Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
On July 29, 2019, BioLargo, Inc. (the “Company”) closed a private securities offering through which it offered twelve-month promissory notes at a 25% original issue discount (“Twelve-Month OID Note”) and stock purchase warrants (“Warrant”) to accredited investors. The Company received subscriptions in an aggregate total of $1,835,000. Once the investments are fully processed, the Company expects to issue promissory notes in the aggregate principal amount of $2,293,750. Each OID note matures twelve months from the date of issuance, and accrues interest at an annual rate of 5%. It may be converted by the investor at any time at $0.17 per share, subject to adjustment in the event the Company issues a fixed-price convertible note at a lower conversion rate, or conducts an equity offering at a per-share price less than the conversion price. The Company may prepay the notes at any time upon 10 days’ notice to the investor, during which time they may convert the note to stock, and must prepay the notes upon conclusion of a securities offering in which at least $3.5 million is raised. In the event such an offering is not concluded prior to the maturity date of the note, or the note is not otherwise paid in full, the Company shall redeem the Note at maturity by issuing the number of shares of common stock equal to the outstanding balance divided by the lower of (i) the current conversion price and (ii) seventy percent (70%) of the lowest daily volume weighted average price during the 25 trading days immediately preceding the conversion.
In addition to the note, each investor will receive a warrant to purchase BioLargo common stock for $0.25 per share, expiring 5 years from the date of issuance (the “Warrant”). The number of shares purchasable under the warrant is equal to the 75% of the principal balance of the note divided by .17. If the warrant shares are not registered within 18 months of the warrant issue date, the warrant will allow for a cashless exercise. Once the investments are fully processed, the Company expects to issue warrants to purchase approximately 10.2 million shares.
In addition to the foregoing, two holders of a secured line of credit issued in 2018, in the aggregate principal amount $180,000, converted the principal amount of their investment into Twelve-Month OID Notes and Warrants under the terms of the above-described offering. Once the investments are fully process, the Company anticipates issuing notes in the principal amount of $225,000, and warrants to purchase 992,647 shares.
On July 29, 2019, Tangiers Global, LLC, elected to convert $330,000 principal amount and $39,600 accrued interest due on its promissory note issued January 31, 2019, into 2,640,000 shares of common stock. On August 2, 2019, Tangier’s invested an additional $350,000 and, once the investment is processed, will receive a promissory note with the same terms and conditions as the Twelve-Month OID Note described above in the principal amount of $437,500, and a stock purchase with the same terms and conditions as those issued to the Twelve-Month OID Note investors, allowing for the purchase of 1,930,147 shares.