BIOLARGO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021
(in thousands, except for per share data)
| | September 30, 2022 (Unaudited) | | | December 31, 2021 | |
Assets | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 1,268 | | | $ | 962 | |
Accounts receivable, net of allowance | | | 884 | | | | 513 | |
Inventories, net of allowance | | | 260 | | | | 241 | |
Prepaid expenses and other current assets | | | 120 | | | | 85 | |
Total current assets | | | 2,532 | | | | 1,801 | |
| | | | | | | | |
Non-current assets | | | | | | | | |
Equipment and leasehold improvements, net of depreciation | | | 196 | | | | 61 | |
Other non-current assets | | | 123 | | | | 69 | |
Investment in South Korean joint venture | | | 33 | | | | 48 | |
Right of use operating lease, net of amortization | | | 896 | | | | 453 | |
Clyra Medical prepaid marketing (Note 8) | | | 591 | | | | 591 | |
Total assets | | $ | 4,371 | | | $ | 3,023 | |
Liabilities and stockholders’ equity (deficit) | |
Current liabilities: | | | | | | | | |
Accounts payable and accrued expenses | | $ | 520 | | | $ | 559 | |
Debt obligations, net of discount and amortization (Note 4) | | | 86 | | | | 314 | |
Contract liability | | | 6 | | | | 89 | |
Customer deposits | | | 109 | | | | 79 | |
Lease liability | | | 97 | | | | 103 | |
Clyra Medical accounts payable and accrued expenses (Note 8) | | | 211 | | | | 230 | |
Total current liabilities | | | 1,029 | | | | 1,374 | |
Long-term liabilities: | | | | | | | | |
Debt obligations, net of discount and amortization (Note 4) | | | 247 | | | | 180 | |
Clyra Medical debt obligations (Note 8) | | | 263 | | | | 187 | |
Lease liability | | | 799 | | | | 349 | |
Total long-term liabilities | | | 1,309 | | | | 716 | |
Total liabilities | | | 2,338 | | | | 2,090 | |
| | | | | | | | |
COMMITMENTS AND CONTINGENCIES (Note 10) | | | | | | | | |
| | | | | | | | |
STOCKHOLDERS’ EQUITY (DEFICIT): | | | | | | | | |
Preferred Series A, $0.00067 Par Value, 50,000,000 Shares Authorized, -0- Shares Issued and Outstanding, at September 30, 2022 and December 31, 2021 | | | — | | | | — | |
Common stock, $0.00067 Par Value, 550,000,000 Shares Authorized, 274,622,640 and 255,893,726 Shares Issued, at September 30, 2022 and December 31, 2021 | | | 184 | | | | 171 | |
Additional paid-in capital | | | 147,470 | | | | 143,718 | |
Accumulated deficit | | | (142,505 | ) | | | (139,121 | ) |
Accumulated other comprehensive loss | | | (185 | ) | | | (115 | ) |
Total BioLargo Inc. and subsidiaries stockholders’ equity | | | 4,964 | | | | 4,653 | |
Non-controlling interest (Note 8) | | | (2,931 | ) | | | (3,720 | ) |
Total stockholders’ equity | | | 2,033 | | | | 933 | |
Total liabilities and stockholders’ equity | | $ | 4,371 | | | $ | 3,023 | |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
BIOLARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(in thousands, except for share and per share data)
(unaudited)
| | THREE MONTHS | | | NINE MONTHS | |
| | SEPTEMBER 30, 2022 | | | SEPTEMBER 30, 2021 | | | SEPTEMBER 30, 2022 | | | SEPTEMBER 30, 2021 | |
| | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | |
Product revenue | | $ | 1,216 | | | $ | 431 | | | $ | 2,532 | | | $ | 1,190 | |
Service revenue | | | 284 | | | | 281 | | | | 1,254 | | | | 553 | |
Total revenue | | | 1,500 | | | | 712 | | | | 3,786 | | | | 1,743 | |
| | | | | | | | | | | | | | | | |
Cost of revenue | | | | | | | | | | | | | | | | |
Cost of goods sold | | | (515 | ) | | | (204 | ) | | | (1,174 | ) | | | (600 | ) |
Cost of service | | | (233 | ) | | | (158 | ) | | | (720 | ) | | | (363 | ) |
Total cost of revenue | | | (748 | ) | | | (362 | ) | | | (1,894 | ) | | | (963 | ) |
Gross profit | | | 752 | | | | 350 | | | | 1,892 | | | | 780 | |
| | | | | | | | | | | | | | | | |
Operating expenses | | | | | | | | | | | | | | | | |
Selling, general and administrative expenses | | | 1,424 | | | | 1,461 | | | | 4,847 | | | | 4,766 | |
Research and development | | | 271 | | | | 344 | | | | 1,018 | | | | 1,027 | |
Total operating expenses | | | 1,695 | | | | 1,805 | | | | 5,865 | | | | 5,793 | |
| | | | | | | | | | | | | | | | |
Operating loss | | | (943 | ) | | | (1,455 | ) | | | (3,973 | ) | | | (5,013 | ) |
| | | | | | | | | | | | | | | | |
Other (expense) income: | | | | | | | | | | | | | | | | |
Interest expense | | | (14 | ) | | | (26 | ) | | | (42 | ) | | | (208 | ) |
PPP loan forgiveness | | | — | | | | — | | | | 174 | | | | 43 | |
Tax credit | | | 66 | | | | 21 | | | | 66 | | | | 50 | |
Grant income | | | 44 | | | | 25 | | | | 51 | | | | 25 | |
Total other (expense) income: | | | 96 | | | | 18 | | | | 249 | | | | (90 | ) |
| | | | | | | | | | | | | | | | |
Net loss | | | (847 | ) | | | (1,435 | ) | | | (3,724 | ) | | | (5,103 | ) |
| | | | | | | | | | | | | | | | |
Net loss attributable to noncontrolling interest | | | (343 | ) | | | (134 | ) | | | (340 | ) | | | (549 | ) |
Net loss attributable to common shareholders | | $ | (504 | ) | | $ | (1,301 | ) | | $ | (3,384 | ) | | $ | (4,554 | ) |
| | | | | | | | | | | | | | | | |
Net loss per share attributable to common shareholders: | | | | | | | | | | | | | | | | |
Loss per share attributable to shareholders – basic and diluted | | $ | (0.00 | ) | | $ | (0.01 | ) | | $ | (0.01 | ) | | $ | (0.02 | ) |
Weighted average number of common shares outstanding: | | | 270,665,820 | | | | 252,912,561 | | | | 265,812,188 | | | | 243,529,117 | |
Comprehensive loss: | | | | | | | | | | | | | | | | |
Net loss | | $ | (847 | ) | | $ | (1,435 | ) | | $ | (3,724 | ) | | $ | (5,103 | ) |
Foreign currency translation | | | (59 | ) | | | (7 | ) | | | (70 | ) | | | (9 | ) |
Comprehensive loss | | | (850 | ) | | | (1,442 | ) | | | (3,794 | ) | | | (5,112 | ) |
Comprehensive loss attributable to noncontrolling interest | | | (343 | ) | | | (134 | ) | | | (340 | ) | | | (549 | ) |
Comprehensive loss attributable to common stockholders | | $ | (507 | ) | | $ | (1,308 | ) | | $ | (3,454 | ) | | $ | (4,563 | ) |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
BIOLARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(in thousands, except for share data)
(unaudited)
|
|
Common stock |
|
|
Additional paid-in |
|
|
Accumulated |
|
|
Accumulated other comprehensive |
|
|
Non- controlling |
|
|
Total stockholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
deficit |
|
|
Loss |
|
|
interest |
|
|
equity (deficit) |
|
Balance, December 31, 2021 |
|
|
255,893,726 |
|
|
$ |
171 |
|
|
$ |
143,718 |
|
|
$ |
(139,121 |
) |
|
$ |
(115 |
) |
|
$ |
(3,720 |
) |
|
$ |
933 |
|
Sale of common stock for cash |
|
|
6,703,789 |
|
|
|
4 |
|
|
|
1,198 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,202 |
|
Issuance of common stock for service |
|
|
86,752 |
|
|
|
— |
|
|
|
17 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
17 |
|
Stock option compensation expense |
|
|
— |
|
|
|
— |
|
|
|
660 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
660 |
|
Clyra Medical stock option expense |
|
|
— |
|
|
|
— |
|
|
|
141 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
141 |
|
Noncontrolling interest allocation |
|
|
— |
|
|
|
— |
|
|
|
(528 |
) |
|
|
— |
|
|
|
— |
|
|
|
528 |
|
|
|
— |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,652 |
) |
|
|
— |
|
|
|
108 |
|
|
|
(1,544 |
) |
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8 |
) |
|
|
— |
|
|
|
(8 |
) |
Balance, March 31, 2022 |
|
|
262,684,267 |
|
|
$ |
175 |
|
|
$ |
145,206 |
|
|
$ |
(140,773 |
) |
|
$ |
(123 |
) |
|
$ |
(3,084 |
) |
|
$ |
1,401 |
|
Sale of common stock for cash |
|
|
5,011,570 |
|
|
|
4 |
|
|
|
944 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
948 |
|
Issuance of common stock for service |
|
|
340,891 |
|
|
|
— |
|
|
|
59 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
59 |
|
Stock option compensation expense |
|
|
— |
|
|
|
— |
|
|
|
234 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
234 |
|
Clyra Medical stock option expense |
|
|
— |
|
|
|
— |
|
|
|
82 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
82 |
|
Noncontrolling interest allocation |
|
|
— |
|
|
|
— |
|
|
|
(103 |
) |
|
|
— |
|
|
|
— |
|
|
|
103 |
|
|
|
— |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,228 |
) |
|
|
— |
|
|
|
(105 |
) |
|
|
(1,333 |
) |
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
|
— |
|
|
|
(3 |
) |
Balance, June 30, 2022 |
|
|
268,036,728 |
|
|
$ |
179 |
|
|
$ |
146,422 |
|
|
$ |
(142,001 |
) |
|
$ |
(126 |
) |
|
$ |
(3,086 |
) |
|
$ |
1,388 |
|
Sale of common stock for cash |
|
|
6,207,084 |
|
|
|
4 |
|
|
|
1,113 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,117 |
|
Issuance of common stock for service |
|
|
378,828 |
|
|
|
1 |
|
|
|
95 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
96 |
|
Stock option compensation expense |
|
|
— |
|
|
|
— |
|
|
|
253 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
253 |
|
Clyra Medical stock option expense |
|
|
— |
|
|
|
— |
|
|
|
85 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
85 |
|
Noncontrolling interest allocation |
|
|
— |
|
|
|
— |
|
|
|
(498 |
) |
|
|
— |
|
|
|
— |
|
|
|
498 |
|
|
|
— |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(504 |
) |
|
|
— |
|
|
|
(343 |
) |
|
|
(847 |
) |
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(59 |
) |
|
|
— |
|
|
|
(59 |
) |
Balance, September 30, 2022 |
|
|
274,622,640 |
|
|
$ |
184 |
|
|
$ |
147,470 |
|
|
$ |
(142,505 |
) |
|
$ |
(185 |
) |
|
$ |
(2,931 |
) |
|
$ |
2,033 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
|
|
Common stock |
|
|
Additional paid-in |
|
|
Accumulated |
|
|
Accumulated other comprehensive |
|
|
Non- controlling |
|
|
Total stockholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
deficit |
|
|
Loss |
|
|
interest |
|
|
equity (deficit) |
|
Balance, December 31, 2020 |
|
|
225,885,682 |
|
|
$ |
151 |
|
|
$ |
135,849 |
|
|
$ |
(132,041 |
) |
|
$ |
(101 |
) |
|
$ |
(4,093 |
) |
|
$ |
(235 |
) |
Sale of common stock for cash |
|
|
13,330,619 |
|
|
|
9 |
|
|
|
2,097 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,106 |
|
Issuance of common stock for service |
|
|
747,487 |
|
|
|
1 |
|
|
|
110 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
111 |
|
Stock option compensation expense |
|
|
— |
|
|
|
— |
|
|
|
424 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
424 |
|
Warrants and conversion feature issued as discount on convertible note payable |
|
|
— |
|
|
|
— |
|
|
|
35 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
35 |
|
Clyra Medical stock option expense |
|
|
— |
|
|
|
— |
|
|
|
161 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
161 |
|
Noncontrolling interest allocation |
|
|
— |
|
|
|
— |
|
|
|
(313 |
) |
|
|
— |
|
|
|
— |
|
|
|
313 |
|
|
|
— |
|
Clyra Medical securities offering |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
50 |
|
|
|
50 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,631 |
) |
|
|
— |
|
|
|
(247 |
) |
|
|
(1,878 |
) |
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
(2 |
) |
Balance, March 31, 2021 |
|
|
239,963,788 |
|
|
$ |
161 |
|
|
$ |
138,363 |
|
|
$ |
(133,672 |
) |
|
$ |
(103 |
) |
|
$ |
(3,977 |
) |
|
$ |
772 |
|
Conversion of notes |
|
|
1,966,439 |
|
|
|
1 |
|
|
|
327 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
328 |
|
Sale of common stock for cash |
|
|
8,627,237 |
|
|
|
6 |
|
|
|
1,408 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,414 |
|
Issuance of common stock for service |
|
|
357,132 |
|
|
|
— |
|
|
|
60 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
60 |
|
Issuance of common stock for interest |
|
|
81,777 |
|
|
|
— |
|
|
|
16 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16 |
|
Stock option compensation expense |
|
|
— |
|
|
|
— |
|
|
|
330 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
330 |
|
Clyra Medical stock option expense |
|
|
— |
|
|
|
— |
|
|
|
102 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
102 |
|
Noncontrolling interest allocation |
|
|
— |
|
|
|
— |
|
|
|
(314 |
) |
|
|
— |
|
|
|
— |
|
|
|
314 |
|
|
|
— |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,622 |
) |
|
|
— |
|
|
|
(168 |
) |
|
|
(1,790 |
) |
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance, June 30, 2021 |
|
|
250,996,373 |
|
|
$ |
168 |
|
|
$ |
140,292 |
|
|
$ |
(135,294 |
) |
|
$ |
(103 |
) |
|
$ |
(3,831 |
) |
|
$ |
1,232 |
|
Conversion of notes |
|
|
3,306,708 |
|
|
|
2 |
|
|
|
598 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
600 |
|
Sale of common stock for cash |
|
|
648,805 |
|
|
|
1 |
|
|
|
122 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
123 |
|
Issuance of common stock for interest |
|
|
416,667 |
|
|
|
— |
|
|
|
60 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
60 |
|
Stock option compensation expense |
|
|
— |
|
|
|
— |
|
|
|
251 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
251 |
|
Clyra Medical stock option expense |
|
|
— |
|
|
|
— |
|
|
|
179 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
179 |
|
Noncontrolling interest allocation |
|
|
— |
|
|
|
— |
|
|
|
(159 |
) |
|
|
— |
|
|
|
— |
|
|
|
159 |
|
|
|
— |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,301 |
) |
|
|
— |
|
|
|
(134 |
) |
|
|
(1,435 |
) |
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7 |
) |
|
|
— |
|
|
|
(7 |
) |
Balance, September 30, 2021 |
|
|
255,368,553 |
|
|
$ |
171 |
|
|
$ |
141,343 |
|
|
$ |
(136,595 |
) |
|
$ |
(110 |
) |
|
$ |
(3,806 |
) |
|
$ |
1,003 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
BIOLARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(in thousands, except for per share data)
(unaudited)
|
|
SEPTEMBER 30, 2022 |
|
|
SEPTEMBER 30, 2021 |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,724 |
) |
|
$ |
(5,103 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Stock option compensation expense |
|
|
1,455 |
|
|
|
1,447 |
|
Common stock issued in lieu of salary to officers and fees for services from vendors |
|
|
172 |
|
|
|
294 |
|
Common stock issued for interest |
|
|
— |
|
|
|
16 |
|
Interest expense related to amortization of the discount on convertible notes payable and line of credit |
|
|
13 |
|
|
|
114 |
|
PPP loan forgiveness |
|
|
(174 |
) |
|
|
(43 |
) |
Loss on investment in South Korean joint venture |
|
|
15 |
|
|
|
23 |
|
Depreciation expense |
|
|
28 |
|
|
|
17 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(371 |
) |
|
|
20 |
|
Prepaid expenses and other current assets |
|
|
(85 |
) |
|
|
(71 |
) |
Inventories |
|
|
(19 |
) |
|
|
27 |
|
Accounts payable and accrued expenses |
|
|
(40 |
) |
|
|
(85 |
) |
Contract liability |
|
|
(83 |
) |
|
|
114 |
|
Customer deposits |
|
|
30 |
|
|
|
79 |
|
Clyra Medical accounts payable and accrued expenses |
|
|
(20 |
) |
|
|
189 |
|
Net cash used in operating activities |
|
|
(2,803 |
) |
|
|
(2,962 |
) |
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Purchase of equipment |
|
|
(164 |
) |
|
|
(21 |
) |
Net cash used in investing activities |
|
|
(164 |
) |
|
|
(21 |
) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Proceeds from sales of common stock |
|
|
3,267 |
|
|
|
4,120 |
|
Proceeds from the sale of stock in Clyra Medical |
|
|
— |
|
|
|
50 |
|
Proceeds from the issuance of Clyra Medical convertible notes |
|
|
100 |
|
|
|
— |
|
Exercise of warrants |
|
|
— |
|
|
|
60 |
|
Payment of debt obligations |
|
|
— |
|
|
|
(828 |
) |
Payment of Clyra Medical debt obligations |
|
|
(24 |
) |
|
|
(28 |
) |
Net cash provided by financing activities |
|
|
3,343 |
|
|
|
3,374 |
|
Net effect of foreign currency translation |
|
|
(70 |
) |
|
|
(9 |
) |
Net change in cash |
|
|
306 |
|
|
|
382 |
|
Cash at beginning of period |
|
|
962 |
|
|
|
716 |
|
Cash at end of period |
|
$ |
1,268 |
|
|
$ |
1,098 |
|
Supplemental disclosures of cash flow information |
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
11 |
|
|
$ |
56 |
|
Non-cash investing and financing activities |
|
|
|
|
|
|
|
|
Fair value of warrants issued with convertible notes |
|
$ |
— |
|
|
$ |
35 |
|
Conversion of notes payable to common stock |
|
$ |
— |
|
|
$ |
328 |
|
Right of use |
|
$ |
433 |
|
|
$ |
— |
|
Allocation of noncontrolling interest |
|
$ |
1,129 |
|
|
$ |
786 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
BIOLARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Business and Organization
Description of Business
BioLargo, Inc. is an innovative technology developer and environmental engineering company driven by a mission to “make life better” by delivering robust, sustainable solutions for a broad range of industries and applications, with a focus on clean water, clean air and a cleaner earth. The company also owns a majority interest in a medical products subsidiary that has licensed BioLargo’s technologies. Our business strategy is straightforward: we invent or acquire technologies that we believe have the potential to be disruptive in large commercial markets; we develop and validate these technologies to advance and promote their commercial success as we leverage our considerable scientific, engineering, and entrepreneurial talent; we then monetize these technical assets through a variety of business structures that may include licensure, joint venture, sale, spin off, or by deploying direct to market strategies.
Liquidity / Going concern
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of our business. For the nine months ended September 30, 2022, we had a net loss of $3,724,000, used $2,803,000 cash in operations, and at September 30, 2022, we had working capital of $1,503,000, and current assets of $2,532,000. During the three months ended September 30, 2022, we generated revenues of $1,500,000. Only one of our subsidiaries – ONM Environmental – generated operating income. (See Note 9.)
We do not believe gross profits in the year ended December 31, 2022, or in the immediately subsequent quarterly periods, will be sufficient to fund our current level of operations, and therefore believe we will have to obtain further investment capital to continue to fund operations, such as through our purchase agreement with Lincoln Park Capital, which expires in March 2023, and private sales of our securities. (See Note 3.) We have been, and anticipate that we will continue to be, limited in terms of our capital resources.
If we are unable to rely on our current arrangement with Lincoln Park to continue to fund our working capital requirements, we will have to rely on other forms of financing, and there is no assurance that we will be able to do so, or if we do so, it will be on favorable terms.
The foregoing factors raise substantial doubt about our ability to continue as a going concern, unless we are able to continue to raise funds through stock sales to Lincoln Park or other private financings, and in the long term, our ability to attain a reasonable threshold of operating efficiencies and achieve profitable operations by licensing or otherwise commercializing products incorporating our technologies. The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Organization
We are a Delaware corporation formed in 1991. We have four wholly-owned subsidiaries: BioLargo Life Technologies, Inc., organized under the laws of the State of California in 2006; ONM Environmental, Inc., organized under the laws of the State of California in 2009; BioLargo Water Investment Group Inc., organized under the laws of the State of California in 2019, which wholly owns BioLargo Water, Inc., organized under the laws of Canada in 2014; and BioLargo Development Corp., organized under the laws of the State of California in 2016. Additionally, we own 89% of BioLargo Engineering Science and Technologies, LLC (“BLEST”), organized under the laws of the State of Tennessee in 2017. We also own 58% of Clyra Medical Technologies, Inc. (“Clyra” or “Clyra Medical”), organized under the laws of the State of California in 2012, and consolidate their financial statements (see Note 2, subheading “Principles of Consolidation,” and Note 8).
The unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to Rule 8-03 of Regulation S-X under the Securities Act of 1933, as amended. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. For some of our activities, we are still operating in the early stages of the sales and distribution process, and therefore our operating results for the nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022, or for any other period. These unaudited consolidated financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2022.
BIOLARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Summary of Significant Accounting Policies
In the opinion of management, the accompanying balance sheet and related statements of operations, cash flows, and stockholders’ deficit include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and partially-owned subsidiaries BLEST and Clyra Medical. All intercompany accounts and transactions have been eliminated.
Foreign Currency
The Company has designated the functional currency of BioLargo Water, Inc., our Canadian subsidiary, to be the Canadian dollar. Therefore, translation gains and losses resulting from differences in exchange rates are recorded in accumulated other comprehensive income.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less when acquired to be cash equivalents. Substantially all cash equivalents are held in short-term money market accounts at one of the largest financial institutions in the United States. From time to time, our cash account balances are greater than the Federal Deposit Insurance Corporation insurance limit of $250,000 per owner per bank, and during such times, we are exposed to credit loss for amounts in excess of insured limits in the event of non-performance by the financial institution. We do not anticipate non-performance by our financial institution.
As of September 30, 2022 and December 31, 2021, our cash balances were made up of the following (in thousands):
| | September 30, 2022 | | | December 31, 2021 | |
BioLargo, Inc. and subsidiaries | | $ | 1,251 | | | $ | 941 | |
Clyra Medical Technologies, Inc. | | | 17 | | | | 21 | |
Total | | $ | 1,268 | | | $ | 962 | |
Accounts Receivable
Trade accounts receivable are recorded net of allowances for doubtful accounts. Estimates for allowances for doubtful accounts are determined based on payment history and individual customer circumstances. The allowance for doubtful accounts as of September 30, 2022 was $12,000 and at December 31, 2021, was $12,000.
Credit Concentration
We had a limited number of customers that account for significant portions of our revenue. During the nine months ended September 30, 2022 and 2021, we had the following customers that accounted for more than 10% of consolidated revenues, as follows:
| | September 30, 2022 | | | September 30, 2021 | |
Customer A | | | 44 | % | | | <10 | % |
Customer B | | | 14 | % | | | <10 | % |
Customer C | | | <10 | % | | | 12 | % |
Customer D | | | <10 | % | | | 14 | % |
Customer E | | | <10 | % | | | 11 | % |
BIOLARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We had a limited number of customers that accounted for more than 10% of consolidated accounts receivable at September 30, 2022, and at December 31, 2021, as follows:
| | September 30, 2022 | | | December 31, 2021 | |
Customer A | | | 13 | % | | | <10 | % |
Customer B | | | 15 | % | | | <10 | % |
Customer F | | | 11 | % | | | <10 | % |
Customer G | | | <10 | % | | | 32 | % |
Customer H | | | <10 | % | | | 12 | % |
Inventory
Inventories are stated at the lower of cost or net realizable value using the average cost method. The allowance for obsolete inventory as of September 30, 2022, and December 31, 2021, was $3,000. Inventories consisted of (in thousands):
| | September 30, 2022 | | | December 31, 2021 | |
Raw material | | $ | 123 | | | $ | 108 | |
Finished goods | | | 137 | | | | 103 | |
Total | | $ | 260 | | | $ | 241 | |
Other Non-Current Assets
| | September 30, 2022 | | | December 31, 2021 | |
Patents | | $ | 34 | | | $ | 34 | |
Security deposits | | | 35 | | | | 35 | |
Tax credit receivable | | | 54 | | | $ | - | |
Total | | $ | 123 | | | $ | 69 | |
Equity Method of Accounting
On March 20, 2020, we invested $100,000 into a South Korean entity (Odin Co. Ltd., “Odin”) pursuant to a Joint Venture agreement we had entered into with BKT Co. Ltd. and its U.S. subsidiary, Tomorrow Water. We received a 40% non-dilutive equity interest, and BKT and Tomorrow Water each received 30% equity interests for an aggregate $150,000 investment.
We account for our investment in the joint venture under the equity method of accounting. We have determined that while we have significant influence over the joint venture through our technology license and our position on the Board of Directors, we do not control the joint venture or are otherwise involved in managing the entity and we own less than a majority of the equity. Therefore, we record the asset on our consolidated balance sheet and record an increase or decrease the recorded balance by our percentage ownership of the profits or losses in the joint venture. The joint venture incurred a loss during the nine months ended September 30, 2022 and 2021, our 40% ownership share reduced our investment interest by $15,000 and $23,000, respectively.
Impairment
Long-lived and definite lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected future undiscounted cash flows from the use of the asset and its eventual disposition is less than the carrying amount of the asset, then an impairment loss is recognized. The impairment loss is measured based on the fair value of the asset. Any resulting impairment is recorded as a reduction in the carrying value of the related asset in excess of fair value and a charge to operating results. For the nine months ended September 30, 2022 and 2021, management determined that there was no impairment of its long-lived assets, including its patents.
Nevertheless, during the three months ended December 31, 2021, management determined that there was an impairment expense related to the sale back to Scion Solutions, LLC (“Scion’) of certain intellectual property, recorded on our balance sheet as “In-Process Research and Development” and an impairment of Clyra’s prepaid marketing. Total impairment expense for 2021 was $342,000.
BIOLARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Earnings (Loss) Per Share
We report basic and diluted earnings (loss) per share (“EPS”) for common and common share equivalents. Basic EPS is computed by dividing reported earnings by the weighted average shares outstanding. Diluted EPS is computed by adding to the weighted average shares the dilutive effect if stock options and warrants were exercised into common stock. For the three and nine months ended September 30, 2022 and 2021, the denominator in the diluted EPS computation is the same as the denominator for basic EPS due to the anti-dilutive effect of the warrants and stock options on the Company’s net loss.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the period reported. Actual results could differ from those estimates. Estimates are used when accounting for stock-based transactions, debt transactions, derivative liabilities, allowance for bad debt, asset depreciation and amortization, among others.
The methods, estimates and judgments we use in applying these most critical accounting policies have a significant impact on the results of our financial statements.
Share-Based Compensation Expense
We recognize compensation expense for stock option awards on a straight-line basis over the applicable service period of the award, which is the vesting period. Fair value is determined on the grant date. Share-based compensation expense is based on the grant date fair value estimated using the Black-Scholes Option Pricing Model.
For stock and stock options issued to consultants and other non-employees for services, the Company measures and records an expense as of the earlier of the date at which either: a commitment for performance by the non-employee has been reached or the non-employee’s performance is complete. The equity instruments are measured at the current fair value, and for stock options, the instruments are measured at fair value using the Black Scholes option model.
The following methodology and assumptions were used to calculate share-based compensation for the nine months ended September 30, 2022 and 2021:
| | 2022 | | 2021 | |
| | Non Plan | | | 2018 Plan | | Non Plan | | | 2018 Plan | |
Risk free interest rate | | 2.32 | – | 3.83% | | | 2.32 | – | 3.83% | | | 1.73 | % | | 0.93 | – | 1.73% | |
Expected volatility | | 115 | – | 117% | | | 115 | – | 117% | | | 124 | % | | 121 | – | 124% | |
Expected dividend yield | | | — | | | | | — | | | | — | | | | — | | |
Forfeiture rate | | | — | | | | | — | | | | — | | | | — | | |
Life in years | | | 10 | | | | | 10 | | | | 10 | | | | 10 | | |
Expected price volatility is the measure by which our stock price is expected to fluctuate during the expected term of an option. Expected volatility is derived from the historical daily change in the market price of our common stock, as we believe that historical volatility is the best indicator of future volatility.
The risk-free interest rate used in the Black-Scholes calculation is based on the prevailing U.S. Treasury yield as determined by the U.S. Federal Reserve. We have never paid any cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future.
Historically, we have not had significant forfeitures of unvested stock options granted to employees and Directors. A significant number of our stock option grants are fully vested at issuance or have short vesting provisions. Therefore, we have estimated the forfeiture rate of our outstanding stock options as zero.
BIOLARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Warrants
Warrants issued with our convertible promissory notes, note payables, line of credit are accounted for under the fair value and relative fair value method.
The warrant is first analyzed per its terms as to whether it has derivative features or not. If the warrant is determined to be a derivative and not qualify for equity treatment, then it is measured at fair value using the Black Scholes option model, and recorded as a liability on the balance sheet. The warrant is re-measured at its then current fair value at each subsequent reporting date (it is “marked-to-market”).
If the warrant is determined to not have derivative features, it is recorded into equity at its fair value using the Black Scholes option model, however, limited to a relative fair value based upon the percentage of its fair value to the total fair value including the fair value of the convertible note.
Convertible debt instruments are recorded at fair value, limited to a relative fair value based upon the percentage of its fair value to the total fair value including the fair value of the warrant.
Non-Cash Transactions
We have established a policy relative to the methodology to determine the value assigned to each intangible we acquire, and/or services or products received for non-cash consideration of our common stock. The value is based on the market price of our common stock issued as consideration, at the date of the agreement of each transaction or when the service is rendered, or product is received.
Revenue Recognition
We account for revenue in accordance with ASC 606, “Revenue from Contacts with Customers”. The guidance focuses on the core principle for revenue recognition, which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the guidance provides that an entity should apply the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
We generate revenue through our subsidiaries. For the sale of goods, the subsidiary identifies its contract with the customer through a written purchase order, in which the details of the contract are defined including the transaction price and method of shipment. The only performance obligation is to create and ship the product and each product has separate pricing. Revenue is recognized at a point in time when the order for its goods are shipped if its agreement with the customer is FOB manufacturer, and when goods are delivered to its customer if its agreement with the customer is FOB destination. Revenue is recognized with a reduction for sales discounts, as appropriate and negotiated in the customer’s purchase order. In association with certain product purchases, ONM Environmental installs misting systems for which it bills on a time and materials basis. It identifies its contract with the customer through a written purchase order in which the details of the time to be billed and materials purchased and an estimated completion date. The performance obligation is the completion of the installation, and at that time revenue is recognized.
For services, such as through our engineering group, the subsidiary identifies services to be performed in a written contract, which specifies the performance obligations and the rate at which the services will be billed. Each service is separately negotiated and priced. Revenue is recognized as services are performed and completed. Service contracts typically call for invoicing for time and materials incurred for that contract, although some provide for milestone or fixed cost payments, where an agreed-to amount is invoiced per month for the life of the contract. In these instances, completed work, billed hourly, is recognized as revenue. If the billing amount is greater or lesser than the completed work, a contract receivable or contract liability is created. As of September 30, 2022, we had $6,000 of contract liability. As of December 31, 2021, we had contract liability totaling $89,000. To date, there have been no discounts or other financing terms for the contracts.
BIOLARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Royalties or license fees from our intellectual property are based on the licensee’s sales of products incorporating or using our licensed intellectual property.
Government Grants
We have been awarded multiple research grants from the Canadian National Research Institute – Industrial Research Assistance Program (NRC-IRAP) and the National Science and Engineering Research Council of Canada (NSERC). The grants received are considered other income and are included in our consolidated statements of operations. We received our first grant in 2015 and have been awarded over 80 grants totaling over $3.7 million. Some of the funds from these grants are given directly to third parties (such as the University of Alberta or a third-party research scientist) to support research on our technology. The grants have terms generally ranging between nine and eighteen months and support a majority, but not all, of the related research budget costs. This cooperative research allows us to utilize (i) a depth of resources and talent to accomplish highly skilled work, (ii) financial aid to support research and development costs, (iii) independent and credible validation of our technical claims.
The grants typically provide for (i) recurring monthly amounts, (ii) reimbursement of costs for research talent for which we invoice to request payment, and (iii) ancillary cost reimbursement for research talent travel related costs. All awarded grants have specific requirements on how the money is spent, typically to employ researchers. None of the funds may be used for general administrative expenses or overhead in the United States. These grants have substantially increased our level of research and development activities in Canada. We continue to apply for Canadian government and agency grants to fund research and development activities. Not all of our grant applications have been awarded, and no assurance can be made that any pending grant application, or any future grant applications, will be awarded.
Income Taxes
The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of asset and liabilities. Deferred tax assets and liabilities are determined based on the differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on deferred tax asset and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
We account for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by generally accepted accounting principles (“GAAP”). Under GAAP, the tax effects of a position are recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the position are recognized. Management believes there are no unrecognized tax benefits or uncertain tax positions as of September 30, 2022, and December 31, 2021.
The Company assessed its earnings history, trends and estimates of future earnings and determined that the deferred tax asset could not be realized as of September 30, 2022. Accordingly, a valuation allowance was recorded against the net deferred tax asset.
The Company recognizes interest and penalties on income taxes as a component of income tax expense, should such an expense be realized.
Fair Value of Financial Instruments
Management believes the carrying amounts of the Company’s financial instruments (excluding debt and equity instruments) as of September 30, 2022 and December 31, 2021, approximate their respective fair values because of the short-term nature of these instruments. Such instruments consist of cash, accounts receivable, prepaid assets, accounts payable, lines of credit, and other assets and liabilities.
BIOLARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tax Credits
Our research and development activities in Canada may entitle our Canadian subsidiary to claim benefits under the “Scientific Research and Experimental Development Program”, a Canadian federal tax incentive program designed to encourage Canadian businesses of all sizes and in all sectors to conduct research and development in Canada. Benefits under the program include credits to taxable income. If our Canadian subsidiary does not have taxable income in a reporting period, we instead receive a tax refund from the Canadian Revenue Authority. A refund has been submitted totaling $54,000, which is classified in Other Income on our Consolidated Statement of Operations and Comprehensive Loss.
Leases
In February 2016, the FASB issued ASU Update No. 2016-02, “Leases,” which requires lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability, and lessors to recognize a net lease investment. Additional qualitative and quantitative disclosures are also required (see Note 10). We adopted this standard effective January 1, 2019 using the effective date option, as approved by the FASB in July 2018, which resulted in a $399,000 gross up of assets and liabilities; this balance may fluctuate over time as we enter into new leases, extend or terminate current leases. Upon the transition to ASC 842, the Company elected to use hindsight as a practical expedient with respect to determining the lease terms and in assessing any impairment of right-of-use assets for existing leases. No impairment is expected at this time. As of September 30, 2022, the right of use assets on our balance sheet related to our operating leases totals $896,000.
Recent Accounting Pronouncements
In August 2020,the FASB issued Accounting Standards UpdateNo.2020-06,“Debt—Debt with Conversion and Other Options (Subtopic470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”. For convertible instruments, the FASB decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that arenotclearly and closely related to the host contract, that meet the definition of a derivative, and that donotqualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The FASB decided to amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The FASB observed that the application of the derivatives scope exception guidance results in accounting for some contracts as derivatives while accounting for economically similar contracts as equity. The FASB also decided to improve and amend the related EPS guidance. The amendments in this Update are effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021,including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023,including interim periods within those fiscal years; early adoption is permitted. Management has evaluated this update and adopted it as of January 1, 2022. In do so, we evaluated the convertible debt issued by Clyra Medical during the three months ended June 30, 2022 (see Note 8), and determined that the beneficial conversion feature was fixed at the time of issuance and not an embedded derivative under Subtopic 815-15. As a result of the early adoption, there are no other potential affects on the Company’s current financial statements.
Note 3. Sale of Stock for Cash
Lincoln Park Financing
During the three and nine months ended September 30, 2022, we sold 2,440,958 and 4,353,919 shares to Lincoln Park, and in exchange received $485,000 and $903,000 in gross and net proceeds.
BIOLARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the three and nine months ended September 30, 2021, we sold 2,917,819 and 21,444,128 shares to Lincoln Park, and in exchange received $530,000 and $3,545,000 in gross and net proceeds.
Unit Offerings
During the three and nine months ended September 30, 2022, pursuant to our unit offerings, we sold 3,766,126 and 13,568,524 shares of our common stock and received $632,000 and $2,364,000 in gross and net proceeds from thirty accredited investors.
During the three and nine months ended September 30, 2021, pursuant to our unit offerings, we sold 388,889 and 3,820,436 shares of our common stock and received $70,000 and $575,000 in gross and net proceeds from four accredited investors.
In addition to the shares, we issued each investor a six-month and a five-year warrant to purchase additional shares (see Note 6, “Warrants Issued in Unit Offerings”).
Note 4. Debt Obligations
The following table summarizes our debt obligations outstanding as of September 30, 2022, and December 31, 2021 (in thousands). The table does not include debt obligations of our partially owned subsidiary Clyra Medical (see Note 8, “Debt Obligations of Clyra Medical”).
|
|
September 30, 2022 (Unaudited) |
|
|
December 31, 2021 |
|
Current portion of debt: |
|
|
|
|
|
|
|
|
SBA Paycheck Protection Program loans, mature April 2025 |
|
$ |
43 |
|
|
$ |
314 |
|
Convertible note payable, matures March 1, 2023 |
|
|
50 |
|
|
|
— |
|
Debt discount, net of amortization |
|
|
(7 |
) |
|
|
— |
|
Total current portion of debt |
|
$ |
86 |
|
|
$ |
314 |
|
|
|
|
|
|
|
|
|
|
Long-term debt: |
|
|
|
|
|
|
|
|
SBA EIDL Loan |
|
$ |
150 |
|
|
$ |
150 |
|
SBA Paycheck Protection Program loans, mature May 2025 |
|
|
97 |
|
|
|
— |
|
Convertible note payable, matures March 1, 2023 |
|
|
— |
|
|
|
50 |
|
Debt discount, net of amortization |
|
|
— |
|
|
|
(20 |
) |
Total long-term debt |
|
|
247 |
|
|
|
180 |
|
Total |
|
$ |
333 |
|
|
$ |
494 |
|
For the three and nine months ended September 30, 2022, we recorded $14,000 and $42,000, and for the three and nine months ended September 30, 2021, we recorded $42,000 and $208,000, of interest expense related to the amortization of discounts on convertible notes payable, and coupon interest from our note payable, convertible notes and line of credit.
The following discussion includes debt instruments to which amendments were made or included other activity that management deemed appropriate to disclose during the nine months ended September 30, 2022 and 2021. Each of the debt instruments contained in the above table are disclosed more fully in the financial statements contained in the Company’s Form 10-K filed March 31, 2022.
BIOLARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SBA Program Loans
In April 2020, our subsidiaries ONM Environmental, BLEST and Clyra Medical received $218,000, $96,000 and $43,000, respectively, in loans pursuant to the Small Business Association’s (“SBA”) Paycheck Protection Program (“PPP”). The loans mature two years from the inception date (although any payments due are deferred once a forgiveness application has been filed), and incur interest at 1%. Management believes that it has fully complied with the terms of forgiveness as set forth by the SBA, and each subsidiary has filed forgiveness applications. On February 7, 2022, we received notice that the SBA had partially approved ONM Environmental's application for forgiveness of its PPP loan in the amount of $174,000; ONM has appealed and provided additional documentation to support forgiveness of the remaining $43,000. The forgiveness application of BLEST remains pending. On March 19, 2021, we received notice that the SBA had approved the application for forgiveness Clyra’s PPP loan.
Note 5. Share-Based Compensation
Issuance of Common Stock in exchange for payment of payables
Payment of Officer Salaries
On September 30, 2022, we issued 167,781 shares of our common stock at $0.27 per share in lieu of $72,000 of accrued and unpaid salary to our officers.
On September 30, 2021, we issued 61,842 shares of our common stock at $0.19 per share in lieu of $12,000 of accrued and unpaid salary to our officers. On March 31, 2021, we issued 137,364 shares of our common stock at $0.23 per share in lieu of $31,000 of accrued and unpaid salary to our officers.
Payment of Consultant Fees
On September 30, 2022, we issued 211,047 shares of our common stock at $0.27 per share in lieu of $24,000 of accrued and unpaid obligations to consultants. On June 30, 2022, we issued 76,996 shares of our common stock at $0.18 per share in lieu of $60,000 of accrued and unpaid obligations to consultants. On March 31, 2022, we issued 86,752 shares of our common stock at $0.23 per share in lieu of $31,000 of accrued and unpaid obligations to consultants.
On September 30, 2021, we issued 586,963 shares of our common stock at $0.19 per share in lieu of $71,000 of accrued and unpaid salary to consultants. On June 30, 2021, we issued 357,132 shares of our common stock at $0.17 per share in lieu of $60,000 of accrued and unpaid obligations to consultants. On March 31, 2021, we issued 610,123 shares of our common stock at $0.23 per share in lieu of $81,000 of accrued and unpaid obligations to consultants.
Payment of Accrued Interest
During the three months ended June 30, 2021, we issued 81,777 shares of our common stock at $0.17 per share in lieu of $16,000 of accrued and unpaid interest.
Stock Option Expense
During the three and nine months ended September 30, 2022, we recorded an aggregate $338,000 and $1,455,000, and during the three and nine months ended September 30, 2021, we recorded an aggregate $430,000 and $1,447,000 in selling general and administrative expense related to the issuance of stock options. We issued options through our 2018 Equity Incentive Plan, our now expired 2007 Equity Incentive Plan, and outside of these plans. See Note 8 for information on stock option expense for options issued by subsidiary Clyra.
2018 Equity Incentive Plan
On June 22, 2018, our stockholders adopted the BioLargo 2018 Equity Incentive Plan (“2018 Plan”) as a means of providing our directors, key employees and consultants additional incentive to provide services. Both stock options and stock grants may be made under this plan for a period of 10 years. Our Board of Director’s Compensation Committee administers this plan. As plan administrator, the Compensation Committee has sole discretion to set the price of the options. The plan authorizes the following types of awards: (i) incentive and non-qualified stock options, (ii) restricted stock awards, (iii) stock bonus awards, (iv) stock appreciation rights, (v) restricted stock units, and (vi) performance awards. The total number of shares reserved and available for awards pursuant to this Plan as of the date of adoption of this 2018 Plan by the Board is 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.
BIOLARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Activity for our stock options under the 2018 Plan for the nine months ended September 30, 2022 and September 30, 2021, is as follows:
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Aggregate |
|
|
|
Options |
|
|
Exercise |
|
|
Price per |
|
|
intrinsic |
|
|
|
Outstanding |
|
|
Price per share |
|
|
share |
|
|
Value(1) |
|
Balance, December 31, 2021 |
|
|
23,186,142 |
|
|
$0.12 |
– |
0.43 |
|
|
$ |
0.19 |
|
|
|
|
|
Granted |
|
|
4,748,212 |
|
|
0.18 |
– |
0.27 |
|
|
|
0.22 |
|
|
|
|
|
Balance, September 30, 2022 |
|
|
27,934,354 |
|
|
$0.12 |
– |
0.43 |
|
|
$ |
0.19 |
|
|
|
|
|
Non-vested |
|
|
(4,449,874 |
) |
|
0.12 |
– |
0.40 |
|
|
|
0.22 |
|
|
|
|
|
Vested, September 30, 2022 |
|
|
23,484,480 |
|
|
$0.12 |
– |
0.43 |
|
|
$ |
0.19 |
|
|
$ |
1,893,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020 |
|
|
18,865,525 |
|
|
$0.16 |
– |
0.40 |
|
|
$ |
0.19 |
|
|
|
|
|
Granted |
|
|
3,686,462 |
|
|
0.13 |
– |
0.23 |
|
|
|
0.19 |
|
|
|
|
|
Balance, September 30, 2021 |
|
|
22,591,987 |
|
|
$0.12 |
– |
0.43 |
|
|
$ |
0.19 |
|
|
|
|
|
(1) Aggregate intrinsic value based on closing common stock price of $0.27 at September 30, 2022.
The options granted to purchase 4,748,212 shares during the nine months ended September 30, 2022 were issued to officers, board of directors, employees and consultants: (i) we issued options to purchase 290,135 shares of our common stock at an exercise price on the respective grant date of $0.22 and $0.23 per share to our CFO and President to replace options that had expired; (ii) we issued options to purchase 1,134,356 shares of our common stock at an exercise price on the respective grant date ranging between $0.18 – $0.27 per share to members of our board of directors for services performed, in lieu of cash; the fair value of these options totaled $246,000; (iii) we issued options to purchase 2,340,730 shares of our common stock to employees as part of an employee retention plan at an exercise price on the respective date ranging between $0.18 – $0.27 per share; the fair value of employee retention plan options totaled $492,000 and will vest quarterly over four years as long as they are retained as employees; (iv) we issued options to purchase 682,991 shares of our common stock to consultants in lieu of cash for expiring options and per agreement totaling $145,000, and (v) we issued options to our Chief Financial Officer (see “Chief Financial Officer Contract Extension” immediately below). All stock option expense is recorded on our consolidated statement of operations as selling, general and administrative expense.
Chief Financial Officer Contract Extension
On March 22, 2022, we and our Chief Financial Officer Charles K. Dargan, II formally agreed to extend the engagement agreement dated February 1, 2008 (the “Engagement Agreement”, which had been previously extended multiple times), pursuant to which Mr. Dargan has been and continues to serve as the Company’s Chief Financial Officer. The Engagement Extension Agreement dated as of March 22, 2022 (the “Engagement Extension Agreement”) provides for an additional one-year term to expire January 31, 2023 (the “Extended Term”).
As the sole compensation for the Extended Term, Mr. Dargan was issued an option (“Option”) to purchase 25,000 shares of the Company’s common stock for each month during the Extended Term (thus, an option to purchase 300,000 shares reflecting an extended term of 12 months). The Option vests over the period of the Extended Term, with 25,000 shares having vested as of March 22, 2022, and the remaining shares to vest 25,000 shares monthly beginning March 22, 2022, and each month thereafter, so long as the agreement is in full force and effect. The Option is exercisable at $0.24 per share, the closing price of BioLargo’s common stock on March 22, 2022, the grant date, expires ten years from the grant date, and was issued pursuant to the Company’s 2018 Equity Incentive Plan.
The Option is Mr. Dargan’s sole compensation for the Extended Term. As was the case in all prior terms of his engagement, there is no cash component of his compensation for the Extended Term. Mr. Dargan is eligible to be reimbursed for business expenses he incurs in connection with the performance of his services as the Company’s Chief Financial Officer (although he has made no such requests for reimbursement in the past). All other provisions of the Engagement Agreement not expressly amended pursuant to the Engagement Extension Agreement remain the same, including provisions regarding indemnification and arbitration of disputes.
BIOLARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The options granted to purchase 3,686,462 shares during the nine months ended September 30, 2021 were issued to an officer, board of directors, employees and consultants: (i) we issued options to purchase 300,000 shares of our common stock at an exercise price on the respective grant date of $0.17 per share to our CFO as described below; (ii) we issued options to purchase 1,049,024 shares of our common stock at an exercise price on the respective grant date of $0.17 and $0.23 per share to members of our board of directors for services performed, in lieu of cash; the fair value of these options totaled $198,000; (iii) we issued options to purchase 1,800,011 shares of our common stock to employees as part of an employee retention and expiring options plan at exercises price on the respective date ranging between $0.17 and $0.23 per share; the fair value of employee retention plan options totaled $327,000 and will vest quarterly over four years as long as they are retained as employees; and (iv) we issued options to purchase 537,427 shares of our common stock to consultants and employees in lieu of cash for unpaid obligations totaling $95,000. All stock option expense is recorded on our consolidated statement of operations as selling, general and administrative expense.
2007 Equity Incentive Plan
On September 7, 2007, and as amended April 29, 2011, the BioLargo, Inc. 2007 Equity Incentive Plan (“2007 Plan”) was adopted as a means of providing our directors, key employees and consultants additional incentive to provide services. Both stock options and stock grants may be made under this plan for a period of 10 years, which expired on September 7, 2017. The Board’s Compensation Committee administers this plan. As plan administrator, the Compensation Committee has sole discretion to set the price of the options. As of September 2017, the Plan was closed to further stock option grants.
Activity for our stock options under the 2007 Plan for the nine months ended September 30, 2022 and 2021 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Aggregate |
|
|
|
Options |
|
|
Exercise |
|
|
Price per |
|
|
intrinsic |
|
|
|
Outstanding |
|
|
price per share |
|
|
share |
|
|
Value(1) |
|
Balance, December 31, 2021 |
|
|
2,879,246 |
|
|
$0.28 |
– |
0.94 |
|
|
$ |
0.49 |
|
|
|
|
|
Expired |
|
|
(975,161 |
) |
|
$0.28 |
– |
0.35 |
|
|
|
0.36 |
|
|
|
|
|
Balance, September 30, 2022 |
|
|
1,904,085 |
|
|
$0.28 |
– |
0.94 |
|
|
$ |
0.56 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020 |
|
|
5,689,363 |
|
|
$0.28 |
– |
0.94 |
|
|
$ |
0.44 |
|
|
|
|
|
Expired |
|
|
(1,769,008 |
) |
|
0.39 |
– |
0.51 |
|
|
|
0.40 |
|
|
|
|
|
Balance, September 30, 2021 |
|
|
3,920,355 |
|
|
$0.28 |
– |
1.65 |
|
|
$ |
0.45 |
|
|
|
|
|
(1) – Aggregate intrinsic value based on closing common stock price of $0.27 at September 30, 2022.
Non-Plan Options issued
Activity of our non-plan stock options issued for the nine months ended September 30, 2022 and 2021 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Non-plan |
|
|
|
|
|
|
|
average |
|
|
Aggregate |
|
|
|
Options |
|
|
Exercise |
|
|
price per |
|
|
Intrinsic |
|
|
|
Outstanding |
|
|
price per share |
|
|
share |
|
|
value(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2021 |
|
|
20,119,207 |
|
|
$0.17 |
– |
1.00 |
|
|
$ |
0.41 |
|
|
|
|
|
Granted |
|
|
105,797 |
|
|
$0.23 |
– |
0.27 |
|
|
|
0.26 |
|
|
|
|
|
Balance, September 30, 2022 |
|
|
20,225,004 |
|
|
$0.17 |
– |
1.00 |
|
|
$ |
0.39 |
|
|
|
|
|
Non-vested |
|
|
(1,050,000 |
) |
|
0.17 |
– |
0.45 |
|
|
|
0.45 |
|
|
|
|
|
Vested, September 30, 2022 |
|
|
19,175,004 |
|
|
$0.17 |
– |
1.00 |
|
|
$ |
0.38 |
|
|
$ |
274,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020 |
|
|
20,749,583 |
|
|
$0.17 |
– |
1.00 |
|
|
$ |
0.41 |
|
|
|
|
|
Granted |
|
|
43,956 |
|
|
|
0.23 |
|
|
|
|
0.23 |
|
|
|
|
|
Expired |
|
|
(800,000 |
) |
|
|
1.00 |
|
|
|
|
1.00 |
|
|
|
|
|
Balance, September 30, 2021 |
|
|
19,993,539 |
|
|
$0.17 |
– |
1.00 |
|
|
$ |
0.39 |
|
|
|
|
|
(1) – Aggregate intrinsic value based on closing common stock price of $0.27 at September 30, 2022.
BIOLARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the nine months ended September 30, 2022, we issued options to purchase 105,797 shares of our common stock at prices on the grant date ranging $0.23 – $0.27 per share to a vendor for services. The fair value of these options total $36,000 and is recorded in our selling, general and administrative expense.
During the nine months ended September 30, 2021, we issued an option to purchase 43,956 shares of our common stock at $0.23 per share to a vendor for services. The fair value of these options total $10,000 and is recorded in our selling, general and administrative expense.
Note 6. Warrants
We issued warrants to purchase our common stock, at various prices for the nine months ended September 30, 2022 and 2021, is as follows:
| | | | | | | | | | | Weighted | | | | | |
| | | | | | | | | | | average | | | Aggregate | |
| | Warrants | | | Exercise | | | price per | | | Intrinsic | |
| | outstanding | | | price per share | | | share | | | value(1) | |
| | | | | | | | | | | | | | | | | |
Balance, December 31, 2021 | | | 36,765,502 | | | $0.16 | – | 1.00 | | | $ | 0.27 | | | | | |
Issued | | | 27,137,048 | | | 0.19 | – | 0.33 | | | | 0.23 | | | | | |
Expired | | | (10,273,722 | ) | | 0.19 | – | 0.48 | | | | 0.25 | | | | | |
Balance, September 30, 2022 | | | 53,628,828 | | | $0.14 | – | 1.00 | | | $ | 0.26 | | | $ | 2,094,000 | |
| | | | | | | | | | | | | | | | | |
Balance, December 31, 2020 | | | 32,980,989 | | | $0.16 | – | 1.00 | | | $ | 0.29 | | | | | |
Issued | | | 7,865,872 | | | 0.14 | - | 0.27 | | | | 0.20 | | | | | |
Exercised | | | (416,667 | ) | | | 0.14 | | | | | 0.14 | | | | | |
Expired | | | (2,743,406 | ) | | 0.12 | - | 0.70 | | | | 0.59 | | | | | |
Balance, September 30, 2021 | | | 37,686,788 | | | $0.12 | – | 1.00 | | | $ | 0.27 | | | | | |
| (1) | Aggregate intrinsic value based on closing common stock price of $0.27 at September 30, 2022 |
Warrants issued in Unit Offerings
During the nine months ended September 30, 2022, pursuant to our Unit Offerings (see Note 3), we issued nine-month stock purchase warrants to purchase an aggregate 13,568,524 shares of our common stock at $0.19 - $0.23 per share, and five-year stock purchase warrants to purchase an aggregate 13,568,524 shares of our common stock at $0.24 - $0.33 per share.
During the nine months ended September 30, 2021, pursuant to our Unit Offerings (see Note 3), we issued six-month stock purchase warrants to purchase an aggregate 3,932,936 shares of our common stock at exercise prices between $0.14 – 0.22 per share, and five-year stock purchase warrants to purchase an aggregate 3,923,936 shares of our common stock at exercise prices between $0.18 – 0.27 per share.
On August 6, 2021 a holder of a six-month stock purchase warrant exercised the warrant and we received $60,000 and issued 416,667 shares of our common stock.
BIOLARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value – Interest Expense
To determine interest expense related to our outstanding warrants issued in conjunction with debt offerings, the fair value of each award grant is estimated on the date of grant using the Black-Scholes option pricing model and the relative fair values are amortized over the life of the warrant. For the determination of expense of warrants issued for services, extinguishment of debt and settlement, management also uses the option-pricing model. During the nine months ended September 30, 2022 and 2021, no warrants were issued in conjunction with debt offerings.
The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant. Expected volatilities are based on historical volatility of our common stock. The expected life in years is based on the contract term of the warrant.
Note 7. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses for our operations other than our partially-owned subsidiary Clyra Medical included the following (in thousands):
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
Accounts payable and accrued expense |
|
$ |
334 |
|
|
$ |
349 |
|
Accrued interest |
|
|
25 |
|
|
|
25 |
|
Accrued payroll |
|
|
161 |
|
|
|
185 |
|
Total accounts payable and accrued expenses |
|
$ |
520 |
|
|
$ |
559 |
|
Accounts payable and accrued expenses includes ordinary business payables incurred by the Company and its operational subsidiaries. See Note 8, “Accounts Payable and Accrued Expenses”, for the accounts payable and accrued expenses of Clyra Medical.
Note 8. Noncontrolling Interest – Clyra Medical
We consolidate the operations of our partially owned subsidiary Clyra Medical, of which we owned 58% of its outstanding shares as of September 30, 2022.
BioLargo and its partially owned subsidiary Clyra Medical entered into an agreement dated March 3, 2022, whereby BioLargo agreed to convert $633,000 in working capital advances, made to or on behalf of Clyra Medical, into 2,042 shares of Clyra Medical common stock at a rate of $310 per share.
Debt Obligations of Clyra Medical
On April 8, 2022, Clyra Medical issued a promissory note in the principal amount of $100,000 to an individual investor, payable April 8, 2024 bearing 8% annual interest. The note may be converted by its holder at any time prior to the maturity date, and automatically converts to stock upon (i) Clyra’s sale of $5,000,000 or more of its common or preferred stock, or (ii) the maturity date, at a conversion price equal to 70% of the lowest price-per-share of shares sold to a future investor prior to the maturity date.
On June 30, 2020, Clyra Medical entered into a Revolving Line of Credit Agreement whereby Vernal Bay Capital Group, LLC committed to provide a $1,000,000 inventory line of credit. Since inception, $260,000 in line of credit draws were made and Clyra has repaid $97,000. As of September 30, 2022, the balance outstanding on this line of credit totals $163,000. Funds from the line of credit must be used to produce inventory. Additional draws are conditional upon the presentation of invoices or purchase orders to the lender equal to the greater of one-half of principal outstanding on the line of credit, and $200,000. The line of credit accrues interest at 15%, requires Clyra pay interest and principal from gross product sales, and is due on demand. Clyra is required to pay 60% of gross product sales to reduce amounts owed on the line of credit. Clyra issued Vernal Bay 323 shares of its common stock as a commitment fee for the line of credit, valued at $70,000. A security agreement of the same date grants Vernal Bay a security interest in Clyra’s inventory, as that term is defined in the Uniform Commercial Code.
BIOLARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Prepaid Marketing - Consulting Agreement
On December 30, 2015, Clyra entered into a consulting agreement with Beach House Consulting, LLC, through which Jack B. Strommen will be providing consulting services to Clyra related to its sales and marketing activities, and in exchange receive $23,000 per month for a period of four years. On June 30, 2020, at Clyra’s request, Beach House Consulting agreed to accept 3,639 shares of Clyra common stock, in lieu of cash, as full prepayment of the consulting fee. The obligation to provide the consulting services is dependent on Clyra generating an average of $250,000 in monthly sales over three consecutive months, which has not been met. The value of the shares issued to Beach House were higher but the asset was impaired in 2021, the asset totals $591,000 and is recorded as a non-current asset on our balance sheet.
Clyra Medical Equity transactions
As of September 30, 2022, Clyra Medical had the following common shares outstanding:
Shareholder |
|
Shares |
|
|
Percent |
|
BioLargo, Inc. |
|
|
51,249 |
|
|
|
58 |
% |
Sanatio Capital |
|
|
18,704 |
|
|
|
21 |
% |
Other |
|
|
19,118 |
|
|
|
21 |
% |
Total |
|
|
89,071 |
|
|
|
|
|
Sales of Common Shares
During the nine months ended September 30, 2022 and 2021, Clyra raised $0 and $50,000 at $310 per Clyra share.
Stock Options
Clyra issues options to its employees and consultants in lieu of compensation owed on a regular basis. As of December 31, 2021, the Company had issued options to purchase 14,004 shares of Clyra stock. During the nine months ended September 30, 2022 and 2021, Clyra issued options to purchase 1,403 and 2,074 shares of its common stock. Each option issued has an exercise price of $1.00 per share, are vested upon issuance and an expiration date 10 years from the date of grant. The fair value of the options issued in the nine months ended September 30, 2022 and 2021 totaled $304,000 and $442,000. We used the Black-Scholes model to calculate the initial fair value, assuming a stock price on date of grant of $310 per share. Because Clyra is a private company with no secondary market for its common stock, the resulting fair value was discounted by 30%. We also used a risk-free rate ranging between 2.32% - 3.83%, a volatility of 40% and an expected life of 10 years.
Clyra Accounts Payable and Accrued Expenses
Clyra had the following accounts payable and accrued expenses as follows:
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
Accounts payable and accrued expense |
|
$ |
202 |
|
|
$ |
149 |
|
Accrued interest |
|
|
4 |
|
|
|
51 |
|
Accrued payroll |
|
|
5 |
|
|
|
30 |
|
Total Clyra Medical accounts payable and accrued expenses |
|
$ |
211,000 |
|
|
$ |
230 |
|
Note 9. Business Segment Information
BioLargo currently has four operating business segments, plus its corporate entity which is responsible for general corporate operations, including administrative functions, finance, human resources, marketing, legal, etc. The four operational business segments are:
ONM Environmental (“ONM”) -- which sells odor and volatile organic control products and services (located in Westminster, California);
|
1. |
ONM Environmental (“ONM”) -- which sells odor and volatile organic control products and services (located in Westminster, California); |
BIOLARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2. |
Clyra Medical Technologies (“Clyra”) -- which develops and sells medical products based on our technologies, including BioClynse wound irrigation solution; |
|
3. |
BLEST -- which provides professional engineering services on a time and materials basis for outside clients and supports our internal operations as needed (located in Oak Ridge, Tennessee); and |
|
4. |
BioLargo Water (“Water”) -- which historically focused entirely on R&D, and has now shifted its focus to commercializing the AOS technology (located in Edmonton, Alberta Canada). |
Historically, none of our operating business units have operated at a profit (other than ONM this last quarter) and therefore each required additional cash to meet its monthly expenses, funded through BioLargo’s sales of debt or equity, research grants, and tax credits. Clyra Medical has also been funded by third party investors who invest directly in Clyra Medical in exchange for equity ownership in that entity.
The segment information for the three and nine months ended September 30, 2022 and 2021, is as follows (in thousands):
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BioLargo corporate |
|
$ |
2 |
|
|
$ |
— |
|
|
$ |
4 |
|
|
$ |
7 |
|
ONM |
|
|
1,199 |
|
|
|
420 |
|
|
|
2,499 |
|
|
|
1,058 |
|
BLEST |
|
|
401 |
|
|
|
416 |
|
|
|
1,613 |
|
|
|
1,070 |
|
Water |
|
|
1 |
|
|
|
2 |
|
|
|
1 |
|
|
|
9 |
|
Clyra Medical |
|
|
17 |
|
|
|
9 |
|
|
|
34 |
|
|
|
114 |
|
Intersegment revenue |
|
|
(120 |
) |
|
|
(135 |
) |
|
|
(365 |
) |
|
|
(522 |
) |
Total |
|
$ |
1,500 |
|
|
$ |
712 |
|
|
$ |
3,786 |
|
|
$ |
1,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BioLargo corporate |
|
$ |
(783 |
) |
|
$ |
(868 |
) |
|
$ |
(2,925 |
) |
|
$ |
(2,726 |
) |
ONM |
|
|
400 |
|
|
|
(72 |
) |
|
|
418 |
|
|
|
(355 |
) |
Clyra Medical |
|
|
(240 |
) |
|
|
(219 |
) |
|
|
(736 |
) |
|
|
(958 |
) |
BLEST |
|
|
(179 |
) |
|
|
(140 |
) |
|
|
(158 |
) |
|
|
(513 |
) |
Water |
|
|
(141 |
) |
|
|
(156 |
) |
|
|
(572 |
) |
|
|
(461 |
) |
Total |
|
$ |
(943 |
) |
|
$ |
(1,455 |
) |
|
$ |
(3,973 |
) |
|
$ |
(5,013 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BioLargo corporate |
|
$ |
(6 |
) |
|
$ |
(6 |
) |
|
$ |
(18 |
) |
|
$ |
(106 |
) |
Clyra Medical |
|
|
(8 |
) |
|
|
(20 |
) |
|
|
(24 |
) |
|
|
(96 |
) |
Total |
|
$ |
(14 |
) |
|
$ |
(26 |
) |
|
$ |
(42 |
) |
|
$ |
(208 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BioLargo corporate |
|
$ |
(140 |
) |
|
$ |
(220 |
) |
|
$ |
(570 |
) |
|
$ |
(765 |
) |
Clyra Medical |
|
|
(31 |
) |
|
|
(20 |
) |
|
|
(73 |
) |
|
|
(53 |
) |
BLEST |
|
|
(100 |
) |
|
|
(123 |
) |
|
|
(288 |
) |
|
|
(358 |
) |
Water |
|
|
(119 |
) |
|
|
(109 |
) |
|
|
(446 |
) |
|
|
(366 |
) |
Intersegment R&D |
|
|
119 |
|
|
|
135 |
|
|
|
359 |
|
|
|
515 |
|
Total |
|
$ |
(271 |
) |
|
$ |
(344 |
) |
|
$ |
(1,018 |
) |
|
$ |
(1,027 |
) |
The segment asset information for September 30, 2022 and December 31, 2021, is as follows (in thousands):
As September 30, 2022 |
|
BioLargo |
|
|
ONM |
|
|
Clyra |
|
|
BLEST |
|
|
Water |
|
|
Elimination |
|
|
Total |
|
Tangible assets |
|
$ |
785 |
|
|
$ |
1,079 |
|
|
$ |
814 |
|
|
$ |
590 |
|
|
$ |
194 |
|
|
$ |
(20 |
) |
|
$ |
3,442 |
|
Right of use |
|
|
157 |
|
|
|
— |
|
|
|
— |
|
|
|
739 |
|
|
|
— |
|
|
|
— |
|
|
|
896 |
|
Investment in South Korean joint venture |
|
|
33 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
33 |
|
Total |
|
|
975 |
|
|
|
1,079 |
|
|
|
814 |
|
|
|
1,329 |
|
|
|
194 |
|
|
|
(20 |
) |
|
|
4,371 |
|
BIOLARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2021 |
|
BioLargo |
|
|
ONM |
|
|
Clyra |
|
|
BLEST |
|
|
Water |
|
|
Elimination |
|
|
Total |
|
Tangible assets |
|
$ |
690 |
|
|
$ |
451 |
|
|
$ |
832 |
|
|
$ |
445 |
|
|
$ |
152 |
|
|
$ |
(47 |
) |
|
$ |
2,522 |
|
Right of use |
|
|
222 |
|
|
|
— |
|
|
|
— |
|
|
|
231 |
|
|
|
— |
|
|
|
— |
|
|
|
453 |
|
Investment in South Korean joint venture |
|
|
48 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
48 |
|
Total |
|
|
960 |
|
|
|
451 |
|
|
|
832 |
|
|
|
676 |
|
|
|
152 |
|
|
|
(47 |
) |
|
|
3,023 |
|
Note 10. Commitments and Contingencies
Office Leases
We have long-term operating leases for office, industrial and laboratory space in Westminster, California, Oak Ridge, Tennessee, and Alberta, Canada. Payments made under operating leases are charged to the Consolidated Statement of Operations and Comprehensive Loss on a straight-line basis over the term of the operating lease agreement. For the nine months ended September 30, 2022 and 2021, rental expense was $228,000 and $170,000, respectively. As of September 30, 2022, our weighted average remaining lease term is nine years and the total remaining operating lease payments is $1,859,000.
We have long-term operating leases for office, industrial and laboratory space in Westminster, California, Oak Ridge, Tennessee, and Alberta, Canada. Payments made under operating leases are charged to the Consolidated Statement of Operations and Comprehensive Loss on a straight-line basis over the term of the operating lease agreement. On January 1, 2019, we adopted ASC 842 which resulted in a right-of-use asset and lease liability. Short-term leases are not included in our analysis. The lease of our Westminster facility expires August 2024. It is too early for management to determine if it will exercise its option to extend the lease four years, therefore the four-year extension is not included in the analysis. In September 2022, the lease of our Oak Ridge, Tennessee facility was extended for ten years. The ten year lease added $443,000 to our right of use and lease liability on our September 30, 2022 balance sheet. The lease of our Canadian facility is less than one year. None of our leases have additional terms related to the payments or mechanics of the lease. The leases have no additional payment terms such as common area maintenance payments, tax sharing payments or other allocable expenses. Likewise, the leases do not contain other terms and conditions of use, such as variable lease payments, residual value guaranties or other restrictive financial terms. Since there is no explicit interest rate in our leases, management used its incremental borrowing rate, which is estimated to be 18% to determine lease liability.
Note 11. Subsequent Events.
Management has evaluated subsequent events through the date of the filing of this Quarterly Report and management noted the following for disclosure.
Sales to Lincoln Park
From October 1, 2022, through November 10, 2022, we sold 479,546 shares of our common stock to Lincoln Park (see Note 3), and received $107,000 in gross and net proceeds.
Unit Offering Investments
From October 1, 2022, through November 10, 2022, we received $567,000 of gross and net proceeds from fifteen investors in our Unit Offering (see Note 3), and issued an aggregate 3,432,486 shares of common stock, six-month warrants to purchase an aggregate 3,432,486 shares of common stock at an average $0.198 per share, and five-year warrants to purchase an aggregate 3,432,486 shares of common stock at an average $0.248 per share.