Amount																						$ 305,000
Investor Warrants for Amended Notes Payable Due August 12th and 16th, 2020 [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights		$ 0.17
Warrants Issued in Conversion of Secured Line of Credit to Twelve Month OID Notes [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights																				$ 0.25	$ 0.17	$ 0.25			$ 0.25	$ 0.25
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																				1,130,515	1,130,515	1,130,515			1,130,515	1,130,515
Warrants and Rights Outstanding, Term																				5 years		5 years			5 years	5 years
Warrants Issued in Connection with Conversion of Notes Due June 15, 2021 [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 0.25																			$ 0.17		$ 0.17			$ 0.17	$ 0.17
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																				551,471		551,471			551,471	551,471
Warrants and Rights Outstanding, Term	5 years
Warrants In Connection With OID Notes [Member]
Class of Warrant or Right, Increase Shares Available for Purchase									300,000
Warrant for OID Investor [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights																				$ 0.25		$ 0.25			$ 0.25	$ 0.25
Warrant In Connection With Convertible Note [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 0.25		$ 0.30																							$ 0.25
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					1,200,000
Warrants and Rights Outstanding, Term			5 years		5 years																							5 years
Promissory Notes Payable, Issued to Vernal Bay Investments, Originally Issued September 19, 2018 [Member]
Debt Instrument Extension Option Increase In Principal Percentage										10.00%
Promissory Notes Payable, Originally Issued September 19, 2018 [Member]
Debt Instrument, Face Value, After Increase from Maturity Date Extension										$ 484,000
Notes Payable, Maturing September 6, 2019 [Member]
Debt Conversion, Original Debt, Amount		$ 60,000		$ 380,000
Debt Instrument, Face Amount		$ 75,000																			$ 475,000
Debt Instrument, Term		12 years		1 year
Original Issue Discount, Percentage		25.00%		25.00%
Class of Warrant or Right, Exercise Price of Warrants or Rights				$ 0.17
Debt Instrument, Interest Rate, Stated Percentage		5.00%		5.00%						18.00%
Gain (Loss) on Extinguishment of Debt, Total																										$ 422,000
Line of Credit, Due on Demand After September 1, 2019 [Member]
Debt Instrument, Interest Rate, Stated Percentage																					5.00%
Long-term Line of Credit, Total																				$ 225,000		$ 225,000			$ 225,000	225,000
Line of Credit, Due on Demand After September 1, 2019 [Member] | Subsequent Event [Member]
Repayments of Lines of Credit																			$ 225,000
Convertible Notes Maturing June 15, 2021 [Member] | Convertible Notes Payable [Member]
Debt Conversion, Original Debt, Amount																				110,000
Debt Instrument, Face Amount	$ 100,000																			$ 125,000		$ 125,000			$ 125,000	$ 125,000
Debt Instrument, Term	1 year																			1 year
Original Issue Discount, Percentage	25.00%																			25.00%		25.00%			25.00%	25.00%
Debt Instrument, Interest Rate, Stated Percentage																				5.00%		5.00%			5.00%	5.00%
Gain (Loss) on Extinguishment of Debt, Total																										$ (64,000)
Triton Fund Investment [Member]
Debt Instrument, Face Amount																															$ 300,000
Debt Instrument, Interest Rate, Stated Percentage																															5.00%
Bridge Loan																															$ 225,000
Discount On Convertible Note Payable																															$ 75,000
Conversion of Accrued Interest into Common Stock [Member]
Debt Conversion, Converted Instrument, Shares Issued							384,980
Debt Conversion, Original Debt, Accrued Interest Amount							$ 106,600
Debt Instrument, Convertible, Conversion Price							$ 0.27
Convertible Promissory OID Note [Member]
Debt Instrument, Face Amount																							$ 213,000
OID Note [Member]
Debt Instrument, Term									1 year
OID Note [Member] | Convertible Notes Payable [Member]
Original Issue Discount, Percentage																							25.00%
Convertible Three Month OID Note, Matures November 12, 2019 [Member] | Convertible Notes Payable [Member]
Debt Instrument, Face Amount			$ 110,000
Original Issue Discount, Percentage			10.00%
Debt Instrument, Convertible, Conversion Price			$ 0.17
Proceeds from Convertible Debt			$ 100,000
Debt Instrument, Unamortized Discount, Total			10,000
Debt Instrument, Convertible, Beneficial Conversion Feature			47,000
Convertible Note to Crossover Capital Fund I, LP [Member] | Convertible Notes Payable [Member]
Debt Instrument, Face Amount											$ 110,000
Debt Instrument, Term											270 days
Original Issue Discount, Percentage											10.00%
Proceeds from Short-term Debt, Total											$ 95,000
Payments of Debt Issuance Costs											$ 5,000
Convertible Note Related to Second Investment From Crossover Capital [Member]
Debt Instrument, Face Amount								$ 90,000
Debt Instrument, Term								270 days
Original Issue Discount, Percentage								10.00%
Proceeds from Convertible Debt								$ 77,000
Debt Instrument, Convertible, Beneficial Conversion Feature								$ 134,000
Debt Instrument, Convertible, Conversion Price, Percentage of Lowest Closing Bid Price								70.00%
Debt Instrument, Convertible, Number of Consecutive Trade Days Prior to Conversion Date								25 days
Payments of Debt Issuance Costs								$ 5,000
Vista Capital 2017 Note [Member]
Debt Instrument Extension Option Increase In Principal Percentage													10.00%
Gain (Loss) on Extinguishment of Debt, Total													$ (38,000)
Vista Capital 2017 Note [Member] | Convertible Notes Payable [Member]
Short-term Debt, Total																				$ 101,000		$ 101,000			$ 101,000	101,000
Vista Capital 2017 Note [Member] | Convertible Notes Payable [Member] | Vista Capital [Member]
Debt Instrument, Face Value, After Increase from Maturity Date Extension													$ 420,000				$ 605,100
Debt Instrument, Interest Rate, Stated Percentage																	5.00%
Debt Instrument, Convertible, Beneficial Conversion Feature																	$ 487,000
Debt Instrument, Convertible, Conversion Price, Percentage of Lowest Closing Bid Price																	80.00%
Debt Instrument, Convertible, Number of Consecutive Trade Days Prior to Conversion Date																	25 days
Debt Instrument, Convertible, Prepayment Penalty																	15.00%												20.00%
Debt Instrument, Convertible, Default Penalty																	25.00%												30.00%
Convertible Note To EMA Financial, LLC [Member]
Debt Instrument, Face Amount										$ 110,000
Debt Instrument, Term										270 days
Debt Instrument, Interest Rate, Stated Percentage										10.00%
Proceeds from Convertible Debt										$ 95,000
Debt Instrument, Convertible, Beneficial Conversion Feature										$ 77,000
Debt Instrument, Convertible, Conversion Price, Percentage of Lowest Closing Bid Price										70.00%
Debt Instrument, Convertible, Number of Consecutive Trade Days Prior to Conversion Date										25 days
Payments of Debt Issuance Costs										$ 5,000
Convertible Note To EMA Financial, LLC [Member] | Maximum [Member]
Debt Instrument, Convertible, Prepayment Penalty										24.00%
Debt Instrument, Convertible, Days to Prepay Following Effective Date										90 days
Convertible Twelve Months OID Notes [Member]
Debt Instrument, Face Amount																				$ 2,794,000		$ 2,794,000			$ 2,794,000	$ 2,794,000
Debt Instrument, Term																									1 year
Original Issue Discount, Percentage										10.00%
Debt Instrument, Interest Rate, Stated Percentage																				5.00%		5.00%			5.00%	5.00%
Proceeds from Convertible Debt																									$ 2,235,000
Debt Instrument, Unamortized Discount, Total																				$ 559,000		$ 559,000			559,000	$ 559,000
Debt Instrument, Convertible, Beneficial Conversion Feature																									2,235,000
Amount of Qualifying Offering Needed to Trigger Note Prepayment																				$ 3,500,000		$ 3,500,000			$ 3,500,000	$ 3,500,000
Debt Instrument, Convertible, Conversion Price, Percentage of Lowest Closing Volume Weighted Average Price																				70.00%		70.00%			70.00%	70.00%
Debt Instrument, Convertible, Number of Consecutive Trade Days Preceding The Conversion																										25 days
Convertible Twelve Months OID Notes [Member] | Thirty Four Accredited Investors [Member]
Original Issue Discount, Percentage																				25.00%		25.00%			25.00%	25.00%
Convertible Twelve Months OID Notes [Member] | Convertible Notes Payable [Member]
Debt Instrument, Face Amount			$ 4																	$ 381,000		$ 381,000			$ 381,000	$ 381,000		$ 330,882
Debt Instrument, Term			174632 years 120 days																			1 year
Original Issue Discount, Percentage																				25.00%		25.00%			25.00%	25.00%
Debt Instrument, Unamortized Discount, Total																				$ 76,000		$ 76,000			$ 76,000	$ 76,000
Debt Instrument, Convertible, Beneficial Conversion Feature																						$ 381,000
Convertible Note To EMA Financial, LLC, First 90 days [Member]
Debt Instrument, Convertible, Prepayment Penalty										125.00%
Convertible Note To EMA Financial, LLC, Second 90 days [Member]
Debt Instrument, Convertible, Prepayment Penalty										130.00%
Vista Capital 2019 Note [Member] | Convertible Notes Payable [Member] | Vista Capital [Member]
Debt Instrument, Face Amount																	$ 330,000
Debt Instrument, Term																	270 days
Debt Instrument, Interest Rate, Stated Percentage																	12.00%
Proceeds from Convertible Debt																	$ 300,000
Debt Instrument, Convertible, Beneficial Conversion Feature																	$ 300,000
Debt Instrument, Convertible, Conversion Price, Percentage of Lowest Closing Bid Price																	65.00%
Debt Instrument, Convertible, Number of Consecutive Trade Days Prior to Conversion Date																	25 days
Common Stock, Limit on Ownership Interest, Percent																	4.99%
Convertible Note, Maturing August 9, 2021 [Member]
Debt Instrument, Face Amount					$ 600,000
Original Issue Discount, Percentage					15.00%
Debt Instrument, Convertible, Conversion Price					$ 0.30
Proceeds from Convertible Debt					$ 600,000

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Note 2 - Summary of Significant Accounting Policies - Credit Concentration (Details) - Customer Concentration Risk [Member]	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Customer A [Member] | Revenue from Contract with Customer Benchmark [Member]
Credit concentration	13.00%	44.00%
Customer W [Member] | Accounts Receivable [Member]
Credit concentration	10.00%	12.00%
Customer B [Member] | Revenue from Contract with Customer Benchmark [Member]
Credit concentration		12.00%
Customer B [Member] | Revenue from Contract with Customer Benchmark [Member] | Maximum [Member]
Credit concentration	10.00%
Customer X [Member] | Accounts Receivable [Member]
Credit concentration	10.00%	31.00%
Customer C [Member] | Revenue from Contract with Customer Benchmark [Member]
Credit concentration	10.00%	10.00%
Customer Y [Member] | Accounts Receivable [Member]
Credit concentration	17.00%	10.00%
Customer Z [Member] | Accounts Receivable [Member]
Credit concentration	15.00%	10.00%

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Note 6 - Warrants (Details Textual) - USD ($)					1 Months Ended	3 Months Ended			4 Months Ended	9 Months Ended
	Sep. 16, 2019	Aug. 15, 2019	Jun. 24, 2019	Jun. 07, 2019	Sep. 30, 2019	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2019	Sep. 30, 2018	Aug. 31, 2019	Aug. 20, 2019	Aug. 09, 2019	Jun. 04, 2019	Mar. 05, 2019	Mar. 04, 2019	Jan. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Interest Expense, Debt, Total										$ 2,213,000	$ 2,381,000
Class of Warrant or Right, Exercise Price of Warrants or Rights					$ 0.35	$ 0.35		$ 0.39	$ 0.35	$ 0.35	$ 0.39								$ 0.42	$ 0.45
Gain (Loss) on Extinguishment of Debt, Total						$ (801,000)		$ (578,000)		$ (1,029,000)	$ (578,000)
Deemed Dividends			$ 355,000							781,000	297,000
Proceeds from Warrant Exercises										$ 380,000
Stock Issued During Period, Shares, Exercise of Warrants										3,166,666
Nine Months OID Notes In Connection With Warrant [Member]
Debt Instrument, Convertible, Conversion Price				$ 0.17			$ 0.25
Convertible Twelve Months OID Notes [Member]
Debt Instrument, Face Amount					$ 2,794,000	2,794,000			$ 2,794,000	$ 2,794,000
Debt Instrument, Term									1 year
Original Issue Discount, Percentage															10.00%
Convertible Twelve Months OID Notes [Member] | Convertible Notes Payable [Member]
Debt Instrument, Face Amount		$ 4			$ 381,000	$ 381,000			$ 381,000	$ 381,000			$ 330,882
Debt Instrument, Term		174632 years 120 days				1 year
Original Issue Discount, Percentage					25.00%	25.00%			25.00%	25.00%
Convertible Notes Maturing June 15, 2021 [Member] | Convertible Notes Payable [Member]
Gain (Loss) on Extinguishment of Debt, Total										$ (64,000)
Debt Instrument, Face Amount	$ 100,000				$ 125,000	$ 125,000			$ 125,000	$ 125,000
Debt Instrument, Term	1 year				1 year
Original Issue Discount, Percentage	25.00%				25.00%	25.00%			25.00%	25.00%
Warrants Issued as Part of Debt Extension [Member]
Gain (Loss) on Extinguishment of Debt, Total							$ (56,000)
Aggregated Number of Shares Purchased Under Two Warrants							496,875
Warrant In Connection With Convertible Note [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights														1,200,000
Class of Warrant or Right, Exercise Price of Warrants or Rights		$ 0.25											$ 0.25	$ 0.30
Warrants and Rights Outstanding, Term		5 years											5 years	5 years
Warrants and Rights Outstanding														$ 198,000
Warrants Issued in Conversion of Secured Line of Credit to Twelve Month OID Notes [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					1,130,515	1,130,515			1,130,515	1,130,515		1,130,515
Class of Warrant or Right, Exercise Price of Warrants or Rights					$ 0.25	$ 0.25			$ 0.25	$ 0.25		$ 0.17
Warrants and Rights Outstanding, Term					5 years	5 years			5 years	5 years
Warrants Issued in Connection with Conversion of Notes Due June 15, 2021 [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					551,471	551,471			551,471	551,471
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 0.25				$ 0.17	$ 0.17			$ 0.17	$ 0.17
Warrants and Rights Outstanding, Term	5 years
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right	551,471
Warrants Issued Concurrently with the Nine-month Note Payable [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights							637,500
Class of Warrant or Right, Exercise Price of Warrants or Rights							$ 0.25
Warrants and Rights Outstanding, Term							5 years
Discount On Convertible Note Payable							$ 89,000
Nine Months OID Notes In Connection With Warrant [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights				937,500
Class of Warrant or Right, Number of Securities Called by Warrants or Rights, Increased				$ 300,000
Deemed Dividends				$ 84,000
Twelve Months OID Notes In Connection With Warrant [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights					12,325,370	12,325,370			12,325,370	12,325,370
Class of Warrant or Right, Exercise Price of Warrants or Rights					$ 0.25	$ 0.25			$ 0.25	$ 0.25
Warrants and Rights Outstanding, Term					5 years	5 years			5 years	5 years
Stock Purchase Warrant, Percentage of Principal					75.00%	75.00%			75.00%	75.00%
Class of Warrant or Right, Percentage of Principal Value of Note Calculation, Investment					$ 300,000	$ 300,000			$ 300,000	$ 300,000
Class of Warrant or Right, Percentage of Principal Value of Note Calculation, Numerator Value of Calculation					$ 375,000	$ 375,000			$ 375,000	$ 375,000
Class of Warrant or Right, Percentage of Principal Value of Note Calculation, Denominator Value of Calculation					1,654,412	1,654,412			1,654,412	1,654,412
Discount on Notes Payable					$ 2,240,000	$ 2,240,000			$ 2,240,000	$ 2,240,000
Vista Warrant [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights			2,877,790
Vernal Bay Investments, LLC [Member] | Warrants Issued as Part of Debt Extension [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																1,734,375	1,387,500
Class of Warrant or Right, Exercise Price of Warrants or Rights																$ 0.20	$ 0.25
Maximum Investment Amount under Warrant																$ 346,875
Chappy Bean, LLC [Member] | Warrants Issued as Part of Debt Extension [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																750,000	600,000
Class of Warrant or Right, Exercise Price of Warrants or Rights																$ 0.20
Lincoln Park Capital Fund, LLC [Member] | Warrants Issued as Consent for Variable Rate Date [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																		300,000
Class of Warrant or Right, Exercise Price of Warrants or Rights																		$ 0.25
Warrants and Rights Outstanding, Term																		5 years
Discount On Convertible Note Payable																		$ 54,000

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Note 10 - Business Segment Information - Segment Information (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Revenue	$ 534,000	$ 277,000	$ 1,324,000	$ 867,000	$ 1,364,000
Operating loss	(1,884,000)	(1,665,000)	(5,034,000)	(4,898,000)
Interest expense	(1,289,000)	(266,000)	(2,773,000)	(2,827,000)
Research and development	(332,000)	(442,000)	(1,126,000)	(1,391,000)
Tangible assets	3,211,000		3,211,000		1,291,000
Intangible assets	1,893,000		1,893,000		1,893,000
Corporate, Non-Segment [Member]
Operating loss	(1,347,000)	(1,079,000)	(3,250,000)	(3,225,000)
Interest expense	(1,248,000)	(266,000)	(2,707,000)	(2,825,000)
Research and development	(256,000)	(279,000)	(638,000)	(905,000)
Tangible assets	2,390,000		2,390,000		353,000
Intangible assets	1,893,000		1,893,000		1,893,000
Consolidation, Eliminations [Member]
Tangible assets	(6,000)		(6,000)		(6,000)
Intangible assets
Intersegment Eliminations [Member]
Research and development	170,000	150,000	426,000	450,000
Odor-No-More [Member] | Operating Segments [Member]
Revenue	396,000	246,000	1,012,000	786,000
Operating loss	(90,000)	(112,000)	(231,000)	(366,000)
Research and development	(28,000)		(28,000)
Tangible assets	457,000		457,000		219,000
Intangible assets
Clyra [Member] | Operating Segments [Member]
Tangible assets	65,000		65,000		462,000
Intangible assets
BLEST [Member] | Operating Segments [Member]
Tangible assets	175,000		175,000		230,000
Intangible assets
BioLargo Water [Member] | Operating Segments [Member]
Operating loss	(136,000)	(191,000)	(499,000)	(533,000)
Research and development	(111,000)	(171,000)	(428,000)	(445,000)
Tangible assets	130,000		130,000		33,000
Intangible assets
BioLargo Engineering, Science & Technologies, LLC [Member] | Operating Segments [Member]
Revenue	308,000	181,000	732,000	531,000
Operating loss	27,000	(63,000)	(110,000)	(178,000)
Research and development	(77,000)	(97,000)	(273,000)	(302,000)
BioLargo Engineering, Science & Technologies, LLC [Member] | Intersegment Eliminations [Member]
Revenue	(170,000)	(150,000)	(420,000)	(450,000)
Clyra Segment [Member] | Operating Segments [Member]
Operating loss	(338,000)	(220,000)	(944,000)	(596,000)
Interest expense	(13,000)		(38,000)	(2,000)
Research and development	$ (58,000)	$ (45,000)	$ (213,000)	$ (189,000)

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Note 8 - Noncontrolling Interest - Clyra Medical (Details Textual) - USD ($)			6 Months Ended	9 Months Ended
	Dec. 17, 2018	Sep. 26, 2018	Jun. 30, 2019	Sep. 30, 2019	Dec. 31, 2018
Long-term Debt, Excluding Current Maturities, Total				$ 700,000	$ 1,292,000
Preferred Stock, Shares Outstanding, Ending Balance				0	0
Convertible Notes Issued by Clyra Medical Maturing on June 17, 2020 [Member]
Long-term Debt, Excluding Current Maturities, Total					$ 1,007,000
Clyra [Member]
Stock Issued During Period, Shares, New Issues				2,350
Proceeds from Issuance of Common Stock				$ 470,000
Shares Issued, Price Per Share				$ 200
Clyra Medical Technology Inc [Member] | Sanatio [Member]
Common Stock, Shares, Outstanding, Ending Balance				1,690
Preferred Stock, Dividend Rate, Percentage				8.00%
Preferred Shares Dividend, Period				5 years
Dividends Payable, Current				$ 230,000
Clyra Medical Technology Inc [Member] | Sanatio [Member] | Preferred Class A [Member]
Preferred Stock, Shares Outstanding, Ending Balance				9,830
Scion Acquisition [Member]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares		21,000
Business Combination, Consideration Transferred, Liabilities Incurred		$ 1,250,000
Business Acquisition, Base Capital Requirement for Escrow Release	$ 1,000,000	1,000,000
Business Acquisition, Gross Revenue, Tranche One	100,000
Business Acquisition, Gross Revenue, Tranche Two	100,000
Business Acquisition, Gross Revenue, Tranche Three	500,000
Business Acquisition, Gross Revenue, Tranche Five	$ 2,000,000
Scion Acquisition [Member] | Convertible Notes Issued by Clyra Medical Maturing on June 17, 2020 [Member]
Long-term Debt, Excluding Current Maturities, Total				$ 1,007,000
Scion Acquisition [Member] | Clyra [Member]
Debt Instrument, Face Amount		$ 1,250,000
Debt Instrument, Interest Rate, Stated Percentage		5.00%
Debt Instrument, Percent of Investment Proceeds		25.00%
Debt Instrument, Extension Period		1 year
Debt Instrument, Term		1 year 180 days
Debt Instrument, Percent of Gross Revenue		5.00%
Scion Acquisition [Member] | Clyra Acquisition, Common Stock [Member]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares	15,500	10,000	15,500
Scion Acquisition [Member] | Clyra Acquisition, Common Stock Redeemable for BioLargo Common Shares [Member]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares		7,142,858

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Note 6 - Warrants (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

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

								Weighted
								a verage		Aggregate
	Warrants			Exercise				p rice per		intrinsic
As of September 30 , 2018 :	o utstanding			p rice per share				share		value (1)
Balance, December 31, 2017		22,104,817		$	0.125	–	1.00	$	0.45
Issued		6,451,013			0.25	–	0.48		0.23
Expired		(2,683,400	)				0.40		0.40
Balance, September 30, 2018		25,872,430		$	0.125	–	1.00	$	0.39
As of September 30 , 2019 :
Balance, December 31, 2018		26,872,430		$	0.25	–	1.00	$	0.42
Issued		24,321,947			0.10	–	0.30		0.21
Exercised		(7,505,746	)		0.10	–	0.12		0.11
Balance, September 30, 2019		43,688,631		$	0.10	–	1.00	$	0.35	$	1,898,000

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

	September 30 , 2018				September 30 , 2019
Risk free interest rate			2.54	%	1.42	–	2.62	%
Expected volatility			252	%	86	–	110	%
Expected dividend yield		—				—
Forfeiture rate		—				—
Expected life in years	5	–	10		2	—	5

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Note 1 - Business and Organization (Details Textual)	1 Months Ended	3 Months Ended						9 Months Ended		12 Months Ended
	Nov. 14, 2019 USD ($)	Sep. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Sep. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)	Mar. 31, 2018 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest, Total		$ (3,887,000)	$ (1,987,000)	$ (2,749,000)	$ (2,378,000)	$ (3,600,000)	$ (2,430,000)	$ (8,625,000)	$ (8,410,000)
Net Cash Provided by (Used in) Operating Activities, Total								(3,181,000)	(3,051,000)
Working Capital		2,191,000						2,191,000
Assets, Current, Total		2,566,000						2,566,000		$ 955,000
Revenue from Contract with Customer, Including Assessed Tax		534,000			277,000			1,324,000	867,000	1,364,000
Cash and Cash Equivalents, at Carrying Value, Ending Balance		2,136,000			$ 534,000			2,136,000	$ 534,000	655,000	$ 990,000
Long-term Debt, Current Maturities, Total		5,000,000						5,000,000
Convertible Notes Payable, Current		$ 5,224,000						5,224,000		1,365,000
Cash Provided by Financing Activities								$ 4,690,000
Number of Wholly-Owned Subsidiaries		5						5
Clyra Medical Technology Inc [Member] | Biolargo [Member]
Noncontrolling Interest, Ownership Percentage by Parent		38.00%						38.00%
Convertible Note, Maturing April 7, 2020 [Member]
Convertible Notes Payable, Current		$ 370,000						$ 370,000
Convertible Twelve Months OID Notes [Member]
Convertible Notes Payable, Current		3,175,000						3,175,000
Amount of Qualifying Offering Needed to Trigger Note Prepayment		$ 3,500,000						$ 3,500,000
Subsequent Event [Member]
Repayments of Long-term Debt, Total	$ 645,000
Debt Conversion, Original Debt, Amount	$ 609,000

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Note 5 - Share-based Compensation (Details Textual) - USD ($)														2 Months Ended	3 Months Ended						9 Months Ended
	Sep. 30, 2019	Jul. 23, 2019	Jul. 05, 2019	Jun. 28, 2019	May 28, 2019	Mar. 29, 2019	Jan. 31, 2019	Jan. 16, 2019	Sep. 28, 2018	Jun. 29, 2018	Jun. 22, 2018	Mar. 31, 2018	Sep. 07, 2017	Sep. 30, 2018	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Stock Issued During Period, Value, Issued for Services															$ 166,000	$ 213,000	$ 206,000	$ 198,000	$ 250,000	$ 196,000
Stock Issued During Period, Value, New Issues																		$ 445,000	$ 212,000	$ 168,000
Share-based Payment Arrangement, Nonvested Award, Option, Cost Not yet Recognized, Amount	$ 1,594,000														$ 1,594,000						$ 1,594,000
2018 Equity Incentive Plan [Member]
Shares Issued, Price Per Share	$ 0.31														$ 0.31						$ 0.31
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period											10 years
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized											40,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized Per Year											2,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross														790,087							7,072,342
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price
The 2007 Equity Incentive Plan [Member]
Shares Issued, Price Per Share	0.31														0.31						0.31
Non Plan [Member]
Shares Issued, Price Per Share	0.31														0.31						$ 0.31
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross																					1,290,222	1,211,527
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price
Selling, General and Administrative Expenses [Member]
Share-based Payment Arrangement, Expense																					$ 1,201,000	$ 984,000
Sale of Products and License of Technology [Member]
Contract with Customer, Liability, Revenue Recognized					$ 3,000,000
Restricted Stock Units (RSUs) [Member] | Vice President of Operation and President of Subsidiary [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period					500,000
Proceeds Cash, Trigger for Award as Unvested					$ 3,000,000
Share-based Payment Arrangement, Option [Member]
Shares Granted, Value, Share-based Payment Arrangement, before Forfeiture																					1,486,000	526,000
Vested Employee Stock Options [Member]
Shares Granted, Value, Share-based Payment Arrangement, before Forfeiture																					$ 1,193,000	$ 984,000
Common Stock Issued for Accrued Interest Due on Promissory Note [Member]
Stock Issued During Period, Shares, New Issues																					622,784	2,002,868
Stock Issued During Period, Value, New Issues																					$ 147,000	$ 519,000
Minimum [Member] | Common Stock Issued for Accrued Interest Due on Promissory Note [Member]
Shares Issued, Price Per Share	0.10													$ 0.31	0.10			$ 0.31			$ 0.10	$ 0.31
Maximum [Member] | 2018 Equity Incentive Plan [Member]
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price														0.34
Maximum [Member] | The 2007 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period													10 years
Maximum [Member] | Common Stock Issued for Accrued Interest Due on Promissory Note [Member]
Shares Issued, Price Per Share	$ 0.27													0.42	0.27			0.42			0.27	$ 0.42
Officer [Member]
Stock Issued During Period, Shares, Issued for Services	35,080			465,875		579,996			249,258	176,947		323,030
Stock Issued During Period, Value, Issued for Services	$ 11,000			$ 107,000		$ 93,000			$ 67,000	$ 76,000		$ 84,000
Shares Issued, Price Per Share	$ 0.31			$ 0.23		$ 0.16			$ 0.27	$ 0.43		$ 0.26			0.31					$ 0.26	$ 0.31
Consultants [Member]
Stock Issued During Period, Shares, Issued for Services																					1,759,472	1,390,813
Stock Issued During Period, Value, Issued for Services																					$ 376,000	$ 417,000
Consultants [Member] | Minimum [Member]
Shares Issued, Price Per Share	0.16													0.23	0.16			0.23			$ 0.16	$ 0.23
Consultants [Member] | Maximum [Member]
Shares Issued, Price Per Share	0.23													$ 0.41	0.23			$ 0.41			$ 0.23	$ 0.41
Employees, Consultations, Offers, and Directors [Member] | 2018 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross																					7,072,342
Employees and Consultants [Member] | 2018 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross																					6,097,702
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period																					4 years
Employees and Consultants [Member] | Minimum [Member] | 2018 Equity Incentive Plan [Member]
Shares Issued, Price Per Share	0.16														0.16						$ 0.16
Employees and Consultants [Member] | Maximum [Member] | 2018 Equity Incentive Plan [Member]
Shares Issued, Price Per Share	0.40														0.40						$ 0.40
Board Of Directors [Member] | 2018 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross																					974,640
Board Of Directors [Member] | Minimum [Member] | 2018 Equity Incentive Plan [Member]
Shares Issued, Price Per Share	0.16														0.16						$ 0.16
Board Of Directors [Member] | Maximum [Member] | 2018 Equity Incentive Plan [Member]
Shares Issued, Price Per Share	0.32														0.32						$ 0.32
Chief Financial Officer [Member] | 2018 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross								300,000
Share Price								$ 0.22
Chief Financial Officer [Member] | Equity Incentive Plan 2007 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares																					75,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Remaining Number of Shares to Vest Each Month							25,000
Vice President of Operation and President of Subsidiary [Member] | 2018 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross					1,200,000
Vice President of Operation and President of Subsidiary [Member] | Equity Incentive Plan 2007 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period					10 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross					1,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period					5 years
Share Price					$ 0.17
Share-based Compensation Arrangement by Share-based Payment Award Options Annual Vesting Installment Shares					200,000
Vice President of Sales [Member] | 2018 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			300,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares					200,000
Share-based Compensation Arrangement by Share-based Payment Award Options Annual Vesting Installment Shares			100,000
Share-based Payment Arrangement, Amortization Term			91 days
Vice President of Sales [Member] | 2018 Equity Incentive Plan [Member] | Vesting Annually [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period					1 year
Share Price					$ 0.17
Vice President of Sales [Member] | 2018 Equity Incentive Plan [Member] | Vesting At Various Metrics [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross					1,000,000
Director of Business Development for Odor-No-More [Member] | 2018 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		1,000,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price		$ 0.35
Director of Business Development for Odor-No-More [Member] | 2018 Equity Incentive Plan [Member] | Share-based Payment Arrangement, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		90 days
Director of Business Development for Odor-No-More [Member] | 2018 Equity Incentive Plan [Member] | Share-based Payment Arrangement, Tranche Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		1 year
Director of Business Development for Odor-No-More [Member] | 2018 Equity Incentive Plan [Member] | Share-based Payment Arrangement, Tranche Three [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		2 years
Director of Business Development for Odor-No-More [Member] | Non Contingent Options [Member] | 2018 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		400,000
Director of Business Development for Odor-No-More [Member] | Non Contingent Options [Member] | 2018 Equity Incentive Plan [Member] | Share-based Payment Arrangement, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		100,000
Director of Business Development for Odor-No-More [Member] | Non Contingent Options [Member] | 2018 Equity Incentive Plan [Member] | Share-based Payment Arrangement, Tranche Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		100,000
Director of Business Development for Odor-No-More [Member] | Non Contingent Options [Member] | 2018 Equity Incentive Plan [Member] | Share-based Payment Arrangement, Tranche Three [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		200,000
Director of Business Development for Odor-No-More [Member] | Contingent Options [Member] | 2018 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		600,000
Board of Directors and Vendors [Member] | Non Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross																					1,290,222
Board of Directors and Vendors [Member] | Minimum [Member] | Non Plan [Member]
Shares Issued, Price Per Share	0.16														0.16						$ 0.16
Board of Directors and Vendors [Member] | Maximum [Member] | Non Plan [Member]
Shares Issued, Price Per Share	$ 0.25														$ 0.25						$ 0.25

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Note 2 - Summary of Significant Accounting Policies - Stock Options, Valuation Assumptions (Details)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Non Plan [Member]
Risk free interest rate
Expected volatility
Life in years (Year)
Non Plan [Member] | Minimum [Member]
Risk free interest rate	2.00%	2.43%
Expected volatility	147.00%	538.00%
Non Plan [Member] | Maximum [Member]
Risk free interest rate	2.65%	2.91%
Expected volatility	152.00%	563.00%
2018 Equity Incentive Plan [Member]
Risk free interest rate
Expected volatility
Life in years (Year)
2018 Equity Incentive Plan [Member] | Minimum [Member]
Risk free interest rate	2.00%
Expected volatility	147.00%	538.00%
2018 Equity Incentive Plan [Member] | Maximum [Member]
Risk free interest rate	2.65%	2.91%
Expected volatility	152.00%	548.00%

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Note 3 - Lincoln Park Financing

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Stock Purchase Agreement [Text Block]

Note

3.

Lincoln Park Financing

On

August 25, 2017,

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

$10

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

three

years. The LPC Purchase Agreement allows us, from time to time and at our sole discretion, to direct Lincoln Park to purchase shares of our common stock, subject to limitations in both volume and dollar amount. The purchase price of the shares that

may

be sold to Lincoln Park under the Purchase Agreement is the lower of (i) the lowest sale price on the date of purchase, or (ii) the average of the

three

lowest closing prices in the prior

12

business days. There are

no

restrictions on future financings, rights of

first

refusal, participation rights, penalties or liquidated damages in the LPC Purchase Agreement or LPC RRA other than a prohibition on entering into a “Variable Rate Transaction,” as defined in the Purchase Agreement. Lincoln Park

may

not

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

We did

not

sell any shares to Lincoln Park during the

nine

months ended

September 30, 2019.

Since we have

not

used this financing option during

2019,

in

September 2019,

we began amortizing the deferred offering cost to interest expense over the remaining term through

September 30, 2020.

We recorded

$13,000

of interest expense during the

nine

months ended

September 30, 2019,

and we will record

$13,000

of interest expense per month through

September 30, 2020.

During the

nine

months ended

September 30, 2018,

we elected to sell to Lincoln Park

2,800,733

shares of our common stock for which we received

$826,000.

Additionally, we issued Lincoln Park

40,400

“additional commitment” shares, pursuant to the LPC Purchase Agreement. We record stock sales in our equity statement and the additional commitment shares issued reduce the deferred offering costs on our balance sheet.

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Note 5 - Share-based Compensation

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Compensation and Employee Benefit Plans [Text Block]

Note

5.

Share-Based Compensation

Issuance of Common Stock in exchange for payment of payables

Payment of Officer Salaries

On

March 29, 2019,

we issued

579,996

shares of our common stock in lieu of

$93,000

of accrued salary and unreimbursed business expenses owed to

two

of our officers. The price-per-share of

$0.16

was based on the closing price of our common stock on the last business day of the month. These shares were issued pursuant to our

2018

Equity Incentive Plan.

On

June 28, 2019,

we issued

465,875

shares of our common stock in lieu of

$107,000

of accrued salary and unreimbursed business expenses owed to

two

of our officers. The price-per-share of

$0.23

was based on the closing price of our common stock on the last business day of the month. These shares were issued pursuant to our

2018

Equity Incentive Plan.

On

September 30, 2019,

we issued

35,080

shares of our common stock in lieu of

$11,000

of accrued salary and unreimbursed business expenses owed to an officer. The price-per-share of

$0.31

was based on the closing price of our common stock on the last business day of the month. These shares were issued pursuant to our

2018

Equity Incentive Plan.

On

March 31, 2018,

we issued

323,030

shares of our common stock in lieu of

$84,000

of accrued salary and unreimbursed business expenses owed to

two

of our officers. The price-per-share of

$0.26

was based on the closing price of our common stock on the last business day of the month.

On

June 29, 2018,

we issued

176,947

shares of our common stock in lieu of

$76,000

of accrued salary and unreimbursed business expenses owed to

two

of our officers. The price-per-share of

$0.43

was based on the closing price of our common stock on the last business day of the month.

On

September 28, 2018,

we issued

249,258

shares of our common stock at

$0.27

per share in lieu of

$67,000

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

nine

months ended

September 30, 2019,

we issued

1,759,472

shares of our common stock at a range of

$0.16

–

$0.23

per share in lieu of

$376,000

accrued and unpaid obligations to consultants.

During the

nine

months ended

September 30, 2018,

we issued

1,390,813

shares of our common stock, at prices ranging between

$0.23

-

$0.41

per share, in lieu of

$417,000

of accrued and unpaid obligations to consultants.

Payment of Interest on Notes

During the

nine

months ended

September 30, 2019,

we issued

622,784

shares of our common stock, at prices ranging between

$0.10

-

$0.27per

share, in lieu of

$147,000

of accrued interest due on promissory notes.

During the

nine

months ended

September 30, 2018,

we issued

2,002,868

shares of our common stock, at prices ranging between

$0.31

–

0.42

per share, in lieu of accrued interest totaling

$519,000.

Restricted Stock Units

On

May 28, 2019,

our Compensation Committee, in conjunction with the approval of a new employment agreement for our Vice President of Operations and President of our subsidiary Odor-

No

-More, granted Joseph L. Provenzano a restricted stock unit of

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.

Stock Option Expense

Share-based compensation expense was

$984,000

and

$1,201,000

for the

nine

months ended

September 30, 2018

and

2019,

and is recorded in selling, general and administrative expense on the consolidated statements of operations.

The grant-date fair value of the stock options granted was an aggregate

$526,000

and

$1,486,000

for the

nine

months ended

September 30, 2018

and

2019,

respectively.

The grant-date fair value of the stock options that vested was

$984,000

and

$1,193,000

for the

nine

months ended

September 30, 2018

and

2019,

respectively.

As of

September 30, 2019,

there was

$1,594,000

of unrecognized stock compensation expense related to unvested stock options issued as part of our

2018

Plan issuances.

We issued options through our

2018

Equity Incentive Plan, and outside of this plan. Our

2007

Plan is closed. Stock option activity is described below.

2018

Equity Incentive Plan

On

June 22, 2018,

our stockholders adopted the BioLargo

2018

Equity Incentive Plan (

“2018

Plan”) as a means of providing our directors, key employees and consultants additional incentive to provide services. Both stock options and stock grants

may

be made under this plan for a period of

10

years. Our Board of Directors’ 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 was

40

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

2018

Plan increases automatically each

January 1

st

by the lesser of (a)

2

million shares, or (b) such number of shares determined by our Board.

Activity for our stock options under the

2018

Plan from inception through

September 30, 2018

and from

December 31, 2018

through the

nine

months ended

September 30, 2019,

is as follows:

As of September 30, 2018 :	Options Outstanding		Exercise Price per share				Weighted Average Exercise Price per share		Aggregate intrinsic Value (1)
Inception, June 22, 2018		—				—		—
Granted		790,087		0.25	-	0.43		0.34
Balance and vested, September 30, 2018		790,087	$	0.25	-	0.43	$	0.34	$	—

As of September 30 , 2019 :	Options Outstanding			Exercise Price per share				Weighted Average Exercise Price per share		Aggregate intrinsic Value (1)
Balance, December 31, 2018		1,318,517		$	0.22	–	0.43	$	0.30
Granted		7,072,342			0.16	–	0.40		0.27
Expired		—					—		—
Balance, September 30, 2019		8,390,859		$	0.16	–	0.43	$	0.27
Non-vested		(4,144,926	)		0.16	–	0.40		0.29
Vested, September 30, 2019		4,245,933		$	0.17	–	0.36	$	0.23	$	457,000

(

1

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

$0.31

at

September 30, 2019.

The options to purchase

7,072,342

shares granted during the

nine

months ended

September 30, 2019

are comprised of options issued to employees, consultants, officers, and directors. We issued options to purchase

6,097,702

shares of our common stock employees as part of their employment agreement and as part of an employee retention program on their respective grant dates ranging between

$0.16

–

0.40

per share. The vesting terms for employment agreements generally called for a portion of option to vest immediately and the remaining portion to vest over

four

years. Certain option issuances to our officers and employees have vesting terms that are based on metrics over a period of time, these are described in more detail below. We issued options to purchase

974,640

shares of our common stock to members of our board of directors for services performed, in lieu of cash, at an exercise price on the respective grant dates ranging between

$0.16

–

0.32

per share.

Chief Financial Officer Contract Extension

On

January 16, 2019,

we agreed to extend the engagement agreement dated

February 1, 2008 (

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

January 16, 2019 (

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

September 30, 2019 (

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

September 30, 2018. 

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

December 31, 2018

extension.

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

300,000

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

January 16, 2019

of

$0.22,

to expire

January 16, 2029,

and to vest over the term of the engagement with

75,000

shares having vested as of

December 31, 2018,

and the remaining shares to vest

25,000

shares monthly beginning

January 31, 2019,

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

2018

Equity Incentive Plan.

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

no

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

no

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

not

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

Vice President of Operations Contract Extension

On

May 28, 2019,

the Compensation Committee of the Board of Directors approved the terms of an employment agreement for Joseph L. Provenzano to continue his work as Vice President of Operations and President of our subsidiary Odor-

No

-More, and granted to Mr. Provenzano an incentive stock option to purchase

1,000,000

shares of the Company’s common stock pursuant to the terms of our

2018

Plan. The exercise price and fair value of the option is equal to the closing price of our common stock on the

May 28, 2019

grant date, at

$0.17

per share. The option will vest annually in

200,000

increments over

five

years. The option

may

be exercised for up to

ten

years following the grant date. 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 Mr. Provenzano’s employment agreement.

Vice President of Sales

On

May 28, 2019,

the Compensation Committee of the Board of Directors approved the terms of an employment agreement for our Vice President of Sales and issued him options to purchase an aggregate

1,200,000

shares of the Company’s common stock pursuant to the terms of our

2018

Plan. The exercise price of the

first

option to purchase

200,000

shares is equal to the closing price of our common stock on the

May 28

grant date, at

$0.17

per share. One-

third

of the option vests upon grant, the next

third

at the

first

anniversary of the grant, and the final

third

upon the

second

anniversary of the grant. The remaining options to purchase an aggregate

1,000,000

shares are unvested at grant date, and contingent upon certain performance metrics based on sales of our Odor-

No

-More subsidiary,

none

of which have been met. As such,

no

additional fair value was recorded and we are unable to estimate at this time if these metrics will be met. Upon execution of his employment agreement on

July 5, 2019,

an additional option to purchase

300,000

shares was granted, with an exercise price as of

July 5 (

$0.25

), vesting

100,000

shares on the first,

second

and

third

anniversary of the agreement.

Director of Business Development for Odor-

No

-More

On

July 23, 2019,

the Compensation Committee of the Board of Directors approved the terms of an employment agreement for Odor-

No

-More’s Director of Business Development, who also serves as BioLargo’s Director of Corporate Development, and issued him options to purchase an aggregate

1,000,000

shares of the Company’s common stock at

$0.35

per share pursuant to the terms of our

2018

Plan. The

first

option allows the purchase of

400,000

shares and vests

100,000

90

days after issuance,

100,000

shares on the

first

anniversary, and

200,000

shares on the

second

anniversary of the employment agreement. The remaining options to purchase an aggregate

600,000

shares are unvested at grant date, and contingent upon certain performance metrics based on sales of our Odor-

No

-More subsidiary,

none

of which have been met. As such,

no

additional fair value was recorded at

September 30, 2019,

and we are unable to estimate at this time if these metrics will be met.

2007

Equity Incentive Plan

On

September 

7,

2007,

and as amended

April 29, 2011,

the BioLargo, Inc.

2007

Equity Incentive Plan (

“2007

Plan”) was adopted as a means of providing our directors, key employees and consultants additional incentive to provide services. Both stock options and stock grants

may

be made under this plan for a period of

10

years, which expired on

September 7, 2017.

As of

September 2017,

the Plan was closed to further stock option grants.

Activity for our stock options under the

2007

Plan for the

nine

months ended

September 30, 2018

and

2019

is as follows:

As of September 30 , 2018 :	Options Outstanding			Exercise p rice per share				Weighted Average Price per share		Aggregate intrinsic Value (1)
Balance, December 31, 2017		9,831,586		$	0.23	–	1.89	$	0.44
Expired		(110,000	)		1.45	–	1.89		1.60
Balance, September 30, 2018		9,721,586		$	0.23	–	1.65	$	0.43
As of September 30 , 2019 :
Balance, December 31, 2018		9,691,586		$	0.23	–	0.94	$	0.43
Expired		(902,135	)		0.28	–	0.70		0.48
Balance, September 30, 2019		8,789,451		$	0.23	–	1.65	$	0.47	$	25,000

(

1

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

$0.31

at

September 30, 2019.

Non-Plan Options issued

Activity of our non-plan stock options issued for the

nine

months ended

September 30, 2018

and

2019

is as follows:

As of September 30 , 2018 :	Non-plan Options outstanding			Exercise price per share				Weighted Average price per share		Aggregate intrinsic value (1)
Balance, December 31, 2017		20,018,408		$	0.25	–	1.00	$	0.51
Granted		1,211,527			0.23	–	0.43		0.26
Expired		(2,400,000	)				0.99		0.99
Balance, September 30, 2018		18,829,935		$	0.25	–	1.00	$	0.45
As of September 30 , 2019 :
Balance, December 31, 2018		19,319,496		$	0.23	–	1.00	$	0.43
Granted		1,290,222			0.16	–	0.25		0.22
Expired		(691,975	)				0.55		0.55
Balance, September 30, 2019		19,917,743		$	0.16	–	1.00	$	0.41
Non-vested		(2,202,038	)		0.25	–	0.45		0.45
Vested, September 30, 2019		17,897,705			0.16	–	1.00		0.41	$	420,000

(

1

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

$0.31

at

September 30, 2019.

During the

nine

months ended

September 30, 2019,

we issued options to purchase

1,290,222

shares of our common stock at exercise prices ranging between

$0.16

–

$0.25

per share to vendors for fees for service.

XML

Note 9 - BioLargo Engineering, Science and Technologies, LLC

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Wholly-Owned Subsidiary [Text Block]

Note

9.

BioLargo Engineering, Science and Technologies, LLC

In

September 2017,

we commenced a full-service environmental engineering firm and formed a Tennessee entity named BioLargo Engineering, Science & Technologies, LLC (“BLEST”). In conjunction with the start of this subsidiary, we entered into a

three

-year office lease in the Knoxville, Tennessee area, and entered into employment agreements with

seven

scientists and engineers. (See Note

10

“Business Segment Information”.) The company was capitalized with

two

classes of membership units: Class A,

100%

owned by BioLargo, and Class B, held by management of BLEST, and which initially have

no

“profit interest,” as that term is defined in Tennessee law. However, over the succeeding

five

years, the Class B members can earn up to a

30%

profit interest. They also have been granted options to purchase up to an aggregate

2

million shares of BioLargo, Inc. common stock. The profit interest and option shares are subject to a

five

year vesting schedule tied to the performance of the subsidiary, including gross revenue targets that increase over time, obtaining positive cash flow by

March 31, 2018 (

which was

not

met), collecting

90%

of its account receivables, obtaining a profit of

10%

in its

first

year (and increasing in subsequent years), making progress in the scale-up and commercialization of our AOS system, and using BioLargo research scientists (such as our Canadian team) for billable work on client projects. These criteria are to be evaluated annually by BLEST’s compensation committee (which includes BioLargo’s president, CFO, and BLEST’s president). 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.

No

such units have been issued, and

no

related compensation charges have been recognized.

XML

Consolidated Statement of Stockholders' Equity (Deficit) (Unaudited) - USD ($)	Stock Issued for Financing Fee [Member] Common Stock [Member]	Stock Issued for Financing Fee [Member] Additional Paid-in Capital [Member]	Stock Issued for Financing Fee [Member]	Extension of Convertible Note Maturity Date, Vista Capital [Member] Additional Paid-in Capital [Member]	Extension of Convertible Note Maturity Date, Vista Capital [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Noncontrolling Interest [Member]	Total
Balance (in shares) at Dec. 31, 2017						104,164,465
Balance at Dec. 31, 2017						$ 70,000	$ 97,093,000	$ (101,205,000)	$ (62,000)	$ 695,000	$ (3,409,000)
Issuance of common stock for services (in shares)						714,436
Issuance of common stock for services							196,000				196,000
Issuance of common stock for interest (in shares)						617,072
Issuance of common stock for interest							165,000				165,000
Financing fee in stock (in shares)	252,385
Financing fee in stock		$ 85,000	$ 85,000
Sale of stock for cash (in shares)						658,226
Sale of stock for cash							168,000				168,000
Stock option compensation expense							320,000				320,000
Warrants and beneficial conversion feature issued as discount on convertible notes payable, note payable and line of credit							282,000				282,000
Deemed dividend							297,000	(297,000)
Net loss								(2,323,000)		(107,000)	(2,430,000)
Foreign currency translation									8,000		8,000
Balance (in shares) at Mar. 31, 2018						106,406,584
Balance at Mar. 31, 2018						$ 70,000	98,606,000	(103,825,000)	(54,000)	588,000	(4,615,000)
Balance (in shares) at Dec. 31, 2017						104,164,465
Balance at Dec. 31, 2017						$ 70,000	97,093,000	(101,205,000)	(62,000)	695,000	(3,409,000)
Net loss											(8,410,000)
Foreign currency translation											(5,000)
Balance (in shares) at Sep. 30, 2018						132,036,574
Balance at Sep. 30, 2018						$ 86,000	108,213,000	(109,590,000)	(141,000)	375,000	(1,055,000)
Balance (in shares) at Mar. 31, 2018						106,406,584
Balance at Mar. 31, 2018						$ 70,000	98,606,000	(103,825,000)	(54,000)	588,000	(4,615,000)
Issuance of common stock for services (in shares)						733,821
Issuance of common stock for services							250,000				250,000
Issuance of common stock for interest (in shares)						1,302,734
Issuance of common stock for interest						$ 1,000	327,000				329,000
Sale of stock for cash (in shares)						617,145
Sale of stock for cash							212,000				212,000
Stock option compensation expense							376,000				376,000
Warrants and beneficial conversion feature issued as discount on convertible notes payable, note payable and line of credit							32,000				33,000
Net loss								(3,505,000)		(95,000)	(3,600,000)
Foreign currency translation									(7,000)		(7,000)
Conversion of notes (in shares)						19,298,723
Conversion of notes						$ 13,000	6,215,000				6,228,000
Warrant exercise price reduction for cash							149,000				149,000
Balance (in shares) at Jun. 30, 2018						128,359,007
Balance at Jun. 30, 2018						$ 84,000	106,167,000	(107,330,000)	(61,000)	493,000	(645,000)
Issuance of common stock for services (in shares)						691,791
Issuance of common stock for services							198,000				198,000
Issuance of common stock for interest (in shares)						83,062
Issuance of common stock for interest							21,000				21,000
Sale of stock for cash (in shares)						1,565,762
Sale of stock for cash						$ 1,000	444,000				445,000
Stock option compensation expense							288,000				288,000
Warrants and beneficial conversion feature issued as discount on convertible notes payable, note payable and line of credit							256,000				256,000
Net loss								(2,260,000)		(118,000)	(2,378,000)
Foreign currency translation									(80,000)		47,000
Conversion of notes (in shares)						1,336,952
Conversion of notes						$ 1,000	333,000				334,000
Warrant exercise price reduction for cash							506,000				506,000
Balance (in shares) at Sep. 30, 2018						132,036,574
Balance at Sep. 30, 2018						$ 86,000	108,213,000	(109,590,000)	(141,000)	375,000	(1,055,000)
Balance (in shares) at Dec. 31, 2018						141,466,071
Balance at Dec. 31, 2018						$ 95,000	110,222,000	(111,723,000)	(90,000)	373,000	(1,123,000)
Issuance of common stock for services (in shares)						1,229,541
Issuance of common stock for services						$ 1,000	205,000				206,000
Issuance of common stock for interest (in shares)						139,362
Issuance of common stock for interest							25,000				25,000
Stock option compensation expense							352,000				352,000
Warrants and beneficial conversion feature issued as discount on convertible notes payable, note payable and line of credit							1,115,000				1,115,000
Deemed dividend							342,000	(342,000)
Net loss								(2,576,000)		(173,000)	(2,749,000)
Foreign currency translation									(4,000)		(4,000)
Conversion of notes (in shares)						1,638,479
Conversion of notes						$ 1,000	218,000				219,000
Warrant exercise price reduction for cash				$ 56,000	$ 56,000
Issuance of Clyra Medical common stock							21,000			89,000	110,000
Balance (in shares) at Mar. 31, 2019						144,473,453
Balance at Mar. 31, 2019						$ 97,000	112,556,000	(114,641,000)	(94,000)	289,000	(1,793,000)
Balance (in shares) at Dec. 31, 2018						141,466,071
Balance at Dec. 31, 2018						$ 95,000	110,222,000	(111,723,000)	(90,000)	373,000	(1,123,000)
Net loss											(8,625,000)
Foreign currency translation											$ (1,000)
Warrant exercise (in shares)											3,166,666
Balance (in shares) at Sep. 30, 2019						158,671,346
Balance at Sep. 30, 2019						$ 106,000	119,421,000	(120,556,000)	(91,000)	110,000	$ (1,010,000)
Balance (in shares) at Mar. 31, 2019						144,473,453
Balance at Mar. 31, 2019						$ 97,000	112,556,000	(114,641,000)	(94,000)	289,000	(1,793,000)
Issuance of common stock for services (in shares)						981,684
Issuance of common stock for services							213,000				213,000
Issuance of common stock for interest (in shares)						87,478
Issuance of common stock for interest							15,000				15,000
Stock option compensation expense							296,000				296,000
Warrants and beneficial conversion feature issued as discount on convertible notes payable, note payable and line of credit							756,000				756,000
Deemed dividend							440,000	(440,000)
Net loss								(1,795,000)		(192,000)	(1,987,000)
Foreign currency translation									(4,000)		(4,000)
Conversion of notes (in shares)						2,767,833
Conversion of notes						$ 2,000	294,000				296,000
Issuance of Clyra Medical common stock							74,000			111,000	185,000
Warrant exercise (in shares)						3,744,456
Warrant exercise						$ 3,000	101,000				104,000
Stock issuance to officer (see note 7) (in shares)						500,000
Stock issuance to officer (see note 7)
Balance (in shares) at Jun. 30, 2019						152,554,904
Balance at Jun. 30, 2019						$ 102,000	114,745,000	(116,876,000)	(98,000)	208,000	(1,919,000)
Issuance of common stock for services (in shares)						629,198
Issuance of common stock for services							166,000				166,000
Issuance of common stock for interest (in shares)						395,944
Issuance of common stock for interest							107,000				107,000
Stock option compensation expense							552,000				552,000
Warrants and beneficial conversion feature issued as discount on convertible notes payable, note payable and line of credit							2,060,000				2,060,000
Net loss								(3,680,000)		(207,000)	(3,887,000)
Foreign currency translation									7,000		7,000
Conversion of notes (in shares)						2,791,300
Conversion of notes						$ 2,000	392,000				394,000
Issuance of Clyra Medical common stock							66,000			109,000	175,000
Warrant exercise (in shares)						2,300,000
Warrant exercise						$ 2,000	274,000				276,000
Convert BioLargo convertible note to Clyra Medical shares							440,000				440,000
Debt extinguishment expense							619,000				619,000
Balance (in shares) at Sep. 30, 2019						158,671,346
Balance at Sep. 30, 2019						$ 106,000	$ 119,421,000	$ (120,556,000)	$ (91,000)	$ 110,000	$ (1,010,000)

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Nov. 08, 2019
Document Information [Line Items]
Entity Registrant Name	BIOLARGO, INC.
Entity Central Index Key	0000880242
Trading Symbol	blgo
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		163,916,660
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Amendment Flag	false
Title of 12(b) Security	Common Stock

XML

Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

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

810

,

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

not

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

38%

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

8

).

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency

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

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of

three

months or less when acquired to be cash equivalents. Substantially all cash equivalents are held in short-term money market accounts at

one

of the largest financial institutions in the United States. From time to time, our cash account balances are greater than the Federal Deposit Insurance Corporation insurance limit of

$250,000

per owner per bank, and during such times, we are exposed to credit loss for amounts in excess of insured limits in the event of non-performance by the financial institution. We do

not

anticipate non-performance by our financial institution.

As of

December 31, 2018

and

September 30, 2019,

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

	December 31, 2018		September 30 , 2019
BioLargo, Inc. and wholly owned subsidiaries	$	193	$	2,071
Clyra Medical Technologies, Inc.		462		65
Total	$	655	$	2,136

Receivable [Policy Text Block]

Accounts Receivable

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

December 31, 2018

and

September 30, 2019

was

zero

.

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

Credit Concentration

During the

nine

months ended

September 30, 2018

and

2019,

we had

two

customers that each accounted for more than

10%

of consolidated revenues in the respective periods, as follows:

	September 30 , 201 8			September 30 , 201 9
Customer A		44	%		13	%
Customer B		12	%		<10	%
Customer C		<10	%		10	%

We had

two

customers that accounted for more than

10%

of consolidated accounts receivable at

December 31, 2018

and at

September 30, 2019

as follows:

	December 31, 201 8			September 30 , 201 9
Customer W		12	%		<10	%
Customer X		31	%		<10	%
Customer Y		<10	%		17	%
Customer Z		<10	%		15	%

Inventory, Policy [Policy Text Block]

Inventory

Inventories are stated at the lower of cost or net realizable value using the average cost method. The allowance for obsolete inventory as of

December 31, 2018

and

September 30, 2019

was

$3,000

.

As of

December 31, 2018

and

September 30, 2019,

inventories consisted of (in thousands):

	December 31, 201 8		September 30 , 201 9
Raw material	$	14	$	10
Finished goods		12		9
Total	$	26	$	19

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

Impairment

Long-lived and definite lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not

be recoverable. If the sum of the expected future undiscounted cash flows from the use of the asset and its eventual disposition is less than the carrying amount of the asset, then an impairment loss is recognized. The impairment loss is measured based on the fair value of the asset. Any resulting impairment is recorded as a reduction in the carrying value of the related asset in excess of fair value and a charge to operating results. As of

December 31, 2018

and

September 30, 2019,

management determined that there was

no

impairment of its long-lived assets.

Earnings Per Share, Policy [Policy Text Block]

Earnings (Loss) Per Share

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

three

and

nine

months ended

September 30, 2018

and

2019,

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

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period reported. Actual results could differ from those estimates. Estimates are used when accounting for stock-based transactions, debt transactions, derivative liabilities, allowance for bad debt, asset depreciation and amortization, among others.

The methods, estimates and judgments we use in applying these most critical accounting policies have a significant impact on the results of our financial statements.

Share-based Payment Arrangement [Policy Text Block]

Share-Based Compensation Expense

We recognize compensation expense for stock option awards on a straight-line basis for employees over the applicable service period of the award, which is the vesting period. We recognize compensation expense for stock option awards for non-employees at the fair value on the grant date. Generally, the options issued to non-employees have been earned upon issuance. For the instances that options are issued to non-employees with a vesting schedule, the fair value is calculated on the grant date and the expense is amortized and recorded according to the vesting schedule. Share-based compensation expense is based on the grant date fair value estimated using the Black-Scholes Option Pricing Model.

For stock and stock options issued to consultants and other non-employees for services, the Company measures and records an expense as of the earlier of the date at which either: a commitment for performance by the non-employee has been reached or the non-employee’s performance is complete. The equity instruments are measured at the current fair value, and for stock options, the instruments are measured at fair value on the grant date using the Black Scholes option model.

The following methodology and assumptions were used to calculate share-based compensation for the

nine

months ended

September 30, 2018

and

2019:

	2018								2019
	Non Plan				2018 Plan				Non Plan				20 18 Plan
Risk free interest rate	2.43	–	2.91	%			2.91	%	2.00	-	2.65	%	2.00	-	2.65	%
Expected volatility	538	-	563	%	538	-	548	%	147	-	152	%	147	-	152	%
Expected dividend yield			—				—				—				—
Forfeiture rate			—				—				—				—
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 granted to employees and Directors. A significant number of our stock option grants are fully vested at issuance or have short vesting provisions. Therefore, we have estimated the forfeiture rate of our outstanding stock options as zero.

Warrant Policy [Policy Text Block]

Warrants issued with other securities

Warrants issued with our convertible promissory notes, note payables, and lines of credit are accounted for under the fair value and relative fair value method.

The warrant is

first

analyzed per its terms as to whether it has derivative features or

not.

If the warrant is determined to be a derivative and

not

qualify for equity treatment, then it is measured at fair value using the Black Scholes option model, and recorded as a liability on the balance sheet. The warrant is re-measured at its then current fair value at each subsequent reporting date (it is “marked-to-market”).

If the warrant is determined to

not

have derivative features, it is recorded into equity at its fair value using the Black Scholes option model, however, limited to a relative fair value based upon the percentage of its fair value to the total fair value including the fair value of the convertible note.

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

The warrant and BCF relative fair values are also recorded as a discount to the convertible promissory notes. As presented, these equity features of the convertible promissory notes have recorded a discount to the convertible notes that is substantially equal to the proceeds received.

Debt Modification and Extinguishment, Policy [Policy Text Block]

Debt Modification and Extinguishment

Per the guidance of ASC

470

-

50,

Debt Modifications and Extinguishments, modified terms are considered substantially different if the present value of the cash flows after modification differ by at least

10%

prior to the modification. If so, it is an extinguishment of the debt. Loss on extinguishment of debt is calculated by analyzing fair value of the new debt instrument and its beneficial conversion feature, if any, plus the value of the warrant issued with the new debt instrument, if any, and comparing with the carrying value of the extinguished debt.

Non Cash Transactions [Policy Text Block]

Non-Cash Transactions

We have established a policy relative to the methodology to determine the value assigned to each intangible we acquire, and/or services or products received for non-cash consideration of our common stock. The value is based on the market price of our common stock issued as consideration, at the date of the agreement of each transaction or when the service is rendered or product is received.

Revenue from Contract with Customer [Policy Text Block]

Revenue Recognition

We adopted ASU

2014

-

09,

“Revenue from Contracts with Customers”, Topic

606,

on

January 1, 2018.

The guidance focuses on the core principle for revenue recognition.

The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

Step

1:

Identify the contract(s) with a customer.

Step

2:

Identify the performance obligations in the contract.

Step

3:

Determine the transaction price.

Step

4:

Allocate the transaction price to the performance obligations in the contract.

Step

5:

Recognize revenue when (or as) the entity satisfies a performance obligation.

For product revenue, we identify the contract with the customer through a written purchase order (which

may

be part of a national purchasing agreement), 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. We recognize revenue at a point in time when the order for its goods are shipped if the agreement with our customer is FOB our warehouse facility, and when goods are delivered to its customer if the agreement with our customer is FOB destination. Revenue is recognized with a reduction for sales discounts, as appropriate and negotiated in the customer’s purchase order.

For service revenue, we identify services to be performed in a written contract, which specifies the performance obligations and the rate at which the services will be billed. Each service is separately negotiated and priced. Revenue is recognized as services are performed and completed. Service contracts typically call for invoicing for time and materials incurred for that contract. To date, there have been

no

discounts or other financing terms for the contracts.

In the future, we

may

generate revenues from royalties or license fees from our intellectual property. In the event we do so, we anticipate a licensee would pay a license fee in

one

or more installments and ongoing royalties based on their sales of products incorporating or using our licensed intellectual property. Upon entering into a licensing agreement, we will determine the appropriate method of recognizing the royalty and license fees.

Government Grants [Policy Text Block]

Government Grants

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

first

grant in

2015

and have been awarded over

65

 grants totaling over

$3.6

million. Some of the funds from these grants are given directly to

third

parties (such as the University of Alberta or a

third

-party research scientist) to support research on our technology. The grants have terms generally ranging between

nine

and

eighteen

months and support a majority, but

not

all, of the related research budget costs. This cooperative research allows us to utilize (i) a depth of resources and talent to accomplish highly skilled work, (ii) financial aid to support research and development costs, (iii) independent and credible validation of our technical claims.

The grants typically provide for (i) recurring monthly amounts, (ii) reimbursement of costs for research talent for which we invoice to request payment, and (iii) ancillary cost reimbursement for research talent travel related costs. All awarded grants have specific requirements on how the money is spent, typically to employ researchers.

None

of the funds

may

be used for general administrative expenses or overhead in the United States. These grants have substantially increased our level of research and development activities in Canada. We continue to apply for Canadian government and agency grants to fund research and development activities.

Not

all of our grant applications have been awarded, and

no

assurance can be made that any pending grant application, or any future grant applications, will be awarded.

Income Tax, Policy [Policy Text Block]

Income

Taxes

The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of asset and liabilities. Deferred tax assets and liabilities are determined based on the differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on deferred tax asset and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

We account for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by generally accepted accounting principles (“GAAP”). Under GAAP, the tax effects of a position are recognized only if it is “more-likely-than-

not”

to be sustained by the taxing authority as of the reporting date. If the tax position is

not

considered “more-likely-than-

not”

to be sustained, then

no

benefits of the position are recognized.

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

Fair Value of Financial Instruments

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

December 31, 2018

and

September 30, 2019

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

Tax Credits [Policy Text Block]

Tax Credits

Our research and development activities in Canada

may

entitle our Canadian subsidiary to claim benefits under the “Scientific Research and Experimental Development Program”, a Canadian federal tax incentive program designed to encourage Canadian businesses of all sizes and in all sectors to conduct research and development in Canada. Benefits under the program include credits to taxable income. If our Canadian subsidiary does

not

have taxable income in a reporting period, we instead receive a tax refund from the Canadian Revenue Authority. Those refunds are classified in Other Income on our Consolidated Statement of Operations and Comprehensive Loss.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In

August 2018,

the FASB issued Accounting Standards Update

No.

2018

-

13,

“Fair Value Measurement (Topic

820

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

820,

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

December 15, 2019,

including interim periods within that fiscal year. Management has

not

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

not

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

In

June 2018,

The FASB issued Accounting Standards Update

No.

2018

-

07,

“Compensation – Stock Compensation (topic

718

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

718

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

718

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

718

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

718

does

not

apply to share-based payments used to effectively provide (

1

) financing to the issuer or (

2

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

606,

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

December 15, 2018,

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

not

materially impact our stock compensation expense.

In

February 2016,

the FASB issued ASU Update

No.

2016

-

02,

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

January 1, 2019

using the modified retrospective transition method approved by the FASB in

July 2018,

which resulted in a

$399,000

gross up of assets and liabilities; this balance

may

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

September 30, 2019,

the gross up of our balance sheet related to our operating leases totals

$341,000.

XML

Note 5 - Share-based Compensation - Stock Options (Details) - USD ($)		2 Months Ended	9 Months Ended
		Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
2018 Equity Incentive Plan [Member]
Options outstanding, balance (in shares)			1,318,517
Exercise price per share, balance (in dollars per share)			$ 0.30
Weighted average exercise price per share, balance (in dollars per share)
Options outstanding, balance (in shares)		790,087	7,072,342
Exercise price per share, granted (in dollars per share)			$ 0.27
Weighted average exercise price per share, granted (in dollars per share)
Aggregate intrinsic value, balance	[1]
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, non-vested (in shares)			(4,144,926)
Exercise price per share, non-vested (in dollars per share)			$ 0.29
Weighted average price per share, non-vested (in dollars per share)
Options outstanding, vested (in shares)			4,245,933
Exercise price per share, vested (in dollars per share)			$ 0.23
Weighted average price per share, vested (in dollars per share)			$ 457,000
Options outstanding, expired (in shares)
Options outstanding, balance (in shares)		790,087	8,390,859	790,087
Exercise price per share, balance (in dollars per share)			$ 0.27
Weighted average exercise price per share, balance (in dollars per share)		$ 0.34		$ 0.34
2018 Equity Incentive Plan [Member] | Minimum [Member]
Exercise price per share, balance (in dollars per share)			0.22
Exercise price per share, granted (in dollars per share)		0.25	0.16
Exercise price per share, expired (in dollars per share)
Exercise price per share, non-vested (in dollars per share)			0.16
Exercise price per share, vested (in dollars per share)			0.17
Exercise price per share, balance (in dollars per share)		0.25	0.16	0.25
2018 Equity Incentive Plan [Member] | Maximum [Member]
Exercise price per share, balance (in dollars per share)			0.43
Exercise price per share, granted (in dollars per share)		0.43	0.40
Weighted average exercise price per share, granted (in dollars per share)		0.34
Exercise price per share, non-vested (in dollars per share)			0.40
Exercise price per share, vested (in dollars per share)			0.36
Exercise price per share, balance (in dollars per share)		$ 0.43	$ 0.43	$ 0.43
Equity Incentive Plan 2007 [Member]
Options outstanding, balance (in shares)			9,691,586	9,831,586
Weighted average exercise price per share, balance (in dollars per share)			$ 0.43	$ 0.44
Aggregate intrinsic value, balance	[1]		$ 25,000
Options outstanding, expired (in shares)			902,135	110,000
Weighted average price per share, expired (in dollars per share)			$ 0.48	$ 1.60
Options outstanding, expired (in shares)			(902,135)	(110,000)
Options outstanding, balance (in shares)		9,721,586	8,789,451	9,721,586
Weighted average exercise price per share, balance (in dollars per share)		$ 0.43	$ 0.47	$ 0.43
Equity Incentive Plan 2007 [Member] | Minimum [Member]
Exercise price per share, balance (in dollars per share)			0.23	0.23
Exercise price per share, expired (in dollars per share)			0.28	1.45
Exercise price per share, balance (in dollars per share)		0.23	0.23	0.23
Equity Incentive Plan 2007 [Member] | Maximum [Member]
Exercise price per share, balance (in dollars per share)			0.94	1.89
Exercise price per share, expired (in dollars per share)			0.70	1.89
Exercise price per share, balance (in dollars per share)		$ 1.65	$ 1.65	$ 1.65
Non Plan [Member]
Options outstanding, balance (in shares)			19,319,496	20,018,408
Exercise price per share, balance (in dollars per share)			$ 0.43	$ 0.51
Weighted average exercise price per share, balance (in dollars per share)
Options outstanding, balance (in shares)			1,290,222	1,211,527
Exercise price per share, granted (in dollars per share)			$ 0.22	$ 0.26
Weighted average exercise price per share, granted (in dollars per share)
Options outstanding, expired (in shares)			691,975	2,400,000
Exercise price per share, expired (in dollars per share)			$ 0.55	$ 0.99
Weighted average price per share, expired (in dollars per share)
Options outstanding, non-vested (in shares)			(2,202,038)
Exercise price per share, non-vested (in dollars per share)			$ 0.45
Weighted average price per share, non-vested (in dollars per share)
Options outstanding, vested (in shares)			17,897,705
Exercise price per share, vested (in dollars per share)			$ 0.41
Weighted average price per share, vested (in dollars per share)			$ 420,000
Options outstanding, expired (in shares)			(691,975)	(2,400,000)
Options outstanding, balance (in shares)		18,829,935	19,917,743	18,829,935
Exercise price per share, balance (in dollars per share)		$ 0.45	$ 0.41	$ 0.45
Weighted average exercise price per share, balance (in dollars per share)
Non Plan [Member] | Minimum [Member]
Exercise price per share, balance (in dollars per share)			0.23	0.25
Exercise price per share, granted (in dollars per share)			0.16	0.23
Exercise price per share, non-vested (in dollars per share)			0.25
Exercise price per share, vested (in dollars per share)			0.16
Exercise price per share, balance (in dollars per share)		0.25	0.16	0.25
Non Plan [Member] | Maximum [Member]
Exercise price per share, balance (in dollars per share)			1	1
Exercise price per share, granted (in dollars per share)			0.25	0.43
Exercise price per share, expired (in dollars per share)			0.55	0.99
Exercise price per share, non-vested (in dollars per share)			0.45
Exercise price per share, vested (in dollars per share)			1
Exercise price per share, balance (in dollars per share)		$ 1	$ 1	$ 1

[1] Aggregate intrinsic value based on closing common stock price of $0.31 at September 30, 2019.

XML

Note 3 - Lincoln Park Financing (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Aug. 25, 2017
Interest Expense, Total	$ 1,289,000	$ 266,000	$ 2,773,000	$ 2,827,000
Lincoln Park Capital Fund, LLC [Member]
Stock Purchase Agreement, Maximum Amount of Common Stock					$ 10,000,000
Interest Expense, Total			13,000
Estimated Interest Expense Through Next Twelve Months, Amount Per Month			$ 13,000
Stock Issued During Period, Shares, New Issues				2,800,733
Proceeds from Issuance of Common Stock				$ 826,000
Stock Issued During Period, Shares, Additional Commitment				40,400

XML

Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenues
Revenue	$ 534,000	$ 277,000	$ 1,324,000	$ 867,000
Cost of revenue
Gross profit	268,000	155,000	638,000	381,000
Selling, general and administrative expenses	1,803,000	1,365,000	4,498,000	3,852,000
Research and development	332,000	442,000	1,126,000	1,391,000
Depreciation	17,000	13,000	48,000	36,000
Operating loss	(1,884,000)	(1,665,000)	(5,034,000)	(4,898,000)
Other (expense) income:
Interest expense	(1,289,000)	(266,000)	(2,773,000)	(2,827,000)
Debt conversion expense				(276,000)
Loss on debt extinguishment	(801,000)	(578,000)	(1,029,000)	(578,000)
Tax credit	62,000	73,000	62,000	73,000
Grant income	26,000	58,000	149,000	96,000
Total other expense:	(2,002,000)	(713,000)	(3,591,000)	(3,512,000)
Net loss	(3,886,000)	(2,378,000)	(8,625,000)	(8,410,000)
Net loss attributable to noncontrolling interest	(207,000)	(118,000)	(572,000)	(320,000)
Net loss attributable to common shareholders	$ (3,679,000)	$ (2,260,000)	$ (8,053,000)	$ (8,090,000)
Net loss per share attributable to common shareholders:
Loss per share attributable to shareholders – basic and diluted (in dollars per share)	$ (0.02)	$ (0.02)	$ (0.05)	$ (0.07)
Weighted average number of common shares outstanding: (in shares)	156,435,220	130,445,351	148,239,912	118,057,635
Comprehensive loss:
Net loss	$ (3,887,000)	$ (2,378,000)	$ (8,625,000)	$ (8,410,000)
Foreign currency translation	7,000	47,000	(1,000)	(5,000)
Comprehensive loss	(3,890,000)	(2,331,000)	(8,626,000)	(8,415,000)
Comprehensive loss attributable to noncontrolling interest	(207,000)	(118,000)	(572,000)	(320,000)
Comprehensive loss attributable to common stockholders	(3,683,000)	(2,213,000)	(8,053,000)	(8,095,000)
Product [Member]
Revenues
Revenue	396,000	246,000	1,013,000	786,000
Cost of revenue
Cost of Goods and Services Sold	(171,000)	(98,000)	(448,000)	(426,000)
Service [Member]
Revenues
Revenue	138,000	31,000	311,000	81,000
Cost of revenue
Cost of Goods and Services Sold	$ (95,000)	$ (24,000)	$ (238,000)	$ (60,000)

XML

Note 12 - Subsequent Events

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Subsequent Events [Text Block]

Note

12.

Subsequent Events.

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

Convertible Note, matures

February 28, 2020 (

Vista Capital)

Subsequent to

September 30, 2019,

Vista Capital converted the remaining

$95,452

principal and

$11,089

interest due under the note into

683,108

shares of common stock.

Convertible Notes, matures and

December 7, 2019 (

Tangiers)

On

October 2, 2019,

Tangiers elected to convert the remaining

$185,000

balance of its note into

1,200,000

shares of common stock.

Convertible notes, mature

February 14

and

March 17, 2020

Subsequent to

September 30, 2019,

we paid Crossover Capital

$273,000

cash in full and final satisfaction of its convertible notes.

Convertible Note, matures

April 18, 2020

Subsequent to

September 30, 2019,

we paid Bellridge

$299,000

cash in full and final satisfaction of its convertible note.

Convertible note, matured

November 12, 2019

On

October 28, 2019,

the holder of the

three

-month OID note due

November 12, 2019,

elected to convert the

$110,000

principal plus outstanding interest into

660,709

shares of common stock at a conversion price of

$0.17

per share.

Nine-month OID note redemptions

Subsequent to

September 30, 2019,

we elected to redeem an aggregate principal amount of

$212,500

nine

-month OID notes into an aggregate

1,340,698

shares of our common stock.

XML

Note 2 - Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Significant Accounting Policies [Text Block]

Note

2.

Summary of Significant Accounting Policies

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

Principles of Consolidation

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

810

,

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

not

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

38%

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

8

).

Foreign Currency

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

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of

three

months or less when acquired to be cash equivalents. Substantially all cash equivalents are held in short-term money market accounts at

one

of the largest financial institutions in the United States. From time to time, our cash account balances are greater than the Federal Deposit Insurance Corporation insurance limit of

$250,000

per owner per bank, and during such times, we are exposed to credit loss for amounts in excess of insured limits in the event of non-performance by the financial institution. We do

not

anticipate non-performance by our financial institution.

As of

December 31, 2018

and

September 30, 2019,

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

	December 31, 2018		September 30 , 2019
BioLargo, Inc. and wholly owned subsidiaries	$	193	$	2,071
Clyra Medical Technologies, Inc.		462		65
Total	$	655	$	2,136

Accounts Receivable

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

December 31, 2018

and

September 30, 2019

was

zero

.

Credit Concentration

During the

nine

months ended

September 30, 2018

and

2019,

we had

two

customers that each accounted for more than

10%

of consolidated revenues in the respective periods, as follows:

	September 30 , 201 8			September 30 , 201 9
Customer A		44	%		13	%
Customer B		12	%		<10	%
Customer C		<10	%		10	%

We had

two

customers that accounted for more than

10%

of consolidated accounts receivable at

December 31, 2018

and at

September 30, 2019

as follows:

	December 31, 201 8			September 30 , 201 9
Customer W		12	%		<10	%
Customer X		31	%		<10	%
Customer Y		<10	%		17	%
Customer Z		<10	%		15	%

Inventory

Inventories are stated at the lower of cost or net realizable value using the average cost method. The allowance for obsolete inventory as of

December 31, 2018

and

September 30, 2019

was

$3,000

.

As of

December 31, 2018

and

September 30, 2019,

inventories consisted of (in thousands):

	December 31, 201 8		September 30 , 201 9
Raw material	$	14	$	10
Finished goods		12		9
Total	$	26	$	19

Impairment

Long-lived and definite lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not

be recoverable. If the sum of the expected future undiscounted cash flows from the use of the asset and its eventual disposition is less than the carrying amount of the asset, then an impairment loss is recognized. The impairment loss is measured based on the fair value of the asset. Any resulting impairment is recorded as a reduction in the carrying value of the related asset in excess of fair value and a charge to operating results. As of

December 31, 2018

and

September 30, 2019,

management determined that there was

no

impairment of its long-lived assets.

Earnings (Loss) Per Share

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

three

and

nine

months ended

September 30, 2018

and

2019,

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

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period reported. Actual results could differ from those estimates. Estimates are used when accounting for stock-based transactions, debt transactions, derivative liabilities, allowance for bad debt, asset depreciation and amortization, among others.

The methods, estimates and judgments we use in applying these most critical accounting policies have a significant impact on the results of our financial statements.

Share-Based Compensation Expense

We recognize compensation expense for stock option awards on a straight-line basis for employees over the applicable service period of the award, which is the vesting period. We recognize compensation expense for stock option awards for non-employees at the fair value on the grant date. Generally, the options issued to non-employees have been earned upon issuance. For the instances that options are issued to non-employees with a vesting schedule, the fair value is calculated on the grant date and the expense is amortized and recorded according to the vesting schedule. Share-based compensation expense is based on the grant date fair value estimated using the Black-Scholes Option Pricing Model.

For stock and stock options issued to consultants and other non-employees for services, the Company measures and records an expense as of the earlier of the date at which either: a commitment for performance by the non-employee has been reached or the non-employee’s performance is complete. The equity instruments are measured at the current fair value, and for stock options, the instruments are measured at fair value on the grant date using the Black Scholes option model.

The following methodology and assumptions were used to calculate share-based compensation for the

nine

months ended

September 30, 2018

and

2019:

	2018								2019
	Non Plan				2018 Plan				Non Plan				20 18 Plan
Risk free interest rate	2.43	–	2.91	%			2.91	%	2.00	-	2.65	%	2.00	-	2.65	%
Expected volatility	538	-	563	%	538	-	548	%	147	-	152	%	147	-	152	%
Expected dividend yield			—				—				—				—
Forfeiture rate			—				—				—				—
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 granted to employees and Directors. A significant number of our stock option grants are fully vested at issuance or have short vesting provisions. Therefore, we have estimated the forfeiture rate of our outstanding stock options as zero.

Warrants issued with other securities

Warrants issued with our convertible promissory notes, note payables, and lines of credit are accounted for under the fair value and relative fair value method.

The warrant is

first

analyzed per its terms as to whether it has derivative features or

not.

If the warrant is determined to be a derivative and

not

qualify for equity treatment, then it is measured at fair value using the Black Scholes option model, and recorded as a liability on the balance sheet. The warrant is re-measured at its then current fair value at each subsequent reporting date (it is “marked-to-market”).

If the warrant is determined to

not

have derivative features, it is recorded into equity at its fair value using the Black Scholes option model, however, limited to a relative fair value based upon the percentage of its fair value to the total fair value including the fair value of the convertible note.

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

The warrant and BCF relative fair values are also recorded as a discount to the convertible promissory notes. As presented, these equity features of the convertible promissory notes have recorded a discount to the convertible notes that is substantially equal to the proceeds received.

Debt Modification and Extinguishment

Per the guidance of ASC

470

-

50,

Debt Modifications and Extinguishments, modified terms are considered substantially different if the present value of the cash flows after modification differ by at least

10%

prior to the modification. If so, it is an extinguishment of the debt. Loss on extinguishment of debt is calculated by analyzing fair value of the new debt instrument and its beneficial conversion feature, if any, plus the value of the warrant issued with the new debt instrument, if any, and comparing with the carrying value of the extinguished debt.

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.

For product revenue, we identify the contract with the customer through a written purchase order (which

may

be part of a national purchasing agreement), 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. We recognize revenue at a point in time when the order for its goods are shipped if the agreement with our customer is FOB our warehouse facility, and when goods are delivered to its customer if the agreement with our customer is FOB destination. Revenue is recognized with a reduction for sales discounts, as appropriate and negotiated in the customer’s purchase order.

For service revenue, we identify services to be performed in a written contract, which specifies the performance obligations and the rate at which the services will be billed. Each service is separately negotiated and priced. Revenue is recognized as services are performed and completed. Service contracts typically call for invoicing for time and materials incurred for that contract. To date, there have been

no

discounts or other financing terms for the contracts.

In the future, we

may

generate revenues from royalties or license fees from our intellectual property. In the event we do so, we anticipate a licensee would pay a license fee in

one

or more installments and ongoing royalties based on their sales of products incorporating or using our licensed intellectual property. Upon entering into a licensing agreement, we will determine the appropriate method of recognizing the royalty and license fees.

Government Grants

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

first

grant in

2015

and have been awarded over

65

 grants totaling over

$3.6

million. Some of the funds from these grants are given directly to

third

parties (such as the University of Alberta or a

third

-party research scientist) to support research on our technology. The grants have terms generally ranging between

nine

and

eighteen

months and support a majority, but

not

all, of the related research budget costs. This cooperative research allows us to utilize (i) a depth of resources and talent to accomplish highly skilled work, (ii) financial aid to support research and development costs, (iii) independent and credible validation of our technical claims.

The grants typically provide for (i) recurring monthly amounts, (ii) reimbursement of costs for research talent for which we invoice to request payment, and (iii) ancillary cost reimbursement for research talent travel related costs. All awarded grants have specific requirements on how the money is spent, typically to employ researchers.

None

of the funds

may

be used for general administrative expenses or overhead in the United States. These grants have substantially increased our level of research and development activities in Canada. We continue to apply for Canadian government and agency grants to fund research and development activities.

Not

all of our grant applications have been awarded, and

no

assurance can be made that any pending grant application, or any future grant applications, will be awarded.

Income

Taxes

The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of asset and liabilities. Deferred tax assets and liabilities are determined based on the differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on deferred tax asset and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

We account for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by generally accepted accounting principles (“GAAP”). Under GAAP, the tax effects of a position are recognized only if it is “more-likely-than-

not”

to be sustained by the taxing authority as of the reporting date. If the tax position is

not

considered “more-likely-than-

not”

to be sustained, then

no

benefits of the position are recognized.

Fair Value of Financial Instruments

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

December 31, 2018

and

September 30, 2019

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

Tax Credits

Our research and development activities in Canada

may

entitle our Canadian subsidiary to claim benefits under the “Scientific Research and Experimental Development Program”, a Canadian federal tax incentive program designed to encourage Canadian businesses of all sizes and in all sectors to conduct research and development in Canada. Benefits under the program include credits to taxable income. If our Canadian subsidiary does

not

have taxable income in a reporting period, we instead receive a tax refund from the Canadian Revenue Authority. Those refunds are classified in Other Income on our Consolidated Statement of Operations and Comprehensive Loss.

Recent Accounting Pronouncements

In

August 2018,

the FASB issued Accounting Standards Update

No.

2018

-

13,

“Fair Value Measurement (Topic

820

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

820,

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

December 15, 2019,

including interim periods within that fiscal year. Management has

not

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

not

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

In

June 2018,

The FASB issued Accounting Standards Update

No.

2018

-

07,

“Compensation – Stock Compensation (topic

718

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

718

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

718

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

718

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

718

does

not

apply to share-based payments used to effectively provide (

1

) financing to the issuer or (

2

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

606,

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

December 15, 2018,

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

not

materially impact our stock compensation expense.

In

February 2016,

the FASB issued ASU Update

No.

2016

-

02,

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

January 1, 2019

using the modified retrospective transition method approved by the FASB in

July 2018,

which resulted in a

$399,000

gross up of assets and liabilities; this balance

may

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

September 30, 2019,

the gross up of our balance sheet related to our operating leases totals

$341,000.

XML

Note 4 - Debt Obligations

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

4.

Debt Obligations

The following table summarizes our debt obligations outstanding as of

December 31, 2018

and as of

September 30, 2019 (

in thousands). A portion of these debt obligation have been paid or converted to our common stock (see Note

12

).

	December 31, 201 8		September 30 , 201 9
C urrent liabilities:
Notes payable and line of credit
Notes payable, previously due September 6, 2019	$	400	$	—
Note payable, due on demand 60 days’ notice (or March 8, 2023)		—		50
Line of credit, due on demand 30 days’ notice after September 1, 2019		430		225
Note payable issued by Clyra Medical to Scion, matures June 17, 2020 (Note 8)		—		1,007
Total notes payable and line of credit	$	830	$	1,282
Convertible notes payable:
Convertible note, matured January 11, 2019		300		—
Convertible note, matures July 20, 2019 ( 1 )		440		—
Convertible nine-month OID notes, mature beginning October 2019 ( 2 )		—		213
Convertible three-month OID note, matures November 12, 2019 ( 2 )		—		110
Convertible notes, mature December 7, 2019 ( 2 )		—		185
Convertible notes, mature December 31, 2019 ( 1 )		75		75
Convertible notes, mature February 14 and March 17, 2020 ( 2 )		—		200
Convertible note, matures February 28, 2020 ( 2 )		550		101
Convertible note, matures March 4, 2020		—		—
Convertible note, matures April 7, 2020		—		370
Convertible note, matures April 18, 2020 ( 2 )		—		220
Convertible note, matures June 20, 2020 (1)		—		25
Convertible 12-month OID notes, mature beginning June 2020		—		3,175
Convertible notes, mature August 12 and 16, 2020		—		550
Total convertible notes payable	$	1,365	$	5,224
Total current liabilities	$	2,195	$	6,506
L ong-term liabilities :
Convertible note payable, matures August 9, 2021		—		600
Note payable issued by Clyra Medical to Scion, matures June 17, 2020 (See Note 8)		1,007		—
Convertible notes payable, mature June 20, 2020 (1)		25		—
Convertible notes payable, mature April 20, 2021 (1)		100		100
Convertible notes, mature June 15, 2021 (1)		110		—
Note payable, matures March 8, 2023 (or on demand 60 days’ notice)		50		—
Total long-term liabilities	$	1,292	$	700
Total	$	3,487	$	7,206

(

1

)

    These notes are convertible at our option at maturity.

(

2

)

    These notes have been paid and/or converted to common stock subsequent to

September 30, 2019 (

see Note

12

).

The following discussion includes debt instruments to which amendments were made during the

three

months ended

September 30, 2019,

and includes other activity that management deemed appropriate to disclose. Each of the debt instruments contained in the above table are more fully disclosed in the financial statements contained in the Company’s Annual Report filed with the SEC on

March 29, 2019.

Notes payable, mature

August 12

and

16,

2020

(previously due

September 6, 2019)

On

June 4, 2019,

we exercised our right to extend the maturity dates of

two

promissory notes due

June 5, 2019

which were originally issued

September 19, 2018

to Vernal Bay Investments, LLC (“Vernal”) and Chappy Bean, LLC (“Chappy Bean”). Our election to extend the maturity dates increased the principal amount of each note by

10%,

such that the aggregate principal balance of the

two

notes increased to

$484,000

as of

June 4, 2019.

The extended maturity date was

September 6, 2019.

On

August 12, 2019,

Vernal agreed to refinance the

$380,000

principal and interest due

September 6, 2019,

through the issuance of amended and restated convertible promissory note in the principal amount of

$475,000

due in

12

months, which included a

25%

original issue discount, and is convertible by the holder at

$0.17

per share. The interest rate was reduced from

18%

to

5%

per annum. Vernal also received a stock purchase warrant (see Note

6

). On

August 16, 2019,

Chappy Bean agreed to refinance the

$60,000

remaining on its note due

September 6, 2019,

through the issuance of amended and restated convertible promissory note in the principal amount of

$75,000

due in

12

months, which included a

25%

original issue discount, and is convertible by the holder at

$0.17

per share. The interest rate was reduced from

18%

to

5%

per annum. Chappy Bean also received a stock purchase warrant (see Note

6

).

The total of the fair value of the warrants and the fair value of the new notes and their beneficial conversion features exceeded the carrying value of the old notes by

$422,000,

resulting in a loss on debt extinguishment recorded on our statement of operations.

Line of credit, due on demand

30

days’ notice after

September 1, 2019

During

July

and

August 2019,

line of credit holders in the principal amount of

$205,000,

agreed to satisfy the line of credit through the issuance of an amended and restated convertible promissory note totaling

$256,000

due in

12

months,

August 2020,

including a

25%

original issue discount. They also received a warrant to purchase

1,130,515

shares of our common stock (See Note

6

). The amended and restated note is convertible by the holder at

$0.17

per share. The interest rate was reduced from

18%

to

5%

per annum.

The total of the fair value of the warrant and the fair value of the new note and its beneficial conversion feature exceeded the carrying value of the old note by

$315,000,

resulting in a loss on debt extinguishment recorded on our statement of operations.

As of

September 30, 2019,

the line of credit outstanding balance totaled

$225,000.

Subsequent to

September 30, 2019,

the remaining balance of

$225,000

was paid in full (see Note

12

).

Convertible Notes, mature

June 15, 2021 (

OID Note)

During

September 2019,

the notes holders of the

June 15, 2021

convertible notes totaling

$110,000

agreed to satisfy these notes through the issuance of an amended and restated convertible promissory note totaling

$125,000

due in

12

months,

September 2020,

including a

25%

original issue discount. They also received a warrant to purchase

551,471

shares of our common stock (See Note

6

). The amended and restated note is convertible by the holder at

$0.17

per share. The interest rate was reduced from

18%

to

5%

per annum.

The total of the fair value of the warrant and the fair value of the new note and its beneficial conversion feature exceeded the carrying value of the old note by

$64,000,

resulting in a loss on debt extinguishment recorded on our statement of operations.

Convertible note payable, matures

January 11, 2019 (

Triton)

On

October 16, 2018,

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

$225,000

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

$300,000

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

5%,

and was scheduled to mature

January 11, 2019.

The

$75,000

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

three

-month ended

March 31, 2019.

On

January 8, 2019,

we paid the Triton Note in full.

Convertible note, matured

July 20, 2019

On the

July 20, 2019

maturity date, the holder of a note in the principal amount of

$440,000

elected to convert the principal amount due on the note into

2,000

shares of Clyra Medical common stock held by BioLargo, and

$106,600

in accrued and unpaid interest into

384,980

shares of BioLargo common stock using the

20

-day closing average of

$0.27

per share. (See Note

10

).

Convertible Nine-Month OID Notes

During the

three

months ended

March 31, 2019,

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

$213,000,

with a

25%

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

$0.25

per share, and mature

nine

months from the date of issuance. Our agreement with the investors provided that the initial conversion price

may

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

$0.25.

Each investor also received a stock purchase warrant equal to

75%

of the principal amount, divided by the conversion price of

$0.25

(see Note

6

).

On

June 7, 2019,

we began issuing

twelve

-month OID notes at a lower conversion price (

$0.17;

see “Convertible Twelve-month OID notes”, below). As such, we reduced conversion prices of these notes to

$0.17,

resulting in an increase of

300,000

shares available for purchase under the warrants.

Subsequent to

September 30, 2019,

these notes converted to common stock (see Note

12

).

Convertible Three-month OID note, matures

November 12, 2019

On

August 15, 2019,

we received

$100,000

and issued a convertible promissory note in the aggregate principal amount of

$110,000,

with a

10

% original issue discount, to

one

accredited investor. The convertible note is due

November 12, 2019.

The note is convertible at the holder’s option at

$0.17

per share. The original issue discount totaling

$10,000

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

$47,000,

are both recorded as discount on convertible notes and will be amortized to interest expense over the term of the note.

Subsequent to

September 30, 2019,

this note was converted to common stock (see Note

12

).

Convertible Notes, matures and

December 7, 2019 (

Tangiers)

On

January 31, 2019,

we issued a

12%

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

$495,000

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

two

payments, each due in

nine

months after receipt, and incurs a guaranteed interest of

12%

at inception. The initial payment of

$300,000

was received on

February 5, 2019,

representing a

$330,000

principal amount and

10%

original issue discount. It is due

November 5, 2019.

We received the

second

payment, in the amount of

$150,000,

on

March 7, 2019,

increasing the principal amount due under the note to

$495,000.

This

second

amount, plus guaranteed interest, is due

December 7, 2019.

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

$554,000.

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

75%

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

25

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

$185,000,

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

2019.

On

July 29, 2019,

Tangiers Global, LLC, elected to convert

$369,000

principal amount due on its promissory note issued

January 31, 2019,

into

2,640,000

shares of common stock. As of

September 30, 2019,

the outstanding note balance totals

$185,000.

Subsequent to

September 30, 2019,

the remaining balance of the note was converted to common stock (see Note

12

).

Convertible notes, mature

February 14

and

March 17, 2020

On

May 14, 2019,

we received

$95,000

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

$110,000,

representing a

10%

original issue discount, and a deduction of

$5,000

for legal fees and due diligence. The note is due

nine

months from the date of issuance, on

February 14, 2020.

On

June 17, 2019,

we received a

second

investment from Crossover Capital in the amount of

$77,000

and issued a convertible note in the principal amount of

$90,000,

representing a

10%

original issue discount, and a deduction of

$5,000

for legal fees and due diligence. The note is due

nine

months from the date of issuance,

March 17, 2020.

The notes are convertible at the option of Crossover Capital at a conversion price equal to

70%

of the lowest closing bid price of our common stock during the

25

trading days prior to the conversion date. The intrinsic value of the beneficial conversion features resulted in an aggregate fair value of

$134,000

recorded as a discount on convertible notes on our balance sheet which will be amortized over the terms of the notes as interest expense.

Subsequent to

September 30, 2019,

we paid these notes in full (see Note

12

).

Convertible Note, matures

February 28, 2020 (

Vista Capital)

On

January 7, 2019,

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

December 14, 2017 (

“Vista

2017

Note”) and extend its maturity date to

April 15, 2019.

The principal amount of the note was increased to

$605,100.

The note will continue to earn interest at the rate of

five

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

80%

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

25

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

20%

to

15%,

such that a prepayment requires the payment of an additional

15%

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

30%

to

25%

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

$487,000,

all of which was recorded as interest expense during the

nine

months ended

September 30, 2019.

On

March 28, 2019,

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

2017

Note, to

July 15, 2019.

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

10

percent, to

$420,000.

The increase in principal totaling

$38,000

was recorded as a loss on debt extinguishment on our statement of operations. On

July 16, 2019,

we and Vista further agreed to extend the maturity date to

August 31, 2019

and again on

August 13, 2019,

we and Vista Capital agreed to extend by

nine

months the maturity date to

February 28, 2020.

No

additional consideration was given for these extensions.

During the

nine

months ended

September 30, 2019,

Vista Capital elected to convert

$550,000

of the outstanding principal of the Vista

2017

Note, and we issued

4,557,611

shares of our common stock to Vista pursuant to the conversions. As of

September 30, 2019,

the outstanding balance on the Vista Note totaled

$101,000.

Subsequent to

September 30, 2019,

the remaining balance of the note was converted to common stock (see Note

12

).

Convertible note, matures

March 4, 2020

On

June 4, 2019,

we received

$95,000

and issued a convertible note to EMA Financial, LLC (“EMA”) in the principal amount of

$110,000

(the “EMA Note”), representing a

10%

original issue discount, and a deduction of

$5,000

for legal and diligence fees. The note is due

nine

-months from the date of issuance, on

March 4, 2020,

and earns interest at a rate of

10%

per annum.

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

70%

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

25

trading days prior to the conversion date. We

may

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

90

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

125%

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

130%

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

24%

per annum or the highest rate permitted by law. The intrinsic value of the beneficial conversion feature resulted in a fair value totaling

$77,000,

and is recorded as a discount on convertible notes on our balance sheet. This discount will be amortized over the

nine

-month term of the note as interest expense.

On

September 24, 2019,

we paid this note in full.

Convertible Note, matures

April 7, 2020

(Vista Capital)

On

January 7, 2019,

Vista Capital invested

$300,000

and we issued a convertible promissory note (the “Vista

2019

Note”) in the principal amount of

$330,000,

maturing

nine

months from the date of issuance (

October 7, 2019).

The Vista

2019

Note earned a

one

-time interest charge of

12%,

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

2019

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

65%

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

25

consecutive trading days immediately preceding the conversion date. The Vista

2019

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

4.99%

of our common stock. The Vista

2019

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

2019

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

not

the registration statement filed

November 6, 2018).

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

$300,000,

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

2019.

On

August 13, 2019,

we and Vista Capital amended the note extending the maturity date to

April 7, 2020.

Convertible Note, matures

April 18, 2020

On

April 18, 2019,

we received

$188,000

and issued a convertible note to Bellridge Capital, LP (“Bellridge”) in the principal amount of

$220,000

(the “Bellridge Note”), representing a

10%

original issue discount, and a deduction of

$10,000

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

April 18, 2020

and earns interest at

10%

per annum.

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

70%

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

25

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

$120,000

recorded as a discount on convertible notes on our balance sheet which will be amortized over the term of the note as interest expense.

Subsequent to

September 30, 2019,

we paid this note in full (see Note

12

).

Convertible Twelve-month OID notes

From

June 7, 2019

through

September 30, 2019,

we received

$2,235,000

and issued convertible promissory notes (each, a

“12

-Month OID Note”) in the aggregate principal amount of

$2,794,000,

with a

25%

original issue discount, to

34

accredited investors. The original issuance discount totaled

$559,000

and is recorded as a discount on convertible notes payable on our balance sheet. The intrinsic value of the beneficial conversion features resulted in an aggregate fair value of

$2,235,000,

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

twelve

months from the date of issuance.

During the

three

months

July 1, 2019

through

September 30, 2019,

in exchange for

$305,000

of convertible note payables that were coming due, we issued an additional

$381,000

convertible promissory notes (each, a

“12

-Month OID Note), with a

25%

original issue discount. The original issue discount totaled

$76,000

and is recorded as a discount on convertible notes payable on our balance sheet. The intrinsic value of the beneficial conversion features resulted in an aggregate fair value of

$381,000

and is recorded as debt extinguishment expense on our statement of operations. The discount will be amortized and recorded to interest expense over the term of the notes. These notes mature

twelve

months from the date of issuance.

Each Twelve-month OID Note is convertible by the investor at any time at

$0.17

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

$0.17.

The notes earn interest at a rate of

five

percent (

5%

) per annum, due at maturity. The Company

may

prepay the notes only upon

10

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

may

exercise his/her right to convert the note to stock. The Company is obligated to prepay the notes in the event it receives at least

$3.5

million gross proceeds in a financing transaction. At maturity, the Company

may

redeem the notes through the issuance of common stock at a conversion price equal to the lower of the “conversion price” (initially

$0.17,

as

may

be adjusted), and

70%

of the lowest daily volume weighted average price of the Company’s common stock during the

25

trading days preceding the conversion date.

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

$3.5

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

not

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

not

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

seventy

percent (

70%

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

25

trading days immediately preceding the conversion.

In addition to the note, each OID investor received a warrant to purchase a certain number of shares common stock at

$0.25

per share calculated based on the amount invested (see Note

6

).

Convertible notes, matures

August 9, 2021

On

August 9, 2019,

we received

$600,000

from

one

accredited investor and issued a promissory note in the principal amount of

$600,000,

maturing in

two

years, accruing interest at

15%

to be paid in cash monthly, and which converts to common stock at the holder’s option at

$0.30

per share. This investor also received a warrant to purchase

1,200,000

shares of our common stock at

$0.30

per share, expiring

five

years from the grant date.

XML

Note 8 - Noncontrolling Interest - Clyra Medical

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Noncontrolling Interest Disclosure [Text Block]

Note

8.

Noncontrolling Interest – Clyra Medical

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

2

).

Acquisition of In-process Research and Development

On

September 26, 2018,

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

21,000

shares of the Clyra Medical common stock; (ii)

10,000

shares of Clyra Medical common stock redeemable for

7,142,858

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

$1,250,000

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

$1

million “base capital” to fund its business operations.

On

December 17, 2018,

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

$1

million “base capital”; at that time,

one

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

15,500

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

one

-

fifth

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

$100,000

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

$100,000

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

$500,000

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

$1

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

$2

million in gross revenue.

Scion Solutions – Note Payable and Clyra Liability

The promissory note in the principal amount of

$1,250,000

issued by Clyra Medical to Scion on

September 26, 2018 (

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

5%.

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

25%

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

not

paid off within

18

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

12

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

18

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

25%

of investment proceeds received during the

12

-month period, and (ii)

5%

of Clyra Medical’s gross revenues. At

September 30, 2019,

the balance due on the Clyra-Scion Note equaled

$1,007,000.

Non-Controlling Interest

During the

nine

months ended

September 30, 2019,

Clyra sold

2,350

shares of its common stock for

$470,000

(

$200

per share).

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

As of

September 30, 2019,

Clyra Medical had the following common and preferred shares outstanding:

Shareholder	Shares		Percent
BioLargo, Inc.		26,053		38.0%
Sanatio Capital (1)		11,520		16.8%
Scion Solutions (2)		15,500		22.6%
Other		15,572		22.6%
Total		68,645

Notes:

(

1

) Includes

9,830

Series A Preferred shares (see below), and

1,690

common shares.

(

2

) Does

not

include an additional

15,500

shares held in escrow subject to performance metrics.

Sanatio Capital purchased Series A Preferred shares in

2015.

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

8%

for a period of

five

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

no

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

510

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

December 20,

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

no

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

September 30, 2019

is

$230,000.

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

may

convert the shares to Clyra Medical common stock initially on a

one

-to-

one

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

Preferred shares

may

be converted to common shares on a

one

-to-

one

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

one

-to-

one

basis.

XML

Note 11 - Commitments and Contingencies (Details Textual) - USD ($)		9 Months Ended
	Jun. 18, 2019	Sep. 30, 2019	Sep. 30, 2018
Operating Leases, Rent Expense, Total		$ 156,000	$ 159,000
Lessee, Operating Lease, Renewal Term		4 years
Lessee, Operating Lease, Discount Rate		18.00%
Lessee, Operating Lease, Liability, Payments, Due, Total		$ 645,000
Consulting Services, Monthly Payment		$ 23,000
Consulting Services, Period of Services		4 years
Contractual Obligation, Total		$ 1,100,000
President and Chief Executive Officer [Member]
Employment Agreement, Annual Base Compensation	$ 170,000
Employment Agreement, Term	5 years

XML

Note 8 - Noncontrolling Interest - Clyra Medical Common and Preferred Shares Outstanding (Details) - Clyra Medical Technology Inc [Member]	Sep. 30, 2019 shares
Shares, Outstanding (in shares)	68,645
Biolargo [Member]
Shares, Outstanding (in shares)	26,053
Percent	38.00%
Sanatio [Member]
Shares, Outstanding (in shares)	11,520	[1]
Percent	16.80%	[1]
Scion Solutions [Member]
Shares, Outstanding (in shares)	15,500	[2]
Percent	22.60%	[2]
Other [Member]
Shares, Outstanding (in shares)	15,572
Percent	22.60%

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

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

XML

Note 5 - Share-based Compensation (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

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

As of September 30, 2018 :	Options Outstanding		Exercise Price per share				Weighted Average Exercise Price per share		Aggregate intrinsic Value (1)
Inception, June 22, 2018		—				—		—
Granted		790,087		0.25	-	0.43		0.34
Balance and vested, September 30, 2018		790,087	$	0.25	-	0.43	$	0.34	$	—

As of September 30 , 2019 :	Options Outstanding			Exercise Price per share				Weighted Average Exercise Price per share		Aggregate intrinsic Value (1)
Balance, December 31, 2018		1,318,517		$	0.22	–	0.43	$	0.30
Granted		7,072,342			0.16	–	0.40		0.27
Expired		—					—		—
Balance, September 30, 2019		8,390,859		$	0.16	–	0.43	$	0.27
Non-vested		(4,144,926	)		0.16	–	0.40		0.29
Vested, September 30, 2019		4,245,933		$	0.17	–	0.36	$	0.23	$	457,000

As of September 30 , 2018 :	Options Outstanding			Exercise p rice per share				Weighted Average Price per share		Aggregate intrinsic Value (1)
Balance, December 31, 2017		9,831,586		$	0.23	–	1.89	$	0.44
Expired		(110,000	)		1.45	–	1.89		1.60
Balance, September 30, 2018		9,721,586		$	0.23	–	1.65	$	0.43
As of September 30 , 2019 :
Balance, December 31, 2018		9,691,586		$	0.23	–	0.94	$	0.43
Expired		(902,135	)		0.28	–	0.70		0.48
Balance, September 30, 2019		8,789,451		$	0.23	–	1.65	$	0.47	$	25,000

As of September 30 , 2018 :	Non-plan Options outstanding			Exercise price per share				Weighted Average price per share		Aggregate intrinsic value (1)
Balance, December 31, 2017		20,018,408		$	0.25	–	1.00	$	0.51
Granted		1,211,527			0.23	–	0.43		0.26
Expired		(2,400,000	)				0.99		0.99
Balance, September 30, 2018		18,829,935		$	0.25	–	1.00	$	0.45
As of September 30 , 2019 :
Balance, December 31, 2018		19,319,496		$	0.23	–	1.00	$	0.43
Granted		1,290,222			0.16	–	0.25		0.22
Expired		(691,975	)				0.55		0.55
Balance, September 30, 2019		19,917,743		$	0.16	–	1.00	$	0.41
Non-vested		(2,202,038	)		0.25	–	0.45		0.45
Vested, September 30, 2019		17,897,705			0.16	–	1.00		0.41	$	420,000

XML

Note 10 - Business Segment Information (Tables)

9 Months Ended

Sep. 30, 2019

Notes Tables

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

	Three months ended September 30,						Nine months ended September 30,
	2018			2019			2018			2019
Revenue
Odor-No-More	$	246		$	396		$	786		$	1,012
BLEST		181			308			531			732
BLEST - Intercompany revenue		(150	)		(170	)		(450	)		(420	)
Total	$	277		$	534		$	867		$	1,324
Operating ( loss ) income
BioLargo corporate	$	(1,079	)	$	(1,347	)	$	(3,225	)	$	(3,250	)
Odor-No-More		(112	)		(90	)		(366	)		(231	)
Clyra		(220	)		(338	)		(596	)		(944	)
BLEST		(63	)		27			(178	)		(110	)
Water		(191	)		(136	)		(533	)		(499	)
Total	$	(1,665	)	$	(1,884	)	$	(4,898	)	$	(5,034	)
Interest expense
BioLargo Corporate	$	(266	)	$	(1,248	)	$	(2,825	)	$	(2,707	)
Odor-No-More		—			(28	)		—			(28	)
Clyra		—			(13	)		(2	)		(38	)
Total	$	(266	)	$	(1,289	)	$	(2,827	)	$	(2,773	)
Research and development expense
BioLargo Corporate	$	(279	)	$	(256	)	$	(905	)	$	(638	)
Clyra		(45	)		(58	)		(189	)		(213	)
BLEST		(97	)		(77	)		(302	)		(273	)
Water		(171	)		(111	)		(445	)		(428	)
Intersegement BioLargo corporate		150			170			450			426
Total	$	(442	)	$	(332	)	$	(1,391	)	$	(1,126	)

As of September 30, 2019	BioLargo		ONM		Clyra		BLEST		Water		Elimination			Total
Tangible assets	$	2,390	$	457	$	65	$	175	$	130	$	(6	)	$	3,211
Intangible assets		1,893		—		—		—		—		—			1,893

As of December 31, 2018	BioLargo		ONM		Clyra		BLEST		Water		Elimination			Total
Tangible assets	$	353	$	219	$	462	$	230	$	33	$	(6	)	$	1,291
Intangible assets		1,893		—		—		—		—		—			1,893