Exhibit 10.27

 

CONVERTIBLE PROMISSORY NOTE

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR APPLICABLE
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THERE IS AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

 

Principal Amount: $475,000.00

Westminster, California

Purchase Price: $380,000.00

Issue Date: August 12, 2019

Instrument #: 33146-A

Original issue date: September 18, 2018

 

FOR VALUE RECEIVED, BIOLARGO, INC., a corporation organized under the laws of
the state of Delaware (“Issuer”), promises to pay to the order of Vernal Bay
Investments, LLC (hereafter, together with any subsequent holder hereof, called
“Holder”), at its office, at “Holder’s Address” (as that term is defined below),
or at such other place as Holder may direct, the “Principal Amount” noted above
(the “Loan Amount”), payable August 12, 2020 (the “Maturity Date”). This
convertible note is duly authorized issue of the Issuer, and amends and replaces
instrument number 33146 (“Note”). The outstanding balance of this Note is
convertible, pursuant to the terms set forth herein, at an initial conversion
price of $0.17 per share (“Conversion Price”), as such price may be adjusted.

 

The Issuer agrees to pay interest on the unpaid principal amount of the Loan
Amount from time to time outstanding hereunder at the following rates per year,
compounded annually: (i) before the Maturity Date, whether by acceleration or
otherwise, at the rate per annum equal to five percent (5%); (ii) upon an Event
of Default (see Section 9 below), until paid, at a rate per annum equal to
twelve percent (12%).

 

Payments of both principal and interest are to be made in immediately available
funds in lawful money of the United States of America, or in Common Stock of the
Issuer, at the Holder’s option, as set forth below.

 

The Note is subject to the following additional provisions:

 

1.     Interest. Accrual of interest shall commence as of the Issue Date.
Interest will be paid in cash, or, upon conversion of the Note, in that number
of shares of Common Stock of the Issuer (the “Common Stock”) at a price per
share equal to the Conversion Price. Unless otherwise agreed in writing by both
parties hereto, the interest so payable will be paid to the person in whose name
this Note (or one or more predecessor Notes) is registered on the records of the
Issuer regarding registration and transfers of the Note (the “Note Register”),
provided, however, that the Issuer’s obligation to a transferee of this Note
arises only if such transfer, sale or other disposition is made in accordance
with the terms and conditions contained in this Note and the Subscription
Agreement that the original Holder executed at the time of making an investment
in the Issuer.

 

2.     Withholdings. The Issuer shall be entitled to withhold from all payments
of principal and/or interest of this Note any amounts required to be withheld
under the applicable provisions of the Internal Revenue Code of 1986, as
amended, or other applicable laws at the time of such payments.

 

- 1 -

--------------------------------------------------------------------------------

 

 

3.     Transfer. This Note has been issued subject to investment representations
of the original Holder hereof and may be transferred or exchanged only in
compliance with the Securities Act and applicable state securities laws and in
compliance with the restrictions on transfer provided in the Subscription
Agreement. Prior to the due presentment for such transfer of this Note, the
Issuer and any agent of the Issuer may treat the person in whose name this Note
is duly registered in the Note Register as the owner hereof for the purpose of
receiving payment as herein provided and all other purposes, whether or not this
Note is overdue, and neither the Issuer nor any such agent shall be affected by
notice to the contrary. The transferee shall be bound, as the original Holder by
the same representations and terms described herein and under the Subscription
Agreement.

 

4.      Conversion by Holder. The Holder may, at its option, at any time convert
the principal amount of this Note or any portion thereof, and accrued interest,
into such number of shares of fully paid and non-assessable Common Stock of the
Issuer (“Conversion Shares”) as is obtained by dividing the amount so converted
by the Conversion Price (as adjusted). The right to convert the Note may be
exercised by the Holder by telecopying, emailing to
ShareholderServices@BioLargo.com, mailing (via first class mail, postage
prepaid) or personally delivering an executed and completed notice of conversion
(the “Notice of Conversion”) to the Issuer. The business day on which a Notice
of Voluntary Conversion is delivered in accordance with the provisions hereof
shall be deemed the “Voluntary Conversion Date”. The Holder must return to
Issuer the original Note. The Issuer shall cause the issuance of the Conversion
Shares to an account in Holder’s name at Issuer’s transfer agent, or, upon
Holder’s request, issue and deliver a paper certificate representing the
Conversion Shares, within five business days after the later to occur of (i) the
Voluntary Conversion Date or (ii) the business day on which the Issuer has
received from the Holder the original Note being so converted. Accrued interest
shall be due on the Voluntary Conversion Date and paid as set forth above in
Paragraph 1.

 

5.     Adjustment. The number of Conversion Shares shall be adjusted as follows.
If the Issuer shall at any time subdivide its outstanding shares of Common Stock
into a greater number of shares of Common Stock, the number of Conversion Shares
in effect immediately prior to such subdivision shall be proportionately
increased, and conversely, in case the outstanding shares of Common Stock shall
be combined into a smaller number of shares of Common Stock, the number of
Conversion Shares in effect immediately prior to such subdivision shall be
proportionately decreased.

 

6.     Future Financings. So long as this Note is outstanding, upon (i) any
issuance by the Issuer of any promissory note with a fixed conversion price
lower than the Conversion Price, or (ii) the sale of its common stock in an
equity offering for a price per share lower than the Conversion Price, then the
Company shall notify the Holder of such issuance and the Conversion Price shall
be reduced accordingly. For purpose of clarity, (i) the issuance of a note with
a variable rate conversion price shall not adjust the Conversion Price, (ii) the
issuance of stock pursuant to the conversion of a note with a variable rate
conversion price shall not adjust the Conversion Price, and (iii) the issuance
of stock or options to employees, officers, vendors, consultants, or other third
parties in payment of amounts owed by Issuer to such person(s) shall not adjust
the Conversion Price.

 

7.     Prepayment. At any time the Company shall have the option, upon 10 days’
notice to Holder, to pre-pay the entire remaining outstanding principal amount
of this Note and interest in cash, provided that (i) such amount must be paid in
cash on the next business day following such 10 day notice period, and (ii) the
Holder may still convert this Note pursuant to the terms hereof at all times
until such prepayment amount has been received in full. Except as set forth in
this Section the Company may not prepay this Note in whole or in part.

 

8.     Qualified Financing. Notwithstanding anything to the contrary herein, the
Note (including all outstanding principal and accrued interest) will be
immediately due and payable upon closing by the Issuer of any financing
transaction in which the Issuer receives gross proceeds of at least $3,500,000
(a “Qualified Financing”). In such instance, the Issuer shall follow the
provisions set forth in Section 7 (“Prepayment”) above.

 

- 2 -

--------------------------------------------------------------------------------

 

 

9.     Events of Default. Each of the following occurrences is hereby defined as
an “Event of Default”:

 

a.     Nonpayment. The Issuer shall fail to make any payment of principal,
interest, or other amounts payable hereunder when and as due; or

 

b.     Dissolutions, etc. The Issuer or any subsidiary shall fail to comply with
any provision concerning its existence or any prohibition against dissolution,
liquidation, merger, consolidation or sale of assets; or

 

c.     Noncompliance with this Agreement. The Issuer shall fail to comply in any
material respect with any provision hereof, which failure does not otherwise
constitute an Event of Default, and such failure shall continue for ten (10)
days after the occurrence of such failure; or

 

d.     Bankruptcy. Any bankruptcy, insolvency, reorganization, arrangement,
readjustment, liquidation, dissolution, or similar proceeding, domestic or
foreign, is instituted by or against the Issuer or any of its subsidiaries, or
the Issuer or any of its subsidiaries shall take any step toward, or to
authorize, such a proceeding; or

 

e.     Insolvency. The Issuer shall make a general assignment for the benefit of
its creditors, shall enter into any composition or similar agreement, or shall
suspend the transaction of all or a substantial portion of its usual business;
or

 

f.     Public Trading. The common stock of the Company is suspended or delisted
for trading on the Over the Counter OTCQB Venture Marketplace or NASDAQ; the
Company shall become late or delinquent in its filing requirements as a fully-
reporting issuer registered with the Securities & Exchange Commission, or the
Company shall fail to meet all requirements to satisfy the availability of Rule
144 to the Investor or its assigns including but not limited to timely
fulfillment of its filing requirements as a fully-reporting issuer registered
with the SEC, requirements for XBRL filings, and requirements for disclosure of
financial statements on its website.

 

10.     Holder’s Election upon Default. Upon the occurrence of any Event of
Default (without the need for any party to give any notice or take any other
action), this Note (and all interest through such date) shall be immediately due
and payable. It is agreed that in the event of such action, such Holder shall be
entitled to receive all reasonable fees, costs and expenses incurred, including
without limitation such reasonable fees and expenses of attorneys. The parties
acknowledge that a change in control of the Issuer shall not be deemed to be an
Event of Default as set forth herein.

 

11.     Invalid or Unenforceable Provisions. In case any provision of this Note
is held by a court of competent jurisdiction to be excessive in scope or
otherwise invalid or unenforceable, such provision shall be adjusted rather than
voided, if possible, so that it is enforceable to the maximum extent possible,
and the validity and enforceability of the remaining provisions of this Note
will not in any way be affected or impaired thereby.

 

12.     Voting Rights. This Note does not entitle the Holder hereof to any
voting rights or other rights as a stockholder of the Issuer prior to the
conversion into Common Stock thereof, except as provided by applicable law. If,
however, at the time of the surrender of this Note and conversion the Holder
hereof shall be entitled to convert this Note, the Conversion Shares so issued
shall be and be deemed to be issued to such holder as the record owner of such
shares as of the close of business on the Conversion Date.

 

- 3 -

--------------------------------------------------------------------------------

 

 

IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed by an
officer thereunto duly authorized.

 

 

BIOLARGO, INC.                

 

/s/Dennis P. Calvert

By_________________________

Name: Dennis P. Calvert, President

 

- 4 -

--------------------------------------------------------------------------------

 

 

NOTICE OF VOLUNTARY CONVERSION

 

BIOLARGO, INC.

 

(To be Executed by the Registered Holder)

 

 

 

The undersigned hereby irrevocably elects to convert $_______________ of the
principal amount due on the Convertible Promissory Note – OID, instrument number
706-33223 (“Note”), plus outstanding interest due on the amount converted, into
shares of Common Stock of BioLargo, Inc., according to the conditions set forth
in the Note. Shares due shall be calculated based on the Conversion Price set
forth in the Note.

 

The undersigned represents and warrants to BioLargo that, as of the date hereof,
the undersigned is an “accredited investor” as that term is defined in Rule
501(a) of Regulation D under the Securities Exchange Act of 1934, as amended.

 

 

 

Signature:                                            Date Signed:
_____________________

              

 

 

 

 

 

 

--------------------------------------------------------------------------------

FOR BIOLARGO USE ONLY

 

Date conversion notice received: _______________

 

Stock price on date received: _______________

 

Lowest VWAP over prior 25 trading days: _______________

 

Principal converted: $_______________

 

Accrued interest due at date of conversion: _______________

 

Total to be paid through conversion: _______________

 

Conversion price: _______________

 

Shares to issue: _______________

 

- 5 -