Note

. Share-Based Compensation

Restricted Stock Units

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-

-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

-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.

Issuance of Common Stock in exchange for payment of payables

Payment of Officer Salaries

During

2019,

we issued

1,080,951

shares of our common stock at a conversion price range of

$0.17

$0.32

per share in lieu of accrued and unpaid salary totaling

$210,000.

During

2018,

we issued

1,131,036

shares of our common stock at a conversion price range of

$0.24

$0.43

per share in lieu of accrued and unpaid salary totaling

$319,000.

Shares issued to Officers are unvested at the date of grant and subject to a lock-up agreement restricting vesting and sale until the earlier of (i) the consummation of a sale (in a single transaction or in a series of related transactions) of BioLargo by means of a sale of (a) a majority of the then outstanding common stock of BioLargo (whether by merger, consolidation, sale or transfer of common stock, reorganization, recapitalization or otherwise) or (b) all or substantially all of the assets of BioLargo; and (ii) the successful commercialization of BioLargo’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

-month period from the sale of products and/or the license of technology; and (iii) the Company’s breach of the employment agreement between the Company and Officer and resulting in Officer’s termination.

Payment of Consultant Fees

During

2019,

we issued

2,237,539

shares of our common stock at a range of

$0.17

–

$0.32

per share in lieu of

$500,000

of accrued interest and accrued and unpaid obligations to consultants.

During

2018,

we issued

2,083,085

shares of our common stock at a range of

$0.23

–

$0.42

per share in lieu of

$589,000

of accrued interest and accrued and unpaid obligations to consultants.

All of these offerings and sales were made in reliance on the exemption from registration contained in Section

(

) of the Securities Exchange Act and/or Regulation D promulgated thereunder as

not

involving a public offering of securities.

Payment of Interest

During

2019,

we issued

927,318

shares of our common stock at a range of

$0.10

–

$0.35

per share in lieu of

$200,000

of accrued interest and accrued and unpaid obligations to consultants.

During

2018,

we issued

2,042,196

shares of our common stock at a range of

$0.23

–

$0.42

per share in lieu of

$524,000

of accrued interest and accrued and unpaid obligations to consultants.

All of these offerings and sales were made in reliance on the exemption from registration contained in Section

(

) of the Securities Exchange Act and/or Regulation D promulgated thereunder as

not

involving a public offering of securities.

Stock Option Expense

During the years ended

December 31, 2018

and

2019,

we recorded an aggregate

$1,335,000

and

$1,522,000,

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

2018

Equity Incentive Plan, our now expired

2007

Equity Incentive Plan, and outside of these plans.

2018

Equity Incentive Plan

June 22, 2018,

our stockholders adopted the BioLargo

2018

Equity Incentive Plan (

“2018

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

may

be made under this plan for a period of

years. It is set to expire on its terms on

June

22,

2028.

Our Board of Director’s Compensation Committee administers this plan. As plan administrator, the Compensation Committee has sole discretion to set the price of the options. The plan authorizes the following types of awards: (i) incentive and non-qualified stock options, (ii) restricted stock awards, (iii) stock bonus awards, (iv) stock appreciation rights, (v) restricted stock units, and (vi) performance awards. The total number of shares reserved and available for awards pursuant to this Plan as of the date of adoption of this

2018

Plan by the Board is

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

2018

Plan increases automatically each

January 1

by the lesser of (a)

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

Activity for our stock options under the

2018

Plan from

June 22, 2018,

inception date through the year ended

December 31, 2018,

and the year ended

December 31, 2019,

is as follows:

	Options Outstanding			Exercise Price per share			Weighted Average Price per share		Aggregate intrinsic Value (1)
Inception, June 22, 2018		—
Granted		1,318,517		$0.22	–	0.43	$	0.30
Expired		—			—			—
Balance, December 31, 2018		1,318,517		$0.22	–	0.43	$	0.30
Granted		7,895,839		$0.16	–	0.40	$	0.25
Balance, December 31, 2019		9,214,356		$0.16	–	0.43	$	0.25
Non-vested		(4,097,996	)	$0.17	–	0.45	$	0.29
Vested, December 31, 2019		5,116,360		$0.16	–	0.45	$	0.39	$	97,000

(

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

$0.22

December 31, 2019.

The options to purchase

1,318,517

shares issued during the year ended

December 31, 2018

are comprised of options issued to employees, consultants, officers, and directors: (i) we issued options to purchase

630,289

shares of our common stock at an exercise price on the respective grant date ranging from

$0.22

–

$0.43

per share to employees and consultants in lieu of salary and amounts owed; and (ii) we issued options to purchase

688,228

shares of our common stock at an exercise price on the respective grant dates ranging from

$0.24

–

$0.43

per share to members of our board of directors for services performed, in lieu of cash.

The options to purchase

7,895,839

shares granted during the year ended

December 31, 2019

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

6,614,381

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

1,281,458

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

January 16, 2019,

we agreed to extend the engagement agreement dated

February 1, 2008 (

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

January 16, 2019 (

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

September 30, 2019 (

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

September 30, 2018.

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

December 31, 2018

extension.

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

300,000

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

January 16, 2019

$0.22,

to expire

January 16, 2029,

and to vest over the term of the engagement with

75,000

shares having vested as of

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

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

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

not

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

Vice President of Operations Contract Extension

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-

-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

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-

-More subsidiary,

none

of which have been met. As such,

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-

-More

July 23, 2019,

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

-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

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-

-More subsidiary,

none

of which have been met. As such,

additional fair value was recorded and we are unable to estimate at this time if these metrics will be met.

2007

Equity Incentive Plan

September

2007,

and as amended

April 29, 2011,

the BioLargo, Inc.

2007

Equity Incentive Plan (

“2007

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

may

be made under this plan for a period of

years, which expired on

September 7, 2017.

The Board’s Compensation Committee administers this plan. As plan administrator, the Compensation Committee has sole discretion to set the price of the options. As of

September 2017,

the Plan was closed to further stock option grants.

Activity for our stock options under the

2007

Plan for the years ended

December 31, 2018

and

2019

is as follows:

							Weighted
							Average		Aggregate
	Options			Exercise			Price per		intrinsic
	Outstanding			p rice per share			share		Value (1)
Balance, December 31, 2017		9,831,586		$0.22	–	1.89	$	0.44
Expired		(140,000	)	0.35	–	1.89		1.41
Balance, December 31, 2018		9,691,586		0.22	–	0.94		0.43
Expired		(922,135	)	0.45	–	0.55		0.49
Balance, December 31, 2019		8,769,451		$0.23	–	0.94	$	0.43	$	--

(

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

$0.22

December 31, 2019.

Non-Plan Options issued

During the year ended

December 31, 2019,

we issued options to purchase

1,226,586

shares of our common stock at exercise prices ranging between

$0.16

–

$0.32

per share to vendors for fees for services. The fair value of the options issued totaled

$260,000

and is recorded in our selling, general and administrative expense.

During the year ended

December 31, 2018,

we issued options to purchase

1,701,088

shares of our common stock at exercise prices ranging between

$0.23

–

$0.43

per share to members of our board of directors and vendors for fees for services. The fair value of the options issued totaled

$434,000,

of which

$414,000

is recorded in our selling, general and administrative expense. The remaining

$20,000

of fair value vested during

2019.

Activity of our non-plan stock options issued for the years ended

December 31, 2018

and

2019

is as follows:

	Non-plan Options outstanding			Exercise price per share			Weighted a verage p rice per share		Aggregate intrinsic value (1)
Balance, December 31, 2017		20,018,408		$0.25	–	1.00	$	0.51		--
Granted		1,701,088		0.23	–	0.43		0.26
Expired		(2,400,000	)		0.99			0.99
Balance, December 31, 2018		19,319,496		0.23	–	1.00		0.43		--
Granted		1,226,586		0.16	–	0.32		0.21
Expired		(941,975	)	0.45	–	0.55		0.52
Balance, December 31, 2019		19,604,107		$0.16	–	1.00	$	0.41
Unvested		(3,378,472	)		0.45			0.45
Vested and outstanding, December 31, 2019		16,225,635		$0.23	–	1.00	$	0.43	$	30,000

(

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

$0.22

December 31, 2019.