Note

Share-Based Compensation

Issuance of Common Stock in exchange for payment of payables

Payment of Officer Salaries

March 31, 2020,

we issued

648,755

shares of our common stock at

$0.17

per share in lieu of

$110,000

of accrued and unpaid salary to our officers.

March 29, 2019,

we issued

579,996

shares of our common stock at

$0.16

per share in lieu of

$93,000

of accrued and unpaid obligations to our officers.

Payment of Consultant Fees

March 31, 2020,

we issued

390,735

shares of our common stock at a range of

$0.17

per share in lieu of

$67,000

of accrued and unpaid obligations to consultants.

March 29, 2019,

we issued

649,545

shares of our common stock at

$0.16

per share in lieu of

$113,000

of accrued and unpaid obligations to consultants.

Payment of Accrued Interest

March 31, 2020,

we issued

19,278

shares of our common stock at

$0.17

per share in lieu of

$4,000

of accrued interest.

During the

three

months ended

March 31, 2019,

we issued

139,362

shares of our common stock at a range of

$0.17

–

$0.23

per share in lieu of

$25,000

of accrued interest.

Stock Option Expense

During the

three

months ended

March 31, 2019

and

2020,

we recorded an aggregate

$352,000

and

$320,000,

in selling general and administrative expense related to the issuance and vesting of stock options issued through our

2018

Equity Incentive Plan, our (now expired)

2007

Equity Incentive Plan, and outside of these plans (see Note

related to stock options issued by Clyra Medical).

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. 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 for the

three

months ended

March 31, 2019

and

March 31, 2020,

is as follows:

						Weighted
						Average		Aggregate
	Options		Exercise			Price per		intrinsic
	Outstanding		Price per share			share		Value (1)
Balance, December 31, 2018		1,318,517	$0.22	–	0.43	$	0.30
Granted		890,280	0.16	–	0.22		0.19
Expired		—		—			—
Balance, March 31, 2019		2,208,797	$0.16	–	0.43	$	0.25

Balance, December 31, 2019	9,214,356		$0.22	–	0.43	$	0.25
Granted	1,343,344		0.17	–	0.22		0.18
Expired	—			—			—
Balance, March 31, 2020	10,557,700		$0.16	–	0.43	$	0.25
Non-vested	(4,677,385	)	0.17	–	0.45		0.27
Vested, March 31, 2020	5,880,315		$0.16	–	0.45	$	0.22	$	4,000

(

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

$0.16

March 31, 2020.

The options granted to purchase

1,343,344

shares during the

three

months ended

March 31, 2020

were issued to an officer, board of directors, employees and consultants: (i) we issued options to purchase

300,000

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

$0.22

per share to our CFO as described below; and (ii) we issued options to purchase

397,058

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

$0.17

per share to members of our board of directors for services performed, in lieu of cash. The fair value of these options totaled

$65,000

and is recorded as selling, general and administrative expenses. Additionally, we issued options to purchase

454,080

shares of our common stock to employees as part of an employee retention plan at an exercise price on the respective date of

$0.17

per share. The fair value of employee retention plan options totaled

$76,000

and vest quarterly over

four

years as long as they are retained as employees. We also issued options to purchase

64,706

shares of our common stock to consultants in lieu of cash for unpaid obligations totaling

$11,000.

All stock option expense is recorded on our consolidated statement of operations as selling, general and administrative expense.

Chief Financial Officer Contract Extension

February 25, 2020,

we and our Chief Financial Officer Charles K. Dargan, II, formally agreed to extend the engagement agreement dated

February 1, 2008 (

the “Engagement Agreement”, which had been previously extended multiple times), pursuant to which Mr. Dargan has been and continues to serve as the Company’s Chief Financial Officer. The Engagement Extension Agreement dated as of

February 25, 2020 (

the “Engagement Extension Agreement”) provides for an additional term to begin retroactively on

October 1, 2019,

and to expire

January 31, 2021 (

the “Extended Term”).

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

427,500

shares of our common stock. The Option vests over the period of the Extended Term, with

177,500

shares having vested as of

March 31, 2020,

and the remaining

250,000

shares to vest monthly through

January 31, 2021,

so long as the agreement is in full force and effect. The Option is exercisable at

$0.21

per share, the closing price of our common stock on

February 25, 2020,

expires

ten

years from the grant date, and was issued pursuant to the

2018

Equity Incentive Plan.

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

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

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

not

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

2007

Equity Incentive Plan

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

three

months ended

March 31, 2019

and

2020

is as follows:

							Weighted
							Average		Aggregate
	Options			Exercise			Price per		intrinsic
	Outstanding			price per share			share		Value (1)
Balance, December 31, 2018		9,831,586		$0.23	–	1.89	$	0.44
Expired		(50,000	)		1.89			0.91
Balance, March 31, 2019		9,781,586		$0.23	–	1.65	$	0.43	$	—

Balance, December 31, 2019	9,691,586		$0.23	–	0.94	$	0.42
Expired	(870,000	)		0.57			0.57
Balance, March 31, 2020	8,821,586		$0.23	–	1.65	$	0.41	$	—

(

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

$0.16

March 31, 2020.

Non-Plan Options issued

During the

three

months ended

March 31, 2020,

we issued options to purchase

292,437

shares of our common stock at exercise prices ranging between

$0.17

–

$0.21

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

$50,000,

is recorded in our selling, general and administrative expense.

During the

three

months ended

March 31, 2019,

we issued options to purchase

731,250

shares of our common stock at exercise prices ranging between

$0.16

–

$0.25

per share to members of our board of directors and vendors for fees for services totaling

$139,000.

Activity of our non-plan stock options issued for the

three

months ended

March 31, 2019

and

2020

is as follows:

						Weighted
	Non-plan					a verage		Aggregate
	Options		Exercise			p rice per		intrinsic
As of March 31, 2019 :	o utstanding		p rice per share			share		value (1)
Balance, December 31, 2018		19,319,496	$0.25	–	1.00	$	0.51
Granted		731,250	0.16	–	0.25		0.19
Balance, March 31, 2019		20,050,746	$0.25	–	1.00	$	0.45	$	—

As of March 31, 2020 :
Balance, December 31, 2019	19,888,718		$0.23	–	1.00	$	0.41
Granted	292,437		0.17	–	0.21		0.18
Balance, March 31, 2020	20,181,155		$0.17	–	1.00	$	0.41
Non-vested	(3,191,096	)	0.17	–	0.45		0.45
Vested, March 31, 2020	16,989,249		$0.23	–	1.00	$	0.40	$	5,000

(

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

$0.16

March 31, 2020.