Note 8 - Noncontrolling Interest - Clyra Medical

9 Months Ended

Sep. 30, 2025

Clyra Medical [Member]

Notes to Financial Statements

Noncontrolling Interest Disclosure [Text Block]

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 nine months ended September 30, 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 December 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  December 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 September 30, 2025 and December 31, 2024, the balance outstanding totaled $1,300,000 and $864,000.

Convertible Promissory Notes

During the nine months ended September 30, 2025, Clyra issued convertible promissory notes in the aggregate amount of $250,000. The notes bear interest at the rate of 10% per annum, mature two years after the issuance date, 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 $7.50 per share, expiring August 1, 2027.  Warrants to purchase 41,667 shares of Clyra common stock were issued.  The fair value of these warrants issued totaled $52,000 and is recorded as a debt discount and will be amortized to interest expense over the term of the convertible promissory note.  As of September 30, 2025 the balance outstanding totaled $250,000. 

Guaranteed Note Offering

During the nine months ended September 30, 2025, Clyra issued the convertible 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. The notes may be converted at $6.00 per share by the holder at any time, and by Clyra upon the occurrence of certain events which have been satisfied as of May 15, 2025. 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 note offering.  As of September 30, 2025 the balance outstanding totals $575,000.

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 September 30, 2025 and December 31, 2024 the balance outstanding on this line of credit totaled $134,000. 

Equity Transactions

As of September 30, 2025, Clyra had 11,268,795 shares issued and outstanding, of which 746,418 and 330,000 were Series A and Series B Preferred shares, respectively.  As of December 31, 2024, Clyra had 10,544,527 shares issued and outstanding, of which 746,418 were Series A Preferred shares. As of September 30, 2025, and December 31, 2024, of the outstanding amount, BioLargo owned 5,305,156, common shares and 165,765 Series A Preferred shares. 

BioLargo Conversion of Intercompany Balances

In June 2024, BioLargo converted $741,000 owed to it by Clyra into 148,156 shares of Clyra common stock.  

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, expring three years from the grant date. The fair value of the warrants issued totaled $94,000.  

Sales of Common Stock

During the nine months ended September 30, 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.

During the nine months ended  September 30, 2024, Clyra sold 297,397 shares of its common stock, and issued warrants to purchase 146,083 shares of its common stock at $7.50 per share, expiring February 28, 2027, from five accredited investors. In exchange, it received $1,290,000 in gross proceeds. 

Common Stock issued for services

During the nine months ended September 30, 2025, Clyra issued 31,391 shares of its common stock to vendors for services performed in lieu of cash totaling $60,000 and issued a warrant to purchase 7,849 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 $6,000.

During the nine months ended September 30, 2024, Clyra issued 11,331 shares of its common stock to vendors for services performed in lieu of cash totaling $29,000.

Warrant issued for accounts payable

During the nine months ended September 30, 2025, Clyra issued a warrant to purchase 13,847 shares of common stock to a vendor in exchange for services.  The warrant has an exercise price is $7.50, expires three years from the date of grant, and the fair value totaled $8,000.

Warrant Holder Unit Offering

During the nine months ended September 30, 2025, Clyra allowed existing warrant holders to purchase up to two times the number of warrants they held at their current exercise price and receive, in addition to the shares exercised, an additional warrant equal the number of shares purchased with an exercise price is $7.50 per share to expire June 30, 2028. Clyra received $1,894,000 in gross and net proceeds, and issued warrants to purchase 336,916 shares of its common stock from 26 accredited investors. The relative fair value of these warrants totaled $212,000.

Sales of Series A Preferred Stock

In an offering that closed in October 2023, Clyra sold 746,618 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 September 30, 2025 and December 31, 2024, the Preferred Series A accrued and unpaid dividend totaled $849,000 and $590,000, 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 September 30, 2025, no investors have elected to convert.

Clyra Stock Options

	Clyra Options Outstanding		Weighted average price per share		Weighted average remaining life
Balance, December 31, 2023		1,478,922	$	0.31
Granted		72,610	$	4.18
Balance, September 30, 2024		1,551,532	$	1.20		6.4
Balance, December 31, 2024		1,976,863	$	1.00
Granted		103,774	$	4.50
Balance, September 30, 2025		2,080,637	$	1.17		6.3
Unvested		176,667	$	0.69
Vested Balance, September 30, 2025		2,257,304	$	1.22		6.0

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 $164,000 in the nine months ended September 30, 2025, and $131,000 in the nine months ended September 30, 2024. The Black-Scholes model is used to calculate the initial fair value, during the nine months ended September 30, 2025 and 2024, 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 September 30, 2025, there remains $508,000 of stock option expense to be expensed over the next one year.

	September 30, 2025			September 30, 2024
Risk free interest rate		4.27 - 4.45	%		3.95 - 4.34	%
Expected volatility		21 - 43	%		43 - 49	%
Expected dividend yield		—			—
Forfeiture rate		—			—
Expected life in years		10			10

Clyra Warrants

	Clyra Warrants Outstanding			Weighted average price per share		Weighted average remaining life
Balance, December 31, 2023		749,911		$	3.74
Granted		146,083		$	7.50
Vested Balance, September 30, 2024		895,994		$	4.03		2.2
Balance, December 31, 2024		1,183,182		$	4.84
Granted		747,991		$	7.15
Exercised		(241,073	)	$	6.55
Vested Balance, September 30, 2025		1,690,100		$	5.38		1.8

Accounts Payable and Accrued Expenses

At September 30, 2025, and December 31, 2024, Clyra had the following accounts payable and accrued expenses (in thousands):

Category	2025		2024
Accounts payable	$	265	$	247
Accrued dividend		849		590
Accrued payroll		20		30
Total	$	1,134	$	867

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 $486,000.   

Year ending
December 31, 2025	$	36
December 31, 2026		150
December 31, 2027		150
December 31, 2028		150
Total minimum lease payments	$	486
Less imputed interest		(103	)
Total finance lease liabilities	$	383