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

Secured Promissory Notes

During the year ended  December 31, 2024, Clyra issued promissory notes in the aggregate amount of $1,064,000, the funds of which were used to purchase and secured by equipment for at-scale production of its wound irrigation solution products. Of this total, $200,000 was issued to BioLargo and this eliminates during consolidation of intercompany transactions. The notes bear interest at the rate of 15% per annum, mature in two years, and require interest-only payments until maturity.  During 2025, Clyra issued secured promissory notes in the aggregate amount of $436,000, the funds of which were used to purchase equipment for at-scale manufacture of its products. The notes bear interest at the rate of 15% per annum, mature on  October 31, 2026, require interest-only payments until maturity, and  may be pre-paid at any time. Each investor received a warrant to purchase the number of Clyra common shares equal to the face amount of the note divided by six, at an exercise price of $6.00 per share, expiring  October 31, 2029.  Warrant to purchase 72,667 shares of Clyra common stock were issued. The fair value of the warrants totaled $99,000 and is recorded as a debt discount, which is amortized as interest expense over the term of the secured promissory note.  As of  March 31, 2026, and December 31, 2025, the balance outstanding totaled $1,300,000.

Guaranteed Note Offering

During the three months ended March 31, 2026, Clyra issued the guaranteed promissory notes in the aggregate amount of $2,395,000. The notes bear interest at the rate of 15% per annum, matures February 28, 2029, and is guaranteed by the Company’s largest stockholder, BioLargo Inc. Each investor received a warrant to purchase an aggregate of number of Clyra common shares equal to the face amount of the note divided by 7.5, divided by two, at an exercise price of $7.50 per share, expiring February 28, 2031. Warrants to purchase 159,668 shares of Clyra common stock were issued. The fair value of these warrants issued totaled $232,000 and is recorded as a debt discount and will be amortized to interest expense over the term of the guaranteed note offering. 

During 2025, Clyra issued guaranteed promissory notes in the aggregate amount of $575,000. The notes bear interest at the rate of 15% per annum, matures  July 15, 2027, and is guaranteed by the Company’s largest stockholder, BioLargo Inc.  Each investor received a warrant to purchase an aggregate of number of Clyra common shares equal to the face amount of the note divided by six, at an exercise price of $6.50 per share, expiring  July 15, 2028. Warrants to purchase 88,462 shares of Clyra common stock were issued. The fair value of these warrants issued totaled $80,000 and is recorded as a debt discount and will be amortized to interest expense over the term of the guaranteed promissory notes.  

 As of March 31, 2026 and December 31, 2025, the balance outstanding totals $2,970,000 and $575,000, respectively.

The Black-Scholes model is used to calculate the initial fair value of the warrants issued as part of the Clyra Medical debt obligations, we used a stock price on the date of grant of $6.00 per share, volatility ranging between 35 - 43%. Because Clyra is a private company with no secondary market for its common stock, the resulting fair value was discounted by 30%.

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 $1,000,000 inventory line of credit. Since inception, Clyra Medical received $260,000 in draws and made repayments totaling $126,000. The interest rate on this line of credit is 15%. 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 15% of the principal amount then due under the note. The maturity date has not been further extended, and Clyra continues to provide monthly reporting and make interest payments to Vernal as required. As of March 31, 2026 and December 31, 2025 the balance outstanding on this line of credit totaled $134,000.  Subsequent to March 31, 2026, this line of credit was paid in full.

Equity Transactions

As of March 31, 2026, and December 31, 2025, Clyra had 11,375,860 shares issued and outstanding, of which 746,418 and 330,000 were Series A and Series B Preferred shares, respectively.  As of March 31, 2026, and December 31, 2025, of the total outstanding Clyra shares, BioLargo owned 5,305,156, common shares and 165,765 Series A Preferred shares. 

Sales of Series A Preferred Stock

In an offering that closed in October 2023, Clyra sold 746,418 shares of its Series A Preferred Stock, and in exchange received $1,800,000 in gross and net proceeds. Purchasers of the Series A Preferred Stock also received a 3-year warrant to purchase the same number of additional shares of common stock for $3.72 per share. The fair value of the warrants issued totaled $524,000. Shares of Series A Preferred Stock earn a dividend of 15% each year, compounding annually; the company is under no obligation to pay such dividends in cash, and such dividends automatically convert to common stock upon conversion of the Series A Preferred Stock to common stock. Each share of Series A Preferred stock can be converted by the holder at any time for one share of common stock and automatically convert upon the completion of a public offering of shares in which at least $5,000,000 of gross proceeds is received by the company. Accrued dividends  may be converted to common stock at a conversion rate of $3.10 per share.  As of March 31, 2026 and December 31, 2025, the Preferred Series A accrued and unpaid dividend totaled $1,023,000 and $937,000, respectively. Each investor also entered into an agreement with BioLargo whereby the investor  may exchange some or all of its Series A Preferred stock, plus accrued dividends, into shares of BioLargo common stock, at a price equal to a 20% discount of the volume weighted average price over the 30 prior trading days. Elections  may be made during the period beginning  January 1, 2025, and ending on  June 30, 2026. As of March 31, 2026, no investors have elected to convert.

Sales of Series B Preferred Stock

In an offering that closed in  October 2025, Clyra sold 330,000 shares of its Series B Preferred Stock, and in exchange received $2,145,000 in gross and net proceeds. Purchasers of the Series B Preferred Stock also received warrants to purchase an aggregate 165,000 shares of common stock for $7.50 per share, expiring three years from the grant date. The fair value of the warrants issued totaled $94,000.

Sales of Common Stock

There were no sales of common stock during the three months ended March 31, 2026. 

During the three months ended  March 31, 2025, Clyra sold 49,167 shares of its common stock, and issued 24,584 warrants to purchase shares of its common stock at $7.50 per share, expiring  February 28, 2027, from five accredited investors. In exchange, it received $295,000 in gross proceeds.  The relative fair value of these warrants totaled $38,000.

Common Stock issued for services

There were no shares issued for services during the three months ended March 31, 2026. 

On  March 31, 2025, Clyra issued 6,000 shares in lieu of cash totaling $36,000, to a vendor for services performed and issued a warrant to purchase 3,000 shares of its common stock at $6.00 per share, expiring 5 years from the grant date. The relative fair value of these warrants totaled $5,000.

Clyra Stock Options

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 $297,000 in the three months ended March 31, 2026, and $49,000 in the three months ended March 31, 2025. The Black-Scholes model is used to calculate the initial fair value, during the three months ended March 31, 2026 and 2025, we used a stock price on the date of grant of $4.50 per share. Because Clyra is a private company with no secondary market for its common stock, the resulting fair value was discounted by 30%.

As of March 31, 2026, there remains $1,384,000 of stock option expense to be expensed over the next three years.

Clyra Warrants

Accounts Payable and Accrued Expenses

At March 31, 2026, and December 31, 2025, Clyra had the following accounts payable and accrued expenses (in thousands):

Sale and leaseback of equipment 

On  December 4, 2024, Clyra entered into an agreement whereby it sold and leased back certain equipment to be used in the manufacturing of its wound irrigation solution. Clyra received $350,000 cash and a secured promissory note in the principal amount of $82,000 which bears interest at 15%, requires interest be paid monthly, and the principal balance due on  December 4, 2028. The obligations of the Note are secured by the equipment pursuant to a security agreement. At the end of the lease term, Clyra has the option to purchase the equipment for $82,000. Concurrently, Clyra leased the equipment for a 49-month term.  The remaining lease payments total $412,000.