What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-31 compared with 2021-03-30 · 127 added, 103 removed, 173 unchanged (57% of the section changed)

MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES

MARKET FOR REGISTRANT ’

S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES

Market Information

Since January 23, 2008, our common stock has been quoted on the OTC Markets “OTCQB” marketplace (formerly known as the “OTC Bulletin Board”) under the trading symbol “BLGO”.

Since January 23, 2008, our common stock has been quoted on the OTC Markets “OTCQB”

marketplace (formerly known as the “OTC Bulletin Board”) under the trading symbol “BLGO”.

The table below represents the quarterly high and low closing prices of our common stock for the last two fiscal years as reported by Yahoo Finance.

First Quarter

$              0.25

$              0.12

$              0.29

$              0.12

Second Quarter

$              0.24

$              0.16

$              0.20

$              0.14

Third Quarter

$              0.22

$              0.17

$              0.22

$              0.15

Fourth Quarter

$              0.23

$              0.17

$              0.16

$              0.12

The closing bid price for our common stock on March 29, 2022, was $0.236 per share.

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security holders (2)

Includes 5,689,363 shares issuable under the 2007 Equity Plan.

The 2007 Equity Plan expired September 6, 2017, and 18,865,525 shares issuable under the 2018 Equity Incentive Plan adopted by the Board on March 7, 2018 and subsequently approved by stockholders on May 23, 2018.

Includes 5,689,363 shares issuable under the 2007 Equity Plan.  The 2007 Equity Plan expired September 6, 2017, and 18,865,525 shares issuable under the 2018 Equity Incentive Plan adopted by the Board on March 7, 2018 and subsequently approved by stockholders on May 23, 2018.

This includes various issuances to specific individuals either as a conversion of un-paid obligations pursuant to a plan adopted by our board of directors, or as part of their agreement for services.

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On December 31, 2021, we issued 349,043 shares of our common stock to a vendor to reduce amounts owed to the vendor in the aggregate amount of $69,000.

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.

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.

SELECTED FINANCIAL DATA

Not applicable

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT ’

S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and the related notes to the consolidated financial statements included elsewhere in this report.

This discussion contains forward-looking statements that involve risks and uncertainties.

Such statements, which include statements concerning future revenue sources and concentration, selling, general and administrative expenses, research and development expenses, capital resources, additional financings and additional losses, are subject to risks and uncertainties, including, but not limited to, those discussed above in Part I, Item 1 and elsewhere in this Annual Report, particularly in “Risk Factors,” that could cause actual results to differ materially from those projected.

Such statements, which include statements concerning future revenue sources and concentration, selling, general and administrative expenses, research and development expenses, capital resources, additional financings and additional losses, are subject to risks and uncertainties, including, but not limited to, those discussed above in Part I, Item 1 and elsewhere in this Annual Report, particularly in “Risk Factors,”

that could cause actual results to differ materially from those projected.

The forward-looking statements set forth in this Annual Report are as of December 31, 2021 unless expressly stated otherwise, and we undertake no duty to update this information.

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Depending on the severity and longevity of the COVID-19 pandemic, our business, customers, and stockholders may experience a significant negative impact.

Results of Operations — Comparison of the years ended December 31, 2020 and 2019

Results of Operations —

Comparison of the years ended December 31, 2021 and 2020

We operate our business in distinct business segments:

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Consolidated revenue for the year ended December 31, 2021 was $2,531,000, which is a 4% increase over the same period in 2020.

Sales at our operating divisions decreased upon the initial shutdowns in late March due to the COVID-19 pandemic, but have since rebounded.

Our product revenue includes sales of our CupriDyne Clean industrial odor control product, Clyraguard Personal Protection Spray, and hand sanitizers.

While we expect revenues to continue to increase, given the considerable extended time of the COVID-19 pandemic, we cannot be certain.

ONM Environmental (formerly, Odor-No-More)

Our wholly-owned subsidiary ONM Environmental generates revenues through sales of our flagship product CupriDyne Clean, by providing design, installation, and maintenance services on the systems that deliver CupriDyne Clean at its clients’ facilities, and through sales of odor absorption products to the U.S.

Our service revenue increased 58%, while revenue from product sales and related services decreased by 14%.

Our product revenue includes sales of our CupriDyne Clean industrial odor control product, Clyraguard Personal Protection Spray, and hand sanitizers, which were affected by the COVID-19 pandemic.

While we expect overall revenues to continue to increase, given the considerable extended time of the COVID-19 pandemic, we cannot be certain.

ONM Environmental

facilities, and through sales of odor absorption products to the U.S.

During 2020, ONM Environmental added two employees to focus on business development, increasing sales and increased levels of construction and maintenance contracts.

Revenue (ONM)

ONM’s revenues for the year ended December 31, 2020, were $1,554,000, an increase of $95,000 or 7% from the same period in 2019.

Sales on a quarter-to-quarter basis had been increasing until the COVID-19 pandemic shut down businesses across the country, and have since rebounded.

ONM’s fourth quarter revenue were approximately $617,000, an increase of 74% over the prior quarter due to the installation of large custom CupriDyne Clean misting systems.

During 2021, ONM reduced staff in line with the reduction in sales.

Revenue (ONM Environmental)

ONM Environmental’s revenues for the year ended December 31, 2021, were $1,419,000, a decrease of $148,000 or 9% from the same period in 2020.

ONM Environmental’s fourth quarter revenue were approximately $360,000, a decrease of 42% over the prior quarter due to the installation of large custom CupriDyne Clean misting systems in that quarter.

Of its gross sales in 2021, approximately two-thirds were to the waste handling industry.

Cost of Goods Sold (ONM)

ONM’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’s costs of goods improved 2% in 2020 to 41%.

The slight decrease in cost of goods is due to increase sales of higher-margin products and services, and an increase in product prices.

Selling, General and Administrative Expense (ONM)

ONM’s selling, general and administrative expenses increased by 22% to $1,418,000 during the year ended December 31, 2020.

These expenses have increased alongside its efforts to increase revenues by hiring additional sales and support staff.

We expect these expenses to remain consistent in 2021 unless and until its revenues increase.

Net Loss (ONM)

ONM generated $1,554,000 in revenue, a gross margin of $925,000, and had total costs and expenses of $1,408,000, resulting in a net loss of $483,000, compared with $337,000 in 2019.

To increase its revenues, ONM had continued to invest in expanding its sales and operations, resulting in a continuing loss from operations, up and until the COVID-19 crisis occurred, but is now focused primarily on developing distribution and strategic alliances as it seeks to expand sales with existing staff.

We expect ONM’s revenues from product sales to increase in the year ended December 31, 2022, due to an anticipated increase in the volume of consumer product sales.

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 increased 9% in 2021 to 47%.

The increase in cost of goods is due to increase in raw material costs.

Selling, General and Administrative Expense (ONM Environmental)

ONM Environmental’s selling, general and administrative expenses increased by 13% to $1,235,000 during the year ended December 31, 2021.

These expenses decreased due to a reduction of sales and support staff.

We expect these expenses to remain consistent in the year ending December 31, 2022.

Operating Loss (ONM Environmental)

ONM Environmental generated $1,419,000 in revenue, a gross margin of $724,000, and had total costs and expenses of $1,235,000, resulting in an operating loss of $511,000, compared with $493,000 in 2020.

BLEST (engineering division)

Revenue (BLEST)

Our engineering segment (BLEST) generated $615,000 of revenue in 2020, compared to $401,000 in 2019.

Our engineering segment (BLEST) generated $961,000 of revenue in 2021, net of intersegment revenue, compared to $615,000 in 2020, representing a 56% increase from the prior year.

The increase is due to an increased number of client contracts, including those as a subcontractor for Bhate pursuant to which BLEST is providing services to U.S.

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In addition to providing service to third party clients, BLEST provides services to BioLargo and its subsidiaries for internal BioLargo projects.

These services are billed internally, considered intersegment revenue, and is therefore eliminated in consolidation.

These services are billed internally, are considered intersegment revenue, and are eliminated in the consolidation of our financial statements.

In the year ended December 31, 2021, it totaled $674,000, primarily used to further engineer and develop our flagship AOS water filtration system and our AEC PFAS treatment system.

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Cost of Goods (Services) Sold (BLEST)

BLEST’s cost of services includes employee labor as well as subcontracted labor costs.

In 2021, its cost of services were 69% of its revenues, versus 77% in 2020.

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Selling, General and Administrative Expense (BLEST)

BLEST’S SG&A expenses were $413,000 in 2020, compared to $478,000 in 2019.

We expect these expenses to remain flat in 2020, as the staff required to increase service to its clients and revenues will be included in cost of services.

Net Loss (BLEST)

BLEST generated $615,000 in revenue from third parties, a gross margin of $145,000, and had total costs and expenses of $764,000, resulting in a net loss of $619,000, compared with a net loss of $749,000 in 2019.

BLEST provides substantial support to BioLargo’s other operations, including BioLargo Water and Odor-No-More.

BLEST SG&A expenses were $441,000 in 2021, compared to $413,000 in 2020.

We expect these expenses to remain flat in 2022.Increases in engineering staff are included in cost of services.

Operating Loss (BLEST)

BLEST generated $961,000 in revenue from third parties, a gross margin of $300,000, and had total costs and expenses of $929,000, resulting in an operating loss of $629,000, compared with an operating loss of $619,000 in 2020.

BLEST provides substantial support to BioLargo’s other operations, including BioLargo Water and Odor-No-More.

While we are unable to record revenues generated from services by the engineering group to other BioLargo operating divisions for important project such as the development of the AOS and AEC technologies, it is important to note that its net loss would be eliminated if it were selling these services to a third party at fair market value.

Because the subsidiary had a net loss, we invested cash during the year to allow it to maintain operations.

BLEST’s need for a cash subsidy to support its operations has decreased over time.

We expect that in 2022 its sales and thus its gross profit will continue to increase.

Our goal for this operation is that it produces a profit and contributes to corporate overhead in a significant way, although predicting when that will happen given the COVID-19 pandemic and other uncertainties in the market, and our limited resources, is difficult.

Our wholly owned Canadian subsidiary has been awarded more than 80 research grants over the years from various Canadian public and private agencies, including the Canadian National Research Institute – Industrial Research Assistance Program (NRC-IRAP), the National Science and Engineering Research Council of Canada (NSERC), and the Metropolitan Water District of Southern California’s Innovative Conservation Program “ICP”.

Primarily 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.

The amount of grant income decreased $81,000 in 2020 to $137,000.

We continued to win grants and it is important to note that amounts paid directly to third parties are not included as income in our financial statements.

Our Canadian subsidiary applied for and received a refund on our income taxes pursuant to the “Scientific Research and Experimental Development (SR&ED) Program”, a Canadian federal tax incentive program designed to encourage Canadian businesses to conduct research and development in Canada.

For the years ended December 31, 2020 and 2019, we received a refund of $99,000 and $63,000.

The amount of grant income decreased $82,000 in the year ended December 31, 2021, to $55,000. 

Grant funds paid directly to third parties are not included as income in our financial statements.

For the years ended December 31, 2021 and 2020, we received a refund of $20,000 and $110,000, respectively.

Small Business Administration forgave a Paycheck Protection Program loan in the principal amount of $43,0000 granted to our partially owned subsidiary, Clyra Medical.

Although we are continuing to apply for government and industry grants, and indications from the various grant agencies is highly encouraging, we cannot be certain of continuing those successes in the future.

We are very active in both the US and Canada, pursuing grant support for various uses of our products that we believe can help in managing the COVID-19 crisis.

Selling, General and Administrative Expense – consolidated

Our Selling, General and Administrative expense (“SG&A”) include both cash (for example, salaries to employees) and non-cash expenses (for example, stock option compensation expense).

Our consolidated SG&A increased in the aggregate by 22% ($1,333,000) in the year ended December 31, 2020 to $7,473,000.

Our non-cash expenses (through the issuance of stock and stock options) increased in 2020 compared with 2019 ($3,125,000 compared to $2,232,000) because of options issued for Clyra Medical expenses increased and to option issuances to our employees, vendors and consultants resulted in a greater number of stock and stock options in lieu of cash owed.

Selling, General and Administrative Expense –

Our Selling, General and Administrative expense (“SG&A”) include both cash (for example, salaries to employees) and non-cash expenses (for example, stock option compensation expense).

Our consolidated SG&A decreased in the aggregate by 17% ($1,301,000) in the year ended December 31, 2021, to $6,172,000. 

Our non-cash expenses (through the issuance of stock and stock options) were relatively flat 2021 compared with 2020 ($2,241,000 compared to $2,232,000).

The largest components of our SG&A expenses included (in thousands):

December 31, 2020

December 31, 2019

Year ended December 31, 2021

Year ended December 31, 2020

Salaries and payroll related

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Investor relations

Our salaries and payroll-related and office-related expenses increased in 2020 due to increased sales personnel at ONM Environmental.

Consulting expense increased due primarily to new sales activity at Clyra Medical requiring the supporting infrastructure.

There was a slight increase in professional fees and sales and marketing as Biolargo increased its sales and business development efforts in its subsidiaries.

Our salaries and payroll-related and office-related expenses decreased in the year ended December 31, 2021, due to a reduction of sales personnel and office staff at ONM Environmental. 

Consulting expense decreased due primarily to a reduction in consultants at Clyra as its business focused shifted to its surgical wash product.

There was a decline in professional fees and sales and marketing as Biolargo as Biolargo reduced its efforts in those areas in order to control costs.

Research and Development

In the year ended December 31, 2020, we spent approximately $1,338,000 in the research and development of our technologies and products.

This was a decrease of 9% ($134,000) compared to 2019, primarily due to a change in focus from pure research activities to commercializing our technologies and inventions, including the AOS and AEC water treatment systems.

We incurred approximately $1,300,000 in expense related to our research and development activities in 2020, a decrease of approximately $150,000 compared with the prior year.

We increased research and development to develop products in response to the COVID-19 pandemic, and decreased in other areas as our water treatment technologies have neared commercialization.

In the year ended December 31, 2021, we spent $1,367,000 in the research and development of our technologies and products.

This was an increase of 2% ($29,000) compared to 2020.

Interest expense

Our interest expense for the year ended December 31, 2021, was $234,000, a decrease of 88% compared with 2020.

The significant decrease in interest expense is related to the significant decrease of our debt obligations and debt issued during 2020 versus 2019.

The significant decrease in interest expense is related to the significant decrease of our debt obligations and a reduction of debt issued during 2021 versus 2020.

Of our total interest expense in 2021, $99,000 was paid in cash, and the remainder, $135,000, was paid by issuing shares of our common stock.

Our non-cash interest related expenses were comprised primarily as follows:

(i) $1,618,000 non-cash debt discounts related to warrants issued in conjunction with debt instruments being amortized over the life of the debt instrument (in 2019, it was $3,376,000), and (ii) $184,000 related to interest on debt instruments converted to common stock.

Our outstanding debt as of December 31, 2020 was lower than as of December 31, 2019, and thus we expect our interest expense in 2021 to be less than that in 2020, provided we do not issue more debt with attached warrants during the remainder of the year.

Our non-cash interest related expenses were comprised primarily of $119,000 in non-cash debt discounts related to warrants issued in conjunction with debt instruments being amortized over the life of the debt instrument;

for the year ended December, 2022, non-cash interest expense totaled $1,618,000.

Our outstanding debt as of December 31, 2021, was lower than as of December 31, 2020.

We expect our interest expense in the year ending December 31, 2022, to be in line with the prior year, provided we do not issue debt with attached warrants during the remainder of the year. 

Additionally, we record the relative fair value of the warrants and the intrinsic value of the beneficial conversion feature sold with the convertible notes payable which typically results in a full discount on the proceeds from the convertible notes.

This discount is amortized as interest expense over the term of the convertible notes.

We expect our interest expense to decrease in 2021 because total amount we amortize (the line item on our balance sheet “Discount on convertible notes payable and line of credit, net of amortization”) decreased by $1,550,000 in 2020 – from $1,654,000 at December 31, 2019, to $104,000 at December 31, 2020.

We also are currently selling units of common stock and warrants instead of using convertible debt for financing our working capital needs, which if continued, will continue to reduce our ongoing interest expense as compared with prior years.

Net loss for the year ended December 31, 2021, was $6,894,000 a loss of $0.03 per share, compared to a net loss for the year ended December 31, 2020, of $9,700,000 a loss of $0.05 per share.

Our net loss this year declined because of an increase in revenue and a reduction in interest expense.

The net loss per business segment is as follows (in thousands):

December 31, 2020

December 31, 2019

Our net loss this year declined because of reduction in sales, general and administrative costs, and in interest expense.

The net income (loss) per business segment is as follows (in thousands):

Net income (loss)

Year ended December 31, 2021

Year ended December 31, 2020

ONM Environmental

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Consolidated net loss

It is important to note that over half of our net loss is due to non-cash expenses, such as interest and stock/stock options issued to employees and vendors in lieu of cash.

In the year ended December 31, 2021, approximately 40% of our net loss was due to non-cash expenses, 

including $135,000 in interest expense, $1,872,000 of stock option compensation expense, and $367,000 of services paid by the issuance of our common stock.

Clyra Medical’s net income of $593,000 during the year ended December 31, 2021, was not due to operating activities, but rather due to the recent transaction with Scion Solutions (see Note 9).

In the year ended December 31, 2020, over half of our net loss is due to non-cash expenses, such as interest and stock/stock options issued to employees and vendors in lieu of cash.

Of the net loss of $9,700,000, interest expense was $1,923,000, of which $1,805,000 was non-cash expense.

Additionally, we recorded $2,459,000 of stock option compensation expense, an additional $666,000 of services were paid by the issuance of our common stock and we recorded $442,000 loss on extinguishment of debt.

The total of these non-cash items account for $5,372,000 of the consolidated loss of $9,700,000.

Assuming they continue to expand sales, we believe that ONM and BLEST (engineering) can achieve positive cash flow from operations at some point in the future, although predicting when that will happen given the COVID-19 pandemic and other uncertainties in the market, and our limited resources, is difficult.

As we are still in the early stages of commercialization of our products, and intend to invest substantial resources into launching the AOS and AEC water treatment systems, we expect to continue to incur a net loss for the foreseeable future.

We believe that ONM and BLEST (engineering) can achieve positive cash flow from operations at some point in the future, although predicting when that will happen given the COVID-19 pandemic and other uncertainties in the market, and our limited capital resources, is difficult.

We expect to continue to incur a net loss for the foreseeable future. 

Liquidity and Capital Resources

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of our business.

For the year ended December 31, 2020, we had a net loss of $9,700,000, used $4,154,000 cash in operations, and at December 31, 2020, we had a working capital deficit of $2,039,000, and current assets of $1,505,000.

We do not believe gross profits in 2021 will be sufficient to fund our current level of operations or pay our debts as they become due during the next 12 months, and therefore we will have to obtain further investment capital to continue to fund operations and seek to refinance our existing debt.

For the year ended December 31, 2021, we had a net loss of $6,894,000, used $3,937,000 cash in operations, and at December 31, 2021, we had working capital of $427,000, and current assets of $1,801,000.

We are unable to rely on historical results or current contracts that would be sufficient to predict that sales and gross profits in 2022 will be sufficient to fund our current level of operations or pay our debts as they become due during the next 12 months, and therefore we will have to obtain further investment capital to continue to fund operations and seek to refinance our existing debt.

We have been, and anticipate that we will continue to be, limited in terms of our capital resources.

During the year ended December 31, 2021, we generated revenues of $2,531,000 through our subsidiaries.

(See Note 12.) Our segments did not individually or in the aggregate generate enough revenues or gross profits to fund their operations, or fund our corporate operations or other business segments.

(See Note 12.)  Our segments did not individually or in the aggregate generate enough revenues or gross profits to fund their operations, or fund our corporate operations or other business segments.

Thus, to operate throughout 2021, we continued to sell securities to raise cash (see Notes 3 and 10), and were able to borrow money through programs administered by the Small Business Administration.

As of December 31, 2020, our cash and cash equivalents totaled $716,000, and our total liabilities included $1,006,000 in debt that is convertible at the option of the debtholders, $100,000 of debt that we may convert to equity at the April 2021 maturity date, $100,000 notes due on demand, $224,000 owed by our partially owned subsidiary Clyra Medical Technologies, Inc.

(“Clyra”) due in June 2021, and $1,007,000 owed by Clyra that must be paid out of operational cash (see Note 4 and 10), with a maturity date that automatically extends each June.

Since December 30, 2020, we have received over $2 million in proceeds from stock sales to Lincoln Park (see Note 3), and paid off $650,000 in debt (see also Note 14).

We have two promissory notes due in August, 2021, (see Note 4, “ Notes payable, mature August 12 and 16, 2021 ”), each of which may be converted by the holder into equity at $0.14 per share.

If the holders do not voluntarily convert the notes to equity, we intend to pay the notes with cash raised through sales of stock to Lincoln Park, although there is no guarantee that we will be able to do so.

The proceeds we receive from stock sales to Lincoln Park is a function of stock price and volume – a lower stock price and less trading volume results in less money we can receive from Lincoln Park.

As of December 31, 2021, our cash and cash equivalents totaled $962,000.

Our liabilities included $50,000 in debt that is due at the March 2023 maturity date, $314,000 due in SBA PPP loans (see Note 14), and $150,000 due to the SBA pursuant to an EIDL loan, payable in monthly installments of $800 beginning July 2023.

Additionally, $187,000 owed by our partially owned subsidiary Clyra Medical Technologies, Inc.

(“Clyra”) due in June 2023, and  

Subsequent to December 30, 2021, we have received approximately $345,000 in gross and net proceeds from sales of our common stock to Lincoln Park.

The proceeds we receive from stock sales to Lincoln Park is a function of stock price and volume –

a lower stock price and less trading volume results in less money we can receive from Lincoln Park.

Our agreement with Lincoln Park precludes us from selling shares to Lincoln Park on a daily basis if our stock price falls below $0.10 per share.

If we are unable to make daily sales, it is not likely we will be able to sell enough shares to Lincoln Park to pay the debt due in August, 2021.

In such event, we intend to negotiate for a delay in repayment with the holders of the notes.

If we are unable to rely on our current arrangement with Lincoln Park to fund our working capital requirements, we will have to rely on other forms of financing, and there is no assurance that we will be able to do so, or if we do so, it will be on favorable terms.

To reduce our operational cash burdens, we regularly issue officers and vendors stock or options in lieu of cash, and anticipate that we will continue to be able to do so in the future.

In the year ended December 31, 2020, our CEO and CSO accepted stock in lieu of $300,000 in unpaid salary and business expenses.

Each has indicated a willingness to do so in the future.

The foregoing factors raise substantial doubt about our ability to continue as a going concern, unless we are able to continue to raise funds through stock sales to Lincoln Park or other private financings, and in the long term, our ability to attain a reasonable threshold of operating efficiencies and achieve profitable operations by licensing or otherwise commercializing products incorporating our technologies.

The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

For the year ended December 31, 2020, we had a net loss of $9,700,000, used $4,154,000 cash in operations, and at December 31, 2020, had a working capital deficit of $2,039,000, and current assets of $1,505,000.

We operate our business in five distinct business segments.

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Cash was generated as follows (in thousands):

December 31, 2020

December 31, 2019

Year ended December 31, 2021

(in thousands)

Year ended December 31, 2020

(in thousands)

SOURCES OF CASH

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Debt (Clyra Medical)

Although ONM, BLEST, and Clyra Medical generated revenues in the year ended December 31, 2020, neither generated operating profits.

As such, we provided cash subsidies to each of these business segments to allow them to continue operations.

While revenues have increased in both operating segments, both continue to expand operations and thus continue to generate losses.

Although ONM Environmental, BLEST, and Clyra Medical generated revenues in the year ended December 31, 2021, each incurred an operating loss.

We provided cash subsidies to each of these business segments to allow them to continue operations.

Critical Accounting Policies

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Revenue Recognition

We adopted ASU 2014-09, “Revenue from Contracts with Customers”, Topic 606, on January 1, 2018.

The guidance focuses on the core principle for revenue recognition.

We adopted ASU 2014-09, “Revenue from Contracts with Customers”, Topic 606, on January 1, 2018.

The guidance focuses on the core principle for revenue recognition. 

The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

To achieve that core principle, an entity should apply the following steps:

Step 1:  

Identify the contract(s) with a customer.

Step 2:  

Identify the performance obligations in the contract.

Step 3:  

Determine the transaction price.

Step 4:  

Allocate the transaction price to the performance obligations in the contract.

Step 5:  

Recognize revenue when (or as) the entity satisfies a performance obligation.

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The only performance obligation is to create and ship the product and each product has separate pricing.

ONM recognizes revenue at a point in time when the order for its goods are shipped if its agreement with the customer is FOB ONM’s warehouse facility, and when goods are delivered to its customer if its agreement with the customer is FOB destination.

Revenue is recognized with a reduction for sales discounts, as appropriate and negotiated in the customer’s purchase order.

ONM also installs misting systems for which it bills on a time and materials basis.

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Revenue is recognized as services are performed and completed.

BLEST’s contracts typically call for invoicing for time and materials incurred for that contract.

A few contracts have called for milestone or fixed cost payments where BLEST bills an agreed-to amount per month for the life of the contract.

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If the warrant is determined to be a derivative and not qualify for equity treatment, then it is measured at fair value using the Black Scholes option model, and recorded as a liability on the balance sheet.

The warrant is re-measured at its then current fair value at each subsequent reporting date (it is “marked-to-market”).

If the warrant is determined to not have derivative features, it is recorded into equity at its fair value using the Black Scholes option model, however, limited to a relative fair value based upon the percentage of its fair value to the total fair value including the fair value of the convertible note.

Convertible debt instruments are recorded at fair value, limited to a relative fair value based upon the percentage of its fair value to the total fair value including the fair value of the warrant.

Further, the convertible debt instrument is examined for any intrinsic beneficial conversion feature (“BCF”) of which the conversion price is less than the closing common stock price on date of issuance.

If the relative fair value method is used to value the convertible debt instrument and there is an intrinsic BCF, a further analysis is undertaken of the BCF using an effective conversion price which assumes the conversion price is the relative fair value divided by the number of shares the convertible debt is converted into by its terms.

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Share-based Payments

It is the Company’s policy to expense share-based payments as of the date of grant or over the term of the vesting period in accordance with Auditing Standards Codification Topic 718 “Share-Based Payment.” Application of this pronouncement requires significant judgment regarding the assumptions used in the selected option pricing model, including stock price volatility and employee exercise behavior.

It is the Company’s policy to expense share-based payments as of the date of grant or over the term of the vesting period in accordance with Auditing Standards Codification Topic 718 “Share-Based Payment.” Application of this pronouncement requires significant judgment regarding the assumptions used in the selected option pricing model, including stock price volatility and employee exercise behavior.

Most of these inputs are either highly dependent on the current economic environment at the date of grant or forward-looking expectations projected over the expected term of the award.

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Observable inputs are those that market participants would use in pricing the assets based on market data obtained from sources independent of the Company.

Unobservable inputs reflect the Company’s assumptions about inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The Company has determined the appropriate level of the hierarchy and applied it to its financial assets and liabilities.

Management believes the carrying amounts of the Company’s financial instruments as of December 31, 2020 and 2019 approximate their respective fair values because of the short-term nature of these instruments.

Such instruments consist of cash, accounts receivable, prepaid assets, accounts payable, convertible notes, and other assets and liabilities.

Management believes the carrying amounts of the Company’s financial instruments as of December 31, 2021 and 2020, approximate their respective fair values because of the short-term nature of these instruments.

Such instruments include cash, accounts receivable, prepaid assets, and accounts payable.

Recent Accounting Pronouncements

See Note 2 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies – Recent Accounting Pronouncements”, for the applicable accounting pronouncements affecting the Company.

See Note 2 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies –

Recent Accounting Pronouncements”, for the applicable accounting pronouncements affecting the Company.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not applicable.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements as of and for the years ended December 31, 2020 and 2019 are presented in a separate section of this report following Item 14 and begin with the index on page F-1.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity