Note 8 - Noncontrolling Interest

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Noncontrolling Interest Disclosure [Text Block]

Note

8.

Noncontrolling Interest

In

May

2012,

we formed a subsidiary for the purpose of marketing and selling medical products containing our technology, Clyra Medical Technology, Inc. (“Clyra”). Until

December

17,

2012,

this subsidiary was wholly-owned, with

7,500

shares issued to BioLargo, Inc. On

December

17,

2012,

Clyra issued

1,500

shares of Clyra common stock to a

three

-member management team,

one

-

third

of which vested immediately, and the remaining over time. The shares granted to the

three

executives are restricted from transfer until a sale of the company, whether by means of a sale of its stock or substantially all of its assets, or otherwise by agreement of Clyra, BioLargo and the executives.

On

December

30,

2015,

Clyra sold

9,830

shares of its Series A Preferred Stock (“Preferred Shares”) to Sanatio Capital, LLC (“Sanatio”) for

$750,000.

This sale was made in reliance on the exemption from registration contained in Section 

4(2)

of the Securities Exchange Act and Regulation D promulgated thereunder as not involving a public offering of securities. As a result of the sale, Sanatio owns

40%

of Clyra’s issued and outstanding shares, BioLargo owns

54%,

and the remainder is owned by management.

As set forth in Clyra’s Amended and Restated Articles of Incorporation, Preferred Shares accrue an annual dividend of

8%

for a period of

five

years. Although the dividends begin to accrue immediately, Clyra has no obligation to declare a dividend until a product of the company has received a premarket approval by the United States Federal Drug Administration (“FDA”), or for which a premarket notification pursuant to form

510(k)

has been submitted and for which the FDA has given written clearance to market the product in the United States (either, “FDA Approval”). After FDA Approval, annually on

December

20,

and unless prohibited by California law governing distributions to shareholders, Clyra is required to declare and pay any accruing dividends to holders of Preferred Shares then accrued but unpaid. Management classifies the Preferred Shares dividend as a medium probability of occurring and as of

March

31,

2017

the Preferred Shares dividend has an accrued and undeclared balance of

$75,000.

Holders of Preferred Shares are entitled to preferential payments in the event of a liquidation, dissolution or winding up of the company, in an amount equal to any accrued and unpaid dividends. After such preference, any remaining assets are distributed pro-rata between holders of Clyra common stock and Preferred Shares as if the Preferred Shares had converted to Clyra common stock. Holders of Preferred Shares

may

convert the shares to Clyra common stock initially on a

one

-to-

one

basis. The conversion formula is subject to change in the event Clyra sells stock at a lower price than the price paid by Sanatio.

In addition to the foregoing, Clyra entered into a consulting agreement with Beach House Consulting, LLC, through which Jack B. Strommen will be providing consulting services to the company. Mr. Strommen is the founder of Beach House Consulting, LLC. Mr. Strommen will be assisting the company in its sales and marketing activities once it has FDA Approval on a product, at which point the agreement provides that Mr. Strommen is to receive

$23,438

per month for a period of

four

years. As of

March

31,

2017,

the Company has not presented any products to the FDA for FDA approval.

From inception, Clyra has generated

no

revenues and the financial impact of Clyra’s operations for the

three

months ended

March

31,

2017,

resulted in a net loss of

$137,082.