NOTE 10 - NOTES PAYABLE-RELATED PARTIES

As of June 30, 2022 and December 31, 2021, the Company had advances from Kent Emry (Chairman of the Company). The balance outstanding as of June 30, 2022 and December 31, 2021 was $1,500.

The Company issued to Joe Galligan (a holder of between 10% and 15% of the Company’s shares of common stock who became a member of the Board on February 16, 2021) one unsecured promissory notes of $125,000 bearing interest at 8% per annum with both principal and initially interest due July 26, 2018. During 2019 and 2020 the note was extended three times, ultimately rendering the note due on demand. The balance outstanding as of June 30, 2022 and December 31, 2021 was $125,000.

On January 22, 2013, the Company issued an unsecured promissory note payable to Kent Emry (Chairman of the Board) for $200,000 due January 1, 2018, with a stated interest rate of 12% per annum beginning three months from issuance, payable monthly. Principal payments were due starting February 1, 2015 at $6,650 per month. The lender has an option to convert the note to licensing rights for the State of Oregon. The Company currently is in default of the principal and interest. The balance outstanding as of June 30, 2022 and December 31, 2021 was $163,610.

On September 9, 2021, the Company issued an unsecured promissory note payable to Kent Emry for $500,000 with principal and interest due June 8, 2022, with a stated interest rate of 25% per annum. The balance outstanding as of June 30, 2022 and December 31, 2021 is $500,000. The interest expense during the three and six months ended June 30, 2022 was $31,164 and $61,986, respectively. If the Company fails to make any payment due under the terms of the promissory note, the Company shall issue a warrant to Kent Emry to which the number of common shares that Kent Emry has the right to purchase equals 119,617 common shares. The warrant shall have a term of three years with an exercise price of $4.14 and shall be equitably adjusted to offset the effect of any stock splits and similar events. During the six months ended June 30, 2022, the Company issued the warrant that entitles Kent Emry to purchase 119,617 common shares due to the loan default. The fair value of the warrant on June 8, 2022 was $214,975, which the Company recognized as interest expense – related party.

The interest expense during the three and six months ended June 30, 2022 were $38,590 and $76,756, respectively. The interest expense during the three and six months ended June 30, 2021 were $7,425 and $14,769, respectively. As of June 30, 2022 and December 31, 2021, the accumulated interest on related parties notes payable was $301,347 and $224,592, respectively, and was included in accounts payable and accrued expenses on the balance sheet.