Note 3. Related Party Transactions | Note 3. Related Party Transactions Related party convertible notes payables As of December 31, 2021 and 2020, convertible notes payable – related parties totaled $0 and $456,032, respectively. During the year ended December 31, 2020, Mr. Beplate loaned the Company $251,730 which was convertible at $0.65. These loans resulted in a beneficial conversion feature of $83,156 which was recorded to interest expense – related party upon issuance. The Company made repayments to Mr. Beplate totaling $505,765, $87,750 was assigned to the Company’s legal counsel and $24,000 was forgiven during the year ended December 31, 2020, leaving a balance of $0 owed to Mr. Beplate as of December 31, 2020. These loans were made to pay for operating expenses of the Company, due on demand and carried no interest rate. During the year ended December 31, 2020, Brian Thom, the Chief Executive Officer loaned the Company $450,000 and also converted $105,000 of accrued compensation into a convertible note. The note and loans were convertible at $0.50 per share at the discretion of the Mr. Thom, had a maturity date of March 31, 2021 and carried an interest rate of 3%. The loans resulted in a beneficial conversion feature totaling $338,105 which was recorded as a debt discount. The debt discount was amortized through the maturity dates and $138,792 was amortized to interest expense – related party during the year ended December 31, 2020. As of December 31, 2020, the total outstanding balance of the note and loans was $555,000 and the remaining unamortized debt discount was $199,314. During the year ended December 31, 2021, Mr. Thom converted $45,000 of accrued compensation into a convertible note. The note was convertible at $0.50 per share at the discretion of Mr. Thom, had a maturity date of March 31, 2021 and carried an interest rate of 3%. The note resulted in a beneficial conversion feature of $45,000 which was recorded as a debt discount. The debt discount was amortized through the maturity date and a total of $244,314 for all of Mr. Thom’s notes was amortized to interest expense – related party during the year ended December 31, 2021, which included the unamortized debt discount of $199,314 as of December 31, 2020 and the debt discount of $45,000 recorded during the current year. The remaining unamortized debt discount is $0. The total outstanding principal balance of $600,000 which was related to $450,000 of loans to the Company and $150,000 of accrued compensation along with accrued interest of $10,135 was converted into 1,220,272 shares of common stock leaving $0 owed to Mr. Thom as of December 31, 2021. During the year ended December 31, 2020, Louis Schiliro, the Chief Operating Officer loaned the Company $130,000 and also converted $150,000 of accrued compensation into a convertible note. The note and loans are convertible at $0.50 per share at the discretion of Mr. Schiliro, have a maturity date of March 31, 2021 and have an interest rate of 3%. During the year ended December 31, 2020, $110,000 of the convertible note payable along with $1,028 of accrued interest was assigned to the Company’s legal counsel leaving a total outstanding balance of the note and loans of $170,000. The loans and note resulted in a beneficial conversion feature totaling $174,985 which was recorded as a debt discount. The debt discount was amortized through the maturity dates and $105,331 was amortized to interest expense – related party during the year ended December 31, 2020. During the year ended December 31, 2021, Mr. Schiliro converted $45,000 of accrued compensation into a convertible note. The note was convertible at $0.50 per share at the discretion of Mr. Schiliro, had a maturity date of March 31, 2021 and carried an interest rate of 3%. The note resulted in a beneficial conversion feature of $45,000 which was recorded as a debt discount. The debt discount was amortized through the maturity date and a total of $114,654 for all of Mr. Schiliro’s notes was amortized to interest expense – related party during the year ended December 31, 2021, which included the unamortized debt discount of $69,654 as of December 31, 2020 and the debt discount of $45,000 recorded during the current year. The remaining unamortized debt discount is $0. During the year ended December 31, 2021, $175,000 of the convertible note payable along with $1,502 of accrued interest was assigned to one of the Company’s legal counsel leaving a total outstanding balance of $40,000. The remaining balance of $40,000 along with accrued interest was converted into 80,173 shares of common stock leaving $0 owed to Mr. Schiliro as of December 31, 2021. During the year ended December 31, 2020, Kristofer Heaton, the Principal Financial Officer, converted $3,750 of accrued compensation into a convertible loan. The loan was convertible at $0.50 per share at the discretion of Mr. Heaton, had a maturity date of March 31, 2021 and carried an interest rate of 3%. This note resulted in a beneficial conversion feature totaling $3,750 which was recorded as a debt discount. The debt discount is being amortized through the maturity date and $0 was amortized to interest expense – related party during the year ended December 31, 2020. During the year ended December 31, 2021, Mr. Heaton, converted $22,500 of accrued compensation into a convertible note. The note was convertible at $0.50 per share at the discretion of Mr. Heaton, had a maturity date of March 31, 2021 and carried an interest rate of 3%. The note resulted in a beneficial conversion feature totaling $22,500 which was recorded as a debt discount. The debt discount is being amortized through the maturity date and a total of $26,250 for all of Mr. Heaton’s notes was amortized to interest expense – related party during the year ended December 31, 2021, which included the unamortized debt discount of $3,750 as of December 31, 2020 and the debt discount of $22,500 recorded during the current period. The remaining unamortized debt discount is $0. The total outstanding principal balance of $26,250 along with accrued interest was converted into 52,666 shares of common stock leaving $0 owed to Mr. Heaton as of December 31, 2021. Interest expense – related party on the above convertible notes was $392,112 ($6,894 interest expense along with $385,218 of debt discount amortization) and $336,203 ($8,925 interest expense along with $327,278 of debt discount amortization) during the years ended December 31, 2021 and 2020, respectively. Accrued interest – related party due to these convertible notes was $2,308 and $7,503 as of December 31, 2021 and 2020, respectively. Loans payable/Advances from related parties During the year ended December 31, 2021, Mr. Schiliro advanced the Company $34,000 to pay for operating expenses and paid $30,000 of expenses on behalf of the Company. During the year ended December 31, 2021, the Company issued 25,000 shares of common stock to settle $20,000 of the outstanding balance. The shares of common stock had a fair market value of $26,750 and the Company recorded a loss on debt settlement of $6,750. As of December 31, 2021 and December 31, 2020, the balance owed to Mr. Schiliro was $44,000 and $0, respectively. These amounts were converted to a loan payable and have an interest rate of 10% and are due on demand. During the year ended December 31, 2021, Mr. Thom loaned the Company a total of $175,000 to pay for operating expenses. As of December 31, 2021, the amount of $175,000 is owed to Mr. Thom. The loans have an interest rate of 10% and are due on demand. Interest expense – related party on the above loans payable – related party was $2,308 during the year ended December 31, 2021 leaving an accrued interest – related party balance of $2,308. Accrued liabilities During the year ended December 31, 2020, $188,375 was paid to Mr. Beplate, $100,000 of accrued compensation was converted to a convertible note payable and then assigned to the Company’s legal counsel and $8,395 of accrued compensation was forgiven. The note was convertible at $0.50 per share at the discretion of the note holder, had a maturity date of March 31, 2021 and carried an interest rate of 3%. The note resulted in a beneficial conversion feature totaling $100,000 which was recognized into interest expense. As of December 31, 2021 and 2020, $0 and $0 was owed to Mr. Beplate, respectively. As of December 31, 2021 and December 31, 2020, $0 and $74,056 was owed to Nate Knight, who was the Company’s Chief Financial Officer until November 2020, for accrued compensation and reimbursable expenses. During the year ended December 31, 2021, the Company issued 78,500 shares of common stock to settle the total balance owed of $74,056. The shares of common stock had a fair market value of $82,425 and the Company record a loss on debt settlement of $8,368. As of December 31, 2021 and December 31, 2020, $899 and $0 was owed to Brian Thom, the Chief Executive Officer, for accrued compensation and reimbursable expenses. During the years ended December 2021 and 2020, $45,000 and $105,000 of compensation were converted into convertible loans as mentioned above. In the year ended December 31, 2021, $135,000 of accrued compensation was settled with the issuance of 270,000 shares of common stock. The stock had a fair market value of $221,400 which resulted in a $86,400 loss on settlement of debt (see Note 6). As of December 31, 2021 and December 31, 2020, $0 and $59,467 was owed to Louis Schiliro, the Chief Operating Officer, for accrued salary and reimbursable expenses, respectively. During the years ended December 31, 2021 and 2020, $45,000 and $150,000 of compensation were converted into a convertible loan as mentioned above and in the year ended December 31, 2020 $30,000 was paid in cash. During the year ended December 31, 2021, the Company issued 74,335 shares of common stock to settle the total prior year balance owed of $59,467 and issued 270,000 shares of common stock to settle $135,000 of accrued compensation. The shares of common stock had a total fair market value of $300,938 and the Company recorded a loss on settlement of debt in the amount of $106,471 (see Note 6). As of December 31, 2021 and December 31, 2020, $0 and $52,625 was owed to Mr. Heaton, for accrued compensation and services provided. During the years ended December 31, 2021 and 2020, $22,500 and $3,750 of compensation were converted into a convertible note as described above. During the year ended December 31, 2021, 320,250 shares of common shares of stock were issued to settle $105,000 of accrued compensation and $52,625 of prior accruals. The shares of common stock had a total fair market value of $262,605 and the Company recorded a loss on settlement of debt in the amount of $104,980 (see Note 6). Equity transactions On July 21, 2020, the Board of Directors approved amendments to RSU Agreements put in place on March 25, 2019 (“2019 RSU Agreement”). The approved amendments increased the amount of RSU’s granted to Mr. Beplate from 33,000,000 to 33,800,000, increased the amount of RSU’s granted to Mr. Schiliro from 8,000,000 to 10,000,000, increased the amount of RSU’s granted to Mr. Heaton from 50,000 to 500,000, increased the amount of RSU’s granted to the office administrator, who is a person affiliated with the Company’s former CEO from 250,000 to 500,000 and increased the amount of RSU’s granted to the Technical Product Supervisor, who is the son of the former office administrator from 250,000 to 500,000. The July 21 amendment also changed the vesting terms so that 15% of RSUs vested on July 15, 2020, an additional 15% of RSU units upon FDA approval of a PMA Class III awarded to the Company, an additional 20% of RSU units on January 1, 2021 and the balance of all unvested RSU units on the earliest date that (a) the Company achieves $20 million in gross cumulative sales commencing as of January 1, 2020, (b) a Covered Transaction is consummated or (c) a Trigger Event occurs. Each Grantee has the option to delay the Vesting Date of all or part of his RSUs until no later than an event described in (b) or (c) above, by serving written notice to the Company prior to such Vesting Date. The change in vesting terms resulted in a total of 6,795,000 of the RSU’s vesting on July 15, 2020 with 5,070,00 being issued to Mr. Beplate, 1,500,000 being issued to Mr. Schiliro, 75,000 being issued to Mr. Heaton, 75,000 being issued to the former office administrator, who is a person affiliated with the Company’s former CEO and 75,000 being issued to the Technical Product Supervisor, who is the son of the former office administrator. The change in vesting terms also resulted in a total of 50,000 of the RSU’s vesting on July 20, 2020 with 50,000 being issued to the Marketing and Advertising Supervisor, who is the daughter of the former office administrator. The vesting of the 6,845,000 RSU’s resulted in stock-based compensation expense of $4,859,950 which was the fair value of the stock on the vesting date. The former office administrator resigned during the year ended December 31, 2020 and forfeited 425,000 of the remaining unvested RSU’s with a value of $301,750 ($70,567 of which had been recognized and reversed). In November 2020, the Company granted Mr. Thom 11,500,000 RSU’s which subject to certain conditions, shall vest upon the achievement of certain Company objectives and milestones. In December 2020, the Company entered into a second restricted stock unit agreement with Mr. Heaton. The second agreement issued an additional 1,000,000 RSU’s, 500,000 of which were granted on the award date and 500,000 of which would be granted on May 15, 2021 provided his professional services agreement was in effect on that date. The 500,000 RSU’s were granted during 2021 per the agreement. The RSU’s, subject to certain conditions, shall vest upon the achievement of certain Company objectives and milestones. During the year ended December 31, 2020, the Company issued a total of 125,000 shares of restricted common stock to Mr. Thom, prior to becoming Chief Executive Officer, for services rendered. The shares had a fair market value of $100,625. Per the vesting schedules of certain of the Company’s amended RSU Agreements, on January 1, 2021, 6,760,000 shares of common stock were issued to Mr. Beplate, 2,000,000 shares of common stock were issued to Mr. Schiliro and 100,000 shares of common stock were issued to Mr. Heaton. On January 6, 2021, the Board of Directors approved the second amendment to the RSU Agreement between the Company and Mr. Beplate in conjunction with Mr. Beplate’s retirement from his day-to-day management role with the Company. The amendment accelerated the vesting and immediately settled his remaining RSU’s by issuing 21,970,000 shares of common stock. Further, as a bonus in recognition of Mr. Beplate’s service to the Company and in recruitment of new executive management, the Company issued to Mr. Beplate an additional 2,000,000 shares of common stock. The Company recorded $26,127,300 of stock-based compensation expense during the year ended December 31, 2021 related to the accelerated vesting of these RSU’s and issuance of common stock. During the year ended December 31, 2021, the Company issued 30,000 shares of common stock to Mr. Thom, 30,000 shares of common stock to Mr. Schiliro and 25,000 shares of common stock to Mr. Heaton for services rendered. The 85,000 shares of common stock had a total fair market value of $69,700. |