NOTE 10 - NOTES PAYABLE-RELATED PARTIES

As of June 30, 2023 and December 31, 2022, the Company had advances from Kent Emry (Chairman of the Company). The balance outstanding as of June 30, 2023 and December 31, 2022 was $1,500.

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, 2023 and December 31, 2022 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, 2023 and December 31, 2022 is $500,000. The interest expense during the three months ended June 30, 2023 and 2022 were $31,164. The interest expense during the six months ended June 30, 2023 and 2022 were $61,986. 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. On June 8, 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.

On September 20, 2022, the Company received $20,000 advances from Louis C Lucido, a member of the Company’s Board of Directors. The balance outstanding as of June 30, 2023 and December 31, 2022 was $20,000.

On November 1, 2022, the Company issued an unsecured promissory note payable to Louis C Lucido for $300,000 with principal and interest due November 1, 2023, with a stated interest rate of 5% per annum. Under the terms of the note the Company shall pay quarterly interest payments of $3,750. On April 3, 2023, the Company entered into the Louis 2023 Exchange Agreement, pursuant to which Mr. Lucido agreed to exchange of the promissory note then outstanding of $300,000 and the accrued interest on the promissory note of $13,892 into the Company’s 183,606 shares of common stock at $1.71 per share, resulting in the recognition of $34,338 of loss on settlement of debt. The balance outstanding as of June 30, 2023 and December 31, 2022 was $0 and $300,000. As the Company failed to make a payment due under the terms of the promissory note, the stated interest rate of the note was increased to 20% on February 1, 2023. The interest expense during the three months ended June 30, 2023 was $7,687. The interest expense during the six months ended June 30, 2023 was $11,386. As additional consideration for the loan the Company issued 33,000 shares of common stock and valued at $59,400, which was recognized as debt discount. During the three months ended June 30, 2023, the Company amortized $488 of debt discount as interest expense. During the six months ended June 30, 2023, the Company amortized $15,135 of debt discount as interest expense. The remaining debt discount was written off as a loss on settlement of debt for the three months ended June 30, 2023.

On December 8, 2022, the Company received $55,000 advances from Mr. Lucido. The balance outstanding as of June 30, 2023 and December 31, 2022 was $55,000.

On March 16, 2023, the Company received $50,000 advances from Mr. Lucido. The balance outstanding as of June 30, 2023 and December 31, 2022 was $50,000.

During the six months ended June 30, 2023, the Company received $133,273 advances from Lourdes Felix. The balance outstanding as of June 30, 2023 was $98,273.

The interest expense – related parties during the three months ended June 30, 2023 and 2022 were $162,825 and $372,118, respectively, which includes the amortization of royalty obligations as interest expense of $118,554 and $118,554, respectively (see Note 12). The interest expense – related parties during the six months ended June 30, 2023 and 2022 were $332,205 and $525,618, respectively, which includes the amortization of royalty obligations as interest expense of $233,888 and $233,888, respectively (see Note 12). As of June 30, 2023 and December 31, 2022, the accumulated interest on related parties notes payable was $401,857 and $332,567, respectively, and was included in accounts payable and accrued expenses on the balance sheet.

The outstanding notes payables to related parties as of June 30, 2023 and December 31, 2022 were summarized as below: