Biolargo, Inc 10-Q for FY2024 Q2
Biolargo, Inc. (BLGO)
About this 10-Q
Biolargo, Inc filed this 10-Q on August 14, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).
Headline figures
Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $5.01M
- up 246.7% from $1.45M a year earlier
- Net loss
- $780K
- compared with a net loss of $1.63M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number
BIOLARGO, INC.
(Exact name of registrant as specified in its charter)
| | | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
| | | OTC Markets (OTCQX) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of the Registrant’s Common Stock outstanding as of August 13, 2024 was
FORM 10-Q
INDEX
| Item 1 |
1 | |
| Item 2 |
Management's Discussion and Analysis and Financial Condition and Results of Operations |
26 |
| Item 4 |
37 |
| Item 2 |
39 | |
| Item 5 |
39 | |
| Item 6 |
40 | |
| 42 |
PART I – FINANCIAL INFORMATION
BIOLARGO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except for share and per share data)
| June 30, 2024 | December 31, | |||||||
| (unaudited) | 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net of allowance | ||||||||
| Inventories, net of allowance | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Equipment and leasehold improvements, net of depreciation | ||||||||
| Other non-current assets | ||||||||
| Investment in South Korean joint venture | ||||||||
| Right of use, operating leases, net of amortization | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Clyra Medical accounts payable and accrued expenses | ||||||||
| Clyra Medical debt obligations | ||||||||
| Debt obligation | ||||||||
| Contract liabilities | ||||||||
| Lease liabilities | ||||||||
| Deposits | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Debt obligations, net of current | ||||||||
| Lease liabilities, net of current | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred Series A, $ Par Value, Shares Authorized, Shares Issued and Outstanding, at June 30, 2024 and December 31, 2023 | ||||||||
| Common stock, $ Par Value, Shares Authorized, and Shares Issued, at June 30, 2024 and December 31, 2023 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total BioLargo Inc. and subsidiaries stockholders’ equity | ||||||||
| Non-controlling interest (Note 8, 9, 10) | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
BIOLARGO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except for share and per share data)
(unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2024 |
2023 |
2024 |
2023 |
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| Revenue |
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| Product revenue |
$ | $ | $ | $ | ||||||||||||
| Service revenue |
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| Total revenue |
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| Cost of revenue |
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| Cost of goods sold |
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) | ( |
) | ( |
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| Cost of service |
( |
) | ( |
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| Total cost of revenue |
( |
) | ( |
) | ( |
) | ( |
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| Gross profit |
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| Selling, general and administrative expenses |
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| Research and development |
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| Total operating expenses |
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| Operating loss: |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other (expense) income: |
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| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Tax credit reversal |
( |
) | ( |
) | ||||||||||||
| PPP loan forgiveness |
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| Grant income |
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| Total other expense: |
( |
) | ( |
) | ||||||||||||
| Net loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net loss attributable to noncontrolling interest |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net loss attributable to common shareholders |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Net loss per share attributable to common shareholders: |
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| Loss per share attributable to shareholders – basic and diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted average number of common shares outstanding: |
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| Comprehensive loss: |
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| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Foreign currency translation |
( |
) | ( |
) | ( |
) | ||||||||||
| Comprehensive loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Comprehensive loss attributable to noncontrolling interest |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Comprehensive loss attributable to common stockholders |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
BIOLARGO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except for share data)
| Common stock | Additional paid-in | Accumulated | Accumulated other comprehensive | Non-controlling | Total stockholders’ | |||||||||||||||||||||||
| Shares | Amount | capital | deficit | loss | interest | equity | ||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Sale of stock for cash, net of offering costs of $ (unaudited) | ||||||||||||||||||||||||||||
| Issuance of stock for services (unaudited) | ||||||||||||||||||||||||||||
| Warrant exercise (unaudited) | ||||||||||||||||||||||||||||
| Stock option compensation expense (unaudited) | — | |||||||||||||||||||||||||||
| Stock option compensation expense Clyra (unaudited) | — | |||||||||||||||||||||||||||
| Stock for service Clyra (unaudited) | — | |||||||||||||||||||||||||||
| Clyra unit offering (unaudited) | — | |||||||||||||||||||||||||||
| Clyra dividend Series A Preferred stock (unaudited) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| BioLargo Energy Technology Inc. (BETI) sales of stock (unaudited) | — | |||||||||||||||||||||||||||
| Noncontrolling interest allocation (unaudited) | — | ( | ) | |||||||||||||||||||||||||
| Net loss (unaudited) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Foreign currency translation (unaudited) | — | |||||||||||||||||||||||||||
| Balance, March 31, 2024 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Stock for cash, net offering costs of $ (unaudited) | ||||||||||||||||||||||||||||
| Issuance of stock for services (unaudited) | ||||||||||||||||||||||||||||
| Issuance of common stock in exchange for BETI shares (unaudited) | ||||||||||||||||||||||||||||
| Warrant exercise (unaudited) | ||||||||||||||||||||||||||||
| Stock option exercise (unaudited) | ||||||||||||||||||||||||||||
| Stock option compensation expense (unaudited) | — | |||||||||||||||||||||||||||
| Stock option compensation expense Clyra (unaudited) | — | |||||||||||||||||||||||||||
| Stock for service Clyra (unaudited) | — | |||||||||||||||||||||||||||
| Clyra unit offering (unaudited) | — | |||||||||||||||||||||||||||
| Clyra dividend Series A Preferred stock (unaudited) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Noncontrolling interest allocation (unaudited) | — | ( | ) | |||||||||||||||||||||||||
| Net loss (unaudited) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Foreign translation adjustment (unaudited) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, June 30, 2024 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
BIOLARGO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except for share data)
| Common stock | Additional paid-in | Accumulated | Accumulated other comprehensive | Non-controlling | Total stockholders’ | |||||||||||||||||||||||
| Shares | Amount | capital | deficit | loss | interest | equity | ||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Sale of stock for cash (unaudited) | ||||||||||||||||||||||||||||
| Issuance of stock for services (unaudited) | ||||||||||||||||||||||||||||
| Issuance of stock in exchange for Clyra shares (unaudited) | — | — | — | |||||||||||||||||||||||||
| Stock option compensation expense (unaudited) | — | |||||||||||||||||||||||||||
| Stock option expense Clyra (unaudited) | — | |||||||||||||||||||||||||||
| Warrant issued for interest (unaudited) | — | |||||||||||||||||||||||||||
| Clyra sales of Series A Preferred stock (unaudited) | — | |||||||||||||||||||||||||||
| Clyra dividend Series A Preferred stock (unaudited) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| BETI sales of stock (unaudited) | — | |||||||||||||||||||||||||||
| Noncontrolling interest allocation (unaudited) | — | ( | ) | |||||||||||||||||||||||||
| Net loss (unaudited) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Foreign currency translation (unaudited) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, March 31, 2023 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Sale of stock for cash (unaudited) | ||||||||||||||||||||||||||||
| Issuance of stock for services (unaudited) | ||||||||||||||||||||||||||||
| Stock option compensation expense (unaudited) | — | |||||||||||||||||||||||||||
| Stock option compensation expense Clyra (unaudited) | ||||||||||||||||||||||||||||
| Clyra sales of Series A Preferred stock (unaudited) | — | |||||||||||||||||||||||||||
| Clyra dividend Series A Preferred stock (unaudited) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| BETI sales of stock (unaudited) | — | |||||||||||||||||||||||||||
| Noncontrolling interest allocation (unaudited) | — | ( | ) | |||||||||||||||||||||||||
| Net loss (unaudited) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Foreign currency translation (unaudited) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, June 30, 2023 (unaudited) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
BIOLARGO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except for share and per share data)
(unaudited)
| Six Months Ended June 30, |
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| 2024 |
2023 |
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| Cash flows from operating activities |
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| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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| Stock option compensation expense |
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| Common stock issued for services |
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| Bad debt expense |
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| Excess and obsolete inventory |
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| PPP loan forgiveness |
( |
) | ||||||
| Amortization of right-of-use operating lease assets |
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| Lease liabilities, net |
( |
) | ( |
) | ||||
| Interest expense related to amortization of the discount on note payable |
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| Fair value of warrant issued for interest |
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| Loss on investment in South Korean joint venture |
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| Depreciation expense |
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| Changes in assets and liabilities: |
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| Accounts receivable |
( |
) | ||||||
| Inventories |
( |
) | ( |
) | ||||
| Prepaid expenses and other assets |
( |
) | ||||||
| Accounts payable and accrued expenses |
( |
) | ||||||
| Deposits |
( |
) | ( |
) | ||||
| Clyra accounts payable and accrued expenses |
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| Contract liabilities |
( |
) | ( |
) | ||||
| Net cash provided by (used in) operating activities |
( |
) | ||||||
| Cash flows from investing activities |
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| Equipment purchases |
( |
) | ( |
) | ||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Cash flows from financing activities |
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| Proceeds from sale of BioLargo common stock |
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| Proceeds from warrant exercise |
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| Proceeds from option exercise |
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| Proceeds from sale of BETI common stock |
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| Repayment of debt obligations |
( |
) | ( |
) | ||||
| Repayment by Clyra debt obligations |
( |
) | ||||||
| Proceeds from sales of Clyra Preferred Series A |
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| Proceeds from sales of Clyra common stock |
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| Net cash provided by financing activities |
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| Net effect of foreign currency translation |
( |
) | ||||||
| Net change in cash |
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| Cash and cash equivalents at beginning of period |
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| Cash and cash equivalents at end of period |
$ | $ | ||||||
| Supplemental disclosures of cash flow information |
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| Cash paid during the period for: |
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| Interest |
$ | $ | ||||||
| Income taxes |
$ | $ | ||||||
| Short-term lease payments not included in lease liabilities |
$ | $ | ||||||
| Non-cash investing and financing activities |
||||||||
| Conversion of Clyra common stock to BioLargo common stock |
$ | $ | ||||||
| Conversion of BETI common stock to BioLargo common stock |
$ | $ | ||||||
| Allocation of noncontrolling interest |
$ | ( |
) | $ | ||||
| Leasehold improvements included in accounts payable |
$ | $ | ||||||
| Clyra dividend Preferred Series A |
$ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Note 1. Business and Organization
Description of Business
BioLargo, Inc. (“BioLargo”, or the “Company”) invents, develops, and commercializes innovative platform technologies to solve challenging environmental problems like PFAS contamination (per- and polyfluoroalkyl substances), advanced water and wastewater treatment, industrial odor control, air quality control, infection control, and myriad environmental remediation challenges. 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.
Organization
We are a Delaware corporation formed in 1991, and have 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 Equipment Solutions & Technologies, Inc., organized under the laws of the State of California in 2022; BioLargo Canada, 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 are the controlling stockholder in subsidiaries: we own
Liquidity / Going Concern
For the three and six months ended June 30, 2024, we generated revenues of $
While we were able to generate net cash from operating activities during the six months ended June 30, 2024, we do not have a long history of doing so and are highly reliant upon one customer for the generation of a majority of our revenues. We also continue to use cash to invest in capital equipment, research and development, and our new technologies. For these reasons, we and our partially owned subsidiaries continue to sell securities to ensure available working capital. During the six months ended June 30, 2024, we received $
The foregoing factors raise substantial doubt about our ability to continue as a going concern, unless we are able to (i) continue to increase revenues, generate cash from operations, or generate cash from financing activities, (ii) convert assets such as our $
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and partially owned subsidiaries BETI, BLEST and Clyra Medical. All intercompany accounts and transactions have been eliminated.
The accounting and financial reporting policies of the Company conform, in all material respects, to accounting principles generally accepted in the United States of America (“GAAP”) and to general practices within the industry. The condensed consolidated financial statements in the Quarterly Report on Form 10-Q have not been audited by an independent registered public accounting firm, but in the opinion of management, reflect all necessary adjustments for a fair presentation of the Company’s condensed consolidated financial position and condensed consolidated results of operations. All adjustments were of a normal and recurring nature. The condensed consolidated financial statements have been prepared in accordance with GAAP and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission (the “SEC”). Accordingly, the condensed consolidated financial statements do not include all information and footnotes required by GAAP for complete financial presentation and should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, 2023, included in our Annual Report on Form 10-K filed with the SEC on April 1, 2024. The results of operations for the six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full year or any future period.
Foreign Currency
The Company has designated the functional currency of BioLargo Canada, 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 loss.
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 June 30, 2024, and December 31, 2023, our cash balances were made up of the following (in thousands):
| June 30, 2024 | December 31, 2023 | |||||||
| BioLargo, Inc. and subsidiaries | $ | $ | ||||||
| Clyra Medical Technologies, Inc. | ||||||||
| Total | $ | $ | ||||||
Accounts Receivable
Accounts receivable are customer obligations that are unconditional. Accounts receivable are presented net of an allowance for doubtful accounts for expected credit losses, which represents an estimate of amounts that may not be collectible. The Company performs ongoing credit evaluations of its customers and, if necessary, provides an allowance for doubtful accounts and expected credit losses. A credit loss expense to the allowances for doubtful accounts for expected credit losses is recorded based on factors including the length of time the receivables are past due, the current business environment, and the Company’s historical experience. Provisions to the allowances for doubtful accounts for expected credit losses are recorded to general and administrative expenses. The Company writes off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues collection of the receivable. The Company does not have any off-balance-sheet credit exposure related to customers. As of June 30, 2024, and December 31, 2023, the allowance for doubtful accounts for expected credit losses was
Credit Concentration
We have a limited number of customers that account for significant portions of our revenue. During the three and six months ended June 30, 2024 and 2023, the following customers accounted for more than 10% of consolidated revenues:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Customer A | % | % | % | % | ||||||||||||
| Customer B | % | % | % | % | ||||||||||||
At June 30, 2024 and December 31, 2023, customer accounted for more than
| June 30, 2024 | December 31, 2023 | |||||||
| Customer A | % | % | ||||||
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 June 30, 2024, and December 31, 2023, was
| June 30, 2024 | December 31, 2023 | |||||||
| Raw material | $ | $ | ||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
Other Non-Current Assets
Other non-current assets consisted of (i) security deposits related to our business offices, (ii) patents acquired on October 22, 2021, for $
| June 30, 2024 | December 31, 2023 | |||||||
| Patents | $ | $ | ||||||
| Security deposits | ||||||||
| Total | $ | $ | ||||||
Equity Method of Accounting
On March 20, 2020, we invested $
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 recognized the investment on our condensed consolidated balance sheets and record an increase or decrease of the recorded balance by our percentage ownership of the profits or losses in the joint venture. The joint venture has incurred a loss since inception and our
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 operations. There were no impairment losses related to intangible assets during the six months ended June 30, 2024 or 2023.
Loss Per Share
We report basic and diluted loss per share (“LPS”) for common and common share equivalents. Basic LPS is computed by dividing reported losses by the weighted average shares outstanding. Diluted LPS 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 six months ended June 30, 2024 and 2023, the denominator in the diluted LPS computation is the same as the denominator for basic LPS due to the Company’s net loss which creates an anti-dilutive effect of the warrants and stock options. As of June 30, 2024, the total stock options and warrants vested and available to be exercised totals
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP 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 condensed consolidated 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 doubtful accounts, asset depreciation and amortization, impairment expense, 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 condensed consolidated 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 six months ended June 30, 2024 and 2023:
| 2024 | 2023 | |||||||||||||||
| Non Plan | 2018 Plan | Non Plan | 2018 Plan | |||||||||||||
| Risk free interest rate | % | % | % | % | ||||||||||||
| Expected volatility | % | % | % | % | ||||||||||||
| Expected dividend yield | ||||||||||||||||
| Forfeiture rate | ||||||||||||||||
| Life in years | ||||||||||||||||
Expected price volatility is the measure by which our stock price is expected to fluctuate during the expected term of an option. The 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.
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. The warrant relative fair values are also recorded as a discount to the convertible promissory notes.
Non-Cash Transactions
We determine the value assigned to each intangible we acquire, and/or services or products received for non-cash consideration of our common stock 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 Contracts 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.
The Company’s products are sold through a contract with the customer and 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 goods are shipped if the agreement is FOB manufacturer, and when goods are delivered if FOB destination. Revenue is recognized with a reduction for sales discounts, as appropriate and negotiated in the customer’s purchase order.
Service contracts are performed through a written contract, which specifies the performance obligations and the rate at which the services will be billed, typically by time and materials. Each service is separately negotiated and priced. Revenue is recognized as services are performed and completed, or, for services related to product installations, at the completion of the installation. A few contracts have called for milestone or fixed cost payments, where we invoice 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.
The Company has outstanding contract liability obligations of $
As we generate revenues from royalties or license fees from our intellectual property, a licensee will pay a license fee in one or more installments and ongoing royalties based on their sales of products incorporating or using our licensed intellectual property. We have entered into a licensing agreement for the CupriDyne Clean product, and we recognize royalty and license fees on a quarterly basis as the product is sold through to third parties and reported to us.
Government Grants
We have been awarded multiple research grants from the private and public Canadian research programs. The income we receive directly from grants is recorded as other income. We have been awarded over 80 grants since our first in 2015. 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 and 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 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
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 June 30, 2024 and December 31, 2023. Accordingly, a 100% 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 as of June 30, 2024 and December 31, 2023 approximate their respective fair values because of the short-term nature of these instruments. Such instruments consist of cash, accounts receivable, accounts payable, and line of credit. The carrying amount of debt instruments are believed to approximate fair value as the stated interest rates are reflective of the prevailing market rates.
Leases
At inception of a lease contract, we assess whether the contract is, or contains, a lease. Our assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period of the contract, and (3) whether we have the right to direct the use of the asset during such time period. At inception of a lease, we allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. Leases are classified as either finance leases or operating leases. A lease must be classified as a finance lease if any of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any of these criteria. We have no leases classified as finance leases. For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, management estimates the incremental borrowing rate, which currently is estimated to be
Equipment and Leasehold Improvements
Equipment and leasehold improvements and are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from
Noncontrolling Interest
A noncontrolling interest is defined as the portion of the equity in an entity not attributable, directly or indirectly, to the primary beneficiary. Noncontrolling interests are required to be presented as a separate component of equity on a consolidated balance sheets. Accordingly, the presentation of net loss is modified to present the loss attributed to controlling and non-controlling interests. The noncontrolling interest on the Company’s consolidated balance sheets represents equity not held by the Company. In accordance with ASC 810-10-20, “Noncontrolling Interests” BioLargo consolidates three non-wholly owned subsidiaries - Clyra, BLEST and BETI. Noncontrolling interest of Clyra represents
Note 3. Sale of Stock for Cash
Lincoln Park Financing
On December 13, 2022, we entered into a stock purchase agreement (the “LPC Purchase Agreement”) with Lincoln Park, pursuant to which Lincoln Park agreed to purchase from us at our request up to an aggregate of $
During the three months ended June 30, 2024, we did sell any shares to Lincoln Park. During the six months ended June 30, 2024, we sold
During the three and six months ended June 30, 2023, we sold
Unit Offerings
During the three months ended June 30, 2024, we sold
During the three and six months ended June 30, 2023, we sold
In addition to the shares, we issued each investor a -month and a -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 June 30, 2024 and December 31, 2023 (in thousands). The table does not include debt obligations of our partially owned subsidiary Clyra Medical (see Note 8, “Debt Obligations of Clyra Medical”).
| June 30, 2024 | December 31, 2023 | |||||||
| Current portion of debt: | ||||||||
| SBA Paycheck Protection Program loan | $ | $ | ||||||
| Vehicle loan, current portion | ||||||||
| SBA EIDL Loan, matures July 2053, current portion | ||||||||
| Total current portion of debt | $ | $ | ||||||
| Long-term debt: | ||||||||
| SBA Paycheck Protection Program loans, matures May 2025 | $ | $ | ||||||
| Vehicle loan, matures March 2029 | ||||||||
| SBA EIDL Loan, matures July 2053 | ||||||||
| Total long-term debt, net of current | $ | $ | ||||||
| Total | $ | $ | ||||||
For the three and six months ended June 30, 2024, we recorded $
For the three and six months ended June 30, 2023, we recorded $
Vehicle loan
On February 7, 2023, we entered a loan agreement with Bank of America for the purchase of a commercial vehicle used in operations totaling $
SBA Program Loans
On June 28, 2024, we received notice that the SBA had forgiven all of the $
On February 7, 2022, we received notice that the SBA had forgiven $
In July 2020, ONM Environmental received an Economic Injury Disaster Loan (EIDL) from the SBA in the amount of $
Note 5. Share-Based Compensation
Issuance of Common Stock in exchange for Services
Payment of Officer Salaries
shares were issued to officers as payment of salary during the three or six months ended June 30, 2024.
On June 30, 2023, an officer agreed to convert an aggregate $
Payment of Consultant and Vendor Fees
On June 30, 2024, we issued
On June 30, 2023, we issued
All of these offerings and sales were made in reliance on the exemption from registration contained in Section 4(2) of the Securities Exchange Act and/or Regulation D promulgated thereunder as not involving a public offering of securities.
Stock Option Expense
During the three and six months ended June 30, 2024, we recorded an aggregate $
2024 Equity Incentive Plan
On June 13, 2024, our stockholders adopted the BioLargo 2024 Equity Incentive Plan (“2024 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
Activity for our stock options under the 2024 Plan during the six months ended June 30, 2024, is as follows:
| Options outstanding | Weighted average price per share | Weighted average remaining life | Aggregate intrinsic Value(1) | |||||||||||||
| Balance, December 31, 2023 | $ | |||||||||||||||
| Granted | $ | |||||||||||||||
| Balance, June 30, 2024 | $ | $ | ||||||||||||||
| Unvested | ( | ) | $ | |||||||||||||
| Vested, June 30, 2024 | $ | $ | ||||||||||||||
(1) – Aggregate intrinsic value based on closing common stock price of $
The options granted to purchase
As of June 30, 2024, there remains $
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
Activity for our stock options under the 2018 Plan during the six months ended June 30, 2024, and 2023, is as follows:
| Options outstanding | Weighted average price per share | Weighted average remaining life | Aggregate intrinsic Value(1) | |||||||||||||
| Balance, December 31, 2023 | $ | |||||||||||||||
| Granted | $ | |||||||||||||||
| Exercised | ( | ) | $ | |||||||||||||
| Balance, June 30, 2024 | $ | $ | ||||||||||||||
| Unvested | ( | ) | $ | |||||||||||||
| Vested, June 30, 2024 | $ | $ | ||||||||||||||
| Balance, December 31, 2022 | $ | |||||||||||||||
| Granted | $ | |||||||||||||||
| Balance, June 30, 2023 | $ | $ | ||||||||||||||
(1) – Aggregate intrinsic value based on closing common stock price of $
The options granted to purchase
As of June 30, 2024, there remains $
The options granted to purchase
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
Activity for our stock options under the 2007 Plan for the six months ended June 30, 2024 and 2023 is as follows:
2007 Equity Incentive Plan
| Options Outstanding | Weighted average price per share | Weighted average remaining life | Aggregate intrinsic Value(1) | |||||||||||||
| Balance, December 31, 2023 | $ | |||||||||||||||
| Expired | ( | ) | $ | |||||||||||||
| Balance, June 30, 2024 | $ | $ | — | |||||||||||||
| Balance, December 31, 2022 | $ | |||||||||||||||
| Expired | ( | ) | $ | |||||||||||||
| Balance, June 30, 2023 | $ | $ | — | |||||||||||||
(1) – Aggregate intrinsic value based on closing common stock price of $
Non-Plan Options
Activity of our non-plan stock options issued for the six months ended June 30, 2024 and 2023 is as follows:
| Non-plan Options outstanding | Weighted average price per share | Weighted average remaining life | Aggregate intrinsic Value(1) | |||||||||||||
| Balance, December 31, 2023 | | $ |
| |||||||||||||
| Granted | | $ |
| |||||||||||||
| Expired | ( | ) | $ | |||||||||||||
| Exercised | ( | ) | $ | |||||||||||||
| Balance, June 30, 2024 | $ | $ | ||||||||||||||
| Unvested | ( | ) | $ | |||||||||||||
| Vested, June 30, 2024 | $ | $ | ||||||||||||||
| Balance, December 31, 2022 | $ | |||||||||||||||
| Granted | | $ |
| |||||||||||||
| Balance, June 30, 2023 | $ | $ | ||||||||||||||
(1) – Aggregate intrinsic value based on closing common stock price of $
During the six months ended June 30, 2024, we issued options to purchase an aggregate
During the three months ended June 30, 2024, investors exercised stock options and we received $
During the six months ended June 30, 2023, we issued options to purchase an aggregate
Note 6. Warrants
We have certain warrants outstanding to purchase our common stock, at various prices, as described in the following table:
| Warrants outstanding | Weighted average price per share | Weighted average remaining life | Aggregate intrinsic value(1) | |||||||||||||
| Balance, December 31, 2023 | | $ |
| |||||||||||||
| Granted | | $ |
| |||||||||||||
| Exercised | ( | ) | $ | |||||||||||||
| Expired |
| $ |
| |||||||||||||
| Balance, June 30, 2024 | $ | $ | ||||||||||||||
| Balance, December 31, 2022 | $ | |||||||||||||||
| Granted | $ | |||||||||||||||
| Expired | ( | ) | $ | |||||||||||||
| Balance, June 30, 2023 | $ | $ | ||||||||||||||
(1) – Aggregate intrinsic value based on closing common stock price of $
During the six months ended June 30, 2024, investors exercised warrants to purchase
Warrants issued in Unit Offerings
During the three months ended June 30, 2024, we issued -month stock purchase warrants to purchase an aggregate
During the six months ended June 30, 2023, pursuant to our Unit Offerings (see Note 3), we issued -month stock purchase warrants to purchase an aggregate
Warrant issued in conjunction with amendment to note payable
On March 6, 2023, we entered into an agreement with the holder of a $
Warrant Fair Value
We use the Black-Scholes option pricing model to determine the relative fair value of warrants issued in conjunction with debt instruments, common stock, and for services. With respect to debt instruments, relative fair value is amortized over the life of the warrant. The principal assumptions we used in applying the Black-Scholes model were as follows:
| 2024 | 2023 | |||||||
| Risk free interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected dividend yield | — | — | ||||||
| Forfeiture rate | — | — | ||||||
| Expected life in years | .5 – 5 | .5 – 5 | ||||||
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
As of June 30, 2024, accounts payable and accrued expenses included the following (in thousands):
| Category | BioLargo | ONM | BLEST | Canada | BETI | BEST | Intercompany amounts | Totals | ||||||||||||||||||||||||
| Accounts payable | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Accrued payroll | ||||||||||||||||||||||||||||||||
| Total | $ | |||||||||||||||||||||||||||||||
As of December 31, 2023, accounts payable and accrued expenses included the following (in thousands):
| Category | BioLargo | ONM | BLEST | Canada | BETI | BEST | Intercompany amounts | Totals | ||||||||||||||||||||||||
| Accounts payable | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||
| Accrued payroll | ||||||||||||||||||||||||||||||||
| Accrued interest | ||||||||||||||||||||||||||||||||
| Total | $ | |||||||||||||||||||||||||||||||
See Note 8, “Accounts Payable and Accrued Expenses”, for the accounts payable and accrued expenses of Clyra Medical.
Amounts owed by ONM Environmental are comprised primarily of amounts owed to suppliers for goods and were not yet required to be paid as of the period end date.
Note 8. Noncontrolling Interest – Clyra Medical
As discussed in Note 2 above, we consolidate the operations of our partially owned subsidiary Clyra Medical.
Debt Obligations of Clyra Medical
Promissory Note
On April 8, 2022, Clyra Medical issued a promissory note in the principal amount of $
Line of Credit
On June 30, 2020, Clyra Medical entered into a Revolving Line of Credit Agreement whereby Vernal Bay Capital Group, LLC ("Vernal") committed to provide a $
On December 13, 2022, Clyra and Vernal amended the Revolving Line of Credit Agreement extending the maturity date of the line of credit to September 30, 2024, and modifying the payment terms such that amounts of principal due in each month are capped at a maximum of
As of June 30, 2024, the balance outstanding on this line of credit totals $
Equity Transactions
On December 15, 2023, Clyra filed a Certificate of Conversion with the Delaware Secretary of State, formally changing its corporate domicile from California to Delaware. In association with the change, for each one share of common stock of the California corporation,
During the six months ended June 30, 2024, Clyra issued
As of June 30, 2024, Clyra had
BioLargo Conversion of Intercompany Balances
In June 2024, BioLargo converted $
Sales of Common Stock
During the six months ended June 30, 2024, Clyra sold
During the three months ended June 30, 2024, Clyra issued
During the six months ended June 30, 2023, Clyra did sell shares of its common stock.
Sales of Series A Preferred Stock
The Series A Preferred Stock offering closed in October 2023. In total, Clyra sold
Clyra Stock Options
| Clyra Options Outstanding | Weighted average price per share | Weighted average remaining life | ||||||||||
| Balance, December 31, 2023 | $ | |||||||||||
| Granted | $ | |||||||||||
| Balance, June 30, 2024 | $ | |||||||||||
| Unvested | ( | ) | $ | |||||||||
| Balance, June 30, 2024 | $ | |||||||||||
| Balance, December 31, 2022 | $ | |||||||||||
| Granted | ||||||||||||
| Balance, June 30, 2023 | $ | |||||||||||
Clyra issues options to its employees and consultants in lieu of compensation owed on a regular basis. The fair value of the options issued totaled $
| June 30, 2024 | December 31, 2023 | |||||||
| Risk free interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected dividend yield | — | — | ||||||
| Forfeiture rate | — | — | ||||||
| Expected life in years | ||||||||
Clyra Warrants
| Clyra Options Outstanding | Weighted average price per share | Weighted average remaining life | ||||||||||
| Balance, December 31, 2023 | $ | |||||||||||
| Granted | $ | |||||||||||
| Balance, June 30, 2024 | $ | |||||||||||
| Balance, December 31, 2022 | $ | |||||||||||
| Granted | ||||||||||||
| Balance, June 30, 2023 | $ | $ | ||||||||||
As part of the Clyra unit offering, it issued -year warrants to purchase
Accounts Payable and Accrued Expenses
At June 30, 2024, and December 31, 2023, Clyra had the following accounts payable and accrued expenses (in thousands):
| Category | 2024 | 2023 | ||||||
| Accounts payable | $ | $ | ||||||
| Accrued dividend | $ | |||||||
| Accrued payroll | ||||||||
| Accrued interest | ||||||||
| Total | $ | $ | ||||||
Note 9. BioLargo Engineering, Science and Technologies, LLC
In September 2017, we commenced a full-service environmental engineering firm and formed a Tennessee entity named BioLargo Engineering, Science & Technologies, LLC (“BLEST”). In conjunction with the start of this subsidiary, we entered into a three-year office lease in the Knoxville, Tennessee area, and entered into employment agreements with six scientists and engineers. BLEST was capitalized with two classes of membership units: Class A,
Note 10. BioLargo Energy Technologies, Inc.
BioLargo Energy Technologies, Inc. (“BETI”) was formed for the purpose of commercializing a proprietary sodium battery technology. BioLargo purchased
During the six months ended June 30, 2024, BETI sold
During the six months ended June 30, 2023, BETI sold
As of June 30, 2024, BETI had
Note 11. Business Segment Information
BioLargo has operating business segments, plus its corporate entity which is responsible for general corporate operations, including administrative functions, finance, human resources, marketing, legal, etc. The operational business segments are:
| 1. | ONM Environmental -- which sells odor and volatile organic control products and services, located in Westminster, California; |
| 2. | Clyra Medical Technologies (“Clyra Medical”) -- which develops and sells medical products based on our technologies, located in Tampa, Florida; |
| 3. | BioLargo Engineering (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; |
| 4. | BioLargo Canada, Inc. (“Canada”) – the main hub of our scientists researching and developing our technologies, operating out of the University of Alberta, Edmonton, Canada; and |
| 5. | BioLargo Energy Technologies, Inc. (“BETI”) – which is developing our proprietary battery technology. |
| 6. | BioLargo Equipment Solutions & Technologies, Inc. (“BEST”) – which manages the sales and distribution of our water treatment products and related services. |
Other than ONM Environmental, none of our operating business units have operated at a profit, 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. BETI and Clyra Medical have also been funded by third party investors who invest directly in exchange for equity ownership in that entity.
The segment information for the three and six months ended June 30, 2024, and 2023, is as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | ||||||||||||||||
| ONM Environmental | $ | $ | $ | $ | ||||||||||||
| BLEST | ||||||||||||||||
| BioLargo Canada | ||||||||||||||||
| Clyra Medical | ||||||||||||||||
| Intersegment revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Stock option expense | ||||||||||||||||
| BioLargo corporate | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Clyra Medical | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Depreciation expense | ||||||||||||||||
| BioLargo corporate | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| ONM Environmental | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| BLEST | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Clyra Medical | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Research and development expense | ||||||||||||||||
| BioLargo corporate | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| ONM Environmental | ||||||||||||||||
| BLEST | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| BETI | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| BioLargo Canada | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Clyra Medical | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Intersegment R&D | ||||||||||||||||
| Total | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Operating income (loss) | ||||||||||||||||
| BioLargo corporate | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| ONM Environmental | ||||||||||||||||
| BLEST | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| BETI | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| BEST | ( | ) | ( | ) | ||||||||||||
| BioLargo Canada | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Clyra Medical | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Interest income (expense) | ||||||||||||||||
| BioLargo corporate | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| ONM Environmental | ( | ) | ( | ) | ||||||||||||
| Clyra Medical | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| As of June 30, 2024 | BioLargo | ONM | BLEST | CLYRA | BETI | BEST | Canada | Elimination | Total | |||||||||||||||||||||||||||
| Tangible assets | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Right of use operating lease | ||||||||||||||||||||||||||||||||||||
| Investment in South Korean joint venture | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| As of December 31, 2023 | BioLargo | ONM | BLEST | CLYRA | BETI | BEST | Canada | Elimination | Total | |||||||||||||||||||||||||||
| Tangible assets | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Right of use operating lease | ||||||||||||||||||||||||||||||||||||
| Investment in South Korean joint venture | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
Note 12. Leases
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. Short-term leases less than one-year are not included in our analysis. For the three and six months ended June 30, 2024, rental expense totaled and for the three and six months ended June 30, 2023, rental expense totaled $
| BioLargo | ||||||||||||
| Year ending | Corp / ONM | BLEST | Total | |||||||||
| December 31, 2024 | ||||||||||||
| December 31, 2025 | ||||||||||||
| December 31, 2026 | ||||||||||||
| December 31, 2027 | ||||||||||||
| December 31, 2028 | ||||||||||||
| Thereafter | ||||||||||||
| Total minimum lease payments | $ | $ | $ | |||||||||
Stock Issuances
From July 1, 2024, through August 13, 2024, we issued
From July 1, 2024, through August 13, 2024, we issued
From July 1, 2024, through August 13, 2024, we issued
Extension of Agreement with Chief Financial Officer
On August 13, 2024, we and our Chief Financial Officer Charles K. Dargan, II agreed to extend the term of his 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 our Chief Financial Officer. The Engagement Extension Agreement dated as August 13, 2024 (the “Engagement Extension Agreement”) expires January 31, 2025 (the “Extended Term”), at which time the agreement will automatically renew for subsequent -year periods.
As the sole compensation for the Extended Term, Mr. Dargan was issued an option (“Option”) to purchase
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This quarterly report on Form 10-Q contains forward-looking statements. These forward-looking statements involve risks and uncertainties, including statements regarding BioLargo’s capital needs, business plans and expectations. Such forward-looking statements involve risks and uncertainties regarding BioLargo’s ability to carry out its planned development and production of products. Forward-looking statements are made, without limitation, in relation to BioLargo’s operating plans, BioLargo’s liquidity and financial condition, availability of funds, operating and exploration costs and the market in which BioLargo competes. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks outlined in our Form most recent annual report on Form 10-K, and, from time to time, in other reports BioLargo files with the SEC. These factors may cause BioLargo’s actual results to differ materially from any forward-looking statement. BioLargo disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. The information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Unless otherwise expressly stated herein, all statements, including forward-looking statements, set forth in this Form 10-Q are as of June 30, 2024, unless expressly stated otherwise, and we undertake no duty to update this information.
When we refer in this report to “BioLargo,” the “Company,” “our Company,” “we,” “us” and “our,” we mean BioLargo, Inc., and our subsidiaries, including BioLargo Life Technologies, Inc., which holds our intellectual property; ONM Environmental, Inc., which manufactures, markets, sells and distributes our odor and volatile organic compound ("VOC") control products; BioLargo Energy Technologies, Inc. (“BETI”), formed to commercialize our proprietary battery technology; BioLargo Canada, Inc., our primary research and development team operating in Edmonton, Alberta Canada; BioLargo Engineering, Science & Technologies, LLC (“BLEST”), a professional engineering services division in Oak Ridge Tennessee; BioLargo Equipment Solutions & Technologies, Inc., which sells our water treatment products; BioLargo Development Corp., which employs and provides benefits to our employees; and Clyra Medical Technologies, Inc. (“Clyra Medical”), which commercializes our technologies in the medical and dental fields. All subsidiaries are wholly owned, except for BETI, BLEST and Clyra Medical.
The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this report.
DESCRIPTION OF BUSINESS
Our Business - Innovator and Solution Provider
BioLargo is in the business of creating new cleantech technologies to solve tough, globally relevant problems. We invent, develop, then commercialize disruptive technologies to tackle challenges in air quality, water, environmental engineering, battery energy storage, and advanced antimicrobial medical device platforms. Our model is to invent new technologies that solve specific problems, develop them and prove they work, and then commercialize them with purpose-suited subsidiaries, identify and secure the right partnerships to increase their commercial reach, or potentially sell the intellectual property.
Why do we do this work? Every member of our team – including PhD scientists, engineers, and entrepreneurs – has a passion for seeking new, never-before-seen innovations that can make life better around the world. We care about safeguarding the environment and human health for future generations. We care about making technologies that are affordable and flexible enough to be accessed around the world. And we care about being the best at what we do – creating best-in-class technologies to solve big, tough cleantech challenges.
Some of our areas of focus include environmental problems like PFAS contamination, water pollution by pharmaceuticals and micropollutants, air pollution by VOCs, hard-to-treat odors from landfills and sewage plants, infection and wound healing and the creation of energy storage systems that are more affordable, efficient, safer and environmentally friendly.
Below you’ll read about the cleantech ventures and projects we are focused on commercialization today. Behind those, however, is a pipeline of other cleantech innovations in various stages of development associated with our expansive array of issued and pending patents, and that have been funded in part by over 90 government grants.
We operate our business in distinct business segments:
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Odor and VOC control products, including consumer products, such as the Pooph-branded pet-odor control product, and our industrial odor control product, CupriDyne Clean Industrial Odor Eliminator, sold by our subsidiary ONM Environmental, Inc.; |
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Water treatment equipment and solutions, including our PFAS removal system the Aqueous Electrostatic Concentrator (AEC), our water reuse and recycling technology co-developed with Garratt-Callahan called AROS, and our micro-pollutant treatment and energy-efficient disinfection solution, the AOS, all sold by our subsidiary BioLargo Equipment Solutions & Technologies, Inc.; |
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Battery energy storage system solutions under the brand name CellinityTM being developed by our partially owned (96%) subsidiary BioLargo Energy Technologies, Inc.; |
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Medical products based on our technologies, including the FDA-cleared Bioclynse surgical wound irrigation solution sold by our partially owned (53%) subsidiary Clyra Medical Technologies, Inc.; |
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Our professional engineering services division, which, in addition to serving outside clients on a fee for service basis, supports our internal business units, through our partially owned (77.5%) subsidiary BioLargo Engineering, Science & Technologies, LLC ("BLEST"); |
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Our research and support personnel, through our wholly-owned subsidiary BioLargo Canada, Inc., located on campus at the University of Alberta, Edmonton, Canada. |
Odor Control (Consumer and Industrial)
ONM Environmental, Inc. ("ONM") is BioLargo’s wholly-owned subsidiary that delivers robust and comprehensive products and services to control and mitigate odor and VOCs for both consumer and industrial applications.
Pooph - Consumer Private-Label Products
ONM sells privately labeled odor-control products based on our technologies to third parties who market and sell the products under their own brand names. The most successful of these products is the "Pooph" branded pet odor control product sold by Pooph Inc. both directly to consumers and to national and regional retailers including Walmart, Amazon, Home Depot, Ace Hardware, Chewy.com, Target, Ralphs, and others. Pooph is advertised on television nationally, and is expanding its product lines to other products based on our odor technologies. In addition to purchasing product from us at an agreed-upon manufacturing margin, Pooph Inc. pays us six percent royalty on their sales in exchange for exclusive rights to our technology for pet odors. During the three and six months ended June 30, 2024, revenues from sales to Pooph comprised 70% and 78% of our company-wide revenue
The success of Pooph is an example of our strategy of developing distribution channels that do not rely on our in-house sales and distribution infrastructure, and do not require our investment in marketing dollars. We continue to explore potential partnerships and products along these lines with other parties, and to support existing private label products.
Industrial Odor and VOC Solutions
We believe ONM's industrial odor control product, CupriDyne Clean, is the number-one performing industrial odor-control product in the market, and that it offers substantial savings to our customers compared with competing products. We have been and expect to continue selling product to municipalities and some of the largest solid waste handling companies in the country, with a portion of chemistry product sales resulting from national purchasing agreements (NPAs). ONM Environmental continues to focus on securing more contracts with existing customers and developing business with new customers. ONM Environmental holds General Engineering, Electrical, Plumbing and Low Voltage contractor licenses issued by the California Contractors State License Board, and offers a menu of services to landfills, transfer stations, wastewater treatment facilities as well as facilities in non-waste related industries. These services include engineering design, construction, installation, ongoing maintenance and on-site support services to assist our clients in the implementation and continued use of the various systems that deliver our liquid products in the field (such as misting systems).
South Korean Joint Venture
In 2020, we partnered with a leading wastewater treatment solution provider based in South Korea in a joint venture to commercialize our CupriDyne Clean products in South Korea. We own 40% of the joint venture. Although the joint venture established manufacturing and is marketing the product, the pandemic significantly impacted the expected growth of the company. While the local management team continues to market the product to industrial clients, their efforts have struggled to gain a foothold. We are not obligated to contribute additional funds to the venture, and cannot predict its future success.
BioLargo Equipment Solutions & Technologies – Innovative Water Treatment Solutions
Over the years, we have developed multiple innovative technologies and equipment platforms that focus on challenging issues in the water treatment industry, including the AOS technology (developed to remove micro-pollutants), the AEC (developed to remove PFAS from water), and the AROS water reuse technology (co-developed with Garratt-Callahan), for applications to recycle cooling tower water (such as those used in data centers). As a result of increase in interest from potential customers for our PFAS solutions, we believe we will be better able to serve this market with a uniform identity and operating unit called BioLargo Equipment Solutions & Technologies, Inc. (“BEST”), which will manage the sales and distribution of our water treatment products and related services. As we transition this venture from incubation to commercialization, we are focusing staff and resources we believe necessary for success.
In February, 2024, three respected and experienced veterans of the water industry joined BEST’s board of directors to assist the company in its efforts to commercialize its innovative water treatment technologies. These are: 1) Jeffrey Kightlinger, former CEO of the Metropolitan Water District of Southern California, 2) Sally Gutierrez, retired career senior executive from the US Environmental Protection Agency, and 3) Larry Dick, former Vice Chairman of the Metropolitan Water District of Southern California and board member of the Municipal Water District of Orange County. Each brings their significant and distinctive experience from decades in the water industry to BEST’s board to help the company create the necessary regulatory and industry connections that will be critical for its efforts to secure larger and more high-profile projects for its PFAS treatment and other water treatment technologies.
The sales process in the municipal and industrial water and wastewater industry is a very technically intensive process, and can be long and arduous. The entirety of the sales cycle can be lengthy, in some cases even taking many months or in very large projects, multiple years to complete bench-scale in-house validation testing and piloting, field piloting, project scoping and bidding, and contracting, before a project starts. The process is also very engineering-intensive, and therefore the staff required to secure contracts for water treatment projects need to be engineers, in most cases. In our company, BLEST’s engineers fill this role.
Having secured its first contract to install an AEC system to remove PFAS from drinking water, BEST has been actively in scoping and bidding water treatment projects for over a year and as a result has developed a substantial pipeline of potential projects in which customers indicate a high level of interest. In addition, BEST regularly receives inquiries for new projects in development through the company’s network of manufacturer’s sales representatives. It is important to note that additional staffing is needed to meet what we believe is, and will continue to be a rapidly escalating level of customer interest in our solutions. Although BEST is primarily focused on AEC, AROS and AOS, discussed below, it offers comprehensive water treatment solutions, related equipment, and services, some of which may be manufactured by third parties and sold by BEST as an authorized distributor. The AEC, AROS and AOS are discussed in the following sections.
AEC, a solution for the PFAS “forever-chemicals” crisis
One of the most significant and timely innovations in our portfolio is our per- and polyfluoroalkyl substance (PFAS) removal and collection/disposal solution we call the Aqueous Electrostatic Concentrator (AEC), a novel water treatment system that removes PFAS from water at a lower operating cost while generating only a fraction of the PFAS-laden waste of the most common currently used solutions (carbon filtration, ion exchange, and reverse osmosis). According to the Center for Disease Control, PFAS are a group of chemicals used to make fluoropolymer coatings and products that resist heat, oil, stains, grease, and water. Fluoropolymer coatings can be in a variety of products. These include clothing, furniture, adhesives, food packaging, heat-resistant non-stick cooking surfaces, and the insulation of electrical wire. PFAS are a concern because they do not break down in the environment, can move through soils and contaminate drinking water sources, and build up (bioaccumulate) in fish and wildlife. PFAS chemicals have been linked to cancer, immune disorders, liver dysfunction, and many other human health problems, and are contained in a vast range of manufactured goods, common household products (e.g., cleaning products, cookware), and electronics, and contaminate drinking water in unsafe levels all over the globe. Detection of unsafe levels of PFAS around the world has given rise to a number of market opportunities for treatment and remediation technologies, including in drinking water, industrial wastewater, municipal wastewater, solid waste, organic foods and more.
On April 10, 2024, the EPA announced the final National Primary Drinking Water Regulation (NPDWR) setting maximum contaminant levels for six PFAS chemicals as low as four parts per trillion in drinking water – a standard our AEC has been shown to meet in pilot studies. We anticipate that these new regulations will increase demand in the United States for PFAS water treatment equipment and services.
On April 19, 2024, the EPA announced it had finalized new regulations that treat two PFAS chemicals – PFOS and PFOA – as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as the Superfund law. The new rules allow the EPA to hold polluters financial responsible for contaminated sites, and will also lead to these PFAS chemicals being listed as “hazardous materials” under the Hazardous Materials Transportation Act, which will require materials containing these chemicals to be transported using special protocols. Although final rules have not been issued, in February 2024 the EPA proposed changes to the Resource Conservation and Recovery Act regulations by adding nine PFAS chemical compounds to its list of hazardous constituents in Title 40 of the Code of Federal Regulations Part 261 Appendix VIII. Combined with the new CERCLA regulations, a final RCRA regulation of PFAS may increase the costs of the handling, transport, and disposal of PFAS-containing materials including water treatment waste.
We have successfully validated the AEC as an effective system to selectively extract and collect PFAS chemicals from contaminated water, including performance testing that shows “non-detect” levels of removal, which meets new EPA standards. We have demonstrated more than 10,000 hours of continuous operation showing no materially significant degradation of the AEC system’s components or performance over time. As a modular system, we believe the AEC is scalable to small portable commercial units as well as very large commercial operations, and we believe that our engineering team has the experience to deliver systems to meet the needs of any sized commercial installation. In order to provide a full turn-key solution for our customers, we have developed an expanded offering whereby we can bundle a service package with each customer project that includes a membrane exchange program, the collection of PFAS, and transport and destruction of the PFAS.
Our strategy to market our PFAS treatment technology and related engineering services is as follows: 1) focus on demonstrating our technology’s efficacy in first demonstration projects, trials, and early customer deployments with the understanding that this early success can be leveraged to secure larger and more numerous subsequent projects, 2) market our PFAS expertise and our technology by presenting at industry events and conferences around the country, cultivating our status as “thought leaders” in the space, 3) use our network of manufacturer’s representatives and channel selling partners to maximize the number of potential opportunities with early adopters, and 4) engage in discussions with credible distribution partners at established water treatment technology companies.
The AEC’s commercial roll-out is being executed with the help of a network of sales representative organizations whose role will be to market and sell the treatment system, related equipment, and the Company’s engineering services to municipal and industrial customers across the country. We have secured channel partner agreements with several sales representative organizations ensuring coverage for most of the continental United States. We have one PFAS project ongoing, in New Jersey, and expect our equipment to be installed and operational before the end of the year. We believe this project represents a key milestone for the commercialization of the AEC, as industry validation of the technology in a first municipal drinking water treatment project will play an important role in convincing additional municipalities to adopt the technology for treating PFAS-contaminated water, as the company will publish reference customer data from the project that highlights the AEC’s distinct advantages over incumbent technologies like carbon filtration and ion exchange.
We are currently bidding on and/or in negotiations with multiple prospective industrial and municipal customers to treat PFAS contaminated water. These opportunities include small to medium sized municipalities, waste facilities, Air Force bases, remediation sites, and industrial sites, and we are waiting for our customers to finalize budgets and agreements with us. Currently, our bottleneck for processing additional expanding opportunities for PFAS treatment projects is staffing, and therefore we are currently working to hire additional qualified sales engineers to assist in bidding and specification efforts for new projects.
AROS Minimal Liquid Discharge Water Treatment
In partnership with Garratt-Callahan, one of the country’s oldest and largest privately held water treatment companies, our engineers developed a “minimal liquid discharge” wastewater treatment system called the Aqueous Reuse Optimization System (AROS) that minimizes industrial wastewater discharges and thus the regulatory fees associated with wastewater discharge, including for uses like cooling towers at data centers. Garratt-Callahan, who invented and patented the technology, is currently marketing the AROS system to its existing customer base and to new prospective customers. BLEST will serve as the manufacturing partner and Garratt-Callahan will serve as the selling distributor to leverage their national sales force and over one hundred years of providing services and products to customers.
Presently, both BioLargo and Garratt-Callahan are engaged in discussions with multiple potential first customers for the AROS system.
Advanced Oxidation System (AOS)
The Advanced Oxidation water treatment system (AOS) is our patented water treatment device that generates highly oxidative and energetic species of iodine and other molecules which allow it to eliminate pathogenic organisms and organic contaminants rapidly and effectively as water passes through the device. The key value proposition of the AOS is its ability to reduce or eliminate a wide variety of waterborne contaminants with high performance, including the normally hard-to-treat class of recalcitrant water contaminants called “micropollutants”, while using very little electricity and input chemicals.
Our proof-of-concept studies and on-site pilot projects have generated results that project the AOS will be more cost- and energy-efficient than commonly used advanced water treatment technologies such as UV, electro-chlorination, and ozonation. Furthermore, our technology has been proven capable of removing hard-to-treat organic micropollutants such as pharmaceuticals from water more quickly and energy-efficiently than other technologies. Together, these characteristics make the AOS an economical and versatile tool to enable wastewater treatment and reuse in the face of emerging water contaminants and increasing regulatory scrutiny on industrial wastewater discharge.
The AOS has, broadly speaking, two target applications: 1) treatment of municipal or industrial wastewater to eliminate bacteria, viruses, other organisms, and regulated organic contaminants, while using less electrical energy than other technologies, and 2) treatment of water or wastewater specifically to eliminate micropollutants/pharmaceuticals, at which the AOS particularly excels at compared to existing technologies. Our work to have the AOS adopted in the US and Canada for application 1) has been met with resistance because existing technologies, while less energy efficient than our technology, are effective enough against target contaminants, and our “value-add” of also eliminating hard-to-treat micropollutants isn’t relevant unless regulations dictate that those chemicals must be removed. Similarly, application 2) is only relevant in jurisdictions where those hard-to-treat micropollutants are regulated. Unfortunately, this does not include the US or Canada, but it does include several European countries. For that reason, presently, much of our business development efforts to secure projects for the AOS focus on development of partnerships to demonstrate the AOS for the European micropollutant market.
The AOS has been and will continue to be included as a component of treatment trains (comprehensive systems) we scope for other projects. In addition, it is included in the catalog of offerings being sold through our independent representatives as well as channel partners. BEST will continue to attempt to cultivate sales channels in Canada, Europe and South America, where there has been more interest.
BioLargo Energy Technologies, Inc.
Our subsidiary BioLargo Energy Technologies, Inc. (“BETI”) was founded to commercialize a novel battery technology with the potential to help facilitate the ongoing shift toward renewable energy production by providing a safer, longer lasting, more eco-friendly, and more affordable alternative to lithium-ion batteries. Designed for long duration energy storage, also known as battery energy storage solutions (BESS), our battery, called Cellinity™, uses a novel “liquid sodium” chemistry that involves common materials that can be sourced domestically, and which has, for a variety of reasons, significant advantages over other battery chemistries for use in stationary, long-duration energy storage.
BETI has constructed a pilot-scale battery production facility in our Oak Ridge Tennessee engineering headquarters, and is currently attempting to manufacture prototype batteries for testing to confirm energy efficiency, useful life expectancy, energy density, safety profile, number of charge/discharge cycles, and other technical claims that we believe will differentiate the battery from incumbent technologies. Once prototype batteries are built and tested, and assuming such tests show the batteries have the characteristics we expect would differentiate it from other battery technologies, we will complete the design on a larger sized battery cell that would then be incorporated into battery packs and battery sizes meant for industrial facilities. Once designed, our engineers will work to develop manufacturing processes that would allow scale production to ensure costs of goods in line with market demand and conditions.
Batteries built based on the underlying technology a decade ago demonstrated features that far surpass comparable lithium-ion batteries, the dominant incumbent technology in the market, including:
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Increased safety, no runaway fire risks, and a more sustainable design – with no rare-earth elements – that is capable of being manufactured completely from a domestic supply chain |
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Ability to charge and discharge completely, with no degradation of performance, ensuring virtually unlimited charge/discharge cycles, and without self-discharge and no out-gassing |
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Increased energy efficiency and energy density in comparison to lithium-ion batteries, and a longer useful life expectancy of at least 10 years and expected to be up to 20 years or more |
Our battery technology operates at higher temperatures than lithium batteries and much lower temperature than competing sodium-based batteries, and its casing and materials when combined, are heavier than lithium-ion, making it more suitable for stationary energy storage applications like grid-scale energy storage, electric vehicle charging stations, and commercial and residential energy storage, and believed to be less suitable for placement into electric vehicles or portable electronics.
We are exploring multiple opportunities to commercialize our proprietary liquid sodium batteries through joint ventures with third parties. The third parties would finance the construction of independent battery manufacturing facilities designed and built under the direction of our engineers, and the joint venture would market, manufacture and distribute batteries. BioLargo would (i) receive a minority equity position in each joint venture, (ii) separately manufacture and sell at a profit to the joint venture certain proprietary battery components, and (iii) receive a royalty on the revenues of the joint venture.
Given the global growing demand for better batteries, and, while we are witnessing a number of current examples in which battery manufacturers have secured forward-contracts to supply batteries to its customers with backlogs of orders that amount to multiple years of production capacity, we believe our offer to partner with customers to secure needed inventory provides for a clear potential pathway to access capital, and more readily scale up production to meet demand around the world. At this point, we do not intend to finance and build our own manufacturing facilities, nor would we develop in-house sales channels, although that possibility remains on the table if needed.
Clyra Medical Technologies, Inc. - Bioclynse Wound Irrigation Solution
Clyra Medical Technologies, Inc. is our partially owned subsidiary creating medical products based on our technologies. Its primary product is a surgical wound irrigation solution called Bioclynse that can help manage patient care and outcomes. The first target market for this product is orthopedics, including hip and knee replacement surgeries. Management believes Bioclynse outperforms competing products as it has proven performance in biofilm disruption and inhibition, is non-toxic and non-cytotoxic, is non-sensitizing to tissue, and unlike competing products, does not need to be rinsed and/or removed from a surgical cavity. Clyra management is focused on developing partnerships with large, well-established distributors who can help rapidly accelerate the product’s access to clinicians and surgeons in hospitals around the country. It, and its manufacturing partner, Keystone Industries, have invested in manufacturing equipment to support at-scale manufacturing for the Bioclynse product's use in sterile settings, such as in surgery. In total, Clyra has committed approximately $1.5 million in equipment and related assets to support an expected national roll out of Bioclynse. During the six months ended June 30, 2024, Clyra sold $1,115,000 in common stock to support these efforts.
Full Service Environmental Engineering
BioLargo Engineering, Science & Technologies, LLC (“BLEST”) offers full service environmental engineering to third parties and provides engineering support services to our internal teams to accelerate the commercialization of our technologies.
BLEST focuses its efforts in three areas:
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providing engineering services to third-party clients as well as affiliated BioLargo entities; |
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supporting internal product development; and |
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advancing their own technical innovations such as the AEC PFAS treatment technology and the battery energy storage system. |
BLEST operates out of an engineering facility in Oak Ridge, Tennessee (a suburb of Knoxville), and employs a group of scientists and engineers, many of whom are owners of the entity (BioLargo owns 82% as of December 31, 2023). 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. Many of the other team members are also former employees of CB&I and Shaw, with the exception of more recent staff hires. The team is highly experienced across multiple industries and we believe are considered experts in their respective fields, including: chemical engineering, wastewater treatment (including design, operations, data gathering and data evaluation), process safety, energy efficiency, air pollution, design and control, technology evaluation, technology integration, air quality management & testing, engineering management, permitting, industrial hygiene, applied research and development, air testing, environmental permitting, HAZOP review, chemical processing, thermal design, computational fluid dynamics, mechanical engineering, mechanical design, NEPDES permitting, RCRA/TSCA compliance and permitting, project management, storm water design & permitting, computer assisted design (CAD), bench chemistry, continuous emission monitoring system operator, data handling and evaluation and decommissioning and decontamination of radiological and chemical contaminated facilities. The team has decades of high-level experience in the energy industry. The engineering team has also developed an extended network of trusted engineering subcontractors that assist in serving specific client projects as needed.
BLEST engineers generate revenue through services to third party clients, as well as for internal BioLargo projects such as the AEC and battery (revenues from internal projects are eliminated in the consolidation of our financial statements and are designed “intersegment revenue”). Third party contracts include ongoing work at U.S. Air Force bases for air quality control. In the second quarter of 2024, BLEST secured new contracts to provide air quality control compliance services to additional U.S. Air Force bases, increasing its ongoing contract-based revenue to approximately $100,000 per month. Efforts to expand this work as well as with other clients are consistently ongoing.
The staff time devoted to supporting the AEC (PFAS) and battery related work is demanding and , at the same time, BLEST needs to hire more qualified staff to meet and expanding demand for our growing list of customers and/or expected customers. When we combine the demands of current revenue generating projects and expected growth, we are presented with an obvious challenge to manage quality, timely performance as well as access to qualified staff. We are working carefully to find balance to help ensure we meet the demands of both in a practical customer centric and capital conserving way. It may be for example, when we secure larger and larger contracts for PFAS or Garrett Callan related work, we will need to depend heavily on our contact manufactures to meet the customer demands in the near term as we scale up our infrastructure and work force capabilities.
Results of Operations
Our revenues increased 247% and 88% in the three and six months ended June 30, 2024, as compared with the same periods in 2023, primarily due to an increased volume of sales of our pet odor control product private labeled to a third party under the brand name “Pooph”, which comprised 70% and 78%, respectively of our company-wide revenues in such periods. Our financial statements separate revenue based on products and services. Revenues from the sale of products for the three and six months ended June 30, 2024, increased 272% and 95% over the same periods in 2023. Revenues from services for the three and six months ended June 30, 2024, decreased 5% over the same periods in 2023.
ONM Environmental
Our wholly-owned subsidiary ONM Environmental generates revenues through (i) sales of our flagship product CupriDyne Clean, including related design, installation, and maintenance services on the systems that deliver CupriDyne Clean at its clients’ facilities, and (ii) sale of private-label products to third parties, including the Pooph branded pet odor control product.
Revenue (ONM Environmental)
ONM Environmental’s revenues increased 205% (to $4,012,000) and 77% (to $8,586,000) in the three and six months ended June 30, 2024, compared with the same periods in 2023. The increase in revenues was almost entirely due to an increase in the volume of sales of our pet odor product private labeled to a third party under the brand name "Pooph". Because ONM Environmental has no control over the marketing and sales activity or levels of the Pooph branded products, it cannot predict sales volumes related to it in future periods. Pooph management has indicated their intentions to continue advertising and expanding sales. While they have performed well in the past, their execution of those future plans has inherent risks that are out of our control.
Cost of Goods Sold (ONM Environmental)
ONM Environmental’s cost of goods sold includes costs of raw materials, contract manufacturing, and portions of depreciation, salaries and expenses related to the manufacturing and installation of its products. As a percentage of revenue, ONM Environmental’s costs of goods for the three and six months ended June 30, 2024, were 55% and 54%, an increase of 41% and 14%, compared to the same period in 2023. The current period increase in cost of goods is due an increase in raw material costs.
Selling, General and Administrative Expense (ONM Environmental)
ONM Environmental’s selling, general and administrative expenses increased 11% during each of the three and six months ended June 30, 2024, as compared with the same period in 2023. The increase is due to additional employees.
Operating Income (ONM Environmental)
ONM Environmental generated operating income of $1,490,000 and $3,288,000 in the three and six months ended June 30, 2024, compared to operating income of $428,000 and $1,815,000 for the three and six months ended June 30, 2023. The generation of operating income for the three and six months ended June 30, 2024, was entirely dependent on sale of Pooph branded products.
BLEST (engineering)
Revenue (BLEST)
Our engineering segment's (BLEST's) revenues increased 665% (to $1,002,000) and 267% (to $1,187,000), net of intersegment revenue, in the three and six months ended June 30, 2024, as compared with the same periods in 2023. The increase in revenue in the three and six months ended June 30, 2024, as compared with prior periods is due to $878,000 of revenue recognized in the quarter from the sale of water treatment equipment. Although we are focused on sales of water treatment equipment such as our AEC, AOS, and AROS systems, the sales cycle for municipal and industrial water treatment equipment is long, and management does not expect a to record similar level revenue from equipment sales in either the third or fourth quarter of 2024. With recent new contracts, our engineers are generating approximately $100,000 in monthly services revenues for air quality management services at U.S. Air Force bases. These ongoing contracts are expected to continue provide a monthly base revenue, in addition to regular work for other clients. In the future, equipment sales will be primarily handled through our subsidiary dedicated for that purpose - BioLargo Equipment Solutions & Technologies, Inc. (BEST).
In addition to providing services to third party clients, BLEST provides services for internal BioLargo projects. These services are billed internally, are considered intersegment revenue, and are eliminated in the consolidation of our financial statements. In the three and six months ended June 30, 2024, intersegment revenue for BLEST totaled $257,000 and $428,000 and for the three and six months ended June 30, 2023, intersegment revenue for BLEST totaled $408,000 and $578,000.
Cost of Revenues (BLEST)
BLEST’s cost of revenues includes employee labor, subcontracted costs and cost of goods sold. In the three and six months ended June 30, 2024, costs were 67% and 63% of revenues, versus 56% and 64% in the same period in 2023. The increase is related to lower margins on equipment sales. In future periods, equipment sales are expected to be through our subsidiary BEST.
Selling, General and Administrative Expense (BLEST)
BLEST’s SG&A expenses were $238,000 and $441,000, in the three and six months ended June 30, 2024, compared to $214,000 and $399,000, in the three and six months ended June 30, 2023, the increase is due to an additional employee. In June and July 2024, BLEST has hired four additional full time employees.
Operating Loss (BLEST)
BLEST incurred an operating loss of $247,000 and $692,000, in the three and six months ended June 30, 2024, compared to an operating loss of $450,000 and $818,000 in the three and six months ended June 30, 2023. This operating loss is reflective of the focus at BLEST on internal BioLargo projects. While we are unable to record revenues generated from services by the engineering group to other BioLargo operating divisions for important projects such as the development of the battery, AOS and AEC technologies, it is important to note that its operating loss would be eliminated if it were selling these services to a third party at fair market value. The decrease in operating loss was due to an increase in third party-revenues. Because the subsidiary had an operating loss, we invested cash during the quarter to allow it to maintain operations.
Clyra Medical
Clyra Medical did not generate revenue in 2024, and it generated $6,000 in the three months end June 30, 2023. In the three and six months ended June 30, 2024, had $616,000 and $1,161,000 in total costs and expenses, which included $100,000 and $220,000 in research and development expenses. In the same period in 2023, had $396,000 and $823,000 in total costs and expenses, which included $60,000 and $194,000 in research and development expenses. We expect Clyra's losses to continue in the near future as Clyra works to finalize agreements with third parties to distribute its products.
BETI
BETI has not generated generate revenue, and for the three and six months ended June 30, 2024, had $226,000 and $381,000 in total costs and expenses, which included $133,000 and $213,000 in research and development expenses. In the same periods in 2023, had $297,000 and $384,000 in total costs and expenses, which included $271,000 and $303,000 in research and development expenses. The primary focus of BETI is the development of its battery technology. We do not expect BETI to generate revenue in the near future as it continues its research and development activities.
BEST
Formed in 2024 to develop and commercialize our various water treatment equipment, including the AEC. BEST did not generate revenue during 2024. During the three and six months ended June 30, 2024 incurred $49,000 and $115,000 in total expenses primarily related to salaries and marketing.
Selling, General and Administrative Expense – consolidated
Our SG&A expenses include both cash (for example, salaries to employees) and non-cash expenses (for example, stock option compensation expense). For the three and six months ended June 30, 2024 consolidated SG&A increased in the aggregate by 34% (to $2,404,000) and by 32% (to $4,629,000). The largest components of our SG&A expenses included (in thousands):
| Three Months Ended |
Six Months Ended |
||||||||||||||
| June 30, 2024 |
June 30, 2023 |
June 30, 2024 |
June 30, 2023 |
||||||||||||
| Salaries and payroll related |
$ | 802 | $ | 574 | $ | 1,504 | $ | 1,180 | |||||||
| Professional fees |
213 | 203 | 494 | 414 | |||||||||||
| Consulting |
386 | 186 | 865 | 384 | |||||||||||
| Office expense |
579 | 494 | 1,025 | 952 | |||||||||||
| Sales and marketing |
139 | 118 | 238 | 211 | |||||||||||
| Investor relations |
201 | 86 | 330 | 179 | |||||||||||
| Board of director expense |
84 | 130 | 173 | 195 | |||||||||||
| Total Selling, General & Administrative |
$ | 2,404 | $ | 1,791 | $ | 4,629 | $ | 3,515 | |||||||
In the three and six months ended June 30, 2024, our non-cash expenses from the issuance of stock and stock options totaled $669,000 and $1,292,000 compared to $363,000 and $826,000 for the three and six months ended June 30, 2023. This increase is due to stock option issuances for previously issued stock options that expired during the three and six months ended June 30, 2024. The majority of this stock option expense is recorded in Consulting expense. Salaries and payroll related expense increased due to the addition of new employees; company wide, there are 36 full time employees. Professional fees increased due to the addition of our BEST subsidiary, private securities offerings for BioLargo and Clyra, and other organizational needs that required professionals. Investor relation expense increased as we continue to tell the BioLargo story to the public markets through speaking events and trade shows.
Research and Development
In the three and six months ended June 30, 2024, we spent $623,000 and $1,407,000 in the research and development of our technologies and products. This was an increase of 6% and 22% compared to the three and six months ended June 30, 2023. The increase is primarily due to work related to (i) the battery project, and (ii) the AEC. As these products mature, we expect the level of research and development to decrease.
Interest expense
Our interest expense for the three and six months ended June 30, 2024, was $2,000 and $14,000 compared to $12,000 and $60,000 in the three and six months ended June 30, 2023. The decrease is due to a decrease in financing activities.
Other Income and Expense
For the three and six months ended June 30, 2024, we had $15,000 of grant income, as compared with the $32,000 in the three and six months ended June 30, 2023. Grant income is primarily generated through our wholly owned Canadian subsidiary, we have been awarded more than 80 research grants over the years from various 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. Grant funds paid directly to third parties are not included as income in our financial statements.
Net Loss
Net loss for the three and six months ended June 30, 2024, was $780,000 and $1,555,000 a loss of $ (0.001) and $ (0.003)per share, compared to a net loss for the three and six months ended June 30, 2023, of $1,626,000 and $2,120,000, a loss of $ (0.005) and $ (0.006) per share. Our net loss for the three and six months ended June 30, 2024, decreased because of the increase in revenue offset by an increase in SG&A expense. Of the SG&A expense, $669,000 and $1,292,000 in the three and six months ended June 30, 2024, are non-cash expenses related to the issuance of stock and stock options.
The net income (loss) per business segment is as follows (in thousands):
| Three Months Ended |
Six Months Ended |
||||||||||||||
| June 30, 2024 |
June 30, 2023 |
June 30, 2024 |
June 30, 2023 |
||||||||||||
| BioLargo corporate |
$ | (1,126 | ) | $ | (639 | ) | $ | (2,374 | ) | $ | (1,474 | ||||
| ONM |
1,496 | 426 | 3,292 | 1,811 | |||||||||||
| Clyra Medical |
(622 | ) | (404 | ) | (1,174 | ) | (840 | ||||||||
| BLEST |
(150 | ) | (450 | ) | (595 | ) | (818 | ||||||||
| BETI |
(226 | ) | (297 | ) | (381 | ) | (384 | ||||||||
| BEST |
(49 | ) | — | (115 | ) | — | |||||||||
| BioLargo Canada |
(103 | ) | (262 | ) | (208 | ) | (415 | ||||||||
| Net loss |
$ | (780 | ) | $ | (1,626 | ) | $ | (1,555 | ) | $ | (2,120 | ||||
Liquidity and Capital Resources
For the three and six months ended June 30, 2024, we generated revenues of $5,014,000 and $9,773,000 and we had a net loss of $780,000 and $1,555,000 For the six months ended June 30, 2024, we generated $330,000 net cash from operating activities. On June 30, 2024, we had current assets of $7,110,000, of which $4,765,000 was cash and cash equivalents, had current liabilities of $3,012,000, and working capital of $4,098,000.
While we were able to generate net cash from operating activities during the six months ended June 30, 2024, we do not have a long history of doing so and are highly reliant upon one customer for the generation of a majority of our revenues. We also continue to use cash to invest in capital equipment, research and development, and our new technologies. For these reasons, we and our partially owned subsidiaries continue to sell securities to ensure available working capital. We have been, and anticipate that we will continue to be, limited in terms of our capital resources, and expect to continue to need further investment capital to fund our business plans and investments in our new technologies.
For these reasons, we continue to sell securities to ensure available working capital, both directly and through our subsidiaries; during the six months ended June 30, 2024, we received net proceeds of $1,789,000. Additionally during the six months ended June 30, 2024, we received $301,000 in net proceeds from the exercise of stock options and warrants. We have been, and anticipate that we will continue to be, limited in terms of our capital resources, and expect to continue to need further investment capital to fund our business plans and investments into our new technologies. The foregoing factors raise substantial doubt about our ability to continue as a going concern, unless we are able to (i) continue to increase revenues, generate cash from operations, and/or generate cash from financing activities, (ii) convert assets such as our $2,104,000 in accounts receivable into cash; or, (iii) if necessary, reduce ongoing cash obligations by curtailing portions of our operations.
Critical Accounting Policies
Our discussion and analysis of our results of operations and liquidity and capital resources are based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our condensed consolidated 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.
Our significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements are described in (i) in Part I, Item 1 of this Form 10-Q, Note 2, “Summary of Significant Accounting Policies” and (ii) in the Form 10-K for the year ended December 31, 2023, filed with the SEC on April 1, 2024, in the Notes to Consolidated Financial Statements in Part II, Item 8, and “Critical Accounting Policies and Estimates” in Part II, Item 7. There have been no material changes to the Company’s critical accounting policies and estimates since the filing of its Form 10-K.
Item 4. Controls and Procedures
We conducted an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended – the “Exchange Act”) as of the end of the period covered by this Report. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2024, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
Our procedures have been designed to ensure that the information relating to our company, including our consolidated subsidiaries, required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow for timely decisions regarding required disclosure. However, our Company is continuing to grow and evolve, as our product and services sales continues to grow, and as we diversify our clients to include municipalities, increasing strain on our accounting systems. These activities put stress on our overall controls and procedures. We do not yet have the resources to implement the more sophisticated control systems used by larger companies. Although we have made some improvements, our chief executive officer and chief financial officer have concluded that, as of the evaluation date, our disclosure controls and procedures were not effective, due to the material weakness identified below.
It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
Under the supervision and with the participation of our management, including our chief executive officer and the chief financial officer, we have established internal control procedures in accordance with the guidelines established in the 2013 Framework —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Management evaluated the effectiveness of our internal controls, and concluded that due to our limited financial and personnel resources, the fact that we operate our business in three distinct locations in the U.S. and Canada, and the lack of sophisticated reporting systems, we continue to have a material weakness in our internal controls with respect to the closing our financial statements. Until the Company has the financial resources to implement more robust automated systems, or to hire additional dedicated accounting personnel, we expect this material weakness to continue.
Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls or our internal control over financial reporting, or any system we design or implement in the future, will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following is a report of sales of unregistered securities during the period covered by this report not previously reported in an annual report on Form 10-K, a Quarterly Report on Form 10-Q, or a Current Report on Form 8-K.
During the three months ended June 30, 2024, we sold 454,547 shares of our common stock and received $152,000 gross and $136,000 net proceeds from two accredited investors. In addition to the shares, we issued six-month and five-year warrants to purchase an aggregate 909,094 additional shares.
During the three months ended June 30, 2024, we did not sell shares to Lincoln Park.
All of these offerings and sales were made in reliance on the exemption from registration contained in Section 4(2) of the Securities Exchange Act and/or Regulation D promulgated thereunder as not involving a public offering of securities.
Extension of Agreement with Chief Financial Officer
August 13, 2024, we and our Chief Financial Officer Charles K. Dargan, II agreed to extend the term of his 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 our Chief Financial Officer. The Engagement Extension Agreement dated as August 13, 2024 (the “Engagement Extension Agreement”) expires January 31, 2025 (the “Extended Term”), at which time the agreement will automatically renew for subsequent one-year periods.
As the sole compensation for the Extended Term, Mr. Dargan was issued an option (“Option”) to purchase 300,000 shares of the Company’s common stock. The Option vests over the period of the Extended Term in monthly installments of 25,000 shares, 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 the August 13, 2024 grant date, expires ten years from the grant date, and was issued pursuant to the Company’s 2024 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. Upon each renewal of the agreement, Mr. Dargan will be issued an option to purchase 300,000 shares, at an exercise price equal to the closing price of the Company's common stock on the prior business day, vesting over one year.
See the Exhibit Index for a list of exhibits filed as part of this report and incorporated herein by reference.
Exhibit Index
| Incorporated by Reference Herein |
|||
| Exhibit Number |
Exhibit Description |
Form |
File Date |
| 3.1 |
Form 10-KSB |
5/23/2003 |
|
| 3.2 |
Amended and Restated Certificate of Incorporation for BioLargo, Inc. filed March 16, 2007 |
Form 10-KSB |
5/4/2007 |
| 3.3 |
Certificate of Amendment to Certificate of Incorporation, filed May 25, 2018 |
Pos Am |
6/22/2018 |
| 3.4 |
Certificate of Amendment to Certificate of Incorporation, filed August 30, 2022 |
Form 10-Q |
11/14/2022 |
| 4.1 |
Form 10-QSB |
11/19/2007 |
|
| 4.2 |
Def 14C (Exhibit A) |
5/2/2011 |
|
| 4.3 |
Form of Stock Options issued in exchange for reduction in accounts payable. |
Form 10-K |
3/31/2015 |
| 4.4 |
Form S-8 |
6/22/2018 |
|
| 4.5 |
Stock Option Award Agreement under 2018 Equity Incentive Plan |
Form S-8 |
6/22/2018 |
| 4.6 |
Notice of Stock Option Grant under 2018 Equity Incentive Plan |
Form S-8 |
6/22/2018 |
| 4.7 |
Restricted Stock Unit Award Agreement under 2018 Equity Incentive Plan |
Form S-8 |
6/22/2018 |
| 4.8 |
Notice of Restricted Stock Unit Award under 2018 Equity Incentive Plan |
Form S-8 |
6/22/2018 |
| 10.15 |
Form 10-Q |
5/17/2023 |
|
| 10.16*† | 2024 Engagement Extension Agreement with CFO | filed herewith | |
| 31.1* |
filed herewith |
||
| 31.2* |
filed herewith |
||
| 32* |
filed herewith |
||
| 101.INS** |
Inline XBRL Instance |
||
| 101.SCH** |
Inline XBRL Taxonomy Extension Schema |
||
| 101.CAL** |
Inline XBRL Taxonomy Extension Calculation |
||
| 101.DEF** |
Inline XBRL Taxonomy Extension Definition |
||
| 101.LAB** |
Inline XBRL Taxonomy Extension Labels |
||
| 101.PRE** |
Inline XBRL Taxonomy Extension Presentation |
||
| 104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101) |
* Filed herewith
** Furnished herewith
† Management contract or compensatory plan, contract or arrangement
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: August 14, 2024 |
BIOLARGO, INC.
By: /s/ DENNIS P. CALVERT |
|
| Dennis P. Calvert Chief Executive Officer |
||
| Date: August 14, 2024 |
By: /s/ CHARLES K. DARGAN, II |
|
| Chief Financial Officer |
EXHIBIT 10.16
BioLargo, Inc.
2024 Engagement Extension Agreement
This Engagement Extension Agreement dated August 13, 2024 (the “Extension”) references the Engagement Agreement and Scope Letter dated February 1, 2008 (“2008 Agreement”) by and between CFO 911 (Charles K. Dargan II) (the “Advisor)” and BioLargo, Inc. (the “Company”), and written extensions to the Agreement (the “Prior Extensions”), pursuant to which Charles K. Dargan II has been serving as the Company’s Chief Financial Officer. The parties desire to extend the terms of the prior agreements for a period of one year, pursuant to the terms of this Extension. The 2008 Agreement, the Prior Extensions and this Extension are collectively referred to herein as the “Agreement”.
Except as expressly amended or modified herein, all terms and conditions set forth in the 2008 Agreement and Prior Extensions are incorporated herein by this reference and continue to be in full force and effect. The parties acknowledge and confirm that Mr. Dargan has been serving as the Company’s Chief Financial Officer since February 1, 2008, and that he continues to do so through today’s date. The prior extension expired on January 31, 2024. The Advisor and the Company hereby agree to extend the Term of the engagement as set forth in the 2008 Agreement for one year, to expire January 31, 2025 (the “Extended Term”), and to automatically renew each year upon the same terms herein, unless either party gives notice of non-renewal. Notwithstanding the foregoing, either party may terminate this Agreement upon 30 days’ written notice. At the end of the Extended Term, unless this Agreement has been terminated, Advisor shall continue to serve as the Company’s Chief Financial Officer until one of the parties gives notice to terminate the relationship.
As compensation for his services during the Extended Term (or any renewal term after the date hereof), the Company shall issue to Charles K. Dargan II an option (the “Option”) to purchase three hundred thousand (300,000) shares of the Company’s common stock. The Option shall vest in equal monthly installments over the period of the Extended Term, so long as this Agreement is in full force and effect. The Option shall be exercisable at the closing price of the Company’s common stock as of the date hereof (the “Grant Date”), and shall expire ten years from the grant date. The Option shall be issued pursuant to the Company’s 2024 Equity Incentive Plan. For any renewal term, the Grant Date shall be on February 1st, and the Option exercise price shall be the closing price of the Company’s common stock on the business day prior to the Grant Date.
AGREED TO AND ACCEPTED
CFO 911 BioLargo, Inc.
/s/Charles K Dargan II /s/Dennis P Calvert
By: By:
Name: Charles K. Dargan II Name: Dennis P. Calvert
Title: Chief Executive Officer Title: President/CEO
Date signed: August 13, 2024 Date signed: August 13, 2024
EXHIBIT 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Dennis P. Calvert, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of BioLargo, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 14, 2024 |
By: |
/s/ DENNIS P. CALVERT |
||||
|
Dennis P. Calvert |
||||||
|
Chief Executive Officer |
||||||
EXHIBIT 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Charles K. Dargan II, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of BioLargo, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 14, 2024 |
By: |
/s/ CHARLES K. DARGAN II |
||||
|
Charles K. Dargan II |
||||||
|
Chief Financial Officer |
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EXHIBIT 32
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Dennis P. Calvert, Chief Executive Officer of BioLargo, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that the Quarterly Report of BioLargo, Inc. on Form 10-Q for the quarter ended June 30, 2024, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of BioLargo, Inc.
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Dated: August 14, 2024 |
By: |
/s/ DENNIS P. CALVERT |
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Dennis P. Calvert |
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President and Chief Executive Officer |
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A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to BioLargo, Inc. and will be retained by BioLargo, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
I, Charles K. Dargan II, Chief Financial Officer of BioLargo, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge that the Quarterly Report of BioLargo, Inc. on Form 10-Q for the quarter ended June 30, 2024, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of BioLargo, Inc.
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Dated: August 14, 2024 |
By: |
/s/ CHARLES K. DARGAN II |
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Charles K. Dargan II |
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Chief Financial Officer |
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A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to BioLargo, Inc. and will be retained by BioLargo, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.