Related Party Transactions

6 Months Ended

Jun. 30, 2018

Note 11 - RELATED PARTY TRANSACTIONS

The following table provides details of the Company's related party transactions during the three and six months ended June 30, 2018 and 2017

(a)	Services provided from related parties:

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Consulting fees from CEO and President (i)	$	34,866	$	30,000	$	73,733	$	60,000
Consulting fees from a Director (ii)		15,361		10,980		30,722		21,635
Professional fees from Director (iii)		3,686		3,294		7,373		6,490
Consulting fees for VP (iv)		12,904		6,588		25,807		12,981
Stock options granted to CEO and President (i)		122,543		-		245,086		-
Stock options granted to Director (ii)		45,300		-		90,600		-
Stock options granted to VP (iv)		16,800		-		33,600		187,200
Stock award granted to Director (iii)		-		-		-		172,000
	$	251,460	$	50,862	$	506,921	$	460,306

(i)

On September 10, 2013 Mr. Leontaritis was appointed President. On January 15, 2014, the Board of Directors of the Company approved the execution of a consulting agreement between the Company and Sotirios Leontaritis ("Leontaritis"), whereby Leontaritis shall provide services to the Company as the Company's President and Chief Executive Officer in regard to the Company's management and operations for the period from January 1, 2014 to December 31, 2016. Under the terms of the agreement, the Company agreed to pay to Leontaritis US$60,000 per annum payable in monthly payments of US$5,000 a month for the term of the contract. On January 1, 2017, the Company approved a three-year extension to the consulting agreement. Mr. Leontaritis will continue to serve for a term of three years, effective as of January 1, 2017, and ending on December 31, 2019; the Company shall pay to Leontaritis US$120,000 per annum payable in monthly payments of US$10,000 a month for the term of the contract. In January 2018, the Company agreed to revise the currency of Mr. Leontaritis salary, and his compensation changed from US$10,000 per month to EUR10,000 (USD$11,650) per month. Further, Mr. Leontaritis is entitled to acquire at his discretion 150,000 shares of the common stock at a price of $6 per share for a term of five (5) years. The Company recognized stock-based compensation expense allocated to consulting fees of $122,543 and $245,086 during the three and six months ended June 30, 2018 and 2017. The unrecognized amount of $1,715,608 will be expensed in future periods. Over the remaining term of his contract which expires in fiscal 2019, Mr. Leontaritis is entitled to total remaining minimum payments of EUR180,000 (US$217,918).

(ii)

On September 30, 2013, the Board of Directors of the Company appointed Dr. Christos Kapatos as a director of the Company. On April 16, 2014, the Company entered into a consulting contract with Dr. Kapatos where under his compensation shall be USD$49,290 (€40,000) per year payable in equal monthly installments beginning on May 1, 2014. On May 1, 2015, the Company approved a one-year extension of the consulting agreement, and on August 2, 2016 the Company approved a further one-year extension so that the agreement will expire April 16, 2017. During fiscal 2017 and fiscal 2016 Dr. Kapatos invoiced the Company Euros €40,000 for services rendered in each fiscal year respectively.

On December 12, 2017, the Company approved the issuance of 925,000 common shares to Dr. Christos Kapatos, CTO and Director of the Company, as consideration for the transfer of certain complementary technological developments and work in progress, in the form of a stock award which vested as of the date of grant. The 925,000 shares have been valued at $925,000, or $1.00 per share, the fair market value on grant date, which amount has been expensed as research and development expenses. Concurrently, the Company approved a six-year extension to the consulting agreement with Dr. Kapatos. The revision to the Agreement ("Addendum No. 3") has a term of six years, being effective as of April 16, 2017, and ending on April 15, 2023, renewable for such further term as may be mutually agreed between the parties. As per Addendum No. 3 Mr. Kapatos shall receive annual compensation of EUR50,000 (US$58,250) and shall be entitled to a 100% bonus of the total annual compensation for every profitable year of the Company. Dr Kapatos shall also be entitled to acquire at his discretion 1,250,000 shares of the common stock at a price of US$1.00 for a term of six years.

On May 23, 2018 the Company approved an amendment to the term of the scientific advisory agreement with Dr. Christos Kapatos, board member CTO and member of the Scientific Advisory Board, originally entered into on April 15, 2014 in order to extend the term to April 15, 2019.

The Company recognized stock-based compensation expense allocated to consulting fees of $45,300 and $90,600 during the three and six months ended June 30, 2018. The unrecognized amount of $984,900 will be expensed in future periods. Over the remaining term of his contract which expires in fiscal 2023, Dr. Kapatos is entitled to total minimum payments of EUR275,000 (US$332,930).

(iii)

On September 10, 2013, the Board of Directors of the Company elected Nikolaos Kardaras as Secretary and a director of the Company. During each of fiscal 2017 and fiscal 2016, Mr. Kardaras invoiced the Company EUR12,000 for services rendered in his capacity as a director which amount totaled US$13,500 and $13,300 respectively. During the six months ended June 30, 2018 Mr. Kardaras invoiced the Company EUR6,000 (USD$7,373)

On March 3, 2017, the Company approved the issuance of 50,000 common shares for the services provided by Mr. Nikolaos Kardaras in the form of a stock award which vested as of the date of grant. 50,000 shares have been valued at $172,000, the fair market value of $3.44 per share on issue date, which amount has been expensed as stock-based compensation.

(iv)

On September 1, 2015, the Board of Directors of the Company approved a consulting agreement with Sergios Katsaros and appointed Mr. Katsaros Vice President. Under the terms of the consulting agreement, Mr. Katsaros will work directly with the Company's President and CEO in order to create and implement the Company's strategic plan and assist in securing additional financing to meet the needs of the Company's business plan and corporate objectives. The initial term of the contract is six months and Mr. Katsaros will receive compensation of USD$2,330 (€2,000) per month. On March 1, 2016, the Company approved a one-year extension to the consulting agreement and the Company approved the grant of a stock award of 15,000 common shares as compensation for the services provided by Vice President, Sergios Katsaros. The award vests in three equal instalments of 5,000 shares as of the date of grant, the six-month anniversary of the date of grant and the 12-month anniversary of date of grant. During fiscal 2016 a total of $169,000 in respect of 10,000 vested shares was recorded as stock-based compensation. On March 1, 2017, the final instalment of 5,000 shares were issued in accordance with the terms of the award valued at $17,200, the fair market value on grant date, which amount has been expensed as stock-based compensation in 2017.

On March 17, 2017, the Company approved the issuance of a further 50,000 common shares for the services provided by Mr. Katsaros, in the form of a stock award which vested as of the date of grant. 50,000 shares have been valued at $170,000, the fair market value of $3.40 per share on grant date, which amount has been expensed as stock-based compensation.

On December 12, 2017 the Company approved a three-year extension to the consulting agreement between the Company and Mr. Katsaros effective as of January 2, 2018. The revision to the Agreement has a term of three years, being effective as of January 2, 2018, and ending on January 1, 2021, renewable for such further term as may be mutually agreed between the parties. Mr. Katsaros shall be remunerated with a monthly stipend of EUR3,500 (US$4,310), and shall be entitled to a 100% bonus of the total annual compensation for every profitable year of the Company. Mr. Katsaros shall also be entitled to acquire at his discretion 500,000 shares of the common stock at a price of US$1.00 for a term of five years commencing January 2, 2018.

The Company recognized stock-based compensation expense allocated to consulting fees of $16,800 during the six months ended June 30, 2018. The unrecognized amount of $320,300 will be expensed in future periods. Over the remaining term of his contract which expires in fiscal 2021, Mr. Katsaros is entitled to total minimum payments of EUR105,000 (US$127,119).

(b)	Accounts payable and accrued liabilities from related parties:

	June 30,			December 31,
	2018			2017
CEO and President (i)	$	16,427		$	413,010
Director (ii)		-			95,843
Converted to shares upon debt settlement		(16,427	)		-
	$	-		$	508,853

(c)	Advances from related parties:

	June 30,			December 31,
	2018			2017
CEO and President (i)	$	44,485		$	287,073
Director (ii)		-			54,282
Converted to shares upon debt settlement		(44,485	)		-
	$	-		$	341,355

(d)	Convertible Debt, related parties:

On February 15, 2018, the Company and certain shareholders holding in excess of 5% of the Company's common stock and concurrently holding a position on the Company's Board, or acting in the capacity of any officer of the Company or its subsidiaries, agreed that repayment against pre-existing debt payable by the Company on the agreement date shall be suspended until such time as the Company concludes a full profitable year of operations. Further the parties agreed that any such pre-existing debt or portion thereof shall be convertible at any time into restricted shares of the Company's common stock at a price equal or greater to $0.60 per share. On the date of the agreement the fair market value of the Company's common stock as traded on OTCMarkets was $0.806 per share. The Company accounted for this transaction by applying ASC 470-20-35. As the convertible debt has no stated redemption date, the Company will recognize the discount as interest expense on the earliest conversion date.

The Company has reclassified all debts payable as of February 15, 2018 to our CEO and CTO from advances and accounts payable, related party, to convertible debt, related party.

On each of May 31, 2018 and on June 26, 2018, the Company entered into Debt Settlement and Subscription Agreements with the President of the Company, Mr. Sotirios Leontaritis to settle total debt in the amount of $679,371 in respect to certain unpaid salary, advances for operational shortfalls and certain unsettled expense reimbursements. into 1,132,286 shares of the Company's common stock at a price of US$0.60 per share. The Company valued the aforementioned issuances at the closing price of the Company's stock as traded on the OTCMarkets on the date of issue. The difference in price resulted in the Company recording interest expense in the amount of $1,321,971 in respect of the transaction.

On June 26, 2018, the Company entered into a Debt Settlement and Subscription Agreement with a Director of the Company, Dr. Christos Kapatos to settle total debt in the amount of US$131,870 in respect to certain unpaid salary, advances for operational shortfalls and certain unsettled expense reimbursements into 219,784 shares of the Company's common stock at a price of US$0.60 per share. The Company valued those issuances at the closing price of the Company's stock as traded on the OTCMarkets on the date of issue. The difference in price resulted in the Company recording interest expense in the amount of $285,718 in respect to the transaction.

Rafina Innovations Inc. 10-Q