Table of Contents
As filed with the Securities and Exchange Commission
on April 27, 2020
Registration No. 333-215730
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Post-Effective Amendment
No. 3 to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BIOLARGO, INC.
(Exact name of registrant as specified in its charter)
|
Delaware
|
|
2800
|
|
65-0159115
|
|
(State or other jurisdiction of
|
|
(Primary Standard Industrial
|
|
(I.R.S. Employer
|
|
incorporation or organization)
|
|
Classification Code Number)
|
|
Identification No.)
|
|
BioLargo, Inc.
|
|
14921 Chestnut St.
Westminster, CA 92683
|
|
(888) 400-2863
|
|
(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices)
|
Agents and Corporations, Inc.
1201 Orange Street, Suite 600
Wilmington, DE 19801
(302) 575-0877
|
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
|
| |
| |
|
Copy to:
|
|
Christopher A. Wilson, Esq.
|
|
Wilson Bradshaw, LLP
|
|
18818 Teller Avenue, Suite 115
|
|
Irvine, CA 92612
|
|
Tel: (949) 752-1100
cwilson@wbc-law.com
|
Approximate date of commencement of proposed sale to the
public:
From time to time after this registration statement is declared
effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box: ☒
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check
the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company or an emerging growth company. See
the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and "emerging growth company" in Rule
12b-2 of the Exchange Act.
|
Large accelerated filer: ☐
|
|
Smaller reporting company: ☒
|
|
Accelerated filer: ☐
|
|
Emerging growth company ☐
|
|
Non-accelerated filer: ☐
|
|
|
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 to Section 7(a)(2)(B) of the Securities Act.
☐
The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until the registration statement shall become effective on
such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
EXPLANATORY NOTE
BioLargo, Inc. (the “Company,” “we,” or “us”) filed a Registration
Statement on Form S-1 with the Securities and Exchange Commission
(“SEC”) on June 9, 2017 (the “Registration Statement”). The
Registration Statement was declared effective on June 15, 2017. The
Company filed post-effective Amendment No. 1 to the Registration
Statement on August 28, 2018, and it was declared effective on
September 6, 2018, and post-effective Amendment No. 2 to the
Registration Statement on August 30, 2019, and it was declared
effective on September 11, 2019.
The Company is submitting this Post-Effective Amendment No. 3
(“Amendment”) to its Registration Statement for the purpose of (i)
providing information from its Annual Report on Form 10-K for the
period ended December 31, 2019 filed with the SEC March 31, 2020;
(ii) incorporating by reference the Current Reports on Form 8-K
filed since March 31, 2020, to the date of this Amendment.
The contents of the Registration Statement as previously filed
which are not modified and revised by this Amendment are hereby
incorporated by reference.
The information in this prospectus is not complete and may be
changed. These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
PROSPECTUS (Subject to Completion)
Dated: April 27, 2020
PROSPECTUS
36,090,857 shares of common stock
This prospectus relates to the sale of up to 36,090,857 shares of
our common stock by persons who have purchased shares in a series
of private placements. The aforementioned persons are sometimes
referred to in this prospectus as the selling
stockholders. The shares offered under this
prospectus by the selling stockholders may be sold on the public
market, in negotiated transactions with a broker-dealer or market
maker as principal or agent, or in privately negotiated
transactions not involving a broker dealer. The prices at which the
selling stockholder may sell the shares may be determined by the
prevailing market price of the shares at the time of sale, may be
different than such prevailing market prices or may be determined
through negotiated transactions with third parties. We
will not receive proceeds from the sale of our shares by the
selling stockholders.
As of the date of this prospectus, the selling stockholders have
not exercised any of the warrants to purchase shares registered
hereby. The selling shareholders have sold approximately ________
shares registered for sale in the registration statement of which
this prospectus is part.
Each selling stockholder may be considered an “underwriter” within
the meaning of the Securities Act of 1933, as amended.
Since January 23, 2008, our common stock has been quoted on the OTC
Markets “OTCQB” marketplace (formerly known as the “OTC Bulletin
Board”) under the trading symbol “BLGO.” The selling stockholders
will sell up the shares at prices established on the OTC Bulletin
Board during the term of this offering, at prices different than
prevailing market prices or at privately negotiated prices. On
April 21, 2020, the last reported sale price of our common stock on
the OTC Markets was $0.16.
The securities offered in this prospectus involve a high degree
of risk. You should consider the risk factors beginning on page
3 before purchasing our common stock.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is April 27, 2020
TABLE OF
CONTENTS
Unless otherwise specified, the information in this prospectus
is set forth as of April 27, 2020, and we anticipate
that changes in our affairs will occur after such date. We have not
authorized any person to give any information or to make any
representations, other than as contained in this prospectus, in
connection with the offer contained in this prospectus. If any
person gives you any information or makes representations in
connection with this offer, do not rely on it as information we
have authorized. This prospectus is not an offer to sell our common
stock in any state or other jurisdiction to any person to whom it
is unlawful to make such offer.
PROSPECTUS
SUMMARY
The following summary highlights selected information from this
prospectus and may not contain all the information that is
important to you. To understand our business and this registration
statement fully, you should read this entire prospectus carefully,
including the financial statements and the related notes beginning
on page F-1. When we refer in this prospectus to “BioLargo,” the
“Company,” “our company,” “we,” “us” and “our,” we mean BioLargo,
Inc., a Delaware corporation, and its subsidiaries, BioLargo Life
Technologies, Inc., a California corporation, Odor-No-More, Inc., a
California corporation, BioLargo Water Investment Group, Inc., a
California corporation (and its subsidiary, BioLargo Water, Inc., a
Canadian corporation), BioLargo Development Corp., a California
corporation, BioLargo Engineering, Science & Technologies, LLC,
Tennessee limited liability company, and partially owned Clyra
Medical Technologies, Inc., a California corporation. This
prospectus contains forward-looking statements and information
relating to BioLargo. See “Cautionary Note Regarding Forward
Looking Statements” on page 14.
Our Company
BioLargo, Inc. is a Delaware corporation.
Our principal executive offices are located at 14921 Chestnut St.,
Westminster, California 92683. Our telephone number is (888)
400-2863.
The Registration Statement
This prospectus covers 36,090,857 shares of stock, all of which are
offered for sale by the selling stockholders.
ABOUT THIS
REGISTRATION
|
Securities Being Registered
|
This Prospectus covers the following shares, all of which are being
sold by the selling stockholders: 20,159,062 shares of common stock
of BioLargo issuable upon the exercise of outstanding warrants to
purchase common stock, and 15,931,795 outstanding shares. As
of the date hereof, the selling stockholders have not exercised any
of the warrants, but have sold approximately __________ shares held
by them and offered for sale by this prospectus.
|
|
|
|
|
Initial Offering Price
|
The selling stockholders will sell up to 36,090,857 shares at
prices established on the OTC Electronic Bulletin Board during the
term of this offering, at prices different than prevailing market
prices or at privately negotiated prices. We may receive up to
approximately $9.5 million in the event the selling stockholders
exercise warrants to purchase 20,159,062 shares.
|
|
|
|
|
Termination of the Offering
|
The offering will conclude when all the 36,090,857 shares of common
stock registered hereby have been sold by the selling
stockholders.
|
|
|
|
|
Risk Factors
|
An investment in our common stock is highly speculative and
involves a high degree of risk. See “Risk Factors” beginning on
page 3.
|
RISK
FACTORS
An investment in our common stock is highly speculative,
involves a high degree of risk and should be made only by investors
who can afford a complete loss. You should carefully consider the
following risk factors, together with the other information in this
prospectus, including our financial statements and the related
notes, before you decide to buy our common stock. If any of the
following risks actually occurs, then our business,
financial condition or results of operations could be materially
adversely affected, the trading of our common stock could decline,
and you may lose all or part of your investment therein.
Risks Relating to our Business
COVID-19
The Covid-19 crisis creates an environment in which no person can
be certain about what is next. The global reach and impact are far
reaching and place extreme pressure on financing, sales, accounts
receivable collection cycles, and any growth plan. We believe the
Covid-19 virus crisis may have a delaying effect on our plans for
growth and expansion. We urge the reader to consider our
forward-looking statements in light of the extraordinary
circumstances of today’s business, social and economic climate.
While our company is mobilizing to be a solutions provider to help
inhibit the spread of Covid-19, these business plans are not mature
and may be more difficult that we expect. While it may be
reasonable to assume that the crisis will subside, we cannot be
certain about the timing and a host of impacts that cannot be
easily predicted to occur.
Our business could be adversely affected by the coronavirus
or other pathogens, or similar crises.
Our business could be adversely affected by the recent outbreak of
coronavirus in and across the United States and world. In addition,
our results and financial condition may be adversely affected by
pending or possible federal or state legislation (or other similar
laws, regulations, orders or other governmental or regulatory
actions) that, if adopted, would impose restrictions on our ability
to operate our business. For example, our sales and technical field
force has been restricted from traveling. While we have implemented
cautionary procedures at our manufacturing facility, there may be
disruptions to our ability to manufacture due to “stay at home”
orders or additional workplace controls. Our workplace would be
further disrupted if one or more of our employees tested positive
for COVID-19. Our customers may be less inclined or unable to
purchase our products due to restrictions under which they may be
operating. If financial markets continue to tighten, we may have
more limited ability to raise necessary financing. Further, our
business plan includes products which will require regulatory
approvals. Such approvals may be delayed significantly as a result
of the pandemic as government resources are directed to address the
pandemic. Even if the COVID-19 pandemic passes, another crisis with
similar effects could develop and harm our business, financial
results and liquidity.
Our limited operating history makes evaluation of our
business difficult.
We have limited and only nominal historical financial data upon
which to base planned operating expenses or forecast accurately our
future operating results. Because our operations are not yet
sufficient to fund our operational expenses, we rely on investor
capital to fund operations. Our limited operational history make it
difficult to forecast the need for future financing activities.
Further, our limited operating history will make it difficult for
investors and securities analysts to evaluate our business and
prospects. Our failure to address these risks and difficulties
successfully could seriously harm us.
We have never generated significant revenues, have a history
of losses, and cannot assure you that
we will ever become or remain profitable.
We have not yet generated any significant revenue from operations,
and, accordingly, we have incurred net losses every year since our
inception. To date, we have dedicated most of our financial
resources to research and development, general and administrative
expenses, and initial sales and marketing activities. We have
funded the majority of our activities through the issuance of
convertible debt or equity securities. Although sale of our
CupriDyne Clean products are increasing, and we are devoting more
energy and money to our sales and marketing activities, we continue
to anticipate net losses and negative cash flow for the
foreseeable future. Our ability to reach positive cash flow depends
on many factors, including our ability to fund sales and marketing
activities, and the rate of client adoption. There can be no
assurance that our revenues will be sufficient for us to become
profitable in 2020 or future years, or thereafter
maintain profitability. We may also face unforeseen problems,
difficulties, expenses or delays in implementing our business plan,
including generally the need for odor control products in solid
waste handling operations, which we may not fully understand or be
able to predict.
Our cash requirements are significant.
We will continue to
require additional financing to sustain our operations and
without it we may not be able to continue operations.
Our cash requirements and expenses continue to be significant. Our
net cash used in continuing operations for the year ended December
31, 2019 was almost $4,000,000, over $300,000 per month, of which
approximately $100,000 per month was financed by outside investors
directly into Clyra Medical Technologies, Inc. During that same
period, we generated only $1,861,000 in total gross revenues. Thus,
in order to become profitable, we must significantly increase our
revenues. Although our revenues have been increasing through sales
of our products and from our engineering division, we expect to
continue to use cash in 2020 as it becomes available.
At December 31, 2019, we had working capital deficit of
approximately $3,289,000. Our auditor’s report for the year ended
December 31, 2019 includes an explanatory paragraph to their audit
opinion stating that our recurring losses from operations and
working capital deficiency raise substantial doubt about our
ability to continue as a going concern. We do not currently have
sufficient financial resources to fund our operations or those of
our subsidiaries. Therefore, we need additional financing to
continue these operations.
We have relied on private securities offerings, as well as sales of
shares to Lincoln Park Capital Fund, LLC (“Lincoln Park”) (see
“Risks Relating to our Common Stock”, below), to provide cash
needed to close the gap between operational revenue and expenses.
Our ability to rely on private financing may change if the United
States enters a recession, or if the stock market does not recover
from the current bull market. The coronavirus pandemic, and the
responses of governments worldwide to the pandemic, has caused
significant turmoil and downward pressure in the U.S. stock market.
We expect as a result that many private investors will forego
high-risk investments, and thus while we have been able to rely on
private investments in the past, we may not be able to do so in the
foreseeable future. See “Risks Relating to Our Common Stock” at
page 16.
We regularly issue
stock, or stock options, instead of
cash, to pay some of our operating expenses. These issuances are
dilutive to our existing stockholders.
We are party to agreements that provide for the payment of, or
permit us to pay at our option, securities rather than cash in
consideration for services provided to us. We include these
provisions in agreements to allow us to preserve cash. We
anticipate that we will continue to do so in the future. All such
issuances preserve our cash reserves, but are also dilutive to our
stockholders because they increase (and will increase in the
future) the total number of shares of our common stock issued and
outstanding, even though such arrangements assist us with managing
our cash flow. These issuances also increase the expense amount
recorded.
Our stockholders face further potential dilution in any new
financing.
Our private securities offerings typically provide for convertible
securities, including notes and warrants. Any additional capital
that we raise would dilute the interest of the current stockholders
and any persons who may become stockholders before such financing.
Given the low price of our common stock, such dilution in any
financing of a significant amount could be substantial.
Our stockholders face further potential adverse effects from
the terms of any preferred stock that may be issued in the
future.
Our certificate of incorporation authorizes 50 million shares of
preferred stock. None are outstanding as of the date hereof. In
order to raise capital to meet expenses or to acquire a business,
our board of directors may issue additional stock, including
preferred stock. Any preferred stock that we may issue may have
voting rights, liquidation preferences, redemption rights and other
rights, preferences and privileges. The rights of the holders of
our common stock will be subject to, and in many respects
subordinate to, the rights of the holders of any such preferred
stock. Furthermore, such preferred stock may have other rights,
including economic rights, senior to our common stock that could
have a material adverse effect on the value of our common stock.
Preferred stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes,
can also have the effect of making it more difficult for a third
party to acquire a majority of our outstanding voting stock,
thereby delaying, deferring or preventing a change in control of
our company.
There are several specific business opportunities we are
considering in further development of our business. None of these
opportunities is yet the subject of a definitive agreement, and
most or all of these opportunities will require additional funding
obligations on our part, for which funding is not currently in
place.
In furtherance of our business plan, we are presently considering a
number of opportunities to promote our business, to further develop
and broaden, and to license, our technology with third parties.
While discussions are underway with respect to such opportunities,
there are no definitive agreements in place with respect to any of
such opportunities at this time. There can be no assurance
that any of such opportunities being discussed will result in
definitive agreements or, if definitive agreements are entered
into, that they will be on terms that are favorable to
us.
Moreover, should any of these opportunities result in definitive
agreements being executed or consummated, we may be required to
expend additional monies above and beyond our current operating
budget to promote such endeavors. No such financing is in place at
this time for such endeavors, and we cannot assure you that any
such financing will be available, or if it is available, whether it
will be on terms that are favorable to our company.
We expect to incur future losses and may not be able to
achieve profitability.
Although we are generating revenue from the sale of our products,
and we expect to generate revenue from new products we are
introducing, and eventually from other license or supply
agreements, we anticipate net losses and negative cash flow to
continue for the foreseeable future until our products are expanded
in the marketplace and they gain broader acceptance by resellers
and customers. Our current level of sales is not sufficient to
support the financial needs of our business. We cannot predict when
or if sales volumes will be sufficiently large to cover our
operating expenses. We intend to expand our marketing efforts of
our products as financial resources are available, and we intend to
continue to expand our research and development efforts.
Consequently, we will need to generate significant additional
revenue or seek additional financings to fund our operations. This
has put a proportionate corresponding demand on capital. Our
ability to achieve profitability is dependent upon our efforts to
deliver a viable product and our ability to successfully bring it
to market, which we are currently pursuing. Although our management
is optimistic that we will succeed in licensing our technology, we
cannot be certain as to timing or whether we will generate
sufficient revenue to be able to operate profitably. If we cannot
achieve or sustain profitability, then we may not be able to fund
our expected cash needs or continue our operations. If we are not
able to devote adequate resources to promote commercialization of
our technology, then our business plans will suffer and may
fail.
Because we have limited resources to devote to sales, marketing and
licensing efforts with respect to our technology, any delay in such
efforts may jeopardize future research and development of
technologies and commercialization of our technology. Although our
management believes that it can finance commercialization efforts
through sales of our securities and possibly other capital sources,
if we do not successfully bring our technology to market, our
ability to generate revenues will be adversely
affected.
Our internal controls are not effective.
We have determined that our disclosure controls and procedures and
our internal control over financial reporting are currently not
effective. The lack of effective internal controls, has not yet,
but could in the future, materially adversely affect our financial
condition and ability to carry out our business plan. As more
financial resources come available, we need to invest in additional
personnel to better manage the financial reporting processes.
Our management team for financial reporting, under the supervision
and with the participation of our chief executive officer and
our chief financial officer, conducted an evaluation of the
effectiveness of the design and operation of our internal controls.
Recognizing the dynamic nature and growth of the Company’s business
in the past two years, including the growth of the core operations
and the increase in the number of employees, management has
recognized the strain on the overall internal control environment.
As a result, management has concluded that its internal controls
over financial reporting are not effective. Management identified a
material weakness with respect to deficiencies in its financial
closing and reporting procedures. Management believes this is due
to a lack of resources. Management intends to add accounting
personnel and operating staff and more sophisticated systems in
order to improve its reporting procedures and internal controls,
subject to available capital. Until we have adequate resources
to address these issues, any material weaknesses may
materially adversely affect our ability to report accurately our
financial condition and results of operations in the future in a
timely and reliable manner. In addition, although we continually
review and evaluate internal control systems to allow management to
report on the sufficiency of our internal controls, we cannot
assure you that we will not discover additional weaknesses in our
internal control over financial reporting. Any such additional
weakness or failure to remediate the existing weakness could
materially adversely affect our financial condition or ability
to comply with applicable financial reporting requirements and the
requirements of the Company’s various financing
agreements.
If we are not able to manage our anticipated growth
effectively, we may not become profitable.
We anticipate that expansion will continue to be required to
address potential market opportunities for our technology and our
products. Our existing infrastructure is limited. While we
believe our current manufacturing processes as well as our office
and warehousing provide the basic resources to expand as we grow
sales of CupriDyne Clean to more than $2 million per
month, our infrastructure will need more staffing to support
manufacturing, customer service, administration as well as
sales/account executive functions. There can be no assurance
that we will have the financial resources to create new
infrastructure, or that any such infrastructure will be
sufficiently scalable to manage future growth, if any. There also
can be no assurance that, if we invest in additional
infrastructure, we will be effective in expanding our operations or
that our systems, procedures or controls will be adequate to
support such expansion. In addition, we will need to provide
additional sales and support services to our partners if we achieve
our anticipated growth with respect to the sale of our technology
for various applications. Failure to properly manage an increase in
customer demands could result in a material adverse effect on
customer satisfaction, our ability to meet our contractual
obligations, and our operating results.
Some of the products incorporating our technology will
require regulatory approval.
The products in which our technology may be incorporated have both
regulated and non-regulated applications. The regulatory approvals
for certain applications may be difficult, impossible, time
consuming and/or expensive to obtain. While our management believes
such approvals can be obtained for the applications contemplated,
until those approvals from the FDA or the EPA or other regulatory
bodies, at the federal and state levels, as may be required are
obtained, we may not be able to generate commercial revenues for
regulated products. Certain specific regulated applications and
their use require highly technical analysis and additional
third-party validation and will require regulatory approvals from
organizations like the FDA. Certain applications may also be
subject to additional state and local agency regulations,
increasing the cost and time associated with commercial strategies.
Additionally, most products incorporating our technology that may
be sold in the European Union (“EU”) will require EU and possibly
also individual country regulatory approval. All such approvals,
including additional testing, are time-consuming, expensive and do
not have assured outcomes of ultimate regulatory
approval.
We need to outsource and rely on third parties for the
manufacture of the chemicals, material components or delivery
apparatus used in our technology, and part of our future success
will be dependent on the timeliness and effectiveness of the
efforts of these third parties.
We do not have the required financial and human resources or
capability to manufacture the chemicals necessary to make our
odor control products. Our business model calls for the outsourcing
of the manufacture of these chemicals in order to reduce our
capital and infrastructure costs as a means of potentially
improving our financial position and the profitability of our
business. Accordingly, we must enter into agreements with other
companies that can assist us and provide certain capabilities,
including sourcing and manufacturing, which we do not possess. We
may not be successful in entering into such alliances on favorable
terms or at all. Even if we do succeed in securing such agreements,
we may not be able to maintain them. Furthermore, any delay in
entering into agreements could delay the development and
commercialization of our technology or reduce its competitiveness
even if it reaches the market. Any such delay related to such
future agreements could adversely affect our business. While
we have been able to secure materials and supplies like plastic
containers through the COVID-19 crisis, we have not assurances that
our ability to purchase in large quantities on a continual
basis.
If any party to which we have outsourced certain functions
fails to perform its obligations under agreements with us, the
commercialization of our technology could be delayed or
curtailed.
To the extent that we rely on other companies to manufacture the
chemicals used in our technology, or sell or market products
incorporating our technology, we will be dependent on the
timeliness and effectiveness of their efforts. If any of these
parties does not perform its obligations in a timely and effective
manner, the commercialization of our technology could be delayed or
curtailed because we may not have sufficient financial resources or
capabilities to continue such efforts on our own.
We rely on a small number of key supply ingredients in order
to manufacture our products.
All of the supply ingredients used to manufacture our products are
readily available from multiple suppliers. However, commodity
prices for these ingredients can vary significantly, and the
margins that we are able to generate could decline if prices rise.
If our manufacturing costs rise significantly, we may be forced to
raise the prices for our products, which may reduce their
acceptance in the marketplace.
If our technology or products incorporating our technology do
not gain market acceptance, it is unlikely that we will become
profitable.
The potential markets for products into which our technology can be
incorporated are rapidly evolving, and we have many successful
competitors including some of the largest and most well-established
companies in the world. The commercial success of products
incorporating our technology will depend on the adoption of our
technology by commercial and consumer end users in various
fields.
Market acceptance may depend on many factors, including:
| |
●
|
the willingness and ability of consumers and industry partners to
adopt new technologies from a company with little or no history in
the industry;
|
| |
●
|
our ability to convince potential industry partners and consumers
that our technology is an attractive alternative to other competing
technologies;
|
| |
●
|
our ability to license our technology in a commercially effective
manner;
|
| |
●
|
our ability to continue to fund operations while our products move
through the process of gaining acceptance, before the time in which
we are able to scale up production to obtain economies of scale;
and
|
| |
●
|
our ability to overcome brand loyalties.
|
If products incorporating our technology do not achieve a
significant level of market acceptance, then demand for our
technology itself may not develop as expected, and, in such event,
it is unlikely that we will become profitable.
Any revenues that we may earn in the future are
unpredictable, and our operating results are likely to fluctuate
from quarter to quarter.
We believe that our future operating results will fluctuate due to
a variety of factors, including:
| |
●
|
delays in product development by us or third parties;
|
| |
●
|
market acceptance of products incorporating our technology;
|
| |
●
|
changes in the demand for, and pricing of, products incorporating
our technology;
|
| |
●
|
competition and pricing pressure from competitive products; and
|
| |
●
|
expenses related to, and the results of, proceedings relating to
our intellectual property.
|
We expect our operating expenses will continue to fluctuate
significantly in 2020 and beyond, as we continue our research and
development and increase our marketing and licensing activities.
Although we expect to generate revenues from licensing our
technology in the future, revenues may decline or not grow as
anticipated, and our operating results could be substantially
harmed for a particular fiscal period. Moreover, our operating
results in some quarters may not meet the expectations of stock
market analysts and investors. In that case, our stock price most
likely would decline.
Some of our revenue may
be dependent on the award of new contracts
from the U.S. government, which we do not
directly control.
Some of our revenue has been generated from sales to the U.S.
Defense Logistics Agency through a bid process in response to
request for bids. The timing and size of requests for bids is
unpredictable and outside of our control. The number of other
companies competing for these bids is also unpredictable and
outside of our control. In the event of more competition for these
awards, we may have to reduce our margins. These variables make it
difficult to predict when or if we will sell more products to the
U.S. government, which in turns makes it difficult to stock
inventory and purchase raw materials.
We have limited product distribution experience, and we rely
in part on third parties who may not successfully sell our
products.
We have limited product distribution experience and rely in part on
product distribution arrangements with third parties. In our future
product offerings, we may rely solely on third parties for product
sales and distribution. We also plan to license our technology to
certain third parties for commercialization of certain
applications. We expect to enter into additional distribution
agreements and licensing agreements in the future, and we may not
be able to enter into these additional agreements on terms that are
favorable to us, if at all. In addition, we may have limited or no
control over the distribution activities of these third parties.
These third parties could sell competing products and may devote
insufficient sales efforts to our products. As a result, our future
revenues from sales of our products, if any, will depend on the
success of the efforts of these third parties.
We may not be able to attract or retain qualified senior
personnel.
We believe we are currently able to manage our current business
with our existing management team. However, as we expand the scope
of our operations, we will need to obtain the full-time services of
additional senior management and other personnel. Competition for
highly-skilled personnel is intense, and there can be no assurance
that we will be able to attract or retain qualified senior
personnel. Our failure to do so could have an adverse effect on our
ability to implement our business plan. As we add full-time senior
personnel, our overhead expenses for salaries and related items
will increase from current levels and, depending upon the number of
personnel we hire and their compensation packages, these increases
could be substantial.
If we lose our key personnel or are unable to attract and
retain additional personnel, we may be unable to achieve
profitability.
Our future success is substantially dependent on the efforts of our
senior management, particularly Dennis P. Calvert, our president
and chief executive officer. The loss of the services of Mr.
Calvert or other members of our senior management may significantly
delay or prevent the achievement of product development and other
business objectives. Because of the scientific nature of our
business, we depend substantially on our ability to attract and
retain qualified marketing, scientific and technical personnel.
There is intense competition among specialized and
technologically-oriented companies for qualified personnel in the
areas of our activities. If we lose the services of, or do not
successfully recruit, key marketing, scientific and technical
personnel, then the growth of our business could be substantially
impaired. At present, we do not maintain key man insurance for any
of our senior management, although management is evaluating the
potential of securing this type of insurance in the future as may
be available.
Nondisclosure agreements with employees and others may not
adequately prevent disclosure of trade secrets and other
proprietary information.
In order to protect our proprietary technology and processes, we
rely in part on nondisclosure agreements with our employees,
potential licensing partners, potential manufacturing partners,
testing facilities, universities, consultants, agents and other
organizations to which we disclose our proprietary information.
These agreements may not effectively prevent disclosure of
confidential information and may not provide an adequate remedy in
the event of unauthorized disclosure of confidential information.
In addition, others may independently discover trade secrets and
proprietary information, and in such cases we could not assert any
trade secret rights against such parties. Costly and time-consuming
litigation could be necessary to enforce and determine the scope of
our proprietary rights, and failure to obtain or maintain trade
secret protection could adversely affect our competitive business
position. Since we rely on trade secrets and nondisclosure
agreements, in addition to patents, to protect some of our
intellectual property, there is a risk that third parties may
obtain and improperly utilize our proprietary information to our
competitive disadvantage. We may not be able to detect unauthorized
use or take appropriate and timely steps to enforce our
intellectual property rights.
We may become subject to product liability
claims.
As a business that manufactures and markets products for use by
consumers and institutions, we may become liable for any damage
caused by our products, whether used in the manner intended or not.
Any such claim of liability, whether meritorious or not, could be
time-consuming and/or result in costly litigation. Although we
maintain general liability insurance, our insurance may not cover
potential claims of the types described above and may not be
adequate to indemnify for all liabilities that may be imposed. Any
imposition of liability that is not covered by insurance or is in
excess of insurance coverage could harm our business and operating
results, and you may lose some or all of any investment you have
made, or may make, in our company.
Litigation or the actions of regulatory authorities may harm
our business or otherwise distract our management.
Substantial, complex or extended litigation could cause us to incur
major expenditures and distract our management. For example,
lawsuits by employees, former employees, investors, stockholders,
partners, customers or others, or actions taken by regulatory
authorities, could be very costly and substantially disrupt our
business. As a result of our financing activities over time, and by
virtue of the number of people that have invested in our company,
we face increased risk of lawsuits from investors. Such lawsuits or
actions could from time to time be filed against our company and/or
our executive officers and directors. Such lawsuits and actions are
not uncommon, and we cannot assure you that we will always be able
to resolve such disputes or actions on terms favorable to our
company.
If we suffer negative publicity concerning the safety or
efficacy of our products, our sales may be harmed.
If concerns should arise about the safety or efficacy of any of our
products that are marketed, regardless of whether or not such
concerns have a basis in generally accepted science or
peer-reviewed scientific research, such concerns could adversely
affect the market for those products. Similarly, negative publicity
could result in an increased number of product liability claims,
whether or not those claims are supported by applicable law.
The licensing of our technology or the manufacture, use or
sale of products incorporating our technology may infringe on the
patent rights of others, and we may be forced to litigate if an
intellectual property dispute arises.
If we infringe or are alleged to have infringed another party’s
patent rights, we may be required to seek a license, defend an
infringement action or challenge the validity of the patents in
court. Patent litigation is costly and time consuming. We may not
have sufficient resources to bring these actions to a successful
conclusion. In addition, if we do not obtain a license, do not
successfully defend an infringement action or are unable to have
infringed patents declared invalid, we may:
| |
●
|
incur substantial monetary damages;
|
| |
●
|
encounter significant delays in marketing our current and proposed
product candidates;
|
| |
●
|
be unable to conduct or participate in the manufacture, use or sale
of product candidates or methods of treatment requiring
licenses;
|
| |
●
|
lose patent protection for our inventions and products; or
|
| |
●
|
find our patents are unenforceable, invalid or have a reduced scope
of protection
|
Parties making such claims may be able to obtain injunctive relief
that could effectively block our company’s ability to further
develop or commercialize our current and proposed product
candidates in the United States and abroad and could result in the
award of substantial damages. Defense of any lawsuit or failure to
obtain any such license could substantially harm our company.
Litigation, regardless of outcome, could result in substantial cost
to, and a diversion of efforts by, our company.
Our patents are expensive to maintain, our patent
applications are expensive to prosecute, and thus we are unable to
file for patent protection in many countries.
Our ability to compete effectively will depend in part on our
ability to develop and maintain proprietary aspects of our
technology and either to operate without infringing the proprietary
rights of others or to obtain rights to technology owned by third
parties. Pending patent applications relating to our technology may
not result in the issuance of any patents or any issued patents
that will offer protection against competitors with similar
technology. We must employ patent attorneys to prosecute our patent
applications both in the United States and internationally.
International patent protection requires the retention of patent
counsel and the payment of patent application fees in each foreign
country in which we desire patent protection, on or before filing
deadlines set forth by the International Patent Cooperation Treaty
(“PCT”). We therefore choose to file patent applications only in
foreign countries where we believe the commercial opportunities
require it, considering our available financial resources and the
needs for our technology. This has resulted, and will continue to
result, in the irrevocable loss of patent rights in all but a few
foreign jurisdictions.
Patents we receive may be challenged, invalidated or circumvented
in the future, or the rights created by those patents may not
provide a competitive advantage. We also rely on trade secrets,
technical know-how and continuing invention to develop and maintain
our competitive position. Others may independently develop
substantially equivalent proprietary information and techniques or
otherwise gain access to our trade secrets.
We are subject to risks related to future business outside of
the United States.
Over time, we may develop business relationships outside of North
America, and as those efforts are pursued, we will face risks
related to those relationships such as:
| |
●
|
foreign currency fluctuations;
|
| |
●
|
unstable political, economic, financial and market conditions;
|
| |
●
|
import and export license requirements;
|
| |
●
|
increases in tariffs and taxes;
|
| |
●
|
high levels of inflation;
|
| |
●
|
restrictions on repatriating foreign profits back to the United
States;
|
| |
●
|
greater difficulty collecting accounts receivable and longer
payment cycles;
|
| |
●
|
less favorable intellectual property laws, and the lack of
intellectual property legal protection;
|
| |
●
|
regulatory requirements;
|
| |
●
|
unfamiliarity with foreign laws and regulations; and
|
| |
●
|
changes in labor conditions and difficulties in staffing and
managing international operations.
|
The volatility of certain raw material costs may adversely
affect operations and competitive price advantages for products
that incorporate our technology.
Most of the chemicals and other key materials that we use in our
business, such as minerals, fiber materials and packaging
materials, are neither generally scarce nor price sensitive, but
prices for such chemicals and materials can be cyclical. Supply and
demand factors, which are beyond our control, generally affect the
price of our raw materials. We try to minimize the effect of price
increases through production efficiency and the use of alternative
suppliers, but these efforts are limited by the size of our
operations. If we are unable to minimize the effects of increased
raw material costs, our business, financial condition, results of
operations and cash flows may be materially adversely affected.
Certain of our products sales historically have been highly
impacted by fluctuations in seasons and weather.
Industrial odor control products have proven highly effective in
controlling volatile organic compounds that are released as vapors
produced by decomposing waste material. Such vapors are produced
with the highest degree of intensity in temperatures between 40
degrees Fahrenheit (5 degrees Celsius) and 140 degrees Fahrenheit
(60 degrees Celsius). When weather patterns are cold or in times of
precipitation, our clients are less prone to use our odor control
products, presumably because such vapors are less noticeable or, in
the case of precipitation, can be washed away or altered. This
leads to unpredictability in use and sales patterns for,
especially, our CupriDyne Clean product line which accounts for
over one-half our total sales.
The cost of maintaining our public company reporting
obligations is high.
We are obligated to maintain our periodic public filings and public
reporting requirements, on a timely basis, under the rules and
regulations of the SEC. In order to meet these obligations, we will
need to continue to raise capital. If adequate funds are not
available, we will be unable to comply with those requirements and
could cease to be qualified to have our stock traded in the public
market. As a public company, we incur significant legal, accounting
and other expenses. In addition, the Sarbanes-Oxley Act of 2002, as
well as related rules adopted by the SEC, has imposed substantial
requirements on public companies, including certain corporate
governance practices and requirements relating to internal control
over financial reporting under Section 404 of the Sarbanes-Oxley
Act.
Business disruptions could seriously harm our future revenue
and financial condition and increase our costs and
expenses.
Our operations, and those of our contractors and consultants, could
be subject to pandemics, earthquakes, power shortages,
telecommunications failures, water shortages, floods, hurricanes,
typhoons, fires, extreme weather conditions, medical epidemics,
acts of terrorism, acts of war and other natural or man-made
disasters or business interruptions, for which we are predominantly
self-insured. The occurrence of any of these business disruptions
could seriously harm our operations and financial condition and
increase our costs and expenses. We rely in part on third-party
manufacturers to produce and process our products or the raw
materials used to make our products. Our ability to obtain supplies
of our products or raw materials could be disrupted if the
operations of these suppliers are affected by a man-made or natural
disaster, pandemics, epidemics, or other business interruption,
including the recent novel strain of coronavirus (SARS-CoV-2
aka COVID-19) that originally surfaced in Wuhan, China in
December 2019. The extent to which COVID-19 impacts our
business will depend on future developments, which are highly
uncertain and cannot be predicted, including new information which
may emerge concerning the severity of COVID-19 and the actions to
contain 2 or treat its impact, among others. Our corporate
headquarters and offices of Odor-No-More are in Southern California
near major earthquake faults and fire zones. Our operations and
financial condition could suffer in the event of a major
earthquake, fire or other natural disaster.
A coronavirus pandemic is ongoing in many parts of the world
and may result in significant disruptions to our clients and/or
supply chain which could have a material adverse effect on our
business and revenues.
A coronavirus pandemic exists as of the filing of this report. As
the pandemic is still evolving as of this time, much of its impact
remains unknown, and it is impossible to predict the impact it may
have on the development of our business and on our revenues.
Our corporate headquarters and offices of our Odor-No-More division
are in Southern California. On March 19, 2020, California’s
Governor issued an executive order that all residents of the State
must stay at home indefinitely except as needed to maintain
“essential critical infrastructure”. As a result, many businesses
have closed and many people are out of work. Although many of our
clients are included in the definitions of “essential critical
infrastructure”, such as wastewater treatment plants and refuse
collection infrastructure, it is likely that this “stay at home”
order and its effect on California’s economy (and similar orders
across the country and world, and their effect on the U.S. and
worldwide economy) will adversely affect our clients willingness to
purchase our products and services, and thus adversely affect our
revenues. No one knows how long these “stay at home” orders will
remain in effect, and experts expect that an extended (months-long)
stay at home requirement is likely to have an extended and
significant impact on the economy as a whole.
The severity of the coronavirus pandemic could also make access to
our existing supply chain difficult or impossible by delaying the
delivery of key raw materials used in our product candidates and
therefore delay the delivery of our products. Any of these results
could materially impact our business and have an adverse effect on
our business.
A recession in the United States may affect our
business.
If the U.S. economy were to contract into a recession or
depression, our existing clients, and potential future clients, may
divert their resources to other goods and services, and our
business may suffer.
Risks Relating to our Common Stock
The sale or issuance of our common stock to Lincoln Park may
cause dilution, and the sale of the shares of common stock acquired
by Lincoln Park, or the perception that such sales may occur, could
cause the price of our common stock to fall.
On August 25, 2017, we entered into an agreement Lincoln Park,
pursuant to which Lincoln Park committed to purchase up to
$10,000,000 of our common stock for a three-year period. Throughout
the 2017 agreement, we sold Lincoln Park approximately 6,300,000
shares of our stock for approximately $1,800,000.
On March 30, 2020, we entered into a second agreement with Lincoln
Park (the “2020 LPC Agreement”), replacing the 2017 agreement,
pursuant to which we can sell Lincoln Park up to $10,250,000 of our
shares. We issued Lincoln Park 1,785,715 shares as
consideration for its commitments under the agreement, and Lincoln
Park made an initial purchase of $250,000 of shares for $0.14 per
share. We filed a registration statement with the SEC that was
declared effective on April 21, 2020, registering Lincoln Park’s
sale of the commitment shares, the $250,000 in shares in the
initial purchase, and an additional 40,000,000 shares that it may
purchase. Under the 2020 LPC Agreement, we generally have the right
to control the timing and amount of any sales of our shares to
Lincoln Park. Sales of our common stock, if any, to Lincoln Park
will depend on market conditions and other factors to be determined
by us. We may ultimately decide to sell to Lincoln Park all, some
or none of the shares of our common stock that may be available for
us to sell pursuant to the 2020 LPC Agreement. If and when we do
sell shares to Lincoln Park, after Lincoln Park has acquired the
shares, Lincoln Park may resell all, some or none of those shares
at any time or from time to time in its discretion. Therefore,
sales to Lincoln Park by us could result in substantial dilution to
the interests of other holders of our common stock, as well as
sales of our stock by Lincoln Park into the open market causing
reductions in the price of our common stock. Additionally, the sale
of a substantial number of shares of our common stock to Lincoln
Park, or the anticipation of such sales, could make it more
difficult for us to sell equity or equity-related securities in the
future at a time and at a price that we might otherwise desire to
effect sales.
Our common stock is thinly traded and largely
illiquid.
Our stock is currently quoted on the OTC Markets (OTCQB). Being
quoted on the OTCQB has made it more difficult to buy or sell our
stock and from time to time has led to a significant decline in the
frequency of trades and trading volume. Continued trading on the
OTCQB will also likely adversely affect our ability to obtain
financing in the future due to the decreased liquidity of our
shares and other restrictions that certain investors have for
investing in OTCQB traded securities. While we intend to seek
listing on the Nasdaq Stock Market (“Nasdaq”) or another national
stock exchange when our company is eligible, there can be no
assurance when or if our common stock will be listed on Nasdaq or
another national stock exchange.
The market price of our stock is subject to
volatility.
Because our stock is thinly traded, its price can change
dramatically over short periods, even in a single day. An
investment in our stock is subject to such volatility and,
consequently, is subject to significant risk. The market price of
our common stock could fluctuate widely in response to many
factors, including:
| |
●
|
developments with respect to patents or proprietary rights;
|
| |
●
|
announcements of technological innovations by us or our
competitors;
|
| |
●
|
announcements of new products or new contracts by us or our
competitors;
|
| |
●
|
actual or anticipated variations in our operating results due to
the level of development expenses and other factors;
|
| |
●
|
changes in financial estimates by securities analysts and whether
any future earnings of ours meet or exceed such estimates;
|
| |
●
|
conditions and trends in our industry;
|
| |
●
|
new accounting standards;
|
| |
●
|
general economic, political and market conditions and other
factors; and
|
| |
●
|
the occurrence of any of the risks described herein.
|
You may have difficulty selling our shares because they are
deemed a “penny stock”.
Because our common stock is not quoted or listed on a national
securities exchange, if the trading price of our common stock
remains below $5.00 per share, which we expect for the foreseeable
future, trading in our common stock will be subject to the
requirements of certain rules promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”),
which require additional disclosure by broker-dealers in
connection with any trades involving a stock defined as a penny
stock (generally, any non-Nasdaq equity security that has a market
price of less than $5.00 per share, subject to certain exceptions).
Such rules require the delivery, before any penny stock
transaction, of a disclosure schedule explaining the penny stock
market and the risks associated therewith and impose various sales
practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors
(generally defined as an investor with a net worth in excess of
$1,000,000 or annual income exceeding $200,000 individually or
$300,000 together with a spouse). For these types of transactions,
the broker-dealer must make a special suitability determination for
the purchaser and have received the purchaser’s written consent to
the transaction before the sale. The broker-dealer also must
disclose the commissions payable to the broker-dealer and current
bid and offer quotations for the penny stock and, if the
broker-dealer is the sole market-maker, the broker-dealer must
disclose this fact and the broker-dealer’s presumed control over
the market. Such information must be provided to the customer
orally or in writing before or with the written confirmation of
trade sent to the customer. Monthly statements must be sent
disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks. The
additional burdens imposed on broker-dealers by such requirements
could discourage broker-dealers from effecting transactions in our
common stock, which could severely limit the market liquidity of
our common stock and the ability of holders of our common stock to
sell their shares.
Because our shares are deemed a
“penny stock,” rules enacted by FINRA
make it difficult to sell previously restricted
stock.
Rules put in place by the Financial Industry Regulatory Authority
(FINRA) require broker-dealers to perform due diligence before
depositing unrestricted common shares of penny stocks, and as such,
some broker-dealers, including many large national firms (such as
eTrade and Charles Schwab), are refusing to deposit previously
restricted common shares of penny stocks. We routinely issued
non-registered restricted common shares to investors, vendors and
consultants. The issuance of such shares is subjected to the
FINRA-enacted rules. As such, it can be difficult for holders of
restricted stock, including those issued in our private securities
offerings, to deposit the shares with broker-dealers and sell those
shares on the open market.
Because we will not pay dividends in the foreseeable future,
stockholders will only benefit from owning common stock if it
appreciates.
We have never declared or paid a cash dividend to stockholders. We
intend to retain any earnings that may be generated in the future
to finance operations. Accordingly, any potential investor who
anticipates the need for current dividends from his investment
should not purchase our common stock, and must rely on the benefit
of owning shares, and presumably a rise in share price. We cannot
predict the future price of our stock, and due to the factors
enumerated herein, can make no assurance of a future increase in
the price of our common stock.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
All statements, other than statements of historical fact, included
in this prospectus regarding our strategy, future operations,
future financial position, future revenues, projected costs,
prospects and plans and objectives of management are
forward-looking statements. The words “anticipates,” “believes,”
“estimates,” “expects,” “intends,” “may,” “plans,” “projects,”
“will,” “would” and similar expressions are intended to identify
forward-looking statements, although not all forward-looking
statements contain these identifying words.
We have based these forward-looking statements on our current
expectations and projections about future events. Although we
believe that the expectations underlying our forward-looking
statements are reasonable, these expectations may prove to be
incorrect, and all of these statements are subject to risks and
uncertainties. Therefore, you should not place undue reliance on
our forward-looking statements. We have included important risks
and uncertainties in the cautionary statements included in this
prospectus, particularly the section titled “Risk Factors”
incorporated by reference herein. We believe these risks and
uncertainties could cause actual results or events to differ
materially from the forward-looking statements that we make. Should
one or more of these risks and uncertainties materialize, or should
underlying assumptions, projections or expectations prove
incorrect, actual results, performance or financial condition may
vary materially and adversely from those anticipated, estimated or
expected. Our forward-looking statements do not reflect the
potential impact of future acquisitions, mergers, dispositions,
joint ventures or investments that we may make. We do not assume
any obligation to update any of the forward-looking statements
contained herein, whether as a result of new information, future
events or otherwise, except as required by law. In the light of
these risks and uncertainties, the forward-looking events and
circumstances discussed in this prospectus may not occur, and
actual results could differ materially from those anticipated or
implied in the forward-looking statements. Any forward-looking
statement made by us in this prospectus is based only on
information currently available to us and speaks only as of the
date on which it is made.
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be
offered and sold from time to time by the selling stockholders upon
exercise of outstanding warrants to purchase common stock. We will
receive no proceeds from the sale of shares of common stock by the
selling stockholders in this offering. We may receive up to $9.5
million in aggregate gross proceeds upon exercise of the underlying
warrants; provided, however, the exercise price of the warrants is
currently much higher than the price at which our common stock is
trading and therefore we do not anticipate the warrants to be
exercised unless and until the price of our stock increases. See
“Plan of Distribution” elsewhere in this prospectus for more
information.
We expect to use any proceeds that we receive under the exercise of
the warrants to help fund general working capital for our corporate
operations and repayment of debt
DIVIDEND
POLICY
We have never declared or paid a cash dividend to stockholders. We
intend to retain any earnings that may be generated in the future
to finance operations.
CAPITALIZATION
The following table sets forth our actual cash and cash equivalents
and our capitalization as of December 31, 2019 (unaudited), and as
adjusted to give effect to the sale of the shares offered hereby
and the use of proceeds, as described in the section titled “Use of
Proceeds” above.
You should read this information in conjunction with “Managements’
Discussion and Analysis of Financial Condition and Results of
Operations” and our consolidated financial statements and related
notes appearing in our Annual Report on Form 10-K for the year
ended December 31, 2019.
|
|
|
As of December 31, 2019
|
|
|
|
|
Actual
|
|
|
As Adjusted(1)
|
|
|
CASH AND CASH EQUIVALENTS
|
|
$ |
655,000 |
|
|
$ |
10,130,000 |
|
| |
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT:
|
|
|
|
|
|
|
|
|
|
Convertible Preferred Series A, $.00067 Par Value, 50,000,000
Shares Authorized, -0- Shares Issued and Outstanding at December
31, 2019.
|
|
|
— |
|
|
|
— |
|
|
Common stock, $.00067 Par Value, 400,000,000 Shares Authorized,
166,256,024 Shares Issued at December 31, 2019, and 186,415,086
Shares Issued, as adjusted.
|
|
|
111,000 |
|
|
|
125,000 |
|
|
Additional paid-in capital
|
|
|
121,327,000 |
|
|
|
130,788,000 |
|
|
Accumulated other comprehensive loss
|
|
|
(99,000 |
) |
|
|
(99,000 |
) |
|
Accumulated deficit
|
|
|
123,492,000 |
|
|
|
123,492,000 |
|
| |
|
|
|
|
|
|
|
|
|
Total Biolargo stockholders’ deficit
|
|
|
(2,153,000 |
) |
|
|
7,322,000 |
|
|
Non-controlling interest
|
|
|
(27,000 |
) |
|
|
(27,000 |
) |
|
Total stockholders’ deficit
|
|
|
(2,180,000 |
) |
|
|
7,295,000 |
|
|
Total liabilities and stockholders’ deficit
|
|
|
3,621,000 |
|
|
|
13,096,000 |
|
| |
(1)
|
Assumes the selling stockholders exercise all 20,159,062 shares
available for purchase under the stock purchase warrants, at an
aggregate average exercise price $0.47 per share. Given our stock
currently trades at less than $0.25 per share, we do not expect the
selling stockholders will exercise all warrants, and thus do not
expect to receive $9,475,000 cash as reflected in the “as adjusted”
column in the above table.
|
DILUTION
The net tangible book value of our company as of December 31, 2019
was $(4,073,000) or approximately $(0.024) per share of common
stock. Net tangible book value per share is determined by dividing
the net tangible book value of our company (total tangible assets
less total liabilities) by the number of outstanding shares of our
common stock.
Assuming net proceeds of $9,475,000 from the sale of shares to the
selling stockholders pursuant to the stock purchase warrants (see
Note 1 in the Capitalization section immediately above), our
adjusted net tangible book value as of December 31, 2019 would have
been $5,402,000 or $0.029 per share. This represents an immediate
increase in net tangible book value of approximately $0.053 per
share to existing stockholders.
MARKET
PRICE OF AND DIVIDENDS ON COMMON
EQUITY
AND RELATED STOCKHOLDER MATTERS
Market Information
Since January 23, 2008, our common stock has been quoted on the OTC
Markets “OTCQB” marketplace (formerly known as the “OTC Bulletin
Board”) under the trading symbol “BLGO”.
The table below represents the quarterly high and low closing
prices of our common stock for the last three fiscal years as
reported by www.otcmarkets.com.
|
|
|
2018
|
|
|
2018
|
|
|
2020
|
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
High
|
|
|
High
|
|
|
Low
|
|
|
First Quarter
|
|
$ |
0.41 |
|
|
$ |
0.27 |
|
|
$ |
0.27 |
|
|
$ |
0.16 |
|
|
$ |
0.29 |
|
|
$ |
0.12 |
|
|
Second Quarter
|
|
$ |
0.45 |
|
|
$ |
0.31 |
|
|
$ |
0.31 |
|
|
$ |
0.16 |
|
|
$ |
0.17 |
* |
|
$ |
0.15 |
* |
|
Third Quarter
|
|
$ |
0.45 |
|
|
$ |
0.38 |
|
|
$ |
0.38 |
|
|
$ |
0.22 |
|
|
|
n/a |
|
|
|
n/a |
|
|
Fourth Quarter
|
|
$ |
0.30 |
|
|
$ |
0.36 |
|
|
$ |
0.36 |
|
|
$ |
0.22 |
|
|
|
n/a |
|
|
|
n/a |
|
* For the partial quarterly period through April 21, 2020.
The closing price for our common stock on April 21, 2020, was $0.16
per share.
Holders of our Common Stock
As of April 21, 2020, 178,692,138 shares of our common stock were
outstanding and held of record by approximately 650 stockholders of
record, and approximately 2,600 beneficial owners.
Dividends
We have never declared or paid a cash dividend to stockholders. We
intend to retain any earnings that may be generated in the future
to finance operations.
Securities Authorized for Issuance Under Equity Compensation
Plans
Equity Compensation Plan Information as of December 31,
2019
|
Plan Category
|
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)
|
Weighted average
exercise price of
outstanding options,
warrants and rights
(b)
|
Number of securities
remaining available for
future issuance
(c)
|
|
Equity compensation plans approved by security holders
|
17,983,808(1)
|
$0.36
|
32,785,644
|
|
Equity compensation plans not approved by security
holders(2)
|
19,604,107
|
$0.41
|
n/a
|
|
Total
|
37,587,915
|
$0.40
|
32,785,644
|
| |
(1)
|
Includes 8,769,451 shares issuable under the 2007 Equity Plan,
which expired September 6, 2017, and 9,214,356 shares issuable
under the 2018 Equity Incentive Plan adopted by the Board on March
7, 2018 and subsequently approved by stockholders on May 23,
2018.
|
| |
(2)
|
This includes various issuances to specific individuals either as a
conversion of un-paid obligations pursuant to a plan adopted by our
board of directors, or as part of their agreement for services
|
2018 Equity Incentive Plan
On June 22, 2018, our stockholders adopted the BioLargo 2018 Equity
Incentive Plan (“2018 Plan”) as a means of providing our directors,
key employees and consultants additional incentive to provide
services. Both stock options and stock grants may be made under
this plan for a period of 10 years. It is set to expire on its
terms on June 22, 2028. Our Board of Director’s Compensation
Committee administers this plan. As plan administrator, the
Compensation Committee has sole discretion to set the price of the
options. The plan authorizes the following types of awards: (i)
incentive and non-qualified stock options, (ii) restricted stock
awards, (iii) stock bonus awards, (iv) stock appreciation rights,
(v) restricted stock units, and (vi) performance awards. The total
number of shares reserved and available for awards pursuant to this
Plan as of the date of adoption of this 2018 Plan by the Board is
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) 2 million shares, or (b) such number of shares
determined by our Board.
2007 Equity Incentive Plan
On September 7, 2007, and as amended April 29, 2011, the
BioLargo, Inc. 2007 Equity Incentive Plan (“2007 Plan”) was adopted
as a means of providing our directors, key employees and
consultants additional incentive to provide services. Both stock
options and stock grants may be made under this plan for a period
of 10 years, which expired on September 7, 2017. 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.
Equity Compensation Plans not approved by
stockholders
In addition to the 2018 and 2007 Equity Plans, our board of
directors has approved a plan for employees, consultants and
vendors by which outstanding amounts owed to them by our company
may be converted to common stock or options to purchase common
stock. The conversion and exercise price is based on the closing
price of our common stock on the date of agreement. If an option is
issued, the number of shares purchasable by the option is
calculated by dividing the amount owed by the exercise price, times
one and one-half.
DESCRIPTION OF BUSINESS
Our Business - Innovator and Solution Provider
BioLargo, Inc. is an innovator of technology-based products and an
environmental engineering solutions provider driven by a mission to
“make life better”. We feature unique
disruptive solutions to deliver clean air, clean water and a clean,
safe environment.
Our mission is highlighted by our most recent innovation supported
in part with grant funding from the U.S. Environmental Protection
Agency to deliver a cost effective solution to remove PFAS from
water. PFAS is a contaminant commonly referred to as ‘forever
chemicals’ and the ‘contaminant of the decade’ that has been linked
to adverse health effects, with cost to clean up estimates by
analysts to approach $160 billion globally over the next 20-30
years.
We deliver:
| |
●
|
complete environmental solutions to clients;
|
| |
●
|
cost-effective products sold through distribution partners; and
|
| |
●
|
proven technology to our licensing partners
|
BioLargo combines its robust innovation culture with a highly
trained team to be fully equipped to serve clients’ needs in a wide
range of environmental projects from start to finish. Our three
environmentally focused operating units work together to deliver
complete solutions, technology innovation, scientific validation,
engineering, design, build, and construction services, maintenance,
manufacturing, training, permitting, regulatory compliance, system
integration, testing, monitoring and the like.
As a result of our continued commercial progress as well as the
continual validation of our technologies, we are now actively
engaged in partnership discussions with industry leaders at every
level. We are continually reminded by these potential partners that
they believe it is better to be the disruptor than to be the
disrupted. We fully expect our products and technologies to find
commercial adoption around the world and are focused on finding the
right partners.
We also continue to develop and commercialize disruptive
technologies by providing the capital, support, and expertise to
expedite them from “cradle” to “maturity”. Our business strategy is
straightforward: we invent or acquire technologies that we believe
have the potential to be disruptive in large commercial markets; we
incubate and develop these technologies to advance them and promote
their commercial success as we leverage our considerable
scientific, engineering, and entrepreneurial talent; we then
monetize our technologies through a variety of business structures
including licensure through established channel partners, joint
venture, sale, spin off, or in some circumstances deploying
direct-to-market strategies.
We seek to unlock the value of our portfolio of underlying
technologies to both advance our purposeful mission while we create
value for our stockholders. Once our innovative technologies reach
the market, we support their deployment through expanded
engineering and service offering, thus simultaneously ensuring
high-quality customer service and increasing the revenue potential
related to the technology. Because of the success of our
engineering services division, in the past year our engineering
services have grown to become a significant component of our
overall business model. In recent months, the company has also seen
a dramatic shift toward expanding product sales through channel
partnerships, as exemplified by the Joint Venture agreement with
BKT & Tomorrow Water, described in greater detail in the
section “Joint Venture Agreement with BKT & Tomorrow
Water”. The company is also actively engaged in
discussions with other potential high-profile channel partners to
pursue licensure agreements for the company’s patented technologies
and will disclose material information about these discussions as
it becomes available. While these discussions are continuing
through the current crisis, and we have no way to accurately
predict, we would not be surprised if most potential partners will
want to see the crisis subside before material partnerships would
be executed.
Our first significant commercial success is our air quality control
products and services division Odor-No-More, Inc., which is focused
on odor and volatile organic compound (“VOC”) control products sold
under the brands CupriDyne Clean and Nature’s Best Science. We plan
to gear up for rapid growth as resources become available and as
the Covid-19 crisis subsides, as our products are experiencing more
widespread market adoption in the waste handling industry through
national purchasing agreements with four of the largest industry
members, resulting in record revenues for this division in calendar
year 2019. To this end, we now offer a menu of services to our
clients including engineering design, construction, and
installation of misting systems and related equipment used to
deliver our liquid chemistry products, as well as ongoing
maintenance services for installed systems. We also believe these
products will continue to expand through distribution and licensing
partnerships around the world in various markets like wastewater
treatment and more.
We have also begun expanding with early adopters into new vertical
segments such as wastewater treatment, the cannabis industry and
various industrial facilities like steel manufacturing and
livestock processing operations. In 2019 we executed a five-year
white-label distribution agreement with Cannabusters, Inc., a
company organized and owned by Mabre Corporation to feature our
odor and VOC control technology to the cannabis industry in
combination with their air handling and air quality systems. We
believe this to be an important opportunity for BioLargo’s odor and
VOC control products, as the cannabis and hemp industries are
predicted to grow significantly in the US in the coming years and
are known to contend with significant odor and VOC challenges (read
more under Emerging High-Growth Opportunity in Cannabis /
Hemp Industry). We expect the expansion of these commercial
developments to be highly dependent upon the COVID-19 crisis
subsiding at some level.
Our second commercial operation, BioLargo Engineering, Science
& Technologies, LLC (“BLEST”), provides professional
engineering and consulting services to third party clients on a
fee-for-service basis, and also serves as our in-house engineering
team to advance our proprietary technologies and complement service
offerings of our other business segments, such as the engineering,
design, scale-up, and fabrication activities associated with the
commercialization of our water technology subsidiary’s Advanced
Oxidation System (AOS) technology, as well as development of a
product to treat PFAS contaminated water.
In addition to our two operating subsidiaries, we have technologies
and products in the development pipeline progressing towards
commercialization, including our water treatment system for
decontamination and disinfection (our “Advanced Oxidation System”,
or “AOS” – see Pilot Projects discussion below),
and our medical products focused on healing chronic wounds,
including our recently acquired stem cell therapy called the
SkinDiscTM, which
is focused on regenerative tissue management and is licensed to our
minority-owned subsidiary Clyra Medical Technologies, Inc. (“Clyra
Medical”).
We believe our current success with our industrial odor and VOC
control products serves to validate our overall business strategy
which is focused on technology-based products and services capable
of disrupting the status quo in their applicable industry market
segment. We believe that the future of our medical and clean water
technologies has similar and also very large market opportunities
ahead as they are introduced commercially. We also believe that the
model of pursuing licensing deals with well-established channel
partners in each respective market is currently being validated by
the Joint Venture agreement signed with BKT and Tomorrow Water, and
that the company has positive indications that further license
agreements with prospective channel partners are worth pursuing for
the company’s water treatment and air quality control
technologies.
We believe it is important to note that in each operating unit, the
Covid-19 virus crisis may have a delaying effect on our plans for
growth and expansion. We urge the reader to consider our
forward-looking statements in light of the extraordinary
circumstances of today’s business, social and economic climate.
Rapid expansion requires capital and/or partners and given the
uncertainty around the virus, we may face delays.
Odor-No-More Industrial Odor and VOC
Solutions
Our CupriDyne Clean industrial products reduce and eliminate tough
odors and VOC’s in various industrial settings, delivered through
misting systems, sprayers, water trucks and similar water delivery
systems. We believe the product is the number one performing
odor-control product in the market, and that it offers substantial
savings to our customers compared with competing products. Our
products are proven effective in eliminating a number of VOCs
including, but no limited to, hydrogen sulfide (H2S), mercaptans,
fatty acids, sulfur compounds and terpenes.
Waste Handling
Our customer base for our odor and VOC business is expanding. We
are now selling product to four of the largest solid waste handling
companies in the country, and also have secured multiple flagship
clients in the wastewater treatment industry, which we expect to
become a priority market.
Many of our customers have adopted CupriDyne Clean as a replacement
for non-performing competitive products, some of which have been in
use by customers for decades. Upon using CupriDyne Clean, our
customers consistently express a very high degree of satisfaction
with its performance compared to prior solutions. Because of this,
we are realizing systematic adoption by our very large corporate
customers and expect to serve these customers for years to come.
Our experience has helped refine our value proposition and assemble
a comprehensive menu of products and services. Our success in this
market has validated the market opportunity for our products and
services and encourages us to continue investing in infrastructure
and sales and marketing to increase revenues. We estimate there are
approximately 2,000 active landfills1, 8,000
transfer stations2, and
15,000 wastewater treatment agencies3 in
the United States. While all may not have ongoing odor problems or
neighbor complaints, we believe many of the facilities have need
for a disruptive odor solution like CupriDyne Clean.
The total addressable market for the waste handling and wastewater
treatment industries is greater than $1.3 billion. While we are
still assessing the size of the cannabis, agriculture and steel
manufacturing industries, we believe they could readily double the
market opportunities for our product CupriDyne Clean. We have some
early experience in the oil field services and oil field
remediation markets and are highly encouraged by our products
performance controlling VOC’s commonly found in those markets like
BTEX (benzene, toluene, ethylbenzene and xylene) and H2S.
Turn-key Full-service Solutions
At the request of our clients, we offer a menu of services to
landfills, transfer stations, and wastewater treatment facilities.
These services include ongoing maintenance and on-site support
services to assist our clients in the design and continued use of
the various systems that deliver our liquid products in the field
(such as misting systems). We have recently expanded these serves
to engineering design, construction and installation. Our
engineering team at BLEST has been instrumental in supporting these
operations. Our system design, build and install business continues
to grow. We have completed multiple installs during the last
quarter and have several bids outstanding for CupriDyne Clean
delivery systems.
Regional Adoption
Sales of our CupriDyne Clean products and related services were
initially made at the local level, on a per-location/facility
basis. We would demonstrate our product to the manager of
operations at a transfer station or landfill, and he or she
ultimately would decide whether to use our products. If owned by a
national company, in some instances before the operations manager
could buy our products, we were required to obtain official
“vendor” status with the company and sign a “national purchasing
agreement” (“NPA”). Doing so required a tremendous amount of effort
and time. These agreements typically include the addition of our
line of products which will be offered through an online purchasing
portal to the members around the nation. The process of integrating
the data is often delayed by months from the start date of our
agreements given their very technical nature. These processes
establish an easy and familiar selling and purchasing process for
the ongoing and long-term relationships we seek to develop. We now
have NPAs with four of the largest solid waste handling companies
in the United States. Some of these accounts are now introducing us
to regional managers around the country who have the ability to
direct the facilities in their region to use our product. We are
often replacing companies that have served these customers for 20
to 30 years giving support for our claim of ‘disruption’ to an
industry.
We believe that “regional adoption” is a scalable approach for the
larger solid waste handling companies that, with sufficient
resources, we can implement nationwide. Our current national
accounts represent the opportunity to serve more than 3,000 local
operations around North America.
We now have a body of evidence that has been developed through
direct work with our large national accounts that supports our
product claims, namely superior performance, cost savings and
service excellence. As a result, we are receiving support from the
leadership of our national accounts to help expand our services
within their organizations. This support has and will continue to
demand that we increase our activity to deliver RFPs (requests for
proposals), follow up with and make site visits as a result of
introductions to local operators by regional and corporate leaders,
follow up on referrals from local operators to other local
operators and provide high level customer service and
responsiveness to regional office requests for site visits, and
offer our products and services to multiple locations with these
regional operations. Our experience has shown that the cycle from
identifying a new customer that wants to use our products to
installing delivery systems and related equipment (if needed), to
deploying our products can take from 60 to 180 days. The work is
demanding but we know the up-front investment by our team will be
rewarded with expanded adoption and recurring revenues. We are
continually reminded that in many instances we are replacing
companies that have been serving these customers for decades.
We believe that our products will become known as the odor and VOC
elimination product that will become selected as a “best practices”
tool for the waste handling industry. As we continue to achieve
that level of recognition, we believe our large national accounts
will want to modify their stance to encourage their local operators
around the country to choose our product as the top performer and
highest value provider.
In 2019, Odor-No-More hired waste handling industry veteran Mitch
Noto as its Director of Corporate Development in an effort to
further develop the company’s relationships and connections in the
national waste handling industry and to further position CupriDyne®
Clean as a key component of “best practices” for industrial odor
control. With more than 28 years operations and environmental
management experience at one of the largest waste handling
companies in the United States, Mr. Noto brings invaluable
experience and connections. He most recently spearheaded
post-collection operations nationwide and trained and mentored more
than 150 field leaders responsible for operational management. He
is a recognized expert in waste handling operations.
Joint Venture Agreement with BKT & Tomorrow
Water
In December 2019, we entered into a “Joint Venture Framework
Agreement” with a leading wastewater treatment solution provider
based in South Korea (BKT Tech Co. Ltd., “BKT”), to create a South
Korean entity that would manufacture odor and VOC control products
based on CupriDyne® Clean.
The joint venture has been formed and funded, and intends to begin
operations as soon as possible.
BKT is a leading wastewater treatment solutions provider operating
in the USA, South Korea and Vietnam with a reputation for adopting
innovative, environmentally sustainable technologies and practices.
Headquartered in Daejeon, South Korea, BKT has an extensive
distribution network throughout Southeast Asia serving more than
400 customers in South Korea alone, and has a presence in more than
eight countries globally. Under the terms of the agreement,
BioLargo invested $100,000 in the JV, while BKT and its U.S.-based
subsidiary Tomorrow Water invested $75,000 each, for proportionate
non-dilutive interests. The JV will manufacture the CupriDyne Clean
-based odor and VOC control products for distributors throughout
Southeast Asia, including BKT. The JV must achieve minimum sales
targets to maintain exclusive rights in the Asian markets, and an
annual dividend of $2 million paid to BioLargo to secure
exclusive rights in perpetuity. Finally, BKT also purchased
$350,000 of BioLargo common stock (1,593,807 shares).
Cannabis Industry
Odor-No-More recently entered into a five-year “white-label”
distribution agreement with Cannabusters, Inc., a sister company to
Mabre Air Systems, to sell its CupriDyne Clean odor and VOC control
products to Cannabis and Hemp grow and production facilities, which
represent a target market that management’s research indicates is
in sore need of new odor control products and services.
Cannabusters has decades of experience with air quality management
through their sister company Mabre Air Systems, a leader in air
quality control systems in Italy.
The cannabis industry is facing increased scrutiny by regulators to
better control of hazardous air pollutants called terpenes that are
a natural part of production and processing. These gases can also
cause malodors that demand attention and can be problematic as
these companies seek to maintain good community relations and avoid
legal entanglements or lawsuits over nuisance odors. Odor abatement
operating procedures are part and parcel to the permitting
processes for companies involved in the industry and have typically
included traditional carbon filters. With the growth and
concentration of cannabis related operators, the industry has come
to recognize that the volume of terpenes and air flow in a typical
operation are often more than the traditional carbon filter-based
systems can manage effectively. Odor complaints persist. Third
party experts have tested our product and demonstrated that they
eliminate the odor-causing chemicals emanating from cannabis grow
and production operations. As a result, we have had a number of
experts in the cannabis industry tell us that our products could
become part of the ‘best practices’ operating procedures for this
industry and are working toward that goal. With more than 15,000
licensed operators in California alone, we believe this is a
substantial market opportunity.
We believe the Covid-19 virus crisis may have a delaying effect on
our plans for growth and expansion. We urge the reader to consider
our forward-looking statements in light of the extraordinary
circumstances of today’s business, social and economic climate.
Wastewater Treatment
We are beginning to sell CupriDyne Clean to wastewater treatment
facilities in our local markets. Our clients are prominent
municipal agencies and have indicated a desire to expand the use of
our products and services to additional locations in their service
areas. As a result of our success in the field, a client featured
our product as an example of ‘Best Practices’ for the wastewater
treatment industry at a national water quality conference hosted by
the Water Environment Federation. We anticipate overall longer
selling cycles given the technical sophistication of the customers
in this market, and believe that channel partnerships with leading
companies that already sell and service this highly technical
market will be required for our ultimate success. We are encouraged
and are evaluating various strategies to maximize our marketing and
selling proposition into this mature and well-established market.
We are actively engaged in discussions with potential distribution
partners and leading engineering firms with well established
relationships to the clients in order to service this very large
market. To this end, we also recently added a 21-year veteran
of the water and wastewater industry, Tonya Chandler to the
BioLargo team to serve as Director of Strategic Marketing and
Business Development and assist us in developing this distribution
channel.
We also are in discussions with very large international
distributors to sell and distribute our products around the world.
These efforts would be directly supported with our newly formed
joint venture to manufacture product for deliver and distribution
in southeast Asia.
Full Service Environmental Engineering
Our subsidiary BioLargo Engineering, Science & Technologies,
LLC (“BLEST”) offers environmental engineering services 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 four areas:
| |
●
|
Providing engineering services to third-party clients;
|
| |
●
|
Supporting the AOS development efforts by working with our Canadian
subsidiary, BioLargo Water;
|
| |
●
|
Supporting our team at Odor-No-More to provide engineering and
design of the CupriDyne Clean delivery systems to the waste
handling industry; and
|
| |
●
|
Developing new products or engineered solutions for high value
targets like:
|
| |
o
|
our work to develop a feasible and affordable treatment technology
to address the national crisis of per- and polyfluoroalkyl
substance (PFAS) water contamination, funded through a US EPA SBIR
Phase I, and for which BLEST has recently submitted a Phase II EPA
SBIR grant proposal to fund the scale-up and field demonstration of
the new technology;
|
| |
o
|
our work to refine and validate CupriDyne Clean’s efficacy and
delivery systems for managing terpenes from cannabis production,
and to refine and validate CupriDyne Clean’s efficacy and delivery
systems for eliminating hydrogen sulfide (H2S), a common air
contaminant associated with industries like wastewater
treatment;
|
| |
o
|
our work to provide initial proof of claim for CupriDyne Clean’s
efficacy in high volume industrial settings for VOC and air
contaminant mitigation; and
|
| |
o
|
Legionella prevention and monitoring systems.
|
The subsidiary is based in Oak Ridge (a suburb of Knoxville),
Tennessee, and employs seven scientists and engineers who
collectively have over two hundred years of experience in diverse
engineering fields. The team is led by Randall Moore, who served as
Manager of Operations for Consulting and Engineering for the
Knoxville office of CB&I Environmental & Infrastructure and
was formerly a leader at The Shaw Group, Inc., a Fortune 500 global
engineering firm. The other team members are also former employees
of CB&I and Shaw. The team is highly experienced across
multiple industries and they are considered experts in their
respective fields, including chemical engineering, wastewater
treatment (including design, operations, data gathering and data
evaluation), process safety, energy efficiency, air pollution,
design and control, technology evaluation, technology integration,
air quality management & testing, engineering management,
permitting, industrial hygiene, applied research and development,
air testing, environmental permitting, HAZOP review, chemical
processing, thermal design, computational fluid dynamics,
mechanical engineering, mechanical design, NEPDES permitting,
RCRA/TSCA compliance and permitting, project management,
storm water design & permitting, computer assisted design
(CAD), bench chemistry, continuous emission monitoring system
operator, data handling and evaluation and decommissioning and
decontamination of radiological and chemical contaminated
facilities.
Business Development at BLEST
In 2019, BLEST was awarded subcontracts to do work on seven U.S.
Air Force bases in Texas, Kansas, Illinois and Arizona, and is
attempting to secure additional contracts. Primary contractor Bhate
Environmental Associates, Inc. has bid multiple additional projects
with BioLargo to conduct “Fence-to-Fence (F2F) environmental
compliance”. The total value of the contracts awarded (split
between the prime contractor Bhate and its subcontractors,
including BLEST) is in excess of $15 million over five years (with
one year guaranteed). BLEST is responsible for air quality
compliance, one of the three major components of the services.
BLEST recently completed a feasibility and placement study for 1.1
million tons of magnesium rich production tailings in Northern
California for a new client, and has confirmed technical ability to
convert the contents of the tailings ponds into a marketable
product. This project is now transitioning into laboratory-based
process development work to validate the chemical process to
produce magnesium hydroxide of 99% purity from the tailings. This
project has a current back log of over $125,000.
CIBC, BLEST’s client that is planning to build a $750 million
municipal waste processing facility in Chesapeake, VA, has begun
its Phase I of this project. BLEST, serving as Owner’s Engineer,
will prepare a comprehensive Design Basis and a bid Specification
to solicit a fixed price bid from an EPC contractor to design and
construct Phase I of the plant. BLEST anticipates the Design Basis
and Bid Spec to provide $90,000 in revenue to BLEST.
BLEST received multiple awards from Lamb Weston in February 2020,
totaling approximately $78,000 for four plant sites. Lamb Weston is
upgrading air pollution control systems at these sites to control
emissions of oil mist and particulate from potato frying
operations. BLEST is serving as design consultant and engineering
oversight for new systems at each plant. With the COVID-19 crisis
this work will be delayed.
Water contamination – new technology to eliminate
PFAS
Per- and poly-fluoroalkyl substances (“PFAS”) are a class of
man-made chemicals found in a wide variety of household and
commercial goods, including food, fabrics, cleaning products,
electronics, and more. A growing body of evidence shows that PFAS
ingestion by humans is linked to cancer, fertility problems,
asthma, and more. Scientists are discovering PFAS contamination in
local municipal drinking water across the United States (and around
the world), meaning that people and wildlife are likely being
exposed to these contaminants daily. In the U.S. alone, it is
estimated that PFAS contamination may be threatening the drinking
water supply for over 110 million people. With PFAS posing
widespread and serious water safety problems, governments and
industry are actively seeking new technologies and processes to
eliminate PFAS from groundwater and drinking water. In response to
“extensive public interest”, the U.S. Environmental Protection
Agency (“EPA”) created an “action plan” to provide short- and
long-term solutions, develop national research and
risk-communication programs, and otherwise take a pro-active
approach to what they describe as an “emerging environmental
challenge.” (See https://www.epa.gov/pfas.)
EPA has established health advisories for PFAS chemicals
based on the agency’s assessment of the latest peer-reviewed
science to provide drinking water system operators, and state,
tribal and local officials who have the primary responsibility for
overseeing these systems, with information on the health risks of
these chemicals, so they can take the appropriate actions to
protect their residents. EPA is committed to supporting states and
public water systems as they determine the appropriate steps to
reduce exposure to PFOA and PFOS in drinking water. As science on
health effects of these chemicals evolves, EPA will continue to
evaluate new evidence.
To provide Americans, including the most sensitive populations,
with a margin of protection from a lifetime of exposure to PFOA and
PFOS from drinking water, EPA has established the health advisory
levels at 70 parts per trillion. Some states have lower
limits. In summer of 2019, the State of California’s Division of
Drinking Water updated its own guidelines to set notification
levels as low as 5.1 parts per trillion for certain PFAS compounds.
Recently Michigan has proposed to set detection limits as low as
6-8 parts per trillion (ppt) highlighting the increasing urgency of
solving this environmental challenge. Given these extremely
stringent PFAS limits and the seriousness of failing to provide
drinking water that meets these standards, municipalities have an
urgent and serious need for technologies that can effectively and
cost-efficiently eliminate PFAS contaminants from drinking water
supplies. Testing concluded that 86 water systems in Southern
California serving 9 million residents had PFAS contamination. In
response, cities are shutting down water wells until the
contamination can be removed. A leading water agency based in
Southern California estimates the cost associated with the clean-up
of PFAS in its ground water wells to reach $850 million and market
analysts estimate the price to clean up PFAS globally could exceed
$160 billion over the next 20 – 30 years. In 2019, BLEST management
made it a priority to develop a novel technology that could
realistically address this problem.
Based on a novel concept to eliminate PFAS compounds, in 2019 the
EPA awarded BLEST an SBIR Phase I Competitive grant in the
amount of $100,000 to further investigate its solution for the
removal of PFAS from water. BLEST has leveraged the grant to
develop a proprietary PFAS treatment device called an “Aqueous
Electrostatic Concentrator” (or “AEC”). The device, currently at a
laboratory “bench” scale, has demonstrated significant capabilities
in reducing PFAS contaminants in water, achieving over 99% removal
in continuous water flow in many applications, with projected
electrical costs below 30 cents per 1,000 gallons. BLEST engineers
have determined that the AEC technology is highly scalable to the
water volumes required by large municipalities. Work is progressing
and highly encouraging on the AEC and management believes it could
be ready for commercial trails within the next 3-6 months. The AEC
has a number of key value propositions over incumbent technologies,
namely lower cost and higher efficiency in the removal of PFAS.
Given the team’s previous roles as project leaders in some of the
most notable remediation projects around the world over the past 30
years, and the break through innovation of the AEC, management is
rapidly becoming recognized as a leading innovator in the field of
PFAS remediation and as such, is being invited to present on the
AEC at a conferences around the world. During 2019 they presented
at an event organized by prominent Southern California innovation
association Sustain SoCal and The Technology Collaboration Center-
Water Industry Workshop held in Houston Texas, and has also been
asked to present its PFAS and other solutions at several other
similar events by other organizations in 2019, including the
BlueTech Week in San Diego in November of 2019 and the Confluence
Tech Showcase in Westchester Ohio in December. They have been asked
to be a key-note speaker at a number of events that have been
delayed recently as a result of the coronavirus outbreak. They are
scheduled to present at the European Water Tech Week conference to
be held in the Netherlands in the fall of 2020. BLEST has applied
for a Phase II EPA grant for funding to finish the product design
and start a go-to-market campaign. BLEST and BioLargo management
have also already been approached by potential partners and
customers for the AEC, and company management will provide more
information about these relationships as discussions progress.
BioLargo Water and the Advanced Oxidation System -
AOS
BioLargo Water is our wholly owned subsidiary located on campus at
the University of Alberta, Canada, that has been primarily engaged
in the research and development of our Advanced Oxidation System
(“AOS”). The AOS is our patented water treatment device that
generates a series of highly oxidative species of iodine and other
molecules that, because of its proprietary configuration and inner
constituents, allow it to eliminate pathogenic organisms and
organic contaminants as water passes through the device and it
performs with extreme efficacy while consuming very little
electricity. Its key application is rapid and highly efficient
decontamination and disinfection of various types of waters.
The AOS technology has received more than 75 research grants and
been a feature of more than 20 collaborations with academia and
industry. It has continued to be recognized for its scientific
innovation and disruptive market potential. The AOS is now being
prepared to be launched commercially. Recent scale-up designs have
demonstrated its ability to achieve a scalable modular design on a
skid mount, which can process 500 gallons per minute. This
configuration can then be replicated to achieve very large-scale
municipal treatment objectives opening up a host of commercial
opportunities. BioLargo Water has recently launched a crowd funding
initiative at www.WaterWorksFund.com which we believe will yield a
number of valuable benefits, including industry wide exposure.
The key value proposition of the AOS is its ability to eliminate a
wide variety of contaminants with high performance while consuming
extremely low levels of both input electricity and chemistry – a
trait made possible by the complex set of highly oxidative iodine
compounds generated within the AOS reactor. Our proof-of-concept
studies and case studies have generated results that project the
AOS will be more cost- and energy-efficient than commonly used
advanced water treatment technologies such as UV,
electro-chlorination, and ozonation. This value proposition sets
the AOS technology above other water treatment options, as we
believe the AOS may allow safe and reliable water treatment for
significantly lower cost compared to its competitors and may even
enable advanced water treatment in applications where it otherwise
would have been prohibitively costly.
The AOS has the potential to allow reliable and cost-effective
water treatment in numerous industries and applications where
high-level disinfection or elimination of hard-to-treat organic
contaminants is required. We believe the total serviceable market
for our AOS is $10.75 billion for the poultry processing, food
& beverage, and storm water segments with a target beachhead
market for poultry processing in North America at an estimated $240
million.
AOS History
Our AOS was the result of breakthroughs in both advanced iodine
electrochemistry and advances in materials engineering, and its
invention led to BioLargo’s co-founding of a multi-year industrial
research chair whose goal was to solve the contaminated water
issues associated with the Canadian Oil Sands at the University of
Alberta Department of Engineering in conjunction with the top five
oil companies in Canada, the regional water district, and various
environmental agencies of the Canadian government. As an innovator,
we had hoped to be able to offer a breakthrough solution into an
emerging market to help shorten the adoption cycle. That did not
happen. Given the fact that oil companies are now
managing yet another price crisis and there has been no regulatory
mandate for compliance and industry has taken a
wait-and-see position with regards to such mandates,
therefore we will continue to focus on energies on other markets
until such time as proper resources are available. Our AOS is an
award-winning invention that is supported by science and
engineering financial support and highly competitive grants (over
75) from various federal and provincial funding agencies in Canada
such as NSERC, NRC- IRAP, and Alberta Innovates and in the United
States by the Metropolitan Water District of Southern
California.
In a similar situation, the company had invested considerable time
positioning the AOS to serve in the maritime industry to help treat
ballast water discharged from shipping vessels to help protect
local water ways from potentially invasive species contamination.
The governing bodies responsible, the International Maritime
Organization (IMO) and the US Coast guard, extended the deadlines
for regulatory compliance to what has now become a total extension
of 15 years from its originally planned adoption, and pushed
compliance out to the year 2030. While many companies in this
sector failed or, at a minimum suffered extreme financial
hardships, we wisely elected to stand down from this market and
focus on markets with well-established regulatory frameworks.
In the fall of 2017, we had developed a strategic alliance with one
of the largest engineering firms in the world to focus on the
scale-up and refinement of the AOS technology. Within months of
forming that strategic alliance, our then new alliance partner
suffered a financial melt-down as a result of a multi-billion loss
in a protracted litigation, which then resulted in the rapid
dismantling and sale of all the assets of the 55,000-employee
global engineering firm (CB&I).
In each of these situations, while obviously painful, we remained
steadfast and confident that our AOS had an important role to play
in the water industry. We diversified the focus of the AOS to
targets where we could add value where other technologies simply
could not, like poultry process (food & beverage) and now
storm-water treatment. We leveraged our considerable talent to
secure major grant funding to help us advance the science. We ‘made
lemonade from lemons’ by starting our own full-service
environmental engineering firm built on the cornerstone of
innovators and team leaders from CB&I to now become known as
BioLargo Engineering Science & Technologies, (BLEST).
Recent work done in two studies in collaboration with Dr. Rimeh
Daghrir of the Centres des Technologies de L’Eau in Saint Laurent,
Québec and Dr. Greg Goss of the University of Alberta in Edmonton,
AB, have helped to demonstrate that AOS-treated water is not toxic
when discharged to the environment, a crucial step in the process
of commercializing the AOS technology. These studies helped to show
that while some iodinated disinfection byproducts are produced by
the AOS in low quantities (less than 1 ppb), it is not expected
that the AOS produces effluent that is unsafe for the environment.
Furthermore, the study conducted by Dr. Daghrir found additional
evidence that the AOS is capable of degrading and eliminating
pharmaceutical micropollutants such as antibiotics found in water,
strengthening the technology’s claim to eliminating hard-to-treat
micropollutants.
AOS – Going Commercial
Our immediate goals for the development and commercialization of
the AOS are: 1) to secure direct investment into the BioLargo Water
subsidiary to empower its staff to complete its development cycle,
2) complete the ongoing pre-commercial field pilot studies which
are necessary to generate the techno-economic data required to
secure commercial trials, entice future customers, and commence
traversal of regulatory pathways, 3) conduct the first commercial
trials with the AOS, and 4) secure first sale of the AOS. It is our
belief that once pre-commercial pilots have concluded with the AOS,
we will be able to entice major water industry players to partner
with BioLargo Water to accelerate market adoption of the AOS.
Pre-commercial Pilot Projects for AOS
We are now underway on multiple pre-commercial field pilot projects
involving the AOS water treatment system.
The first project involves treating poultry wastewater on-site at a
facility in Alberta Canada, with support from the Canadian Poultry
Growers Association. In this pilot, the AOS was assessed for its
ability to eliminate bacteria and other contaminants from poultry
processing wastewater effectively and cost-efficiently and to
establish operating costs (OPEX) and capital costs (CAPEX) in a
field setting. BioLargo Water built and installed a complete water
“treatment train” with equipment to address all aspects of the
client’s water treatment needs, including organic contaminants,
suspended solids, and biological organisms, in addition to the
connected AOS unit. Therefore, this pilot also represents
BioLargo’s first assessment as a “total solutions provider”, which
could open the door for a wider array of future water treatment
market opportunities. Funded in part by Canadian government grants,
the first phase of this pilot has successfully concluded. We are
now working with the operator to establish a commercial pilot
project to treat wastewater from all farm operations to Canadian
potable standards such that it can be reused in poultry processing
operations.
This will be the first-ever commercial trial for the AOS
technology, marking a pivotal moment in the commercialization of
BioLargo’s proprietary technology.
In another recently concluded pilot project, the AOS was used
on-site at a Californian micro-brewery as a polishing (final
disinfection) step in a wastewater “treatment train” whose goal is
to reduce wastewater contaminant load to levels that would allow
the microbrewery to reduce its wastewater discharge fines and
enable water reuse. This pilot established the efficacy of the AOS
in a field setting for disinfection, the OPEX and CAPEX of the
system, and the AOS’ ability to “plug and play” in the context of
diverse supporting equipment and logistics.
In addition, in late 2019 we commenced an AOS pre-commercial pilot
that to treat Southern California stormwater at our Westminster,
California facility. The pilot’s goal is to demonstrate the
technical and economic feasibility of deploying the AOS to enable
stormwater treatment and reuse, an important and emerging water
management application in the US and Canada. The pilot is helping
establish the capital and operating costs of the AOS in this
application, a crucial step before potential commercial pilot
clients and paying customers would consider the technology in this
industrial setting. The pilot project is supported in part by
research and development funding of to up to $189,000 from the
National Research Council of Canada Industrial Research Assistance
Program (NRC IRAP). BioLargo Water is collaborating on the project
with Richard Watson & Associates, Inc. and Carollo Engineers,
Inc. Richard Watson has been active in stormwater quality
management since 1990 and currently consults to three watershed
management groups in Los Angeles County. Carollo Engineers, a
leading environmental engineering firm providing cost-effective,
innovative, and reliable water treatment solutions, will provide
engineering and water treatment validation for the project.
These pilot projects represent an important step for our AOS
technology. We are confident in our disruptive water treatment
technology and have proven its treatment capabilities in the lab.
However, pilot projects for the AOS, as with any technology, are
crucial to prove its reliability to industry stakeholders as well
the capital cost and operating costs of our technology at-scale.
These data will be critical to pave the way for future market
adoption. We have other pilots currently in evaluation to support
this same cause.
We have recently completed a design for a 500 gallon per minute AOS
spiral design and construction is under way of a commercial
prototype. We believe this accomplishment will open up a host of
commercial opportunities as we show that our system can handle high
volume applications.
We believe that our current designs for the AOS are cost-effective,
commercially viable and should be ready for their first commercial
launch in 2020. We secured a patent on the AOS in 2018, and another
in March 2019. We intend to continue refining and improving the AOS
continually to accomplish a series of goals: expanded patent
coverage, extended useful life, lower capital costs, lower energy
costs, optimized performance, precise configurations for specific
industry challenges, portability, and identifying its performance
limits. Our current and most pressing goal for the AOS, as
evidenced by the pilot projects described above, is to demonstrate
its efficacy in field settings, which is a crucial and necessary
step for the commercialization of any water treatment system.
We are also evaluating opportunities to collaborate with our new
joint venture partner BKT based in South Korea and its sister
company based in Southern California, Tomorrow Water to work
together to develop international financial support for cross
border technology transfer as well as commercial opportunities.
BioLargo Water has recently launched a crowd funding initiative at
www.WaterWorksFund.com which we believe will yield a number of
valuable benefits, including industry wide exposure.
We believe the Covid-19 virus crisis may have a delaying effect on
our plans for growth and expansion. We urge the reader to consider
our forward-looking statements in light of the extraordinary
circumstances of today’s business, social and economic climate.
Advanced Wound Care - Clyra Medical
We also are a minority stockholder and licensor of technology to
Clyra Medical Technologies, Inc., a company we founded which is
focused on advanced wound care, infection control and regenerative
tissue therapy. Clyra has been supported through direct investment
by investors, has recently secured its FDA 510(k) clearance for its
first product. Clyra has assembled a world-class team that includes
a 30-member advisory board of experts and clinicians from the
industry. Clyra is also actively engaged in partnership discussions
with industry leaders as it is preparing for targeted clinical work
to validate its high value product designs.
We initially formed Clyra Medical to commercialize our technology
in the medical products industry, which we believe can be
disruptive to many competing product lines. Our initial product
designs focus in the “advanced wound care” field, which includes
traumatic injury, diabetic ulcers, and chronic hard-to-heal wounds.
We also have designs for products focused on preventing or
controlling infections. In late 2018, we also acquired our second
technology, a stem cell therapy technology, SkinDisc, that is both
complementary to our antimicrobial product designs and it also
presents a high value proposition to offer stand-alone products to
the advanced wound care industry to assist in regenerating tissue.
With the addition of highly skilled team members with extensive
experience and proven track record of success in the medical
industry and, the addition of the SkinDisc, Clyra have expanded its
plans to focus and build out a complete line of products to deliver
state of the art solutions to assist in healing wounds. It is also
presently evaluating a number of additional licensing opportunities
to add complementary technologies and products to its portfolio
with the goal of offering a complete menu of proprietary and
patented products to better serve the advanced wound care patient
population with state-of-the-art medical products. We believe the
total addressable market for these products in the advanced wound
care, dental, orthopedics and regenerative tissue markets exceeds
$1 billion.
FDA Pre-market Clearance under Section 510(k)
On September 17 2019, Clyra received notification that it had
received pre-market clearance from the U.S. Food and Drug
Administration (“FDA”) to market its Clyra Wound Irrigation
Solution, designed for cleansing, irrigating, and debriding dermal
wounds and burns, in addition to moistening and lubricating
absorbent wound dressings, under Section 510(k) of the Food, Drug,
and Cosmetic Act. This product combines the broad-spectrum
antimicrobial capabilities of iodine in a platform complex that
promotes and facilitates wound healing. It is highly differentiated
from existing antimicrobials in multiple ways - by the gentle
nature in which they perform, extremely low dosing of active
ingredients, reduced product costs, extended antimicrobial
activity, and biofilm efficacy. In addition, iodine has no known
acquired microbial resistance, unlike many competing products.
Clyra is leveraging its success on this initial product to create
derivative products for infection control and wound therapy in the
orthopedics, dental and veterinary markets.
Clyra has multiple patent applications pending for medical
products, and are preparing additional applications. While these
patent applications are pending, we intend to continue expanding
patent coverage as we refine and expand our medical products.
We believe this product’s future role in the advanced wound care
industry will be disruptive to many incumbent competing products
like silver, hypochlorous acid and even other iodine-based products
and therefore our extraordinary investment of time and money will
have significant opportunity to generate a considerable return on
investment as the products find their way through the FDA process
for clearance and then to market adoption. Simply stated, we
believe it is worth it and that we will succeed.
Clyra is actively engaged in negotiating collaborations with
industry partners and is working to secure the capital invested
directly into Clyra, that is needed to accelerate clinical
validations for its high value product applications as well as
sales and marketing.
SkinDisc
Our second technology and its related products center around the
SkinDisc technology which we acquired in late 2018 from Scion
Solutions, LLC (“Scion”). Scion is led by Spencer Brown, a medical
device industry veteran with more than 35 years’ experience in
sales, account management, and distribution in the medical device
industry. The SkinDisc product was developed by Dr. Brock Liden, a
renowned medical podiatrist and expert in wound care and diabetic
limb salvage. The SkinDisc is a therapy product that uses a
patient’s own bone marrow and plasma in a unique mixture to
generate a cell-rich bio gel for use with chronic wounds. It has
been tested in over 250 patient cases with no adverse effects, and
has successfully aided in the salvage of limbs that otherwise would
have been amputated in time frames as short at 4 to 7 weeks with
one or two applications.
Intellectual Property
We have 20 patents issued, including 18 in the United States, and
multiple pending. We believe these patents provide a foundation
from which to continue building our patent portfolio, and we
believe that our technology is sufficiently useful and novel that
we have a reasonable basis upon which to rely on our patent
protections. We also rely on trade secrets and technical know-how
to establish and maintain additional protection of our intellectual
property. As our capital resources permit, we expect to expand our
patent protection as we continue to refine our inventions as well
as make new discoveries. See the detailed discussion below of our
patent portfolio.
We regard our intellectual property as critical to our ultimate
success. Our goal is to obtain, maintain and enforce patent
protection for our products and technologies in geographic areas of
commercial interest and to protect our trade secrets and
proprietary information through laws and contractual
arrangements.
Our Chief Science Officer, Mr. Kenneth R. Code, has been
involved in the research and development of the technology
since 1997. He has participated in the Canadian Federal
Scientific Research and Experimental Development program, and he
was instrumental in the discovery, preparation and filing of the
first technology patents. He has worked with manufacturers,
distributors and suppliers in a wide variety of industries to gain
a full appreciation of the potential applications and the
methodologies applicable to our technology for their manufacture
and performance. He continues to research methods and
applications to continue to expand the potential uses of our
technology as well as work to uncover new discoveries that may
provide additional commercial applications to help solve real world
problems in the field of disinfection.
We incurred approximately $1,500,000 in expense related to our
research and development activities in 2019, a decrease of
approximately $250,000 compared with the prior year. This was due
to a shit of focus in our Canadian facility to commercializing our
AOS technology.
We believe that our suite of intellectual property covers the
presently targeted major areas of focus for our licensing strategy.
The description of our intellectual property, at present, is as
follows:
U.S. Patents
● U.S. Patent 10,238,990, issued on
March 26, 2019, and 10,051,866, issued on August 21, 2018, which
protect our AOS system.
● U.S. Patent 10,046,078, issued on
August 14, 2018, relating to the misting systems that eliminate
odors in waste transfer stations, landfills, and other waste
handling facilities.
● U.S. Patent 9,883,653 issued on
February 8, 2018, which encompasses a litter composition used in
the absorption of animal wastes.
● US Patent 9,414,601 granted August
16, 2016, relating to the use of an article for application to a
surface to provide antimicrobial and/or anti-odor activity. At
least one of the reagents is coated with a water-soluble, water
dispersible or water-penetrable covering that prevents ambient
conditions of 50% relative humidity at 25ºC from causing more than
10% of the total reagents exposed to the ambient conditions from
reacting in a twenty-four hour period.
● U.S. Patent 8,846,067, issued on
September 30, 2014, which encompasses a method of treating a
wound or burn on tissue to reduce microbe growth about a
wound comprising applying an antimicrobial composition to the
wound or burn on tissue using a proprietary stable iodine gel or
liquid. This patent covers our technology as used in products being
developed by our subsidiary, Clyra Medical Technologies.
● U.S. Patent 8,757,253, issued on
June 24, 2014, relating to the moderation of oil extraction waste
environments.
● U.S. Patent 8,734,559, issued on May
27, 2014, relating to the moderation of animal waste
environments.
● U.S. Patent 8,679,515 issued on
March 25, 2014, titled “Activated Carbon Associated with Alkaline
or Alkali Iodide,” which provides protection for our BioLargo® AOS
filter.
● U.S. Patent 8,642,057, issued on
February 14, 2014, titled “Antimicrobial and Antiodor Solutions and
Delivery Systems,” relating to our liquid antimicrobial solutions,
including our gels, sprays and liquids imbedded into wipes and
other substrates.
● U.S. Patent 8,574,610, issued on
November 5, 2013, relating to flowable powder compositions,
including our cat litter additive.
● U.S. Patent 8,257,749, issued on
September 4, 2012, relating to the use of our technology as
protection of against antimicrobial activity in environments that
need to be protected or cleansed of microbial or chemical material.
These environments include closed and open environments and
absorbent sheet materials that exhibit stability until activated by
aqueous environments. The field also includes novel particle
technology, coating technology or micro-encapsulation technology to
control the stability of chemicals that may be used to kill or
inhibit the growth of microbes to water vapor or humidity for such
applications.
● U.S. Patent 8,226,964, issued on
July 24, 2012, relating to use of our technology as a treatment of
residue, deposits or coatings within large liquid carrying
structures such as pipes, drains, ducts, conduits, run-offs,
tunnels and the like, using iodine, delivered in a variety of
physical forms and methods, including using its action to
physically disrupt coatings. The iodine’s disruptive activity may
be combined with other physical removal systems such as pigging,
scraping, tunneling, etching or grooving systems or the like.
● U.S. Patent 8,021,610, issued on
September 20, 2011, titled “System providing antimicrobial activity
to an environment,” relating to the reduction of microbial content
in a land mass. Related to this patent are patents held in Canada
and the European Union.
● U.S. Patent 7,943,158, issued on May
17, 2011, titled “Absorbent systems providing antimicrobial
activity,” relating to the reduction of microbial content by
providing molecular iodine to stabilized reagents.
● U.S. Patent 7,867,510, issued on
January 11, 2011, titled “Material having antimicrobial activity
when wet,” relating to articles for delivering stable
iodine-generating compositions.
Pending Patent Applications
Most recently, we filed two patent applications in the United
States for our advanced wound care formulas. The inventions in
these applications form the basis for the work at Clyra Medical and
the products for which that subsidiary intends to seek FDA
approval. In addition to these applications, we have filed patent
applications in multiple foreign countries, including the European
Union, pursuant to the PCT, and other provisional applications.
Subject to adequate financing, we intend to continue to expand and
enhance our suite of intellectual property through ongoing focus on
product development, new intellectual property development and
patent applications, and further third-party testing and
validations for specific areas of focus for commercial
exploitation. We currently anticipate that additional patent
applications will be filed during the next 12 months with the USPTO
and the PCT, although we are uncertain of the cost of such patent
filings, which will depend upon the number of such applications
prepared and filed. The expense associated with seeking patent
rights in multiple foreign countries is expensive and will require
substantial ongoing capital resources. However, we cannot give any
assurance that adequate capital will be available. Without adequate
capital resources, we will be forced to abandon patent applications
and irrevocably lose rights to our technologies.
Competition
We believe that our products contain unique characteristics that
distinguish them from competing products. In spite of these unique
characteristics, our products face competition from products with
similar prices and similar claims. We face stiff competition from
companies in all of our market segments, and many of our
competitors are larger, better-capitalized, sell under valuable and
long-established brands, and have more industry experience.
For example, we would compete with the following leading companies
in our respective markets:
| |
●
|
Disinfecting/Sanitizing: Johnson & Johnson, BASF
Corporation, Dow Chemical Co., E.I. DuPont De Nemours & Co.,
Chemical and Mining Company of Chile, Inc., Proctor and Gamble Co.,
Diversey, Inc., EcoLab, Inc., Steris Corp., Clorox, and Reckitt
Benckiser.
|
| |
●
|
Water Treatment: GE Water, Trojan UV, Ecolab, Pentair, Xylem
and Siemens AG.
|
| |
●
|
Medical Markets: Smith & Nephew, 3M, ConvaTec and Derma
Sciences.
|
| |
●
|
Industrial Odor Control: MCM Odor Control and OMI
Industries.
|
Each of these named companies and many other competitors are
significantly more capitalized than we are and have many more years
of experience in producing and distributing products.
Additionally, our technology and products incorporating our
technology must compete with many other applications and long
embedded technologies currently on the market (such as, for
example, chlorine for disinfection).
In addition to the competition we face for our existing products,
we are aware of other companies engaged in research and development
of other novel approaches to applications in some or all the
markets identified by us as potential fields of application for our
products and technologies. Many of our present and potential
competitors have substantially greater financial and other
resources and larger research and development staffs than we have.
Many of these companies also have extensive experience in testing
and applying for regulatory approvals.
Finally, colleges, universities, government agencies, and public
and private research organizations conduct research and are
becoming more active in seeking patent protection and licensing
arrangements to collect royalties for the use of technology that
they have developed, some of which may be directly competitive with
our applications.
Governmental Regulation
We will have products (each, a ‘‘Medical Device”) that will be
subject to the Federal Food, Drug, and Cosmetic Act, as amended
(including the rules and regulations promulgated thereunder, the
“FDCA”), or similar Laws (including Council Directive 93/42/EEC
concerning medical devices and its implementing rules and guidance
documents) in any foreign jurisdiction (the FDCA and such similar
Laws, collectively, the “Regulatory Laws”) that are developed,
manufactured, tested, distributed or marketed by our company or its
subsidiary Clyra. Each such Medical Device will need to be
developed, manufactured, tested, distributed, and marketed in
compliance with all applicable requirements under the Regulatory
Laws, including those relating to investigational use, premarket
clearance or marketing approval to market a medical device, good
manufacturing practices, labeling, advertising, record keeping,
filing of reports and security, and in compliance with the Advanced
Medical Technology Association Code of Ethics on Interactions with
Healthcare Professionals.
We believe that no article or part of any Medical Device intended
to be manufactured or distributed by our company or any of our
subsidiaries will be classified as (i) adulterated within the
meaning of Sec. 501 of the FDCA (21 U.S.C. § 351) (or other
Regulatory Laws), (ii) misbranded within the meaning of Sec. 502 of
the FDCA (21 U.S.C. § 352) (or other Regulatory Laws) or (iii) a
product that is in violation of Sec 510 of the FDCA (21 U.S.C. §
360) or Sec. 515 of the FDCA (21 U.S.C. § 360e) (or other
Regulatory Laws).
Neither our company nor any of its subsidiaries, nor, to the
knowledge of our company, any officer, employee or agent of our
company or any of its subsidiaries, has been convicted of any crime
or engaged in any conduct for which such Person or entity could be
excluded from participating in the federal health care programs
under Section 1128 of the Social Security Act of 1935, as amended
(the “Social Security Act”), or any similar Law in any foreign
jurisdiction.
Neither our company nor any of its subsidiaries has received any
written notice that the FDA or any other Governmental Authority has
commenced, or threatened to initiate, any action to enjoin
research, development, or production of any Medical Device.
Employees
As of the date of this prospectus, we employ 26 people, 22 of which
are full-time. We also engage consultants on an as needed basis who
provide certain specified services to us.
Description of Property
Our company owns no real property. We are party to three commercial
property leases for our corporate offices and manufacturing
facility in California, our research and development facility in
Canada, and our engineering division in Tennessee.
We currently lease approximately 9,000 square feet of office and
industrial space at 14921 Chestnut St., Westminster, California
92683. The current lease term is from September 1, 2016 to August
31, 2020, at a monthly base rent of $8,379 throughout the term. We
have the option to renew the lease for an additional four-year
term, and intend to do so. If and when we do so, the rental rate
will adjust to current market rates. In addition to serving as our
principal offices, it is also a manufacturing facility where we
manufacture our products.
We also lease approximately 1,300 square feet of office and lab
space from the University of Alberta. The current lease term
expires January 31, 2021, at monthly fee of $5,266 Canadian
dollars, plus GST. These offices serve as our primary research and
development facilities.
We also lease approximately 13,000 square feet of office and
warehouse space at 105 Fordham Road, Oak Ridge, Tennessee, 37830,
for our professional engineering division. The lease term is from
September 1, 2017 through August 31, 2022, at a monthly base rent
of $5,400 throughout the term.
Our telephone number is (888) 400-2863.
Legal Proceedings
Our company is not a party to any material legal proceeding.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion contains forward-looking statements about our
business and operations. Our actual results may differ materially
from those we currently anticipate as a result of
many factors, including those we described under “Risk Factors” and
elsewhere in this prospectus. Certain statements contained in this
discussion, including, without limitation, statements containing
the words “believes,” “anticipates,” “expects” and the like,
constitute “forward-looking statements” within the meaning of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).
However, as we will issue “penny stock,” as such term is defined in
Rule 3a51-1 promulgated under the Exchange Act, we are ineligible
to rely on these safe harbor provisions. Such forward-looking
statements involve known and unknown risks, uncertainties and other
factors that may cause our actual results, performance or
achievements to be materially different from any of the future
results, performance or achievements expressed or implied by such
forward-looking statements. Given these uncertainties, readers are
cautioned not to place undue reliance on such forward-looking
statements. We disclaim any obligation to update any of such
factors or to announce publicly the results of revision of any of
the forward-looking statements contained herein to reflect future
events or developments. For information regarding risk factors that
could have a material adverse effect on our business, refer to the
“Risk Factors” section of this prospectus beginning on page
4.
Results of Operations—Comparison of the years ended December 31,
2019 and 2018
We operate our business in distinct business segments:
| |
●
|
Odor-No-More, which manufactures and sells our odor and VOC control
products and services, including our flagship product, CupriDyne
Clean;
|
| |
●
|
BLEST, our professional engineering services division supporting
our internal business units and serving outside clients on a fee
for service basis;
|
| |
●
|
BioLargo Water, our Canadian division that has been historically
pure research and development, and is now transitioning to focus on
commercializing our AOS system;
|
| |
●
|
Clyra Medical, our partially owned subsidiary focused on the
Advanced Wound Care industry; and
|
| |
●
|
Our corporate operations, which support the operating segments with
legal, accounting, human resources, and other services.
|
Consolidated revenue for the year ended December 31, 2019 was
$1,861,000, a 36% increase from 2018. Of our business segments,
only Odor-No-More and BLEST generate revenues. While both
operations had have shown encouraging growth, neither generates
enough revenue to fund their operations, and thus the parent
corporation, BioLargo, Inc., invests cash into these segments on a
regular basis to fund operations. These two segments are discussed
separately below. Our Canadian team, BioLargo Water, receives funds
from government research grants (reported on our financial
statements as “Other income – Grant income”), and receives funding
as needed from BioLargo. Clyra Medical, however, relies on direct
investment from third parties for 100% of its operating costs and
is not supported with capital from BioLargo’s corporate budget or
fundraising.
We expect the COVID-19 virus pandemic and resulting decrease in
economic activity in the United States will likely cause an adverse
affect our revenue in the first quarter of 2020, and perhaps
subsequent quarters depending on the length of the pandemic and
length of orders limiting certain business operations and requiring
that citizens remain in their homes. At this time, we have not, and
do not plan to, curtail any of our operations, although some of our
employees are working from home. While we are taking action to
generate revenues from Covid-19 related mitigation measures those
revenues are not yet realized and we have no experience to predict
the outcome of those efforts.
Odor-No-More
Our wholly owned subsidiary Odor-No-More generates revenues through
sales of our flagship product CupriDyne Clean, by providing design,
installation, and maintenance services on the systems that deliver
CupriDyne Clean at its clients’ facilities, and through sales of
odor absorption products to the U.S. Government. During 2019
Odor-No-More added two employees to focus on business development,
increasing sales and increased levels of construction and
maintenance contracts. In light of these investments into growth
,Odor-No-More did not generate a net profit in 2019, its revenues
continued to increase throughout the year, while we continued to
invest in additional operational and sales staffing, and, as a
result its net loss decreased in 2019 to $335,000, compared to
$433,000 in 2018.
Revenue (Odor-No-More)
Odor-No-More’s revenues increased 30% in 2019, to $1,459,000. Our
revenue includes both sales of products and design, installation
and maintenance services of systems that deliver our CupriDyne
Clean products. Of product sales, approximately 55% was generated
from sales of CupriDyne Clean products. In 2019, we increased our
efforts to install CupriDyne Clean delivery systems, and we
anticipate that these systems will result in recurring CupriDyne
Clean product sales.
Sales of our CupriDyne Clean powdered and liquid products increased
43% from the prior year, due to the acquisition of more clients and
client locations, and the sale and delivery of more products than
in years past. Of our CupriDyne Clean sales, approximately
two-thirds were made pursuant to “national purchasing agreements”
(“NPA”) with the four largest waste handling companies in the
United States. Our design and installation of misting systems to
deploy our product accounted for 35% of sales in 2019 compared to
10% in 2018. We are working on how to deploy our product solutions
to all of our NPA customers. Doing so during the COVID-19 pandemic
has been challenging.
Sales to the U.S. military are primarily our Specimen Transport
Solidifier pouches and Suction Canister Solidifiers, and are made
to the U.S. Defense Logistics Agency through our distributor
Downeast Logistics. As a result of a decision by Odor-No-More to
focus on CupriDyne Clean sales and design, installation and
maintenance services, rather than these other lower-margin
products, sales to the U.S. military decreased by 70% in 2019 as
compared with 2018.
Cost of Goods Sold (Odor-No-More)
Odor-No-More’s cost of goods sold includes costs of raw materials,
contract manufacturing, and portions of salaries and expenses. As a
percentage of gross sales, Odor-No-More’s cost of goods was 43% in
2019 versus 51% in 2018. This is due to the reduction in sales to
the federal government of the Specimen Transport Solidifier
products, which have a markedly lower margin than sales of the
CupriDyne Clean products.
Selling, General and Administrative Expense
(Odor-No-More)
Odor-No-More’s Selling, General and Administrative (“SG&A”)
expenses include both cash and non-cash expense related to its
operations. Odor-No-More’s SG&A expenses increased to
$1,167,000 in 2019, as compared with $985,000 in 2018, an increase
of 18%. These expenses have increased alongside Odor-No-More’s
efforts to increase revenues by hiring additional sales and support
staff. Upon such time as the COVID-19 crisis subsides, we would
expect its SG&A expenses to increase for the remainder 2020 as
the business unit will continue to increase efforts to generate
additional revenues.
Net Loss (Odor-No-More)
Odor-No-More generated $1,459,000 in revenue, a gross margin of
$832,000, and had total costs and expenses of $1,169,000, resulting
in a net loss of $337,000, compared with $433,000 in 2018, which
was supported by BioLargo’s capital infusion. To increase its
revenues, Odor-No-More had continued to invest in expanding its
sales and operations, resulting in a continuing loss from
operations, up and until the COVID-19 crisis occurred, but is now
focused primarily on developing distribution and strategic
alliances as it seeks to expand sales with existing staff.
BLEST (engineering division)
Revenue (BLEST)
Our engineering segment (BLEST) generated $402,000 of external
revenues in 2019, compared to $241,000 in 2018. The increase is due
to an increased number of client contracts, including those with
Bhate pursuant to which BLEST is providing services and U.S.
military installations.
Services BLEST provides to BioLargo and its subsidiaries for
internal BioLargo projects is considered intersegment revenue and
is eliminated in consolidation. In the year ended December 31,
2019, it was $597,000, primarily used to further engineer and
develop our flagship AOS water filtration system and our AEC PFAS
treatment system. Our 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 Odor-No-More operating unit.
Cost of Goods (Services) Sold (BLEST)
BLEST’s cost of services includes employee labor as well as
subcontracted labor costs. In 2019, its cost of services were 80%
of its revenues, versus 71% in 2018. This increase is due to
upfront costs associated with long term military contracts. We
expect the cost of services to remain closer to 75% in 2020 based
on the contracts currently in progress.
Selling, General and Administrative Expense
(BLEST)
BLEST’S SG&A expenses were $478,000 in 2019, compared to
$443,000 in 2018. We expect these expenses to remain flat in 2020,
as the staff required to increase service to its clients and
revenues will be included in cost of services.
Net Loss (BLEST)
BLEST generated $402,000 in revenue from third parties, a gross
margin of $82,000, and had total costs and expenses of $832,000,
resulting in a net loss of $749,000, compared with a net loss of
$750,000 in 2018.
BLEST provides substantial support to BioLargo’s other operations,
including BioLargo Water and Odor-No-More. While we are unable to
record revenues generated from intracompany services by the
engineering group to other operating divisions, it is important to
note that the net loss would be eliminated if BLEST were an outside
contract-for-hire services company selling services to our water
company or our industrial odor and VOC control operating unit.
Because the subsidiary had a net loss, we invested cash during the
year to allow it to maintain operations. BLEST’s need for a cash
subsidy to support its operations decreased considerably towards
the end of calendar year 2018. We expect this trend to continue,
and expect that in 2020 its sales will continue to increase, and
thus its gross profit will continue to increase. By the end of
2020, we expect that it will no longer require a cash subsidy to
operate, but will be contributing cash to our corporate operations,
except where we elect to continue engaging BLEST to support our
other operating units.
Other Income
Our wholly owned Canadian subsidiary has been awarded more than 75
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. The
amount of grant income increased $60,000 in 2019 to $218,000. 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.
Our Canadian subsidiary applied for and received a refund on our
income taxes pursuant to the “Scientific Research and Experimental
Development (SR&ED) Program”, a Canadian federal tax incentive
program designed to encourage Canadian businesses to conduct
research and development in Canada. For the year ended December 31,
2019 and 2018, we received a refund of $63,000 and $73,000.
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. We are very active in both the US and Canada, pursuing
grant support for various uses of our products that we believe can
help in managing the COVID-19 crisis.
Selling, General and Administrative Expense –
consolidated
Our SG&A expenses include both cash expenses (for example,
salaries to employees) and non-cash expenses (for example, stock
option compensation expense). Our SG&A expenses across all
business segments increased in the aggregate by 16% ($826,000) in
the year ended December 31, 2019 to $6,140,000. Our non-cash
expenses (through the issuance of stock and stock options)
increased in 2019 compared with 2018 ($2,235,000 compared to
$2,232,000) because our employees, vendors and consultants chose to
receive a greater number of stock and stock options in lieu of cash
owed. The largest components of our SG&A expenses included (in
thousands):
|
|
|
Year ended
December 31, 2018
|
|
|
Year ended
December 31, 2019
|
|
|
Salaries and payroll related
|
|
$ |
1,973 |
|
|
$ |
2,186 |
|
|
Professional fees
|
|
|
800 |
|
|
|
809 |
|
|
Consulting
|
|
|
839 |
|
|
|
1,278 |
|
|
Office expense
|
|
|
1,037 |
|
|
|
1,124 |
|
|
Board of director expense
|
|
|
280 |
|
|
|
300 |
|
|
Sales and marketing
|
|
|
246 |
|
|
|
262 |
|
|
Investor relations
|
|
|
139 |
|
|
|
181 |
|
Our salaries and payroll-related and office-related expenses
increased in 2019 due to increased sales personnel at Odor-No-More.
Consulting expense increased due to increased activity at Clyra
Medical, as well as increased activity for investor relations,
financings, and business development.
Research and Development
In the year ended December 31, 2019, we spent approximately
$1,472,000 in the research and development of our technologies and
products. This was a decrease of 14% ($247,000) compared to 2018,
primarily due to a shift in focus from pure research to
commercializing in our Canadian operations. Our R&D expenses do
not include over $300,000 in internal billings from our engineering
division’s work on internal BioLargo projects.
Interest expense
Our interest expense for the year ended December 31, 2019 was
$3,996,000, an increase of $501,000 compared with 2018. Of our
total interest expense, only $195,000 was paid in cash, and the
remainder, $3,801,000, was paid by issuing shares of our common
stock. Our non-cash interest related expenses were comprised
primarily as follows: (i) $3,376,000 non-cash debt discounts
related to warrants issued in conjunction with debt instruments
being amortized over the life of the debt instrument (in 2018, it
was $2,766,000), and (iii) $200,000 related to interest paid in
stock on debt instruments.
While we cannot predict our interest expense in 2020, our
outstanding debt as of December 31, 2019 was higher than as of
December 31, 2018, and thus we expect our interest expense in 2020
to increase. Additionally, we record the relative fair value of the
warrants and the intrinsic value of the beneficial conversion
feature sold with the convertible notes payable which typically
results in a full discount on the proceeds from the convertible
notes. This discount is amortized as interest expense over the term
of the convertible notes. We expect our interest expense to
increase in 2020 because the total amount we amortize (the line
item on our balance sheet “Discount on convertible notes payable
and line of credit, net of amortization”) increased by $1,375,000
in 2019 – from $323,000 at December 31, 2018, to $1,654,000 at
December 31, 2019.
Net Loss
Net loss for the year ended December 31, 2019 was $11,440,000, a
loss of $0.08 per share, compared to a net loss for the year ended
December 31, 2018 of $10,696,000, a loss of $0.09 per share. Our
net loss this year was somewhat offset by an increase in revenue;
nevertheless, the net loss increased mainly due to the increase in
non-cash financing costs, non-cash interest expense to obtain
capital, and increased payroll and related office expenses which
are primarily associated with increased sales personnel at
Odor-No-More. The nominal decrease in net loss per share for the
year ended December 31, 2019 is primarily attributable to the
increase in the number of shares outstanding from 2018 to 2019.
The net loss per business segment is as follows (in thousands):
|
Net loss
|
|
Year ended December 31, 2018
|
|
|
Year ended December 31, 2019
|
|
|
Odor-No-More
|
|
$ |
(433 |
) |
|
$ |
(337 |
) |
|
BLEST
|
|
|
(750 |
) |
|
|
(749 |
) |
|
Clyra Medical
|
|
|
(883 |
) |
|
|
(1,283 |
) |
|
BioLargo Water
|
|
|
(571 |
) |
|
|
(447 |
) |
|
BioLargo corporate
|
|
|
(8,059 |
) |
|
|
(8,624 |
) |
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss
|
|
$ |
(10,696 |
) |
|
$ |
(11,440 |
) |
It is important to note that of the 2019 BioLargo corporate net
loss of $9,221,000, interest expense was $3,996,000, of which
$3,801,000 was non-cash expense. Additionally, we recorded
$1,522,000 of stock option compensation expense and an additional
$710,000 of services were paid by the issuance of our common stock.
The total of these non-cash items account for $6,033,000 of the
consolidated loss of $11,440,000 in total losses. Assuming they
continue to expand sales, we believe that Odor-No-More and BLEST
(engineering) can achieve positive cash flow from operations at
some point in the future. However, with the continued development
costs associated with Clyra Medical (even though it is financed
directly through the sale of stock in Clyra), and with the addition
of any ongoing development costs associated with BioLargo Water to
be incurred through pre-commercial piloting, we expect to continue
to incur a net loss for the foreseeable future.
We have made considerable investments in our water and medical
technologies as well as supporting the start-up expenses for our
engineering team. We believe those investment will pay off as we
now are narrowly focused on commercial sales.
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 year
ended December 31, 2019, we had a net loss of $11,440,000, used
$4,422,000 cash in operations, and at December 31, 2019, we had a
working capital deficit of $3,289,000, and current assets of
$1,065,000. At December 31, 2019, our total liabilities
included $4,757,000 in convertible debt, promissory notes, and line
of credit obligations. Of these obligations, we may require
conversion of an aggregate principal amount of $3,237,000 at
maturity. The remainder of the notes are convertible only at the
option of the noteholder. Of the amounts that we cannot require
conversion at maturity, as of the date of this report, $70,000 is
due on May 7, 2020, and $550,000 is due in August 2020. We do not
believe gross profits will be sufficient to fund our current level
of operations or pay these debts , and thus we believe we will have
to raise additional investment capital to both fund our operations
and refinance this debt.
We have increasingly relied on our credit line from Lincoln Park
Capital (see Note 3 to our Consolidated Financial Statements) to
provide working capital, receiving $288,000 during the first
quarter of 2020. On March 30, 2020, we entered into a new purchase
agreement and registration rights agreement with Lincoln Park for a
$10,250,000 equity line, under similar terms as our previous
arrangement, which was set to expire in August 2020. Lincoln Park
has pledged an initial share purchase of $250,000, at $0.14 per
share.
In the past, we have received significant investments into our
private offerings. In light of the COVID-19 virus pandemic and
March 2020 stock market crash, we are not able to predict whether
private funding will be available for the remainder of the year. If
we are unable to continue to raise cash through private offerings
or our Lincoln Park equity line, we will be forced to curtail our
operations.
We operate our business in five distinct business segments. Each of
these segments obtains cash to fund operations in unique ways.
Odor-No-More and BLEST generate cash by selling products and
services. Clyra Medical obtains cash from third party investments
of sales of its common stock. BioLargo Water generates cash through
government research grants and tax credits. Our corporate
operations generate cash through private offerings of stock, debt
instruments, and warrants. In 2019, cash was generated as follows
(in thousands):
|
|
|
Year ended December 31, 2018
|
|
|
Year ended December 31, 2019
|
|
|
SOURCES OF INCOME AND CASH
|
|
|
|
|
|
|
|
|
|
Revenue from operations
|
|
$ |
1,364 |
|
|
$ |
1,861 |
|
|
Grant income
|
|
|
158 |
|
|
|
218 |
|
|
Tax credit income
|
|
|
73 |
|
|
|
63 |
|
|
Cash investments (to BioLargo)
|
|
|
2,637 |
|
|
|
5,020 |
|
|
Cash investments (to Clyra)
|
|
|
1,005 |
|
|
|
536 |
|
|
Total:
|
|
$ |
5,237 |
|
|
$ |
7,698 |
|
Although two segments (Odor-No-More and BLEST) generated revenues
in the year ended December 31, 2019, neither generated operating
profits. As such, we provided a cash subsidy to each business
segment to allow it to fund its operations. While revenues have
increased in both operating segments, both continue to expand
operations and thus continue to generate losses.
In the first quarter of 2019, we shifted focus at our Canadian
subsidiary (BioLargo Water) from pure research and development to
commercializing the AOS system. In doing so, we reduced our
research staff and thus reduced its monthly cash needs by $15,000.
In late 2019, BioLargo Water commenced a Regulation Crowdfunding
offering in an attempt to raise internal capital to fund its
operations, which remains ongoing. Further efforts are being made
to generate commercial revenues, including development of a hand
sanitizer product to address the need for that product in light of
the COVID-19 pandemic.
Clyra Medical is unique in that it funds its operations through
third party investments. We do not intend to subsidize its
operations in the future.
We used $4,422,000 cash in our total operations in 2019. At
December 31, 2019, we had current assets of $1,065,000. Thus, to
maintain the same level of operations in 2020, and notwithstanding
the increasing revenues at Odor-No-More and BLEST, we expect to
continue to need to raise significant investment capital. In 2019,
we conducted private securities offerings and received $4,466,000
net proceeds. Since first acquiring the BioLargo technology in the
spring of 2007, we have received investment capital of
approximately $22,000,000 which we have invested in development and
commercialization efforts. We intend to continue to raise money
through private securities offerings for the foreseeable
future.
Critical Accounting Policies
Our discussion and analysis of our results of operations and
liquidity and capital resources are based on our consolidated
financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The
preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and disclosure of contingent
assets and liabilities. On an ongoing basis, we evaluate our
estimates and judgments, including those related to revenue
recognition, valuation of offerings of debt with equity or
derivative features which include the valuation of the warrant
component, any beneficial conversion feature and potential
derivative treatment, and share-based payments. We base our
estimates on anticipated results and trends and on various other
assumptions that we believe are reasonable under the circumstances,
including assumptions as to future events. These estimates form the
basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. By
their nature, estimates are subject to an inherent degree of
uncertainty. Actual results that differ from our estimates could
have a significant adverse effect on our operating results and
financial position. We believe that the following significant
accounting policies and assumptions may involve a higher degree of
judgment and complexity than others.
The methods, estimates and judgments the Company uses in applying
these most critical accounting policies have a significant impact
on the results of the Company reports in its financial
statements.
Revenue Recognition
We adopted ASU 2014-09, “Revenue from Contracts with Customers”,
Topic 606, on January 1, 2018. The guidance focuses on the core
principle for revenue recognition.
The core principle of the guidance is that an entity should
recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those
goods or services. To achieve that core principle, an entity should
apply the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance
obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a
performance obligation.
We have revenue from two subsidiaries, Odor-No-More and BLEST.
Odor-No-More 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. Odor-No-More recognizes revenue
at a point in time when the order for its goods are shipped if its
agreement with the customer is FOB Odor-No-More’s warehouse
facility, and when goods are delivered to its customer if its
agreement with the customer is FOB destination. Revenue is
recognized with a reduction for sales discounts, as appropriate and
negotiated in the customer’s purchase order. Odor-No-More also
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.
Revenue is recognized in arrears as the work is performed.
BLEST identifies services to be performed in a written contract,
which specifies the performance obligations and the rate at which
the services will be billed. Each service is separately negotiated
and priced. Revenue is recognized as services are performed and
completed. BLEST’s contracts typically call for invoicing for time
and materials incurred for that contract. A few contracts have
called for milestone or fixed cost payments where BLEST bills an
agreed-to amount 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 receivable or payable is created. These accounts are adjusted
upon additional billings as the work is completed. To date, there
have been no discounts or other financing terms for the
contracts.
Warrants
Warrants issued with our convertible and non-convertible debt
instruments are accounted for under the fair value and relative
fair value method.
The warrant is first analyzed per its terms as to whether it has
derivative features or not. If the warrant is determined to be a
derivative and not qualify for equity treatment, then it is
measured at fair value using the Black Scholes option model, and
recorded as a liability on the balance sheet. The warrant is
re-measured at its then current fair value at each subsequent
reporting date (it is “marked-to-market”).
If the warrant is determined to not have derivative features, it is
recorded into equity at its fair value using the Black Scholes
option model, however, limited to a relative fair value based upon
the percentage of its fair value to the total fair value including
the fair value of the convertible note.
Convertible debt instruments are recorded at fair value, limited to
a relative fair value based upon the percentage of its fair value
to the total fair value including the fair value of the warrant.
Further, the convertible debt instrument is examined for any
intrinsic beneficial conversion feature (“BCF”) of which the
conversion price is less than the closing common stock price on
date of issuance. If the relative fair value method is used to
value the convertible debt instrument and there is an intrinsic
BCF, a further analysis is undertaken of the BCF using an effective
conversion price which assumes the conversion price is the relative
fair value divided by the number of shares the convertible debt is
converted into by its terms. The BCF value is accounted for as
equity.
The warrant and BCF relative fair values are also recorded as a
discount to the convertible promissory notes. At present, these
equity features of the convertible promissory notes have recorded a
discount to the convertible notes that is substantially equal to
the proceeds received.
Share-based Payments
It is the Company’s policy to expense share-based payments as of
the date of grant or over the term of the vesting period in
accordance with Auditing Standards Codification Topic 718
“Share-Based Payment.” Application of this pronouncement
requires significant judgment regarding the assumptions used in the
selected option pricing model, including stock price volatility and
employee exercise behavior. Most of these inputs are either highly
dependent on the current economic environment at the date of grant
or forward-looking expectations projected over the expected term of
the award.
Fair Value Measurement
Generally accepted accounting principles establishes a hierarchy to
prioritize the inputs of valuation techniques used to measure fair
value. The hierarchy gives the highest ranking to the fair values
determined by using unadjusted quoted prices in active markets for
identical assets (Level 1) and the lowest ranking to fair values
determined using methodologies and models with unobservable inputs
(Level 3). Observable inputs are those that market participants
would use in pricing the assets based on market data obtained from
sources independent of the Company. Unobservable inputs reflect the
Company’s assumptions about inputs market participants would use in
pricing the asset or liability developed based on the best
information available in the circumstances. The Company has
determined the appropriate level of the hierarchy and applied it to
its financial assets and liabilities.
Management believes the carrying amounts of the Company’s financial
instruments as of December 31, 2018 and 2019 approximate their
respective fair values because of the short-term nature of these
instruments. Such instruments consist of cash, accounts receivable,
prepaid assets, accounts payable, convertible notes, and other
assets and liabilities.
Recent Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements, “Summary of
Significant Accounting Policies – Recent Accounting
Pronouncements”, for the applicable accounting pronouncements
affecting the Company.
MANAGEMENT
Executive Officers and Directors
The following table sets forth information about our executive
officers and directors as of the date of this prospectus:
|
Name
|
|
Age
|
|
Position
|
| |
Dennis P. Calvert
|
|
57
|
|
President, CEO, Chairman, Director
|
| |
Charles K. Dargan II
|
|
65
|
|
CFO
|
| |
Kenneth R. Code
|
|
73
|
|
Chief Science Officer, Director
|
| |
Joseph L. Provenzano
|
|
51
|
|
Vice President of Operations, Corporate Secretary
|
|
|
Dennis E. Marshall(2)(3)(4)
|
|
77
|
|
Director
|
|
|
Kent C. Roberts III(1)(2)(3)
|
|
60
|
|
Director
|
| |
John S. Runyan(1)(5)(6)
|
|
81
|
|
Director
|
| |
Jack B. Strommen
|
|
50
|
|
Director
|
|
(1)
|
Member of Audit Committee
|
|
(2)
|
Member of Compensation Committee
|
|
(3)
|
Member of Nominating and Corporate Governance Committee
|
|
(4)
|
Chairman of Audit Committee
|
|
(5)
|
Chairman of Compensation Committee
|
|
(6)
|
Chairman of Nominating and Corporate Governance Committee
|
Dennis P. Calvert is our President, Chief Executive
Officer and Chairman of the Board. He also serves in the same
positions for BioLargo Life Technologies, Inc. and BioLargo Water
U.S.A., Inc., both wholly owned subsidiaries, and chairman of the
board of directors of our subsidiaries Odor-No-More, Inc., Clyra
Medical Technologies, Inc. and BioLargo Water, Inc. (Canada). Mr.
Calvert was appointed a director in June 2002 and has served as
President and Chief Executive Officer since June 2002, Corporate
Secretary from September 2002 until March 2003 and Chief Financial
Officer from March 2003 through January 2008. Mr. Calvert holds a
B.A. degree in Economics from Wake Forest University, where he was
a varsity basketball player. Mr. Calvert also studied at Columbia
University and Harding University. He also serves on the board of
directors at The Maximum Impact Foundation, a 501(c)(3), committed
to bridging the gap for lifesaving work around the globe for the
good of man and in the name of Christ. He serves as a Director of
Sustain SoCal (formerly known as Sustain OC). Sustain SoCal is a
trade association that seeks to promote economic growth in the
Southern California clean technology industry. He also serves on
the Board of Directors at TMA Bluetech the leading regional water
cluster promoting science-based ocean water industries and also
serves on the Board of Directors of Tilly’s Life Center, a
nonprofit charitable foundation aimed at empowering teens with a
positive mindset and enabling them to effectively cope with
crisis, adversity and tough decisions. He recently joined the
leadership board at Water UCI, which is an interdisciplinary center
in the School of Social Ecology at the University of California-
Irvine, that facilitates seamless collaboration across schools,
departments, and existing research centers around questions of
fundamental and applied water science, technology, management, and
policy. Mr. Calvert is a scholarship sponsor for the Environmental
Education Research Foundation and also the National Water Research
Institute. He is also an Eagle Scout. He is married and has two
children. Mr. Calvert has an extensive entrepreneurial background
as an operator, investor and consultant. Prior to his work with
BioLargo, he had participated in more than 300 consulting projects
and more than 50 acquisitions as well as various financing
transactions and companies that ranged from industrial chemicals,
healthcare management, finance, telecommunications and consumer
products.
Charles K. Dargan II is our Chief Financial Officer and has
served as such since February 2008. Since January 2003, Mr. Dargan
has served as founder and President of CFO 911, an organization of
senior executives that provides accounting, finance and operational
expertise to both small capitalization public and middle market
private companies in all phases of their business life cycle. From
March 2000 to January 2003, Mr. Dargan was the Chief Financial
Officer of Semotus Solutions, Inc., an American Stock
Exchange-listed wireless mobility software company. Mr. Dargan also
serves as a director of Hiplink Software, Inc. Further, Mr. Dargan
began his finance career in investment banking with Drexel Burnham
Lambert and later became Managing Director of two other investment
banking firms, including Houlihan Lokey Howard & Zukin, where
he was responsible for the management of the private placement
activities of the firm. Mr. Dargan received his B.A. degree in
Government from Dartmouth College, his M.B.A. degree and M.S.B.A.
degree in Finance from the University of Southern California. Mr.
Dargan is also a CPA (inactive) and CFA.
Kenneth R. Code is our Chief Science Officer. He has been a
director since April 2007. Mr. Code is our single largest
stockholder. He is the founder of IOWC, which is engaged in the
research and development of advanced disinfection technology, and
from which our company acquired its core iodine technology in April
2007. Mr. Code has authored several publications and holds several
patents, with additional patents pending, concerning advanced
iodine disinfection. Mr. Code graduated from the University of
Calgary, Alberta, Canada.
Joseph L. Provenzano is our Vice President of Operations,
Corporate Secretary. He has been a director since June 2002,
assumed the role of Corporate Secretary in March 2003, was
appointed Executive Vice President of Operations in January 2008
and was elected President of our subsidiary, Odor-No-More, Inc.,
upon the commencement of its operations in January 2010. He is a
co-inventor on several of our company’s patents and proprietary
manufacturing processes, and he has developed over 30 products from
our CupriDyne® technology. Mr. Provenzano began his corporate
career in 1988 in the marketing field. In 2001 he began work with
an investment holding company to manage their mergers and
acquisitions department, participating in more than 50 corporate
mergers and acquisitions.
Dennis E. Marshall has been a director since April 2006. Mr.
Marshall has over 46 years of experience in real estate, asset
management, management level finance and operations-oriented
management. Since 1981, Mr. Marshall has been a real estate
investment broker in Orange County, California, representing buyers
and sellers in investment acquisitions and dispositions. From March
1977 to January 1981, Mr. Marshall was a real estate syndicator at
McCombs Corporation as well as the assistant to the Chairman of the
Board. While at McCombs Corporation, Mr. Marshall became the Vice
President of Finance, where he financially monitored numerous
public real estate syndications. From June 1973 to September 1976,
Mr. Marshall served as an equity controller for the Don Koll
Company, an investment builder and general contractor firm, at
which Mr. Marshall worked closely with institutional equity
partners and lenders. Before he began his career in real estate,
Mr. Marshall worked at Arthur Young & Co. (now Ernst &
Young) from June 1969 to June 1973, where he served as Supervising
Senior Auditor and was responsible for numerous independent audits
of publicly held corporations. During this period, he obtained
Certified Public Accountant certification. Mr. Marshall earned a
degree in Accounting from the University of Texas, Austin in 1966
and earned a Master of Science Business Administration from the
University of California, Los Angeles in 1969. Mr. Marshall serves
as Chairman of the Audit Committee.
Kent C. Roberts II has been a director since August
2011. Presently, he is a senior member of the investment team
at Vulcan Capital Management, the family office of the late Paul
Allen, co-founder of Microsoft. He leads the team's Finance
and Fintech practice, where he divides his time between public and
private market investment opportunities. Prior to this he was
a partner at Acacia Investment Partners, a management consulting
firm serving the asset management industry. Mr. Roberts has had a
long and successful career in the asset management business as a
north American practice leader or at the senior partner level. His
investment experience spans 30 years where he served in senior
positions in management, research, portfolio management, and
marketing. He has worked for both large firms, as well as
boutiques, which brings unique insight and expertise to global
investment decisions. Prior firm experience includes: Vulcan
Capital, Global Evolution USA, First Quadrant and Bankers Trust
Company. Mr. Roberts began his professional career in the oil and
gas exploration industry. He received an MBA in Finance from the
University of Notre Dame and a BS in Agriculture and Watershed
Hydrology from the University of Arizona, and holds a Series 3
securities license.
John S. Runyan has been a director since October 2011. He
has spent his career in the food industry. He began as a stock
clerk at age 12, and ultimately served the Fleming Companies for 38
years, his last 10 years as a Senior Executive Officer in its
corporate headquarters where he was Group President of Price Impact
Retail Stores with annual sales of over $3 billion. He retired from
Fleming Companies in 2001, and then established JSR&R Company
Executive Advising, with a primary emphasis in the United States
and international food business. His clients have included Coca
Cola, Food 4 Less Price Impact Stores, IGA, Inc., Golden State
Foods, Bozzuto Companies Foodstuffs New Zealand, Metcash Australia
and McLane International. In 2005, he joined Associated Grocers in
Seattle, Washington as President and CEO, overseeing its purchase
in 2007 by Unified Grocers, at which time he became Executive
Advisor to its CEO and to its President. Mr. Runyan currently
serves on the board of directors of Western Association of Food
Chains and Retailer Owned Food Distributors of America.
Additionally, Mr. Runyan served eight years as a board member of
the City of Hope’s Northern California Food Industry Circle, which
included two terms as President, and was recognized with the City
of Hope “Spirit of Life” award. He was the first wholesale
executive to be voted “Man of the Year” by Food People Publication.
He is a graduate of Washburn University, which recognized his
business accomplishments in 2007 as the honoree from the School of
Business “Alumni Fellow Award.” Mr. Runyan serves as Chairman of
the Compensation Committee.
Jack B. Strommen has been a director since June 2017,
and also is a member of the board of directors of our subsidiary,
Clyra Medical Technologies, as the representative of Sanatio
Capital LLC. Mr. Strommen is the CEO of PD Instore, a leader in the
design, production and installation of retail environments and
displays for many Fortune 500 companies including Target, Adidas,
Verizon, Disney and Sony. He also is the Chairman of Our House
Films, an angel investor in several private companies ranging from
bio-tech to med-tech to real estate, and serves on the board of
directors of several private and public companies. A relentless
force of growth, Mr. Strommen has taken his company, PD Instore, to
new and ever increasing levels of success. Mr. Strommen purchased
the family owned, local based printing firm, from his grandfather
in 1999. With his vision and leadership, it went from a local
company with $25M in revenues to a global company with $180M in
global sales. Mr. Strommen led the company in a private sale in
2015, remaining as CEO.
CORPORATE
GOVERNANCE
Our corporate website, www.biolargo.com, contains the
charters for our Audit and Compensation Committees and certain
other corporate governance documents and policies, including our
Code of Ethics. Any changes to these documents and any waivers
granted with respect to our Code of Ethics will be posted
at www.biolargo.com. In addition, we will provide a
copy of any of these documents without charge to any stockholder
upon written request made to Corporate Secretary, BioLargo, Inc.,
14921 Chestnut St., Westminster, California 92683. The
information at www.biolargo.com is
not, and shall not be deemed to be, a part of this prospectus.
Director Independence
Our board of directors has determined that each of Messrs.
Marshall, Roberts and Runyan is independent as defined under
applicable Nasdaq Stock Market, LLC (“Nasdaq”) listing standards.
Our board of directors has determined that neither Mr. Calvert, nor
Mr. Code is independent as defined under applicable Nasdaq listing
standards. Neither Mr. Calvert, nor Mr. Code serve on any committee
of our board of directors.
Meetings of our Board of Directors
Our board of directors held five meetings during 2019. Each of the
incumbent directors attended all the meetings of our board of
directors and committees on which the director served, except for
one absence at our annual board meeting, and one absence at our
November 2019 meeting. Each of our directors is encouraged to
attend our Annual Meeting of Stockholders, when these are held, and
to be available to answer any questions posed by stockholders to
such director.
Communications with our Board of Directors
The following procedures have been established by our board of
directors to facilitate communications between our stockholders and
our board of directors:
| |
•
|
|
Stockholders may send correspondence, which should indicate that
the sender is a Stockholder, to our board of directors or to any
individual director, by mail to Corporate Secretary, BioLargo,
Inc., 14921 Chestnut St., Westminster, California 92683.
|
| |
•
|
|
Our Corporate Secretary will be responsible for the first review
and logging of this correspondence and will forward the
communication to the director or directors to whom it is addressed
unless it is a type of correspondence which our board of directors
has identified as correspondence which may be retained in our files
and not sent to directors. Our board of directors has authorized
the Corporate Secretary to retain and not send to directors
communications that: (a) are advertising or promotional in
nature (offering goods or services), (b) solely relate to
complaints by clients with respect to ordinary course of business
customer service and satisfaction issues or (c) clearly are
unrelated to our business, industry, management or Board or
committee matters. These types of communications will be logged and
filed but not circulated to directors. Except as set forth in the
preceding sentence, the Corporate Secretary will not screen
communications sent to directors.
|
| |
•
|
|
The log of stockholder correspondence will be available to members
of our board of directors for inspection. At least once each year,
the Corporate Secretary will provide to our board of directors a
summary of the communications received from stockholders, including
the communications not sent to directors in accordance with the
procedures set forth above.
|
Our stockholders also may communicate directly with the
non-management directors as a group, by mail addressed to Dennis E.
Marshall, c/o Corporate Secretary, BioLargo, Inc., 14921 Chestnut
St., Westminster, California 92683.
Our Audit Committee has established procedures for the receipt,
retention and treatment of complaints regarding questionable
accounting, internal controls and financial improprieties or
auditing matters. Any of our employees may confidentially
communicate concerns about any of these matters by mail addressed
to Audit Committee, c/o Corporate Secretary, BioLargo, Inc., 14921
Chestnut St., Westminster, California 92683.
All the reporting mechanisms also are posted on our corporate
website, www.biolargo.com. Upon receipt of a
complaint or concern, a determination will be made whether it
pertains to accounting, internal controls or auditing matters and,
if it does, it will be handled in accordance with the procedures
established by the Audit Committee.
Committees of our Board of Directors
Our board of directors has established an Audit Committee, a
Compensation Committee, and a Nominating and Corporate Governance
Committee.
The Audit Committee meets with management and our independent
registered public accounting firm to review the adequacy of
internal controls and other financial reporting matters. Dennis E.
Marshall served as Chairman of the Audit Committee during 2019 and
continues to serve in that capacity. John S. Runyan and Kent C.
Roberts II, current board members, also serve on the Audit
Committee. Our board of directors has determined that
Mr. Marshall qualifies as an “audit committee financial
expert” as defined in Item 401(h) of Regulation S-K of the
Securities Exchange Act of 1934, as amended. The Audit Committee
met four times in 2019.
The Compensation Committee reviews the compensation for all our
officers and directors and affiliates. The Committee also
administers our equity incentive option plan. Mr. Runyan served as
Chairman of the Compensation Committee during 2019. Mr. Marshall
also serves on the Compensation Committee. The Compensation
Committee met once and acted by consent three times during
2019.
Our board of directors did not modify any action or recommendation
made by the Compensation Committee with respect to executive
compensation for the 2018 or 2019 fiscal years. It is the opinion
of the Compensation Committee that the executive compensation
policies and plans provide the necessary total remuneration program
to properly align their performance and the interests of our
stockholders using competitive and equitable executive compensation
in a balanced and reasonable manner, for both the short and long
term.
The Nominating and Corporate Governance Committee was established
in November 2018. Its responsibilities include to identify and
screen individuals qualified to become members of the Board, to
make recommendations to the Board regarding to the Board regarding
the selection and approval of the nominees for director to be
submitted to a stockholder vote at the annual meeting of
stockholders, subject to approval by the Board, to development
corporate governance guidelines and oversee corporate governance
practices, to develop a process for an annual evaluation of the
Board and its committees, to review all director compensation and
benefits, to review, approve and oversee and related party
transaction, to develop and recommend director independent
standards, and to develop and recommend a company code of conduct,
to investigate any alleged breach and enforce the provisions of the
code. This committee did not meet in 2019.
Our board of directors follows the written code of ethics that
applies to its principal executive officers, principal financial
officer, principal accounting officer or controller, or persons
performing similar functions.
Leadership Structure of our Board of Directors
Mr. Calvert serves as both principal executive officer and Chairman
of the Board. The Company does not have a lead independent
director. Messrs. Marshall, Roberts, Strommen and Runyan serve as
independent directors who provide active and effective oversight of
our strategic decisions. As of the date of this filing, the Company
has determined that the leadership structure of the Board has
permitted the Board to fulfill its duties effectively and
efficiently and is appropriate given the size and scope of the
Company and its financial condition.
Our Board of Directors’ Role in Risk Oversight
As a smaller company, our executive management team, consisting of
Messrs. Calvert and Code, are also members of our board of
directors. Our board of directors, including our executive
management members and independent directors, is responsible for
overseeing our executive management team in the execution of its
responsibilities and for assessing our company’s approach to risk
management. Our board of directors exercises these responsibilities
on an ongoing basis as part of its meetings and through its
committees. Each member of the management team has direct access to
the other Board members, and our committees of our board of
directors, to ensure that all risk issues are frequently and openly
communicated. Our board of directors closely monitors the
information it receives from management and provides oversight and
guidance to our executive management team regarding the assessment
and management of risk. For example, our board of directors
regularly reviews our company’s critical strategic, operational,
legal and financial risks with management to set the tone and
direction for ensuring appropriate risk taking within the
business.
Family Relationships
There are no family relationships among the directors and executive
officers of our company.
EXECUTIVE
COMPENSATION
The following table sets forth all compensation earned for services
rendered to our company in all capacities for the fiscal years
ended December 31, 2018 and 2019, by our principal executive
officer and our three most highly compensated executive officers
other than our principal executive officer, collectively referred
to as the “Named Executive Officers.”
Summary Compensation Table
|
Name and
Principal
Positions
|
|
Year
|
|
Salary
|
|
|
Stock
Awards(1)
|
|
|
Option
Awards(1)
|
|
|
All other
Compensation
|
|
|
Total
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dennis P. Calvert,
|
|
2018
|
|
$
|
288,603
|
(2)
|
|
$
|
—
|
|
|
$
|
335,820
|
(3)
|
|
$
|
31,325
|
(4)
|
|
$
|
655,748
|
|
|
Chairman, Chief Executive Officer and President
|
|
2019
|
|
$
|
288,603
|
(2)
|
|
$
|
—
|
|
|
$
|
335,820
|
(3)
|
|
$
|
33,405
|
(4)
|
|
$
|
657,829
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth R. Code,
|
|
2018
|
|
$
|
288,603
|
(5)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,600
|
(4)
|
|
$
|
301,203
|
|
|
Chief Science Officer
|
|
2019
|
|
$
|
288,603
|
(5)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,600
|
(4)
|
|
$
|
301,203
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles K. Dargan
|
|
2018
|
|
$
|
—
|
|
|
$
|
|
|
|
$
|
87,750
|
(6)
|
|
$
|
—
|
|
|
$
|
87,750
|
|
|
Chief Financial Officer
|
|
2019
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
66,900
|
(6)
|
|
$
|
—
|
|
|
$
|
66,900
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Provenzano,
|
|
2018
|
|
$
|
169,772
|
(7)
|
|
$
|
—
|
|
|
$
|
37,600
|
(8)
|
|
$
|
16,565
|
(4)
|
|
$
|
224,937
|
|
|
Corporate Secretary; President Odor-No-More, Inc
|
|
2019
|
|
$
|
169,772
|
(7)
|
|
$
|
—
|
(3)
|
|
$
|
26,795
|
(8)
|
|
$
|
13,940
|
(4)
|
|
$
|
210,507
|
|
| |
(1)
|
Our company recognizes compensation expense for stock option awards
on a straight-line basis over the applicable service period of the
award, which is the vesting period. Share-based compensation
expense is based on the grant date fair value estimated using the
Black-Scholes method. The amounts in the “Stock Awards” and “Option
Awards” columns reflect the aggregate fair value of awards of stock
or options calculated as of the grant date. These amounts do not
represent cash paid to or realized by any of the recipients during
the years indicated.
|
| |
(2)
|
In 2018 and 2019 the employment agreement for Mr. Calvert provided
for a base salary of $288,603, other compensation for health
insurance and an automobile allowance. During the year ended
December 31, 2018, Mr. Calvert agreed to forego $151,149 of cash
compensation due to him and accept 534,619 shares of our common
stock in lieu thereof, at prices ranging between $0.24 - $0.43 per
share. During the year ended December 31, 2019, Mr. Calvert agreed
forego $95,900 of cash compensation due to him and accept 498,653
shares of our common stock in lieu thereof, at prices ranging
between $0.16 - $0.23 per share. The common stock issued to Mr.
Calvert is subject to a “lock up agreement” that prohibits Mr.
Calvert from selling the shares until the earlier of (i) the sale
of the Company; (ii) the successful commercialization of BioLargo
products or technologies as demonstrated by its receipt of at least
$3,000,000 in cash, or the recognition of $3,000,000 in revenue,
over a 12-month period from the sale of products and/or the license
of technology; and (iii) the Company’s breach of the employment
agreement between the Company and Calvert dated May 2, 2017 and
resulting in Calvert’s termination. (See “Employment
Agreements—Dennis P. Calvert” and “Outstanding Equity Awards
at Fiscal Year-End” below for more details).
|
| |
(3)
|
On May 2, 2017, pursuant to his employment agreement, we granted to
our president, Dennis P. Calvert, an option to purchase
3,731,322 shares of the Company’s common stock. The option is a
non-qualified stock option, exercisable at $0.45 per share, the
closing price of our common stock on the grant date, exercisable
for ten years from the date of grant, and vesting in equal
increments on the anniversary of the option agreement for five
years. Any portion of the option which has not yet vested shall
immediately vest in the event of, and prior to, a change of
control, as defined in the employment agreement. The option cliff
vests in 4 equal amounts on each anniversary of the option
agreement. The option agreement contains the other terms standard
in option agreements issued by the Company, including provisions
for a cashless exercise. The fair value of this option totaled
$1,679,095 and is being amortized monthly through May 2, 2022.
During the year ended December 31, 2018 and 2019, we recorded
$335,820 and $335,820, respectively, of selling, general and
administrative expense related to the option.
|
| |
(4)
|
Includes health insurance premiums, automobile allowance, and
bonus.
|
| |
(5)
|
In 2018 and 2019 the employment agreement for Mr. Code provided for
a base salary of $288,603 and other compensation of $12,600. During
the year ended December 31, 2018, Mr. Code agreed to forego
$167,535 of cash compensation due to him and accept 596,417 shares
of our common stock in lieu thereof, at $0.24 - $0.43 per share.
During the year ended December 31, 2019, Mr. Code agreed forego
$115,101 of cash compensation due to him and accept 582,298 shares
of our common stock in lieu thereof, at prices ranging between
$0.16 - $0.32 per share. See “Employment Agreements—Kenneth R.
Code” and “Outstanding Equity Awards at Fiscal Year-End” below for
more details.
|
| |
(6)
|
Our Chief Financial Officer, Charles K. Dargan II, did not receive
any cash compensation during the years ended December 31, 2018 and
2019. His only compensation is the issuance, each year, of an
option to purchase 300,000 shares of our common stock, with 25,000
shares vesting each month. The value set forth in the table
reflects the fair value of the options issued that vested during
the 12 months of the years indicated. See “Employment
Agreements—Charles K. Dargan II” and “Outstanding Equity Awards at
Fiscal Year-End” below for more details.
|
| |
(7)
|
In 2018 and 2019, the employment agreement for Mr. Provenzano
provided for a base salary of $169,772, and other compensation for
health insurance and automobile allowance. See “Employment
Agreements – Joseph Provenzano” and “Outstanding Equity
Awards at Fiscal Year-End” below for more details.
|
| |
(8)
|
On May 28, 2019, pursuant to his employment agreement, we granted
to our Vice President of Operations and President of our subsidiary
Odor-No-More, granted Joseph L. Provenzano a restricted stock unit
of 500,000 shares of common stock, subject to the execution of a
“lock-up agreement” whereby the shares remain unvested unless and
until the earlier of (i) a sale of the Company, (ii) the successful
commercialization of the Company’s products or technologies as
demonstrated by its receipt of at least $3,000,000 in cash, or the
recognition of $3,000,000 in revenue, over a 12-month period from
the sale of products and/or the license of technology, and (iii)
the Company’s breach of the employment agreement resulting in his
termination. Does not include an option to purchase 1,000,000
shares of common stock that vests in five equal increments
beginning one year after grant date.
|
Employment Agreements
Dennis P. Calvert
On May 2, 2017, BioLargo, Inc. (the “Company”) and its President
and Chief Executive Officer Dennis P. Calvert entered into an
employment agreement (the “Calvert Employment Agreement”),
replacing in its entirety the previous employment agreement with
Mr. Calvert dated April 30, 2007.
The Calvert Employment Agreement provides that Mr. Calvert
will continue to serve as the President and Chief Executive Officer
of the Company and receive base compensation equal to his current
rate of pay of $288,603 annually. In addition to this base
compensation, the agreement provides that he is eligible to
participate in incentive plans, stock option plans, and similar
arrangements as determined by the Company’s Board of Directors,
health insurance premium payments for himself and his immediate
family, a car allowance of $800 per month, paid vacation of four
weeks per year, and bonuses in such amount as the Compensation
Committee may determine from time to time.
The Calvert Employment Agreement provides that Mr. Calvert
will be granted an option (the “Option”) to purchase 3,731,322
shares of the Company’s common stock. The Option shall be a
non-qualified stock option, exercisable at $0.45 per share, which
represents the market price of the Company’s common stock as of the
date of the agreement, exercisable for ten years from the date of
grant and vesting in equal increments over five years.
Notwithstanding the foregoing, any portion of the Option which has
not yet vested shall be immediately vested in the event of, and
prior to, a change of control, as defined in the Calvert Employment
Agreement. The agreement also provides for a grant of 1,500,000
shares of common stock, subject to the execution of a “lock-up
agreement” whereby the shares remain unvested unless and until the
earlier of (i) a sale of the Company, (ii) the successful
commercialization of the Company’s products or technologies as
demonstrated by its receipt of at least $3,000,000 in cash, or the
recognition of $3,000,000 in revenue, over a 12-month period from
the sale of products and/or the license of technology, and (iii)
the Company’s breach of the employment agreement resulting in his
termination. The Option contains the other terms standard in option
agreements issued by the Company, including provisions for a
cashless exercise.
The Calvert Employment Agreement has a term of five years, unless
earlier terminated in accordance with its terms. The Calvert
Employment Agreement provides that Mr. Calvert’s employment
may be terminated by the Company due to his death or disability,
for cause, or upon a merger, acquisition, bankruptcy or
dissolution of the Company. “Disability” as used in the Calvert
Employment Agreement means physical or mental incapacity or illness
rendering Mr. Calvert unable to perform his duties on a
long-term basis (i) as evidenced by his failure or inability
to perform his duties for a total of 120 days in any 360-day
period, or (ii) as determined by an independent and licensed
physician whom Company selects, or (iii) as determined without
recourse by the Company’s disability insurance carrier. “Cause”
means that Mr. Calvert has (i) engaged in willful misconduct
in connection with the Company’s business; or (ii) been convicted
of, or plead guilty or nolo contendre in
connection with, fraud or any crime that constitutes a felony or
that involves moral turpitude or theft. If Mr. Calvert’s
employment is terminated due to merger or acquisition, then he will
be eligible to receive the greater of (i) one year’s
compensation plus an additional one half year for each year of
service since the effective date of the employment agreement or
(ii) one year’s compensation plus an additional one half year
for each year remaining in the term of the agreement. Otherwise, he
is only entitled to receive compensation due through the date of
termination.
The Calvert Employment Agreement requires Mr. Calvert to keep
certain information confidential, not to solicit customers or
employees of the Company or interfere with any business
relationship of the Company, and to assign all inventions made or
created during the term of the Calvert Employment Agreement as
“work made for hire”.
Kenneth R. Code
We entered into an employment agreement dated as of April 29, 2007
with Mr. Code, our Chief Science Officer (the “Code Employment
Agreement”), which we amended on December 28, 2012 such that his
salary will remain at $288,603, the level paid in April 2012, with
no further automatic increases. The Code Employment Agreement can
automatically renew for one year periods on April 29th of each
year but may be terminated “without cause” at any time upon 120
days’ notice, and upon such termination, Mr. Code would not receive
the severance originally provided for. All other terms in the 2007
agreement remain the same in the Code Employment Agreement.
In addition, Mr. Code will be eligible to participate in
incentive plans, stock option plans, and similar arrangements as
determined by our board of directors. When such benefits are made
available to our senior employees, Mr. Code is also eligible
to receive health insurance premium payments for himself and his
immediate family, a car allowance of $800 per month, paid vacation
of four weeks per year plus an additional two weeks per year for
each full year of service during the term of the agreement up to a
maximum of 10 weeks per year, life insurance equal to three times
his base salary and disability insurance.
The Code Employment Agreement further requires Mr. Code to
keep certain information confidential, not to solicit customers or
employees of our company or interfere with any business
relationship of our company, and to assign all inventions made or
created during the term of the Code Employment Agreement as “work
made for hire”.
Charles K. Dargan II
Charles K. Dargan, II has served as our Chief Financial Officer
since February 2008 pursuant to an engagement agreement with his
company, CFO 911, that has been renewed and extended each year.
On December 31, 2017, we and Mr. Dargan further extended his
engagement agreement to September 30, 2018. This extension again
compensates Mr. Dargan through the issuance of an option to
purchase 300,000 shares of the Company’s common stock. The strike
price of the option is $0.39 per share, which is equal to the
closing price of the Company’s common stock on the last business
day prior to the extension, expires December 31, 2027, and vests
over the term of the engagement with 75,000 shares having vested as
of December 31, 2017, and the remaining shares to vest 25,000
shares monthly beginning January 31, 2018, and each month
thereafter, so long as his agreement is in full force and
effect.
On January 16, 2019, we and Mr. Dargan again extended his
engagement agreement. The extension provides for an additional term
to expire September 30, 2019, and is retroactively effective to the
termination of the prior extension on September 30, 2018. This
extension again compensates Mr. Dargan through the issuance of
an option to purchase 300,000 shares of the Company’s common stock,
at a strike price equal to the closing price of the Company’s
common stock on January 16, 2019 of $0.223, to expire January 16,
2029, and to vest over the term of the engagement with 75,000
shares having vested as of December 31, 2018, and the remaining
shares to vest 25,000 shares monthly beginning January 31, 2019,
and each month thereafter, so long as the engagement agreement is
in full force and effect. The Option was issued pursuant to the
Company’s 2018 Equity Incentive Plan. The issuance of the Option is
Mr. Dargan’s sole source of compensation for the extended term. 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.
On February 25, 2020, we and Mr. Dargan again extended his
engagement agreement to expire January 31, 2021. As the sole
compensation for the Extended Term, Mr. Dargan was issued an
option (“Option”) to purchase 25,000 shares of the Company’s common
stock for each month during the term (thus, an option to purchase
400,000 shares reflecting an extended term of 16 months). The
Option vests over the period of the agreement, with 75,000 shares
having vested as of December 31, 2019, and the remaining shares to
vest 25,000 shares monthly beginning January 31, 2020, and each
month thereafter, so long as the agreement is in full force and
effect. The Option is exercisable at $0.21 per share, the closing
price of BioLargo’s common stock on February 25, 2020, 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.
Joseph L. Provenzano
Mr. Provenzano has served as Vice President of Operations since
January 1, 2008, in addition to continuing to serve as our
Corporate Secretary. On May 28, 2019, the Compensation Committee of
the Board of Directors approved the terms of a new employment
agreement for Mr. Provenzano, and granted to him an incentive stock
option (the “Option”) to purchase 1,000,000 shares of the Company’s
common stock pursuant to the terms of the Company’s 2018 Equity
Incentive Plan (“Plan”). As set forth in the Plan, the exercise
price of the Option is equal to the closing price of the Company’s
common stock on the May 28 grant date, at $0.17 per share. The
shares in the Option vest in five in equal increments over five
years, and the Option may be exercised for up to ten years
following the grant date. Notwithstanding the foregoing, any
portion of the Option which has not yet vested shall be immediately
vested in the event of, and prior to, a change of control, as
defined in the Provenzano Employment Agreement. The Option contains
the other terms standard in option agreements issued by the
Company, including provisions for a cashless exercise. On May 28,
2019, the Committee also granted Mr. Provenzano a restricted stock
unit of 500,000 shares of common stock, subject to the execution of
a “lock-up agreement” whereby the shares remain unvested unless and
until the earlier of (i) a sale of the Company, (ii) the successful
commercialization of the Company’s products or technologies as
demonstrated by its receipt of at least $3,000,000 in cash, or the
recognition of $3,000,000 in revenue, over a 12-month period from
the sale of products and/or the license of technology, and (iii)
the Company’s breach of the employment agreement resulting in his
termination. On June 18, 2019, the other terms of his employment
agreement were finalized and a document fully executed. Although
fully executed on June 18, 2019, the employment agreement is
effective as of May 28, 2019, to reflect Option grant date.
The Provenzano Employment Agreement provides that
Mr. Provenzano will serve as our Executive Vice President of
Operations, as well as the President and Chief Executive Officer of
our wholly owned subsidiary Odor-No-More. Mr. Provenzano’s base
compensation will remain at his current rate of $170,000 annually.
In addition to this base compensation, the agreement provides that
he is eligible to participate in incentive plans, stock option
plans, and similar arrangements as determined by the our Board of
Directors, health insurance premium payments for himself and his
immediate family, a car allowance covering the expenses of his
personal commercial grade truck which the company uses in company
operations on a continual basis, paid vacation of four weeks per
year, and bonuses in such amount as the Compensation Committee may
determine from time to time.
The Provenzano Employment Agreement has a term of five years,
unless earlier terminated in accordance with its terms. The
Provenzano Employment Agreement provides that Mr. Provenzano’s
employment may be terminated by the Company due to his death or
disability, for cause, or upon a merger, acquisition, bankruptcy or
dissolution of the Company. “Disability” as used in the Provenzano
Employment Agreement means physical or mental incapacity or illness
rendering Mr. Provenzano unable to perform his duties on a
long-term basis (i) as evidenced by his failure or inability
to perform his duties for a total of 120 days in any 360-day
period, or (ii) as determined by an independent and licensed
physician whom Company selects, or (iii) as determined without
recourse by the Company’s disability insurance carrier. “Cause”
means that Mr. Provenzano has (i) engaged in willful misconduct in
connection with the Company’s business; or (ii) been convicted of,
or plead guilty or nolo contendre in connection with, fraud or any
crime that constitutes a felony or that involves moral turpitude or
theft. If Mr. Provenzano’s employment is terminated due to
merger or acquisition, then he will be eligible to receive the
greater of (i) one year’s compensation plus an additional one
half year for each year of service since the effective date of the
employment agreement or (ii) one year’s compensation plus an
additional one half year for each year remaining in the term of the
agreement. Otherwise, he is only entitled to receive compensation
due through the date of termination.
The Provenzano Employment Agreement requires Mr. Provenzano to
keep certain information confidential, not to solicit customers or
employees of the Company or interfere with any business
relationship of the Company, and to assign all inventions made or
created during the term of the Provenzano Employment Agreement as
“work made for hire”.
Director Compensation
Each director who is not an officer or employee of our company
receives an annual retainer of $60,000, paid in cash or shares of
our common stock, or options to purchase our common stock (pursuant
to a plan put in place by our board of directors), in our sole
discretion. Historically, all but one director has received the
entirety of his fees in the form of options to purchase stock,
rather than cash. In addition, Mr. Marshall and Mr. Runyan each
receive an additional $15,000 for their services as the chairman of
the Audit Committee and chairman of the Compensation Committee,
respectively. The following table sets forth information for the
fiscal years ended December 31, 2019 regarding compensation of our
non-employee directors. Our employee directors do not receive any
additional compensation for serving as a director.
|
Name
|
|
Fees Earned
or Fees Paid
in Cash
|
|
Option
Awards
|
|
Non-Equity
Incentive Plan
Compensation
|
All Other
Compensation
|
Total
|
|
|
Dennis E. Marshall
|
|
$
|
75,000
|
(1)
|
|
9,639
|
|
|
—
|
|
—
|
$
|
84,639
|
|
|
Jack B. Strommen
|
|
$
|
60,000
|
(2)
|
|
—
|
|
|
—
|
|
—
|
$
|
60,000
|
|
|
Kent C. Roberts III
|
|
$
|
60,000
|
(3)
|
|
—
|
|
|
—
|
|
—
|
$
|
60,000
|
|
|
John S. Runyan
|
|
$
|
75,000
|
(4)
|
|
—
|
|
|
—
|
|
—
|
$
|
75,000
|
|
|
(1)
|
In 2019, Mr. Marshall earned director fees of $75,000, which
included compensation for serving as Chairman of the Audit
Committee of our board of directors. None of these fees was paid in
cash. During 2019, Mr. Marshall received options in lieu of cash
consisting of (i) on March 29, 2019, an issuance of an option to
purchase 117,188 shares of our common stock at $0.16 per share,
(ii) on June 28, 2019, an issuance of an option to purchase 81,522
shares of our common stock at $0.23 per share, (iii) on September
30, 2019, an issuance of an option to purchase 59,524 shares of our
common stock at $0.32 per share, and (iv) on December 30, 2019, an
issuance of an option to purchase 85,227 shares of our common stock
at $0.22 per share. In addition, on September 18, 2019, he was
issued an option to purchase 45,000 shares of our common stock at
an exercise price of $0.21 per share.
|
|
|
|
|
(2)
|
In 2019 Mr. Strommen earned director fees of $60,000. During 2019,
Mr. Strommen received options in lieu of cash consisting of (i) on
March 29, 2019, an issuance of an option to purchase 93,750 shares
of our common stock at $0.16 per share, (ii) on June 28, 2019, an
issuance of an option to purchase 65,217 shares of our common stock
at $0.23 per share, (iii) on September 30, 2019, an option to
purchase 47,619 shares of our common stock at $0.32 per share, and
(iv) on December 31, 2019, an option to purchase 68,182 shares of
our common stock at $0.22 per share.
|
|
|
|
|
(3)
|
In 2019 Mr. Roberts earned director fees of $60,000. During 2019,
Mr. Roberts received options in lieu of cash consisting of (i) on
March 29, 2019, an issuance of an option to purchase 93,750 shares
of our common stock at $0.16 per share, (ii) on June 28, 2019, an
issuance of an option to purchase 65,217 shares of our common stock
at $0.23 per share, (iii) on September 30, 2019, an option to
purchase 47,619 shares of our common stock at $0.32 per share, and
(iv) on December 31, 2019, an option to purchase 68,182 shares of
our common stock at $0.22 per share.
|
|
|
|
|
(4)
|
In 2019, Mr. Runyan earned director fees of $75,000. None of these
fees was paid in cash. During 2019, Mr. Runyan received options in
lieu of cash consisting of (i) on March 29, 2019, an issuance of an
option to purchase 117,188 shares of our common stock at $0.16 per
share, (ii) on June 28, 2019, an issuance of an option to purchase
81,522 shares of our common stock at $0.23 per share, (iii) on
September 30, 2019, an issuance of an option to purchase 59,524
shares of our common stock at $0.32 per share, and (iv) on December
30, 2019, an issuance of an option to purchase 85,227 shares of our
common stock at $0.22 per share.
|
Limitation of Liability and Indemnification Matters
As permitted by the Delaware general corporation law, we have
included a provision in our certificate of incorporation to
eliminate the personal liability of our directors for monetary
damages for breach of their fiduciary duties as directors, except
for liability (i) for any breach of the director’s duty of loyalty
to our company, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law,
(iii) under section 174 of the Delaware general corporation law or
(iv) for any transaction from which the director derived an
improper personal benefit. Our certificate of incorporation also
provides that our company shall, to the full extent permitted by
section 145 of the Delaware general corporation law, as amended
from time to time, indemnify all persons whom it may indemnify
pursuant thereto.
In addition, our Bylaws provide that we are required to indemnify
our officers and directors even when indemnification would
otherwise be discretionary, and we are required to advance expenses
to our officers and directors as incurred in connection with
proceedings against them for which they may be indemnified.
We may enter into indemnification agreements with our officers and
directors containing provisions that are in some respects broader
than the specific indemnification provisions contained in the
Delaware general corporation law. The indemnification agreements
would require us to indemnify our officers and directors against
liabilities that may arise by reason of their status or service as
officers and directors other than for liabilities arising from
willful misconduct of a culpable nature, to advance their expenses
incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain our directors’ and
officers’ insurance if available on reasonable terms. As of the
date of this prospectus, our company has not entered into any
indemnification agreement with any of its directors or officers,
except for Mr. Strommen.
We have obtained directors’ and officers’ liability insurance in
amounts comparable to other companies of our size and in our
industry.
No pending litigation or proceeding involving a director, officer,
employee or other agent of our company currently exists as to which
indemnification is being sought. We are not aware of any threatened
litigation that may result in claims for indemnification by any
director, officer, employee or other agent of our company.
See “Disclosure of SEC Position on Indemnification for Securities
Act Liabilities.”
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information regarding unexercised
stock options and equity incentive plan awards for each of the
Named Executive Officers outstanding as of December 31,
2019. All stock or options that were granted to the
Named Executive Officers during the fiscal year ended December 31,
2019 have fully vested, except as indicated:
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
|
|
Option
Exercise
Price
|
|
Share
Price on
Grant Date
|
|
Option
Expiration
Date
|
|
Dennis P. Calvert
|
|
3,731,322
|
|
1,865,661
|
|
1,865,661
|
|
$ 0.45
|
|
$ 0.45
|
|
May 2, 2027
|
|
|
|
|
200,000
|
|
|
|
--
|
|
$ 0.575
|
|
$ 0.50
|
|
February 1, 2020
|
|
|
Charles K. Dargan II
|
|
10,000
|
|
|
|
--
|
|
$ 0.50
|
|
$ 0.50
|
|
January 31, 2020
|
|
|
|
|
10,000
|
|
|
|
--
|
|
$ 0.45
|
|
$ 0.45
|
|
February 28, 2020
|
|
|
|
|
60,000
|
|
|
|
--
|
|
$ 0.575
|
|
$ 0.50
|
|
February 1, 2020
|
|
|
|
|
10,000
|
|
|
|
--
|
|
$ 0.50
|
|
$ 0.50
|
|
March 31, 2020
|
|
|
|
|
10,000
|
|
|
|
--
|
|
$ 0.39
|
|
$ 0.39
|
|
April 29, 2020
|
|
|
|
|
10,000
|
|
|
|
--
|
|
$ 0.31
|
|
$ 0.31
|
|
May 31, 2020
|
|
|
|
|
10,000
|
|
|
|
--
|
|
$ 0.25
|
|
$ 0.25
|
|
June 30, 2020
|
|
|
|
|
10,000
|
|
|
|
--
|
|
$ 0.24
|
|
$ 0.24
|
|
July 31, 2020
|
|
|
|
|
10,000
|
|
|
|
--
|
|
$ 0.23
|
|
$ 0.23
|
|
August 30, 2020
|
|
|
|
|
200,000
|
|
|
|
--
|
|
$ 0.30
|
|
$ 0.30
|
|
August 4, 2020
|
|
|
|
|
10,000
|
|
|
|
--
|
|
$ 0.35
|
|
$ 0.35
|
|
September 30, 2020
|
|
|
|
|
10,000
|
|
|
|
--
|
|
$ 0.42
|
|
$ 0.42
|
|
October 31, 2020
|
|
|
|
|
10,000
|
|
|
|
--
|
|
$ 0.40
|
|
$ 0.40
|
|
November 30, 2020
|
|
|
|
|
10,000
|
|
|
|
--
|
|
$ 0.50
|
|
$ 0.50
|
|
December 31, 2020
|
|
|
|
|
10,000
|
|
|
|
--
|
|
$ 0.42
|
|
$ 0.42
|
|
January 31, 2021
|
|
|
|
|
120,000
|
|
|
|
--
|
|
$ 0.41
|
|
$ 0.41
|
|
February 28, 2021
|
|
|
|
|
300,000
|
|
|
|
--
|
|
$ 0.35
|
|
$ 0.35
|
|
April 10, 2022
|
|
|
|
|
410,000
|
|
|
|
--
|
|
$ 0.30
|
|
$ 0.30
|
|
December 28, 2022
|
|
|
|
|
300,000
|
|
|
|
--
|
|
$ 0.30
|
|
$ 0.30
|
|
July 17, 2023
|
|
| |
|
300,000
|
|
|
|
--
|
|
$ 0.30
|
|
$ 0.30
|
|
June 23, 2024
|
|
| |
|
300,000
|
|
|
|
--
|
|
$ 0.57
|
|
$ 0.57
|
|
September 30, 2025
|
|
| |
|
300,000
|
|
|
|
--
|
|
$ 0.69
|
|
$ 0.69
|
|
February 10, 2027
|
|
| |
|
300,000
|
|
|
|
--
|
|
$ 0.39
|
|
$ 0.39
|
|
December 31, 2027
|
|
| |
|
300,000
|
|
|
|
--
|
|
$ 0.22
|
|
$ 0.22
|
|
January 16, 2029
|
|
|
Kenneth R. Code
|
|
200,000
|
|
|
|
--
|
|
$ 1.03
|
|
$ 0.94
|
|
July 17, 2023
|
|
|
|
|
200,000
|
|
|
|
--
|
|
$ 0.575
|
|
$ 0.50
|
|
February 1, 2020
|
|
|
Joseph Provenzano
|
|
200,000
|
|
|
|
|
|
$ 0.575
|
|
$ 0.50
|
|
February 1, 2020
|
|
| |
|
296,203
|
|
|
|
|
|
$ 0.30
|
|
$ 0.30
|
|
August 4, 2020
|
|
| |
|
200,000
|
|
|
|
|
|
$ 0.41
|
|
$ 0.41
|
|
March 21, 2021
|
|
| |
|
100,000
|
|
|
|
|
|
$ 0.45
|
|
$ 0.45
|
|
October 23, 2027
|
|
| |
|
1,000,000
|
|
800,000
|
|
800,000
|
|
$ 0.17
|
|
$ 0.17
|
|
May 28, 2029
|
|
| |
|
32,500
|
|
|
|
|
|
$ 0.22
|
|
$ 0.22
|
|
September 18, 2029
|
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of shares of our common stock as of April 10, 2020,
including rights to acquire beneficial ownership of shares of our
common stock within 60 days of April 21, 2020, by (a) all
stockholders known to the Company to be beneficial owners of more
than 5% of the outstanding Common stock; (b) each director, (c)
each Named Executive Officer, and (d) all directors and executive
officers of the Company as a group:
|
Name and Address of Beneficial Owner(1)
|
Amount of
Beneficial
Ownership
|
Percent of
Class(2)
|
|
Kenneth R. Code(4)
|
24,020,994
|
13.5%
|
|
Dennis P. Calvert(5)
|
11,270,657
|
6.3%
|
|
Jack B. Strommen(6)
|
8,479,879
|
4.7%
|
|
Charles K. Dargan II(7)
|
3,581,500
|
2.0%
|
|
Dennis E. Marshall(8)
|
3,044,448
|
1.7%
|
|
Joseph L. Provenzano(9)
|
2,799,446
|
1.6%
|
|
Kent C. Roberts II(10)
|
2,131,173
|
1.2%
|
|
John S. Runyan(11)
|
2,188,283
|
1.2%
|
|
All directors and officers as a group (8 persons)
|
57,516,380
|
32.2%
|
Except as noted in any footnotes below, each person has sole voting
power and sole dispositive power as to all of the shares shown as
beneficially owned by them. Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes voting
or investment power with respect to securities.
| |
(1)
|
The address for all directors and the Named Executive Officers is:
c/o BioLargo, Inc., 14921 Chestnut St., Westminster, CA 92683,
except for: Kent C. Roberts II’s address is 1146 Oxford Road, San
Marino, CA 91108; Charles K. Dargan II’s address is 18841 NE 29th
Avenue, Suite 700, Aventura, FL 33180; and John S. Runyan’s address
is 30001 Hillside Terrace, San Juan Capistrano, CA 92675
|
| |
(2)
|
Our company has only one class of stock outstanding. The sum
of 177,100,206 shares of common stock outstanding as of the date
hereof, and 17,075,677 shares of common stock subject to options
currently exercisable or exercisable within 60 days by the
directors and officers, are deemed outstanding for determining the
number of shares beneficially owned by the directors and officers,
and the directors and officers as a group, and for computing the
percentage ownership of the person holding such options, but are
not deemed outstanding for computing the percentage ownership of
any other person.
|
| |
(3)
|
Includes 22,139,012 shares owned indirectly by Mr. Code issued on
April 29, 2007 to IOWC Technologies, Inc. in connection with the
acquisition by our company of certain intellectual property and
other assets on that date. Includes 265,000 shares issuable to Mr.
Code upon exercise of options.
|
| |
(4)
|
Includes 1,528,695 shares of common stock held by New Millennium
Capital Partners, LLC, which is wholly owned and controlled by Mr.
Calvert. Includes 2,130,661 shares issuable to Mr. Calvert upon
exercise of other options granted from time to time by our
company.
|
| |
(5)
|
Includes 573,589 shares issuable to Mr. Strommen upon exercise of
options; includes 3,590,476 shares issuable to Mr. Strommen upon
the exercise of warrants.
|
| |
(6)
|
Includes 3,256,500 shares issuable to Mr. Dargan upon exercise of
options.
|
| |
(7)
|
Includes 2,784,476 shares issuable to Mr. Marshall upon exercise of
options.
|
| |
(8)
|
Includes 1,028,703 shares issuable to Mr. Provenzano upon exercise
of options.
|
| |
(9)
|
Includes 1,604,948 shares issuable to Mr. Roberts upon exercise of
options.
|
Includes 1,841,114 shares issuable to Mr. Runyan upon exercise of
options.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Our company has adopted a policy that all transactions between our
company and its executive officers, directors and other affiliates
must be approved by a majority of the members of our board of
directors and by a majority of the disinterested members of our
board of directors, and must be on terms no less favorable to our
company than could be obtained from unaffiliated third parties.
From time to time, our company is unable to pay in full amounts due
to its officers for salary and business expenses, and those amounts
are recorded as liabilities in our financial statements. These
amounts are then paid in the future as our company’s cash position
allows, or through the issuance of our common stock, or an option
to purchase common stock, pursuant to a plan adopted by our board
for the payment of outstanding payables.
Our officers and board members routinely forego cash compensation
in lieu of receiving common stock or options to purchase common
stock, pursuant to a plan adopted by our board for the payment of
outstanding payables.
On March 31, 2019, we issued options to purchase 421,876 shares of
our common stock at an exercise price of $0.16 per share to four
members of our board of directors, in lieu of $67,500 in fees, as
follows: 117,188 to Mr. Marshall in exchange for $18,750 in fees
due; 93,750 to Mr. Strommen in exchange for $15,000 in fees due;
93,750 to Mr. Roberts in exchange for $15,000 in fees due; and
117,188 to Mr. Runyan in exchange for $18,750 in fees due. The
options expire 10 years from the date of grant.
On March 31, 2019, we issued an aggregate 579,996 shares of our
common stock to two executive officers in exchange for a reduction
of $92,799 of salary and unreimbursed business expenses owed to the
officers.
On April 29, 2019, we issued an aggregate 579,996 shares of our
common stock to two executive officers in exchange for a reduction
of $92,799 of salary and unreimbursed business expenses owed to the
officers.
On June 30, 2019, we issued options to purchase 293,478 shares of
our common stock at an exercise price of $0.23 per share to four
members of our board of directors, in lieu of $67,500 in fees, as
follows: 81,522 to Mr. Marshall in exchange for $18,750 in fees
due; 65,217 to Mr. Strommen in exchange for $15,000 in fees due;
65,217 to Mr. Roberts in exchange for $15,000 in fees due; and
81,522 to Mr. Runyan in exchange for $18,750 in fees due. The
options expire 10 years from the date of grant.
On September 30, 2019, we issued options to purchase 214,286 shares
of our common stock at an exercise price of $0.315 per share to
four members of our board of directors, in lieu of $67,500 in fees,
as follows: 59,524 to Mr. Marshall in exchange for $18,750 in fees
due; 47,619 to Mr. Strommen in exchange for $15,000 in fees due;
47,619 to Mr. Roberts in exchange for $15,000 in fees due; and
59,524 to Mr. Runyan in exchange for $18,750 in fees due. The
options expire 10 years from the date of grant.
On December 31, 2019, we issued options to purchase 306,818 shares
of our common stock at an exercise price of $0.22 per share to four
members of our board of directors, in lieu of $67,500 in fees, as
follows: 85,227 to Mr. Marshall in exchange for $18,750 in fees
due; 68,182 to Mr. Strommen in exchange for $15,000 in fees due;
68,182 to Mr. Roberts in exchange for $15,000 in fees due; and
85,227 to Mr. Runyan in exchange for $18,750 in fees due. The
options expire 10 years from the date of grant.
On December 31, 2018, we issued options to purchase 281,250 shares
of our common stock at an exercise price of $0.22 per share to four
members of our board of directors, in lieu of $67,500 in fees, as
follows: 78,125 to Mr. Marshall in exchange for $18,750 in fees
due; 62,500 to Mr. Strommen in exchange for $15,000 in fees due;
62,500to Mr. Roberts in exchange for $15,000 in fees due; and
78,125 to Mr. Runyan in exchange for $18,750 in fees due. The
options expire 10 years from the date of grant.
On March 31, 2018, we issued an aggregate 323,030 shares of our
common stock to two executive officers in exchange for a reduction
of $83,664 of salary owed to the officers.
On March 31, 2018, we issued options to purchase 260,620 shares of
our common stock at an exercise price of $0.295 per share to four
members of our board of directors, in lieu of $67,500 in fees, as
follows: 72,394 to Mr. Marshall in exchange for $18,750 in fees
due; 57,916 to Mr. Strommen in exchange for $15,000 in fees due;
57,916 to Mr. Roberts in exchange for $15,000 in fees due; and
72,394 to Mr. Runyan in exchange for $18,750 in fees due. The
options expire 10 years from the date of grant.
On March 28, 2018, Mr. Strommen invested $100,000 in the Company’s
private securities offering, receiving a promissory note in the
face amount of $100,000, bearing annual interest at the rate of
12%, which is convertible into the Company’s common stock by Mr.
Strommen at any time, or the Company at the April 30, 2021
maturity, at the rate of $0.30 per share. Investors in the offering
also receive a stock purchase warrant to purchase the number of
shares calculated by dividing the investment amount by the note
conversion price. Mr. Strommen received a warrant to purchase
333,334 shares of common stock at $0.48 per share, which expires
April 20, 2023.
On June 29, 2018, we issued an aggregate 176,950 shares of our
common stock to two executive officers in exchange for a reduction
of $76,087 of salary owed to the officers.
On June 29, 2018, we issued options to purchase 156,978 shares of
our common stock at an exercise price of $0.31 per share to four
members of our board of directors, in lieu of $67,500 in fees, as
follows: 43,605 to Mr. Marshall in exchange for $18,750 in fees
due; 34,884 to Mr. Strommen in exchange for $15,000 in fees due;
34,884 to Mr. Roberts in exchange for $15,000 in fees due; and
43,605 to Mr. Runyan in exchange for $18,750 in fees due. The
options expire 10 years from the date of grant.
On September 30, 2018, we issued an aggregate 249,258 shares of our
common stock to two executive officers in exchange for a reduction
of $67,300 of salary owed to the officers.
On September 30, 2018, we issued options to purchase 250,000 shares
of our common stock at an exercise price of $0.27 per share to four
members of our board of directors, in lieu of $67,500 in fees, as
follows: 69,444 to Mr. Marshall in exchange for $18,750 in fees
due; 55,556 to Mr. Strommen in exchange for $15,000 in fees due;
55,556 to Mr. Roberts in exchange for $15,000 in fees due; and
69,444 to Mr. Runyan in exchange for $18,750 in fees due. The
options expire 10 years from the date of grant.
On December 31, 2018, we issued an aggregate 381,801 shares of our
common stock to two executive officers in exchange for a reduction
of $91,632 of salary and unreimbursed business expenses owed to the
officers.
DESCRIPTION OF CAPITAL STOCK
As reflected in the Certificate of Incorporation as amended May 25,
2018, our authorized capital stock consists of 400,000,000 shares
of common stock, par value $0.00067 per share, and 50,000,000
shares of preferred stock, par value $0.00067 per share.
|
Authorized and Issued Stock
|
|
|
|
|
|
|
Number of shares at April 21, 2020
|
|
|
Title of Class
|
|
Authorized
|
|
|
Outstanding
|
|
|
Reserved(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, par value $0.00067 per share
|
|
|
400,000,000
|
|
|
|
178,692,138
|
|
|
|
151,762,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.00067 par value per share
|
|
|
50,000,000
|
|
|
|
-0-
|
|
|
|
-0-
|
|
| |
(1)
|
The 151,762,549 shares reserved for future issuances includes the
shares issuable to the Selling Stockholders upon exercise of their
warrants.
|
Common Stock
Dividends. Each share of our common stock is entitled to
receive an equal dividend, if one is declared. We cannot provide
any assurance that we will declare or pay cash dividends on our
common stock in the future. Any future determination to declare
cash dividends will be made at the discretion of our board of
directors, subject to applicable laws, and will depend on our
financial condition, results of operations, capital requirements,
general business conditions and other factors that our board of
directors may deem relevant. Our board of directors may determine
it to be necessary to retain future earnings (if any) to finance
operations. See “Risk Factors” and “Dividend Policy.”
Liquidation. If our company is liquidated, then assets that
remain (if any) after the creditors are paid and the owners of
preferred stock receive liquidation preferences (as applicable)
will be distributed to the owners of our common stock pro
rata.
Voting Rights. Each share of our common stock entitles the
owner to one vote. There is no cumulative voting. A simple majority
can elect all of the directors at a given meeting, and the minority
would not be able to elect any director at that meeting.
Preemptive Rights. Owners of our common stock have no
preemptive rights. We may sell shares of our common stock to third
parties without first offering such shares to current
stockholders.
Redemption Rights. We do not have the right to buy back
shares of our common stock except in extraordinary transactions,
such as mergers and court approved bankruptcy reorganizations.
Owners of our common stock do not ordinarily have the right to
require us to buy their common stock. We do not have a sinking fund
to provide assets for any buy back.
Conversion Rights. Shares of our common stock cannot be
converted into any other kind of stock except in extraordinary
transactions, such as mergers and court approved bankruptcy
reorganizations.
Nonassessability. All outstanding shares of our common stock
are fully paid and nonassessable.
Preferred Stock
Our certificate of incorporation authorizes our board of directors
to issue “blank check” preferred stock. Our board of directors may
divide this preferred stock into series and establish the rights,
preferences and privileges thereof. Our board of directors may,
without prior stockholder approval, issue any or all of the shares
of this preferred stock with dividend, liquidation, conversion,
voting or other rights that could adversely affect the relative
voting power or other rights of our common stock. Preferred stock
could be used as a method of discouraging, delaying or preventing a
takeover or other change in control of our company. Issuances of
preferred stock in the future could have a dilutive effect on our
common stock.
As of the date of this prospectus, there are no shares of our
preferred stock outstanding.
DESCRIPTION OF THE OFFERING
This is a registration of shares that were previously sold by the
Company in a series of private placements. This prospectus relates
to the sale of up to 36,090,857 shares of our common stock by
selling stockholders.
SELLING STOCKHOLDERS
The following table presents information regarding the selling
stockholders and the shares of our common stock that may be sold by
them pursuant to this prospectus.
Each of the selling shareholders acquired their shares from the
company for cash (or as payment of accrued interest) in a private
placement transaction which was exempt from registration pursuant
Regulation D promulgated under the Securities Act of 1933, except
Freedom Investors Corp., Sexton Equities LLC, and Randall A.
Heller, each of whom received their warrants to purchase shares as
broker-dealer commissions.
Except for Jack Strommen, who is a shareholder of Clyra and may be
a consultant to Clyra, none of the selling stockholders has had
within the past three years any position, office or other material
relationship with our company or any of its predecessors or
affiliates. Other than Freedom Investors Corp., Sexton Equities
LLC, and Randall A. Heller, no selling stockholder is a
broker-dealer or an affiliate of a broker-dealer. Freedom Investors
Corp. is a registered broker-dealer and purchased the shares being
offered under this prospectus in the ordinary course of its
business. Sexton Equities LLC, and Randall A. Heller are affiliated
persons of Freedom Investor Corp. At the time of purchase, Freedom
Investors Corp., Sexton Equities LLC, and Randall A. Heller did not
have any agreement or understanding, directly or indirectly, with
any person to distribute the shares. Freedom Investor Corp. is
deemed to be an underwriter with respect to the shares of stock it
offers for sale under this prospectus. Shares beneficially owned
prior to the offering includes shares that may be issued to the
selling stockholders pursuant to the exercise of stock purchase
warrants and conversion of convertible promissory notes.
Our company issued the shares being offered for resale pursuant to
this prospectus to the selling stockholders in private placements
that we effected in 2013, 2015, and 2016 in exchange for
consideration that we received from the selling stockholders.
|
Name
|
Number of
Shares of
Common stock
Beneficially
Owned Prior to
Offering(1)
|
|
Number of
Shares of
Common
Stock Being
Offered
|
|
Shares of
Common
Stock
Beneficially
Owned After
the Offering
|
|
Percentage
Beneficially
Owned
After
Registration
|
|
Andrea Kochensparger
|
986,992
|
|
986,992
|
|
–
|
|
*
|
|
Anthony J. Jacobson
|
876,596
|
|
585,559
|
|
291,037
|
|
*
|
|
Austin N. Heberger
|
149,883
|
|
149,883
|
|
–
|
|
*
|
|
Best Home Choices, LLC(2)
|
179,858
|
|
179,858
|
|
–
|
|
*
|
|
Black Mountain Equities, Inc.(3)
|
640,000
|
|
640,000
|
|
–
|
|
*
|
|
BMS Endeavor, LLP(4)
|
612,117
|
|
212,117
|
|
400,000
|
|
*
|
|
Brandan Adams and Dr. Shelley Thompson
|
202,771
|
|
202,771
|
|
–
|
|
*
|
|
Brandan M Adams
|
191,429
|
|
191,429
|
|
–
|
|
*
|
|
Brian Griffith
|
201,502
|
|
201,502
|
|
–
|
|
*
|
|
Brian Griffith and Lorelei Griffith
|
107,135
|
|
107,135
|
|
–
|
|
*
|
|
Bruce Evans
|
500,000
|
|
500,000
|
|
–
|
|
*
|
|
Bruce Kelber
|
92,857
|
|
40,000
|
|
52,857
|
|
*
|
|
C1P Solutions Inc.(5)
|
431,221
|
|
345,507
|
|
85,714
|
|
*
|
|
California Clock Co.(6)
|
210,568
|
|
210,568
|
|
–
|
|
*
|
|
Carl Soderlund
|
161,224
|
|
161,224
|
|
–
|
|
*
|
|
Chris T. Washburn
|
71,429
|
|
71,429
|
|
–
|
|
*
|
|
Christopher A. Herr
|
691,050
|
|
691,050
|
|
–
|
|
*
|
|
Coastal Real Estate Investments Inc.(7)
|
273,817
|
|
273,817
|
|
–
|
|
*
|
|
Daniel J. Conger
|
485,233
|
|
485,233
|
|
–
|
|
*
|
|
David Azari
|
1,054,335
|
|
1,054,335
|
|
–
|
|
*
|
|
Demosthenes Dionis
|
147,819
|
|
147,819
|
|
–
|
|
*
|
|
Dennis DeSmith
|
124,000
|
|
60,000
|
|
64,000
|
|
*
|
|
Don and Bryn Oates
|
40,000
|
|
40,000
|
|
–
|
|
*
|
|
Douglas Goularte
|
207,440
|
|
207,440
|
|
–
|
|
*
|
|
Douglas J. Morgan
|
333,981
|
|
333,981
|
|
–
|
|
*
|
|
Duane Fitzgerald
|
209,471
|
|
209,471
|
|
–
|
|
*
|
|
Ermelinda Arriola
|
745,283
|
|
745,283
|
|
–
|
|
*
|
|
Eva Wald
|
150,117
|
|
150,117
|
|
–
|
|
*
|
|
Freedom Investor Corp.
|
128,800
|
|
128,800
|
|
–
|
|
*
|
|
G. Scott McComb
|
133,652
|
|
133,652
|
|
–
|
|
*
|
|
Gemini Master Fund, Ltd.(8)
|
480,000
|
|
480,000
|
|
–
|
|
*
|
|
Golfbully Venture Capital, LLC(9)
|
211,592
|
|
211,592
|
|
–
|
|
*
|
|
Harvey Bibicoff
|
502,095
|
|
502,095
|
|
–
|
|
*
|
|
Irving Cantor
|
150,140
|
|
150,140
|
|
–
|
|
*
|
|
Jack Strommen
|
6,854,154
|
|
6,854,154
|
|
–
|
|
*
|
|
James C. Hilbert
|
798,255
|
|
798,255
|
|
–
|
|
*
|
|
Jeanne M. Stratta
|
290,473
|
|
290,473
|
|
–
|
|
*
|
|
Jeffrey Jackson
|
200,000
|
|
200,000
|
|
–
|
|
*
|
|
Jeffrey Jeremiah McCarty
|
186,802
|
|
186,802
|
|
–
|
|
–*
|
|
Jennifer Blake
|
207,769
|
|
207,769
|
|
–
|
|
*
|
|
John J. Dombroski
|
50,000
|
|
50,000
|
|
–
|
|
*
|
|
John L. Martino
|
484,777
|
|
484,777
|
|
–
|
|
*
|
|
Johnathan Rubic
|
180,601
|
|
180,601
|
|
–
|
|
*
|
|
Jonathan Phillips
|
50,000
|
|
50,000
|
|
–
|
|
*
|
|
Joseph A. Martino
|
765,248
|
|
765,248
|
|
–
|
|
*
|
|
Julius Argumedo
|
102,307
|
|
102,307
|
|
–
|
|
*
|
|
Kent Shuster
|
465,514
|
|
465,514
|
|
–
|
|
*
|
|
Larry Backus
|
267,688
|
|
80,000
|
|
187,688
|
|
*
|
|
Larry Levine
|
1,259,931
|
|
1,259,931
|
|
–
|
|
*
|
|
Mark Sherman
|
397,517
|
|
397,517
|
|
–
|
|
*
|
|
Matthew B. Madden
|
134,272
|
|
134,272
|
|
–
|
|
*
|
|
Michael A. Krever
|
127,964
|
|
127,964
|
|
–
|
|
*
|
|
Michael B. Greenberg
|
206,541
|
|
206,541
|
|
–
|
|
*
|
|
Michael Rivkind
|
108,364
|
|
108,364
|
|
–
|
|
*
|
|
Moshe and Gabriel Azari
|
1,644,219
|
|
1,644,219
|
|
–
|
|
*
|
|
Neta Phillips
|
50,000
|
|
50,000
|
|
–
|
|
*
|
|
Nicholas H. Nguyen
|
466,543
|
|
466,543
|
|
–
|
|
*
|
|
Nicholas Steele
|
93,350
|
|
93,350
|
|
–
|
|
*
|
|
Partner Ship Inc.
|
697,157
|
|
622,157
|
|
75,000
|
|
*
|
|
Patricia Jonikaitis
|
212,301
|
|
212,301
|
|
–
|
|
*
|
|
Paul McDermott
|
74,666
|
|
74,666
|
|
–
|
|
*
|
|
Pedro Arriola
|
278,099
|
|
102,672
|
|
175,427
|
|
*
|
|
Peter Jonikaitis
|
212,406
|
|
212,406
|
|
–
|
|
*
|
|
Peter K Nitz
|
257,762
|
|
257,762
|
|
–
|
|
*
|
|
Phillip Harris
|
100,000
|
|
100,000
|
|
–
|
|
*
|
|
R. Jonathan Robinson
|
499,114
|
|
499,114
|
|
–
|
|
*
|
|
Ralph C. Jenney and Joanne M. Jenney
|
241,919
|
|
241,919
|
|
–
|
|
*
|
|
Randall A. Heller
|
40,000
|
|
40,000
|
|
–
|
|
*
|
|
Raymond A. Pronto
|
1,307,901
|
|
1,307,901
|
|
–
|
|
*
|
|
Robert A. Commandeur
|
504,094
|
|
504,094
|
|
–
|
|
*
|
|
Robert G Szewc
|
273,852
|
|
273,852
|
|
–
|
|
*
|
|
Rona K. Krenik and Mark Krenik
|
148,601
|
|
148,601
|
|
–
|
|
*
|
|
Scott Garver
|
147,661
|
|
147,661
|
|
–
|
|
*
|
|
Sean M. Tabor
|
249,357
|
|
249,357
|
|
–
|
|
*
|
|
Sexton Equities LLC(10)
|
12,000
|
|
12,000
|
|
–
|
|
*
|
|
Stephen E. Harmon
|
293,046
|
|
293,046
|
|
–
|
|
*
|
|
Stephen W. Prough and Kathleen R. Prough
|
210,489
|
|
210,489
|
|
–
|
|
*
|
|
Susan Carlisle
|
93,276
|
|
93,276
|
|
–
|
|
*
|
|
Teri Nowe Myers and Scott Garver
|
295,446
|
|
295,446
|
|
–
|
|
*
|
|
Terry Hartshorn and Sharon Hartshorn
|
631,598
|
|
631,598
|
|
–
|
|
*
|
|
Tim C. Wachter
|
169,930
|
|
169,930
|
|
–
|
|
*
|
|
Timothy C. Larsen
|
220,629
|
|
46,000
|
|
174,629
|
|
*
|
|
Timothy J. Ertmer and Jodi L. Ertmer
|
416,912
|
|
416,912
|
|
–
|
|
*
|
|
Timothy Romanow
|
250,000
|
|
150,000
|
|
100,000
|
|
*
|
|
Tom and Yolanda Talbot
|
548,004
|
|
488,004
|
|
60,000
|
|
*
|
|
Vince J. Severino
|
1,831,364
|
|
1,831,364
|
|
–
|
|
*
|
|
Wesley Larsen
|
280,996
|
|
250,996
|
|
30,000
|
|
*
|
|
William Waligora
|
211,933
|
|
211,933
|
|
–
|
|
*
|
|
TOTAL
|
37,787,209
|
|
36,090,857
|
|
1,696,352
|
|
0.9%
|
| |
(1)
|
Except as noted in any footnotes below, each person has sole voting
power and sole dispositive power as to all of the shares shown as
beneficially owned by them. Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes voting
or investment power with respect to securities. Our company has
only one class of stock outstanding. The sum of 99,040,328
shares of common stock outstanding on June 5, 2017, and 58,547,926
shares of common stock subject to options, warrants and convertible
notes currently exercisable or convertible, or exercisable or
convertible within 60 days, are deemed outstanding for determining
the number of shares beneficially owned by the stockholders.
|
| |
(2)
|
Julius Argumedo is the manager of the limited liability company and
therefore has dispositive power but disclaims any direct beneficial
ownership.
|
| |
(3)
|
Black mountain Equities, Inc. is managed by Adam Baker who has
dispositive power but disclaims beneficial ownership.
|
| |
(4)
|
Dispositive power held by Mark Stangret who disclaims beneficial
ownership.
|
| |
(5)
|
Dispositive power held by Julius Argumedo, Gerarld Argumedo, and
Nicole Argumedo, each of whom disclaims beneficial ownership.
|
| |
(6)
|
Dispositive power held by Woodrow Young who disclaims beneficial
ownership.
|
| |
(7)
|
Dispositive power held by Robert Capetz who disclaims beneficial
ownership.
|
| |
(8)
|
Gemini Strategies Inc. is the investment manager for Gemini Master
Fund, Ltd. Gemini Strategies Inc. is managed by Steven Winters who
has dispositive power but disclaims beneficial ownership.
|
| |
(9)
|
Dispositive power held by Kyle Berger who disclaims beneficial
ownership.
|
| |
(10)
|
Dispositive power held by AJ Sexton who disclaims beneficial
ownership.
|
* Less than one percent (1%)
PLAN OF
DISTRIBUTION
This prospectus covers the sale of up to 36,090,857 shares of our
common stock by the selling stockholders. See “Description of
Offering.”
The Selling Stockholders are “underwriters,” and may be deemed to
be an “underwriter,” within the meaning of the Securities Act. The
Selling Stockholders and any of their respective pledgees, donees,
assignees and successors-in-interest may, from time to time, sell
any or all of their shares of common stock being offered under this
prospectus on any stock exchange, market or trading facility on
which shares of our common stock are traded or in private
transactions. These sales may be at fixed or negotiated prices. The
Selling Stockholders may use any one or more of the following
methods when disposing of shares:
| |
☐
|
ordinary brokerage transactions and transactions in which the
broker-dealer solicits investors;
|
| |
☐
|
block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
|
| |
☐
|
purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
|
| |
☐
|
an exchange distribution in accordance with the rules of the
applicable exchange;
|
| |
☐
|
privately negotiated transactions;
|
| |
☐
|
to cover short sales made after the date that this Registration
Statement is declared effective by the Commission;
|
| |
☐
|
broker-dealers may agree with the Selling Stockholder to sell a
specified number of such shares at a stipulated price per
share;
|
| |
☐
|
a combination of any such methods of sale; and
|
| |
☐
|
any other method permitted pursuant to applicable law; provided,
however, that Selling Stockholders who are executive officers or
directors of the Company have agreed to sell the shares they hold
personally through their individual broker (not a broker that may
be engaged on behalf of the Company, if applicable) and not as
principal acting for their own accounts.
|
The Selling Stockholder may also sell shares under an exemption
from the registration requirements under the Securities Act, if
available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may
receive commissions or discounts from the Selling Stockholder (or,
if any broker-dealer acts as agent for the purchaser of shares,
from the purchaser) in amounts to be negotiated.
The Selling Stockholders may from time to time pledge or grant a
security interest in some or all of the Shares owned by it and, if
it defaults in the performance of their secured obligations, the
pledgees or secured parties may offer and sell shares of common
stock from time to time under this prospectus, or under an
amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933 amending the
list of Selling Stockholders to include the pledgee, transferee or
other successors in interest as Selling Stockholders under this
prospectus.
The Selling Stockholders also may transfer the shares of common
stock in other circumstances, in which case the transferees,
pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.
Any broker-dealers or agents that are involved in selling the
shares offered under this prospectus may be deemed to be
"underwriters," within the meaning of the Securities Act in
connection with these sales. Commissions received by these
broker-dealers or agents and any profit on the resale of the shares
purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Any broker-dealers or agents
that are deemed to be underwriters may not sell shares offered
under this prospectus unless and until we set forth the names of
the underwriters and the material details of their underwriting
arrangements in a supplement to this prospectus or, if required, in
a replacement prospectus included in a post-effective amendment to
the registration statement of which this prospectus is a part.
The Company has advised the Selling Stockholders that it may not
use shares registered on this Registration Statement to cover short
sales of common stock made prior to the date on which this
Registration Statement shall have been declared effective by the
Commission. If the Selling Stockholder uses this prospectus for any
sale of the common stock, it will be subject to the prospectus
delivery requirements of the Securities Act. The Selling
Stockholder will be responsible to comply with the applicable
provisions of the Securities Act and Exchange Act, and the rules
and regulations thereunder promulgated, including, without
limitation, Regulation M, as applicable to such Selling Stockholder
in connection with resales of their respective shares under this
Registration Statement. The Equity Purchaser has agreed not to
engage in any direct or indirect short selling of our common stock
during the term of the Purchase Agreement.
The company is required to pay all fees and expenses incident to
the registration of the shares, but the company will not receive
any proceeds from the sale of the common stock by Selling
Stockholders.
Blue Sky Restrictions on Resale
If the selling stockholder desires to sell shares of our common
stock under this prospectus in the United States, then the selling
stockholder will also need to comply with state securities laws,
also known as “Blue Sky laws,” with regard to secondary sales. All
states offer a variety of exemptions from registration for
secondary sales. Many states, for example, have an exemption for
secondary trading of securities registered under Section 12(g) of
the Exchange Act or for securities of issuers that publish
continuous disclosure of financial and non-financial information in
a recognized securities manual, such as Standard & Poor’s.
Any person who purchases shares of our common stock from the
selling stockholder under this prospectus who then desires to sell
such shares also will have to comply with Blue Sky laws regarding
secondary sales.
DISCLOSURE OF SEC POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
As permitted by the Delaware general corporation law, we have
included a provision in our certificate of incorporation to
eliminate the personal liability of our directors for monetary
damages for breach of their fiduciary duties as directors, except
for liability (i) for any breach of the director’s duty of loyalty
to our company, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law,
(iii) under section 174 of the Delaware general corporation law or
(iv) for any transaction from which the director derived an
improper personal benefit. Our certificate of incorporation also
provides that our company shall, to the full extent permitted by
section 145 of the Delaware general corporation law, as amended
from time to time, indemnify all persons whom it may indemnify
pursuant thereto.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to the directors, officers or
persons controlling the registrant pursuant to the foregoing
provisions, the registrant has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is
therefore unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by our company of expenses
incurred or paid by such director, officer or controlling person of
our company in the successful defense of any action, suit or
proceeding) is asserted by any director, officer or controlling
person of our company in connection with the securities being
registered in the registration statement of which this prospectus
is a part, the registrant will, unless in the opinion of counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by our company is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
LEGAL
OPINION
The validity of the shares covered by the registration statement of
which this prospectus is a part has been passed upon for us by
Wilson Bradshaw, LLP.
EXPERTS
The consolidated financial statements included in this prospectus
for the years ended December 31, 2019 and 2018 have been audited by
Haskell & White LLP, an independent registered public
accounting firm, to the extent and for the periods set forth in
their report appearing elsewhere herein (which expressed an
unqualified opinion and includes an explanatory paragraph referring
to conditions that raise substantial doubt about BioLargo, Inc. and
subsidiaries’ ability to continue as a going concern) and are
included in reliance upon such report given upon the authority of
said firm as experts in auditing and accounting.
ADDITIONAL
INFORMATION
We are subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, and file reports, proxy
statements and other information with the SEC. These reports, proxy
statements and other information may be inspected and copied at the
public reference facilities maintained by the SEC at 100 F Street,
N.E., Washington, D.C. 20549 and at the SEC’s regional offices
located at the Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 233 Broadway, New York, New
York 10279. You can obtain copies of these materials from the
Public Reference Section of the SEC upon payment of fees prescribed
by the SEC. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC’s website (www.SEC.gov) contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the SEC.
We have filed a registration statement on Form S-1 with the SEC
under the Securities Act of 1933, as amended, with respect to the
securities offered in this prospectus. This prospectus, which is
filed as part of a registration statement, does not contain all of
the information set forth in the registration statement, some
portions of which have been omitted in accordance with the SEC’s
rules and regulations. Statements made in this prospectus as to the
contents of any contract, agreement or other document referred to
in this prospectus are not necessarily complete and are qualified
in their entirety by reference to each such contract, agreement or
other document that is filed as an exhibit to the registration
statement. The registration statement may be inspected without
charge at the public reference facilities maintained by the SEC,
and copies of such materials can be obtained from the Public
Reference Section of the SEC at prescribed rates. You may obtain
additional information regarding our company on our website,
located at www.BioLargo.com.
BIOLARGO, INC.
INDEX TO FINANCIAL STATEMENTS
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
BioLargo, Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of
BioLargo, Inc. and Subsidiaries (the “Company”) as of December 31,
2018 and 2019, and the related consolidated statements of
operations, stockholders’ equity (deficit), and cash flows for each
of the two years in the period ended December 31, 2019, and the
related notes (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the
consolidated financial position of the Company as of December 31,
2018 and 2019, and the consolidated results of its operations and
its cash flows for each of the two years in the period ended
December 31, 2019, in conformity with accounting principles
generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the consolidated financial
statements, the Company has experienced recurring losses, negative
cash flows from operations, has limited capital resources, a net
stockholders’ deficit, and significant debt obligations coming due
in the near term. These matters raise substantial doubt about the
Company’s ability to continue as a going concern. Management’s
plans in regard to these matters are also described in Note 1. The
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Changes in Accounting Principle
As discussed in Note 2 to the consolidated financial statements,
effective January 1, 2019, the Company adopted FASB ASC 842,
Leases, using the effective date option, as approved by the FASB in
July 2018.
Basis for Opinion
These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on
our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures include examining, on a
test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation
of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
/s/ HASKELL & WHITE LLP
We have served as the Company’s auditor since 2011.
Irvine, California
March 31, 2020
BIOLARGO, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2018 AND DECEMBER
31, 2019
(in thousands, except for per share data)
|
|
|
DECEMBER 31,
2018
|
|
|
DECEMBER 31,
2019
|
|
| Assets |
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
655 |
|
|
$ |
655 |
|
|
Accounts receivable, net of allowance
|
|
|
257 |
|
|
|
355 |
|
|
Inventories, net of allowance
|
|
|
26 |
|
|
|
16 |
|
|
Prepaid expenses and other current assets
|
|
|
17 |
|
|
|
39 |
|
|
Total current assets
|
|
|
955 |
|
|
|
1,065 |
|
| |
|
|
|
|
|
|
|
|
|
In-process research and development (Note 9)
|
|
|
1,893 |
|
|
|
1,893 |
|
|
Equipment, net of depreciation
|
|
|
126 |
|
|
|
95 |
|
|
Other non-current assets
|
|
|
35 |
|
|
|
35 |
|
|
Right of use, operating lease, net of amortization
|
|
|
— |
|
|
|
411 |
|
|
Deferred offering cost
|
|
|
176 |
|
|
|
122 |
|
|
Total assets
|
|
$ |
3,185 |
|
|
$ |
3,621 |
|
| |
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity (deficit) |
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$ |
501 |
|
|
$ |
602 |
|
|
Clyra Medical note payable (See Note 9)
|
|
|
— |
|
|
|
1,007 |
|
|
Note payable
|
|
|
400 |
|
|
|
50 |
|
|
Line of credit
|
|
|
430 |
|
|
|
50 |
|
|
Convertible notes payable
|
|
|
1,365 |
|
|
|
3,957 |
|
|
Discount on convertible notes payable, and line of credit, net of
amortization
|
|
|
(205 |
) |
|
|
(1,472 |
) |
|
Deferred revenue
|
|
|
— |
|
|
|
35 |
|
|
Lease liability, current
|
|
|
— |
|
|
|
125 |
|
|
Total current liabilities
|
|
|
2,491 |
|
|
|
4,354 |
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
Convertible notes and note payable
|
|
|
285 |
|
|
|
700 |
|
|
Discount on convertible notes payable, net of amortization
|
|
|
(118 |
) |
|
|
(182 |
) |
|
Clyra Medical note payable (Note 9)
|
|
|
1,007 |
|
|
|
— |
|
|
Liability to Clyra Medical shareholder (Note 9)
|
|
|
643 |
|
|
|
643 |
|
|
Lease liability
|
|
|
— |
|
|
|
286 |
|
|
Total liabilities
|
|
|
4,308 |
|
|
|
5,801 |
|
|
COMMITMENTS, CONTINGENCIES (Note 12)
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY (DEFICIT):
|
|
|
|
|
|
|
|