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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 11/14/22 Biolargo, Inc. 10-Q 9/30/22 62:7.5M RDG Filings/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 1.63M
2: EX-3.4 Articles of Incorporation/Organization or Bylaws HTML 21K
3: EX-31.1 Certification -- §302 - SOA'02 HTML 22K
4: EX-31.2 Certification -- §302 - SOA'02 HTML 22K
5: EX-32 Certification -- §906 - SOA'02 HTML 21K
11: R1 Document And Entity Information HTML 69K
12: R2 Consolidated Balance Sheets (Current Period HTML 152K
Unaudited)
13: R3 Consolidated Balance Sheets (Current Period HTML 33K
Unaudited) (Parentheticals)
14: R4 Consolidated Statements of Operations and HTML 116K
Comprehensive Loss (Unaudited)
15: R5 Consolidated Statement of Stockholders' Equity HTML 138K
(Deficit) (Unaudited)
16: R6 Consolidated Statements of Cash Flows (Unaudited) HTML 119K
17: R7 Note 1 - Business and Organization HTML 29K
18: R8 Note 2 - Summary of Significant Accounting HTML 115K
Policies
19: R9 Note 3 - Sale of Stock for Cash HTML 23K
20: R10 Note 4 - Debt Obligations HTML 47K
21: R11 Note 5 - Share-based Compensation HTML 115K
22: R12 Note 6 - Warrants HTML 51K
23: R13 Note 7 - Accounts Payable and Accrued Expenses HTML 27K
24: R14 Note 8 - Noncontrolling Interest - Clyra Medical HTML 43K
25: R15 Note 9 - Business Segment Information HTML 116K
26: R16 Note 10 - Commitments and Contingencies HTML 25K
27: R17 Note 11 - Subsequent Events HTML 23K
28: R18 Significant Accounting Policies (Policies) HTML 164K
29: R19 Note 2 - Summary of Significant Accounting HTML 83K
Policies (Tables)
30: R20 Note 4 - Debt Obligations (Tables) HTML 39K
31: R21 Note 5 - Share-based Compensation (Tables) HTML 96K
32: R22 Note 6 - Warrants (Tables) HTML 47K
33: R23 Note 7 - Accounts Payable and Accrued Expenses HTML 26K
(Tables)
34: R24 Note 8 - Noncontrolling Interest - Clyra Medical HTML 44K
(Tables)
35: R25 Note 9 - Business Segment Information (Tables) HTML 106K
36: R26 Note 1 - Business and Organization (Details HTML 56K
Textual)
37: R27 Note 2 - Summary of Significant Accounting HTML 66K
Policies (Details Textual)
38: R28 Note 2 - Summary of Significant Accounting HTML 23K
Policies - Summary of Cash Balances (Details)
39: R29 Note 2 - Summary of Significant Accounting HTML 39K
Policies - Credit Concentration (Details)
40: R30 Note 2 - Summary of Significant Accounting HTML 24K
Policies - Inventory (Details)
41: R31 Note 2 - Summary of Significant Accounting HTML 25K
Policies - Other Non-current Assets (Details)
42: R32 Note 2 - Summary of Significant Accounting HTML 39K
Policies - Stock Options, Valuation Assumptions
(Details)
43: R33 Note 3 - Sale of Stock for Cash (Details Textual) HTML 31K
44: R34 Note 4 - Debt Obligations (Details Textual) HTML 35K
45: R35 Note 4 - Debt Obligations - Schedule of Debt HTML 38K
(Details)
46: R36 Note 5 - Share-based Compensation (Details HTML 122K
Textual)
47: R37 Note 5 - Share-based Compensation - Stock Options HTML 81K
(Details)
48: R38 Note 6 - Warrants (Details Textual) HTML 39K
49: R39 Note 6 - Warrants - Warrants Outstanding (Details) HTML 43K
50: R40 Note 7 - Accounts Payable and Accrued Expenses - HTML 31K
Summary of Accounts Payable and Accrued Expenses
(Details)
51: R41 Note 8 - Noncontrolling Interest - Clyra Medical HTML 129K
(Details Textual)
52: R42 Note 8 - Noncontrolling Interest - Clyra Medical - HTML 27K
Common Shares Outstanding (Details)
53: R43 Note 8 - Noncontrolling Interest - Clyra Medical - HTML 27K
Summary of Accounts Payable and Accrued Expenses
(Details)
54: R44 Note 9 - Business Segment Information (Details HTML 19K
Textual)
55: R45 Note 9 - Business Segment Information - Segment HTML 79K
Information (Details)
56: R46 Note 10 - Commitments and Contingencies (Details HTML 36K
Textual)
57: R47 Note 11 - Subsequent Events (Details Textual) HTML 42K
60: XML IDEA XML File -- Filing Summary XML 113K
58: XML XBRL Instance -- blgo20220930_10q_htm XML 2.24M
59: EXCEL IDEA Workbook of Financial Reports XLSX 117K
7: EX-101.CAL XBRL Calculations -- blgo-20220930_cal XML 117K
8: EX-101.DEF XBRL Definitions -- blgo-20220930_def XML 1.15M
9: EX-101.LAB XBRL Labels -- blgo-20220930_lab XML 921K
10: EX-101.PRE XBRL Presentations -- blgo-20220930_pre XML 1.16M
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61: JSON XBRL Instance as JSON Data -- MetaLinks 341± 540K
62: ZIP XBRL Zipped Folder -- 0001437749-22-027358-xbrl Zip 262K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM i 10-Q
| i ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended i September 30, 2022.
or
| i ☐ | 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 i 000-19709
BIOLARGO, INC.
(Exact name of registrant as specified in its charter)
| i Delaware | i 65-0159115 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
i 14921 Chestnut St.
i Westminster, i CA i 92683
(Address of principal executive offices)
( i 888) i 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 |
| i Common stock | i 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. i 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). i 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 ☐ | Accelerated filer ☐ |
| i Non-accelerated filer ☒ | Smaller reporting company i ☒ |
| Emerging growth company i ☐ |
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 i ☐ No ☒
The number of shares of the Registrant’s Common Stock outstanding as of November 10, 2022 was i 275,417,050 shares.
FORM 10-Q
INDEX
| Item 1 |
4 | |
| Item 2 |
Management's Discussion and Analysis and Financial Condition and Results of Operations |
25 |
| Item 4 |
35 |
| Item 2 |
37 | |
| Item 5 |
38 | |
| Item 6 |
39 | |
| 40 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
BIOLARGO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021
(in thousands, except for per share data)
| 2022 (Unaudited) | 2021 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | i 1,268 | $ | i 962 | ||||
| Accounts receivable, net of allowance | i 884 | i 513 | ||||||
| Inventories, net of allowance | i 260 | i 241 | ||||||
| Prepaid expenses and other current assets | i 120 | i 85 | ||||||
| Total current assets | i 2,532 | i 1,801 | ||||||
| Non-current assets | ||||||||
| Equipment and leasehold improvements, net of depreciation | i 196 | i 61 | ||||||
| Other non-current assets | i 123 | i 69 | ||||||
| Investment in South Korean joint venture | i 33 | i 48 | ||||||
| Right of use operating lease, net of amortization | i 896 | i 453 | ||||||
| Clyra Medical prepaid marketing (Note 8) | i 591 | i 591 | ||||||
| Total assets | $ | i 4,371 | $ | i 3,023 | ||||
| Liabilities and stockholders’ equity (deficit) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | i 520 | $ | i 559 | ||||
| Debt obligations, net of discount and amortization (Note 4) | i 86 | i 314 | ||||||
| Contract liability | i 6 | i 89 | ||||||
| Customer deposits | i 109 | i 79 | ||||||
| Lease liability | i 97 | i 103 | ||||||
| Clyra Medical accounts payable and accrued expenses (Note 8) | i 211 | i 230 | ||||||
| Total current liabilities | i 1,029 | i 1,374 | ||||||
| Long-term liabilities: | ||||||||
| Debt obligations, net of discount and amortization (Note 4) | i 247 | i 180 | ||||||
| Clyra Medical debt obligations (Note 8) | i 263 | i 187 | ||||||
| Lease liability | i 799 | i 349 | ||||||
| Total long-term liabilities | i 1,309 | i 716 | ||||||
| Total liabilities | i 2,338 | i 2,090 | ||||||
| COMMITMENTS AND CONTINGENCIES (Note 10) | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||
| Preferred Series A, $0.00067 Par Value, 50,000,000 Shares Authorized, -0- Shares Issued and Outstanding, at September 30, 2022 and December 31, 2021 | i — | i — | ||||||
| Common stock, $0.00067 Par Value, 550,000,000 Shares Authorized, 274,622,640 and 255,893,726 Shares Issued, at September 30, 2022 and December 31, 2021 | i 184 | i 171 | ||||||
| Additional paid-in capital | i 147,470 | i 143,718 | ||||||
| Accumulated deficit | ( i 142,505 | ) | ( i 139,121 |
) | ||||
| Accumulated other comprehensive loss | ( i 185 | ) | ( i 115 |
) | ||||
| Total BioLargo Inc. and subsidiaries stockholders’ equity | i 4,964 | i 4,653 | ||||||
| Non-controlling interest (Note 8) | ( i 2,931 | ) | ( i 3,720 |
) | ||||
| Total stockholders’ equity | i 2,033 | i 933 | ||||||
| Total liabilities and stockholders’ equity | $ | i 4,371 | $ | i 3,023 | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
BIOLARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(in thousands, except for share and per share data)
(unaudited)
| THREE MONTHS | NINE MONTHS | |||||||||||||||
| 30, 2022 | 30, 2021 | 30, 2022 | 30, 2021 | |||||||||||||
| Revenues | ||||||||||||||||
| Product revenue | $ | i 1,216 | $ | i 431 | $ | i 2,532 | $ | i 1,190 | ||||||||
| Service revenue | i 284 | i 281 | i 1,254 | i 553 | ||||||||||||
| Total revenue | i 1,500 | i 712 | i 3,786 | i 1,743 | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Cost of goods sold | ( i 515 | ) | ( i 204 | ) | ( i 1,174 | ) | ( i 600 | ) | ||||||||
| Cost of service | ( i 233 | ) | ( i 158 | ) | ( i 720 | ) | ( i 363 | ) | ||||||||
| Total cost of revenue | ( i 748 | ) | ( i 362 | ) | ( i 1,894 | ) | ( i 963 | ) | ||||||||
| Gross profit | i 752 | i 350 | i 1,892 | i 780 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative expenses | i 1,424 | i 1,461 | i 4,847 | i 4,766 | ||||||||||||
| Research and development | i 271 | i 344 | i 1,018 | i 1,027 | ||||||||||||
| Total operating expenses | i 1,695 | i 1,805 | i 5,865 | i 5,793 | ||||||||||||
| Operating loss | ( i 943 | ) | ( i 1,455 | ) | ( i 3,973 | ) | ( i 5,013 | ) | ||||||||
| Other (expense) income: | ||||||||||||||||
| Interest expense | ( i 14 | ) | ( i 26 | ) | ( i 42 | ) | ( i 208 | ) | ||||||||
| PPP loan forgiveness | i — | i — | i 174 | i 43 | ||||||||||||
| Tax credit | i 66 | i 21 | i 66 | i 50 | ||||||||||||
| Grant income | i 44 | i 25 | i 51 | i 25 | ||||||||||||
| Total other (expense) income: | i 96 | i 18 | i 249 | ( i 90 | ) | |||||||||||
| Net loss | ( i 847 | ) | ( i 1,435 | ) | ( i 3,724 | ) | ( i 5,103 | ) | ||||||||
| Net loss attributable to noncontrolling interest | ( i 343 | ) | ( i 134 | ) | ( i 340 | ) | ( i 549 | ) | ||||||||
| Net loss attributable to common shareholders | $ | ( i 504 | ) | $ | ( i 1,301 | ) | $ | ( i 3,384 | ) | $ | ( i 4,554 | ) | ||||
| Net loss per share attributable to common shareholders: | ||||||||||||||||
| Loss per share attributable to shareholders – basic and diluted | $ | ( i 0.00 | ) | $ | ( i 0.01 | ) | $ | ( i 0.01 | ) | $ | ( i 0.02 | ) | ||||
| Weighted average number of common shares outstanding: | i 270,665,820 | i 252,912,561 | i 265,812,188 | i 243,529,117 | ||||||||||||
| Comprehensive loss: | ||||||||||||||||
| Net loss | $ | ( i 847 | ) | $ | ( i 1,435 | ) | $ | ( i 3,724 | ) | $ | ( i 5,103 | ) | ||||
| Foreign currency translation | ( i 59 | ) | ( i 7 | ) | ( i 70 | ) | ( i 9 | ) | ||||||||
| Comprehensive loss | ( i 850 | ) | ( i 1,442 | ) | ( i 3,794 | ) | (5,112 | ) | ||||||||
| Comprehensive loss attributable to noncontrolling interest | ( i 343 | ) | ( i 134 | ) | ( i 340 | ) | ( i 549 | ) | ||||||||
| Comprehensive loss attributable to common stockholders | $ | ( i 507 | ) | $ | ( i 1,308 | ) | $ | ( i 3,454 | ) | $ | ( i 4,563 | ) | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
BIOLARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(in thousands, except for share data)
(unaudited)
| Common stock |
Additional paid-in |
Accumulated |
Accumulated other comprehensive |
Non- controlling |
Total stockholders’ |
|||||||||||||||||||||||
| Shares |
Amount |
capital | deficit |
Loss |
interest |
equity (deficit) | ||||||||||||||||||||||
| Balance, December 31, 2021 |
i 255,893,726 | $ | i 171 | $ | i 143,718 | $ | ( i 139,121 | ) |
$ | ( i 115 | ) |
$ | ( i 3,720 | ) |
$ | i 933 | ||||||||||||
| Sale of common stock for cash |
i 6,703,789 | i 4 | i 1,198 | i — | i — | i — | i 1,202 | |||||||||||||||||||||
| Issuance of common stock for service |
i 86,752 | i — | i 17 | i — | i — | i — | i 17 | |||||||||||||||||||||
| Stock option compensation expense |
— | i — | i 660 | i — | i — | i — | i 660 | |||||||||||||||||||||
| Clyra Medical stock option expense |
— | i — | i 141 | i — | i — | i — | i 141 | |||||||||||||||||||||
| Noncontrolling interest allocation |
— | i — | ( i 528 | ) |
i — | i — | i 528 | i — | ||||||||||||||||||||
| Net loss |
— | i — | i — | ( i 1,652 | ) |
i — | i 108 | ( i 1,544 | ) |
|||||||||||||||||||
| Foreign currency translation |
— | i — | i — | i — | ( i 8 | ) |
i — | ( i 8 | ) |
|||||||||||||||||||
| Balance, March 31, 2022 |
i 262,684,267 | $ | i 175 | $ | i 145,206 | $ | ( i 140,773 | ) |
$ | ( i 123 | ) |
$ | ( i 3,084 | ) |
$ | i 1,401 | ||||||||||||
| Sale of common stock for cash |
i 5,011,570 | i 4 | i 944 | i — | i — | i — | i 948 | |||||||||||||||||||||
| Issuance of common stock for service |
i 340,891 | i — | i 59 | i — | i — | i — | i 59 | |||||||||||||||||||||
| Stock option compensation expense |
— | i — | i 234 | i — | i — | i — | i 234 | |||||||||||||||||||||
| Clyra Medical stock option expense |
— | i — | i 82 | i — | i — | i — | i 82 | |||||||||||||||||||||
| Noncontrolling interest allocation |
— | i — | ( i 103 | ) |
i — | i — | i 103 | i — | ||||||||||||||||||||
| Net loss |
— | i — | i — | ( i 1,228 | ) |
i — | ( i 105 | ) |
( i 1,333 | ) |
||||||||||||||||||
| Foreign currency translation |
— | i — | i — | i — | ( i 3 | ) | i — | ( i 3 | ) |
|||||||||||||||||||
| Balance, June 30, 2022 |
i 268,036,728 | $ | i 179 | $ | i 146,422 | $ | ( i 142,001 | ) |
$ | ( i 126 | ) |
$ | ( i 3,086 | ) |
$ | i 1,388 | ||||||||||||
| Sale of common stock for cash |
i 6,207,084 | i 4 | i 1,113 | i — | i — | i — | i 1,117 | |||||||||||||||||||||
| Issuance of common stock for service |
i 378,828 | i 1 | i 95 | i — | i — | i — | i 96 | |||||||||||||||||||||
| Stock option compensation expense |
— | i — | i 253 | i — | i — | i — | i 253 | |||||||||||||||||||||
| Clyra Medical stock option expense |
— | i — | i 85 | i — | i — | i — | i 85 | |||||||||||||||||||||
| Noncontrolling interest allocation |
— | i — | ( i 498 | ) |
i — | i — | i 498 | i — | ||||||||||||||||||||
| Net loss |
— | i — | i — | ( i 504 | ) |
i — | ( i 343 | ) |
( i 847 | ) |
||||||||||||||||||
| Foreign currency translation |
— | i — | i — | i — | ( i 59 | ) | i — | ( i 59 | ) |
|||||||||||||||||||
| Balance, September 30, 2022 |
i 274,622,640 | $ | i 184 | $ | i 147,470 | $ | ( i 142,505 | ) |
$ | ( i 185 | ) |
$ | ( i 2,931 | ) |
$ | i 2,033 | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| Common stock |
Additional paid-in |
Accumulated |
Accumulated other comprehensive |
Non- controlling |
Total stockholders’ |
|||||||||||||||||||||||
| Shares |
Amount | capital | deficit |
Loss |
interest |
equity (deficit) | ||||||||||||||||||||||
| Balance, December 31, 2020 |
i 225,885,682 | $ | i 151 | $ | i 135,849 | $ | ( i 132,041 | ) |
$ | ( i 101 | ) |
$ | ( i 4,093 | ) |
$ | ( i 235 | ) |
|||||||||||
| Sale of common stock for cash |
i 13,330,619 | i 9 | i 2,097 | i — | i — | i — | i 2,106 | |||||||||||||||||||||
| Issuance of common stock for service |
i 747,487 | i 1 | i 110 | i — | i — | i — | i 111 | |||||||||||||||||||||
| Stock option compensation expense |
— | i — | i 424 | i — | i — | i — | i 424 | |||||||||||||||||||||
| Warrants and conversion feature issued as discount on convertible note payable |
— | i — | i 35 | i — | i — | i — | i 35 | |||||||||||||||||||||
| Clyra Medical stock option expense |
— | i — | i 161 | i — | i — | i — | i 161 | |||||||||||||||||||||
| Noncontrolling interest allocation |
— | i — | ( i 313 | ) |
i — | i — | i 313 | i — | ||||||||||||||||||||
| Clyra Medical securities offering |
— | i — | i — | i — | i — | i 50 | i 50 | |||||||||||||||||||||
| Net loss |
— | i — | i — | ( i 1,631 | ) |
i — | ( i 247 | ) |
( i 1,878 | ) |
||||||||||||||||||
| Foreign currency translation |
— | i — | i — | i — | ( i 2 | ) |
i — | ( i 2 | ) |
|||||||||||||||||||
| Balance, March 31, 2021 |
i 239,963,788 | $ | i 161 | $ | i 138,363 | $ | ( i 133,672 | ) |
$ | ( i 103 | ) |
$ | ( i 3,977 | ) |
$ | i 772 | ||||||||||||
| Conversion of notes |
i 1,966,439 | i 1 | i 327 | i — | i — | i — | i 328 | |||||||||||||||||||||
| Sale of common stock for cash |
i 8,627,237 | i 6 | i 1,408 | i — | i — | i — | i 1,414 | |||||||||||||||||||||
| Issuance of common stock for service |
i 357,132 | i — | i 60 | i — | i — | i — | i 60 | |||||||||||||||||||||
| Issuance of common stock for interest |
i 81,777 | i — | i 16 | i — | i — | i — | i 16 | |||||||||||||||||||||
| Stock option compensation expense |
— | i — | i 330 | i — | i — | i — | i 330 | |||||||||||||||||||||
| Clyra Medical stock option expense |
— | i — | i 102 | i — | i — | i — | i 102 | |||||||||||||||||||||
| Noncontrolling interest allocation |
— | i — | ( i 314 | ) |
i — | i — | i 314 | i — | ||||||||||||||||||||
| Net loss |
— | i — | i — | ( i 1,622 | ) |
i — | ( i 168 | ) |
( i 1,790 | ) |
||||||||||||||||||
| Foreign currency translation |
— | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||
| Balance, June 30, 2021 |
i 250,996,373 | $ | i 168 | $ | i 140,292 | $ | ( i 135,294 | ) |
$ | ( i 103 | ) |
$ | ( i 3,831 | ) |
$ | i 1,232 | ||||||||||||
| Conversion of notes |
i 3,306,708 | i 2 | i 598 | i — | i — | i — | i 600 | |||||||||||||||||||||
| Sale of common stock for cash |
i 648,805 | i 1 | i 122 | i — | i — | i — | i 123 | |||||||||||||||||||||
| Issuance of common stock for interest |
i 416,667 | i — | i 60 | i — | i — | i — | i 60 | |||||||||||||||||||||
| Stock option compensation expense |
— | i — | i 251 | i — | i — | i — | i 251 | |||||||||||||||||||||
| Clyra Medical stock option expense |
— | i — | i 179 | i — | i — | i — | i 179 | |||||||||||||||||||||
| Noncontrolling interest allocation |
— | i — | ( i 159 | ) |
i — | i — | i 159 | i — | ||||||||||||||||||||
| Net loss |
— | i — | i — | ( i 1,301 | ) |
i — | ( i 134 | ) |
( i 1,435 | ) |
||||||||||||||||||
| Foreign currency translation |
— | i — | i — | i — | ( i 7 | ) | i — | ( i 7 | ) | |||||||||||||||||||
| Balance, September 30, 2021 |
i 255,368,553 | $ | i 171 | $ | i 141,343 | $ | ( i 136,595 | ) |
$ | ( i 110 | ) |
$ | ( i 3,806 | ) |
$ | i 1,003 | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
BIOLARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(in thousands, except for per share data)
(unaudited)
| 2022 |
2021 |
|||||||
| Cash flows from operating activities |
||||||||
| Net loss |
$ | ( i 3,724 | ) |
$ | ( i 5,103 | ) |
||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Stock option compensation expense |
i 1,455 | i 1,447 | ||||||
| Common stock issued in lieu of salary to officers and fees for services from vendors |
i 172 | i 294 | ||||||
| Common stock issued for interest |
i — | i 16 | ||||||
| Interest expense related to amortization of the discount on convertible notes payable and line of credit |
i 13 | i 114 | ||||||
| PPP loan forgiveness |
( i 174 | ) |
( i 43 | ) |
||||
| Loss on investment in South Korean joint venture |
i 15 | i 23 | ||||||
| Depreciation expense |
i 28 | i 17 | ||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
( i 371 | ) |
i 20 | |||||
| Prepaid expenses and other current assets |
( i 85 | ) |
( i 71 | ) |
||||
| Inventories |
( i 19 | ) |
i 27 | |||||
| Accounts payable and accrued expenses |
( i 40 | ) |
( i 85 | ) |
||||
| Contract liability |
( i 83 | ) |
i 114 | |||||
| Customer deposits |
i 30 | i 79 | ||||||
| Clyra Medical accounts payable and accrued expenses |
( i 20 | ) |
i 189 | |||||
| Net cash used in operating activities |
( i 2,803 | ) |
( i 2,962 | ) |
||||
| Cash flows from investing activities |
||||||||
| Purchase of equipment |
( i 164 | ) |
( i 21 | ) |
||||
| Net cash used in investing activities |
( i 164 | ) |
( i 21 | ) |
||||
| Cash flows from financing activities |
||||||||
| Proceeds from sales of common stock |
i 3,267 | i 4,120 | ||||||
| Proceeds from the sale of stock in Clyra Medical |
i — | i 50 | ||||||
| Proceeds from the issuance of Clyra Medical convertible notes |
i 100 | i — | ||||||
| Exercise of warrants |
i — | i 60 | ||||||
| Payment of debt obligations |
i — | ( i 828 | ) |
|||||
| Payment of Clyra Medical debt obligations |
( i 24 | ) |
( i 28 | ) |
||||
| Net cash provided by financing activities |
i 3,343 | i 3,374 | ||||||
| Net effect of foreign currency translation |
( i 70 | ) |
( i 9 | ) |
||||
| Net change in cash |
i 306 | i 382 | ||||||
| Cash at beginning of period |
i 962 | i 716 | ||||||
| Cash at end of period |
$ | i 1,268 | $ | i 1,098 | ||||
| Supplemental disclosures of cash flow information |
||||||||
| Cash paid for: |
||||||||
| Interest |
$ | i 11 | $ | i 56 | ||||
| Non-cash investing and financing activities |
||||||||
| Fair value of warrants issued with convertible notes |
$ | i — | $ | i 35 | ||||
| Conversion of notes payable to common stock |
$ | i — | $ | i 328 | ||||
| Right of use |
$ | i 433 | $ | i — | ||||
| Allocation of noncontrolling interest |
$ | i 1,129 | $ | i 786 | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
Note 1. Business and Organization
Description of Business
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 a cleaner earth. The company also owns a majority interest in a medical products subsidiary that has licensed BioLargo’s technologies. 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, 2022, we had a net loss of $ i 3,724,000, used $ i 2,803,000 cash in operations, and at September 30, 2022, we had working capital of $ i 1,503,000, and current assets of $ i 2,532,000. During the three months ended September 30, 2022, we generated revenues of $ i 1,500,000. Only one of our subsidiaries – ONM Environmental – generated operating income. (See Note 9.)
We do not believe gross profits in the year ended December 31, 2022, or in the immediately subsequent quarterly periods, will be sufficient to fund our current level of operations, and therefore believe we will have to obtain further investment capital to continue to fund operations, such as through our purchase agreement with Lincoln Park Capital, which expires in March 2023, and private sales of our securities. (See Note 3.) We have been, and anticipate that we will continue to be, limited in terms of our capital resources.
If we are unable to rely on our current arrangement with Lincoln Park to continue to fund our working capital requirements, we will have to rely on other forms of financing, and there is no assurance that we will be able to do so, or if we do so, it will be on favorable terms.
The foregoing factors raise substantial doubt about our ability to continue as a going concern, unless we are able to continue to raise funds through stock sales to Lincoln Park or other private financings, and in the long term, our ability to 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 four wholly-owned subsidiaries: BioLargo Life Technologies, Inc., organized under the laws of the State of California in 2006; ONM Environmental, 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; and BioLargo Development Corp., organized under the laws of the State of California in 2016. Additionally, we own i 89% of BioLargo Engineering Science and Technologies, LLC (“BLEST”), organized under the laws of the State of Tennessee in 2017. We also own i 58% of Clyra Medical Technologies, Inc. (“Clyra” or “Clyra Medical”), organized under the laws of the State of California in 2012, and consolidate their financial statements (see Note 2, subheading “Principles of Consolidation,” and Note 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, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022, 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, 2021, filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2022.
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.
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Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and partially-owned subsidiaries BLEST and Clyra Medical. All intercompany accounts and transactions have been eliminated.
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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.
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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 September 30, 2022 and December 31, 2021, our cash balances were made up of the following (in thousands):
i
| 2022 | 2021 | |||||||
| BioLargo, Inc. and subsidiaries | $ | i 1,251 | $ | i 941 | ||||
| Clyra Medical Technologies, Inc. | i 17 | i 21 | ||||||
| Total | $ | i 1,268 | $ | i 962 | ||||
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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 September 30, 2022 was $12,000 and at December 31, 2021, was $12,000.
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Credit Concentration
We had a limited number of customers that account for significant portions of our revenue. During the nine months ended September 30, 2022 and 2021, we had the following customers that accounted for more than 10% of consolidated revenues, as follows:
i
| September 30, | 2021 | |||||||
| Customer A | i 44 | % | <10 | % | ||||
| Customer B | i 14 | % | <10 | % | ||||
| Customer C | <10 | % | i 12 | % | ||||
| Customer D | <10 | % | i 14 | % | ||||
| Customer E | <10 | % | i 11 | % | ||||
We had a limited number of customers that accounted for more than 10% of consolidated accounts receivable at September 30, 2022, and at December 31, 2021, as follows:
| 2022 | 2021 | |||||||
| Customer A | i 13 | % | <10 | % | ||||
| Customer B | i 15 | % | <10 | % | ||||
| Customer F | i 11 | % | <10 | % | ||||
| Customer G | <10 | % | i 32 | % | ||||
| Customer H | <10 | % | i 12 | % | ||||
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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 September 30, 2022, and December 31, 2021, was $3,000. Inventories consisted of (in thousands):
i
| 2022 | 2021 | |||||||
| Raw material | $ | i 123 | $ | i 108 | ||||
| Finished goods | i 137 | i 103 | ||||||
| Total | $ | i 260 | $ | i 241 | ||||
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Other Non-Current Assets
i
| 2022 | 2021 | |||||||
| Patents | $ | i 34 | $ | i 34 | ||||
| Security deposits | i 35 | i 35 | ||||||
| Tax credit receivable | i 54 | $ | i - | |||||
| Total | $ | i 123 | $ | i 69 | ||||
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Equity Method of Accounting
On March 20, 2020, we invested $ i 100,000 into a South Korean entity (Odin Co. Ltd., “Odin”) pursuant to a Joint Venture agreement we had entered into with BKT Co. Ltd. and its U.S. subsidiary, Tomorrow Water. We received a i 40% non-dilutive equity interest, and BKT and Tomorrow Water each received i 30% equity interests for an aggregate $ i 150,000 investment.
We account for our investment in the joint venture under the equity method of accounting. We have determined that while we have significant influence over the joint venture through our technology license and our position on the Board of Directors, we do not control the joint venture or are otherwise involved in managing the entity and we own less than a majority of the equity. Therefore, we record the asset on our consolidated balance sheet and record an increase or decrease the recorded balance by our percentage ownership of the profits or losses in the joint venture. The joint venture incurred a loss during the nine months ended September 30, 2022 and 2021, our i 40% ownership share reduced our investment interest by $ i 15,000 and $23,000, respectively.
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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. For the nine months ended September 30, 2022 and 2021, management determined that there was i no impairment of its long-lived assets, including its patents.
Nevertheless, during the three months ended December 31, 2021, management determined that there was an impairment expense related to the sale back to Scion Solutions, LLC (“Scion’) of certain intellectual property, recorded on our balance sheet as “In-Process Research and Development” and an impairment of Clyra’s prepaid marketing. Total impairment expense for 2021 was $342,000.
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Earnings (Loss) Per Share
We report basic and diluted earnings (loss) per share (“EPS”) for common and common share equivalents. Basic EPS is computed by dividing reported earnings by the weighted average shares outstanding. Diluted EPS is computed by adding to the weighted average shares the dilutive effect if stock options and warrants were exercised into common stock. For the three and nine months ended September 30, 2022 and 2021, 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.
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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.
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Share-Based Compensation Expense
We recognize compensation expense for stock option awards on a straight-line basis over the applicable service period of the award, which is the vesting period. Fair value is determined on the grant date. 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 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, 2022 and 2021:
i
| 2022 | 2021 | |||||||||||||||||
| Non Plan | 2018 Plan | Non Plan | 2018 Plan | |||||||||||||||
| Risk free interest rate | i 2.32 | – | i 3.83% |
| i 2.32 | – | i 3.83% | i 1.73 |
% | i 0.93 | – | i 1.73% | ||||||
| Expected volatility | i 115 | – | i 117% |
| i 115 | – | i 117% | i 124 |
% | i 121 | – | i 124% | ||||||
| Expected dividend yield | — | — | — | — | ||||||||||||||
| Forfeiture rate | — | — | — | — | ||||||||||||||
| Life in years | i 10 | i 10 | i 10 | i 10 | ||||||||||||||
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.
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Warrants
Warrants issued with our convertible promissory notes, note payables, line 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.
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.
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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.
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Revenue Recognition
We account for revenue in accordance with ASC 606, “Revenue from Contacts with Customers”. The guidance focuses on the core principle for revenue recognition, which 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, the guidance provides that an entity should apply the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
We generate revenue through our subsidiaries. For the sale of goods, the subsidiary identifies its contract with the customer through a written purchase order, 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. Revenue is recognized at a point in time when the order for its goods are shipped if its agreement with the customer is FOB manufacturer, and when goods are delivered to its customer if its agreement with the customer is FOB destination. Revenue is recognized with a reduction for sales discounts, as appropriate and negotiated in the customer’s purchase order. In association with certain product purchases, ONM Environmental installs misting systems for which it bills on a time and materials basis. It identifies its contract with the customer through a written purchase order in which the details of the time to be billed and materials purchased and an estimated completion date. The performance obligation is the completion of the installation, and at that time revenue is recognized.
For services, such as through our engineering group, the subsidiary identifies services to be performed in a written contract, which specifies the performance obligations and the rate at which the services will be billed. Each service is separately negotiated and priced. Revenue is recognized as services are performed and completed. Service contracts typically call for invoicing for time and materials incurred for that contract, although some provide for milestone or fixed cost payments, where an agreed-to amount is invoiced per month for the life of the contract. In these instances, completed work, billed hourly, is recognized as revenue. If the billing amount is greater or lesser than the completed work, a contract receivable or contract liability is created. As of September 30, 2022, we had $ i 6,000 of contract liability. As of December 31, 2021, we had contract liability totaling $ i 89,000. To date, there have been i no discounts or other financing terms for the contracts.
Royalties or license fees from our intellectual property are based on the licensee’s sales of products incorporating or using our licensed intellectual property.
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Government Grants
We have been awarded multiple research grants from the Canadian National Research Institute – Industrial Research Assistance Program (NRC-IRAP) and the National Science and Engineering Research Council of Canada (NSERC). The grants received are considered other income and are included in our consolidated statements of operations. We received our first grant in 2015 and have been awarded over i 80 grants totaling over $ i 3.7 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.
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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. Management believes there are i no unrecognized tax benefits or uncertain tax positions as of September 30, 2022, and December 31, 2021.
The Company assessed its earnings history, trends and estimates of future earnings and determined that the deferred tax asset could not be realized as of September 30, 2022. Accordingly, a valuation allowance was recorded against the net deferred tax asset.
The Company recognizes interest and penalties on income taxes as a component of income tax expense, should such an expense be realized.
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Fair Value of Financial Instruments
Management believes the carrying amounts of the Company’s financial instruments (excluding debt and equity instruments) as of September 30, 2022 and December 31, 2021, 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.
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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. A refund has been submitted totaling $ i 54,000, which is classified in Other Income on our Consolidated Statement of Operations and Comprehensive Loss.
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Leases
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 (see Note 10). We adopted this standard effective January 1, 2019 using the effective date option, as approved by the FASB in July 2018, which resulted in a $ i 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. Upon the transition to ASC 842, the Company elected to use hindsight as a practical expedient with respect to determining the lease terms and in assessing any impairment of right-of-use assets for existing leases. No impairment is expected at this time. As of September 30, 2022, the right of use assets on our balance sheet related to our operating leases totals $ i 896,000.
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Recent Accounting Pronouncements
In August 2020,the FASB issued Accounting Standards UpdateNo.2020-06,“Debt—Debt with Conversion and Other Options (Subtopic470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”. For convertible instruments, the FASB decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that arenotclearly and closely related to the host contract, that meet the definition of a derivative, and that donotqualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The FASB decided to amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The FASB observed that the application of the derivatives scope exception guidance results in accounting for some contracts as derivatives while accounting for economically similar contracts as equity. The FASB also decided to improve and amend the related EPS guidance. The amendments in this Update are effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021,including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023,including interim periods within those fiscal years; early adoption is permitted. Management has evaluated this update and adopted it as of January 1, 2022. In do so, we evaluated the convertible debt issued by Clyra Medical during the three months ended June 30, 2022 (see Note 8), and determined that the beneficial conversion feature was fixed at the time of issuance and not an embedded derivative under Subtopic 815-15. As a result of the early adoption, there are no other potential affects on the Company’s current financial statements.
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Note 3. Sale of Stock for Cash
Lincoln Park Financing
During the three and nine months ended September 30, 2022, we sold i 2,440,958 and i 4,353,919 shares to Lincoln Park, and in exchange received $ i 485,000 and $ i 903,000 in gross and net proceeds.
During the three and nine months ended September 30, 2021, we sold i 2,917,819 and i 21,444,128 shares to Lincoln Park, and in exchange received $ i 530,000 and $ i 3,545,000 in gross and net proceeds.
Unit Offerings
During the three and nine months ended September 30, 2022, pursuant to our unit offerings, we sold i 3,766,126 and i 13,568,524 shares of our common stock and received $ i 632,000 and $ i 2,364,000 in gross and net proceeds from thirty accredited investors.
During the three and nine months ended September 30, 2021, pursuant to our unit offerings, we sold i 388,889 and i 3,820,436 shares of our common stock and received $ i 70,000 and $ i 575,000 in gross and net proceeds from four accredited investors.
In addition to the shares, we issued each investor a six-month and a five-year warrant to purchase additional shares (see Note 6, “Warrants Issued in Unit Offerings”).
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Note 4. Debt Obligations
The following table summarizes our debt obligations outstanding as of September 30, 2022, and December 31, 2021 (in thousands). The table does not include debt obligations of our partially owned subsidiary Clyra Medical (see Note 8, “Debt Obligations of Clyra Medical”).
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| 2022 (Unaudited) |
December 31, 2021 |
|||||||
| Current portion of debt: |
||||||||
| SBA Paycheck Protection Program loans, mature April 2025 |
$ | i 43 | $ | i 314 | ||||
| Convertible note payable, matures March 1, 2023 |
i 50 | i — | ||||||
| Debt discount, net of amortization |
( i 7 | ) |
i — | |||||
| Total current portion of debt |
$ | i 86 | $ | i 314 | ||||
| Long-term debt: |
||||||||
| SBA EIDL Loan |
$ | i 150 | $ | i 150 | ||||
| SBA Paycheck Protection Program loans, mature May 2025 |
i 97 | i — | ||||||
| Convertible note payable, matures March 1, 2023 |
i — | i 50 | ||||||
| Debt discount, net of amortization |
i — | ( i 20 | ) | |||||
| Total long-term debt |
i 247 | i 180 | ||||||
| Total |
$ | i 333 | $ | i 494 | ||||
For the three and nine months ended September 30, 2022, we recorded $ i 14,000 and $ i 42,000, and for the three and nine months ended September 30, 2021, we recorded $ i 42,000 and $ i 208,000, of interest expense related to the amortization of discounts on convertible notes payable, and coupon interest from our note payable, convertible notes and line of credit.
The following discussion includes debt instruments to which amendments were made or included other activity that management deemed appropriate to disclose during the nine months ended September 30, 2022 and 2021. Each of the debt instruments contained in the above table are disclosed more fully in the financial statements contained in the Company’s Form 10-K filed March 31, 2022.
SBA Program Loans
In April 2020, our subsidiaries ONM Environmental, BLEST and Clyra Medical received $ i 218,000, $ i 96,000 and $ i 43,000, respectively, in loans pursuant to the Small Business Association’s (“SBA”) Paycheck Protection Program (“PPP”). The loans mature two years from the inception date (although any payments due are deferred once a forgiveness application has been filed), and incur interest at 1%. Management believes that it has fully complied with the terms of forgiveness as set forth by the SBA, and each subsidiary has filed forgiveness applications. On February 7, 2022, we received notice that the SBA had partially approved ONM Environmental's application for forgiveness of its PPP loan in the amount of $174,000; ONM has appealed and provided additional documentation to support forgiveness of the remaining $ i 43,000. The forgiveness application of BLEST remains pending. On March 19, 2021, we received notice that the SBA had approved the application for forgiveness Clyra’s PPP loan.
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Note 5. Share-Based Compensation
Issuance of Common Stock in exchange for payment of payables
Payment of Officer Salaries
On September 30, 2022, we issued i 167,781 shares of our common stock at $ i 0.27 per share in lieu of $ i 72,000 of accrued and unpaid salary to our officers.
On September 30, 2021, we issued i 61,842 shares of our common stock at $ i 0.19 per share in lieu of $ i 12,000 of accrued and unpaid salary to our officers. On March 31, 2021, we issued i 137,364 shares of our common stock at $ i 0.23 per share in lieu of $ i 31,000 of accrued and unpaid salary to our officers.
Payment of Consultant Fees
On September 30, 2022, we issued i 211,047 shares of our common stock at $ i 0.27 per share in lieu of $ i 24,000 of accrued and unpaid obligations to consultants. On June 30, 2022, we issued i 76,996 shares of our common stock at $ i 0.18 per share in lieu of $ i 60,000 of accrued and unpaid obligations to consultants. On March 31, 2022, we issued i 86,752 shares of our common stock at $ i 0.23 per share in lieu of $ i 31,000 of accrued and unpaid obligations to consultants.
On September 30, 2021, we issued i 586,963 shares of our common stock at $ i 0.19 per share in lieu of $ i 71,000 of accrued and unpaid salary to consultants. On June 30, 2021, we issued i 357,132 shares of our common stock at $ i 0.17 per share in lieu of $ i 60,000 of accrued and unpaid obligations to consultants. On March 31, 2021, we issued i 610,123 shares of our common stock at $ i 0.23 per share in lieu of $ i 81,000 of accrued and unpaid obligations to consultants.
Payment of Accrued Interest
During the three months ended June 30, 2021, we issued i 81,777 shares of our common stock at $ i 0.17 per share in lieu of $ i 16,000 of accrued and unpaid interest.
Stock Option Expense
During the three and nine months ended September 30, 2022, we recorded an aggregate $ i 338,000 and $ i 1,455,000, and during the three and nine months ended September 30, 2021, we recorded an aggregate $ i 430,000 and $ i 1,447,000 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. See Note 8 for information on stock option expense for options issued by subsidiary Clyra.
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 i 10 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 i 40 million shares. The number of shares available to be issued under the 2018 Plan increases automatically each January 1st by the lesser of (a) i 2 million shares, or (b) such number of shares determined by our Board.
Activity for our stock options under the 2018 Plan for the nine months ended September 30, 2022 and September 30, 2021, is as follows:
i
| Weighted |
|||||||||||||||||
| Average |
Aggregate |
||||||||||||||||
| Options |
Exercise |
Price per |
intrinsic |
||||||||||||||
| Outstanding |
Price per share |
share |
Value(1) |
||||||||||||||
| Balance, December 31, 2021 |
i 23,186,142 | $ i 0.12 | – | i 0.43 | $ | i 0.19 | |||||||||||
| Granted |
i 4,748,212 | i 0.18 | – | i 0.27 | i 0.22 | ||||||||||||
| Balance, September 30, 2022 |
i 27,934,354 | $ i 0.12 | – | i 0.43 | $ | i 0.19 | |||||||||||
| Non-vested |
( i 4,449,874 | ) |
i 0.12 | – | i 0.40 | i 0.22 | |||||||||||
| Vested, September 30, 2022 |
i 23,484,480 | $ i 0.12 | – | i 0.43 | $ | i 0.19 | $ | i 1,893,000 | |||||||||
| Balance, December 31, 2020 |
i 18,865,525 | $ i 0.16 | – | i 0.40 | $ | i 0.19 | |||||||||||
| Granted |
i 3,686,462 | i 0.13 | – | i 0.23 | i 0.19 | ||||||||||||
| Balance, September 30, 2021 |
i 22,591,987 | $ i 0.12 | – | i 0.43 | $ | i 0.19 | |||||||||||
(1) Aggregate intrinsic value based on closing common stock price of $ i 0.27 at September 30, 2022.
The options granted to purchase i 4,748,212 shares during the nine months ended September 30, 2022 were issued to officers, board of directors, employees and consultants: (i) we issued options to purchase i 290,135 shares of our common stock at an exercise price on the respective grant date of $ i 0.22 and $ i 0.23 per share to our CFO and President to replace options that had expired; (ii) we issued options to purchase i 1,134,356 shares of our common stock at an exercise price on the respective grant date ranging between $ i 0.18 – $ i 0.27 per share to members of our board of directors for services performed, in lieu of cash; the fair value of these options totaled $246,000; (iii) we issued options to purchase i 2,340,730 shares of our common stock to employees as part of an employee retention plan at an exercise price on the respective date ranging between $ i 0.18 – $ i 0.27 per share; the fair value of employee retention plan options totaled $ i 492,000 and will vest quarterly over four years as long as they are retained as employees; (iv) we issued options to purchase i 682,991 shares of our common stock to consultants in lieu of cash for expiring options and per agreement totaling $ i 145,000, and (v) we issued options to our Chief Financial Officer (see “Chief Financial Officer Contract Extension” immediately below). All stock option expense is recorded on our consolidated statement of operations as selling, general and administrative expense.
Chief Financial Officer Contract Extension
On March 22, 2022, 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 March 22, 2022 (the “Engagement Extension Agreement”) provides for an additional one-year term to expire January 31, 2023 (the “Extended Term”).
As the sole compensation for the Extended Term, Mr. Dargan was issued an option (“Option”) to purchase i 25,000 shares of the Company’s common stock for each month during the Extended Term (thus, an option to purchase 300,000 shares reflecting an extended term of 12 months). The Option vests over the period of the Extended Term, with i 25,000 shares having vested as of March 22, 2022, and the remaining shares to vest i 25,000 shares monthly beginning March 22, 2022, and each month thereafter, so long as the agreement is in full force and effect. The Option is exercisable at $ i 0.24 per share, the closing price of BioLargo’s common stock on March 22, 2022, the grant date, expires ten years from the grant date, and was issued pursuant to the Company’s 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 no cash component of his compensation for the Extended Term. Mr. Dargan is eligible to be reimbursed for business expenses he incurs in connection with the performance of his services as the Company’s Chief Financial Officer (although he has made no such requests for reimbursement in the past). All other provisions of the Engagement Agreement not expressly amended pursuant to the Engagement Extension Agreement remain the same, including provisions regarding indemnification and arbitration of disputes.
The options granted to purchase i 3,686,462 shares during the nine months ended September 30, 2021 were issued to an officer, board of directors, employees and consultants: (i) we issued options to purchase i 300,000 shares of our common stock at an exercise price on the respective grant date of $ i 0.17 per share to our CFO as described below; (ii) we issued options to purchase i 1,049,024 shares of our common stock at an exercise price on the respective grant date of $ i 0.17 and $ i 0.23 per share to members of our board of directors for services performed, in lieu of cash; the fair value of these options totaled $198,000; (iii) we issued options to purchase i 1,800,011 shares of our common stock to employees as part of an employee retention and expiring options plan at exercises price on the respective date ranging between $ i 0.17 and $ i 0.23 per share; the fair value of employee retention plan options totaled $ i 327,000 and will vest quarterly over four years as long as they are retained as employees; and (iv) we issued options to purchase i 537,427 shares of our common stock to consultants and employees in lieu of cash for unpaid obligations totaling $ i 95,000. All stock option expense is recorded on our consolidated statement of operations as selling, general and administrative expense.
2007 Equity Incentive Plan
On September 7, 2007, and as amended April 29, 2011, the BioLargo, Inc. 2007 Equity Incentive Plan (“2007 Plan”) was adopted as a means of providing our directors, key employees and consultants additional incentive to provide services. Both stock options and stock grants may be made under this plan for a period of i 10 years, which expired on September 7, 2017. The Board’s Compensation Committee administers this plan. As plan administrator, the Compensation Committee has sole discretion to set the price of the options. As of September 2017, the Plan was closed to further stock option grants.
Activity for our stock options under the 2007 Plan for the nine months ended September 30, 2022 and 2021 is as follows:
| Weighted |
|||||||||||||||||
| Average |
Aggregate |
||||||||||||||||
| Options |
Exercise |
Price per |
intrinsic |
||||||||||||||
| Outstanding |
price per share |
share |
Value(1) |
||||||||||||||
| Balance, December 31, 2021 |
i 2,879,246 | $ i 0.28 | – | i 0.94 | $ | i 0.49 | |||||||||||
| Expired |
( i 975,161 | ) |
$ i 0.28 | – | i 0.35 | i 0.36 | |||||||||||
| Balance, September 30, 2022 |
i 1,904,085 | $ i 0.28 | – | i 0.94 | $ | i 0.56 | $ | — | |||||||||
| Balance, December 31, 2020 |
i 5,689,363 | $ i 0.28 | – | i 0.94 | $ | i 0.44 | |||||||||||
| Expired |
( i 1,769,008 | ) |
i 0.39 | – | i 0.51 | i 0.40 | |||||||||||
| Balance, September 30, 2021 |
i 3,920,355 | $ i 0.28 | – | i 1.65 | $ | i 0.45 | |||||||||||
(1) – Aggregate intrinsic value based on closing common stock price of $ i 0.27 at September 30, 2022.
Non-Plan Options issued
Activity of our non-plan stock options issued for the nine months ended September 30, 2022 and 2021 is as follows:
| Weighted |
|||||||||||||||||
| Non-plan |
average |
Aggregate |
|||||||||||||||
| Options |
Exercise |
price per |
Intrinsic |
||||||||||||||
| Outstanding |
price per share |
share |
value(1) |
||||||||||||||
| Balance, December 31, 2021 |
i 20,119,207 | $ i 0.17 | – | i 1.00 | $ | i 0.41 | |||||||||||
| Granted |
i 105,797 | $0.23 | – | i 0.27 | i 0.26 | ||||||||||||
| Balance, September 30, 2022 |
i 20,225,004 | $ i 0.17 | – | i 1.00 | $ | i 0.39 | |||||||||||
| Non-vested |
( i 1,050,000 | ) |
i 0.17 | – | i 0.45 | i 0.45 | |||||||||||
| Vested, September 30, 2022 |
i 19,175,004 | $ i 0.17 | – | i 1.00 | $ | i 0.38 | $ | i 274,000 | |||||||||
| Balance, December 31, 2020 |
i 20,749,583 | $ i 0.17 | – | i 1.00 | $ | i 0.41 | |||||||||||
| Granted |
i 43,956 | i 0.23 | i 0.23 | ||||||||||||||
| Expired |
( i 800,000 | ) |
i 1.00 | i 1.00 | |||||||||||||
| Balance, September 30, 2021 |
i 19,993,539 | $ i 0.17 | – | i 1.00 | $ | i 0.39 | |||||||||||
(1) – Aggregate intrinsic value based on closing common stock price of $ i 0.27 at September 30, 2022.
During the nine months ended September 30, 2022, we issued options to purchase i 105,797 shares of our common stock at prices on the grant date ranging $0.23 – $ i 0.27 per share to a vendor for services. The fair value of these options total $ i 36,000 and is recorded in our selling, general and administrative expense.
During the nine months ended September 30, 2021, we issued an option to purchase i 43,956 shares of our common stock at $ i 0.23 per share to a vendor for services. The fair value of these options total $ i 10,000 and is recorded in our selling, general and administrative expense.
/
Note 6. Warrants
We issued warrants to purchase our common stock, at various prices for the nine months ended September 30, 2022 and 2021, is as follows:
i
| Weighted | |||||||||||||||||
| average | Aggregate | ||||||||||||||||
| Warrants | Exercise | price per | Intrinsic | ||||||||||||||
| outstanding | price per share | share | value(1) | ||||||||||||||
| Balance, December 31, 2021 | i 36,765,502 | $ i 0.16 | – | i 1.00 | $ | i 0.27 | |||||||||||
| Issued | i 27,137,048 | i 0.19 | – | i 0.33 | i 0.23 | ||||||||||||
| Expired | ( i 10,273,722 | ) | i 0.19 | – | i 0.48 | i 0.25 | |||||||||||
| Balance, September 30, 2022 | i 53,628,828 | $ i 0.14 | – | i 1.00 | $ | i 0.26 | $ | i 2,094,000 | |||||||||
| Balance, December 31, 2020 | i 32,980,989 | $ i 0.16 | – | i 1.00 | $ | i 0.29 | |||||||||||
| Issued | i 7,865,872 | i 0.14 | - | i 0.27 | i 0.20 | ||||||||||||
| Exercised | ( i 416,667 | ) | i | i 0.14 | i | i 0.14 | |||||||||||
| Expired | ( i 2,743,406 | ) | i 0.12 | - | i 0.70 | i 0.59 | |||||||||||
| Balance, September 30, 2021 | i 37,686,788 | $ i 0.12 | – | i 1.00 | $ | i 0.27 | |||||||||||
| (1) | Aggregate intrinsic value based on closing common stock price of $ i 0.27 at September 30, 2022 |
Warrants issued in Unit Offerings
During the nine months ended September 30, 2022, pursuant to our Unit Offerings (see Note 3), we issued nine-month stock purchase warrants to purchase an aggregate i 13,568,524 shares of our common stock at $ i 0.19 - $ i 0.23 per share, and five-year stock purchase warrants to purchase an aggregate i 13,568,524 shares of our common stock at $ i 0.24 - $ i 0.33 per share.
During the nine months ended September 30, 2021, pursuant to our Unit Offerings (see Note 3), we issued six-month stock purchase warrants to purchase an aggregate i 3,932,936 shares of our common stock at exercise prices between $ i 0.14 – i 0.22 per share, and five-year stock purchase warrants to purchase an aggregate i 3,923,936 shares of our common stock at exercise prices between $ i 0.18 – i 0.27 per share.
On August 6, 2021 a holder of a six-month stock purchase warrant exercised the warrant and we received $ i 60,000 and issued i 416,667 shares of our common stock.
Fair Value – Interest Expense
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. During the nine months ended September 30, 2022 and 2021, no warrants were issued in conjunction with debt offerings.
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 for our operations other than our partially-owned subsidiary Clyra Medical included the following (in thousands):
i
| 2022 |
2021 |
|||||||
| Accounts payable and accrued expense |
$ | i 334 | $ | i 349 | ||||
| Accrued interest |
i 25 | i 25 | ||||||
| Accrued payroll |
i 161 | i 185 | ||||||
| Total accounts payable and accrued expenses |
$ | i 520 | $ | i 559 | ||||
Accounts payable and accrued expenses includes ordinary business payables incurred by the Company and its operational subsidiaries. See Note 8, “Accounts Payable and Accrued Expenses”, for the accounts payable and accrued expenses of Clyra Medical.
/
Note 8. Noncontrolling Interest – Clyra Medical
We consolidate the operations of our partially owned subsidiary Clyra Medical, of which we owned i 58% of its outstanding shares as of September 30, 2022.
BioLargo and its partially owned subsidiary Clyra Medical entered into an agreement dated March 3, 2022, whereby BioLargo agreed to convert $ i 633,000 in working capital advances, made to or on behalf of Clyra Medical, into i 2,042 shares of Clyra Medical common stock at a rate of $ i 310 per share.
Debt Obligations of Clyra Medical
On April 8, 2022, Clyra Medical issued a promissory note in the principal amount of $ i 100,000 to an individual investor, payable April 8, 2024 bearing i 8% annual interest. The note may be converted by its holder at any time prior to the maturity date, and automatically converts to stock upon (i) Clyra’s sale of $ i 5,000,000 or more of its common or preferred stock, or (ii) the maturity date, at a conversion price equal to i 70% of the lowest price-per-share of shares sold to a future investor prior to the maturity date.
On June 30, 2020, Clyra Medical entered into a Revolving Line of Credit Agreement whereby Vernal Bay Capital Group, LLC committed to provide a $ i 1,000,000 inventory line of credit. Since inception, $ i 260,000 in line of credit draws were made and Clyra has repaid $ i 97,000. As of September 30, 2022, the balance outstanding on this line of credit totals $ i 163,000. Funds from the line of credit must be used to produce inventory. Additional draws are conditional upon the presentation of invoices or purchase orders to the lender equal to the greater of one-half of principal outstanding on the line of credit, and $ i 200,000. The line of credit accrues interest at i 15%, requires Clyra pay interest and principal from gross product sales, and is due on demand. Clyra is required to pay i 60% of gross product sales to reduce amounts owed on the line of credit. Clyra issued Vernal Bay i 323 shares of its common stock as a commitment fee for the line of credit, valued at $ i 70,000. A security agreement of the same date grants Vernal Bay a security interest in Clyra’s inventory, as that term is defined in the Uniform Commercial Code.
Prepaid Marketing - Consulting Agreement
On December 30, 2015, Clyra 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 $ i 23,000 per month for a period of four years. On June 30, 2020, at Clyra’s request, Beach House Consulting agreed to accept i 3,639 shares of Clyra common stock, in lieu of cash, as full prepayment of the consulting fee. The obligation to provide the consulting services is dependent on Clyra generating an average of $ i 250,000 in monthly sales over three consecutive months, which has not been met. The value of the shares issued to Beach House were higher but the asset was impaired in 2021, the asset totals $ i 591,000 and is recorded as a non-current asset on our balance sheet.
Clyra Medical Equity transactions
As of September 30, 2022, Clyra Medical had the following common shares outstanding:
i
| Shareholder |
Shares |
Percent |
||||||
| BioLargo, Inc. |
i 51,249 | i 58 | % |
|||||
| Sanatio Capital |
i 18,704 | i 21 | % |
|||||
| Other |
i 19,118 | i 21 | % |
|||||
| Total |
i 89,071 | |||||||
Sales of Common Shares
During the nine months ended September 30, 2022 and 2021, Clyra raised $ i 0 and $ i 50,000 at $ i 310 per Clyra share.
Stock Options
Clyra issues options to its employees and consultants in lieu of compensation owed on a regular basis. As of December 31, 2021, the Company had issued options to purchase i 14,004 shares of Clyra stock. During the nine months ended September 30, 2022 and 2021, Clyra issued options to purchase i 1,403 and i 2,074 shares of its common stock. Each option issued has an exercise price of $ i 1.00 per share, are vested upon issuance and an expiration date i 10 years from the date of grant. The fair value of the options issued in the nine months ended September 30, 2022 and 2021 totaled $ i 304,000 and $ i 442,000. We used the Black-Scholes model to calculate the initial fair value, assuming a stock price on date of grant of $ i 310 per share. Because Clyra is a private company with no secondary market for its common stock, the resulting fair value was discounted by i 30%. We also used a risk-free rate ranging between i 2.32% - i 3.83%, a volatility of i 40% and an expected life of i 10 years.
Clyra Accounts Payable and Accrued Expenses
Clyra had the following accounts payable and accrued expenses as follows:
i
| 2022 |
2021 |
|||||||
| Accounts payable and accrued expense |
$ | i 202 | $ | i 149 | ||||
| Accrued interest |
i 4 | i 51 | ||||||
| Accrued payroll |
i 5 | i 30 | ||||||
| Total Clyra Medical accounts payable and accrued expenses |
$ | i 211,000 | $ | i 230 | ||||
Note 9. Business Segment Information
BioLargo currently has i 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:
ONM Environmental (“ONM”) -- which sells odor and volatile organic control products and services (located in Westminster, California);
| 1. |
ONM Environmental (“ONM”) -- which sells odor and volatile organic control products and services (located in Westminster, California); |
| 2. |
Clyra Medical Technologies (“Clyra”) -- which develops and sells medical products based on our technologies, including BioClynse wound irrigation solution; |
| 3. |
BLEST -- which provides professional engineering services on a time and materials basis for outside clients and supports our internal operations as needed (located in Oak Ridge, Tennessee); and |
| 4. |
BioLargo Water (“Water”) -- which historically focused entirely on R&D, and has now shifted its focus to commercializing the AOS technology (located in Edmonton, Alberta Canada). |
Historically, none of our operating business units have operated at a profit (other than ONM this last quarter) and therefore each required additional cash to meet its monthly expenses, funded through BioLargo’s sales of debt or equity, research grants, and tax credits. Clyra Medical has also 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, 2022 and 2021, is as follows (in thousands):
i
| Three months ended September 30, |
Nine months ended |
|||||||||||||||
| 2021 |
2022 |
2021 |
||||||||||||||
| Revenue |
||||||||||||||||
| BioLargo corporate |
$ | i 2 | $ | i — | $ | i 4 | $ | i 7 | ||||||||
| ONM |
i 1,199 | i 420 | i 2,499 | i 1,058 | ||||||||||||
| BLEST |
i 401 | i 416 | i 1,613 | i 1,070 | ||||||||||||
| Water |
i 1 | i 2 | i 1 | i 9 | ||||||||||||
| Clyra Medical |
i 17 | i 9 | i 34 | i 114 | ||||||||||||
| Intersegment revenue |
( i 120 | ) | ( i 135 | ) | ( i 365 | ) | ( i 522 | ) | ||||||||
| Total |
$ | i 1,500 | $ | i 712 | $ | i 3,786 | $ | i 1,743 | ||||||||
| Operating income (loss) |
||||||||||||||||
| BioLargo corporate |
$ | ( i 783 | ) | $ | ( i 868 | ) |
$ | ( i 2,925 | ) | $ | ( i 2,726 | ) | ||||
| ONM |
i 400 | ( i 72 | ) |
i 418 | ( i 355 | ) | ||||||||||
| Clyra Medical |
( i 240 | ) | ( i 219 | ) |
( i 736 | ) | ( i 958 | ) | ||||||||
| BLEST |
( i 179 | ) | ( i 140 | ) |
( i 158 | ) | ( i 513 | ) | ||||||||
| Water |
( i 141 | ) | ( i 156 | ) |
( i 572 | ) | ( i 461 | ) | ||||||||
| Total |
$ | ( i 943 | ) | $ | ( i 1,455 | ) |
$ | ( i 3,973 | ) | $ | ( i 5,013 | ) | ||||
| Interest expense |
||||||||||||||||
| BioLargo corporate |
$ | ( i 6 | ) | $ | ( i 6 | ) |
$ | ( i 18 | ) | $ | ( i 106 | ) | ||||
| Clyra Medical |
( i 8 | ) | ( i 20 | ) |
( i 24 | ) | ( i 96 | ) | ||||||||
| Total |
$ | ( i 14 | ) | $ | ( i 26 | ) |
$ | ( i 42 | ) | $ | ( i 208 | ) | ||||
| Research and development expense |
||||||||||||||||
| BioLargo corporate |
$ | ( i 140 | ) | $ | ( i 220 | ) |
$ | ( i 570 | ) | $ | ( i 765 | ) | ||||
| Clyra Medical |
( i 31 | ) | ( i 20 | ) |
( i 73 | ) | ( i 53 | ) | ||||||||
| BLEST |
( i 100 | ) | ( i 123 | ) |
( i 288 | ) | ( i 358 | ) | ||||||||
| Water |
( i 119 | ) | ( i 109 | ) |
( i 446 | ) | ( i 366 | ) | ||||||||
| Intersegment R&D |
i 119 | i 135 | i 359 | i 515 | ||||||||||||
| Total |
$ | ( i 271 | ) | $ | ( i 344 | ) |
$ | ( i 1,018 | ) | $ | ( i 1,027 | ) | ||||
The segment asset information for September 30, 2022 and December 31, 2021, is as follows (in thousands):
| BioLargo |
ONM |
Clyra |
BLEST |
Water |
Elimination |
Total |
||||||||||||||||||||||
| Tangible assets |
$ | i 785 | $ | i 1,079 | $ | i 814 | $ | i 590 | $ | i 194 | $ | ( i 20 | ) | $ | i 3,442 | |||||||||||||
| Right of use |
i 157 | i — | i — | i 739 | i — | i — | i 896 | |||||||||||||||||||||
| Investment in South Korean joint venture |
i 33 | i — | i — | i — | i — | i — | i 33 | |||||||||||||||||||||
| Total |
i 975 | i 1,079 | i 814 | i 1,329 | i 194 | ( i 20 | ) | i 4,371 | ||||||||||||||||||||
| As of December 31, 2021 |
BioLargo |
ONM |
Clyra |
BLEST |
Water |
Elimination |
Total |
|||||||||||||||||||||
| Tangible assets |
$ | i 690 | $ | i 451 | $ | i 832 | $ | i 445 | $ | i 152 | $ | ( i 47 | ) | $ | i 2,522 | |||||||||||||
| Right of use |
i 222 | i — | i — | i 231 | i — | i — | i 453 | |||||||||||||||||||||
| Investment in South Korean joint venture |
i 48 | i — | i — | i — | i — | i — | i 48 | |||||||||||||||||||||
| Total |
i 960 | i 451 | i 832 | i 676 | i 152 | ( i 47 | ) | i 3,023 | ||||||||||||||||||||
/
Note 10. Commitments and Contingencies
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, 2022 and 2021, rental expense was $ i 228,000 and $ i 170,000, respectively. As of September 30, 2022, our weighted average remaining lease term is nine years and the total remaining operating lease payments is $ i 1,859,000.
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. On January 1, 2019, we adopted ASC 842 which resulted in a right-of-use asset and lease liability. Short-term leases are not included in our analysis. The lease of our Westminster facility expires August 2024. It is too early for management to determine if it will exercise its option to extend the lease four years, therefore the four-year extension is not included in the analysis. In September 2022, the lease of our Oak Ridge, Tennessee facility was extended for ten years. The ten year lease added $ i 443,000 to our right of use and lease liability on our September 30, 2022 balance sheet. The lease of our Canadian facility is less than one year. None of our leases have additional terms related to the payments or mechanics of the lease. 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. Since there is no explicit interest rate in our leases, management used its incremental borrowing rate, which is estimated to be i 18% to determine lease liability.
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Note 11. Subsequent Events.
Management has evaluated subsequent events through the date of the filing of this Quarterly Report and management noted the following for disclosure.
Sales to Lincoln Park
From October 1, 2022, through November 10, 2022, we sold i 479,546 shares of our common stock to Lincoln Park (see Note 3), and received $ i 107,000 in gross and net proceeds.
Unit Offering Investments
From October 1, 2022, through November 10, 2022, we received $ i 567,000 of gross and net proceeds from fifteen investors in our Unit Offering (see Note 3), and issued an aggregate i 3,432,486 shares of common stock, six-month warrants to purchase an aggregate i 3,432,486 shares of common stock at an average $ i 0.198 per share, and five-year warrants to purchase an aggregate i 3,432,486 shares of common stock at an average $ i 0.248 per share.
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| 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, 2022, 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, ONM Environmental, Inc., a California corporation, BioLargo Water Investment Group, Inc., a California corporation (which wholly owns BioLargo Water, Inc., a Canadian corporation), and BioLargo Development Corp., a California corporation, (iii) its majority-owned subsidiary BioLargo Engineering, Science & Technologies, LLC, a Tennessee limited liability company, and Canadian subsidiary BioLargo Water, Inc.; and (iv) 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 - Innovator and Solution Provider
BioLargo, Inc. invents, develops, and commercializes innovative platform technologies to solve challenging environmental problems like PFAS contamination, advanced water and wastewater treatment, industrial odor and VOC control, air quality control, infection control, and myriad environmental remediation challenges. Having conducted continual and extensive research and development, BioLargo holds a wide array of issued patents, maintains a robust pipeline of products, and provides full-service environmental engineering. With a keen emphasis on partnerships with academic, government, and commercial organizations and associations, BioLargo has proven itself by executing on challenging environmental engineering projects, demonstrating its powerful technologies through pilots, trials, and early commercial adoption, publishing high-impact academic and industry publications, and winning over 90 grants. We monetize our innovations through direct sales and recurring service contracts, as well as through channel partnerships, meaning licensing agreements, exclusive and non-exclusive distribution agreements, brand development partnerships, sale referral partnerships, strategic joint venture formation, and/or the sale of the IP. Channel partnerships allow us to extend the commercial reach of our products and services disproportionately to our core infrastructure and staffing.
In the third quarter of 2022 we again set a new company-wide quarterly revenue record, building on the second quarter’s unprecedented performance. As a result, the Company has already locked in a record revenue growth rate for the entire year, even before the fourth quarter. A standout this quarter was the pet odor product sold by our consumer packaged goods partners at Ikigai, called Pooph, whose sales contributed significantly to the record product revenues of our odor and VOC control products division ONM Environmental.
The Company has several key projects that management believes will stimulate accelerated growth through 2023. These are:
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The expected launch in major retailers of the Pooph pet odor control product by the Company’s consumer packaged goods partners at Ikigai, which is expected to start in Q4. |
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Our first PFAS removal project at a large industrial site (announced in August), currently in the initial phase of a multi-phase process, which we expect to continue advancing as we engineer a comprehensive PFAS mitigation plan. |
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Expanded commercial roll-out of the company’s PFAS treatment technology through its growing network of sales rep organizations. |
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Garratt-Callahan’s launch of the jointly developed minimal liquid discharge wastewater treatment product. |
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The Company’s work with Ultra Safe Nuclear. |
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Our engineering services division completed the first phase of a large capital project in the cleantech and environmental technologies space - a waste-to-energy conversion plant in South America (see Waste-to-Energy Conversion Plant Project below). This project is expected to advance to additional phases in 2023, and has the potential to lead to additional projects of a similar nature. |
These projects are of a greater commercial significance than projects contracted and executed in previous years. Company management believes BioLargo is now earning more significant commercial opportunities for multiple reasons:
| 1. |
Credibility |
First, we have built our credibility as cleantech technology innovators and environmental engineering service providers to the point where clients, potential clients, and prospective partners rightfully view us as an effective and reliable means to solve their challenges. We operate with a mandate to serve our customers and partners with technical excellence, provide timely and cost-effective results, and a commitment to helping them make the best choices for any particular challenge.
| 2. |
Channel Partner Relationships |
We have key relationships that we believe will continue advancing to become high-revenue and profit generating projects with channel partners such as Garratt-Callahan and Ikigai, as well as our new channel partners in the PFAS remediation industry.
| 3. |
Investments in Talent and Technology |
This “critical mass” of credibility as a cleantech solutions provider is a result of our investments in our talented team of engineers, scientists and team members who have a proven track record of executing complex engineering projects, and our history of developing creative and powerful new technologies that work and are best of class. Secondly, our core patented water treatment technologies, the BioLargo Advanced Oxidation System (AOS) and Aqueous Electrostatic Concentrator (AEC), have now been demonstrated in successful pilot projects, either on-site at a prospective client’s facility, or in-house with client-provided contaminated waters.
Formula for Success: Technology, Talent and Purpose
Technology
BioLargo has continually advanced its robust portfolio of technologies since the first acquisition of early iterations of the BioLargo technology in the spring of 2007. Our innovations have primarily been developed through our internal resources, and some through acquisition. These include patents, patents pending, and trade secrets that include solutions for:
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Water decontamination, including: |
| o |
Removal of per- and poly-fluoroalkyl substances (PFAS) from drinking and ground water |
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Micro-pollutant destruction and removal |
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Legionella detection and water treatment solutions |
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Minimum and zero liquid discharge systems (MLD/ZLD) |
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Disinfection |
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Electro-oxidation |
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Air quality controls and systems including odor and VOC control |
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Mineral processing |
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Infection control |
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Wound management |
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Disinfection |
Talent
We have grown our team to 31 team members and numerous other part-time consultants, including highly qualified PhDs, engineers, MDs and medical professionals, construction professionals, field service technicians, innovators, sales marketing specialists, entrepreneurial and executive leadership.
Purpose
Our mission to make life better drives us to serve others with integrity, knowledge, technology, and solutions that protect the environment, improve quality of life, and protect lives. All our technologies were developed from the ground-up to be sustainable, practical solutions to significant global challenges. We are unique in our ability to tailor our offerings to serve our customers with proven expertise, proven technology and, if needed, we often have the ability to develop new technical solutions to meet our customer’s needs.
Combating the PFAS Forever-Chemical Crisis – the AEC
One of the most significant and timely innovations in our portfolio is our per- and poly-fluoroalkyl substances (PFAS) removal and collection/disposal solution we call the Aqueous Electrostatic Concentrator (AEC). Our engineers developed and are now commercializing the AEC, which is a novel water treatment system that removes PFAS from water at a fraction of the operating cost and generating only a fraction of the PFAS-laden waste of the most common currently used solutions (carbon filtration, ion exchange, and reverse osmosis). PFAS chemicals have been linked to cancer, immune disorders, liver dysfunction, and many other human health problems, and are contained in a vast range of manufactured goods, common household products (e.g., cleaning products, cookware), and electronics, and contaminate drinking water in unsafe levels all over the globe.
PFAS is often referred to as the “contaminant of the decade”, and as such, it is considered a multi-billion dollar commercial market opportunity. The current White House has made the PFAS crisis a critical agenda item and experts expect the EPA and local regulatory agencies to continue to tighten the regulatory requirements to mitigate, manage and limit human exposure to PFAS, all of which we believe will continue to push the market to find and adopt commercially viable solutions. Notably, some emerging regulations on PFAS in the U.S. are expected to skew the market toward seeking treatment technologies that produce as little PFAS-laden solid waste as possible, a favorable trend for our AEC that generates very little PFAS-laden waste. Detection of unsafe levels of PFAS around the world has given rise to a number of market opportunities, including in drinking water, industrial wastewater, municipal wastewater, solid waste, organic foods and more.
We have successfully validated the AEC as an effective system to selectively extract and collect PFAS chemicals from contaminated water including performance testing that shows “non-detect” levels of removal. We have demonstrated more than nine months of continuous operation showing no materially significant degradation of the AEC system’s components or performance over time. We have also successfully demonstrated that the AEC is scalable to a commercial scale and that our engineering team has the proven experience to successfully deliver systems to meet the needs of a commercial installation and sale. Our team has a history of successful execution in the environmental remediation industry and the knowhow to successfully commercialize the AEC.
In August 2022, our engineering division secured its first customer to engineer a comprehensive PFAS mitigation plan for an industrial site. The customer contract is for the first phase of what is expected to be a multi-phase comprehensive PFAS remediation project. The contract was secured in collaboration with a new channel partner, which has been appointed to promote, market, and distribute BioLargo’s water treatment equipment and PFAS-related engineering and project integration services.
The AEC’s commercial roll-out will be executed with the help of a network of sales representative organizations whose role will be to market and sell the treatment system, related equipment, and the Company’s engineering services to municipal and industrial customers across the country. Thus far, we have already secured channel partner agreements with several sales representative organizations, and have verbal commitments from several more as a result of our own business development efforts at recent water industry trade shows. Assuming all these companies sign with us, we will have sales rep coverage for most of the United States.
In October 2022, we entered into a channel partner agreement with Product Recovery Management, Inc. to sell, distribute and act as a contract manufacturer for the AEC and other BioLargo water treatment technologies. Product Recovery Management (PRM) (https://www.prmfiltration.com/), based out of Butner, NC, is a UL-certified equipment integrator specializing in remediation services with over 40 years of history serving customers. PRM designs and manufactures treatment systems that address a wide variety of contamination challenges in the remediation and landfill industries, including PFAS contamination. Their Butner operations include a 250,000 square foot manufacturing facility with large-scale fabrication capabilities.
We are also in negotiations with multiple prospective industrial and municipal customers to treat PFAS contaminated water. Having completed our initial testing of client water (to “non-detect” levels) from a leading water district in Southern California, we are in continuing discussions with their technical team to organize a practical commercial field trial. In light of the fact that we now have our first commercial project under contract, we believe that our expected success will be a key factor to help advance marketing efforts in the municipal market as well as potentially minimize the need for small scale field piloting.
ONM Environmental - Industrial Odor and VOC Solutions
ONM Environmental, Inc. is BioLargo’s subsidiary that delivers robust and comprehensive products and services to control and mitigate odor and volatile organic compounds (“VOCs”) emitted from a variety of industrial activities, including landfills and other waste handling facilities. Its flagship product, CupriDyne® Clean, reduces and eliminates tough odors and VOCs in various industrial settings. CupriDyne Clean is delivered through misting systems, sprayers, water trucks and similar water delivery systems designed, manufactured and installed by ONM. We believe the product is the number-one performing odor-control product in the market, and that it offers substantial savings to our customers compared with competing products. ONM Environmental holds General, Electrical, Plumbing and Low Voltage contractor licenses issued by the California Contractors State License Board, and offers a menu of services to landfills, transfer stations, wastewater treatment facilities as well as facilities in non-waste related industries. These services include engineering design, construction, installation, ongoing maintenance and on-site support services to assist our clients in the implementation and continued use of the various systems that deliver our liquid products in the field (such as misting systems).
We have been and expect to continue selling product to the largest solid waste handling companies in the country, with a portion of chemistry product sales resulting from national purchasing agreements (NPAs) with large waste handling companies. ONM Environmental also is currently servicing an exclusive three-year supply contract with a large municipality in Southern California for the delivery of CupriDyne Clean, which will provide a steady source of chemistry supply revenue for the company over the next three years.
In addition to growing its revenues organically through the sale of odor and VOC control chemistry and air quality control systems to its primary market segment (municipal solid waste handling in California), ONM Environmental aims to accelerate its growth through development of new sales and distribution channels. Some of these, including our partnership with Ikigai Marketing Works, LLC (see “Consumer Packaged Goods Products” below) and our joint venture with BKT Co. Ltd. in South Korea are already actively advancing toward their end-goal, which is to foster new distribution opportunities for our patented odor and VOC control chemistry without being limited by our own sales and distribution infrastructure.
Consumer Packaged Goods Products
We sell pet odor-control products under the brand “Pooph” to Ikigai Marketing Works, LLC, founded by accomplished industry executives from the consumer-packaged goods industry who have executed successful launches of at least five blockbuster products. After a successful test marketing phase, they have been executing a national advertising campaign through extensive television and internet advertising, have launched the product for web sales on their own website and on Amazon, and are launching the products soon in major retailers in the United States (including Walmart). Our agreement with Ikigai grants them an exclusive license to sell the Pooph pet odor-control product, provided certain minimum volume thresholds are met once retail sales begin, and requires, in addition to purchasing product from us at an agreed-upon manufacturing margin, they pay a 6% royalty on sales. We are in negotiations to expand their rights under the license agreement.
Sales of Pooph increased significantly in the past quarter, and accounted for a significant portion of revenues earned by our odor and VOC control products division, ONM Environmental. Ikigai management expects this trend of growth to continue, particularly with the expected launch of the product in major retailers in Q4 of 2022 and beyond.
Full Service Environmental Engineering
Our subsidiary BioLargo Engineering, Science & Technologies, LLC (“BLEST”) offers full service environmental engineering to third parties and provides engineering support services to our internal teams to accelerate the commercialization of our technologies. Its website is found at www.BioLargoEngineering.com.
BLEST focuses its efforts in three areas:
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providing engineering services to third-party clients; |
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supporting internal product development and business units’ services to customers (e.g., the AOS); and |
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advancing their own technical innovations such as the AEC PFAS treatment technology |
The subsidiary is located in Oak Ridge (a suburb of Knoxville, Tennessee), and employs a group of scientists and engineers who collectively worked together for almost 30 years and 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. The engineering team also has developed an extended network of trusted engineering subcontractors that assist in serving specific client projects as needed, from time to time.
In association with Garratt-Callahan, a national industrial water treatment company, BLEST developed a “minimal liquid discharge” (MLD) wastewater treatment system based on Garratt-Callahan proprietary technology that is able to reduce industrial wastewater discharge and therefore reduce wastewater discharge fees for customers. Garratt-Callahan is currently preparing to launch MLD system to its customers. BLEST will serve as the manufacturing partner and Garratt-Callahan will serve as the selling distributor to leverage their national sales force and over one hundred years of providing services and products to customers. BioLargo’s engineers completed the first full-scale prototype of this new technology and tested it with Garratt-Callahan client provided water, with Garratt-Callahan technical staff present on-site at BLEST’s facility. In this “factory acceptance” testing, the system removed over 98% of the target contaminants from water in continuous operation, in line with results achieved by Garratt-Callahan’s original bench-scale and batch processing tests. This factory acceptance testing was a necessary step before commercial trials and/or sales to Garratt-Callahan customers can begin. Garret-Callahan has identified multiple customer prospects, as has BioLargo, through its own marketing efforts. We are working on contractual agreements to move the project forward to first sales.
In the second quarter of 2022, BLEST was contracted by Ultra Safe Nuclear to assist in producing the first prototype fuel production systems for their revolutionary new nuclear reactor called the Micro Modular Reactor (MMR®). Ultra Safe Nuclear is a Seattle-based nuclear energy innovator, and has invented a “fission battery” - a fourth generation modular nuclear reactor – that can deliver safe, zero-carbon, cost-effective energy anywhere. The MMR® uses ceramic-encapsulated nuclear fuel – Fully Ceramic Micro-encapsulated (FCM+++) – an extremely rugged and stable fuel with extraordinary high temperature stability. BioLargo has been retained to provide engineering design support, fabrication, and integration for the company’s prototype fuel production systems. Because of the success of the early phase of the project, this project is expected to expand over the coming months in scope and significance to BioLargo, making them an important customer for BLEST.
Waste-to-Energy Conversion Plant Project
In April 2022, our engineering subsidiary was hired to conduct a comprehensive project plan (i.e., “feasibility”) study by a Southern California based sustainable energy services company intending to build a waste-to-energy conversion plant in South America. The site of the proposed conversion plant is approximately 296 acres, where it is planned to process between two million and up to 8 million tons of municipal solid waste annually and is projected to produce 500 megawatts of energy per year.
The initial feasibility study having been completed, our engineers are now preparing proposals for the next phase of the project. The client has reviewed the feasibility study and is currently evaluating its plans for advancing the project forward. It is expected that if the project moves forward, the second phase is expected to begin in the first quarter 2023.
BioLargo Water and the Advanced Oxidation System – AOS
BioLargo Water is our wholly owned subsidiary located in Edmonton, Alberta, Canada, that developed and is commercializing our Advanced Oxidation water treatment system (AOS). The AOS is our patented water treatment device that generates highly oxidative and energetic species of iodine and other molecules which allow it to rapidly and effectively eliminate pathogenic organisms and organic contaminants as water passes through the device. The key value proposition of the AOS is its ability to reduce or eliminate a wide variety of waterborne contaminants with high performance while using very little electricity and input chemicals. This is made possible by the highly oxidative iodine compounds and reactive oxygen species generated within the AOS reactor as well as the unique and proprietary physical constitution and geometry of the reactor. Our proof-of-concept studies and on-site pilot projects 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. Furthermore, our technology has been proven capable of removing hard-to-treat organic micropollutants such as pharmaceuticals from water more quickly and energy-efficiently than other technologies. Together, these characteristics make the AOS an economical and versatile tool to enable wastewater treatment and reuse in the face of emerging water contaminants and increasing regulatory scrutiny on industrial wastewater discharge. The capabilities of the AOS as a sustainable water treatment technology have been the subject of several high-impact academic papers in scientific journals. The company pursues a policy of publishing about the technology in academic journals as much as possible in order to promote transparency about the technology’s safety and efficacy while also contributing to the field of advanced water treatment science. In June of 2022, the fourth peer-reviewed scientific paper about the AOS was published, in the journal Environmental Science and Pollution Research.
BioLargo’s AOS water treatment technology has completed several pre-commercial demonstration pilots, including one at a poultry farm in Alberta, one at a microbrewery in Southern California, and another in Southern California where stormwater was treated by the AOS. It has an ongoing pilot near Montreal to treat municipal wastewater. It is our belief that once these pre-commercial pilots have concluded with the AOS, our ability to entice major water industry players to partner with BioLargo Water to accelerate market adoption of the AOS will be increased dramatically. Our team in Canada is in discussions with potential early adopters in the agriculture space, and has secured significant provincial and federal grant funding to help defray the cost of a first commercial project.
In the first quarter of 2022, BioLargo Water received a grant from Next Generation Manufacturing Canada (NGen) to support the company’s collaboration with a specialized electrical component designer to assist in optimizing the electrical performance of the AOS with the ultimate goal of maximizing the lifespan of the AOS’ components. In the second quarter, the development work funded by this grant advanced, focusing on improving the performance of the conductive materials within the AOS which allow for water disinfection and decontamination.
Municipal Wastewater Treatment Pilot – Montreal
Our commercial-scale AOS demonstration pilot (run in partnership with acclaimed water experts at the Centre des Technologies de L’Eau) at a municipal wastewater treatment plant near Montreal, Quebec, is ongoing and providing important data that shows the AOS is removing five target pharmaceuticals from the wastewater faster and using less electricity than the ultraviolet disinfections system used in the facility. Notably, the pilot project also showed that the AOS was able to also remove total coliforms (bacteria) from the municipal wastewater more effectively than the UV disinfection system currently in use at the facility.
In January 2022, BioLargo Water was awarded a grant from the government of Canada’s Natural Sciences and Engineering Research Council (NSERC) that allowed for the extension of the pilot project to allow for use of a new, higher flow-rate AOS system, as well as the installation of an AEC system at the pilot to assess its removal of PFAS chemicals from the municipality’s wastewater. This AEC system was recently shipped to the municipal wastewater treatment plant, and is expected to be installed and operational shortly.
Clyra Medical Technologies
Clyra Medical Technologies, Inc. is our partially owned subsidiary creating medical products based on our technology. It is launching a product to be used by surgeons generally, with a first target market aimed toward orthopedic surgeons for use as a wound irrigation solution and to help manage patient care and outcomes. Clyra has secured its first two hospital customers for the product, established a robust quality control system for FDA compliance, recruited a national director of sales, and is negotiating with three separate channel partners to form a commercial alliance. It has secured its first manufacturer’s representatives and is actively expanding these efforts to build out a national rep network. Its other product designs are on hold until such time as it is able to secure the capital and resources to complete any final development and support additional inventory, technical support and sales for these products. There are channel partnerships in development for Clyra’s BioClynse product in three separate healthcare markets.
Conclusion
In the past quarter:
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Our company generated approximately $1.5 million in company-wide revenue representing a 111% increase compared with the third quarter of 2021 and a 13% increase compared with the second quarter of 2022, (see “Results of Operations”, below); |
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Our company continued to demonstrate the commercial viability of our cleantech products and services through organic growth leading to increased revenue; |
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We improved our financial condition by increasing cash flow from revenues, adding to the improved balance sheet resulting from dramatic reduction in debt over the past year; and |
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We advanced the commercialization of our technology assets in target markets through channel partnerships that are either already in place and executing, or are currently developing. |
BioLargo has advanced its technologies and infrastructure to achieve a critical mass to capitalize on its commercial efforts and have a positive impact around the world with clean water, clean air, and infection control solutions. The company presents a scalable business model that targets high-impact cleantech market opportunities. We leverage our considerable scientific, engineering, and entrepreneurial talent to monetize our technologies and ensure high-quality customer service and increased revenue potential. We seek to unlock the value of our portfolio of disruptive technologies to advance our mission to “make life better” and continue creating shareholder value.
Results of Operations
We operate our business in distinct business segments:
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ONM Environmental, which manufactures and sells our odor and VOC control products and services, including our flagship product, CupriDyne Clean; |
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BLEST, our professional engineering services division supporting our internal business units and serving outside clients on a fee for service and/or project bid basis; |
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BioLargo Water, our Canadian division that has been historically pure research and development, and is now transitioning to focus on commercializing our AOS system; |
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Clyra Medical, our partially owned subsidiary focused on the medical device industry; and |
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Our corporate operations, which support the operating segments with legal, accounting, human resources, and other services. |
Consolidated revenue for the three and nine months ended September 30, 2022, was $1,500,000 and $3,786,000 which is a 111% and 117% increase over the same periods in 2021. Our service revenue increased 1% and 127% for the three and nine months ending September 30, 2022, while revenue from product sales and related services increased by 182% and 113% for the three and nine months ending September 30, 2022 as compared to the same periods in the prior year. Our product revenue includes sales of our CupriDyne Clean industrial odor control product, and sales of consumer packaged goods products based on our CupriDyne formula.
ONM Environmental
Our wholly owned subsidiary ONM Environmental generated revenues through sales of its flagship product CupriDyne Clean, and by providing design, installation, and maintenance services on the systems that deliver CupriDyne Clean at its clients’ facilities.
Revenue (ONM Environmental)
ONM Environmental’s revenues for the three and nine months ended September 30, 2022, were $1,199,000 and $2,499,000, an increase of $779,000 and $1,441,000 from the same periods in 2021, and an increase of $411,000 as compared with the prior quarter. The increase in revenues was almost entirely due to an increase in the volume sales of private label odor-control products, specifically the Pooph branded pet-odor product, and an increase in license royalties from sales of the Pooph branded pet-odor product. License royalties were $218,000 and $316,000 for the three and nine months ended September 30, 2022; no license royalties were recognized in the same periods in 2021. Because ONM Environmental has no control over the marketing and sales activity or levels of its private-label clients, including Pooph, it cannot predict sales volumes related to these clients in future periods.
Cost of Goods Sold (ONM Environmental)
ONM Environmental’s revenues for the three and nine months ended September 30, 2022, were $1,199,000 and $2,499,000, an increase of $779,000 and $1,441,000 from the same periods in 2021, and an increase of $411,000 as compared with the prior quarter. The increase in revenues was almost entirely due to an increase in the volume sales of private label odor-control products, specifically the Pooph branded pet-odor product, and an increase in license royalties from sales of the Pooph branded pet-odor product. License royalties were $218,000 and $316,000 for the three and nine months ended September 30, 2022; no license royalties were recognized in the same periods in 2021. Because ONM Environmental has no control over the marketing and sales activity or levels of Pooph, it cannot predict sales volumes related to it in future periods. Management at Pooph has indicated their intentions to continue their national advertising campaign as they place the product in national retail chains.
Operating Income (ONM Environmental)
For the three and nine month ended September 30, 2022, ONM Environmental generated operating income of $400,000 and $418,000, compared with an operating loss of $72,000 and $355,000 for the three and nine months ended September 30, 2021. Provided that its private-label clients continue to increase their purchase of product, we expect this trend to continue.
BLEST (engineering division)
Revenue (BLEST)
For the three and nine months ended September 30, 2022, our engineering segment (BLEST) generated $283,000 and $1,254,000 of revenue from third parties, compared to $281,000 and $555,000 for the same three and nine months in 2021. The increase is due to completion of projects, an increased number of client contracts, and the recognition of $83,000 of deferred revenue for ongoing projects that had achieved certain completion milestones.
In addition to providing service to third party clients, BLEST provides services to BioLargo and its subsidiaries for internal BioLargo projects. These services are billed internally, are considered intersegment revenue, and are eliminated in the consolidation of our financial statements. In the three and nine months ended September 30, 2022, intersegment revenue totaled $118,000 and $359,000, compared to $135,000 and $515,000 for the same periods in 2021. Intersegment revenue primarily used to further engineer and develop our flagship AOS water filtration system and our AEC PFAS treatment system. In addition, BLEST engineers are performing a critical role in the AOS pilot projects, some of which are supported by third-party research grants and has been instrumental in developing and supporting a professional engineered design service for misting systems being sold by our ONM operating unit.
Cost of Goods (Services) Sold (BLEST)
BLEST’s cost of services includes employee labor as well as subcontracted labor costs. In the three and nine months ended September 30, 2022, its cost of services were 82% and 60% of its revenues, versus 71% and 76% cost of services in comparable periods in 2021. These fluctuations are a result of more subcontract costs for the three months and increases in efficiencies related to flat-fee monthly contracts for the nine months.
Operating Loss (BLEST)
For the three and nine months ended September 30, 2022, BLEST had an operating loss of $179,000 and $158,000. For the three and nine months ended September 30, 2021, BLEST had an operating loss of $140,000 and $513,000.
Other Income
Our wholly owned Canadian subsidiary has been awarded more than 80 research grants over the years from various Canadian public and private agencies, including the Canadian National Research Institute – Industrial Research Assistance Program (NRC-IRAP), the National Science and Engineering Research Council of Canada (NSERC), and the Metropolitan Water District of Southern California’s Innovative Conservation Program “ICP”. The research grants received are considered reimbursement grants related to costs we incur and therefore are included as Other Income. We continued to win grants and it is important to note that amounts paid directly to third parties are not included as income in our financial statements.
During the three and nine months ended September 30, 2022, we received grant income totaling $44,000 and $52,000, which was an increase of $19,000 and $27,000 from the same periods in 2021. 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.
On February 7, 2022, we received notice that the SBA had partially approved ONM Environmental's application for forgiveness of its PPP loan in the amount of $174,000. During the three months ended September 30, 2022, Biolargo Water recorded $66,000 of tax credits, primarily related to the refund filed pertaining to the research and development tax credit.
On March 19, 2021, we received notice that the SBA had approved the application for forgiveness Clyra’s PPP loan totaling $43,000.
Selling, General and Administrative Expense – consolidated
Our SG&A expenses include both cash expenses and non-cash expenses (including non-cash stock option compensation expenses). Our SG&A expenses decreased by 2% ($35,000) and increased by 2% ($79,000) in the three and nine months ended September 30, 2022, compared to the same periods in 2021. Our non-cash expenses totaled $1,640,000 in the nine months ended September 30, 2022, compared to $1,314,000 in the nine months ended September 30, 2021. The largest components of our SG&A expenses included (in thousands):
| Three months ended: |
Nine months ended: |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Salaries and payroll related |
$ | 593 | $ | 552 | $ | 2,035 | $ | 1,912 | ||||||||
| Professional fees |
110 | 149 | 451 | 500 | ||||||||||||
| Consulting |
155 | 189 | 605 | 805 | ||||||||||||
| Office expense |
341 | 311 | 1,072 | 900 | ||||||||||||
| Sales and marketing |
71 | 96 | 205 | 255 | ||||||||||||
| Investor relations |
86 | 100 | 233 | 196 | ||||||||||||
| Board of director expense |
68 | 64 | 246 | 198 | ||||||||||||
The increase in salaries and payroll expenses in the nine months ended September 30, 2022 versus 2021 is primarily related to the implementation of a stock option bonus compensation program for employees and other related stock option compensation expenses, and also the hiring of additional personnel to support increasing operations. The decline in the three months ended September 30, 2022 versus 2021 is consistent with reduced stock option grants to employees. Consulting expense decreased as we have reduced the use of consultants to identify business opportunities. The reduction in professional fees is largely due to the reduced use of outside legal counsel and other service providers.
Research and Development
In the three and nine months ended September 30, 2022, we spent $271,000 and $1,018,000 in the research and development of our technologies and products. In the three and nine months ended September 30, 2021, we spent $343,000 and $1,027,000 in the research and development of our technologies and products. This was due to limited liquidity and $59,000 capitalized equipment related to the development of our AEC filters.
Interest expense
Our interest expense for the three and nine months ended September 30, 2022, was $14,000 and $42,000, a decrease of 46% and 80% compared with the same periods of 2021. Our interest expense includes interest from outstanding debt and it is related to the issuance of and modification of convertible promissory notes. We expect our interest expense to be lower in each quarterly period of the year ending December 31, 2022, as compared with the same periods in 2021, due to reduced amounts of debt on our balance sheet.
Net Loss
Net loss for the three and nine months ended September 30, 2022, was $847,000 and $3,724,000, a loss of $0.00 and $0.01 per share, compared to a net loss for the three and nine months ended September 30, 2021, of $1,435,000 and $5,103,000, a loss of $0.01 and $0.02 per share. The decrease in net loss is due primarily to a reduction in interest expense. As noted above (see “Interest Expense”), the reduction of interest expense is directly related to our reduction of the use of debt instruments to finance our working capital requirements.
The net income (loss) per business segment is as follows (in thousands):
| Three months ended |
Nine months ended |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| BioLargo corporate |
(789 | ) | (851 | ) | (2,944 | ) | (2,813 | ) | ||||||||
| ONM |
400 | (72 | ) | 592 | (355 | ) | ||||||||||
| Clyra Medical |
(248 | ) | (239 | ) | (760 | ) | (1,011 | ) | ||||||||
| BLEST |
(152 | ) | (136 | ) | (131 | ) | (513 | ) | ||||||||
| BioLargo Water |
(58 | ) | (137 | ) | (481 | ) | (411 | ) | ||||||||
| Net loss |
(847 | ) | (1,435 | ) | (3,724 | ) | (5,103 | ) | ||||||||
Liquidity and Capital Resources
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, 2022, we had a net loss of $3,724,000, used $2,803,000 cash in operations, and at September 30, 2022, we had working capital of $1,503,000, and current assets of $2,532,000. During the nine months ended September 30, 2022, we generated revenues of $3,786,000 through our operational subsidiaries. (See Note 9.) Our subsidiaries did not individually or in the aggregate generate profits sufficient to fund their operations, or for our corporate operations or other business segments. We do not believe gross profits in 2022 will be sufficient to fund our current level of operations during the next 12 months, and therefore we will have to obtain further investment capital to continue to fund operations and seek to refinance our existing debt, such as through our purchase agreement with Lincoln Park Capital and private securities offerings. (See Note 3.) We have been, and anticipate that we will continue to be, limited in terms of our capital resources.
If we are unable to rely on our current arrangement with Lincoln Park to fund our working capital requirements, we would have to rely on other forms of financing, and there is no assurance that we will be able to do so, or if we do so, it will be on favorable terms. Our current financing arrangement with Lincoln Park expires in March 2023; we expect to enter into a new agreement with Lincoln Park prior to that expiration.
We operate our business in five distinct business segments. Each of these segments obtains cash to fund operations in unique ways. ONM and BLEST generate cash by selling products and services. Clyra Medical obtains cash from revenues, and third-party investments of sales of its common stock. BioLargo Water generates cash through government research grants and tax credits; our corporate operations currently generate cash through private offerings of stock, debt instruments, and warrants, and then provides supplemental capital to support to our various business segments as they advance their technologies, products and commercial efforts.
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.
Note 2, “Summary of Significant Accounting Policies” in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements of the Company’s Form 10-K filed March 31, 2022 in Part II, Item 8, and “Critical Accounting Policies and Estimates” in Part II, Item 7, describe the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. There have been no material changes to the Company’s critical accounting policies and estimates since the Company’s Form 10-K filed March 31, 2022.
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 – the “Exchange Act”) as of the end of the period covered by this Report. There were no changes in our internal control over financial reporting during the quarter ended September 30, 2022, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
Our procedures have been designed to ensure that the information relating to our company, including our consolidated subsidiaries, required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow for timely decisions regarding required disclosure. However, our Company is continuing to grow and evolve, as our product and services sales continues to grow, and as we diversify our clients to include municipalities, increasing strain on our accounting systems. These activities put stress on our overall controls and procedures. As our operations do not yet generate enough cash to fund operations, and we rely on financing activities to maintain our level of operations and fund our anticipated growth, we do not yet have the ability to implement the more sophisticated control systems used by larger companies. Although we have made some improvements, our chief executive officer and chief financial officer have concluded that, as of the evaluation date, our disclosure controls and procedures were not effective, due to the material weakness identified below.
It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
Under the supervision and with the participation of our management, including our chief executive officer and the chief financial officer, we have established internal control procedures in accordance with the guidelines established in the 2013 Framework —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Management evaluated the effectiveness of our internal controls, and concluded that due to our limited financial and personnel resources, the fact that we operate our business in three distinct locations in the U.S. and Canada, and the lack of sophisticated reporting systems, we continue to have a material weakness in our internal controls with respect to the closing our financial statements. Until the Company has the financial resources to implement more robust automated systems, or to hire additional dedicated accounting personnel, we expect this material weakness to continue.
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.
OTHER INFORMATION
| 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, 2022, we sold 3,766,126 and shares of our common stock and received $632,000 in gross and net proceeds from fourteen accredited investors. In addition to the shares, we issued each investor a six-month and a five-year warrant to purchase the number of shares they had purchased, at prices equal to 120% and 150% of the purchase price.
On September 30, 2022, we issued 211,047 shares of our common stock at $0.27 per share in lieu of $23,000 of accrued and unpaid obligations to consultants.
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.
| Other Information |
Increase in Authorized Shares
On August 30, 2022, the Company filed with the Delaware Secretary of State an amendment to its Certification of Incorporation increases the number of authorized shares of its common stock from 400,000,000 to 550,000,000. This action was taken in accordance with the shareholder approval of Proposal 5 at the Company’s annual stockholder’s meeting held June 2, 2022.
Lincoln Park
On March 30, 2020, we entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which the Company has the right to sell to Lincoln Park up to $10,250,000 in shares of the Company’s common stock, $0.00067 par value per share (the “Common Stock”), over the 36-month term of the Purchase Agreement, subject to certain limitations and conditions set forth in the Purchase Agreement.
Concurrently with the execution of the Purchase Agreement on March 30, 2020, we entered into a registration rights agreement (the “Registration Rights Agreement”) with Lincoln Park pursuant to which the Company agreed, among other things, to file a registration statement with the SEC to register for sale under the Securities Act of 1933, as amended (the “Act”), the shares of common stock that may be issued and sold to Lincoln Park from time to time under the Purchase Agreement. We filed a registration statement on Form S-1 with the SEC, which was deemed effective on April 21, 2020.
The Purchase Agreement provides that, commencing on the date that a registration statement is declared effective by the SEC and a final prospectus in connection therewith is filed and the other terms and conditions of the Purchase Agreement are satisfied from time to time on any trading day the Company selects, the Company has the right, in its sole discretion, subject to the conditions and limitations in the Purchase Agreement, to direct Lincoln Park to purchase up to 100,000 shares of Common Stock (each such purchase, a “Regular Purchase”) over the 36-month term of the Purchase Agreement, provided that at least one trading day has passed since the last Regular Purchase. The purchase price of shares of Common Stock pursuant to the Purchase Agreement will be based on the prevailing market price at the time of sale as set forth in the Purchase Agreement. There are no trading volume requirements or restrictions under the Purchase Agreement. Lincoln Park’s obligation under each Regular Purchase shall not exceed $500,000. There is no upper limit on the price per share that Lincoln Park must pay for Common Stock under the Purchase Agreement.
In addition to regular purchases, as described above, the Company may also direct Lincoln Park to purchase additional amounts as accelerated purchases. In all instances, the Company may not sell shares of its Common Stock to Lincoln Park under the Purchase Agreement if it would result in Lincoln Park beneficially owning more than 4.99% of the Common Stock.
Lincoln Park represented to the Company, among other things, that it was an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended), and the Company sold the securities in reliance upon exemptions from the registration requirements of United States federal and state securities laws.
The Purchase Agreement and the Registration Rights Agreement contain customary representations, warranties, agreements and conditions to completing future sale transactions, indemnification rights and obligations of the parties. The Company has the right to terminate the Purchase Agreement at any time, at no cost or penalty. During any “event of default” under the Purchase Agreement, all of which are outside of Lincoln Park’s control, Lincoln Park does not have the right to terminate the Purchase Agreement; however, the Company may not initiate any regular or other purchase of shares by Lincoln Park, until such event of default is cured. There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement or Registration Rights Agreement, other than a prohibition on entering into any “Variable Rate Transaction,” as defined in the Purchase Agreement.
Actual sales of shares of Common Stock to Lincoln Park under the Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the Common Stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations.
The net proceeds under the Purchase Agreement to the Company will depend on the frequency and prices at which the Company sells shares of its stock to Lincoln Park. The Company expects that any proceeds received by the Company from such sales to Lincoln Park will be used for working capital and general corporate purposes.
During the three months ended September 30, 2022, we sold 2,440,958 shares to Lincoln Park, and in exchange received $485,000 and in gross and net proceeds.
See the Exhibit Index for a list of exhibits filed as part of this report and incorporated herein by reference.
| 10.1 |
License Agreement to Clyra Medical Technologies, Inc., dated December 17, 2012 |
Form 8-K |
1/6/2016 |
| 10.2 |
December 30, 2015 amendment to License Agreement with Clyra Medical Technologies, Inc. |
Form 8-K |
1/6/2016 |
| 10.3 |
Consulting Agreement dated December 30, 2015 with Beach House Consulting LLC |
Form 8-K |
1/6/2016 |
| 10.4 |
Commercial Office Lease Agreement for 14921 Chestnut St., Westminster, CA 92683 |
Form 8-K |
8/24/2016 |
| 10.5† |
Form 8-K |
2/27/2020 |
|
| 10.6 |
Form 8-K |
3/31/2020 |
|
| 10.7† |
Form 8-K |
3/19/2021 |
|
| 31.1* |
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| 31.2* |
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| 32* |
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| 101.INS** |
Inline XBRL Instance |
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| 101.SCH** |
Inline XBRL Taxonomy Extension Schema |
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| 101.CAL** |
Inline XBRL Taxonomy Extension Calculation |
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| 101.DEF** |
Inline XBRL Taxonomy Extension Definition |
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| 101.LAB** |
Inline XBRL Taxonomy Extension Labels |
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| 101.PRE** |
Inline XBRL Taxonomy Extension Presentation |
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| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
** Furnished herewith
† Management contract or compensatory plan, contract or arrangement
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.
| BIOLARGO, INC. | ||
| Date: November 14, 2022 |
By: /s/ DENNIS P. CALVERT |
|
| Chief Executive Officer |
||
| Date: November 14, 2022 |
By: /s/ CHARLES K. DARGAN, II |
|
| Chief Financial Officer |
| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
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| 4/8/24 | ||||
| 12/15/23 | ||||
| 3/1/23 | ||||
| 1/31/23 | ||||
| 12/31/22 | ||||
| Filed on: | 11/14/22 | |||
| 11/10/22 | 3 | |||
| 10/1/22 | ||||
| For Period end: | 9/30/22 | |||
| 8/30/22 | ||||
| 6/30/22 | 10-Q, 4 | |||
| 6/2/22 | 8-K, DEF 14A | |||
| 4/8/22 | ||||
| 3/31/22 | 10-K, 10-Q, 4, 8-K | |||
| 3/22/22 | 4, 8-K | |||
| 3/3/22 | 8-K | |||
| 2/7/22 | ||||
| 1/1/22 | ||||
| 12/31/21 | 10-K, 4 | |||
| 12/15/21 | ||||
| 9/30/21 | 10-Q | |||
| 8/6/21 | ||||
| 6/30/21 | 10-Q | |||
| 3/31/21 | 10-Q, 5, 8-K | |||
| 3/19/21 | 8-K | |||
| 12/31/20 | 10-K, 4 | |||
| 6/30/20 | 10-Q, 4, 4/A, 8-K | |||
| 4/21/20 | 424B4, EFFECT | |||
| 3/30/20 | 8-K, NT 10-K | |||
| 3/20/20 | 8-K | |||
| 1/1/19 | ||||
| 6/22/18 | POS AM, S-8 | |||
| 9/7/17 | ||||
| 12/30/15 | 8-K | |||
| 4/29/11 | DEF 14C | |||
| 2/1/08 | 3, 4, 8-K | |||
| 9/7/07 | ||||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 4/12/24 Biolargo, Inc. S-1 6:2M RDG Filings/FA 4/12/24 Biolargo, Inc. POS AM 5:1.8M RDG Filings/FA 4/12/24 Biolargo, Inc. POS AM 5:1.8M RDG Filings/FA 4/01/24 Biolargo, Inc. 10-K 12/31/23 79:9.5M RDG Filings/FA 11/14/23 Biolargo, Inc. 10-Q 9/30/23 68:8.8M RDG Filings/FA 8/14/23 Biolargo, Inc. 10-Q 6/30/23 67:8.6M RDG Filings/FA 5/17/23 Biolargo, Inc. 10-Q 3/31/23 70:8.3M RDG Filings/FA 4/27/23 Biolargo, Inc. S-1 5:1.9M RDG Filings/FA 4/27/23 Biolargo, Inc. POS AM 3:1.8M RDG Filings/FA 4/14/23 Biolargo, Inc. POS AM 4:1.8M RDG Filings/FA 3/31/23 Biolargo, Inc. 10-K 12/31/22 77:9.4M RDG Filings/FA 1/11/23 Biolargo, Inc. S-1/A 5:2.6M RDG Filings/FA 12/23/22 Biolargo, Inc. S-1 5:2.7M RDG Filings/FA |
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 3/30/21 Biolargo, Inc. 10-K 12/31/20 73:9.1M RDG Filings/FA 3/19/21 Biolargo, Inc. 8-K:1,9 3/18/21 2:44K RDG Filings/FA 8/14/20 Biolargo, Inc. 10-Q 6/30/20 61:7.4M RDG Filings/FA 7/07/20 Biolargo, Inc. 8-K:1,9 6/30/20 6:191K RDG Filings/FA 3/31/20 Biolargo, Inc. 8-K:1,9 3/30/20 3:419K RDG Filings/FA 2/27/20 Biolargo, Inc. 8-K:1,9 2/25/20 2:53K RDG Filings/FA 6/22/18 Biolargo, Inc. POS AM 3:2.8M RDG Filings/FA 6/22/18 Biolargo, Inc. S-8 6/22/18 8:502K RDG Filings/FA 5/14/18 Biolargo, Inc. 10-Q 3/31/18 68:6.2M RDG Filings/FA 8/24/16 Biolargo, Inc. 8-K:1,9 8/18/16 2:9.3M RDG Filings/FA 1/06/16 Biolargo, Inc. 8-K:3,8,9 12/30/15 7:462K RDG Filings/FA 3/31/15 Biolargo, Inc. 10-K 12/31/14 75:15M RDG Filings/FA 5/04/07 Biolargo, Inc. 10KSB 12/31/06 19:1.4M Donnelley … Solutions/FA 5/23/03 Biolargo, Inc. 10KSB 12/31/02 15:591K Toppan Merrill/FA |