Note 11. Commitments and Contingencies Calvert Employment Agreement On May 2, 2017, the Company entered into an employment agreement with its President and Chief Executive Officer Dennis P. Calvert (the Calvert Employment Agreement), replacing in its entirety the previous employment agreement with Mr. Calvert dated April 30, 2007. The Calvert Employment Agreement provides that Mr. Calvert will continue to serve as our President and Chief Executive Officer and receive base compensation equal to his current rate of pay of $289,000 annually. In addition to this base compensation, the agreement provides that he is eligible to participate in incentive plans, stock option plans, and similar arrangements as determined by the Companys Board of Directors, health insurance premium payments for himself and his immediate family, a car allowance, paid vacation of four weeks per year, and bonuses in such amount as the Compensation Committee may determine from time to time. Pursuant to the Calvert Employment Agreement, we granted Mr. Calvert a non-qualified stock option (the Option) to purchase 3,731,322 shares of our common stock, exercisable at $0.45 per share, which represented the market price of the Companys common stock as of the date of the agreement, exercisable for ten years from the date of grant and vesting in equal increments over five years (see Note 6 ). The Option provides that any portion of the Option which has not yet vested shall be immediately vested in the event of, and prior to, a change of control, as defined in the Calvert Employment Agreement. The Calvert Employment Agreement also provides for a grant of 1,500,000 shares of common stock, subject to the execution of a lock-up agreement whereby the shares remain unvested unless and until the earlier of (i) a sale of the Company, (ii) the successful commercialization of the Companys products or technologies as demonstrated by its receipt of at least $3 million in cash, or the recognition of $3 million in revenue, over a 12 -month period from the sale of products and/or the license of technology, and (iii) the Companys breach of the employment agreement resulting in his termination. The Option contains the other terms standard in option agreements issued by the Company, including provisions for a cashless exercise. The Calvert Employment Agreement has a term of five years, unless earlier terminated in accordance with its terms. The Calvert Employment Agreement provides that Mr. Calverts employment may be terminated by the Company due to his death or disability, for cause, or upon a merger, acquisition, bankruptcy or dissolution of the Company. Disability as used in the Calvert Employment Agreement means physical or mental incapacity or illness rendering Mr. Calvert unable to perform his duties on a long-term basis (i) as evidenced by his failure or inability to perform his duties for a total of 120 days in any 360 -day period, or (ii) as determined by an independent and licensed physician whom Company selects, or (iii) as determined without recourse by the Companys disability insurance carrier. Cause means that Mr. Calvert has (i) engaged in willful misconduct in connection with the Companys business; or (ii) been convicted of, or plead guilty or nolo contendre in connection with, fraud or any crime that constitutes a felony or that involves moral turpitude or theft. If Mr. Calverts employment is terminated due to merger or acquisition, then he will be eligible to receive the greater of (i) one years compensation plus an additional one -half year for each year of service since the effective date of the employment agreement or (ii) one years compensation plus an additional one -half year for each year remaining in the term of the agreement. Otherwise, he is only entitled to receive compensation due through the date of termination. The Calvert Employment Agreement requires Mr. Calvert to keep certain information confidential, not to solicit customers or employees of the Company or interfere with any business relationship of the Company, and to assign all inventions made or created during the term of the Calvert Employment Agreement as work made for hire. Office Leases We have long-term operating leases for office, industrial and laboratory space in Westminster, California, Oak Ridge, Tennessee, and Alberta, Canada. Payments made under operating leases are charged to the Consolidated Statement of Operations and Comprehensive Loss on a straight-line basis over the term of the operating lease agreement. For the three months ended March 31, 2018 and 2019, total rental expense was $49,000 and $51,000, respectively. On January 1, 2019, we adopted ASC 842 which resulted in a right-of-use asset and lease liability, the adoption resulted in an immaterial cumulative effect of an accounting change that was not recorded. Our right-of-use asset and lease liability operating leases included our office space BioLargo/ONM and BLEST. Our BioLargo/ONM lease has a 4 -year extension and we included this extension in the net present value of our lease payments, which used the incremental borrowing cost to BioLargo of 18%. Water operations lease is considered short-term and not included. The leases have no additional payment terms such as common area maintenance payments, tax sharing payments or other allocable expenses. Likewise, the leases do not contain other terms and conditions of use, such as variable lease payments, residual value guaranties or other restrictive financial terms. Clyra Medical Consulting Agreement Our partially owned subsidiary Clyra Medical (see Note 8 ) entered into a consulting agreement with Beach House Consulting, LLC, through which Jack B. Strommen will be providing consulting services to Clyra Medical related to its sales and marketing activities once it has received FDA Approval (as defined in Note 8 and the associated agreement) on a product, at which point the agreement provides that Mr. Strommen is to receive $23,000 per month for a period of four years. This agreement has not started, and the total cash obligation related to the agreement would be $1.1 million.