Related Party Transactions with Multichip Display, Inc. (MDI)

3 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Note 4 - Related Party Transactions with Multichip Display, Inc. (MDI)

MDI is owned by a minority shareholder (2,000,000 shares or 2.7%) of the Company as of December 31, 2014 and September 30, 2014. In addition, MDI became a minority shareholder (4,330,000 shares or 5.7%) through debt conversion (see below). The total direct and indirect ownership of REAP by MDI is 8.6% at December 31, 2014 and September 30, 2014.

The Company has an exclusive contract to manufacture products under contract from MDI. MDI will be the sales agent for certain government and private company contracts; REAP manufactures products based on bid prices as agreed between the parties. The Company has also agreed to purchase parts from MDI. As part of the agreement, MDI has agreed to support the operations of the Company through December 31, 2015. MDI is both a significant customer and significant vendor of the Company. For the three months ended December 31, 2014 and 2013, all of the Company’s sales resulted from transactions with MDI. The Company had the following related party transactions during at December 31, 2014 and September 30, 2014 and for the three months ended December 31, 2014 and 2013. 

	For the Three Months Ended December 31,
	2014		2013
Sales to MDI	$	125,001	$	129,952
Inventory purchases from MDI*		2,939		143,208
Rent expense paid to MDI		7,500		7,500
Interest expense		5,000		5,000
	December 31, 2014		September 30, 2014
Receivable from MDI	$	1,055,901	$	930,900
Accounts payable to MDI		1,036,497		1,018,831
Accrued interest payable to MDI		43,333		38,333
Convertible note payable to MDI		250,000		250,000

__________

* Includes borrowings to pay for direct labor.

The agreement with MDI includes an offset clause for accounts receivable from MDI and accounts payable to MDI. Neither party has requested to offset the balance.