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

9 Months Ended

Jun. 30, 2016

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 0.5%) of the Company as of June 30, 2016. In addition, MDI became a minority shareholder (4,330,000 shares or 1.) through debt conversion (see below). The total direct and indirect ownership of REAP by MDI is 1.5% at June 30, 2016.

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 certain parts from MDI. As part of the agreement, MDI has agreed to support the operations of the Company through December 31, 2016. MDI is both a significant customer and significant vendor of the Company. For the three months ending June 30, 2015 and 2016, most of the Company’s sales resulted from transactions with MDI. The Company had the following related party transactions through June 30, 2016 for the time periods shown in the tables below.

	Three and Nine Months Ending June 30, 2016
	3 Months		9 Months
Sales to MDI	$	132,500	$	464,992
Inventory purchases from MDI*		115,275		396,300
Rent expense paid to MDI		12,823		73,639
Interest expense to MDI		2,196		54,787
	June 30, 2016		September 30, 2015
Receivable from MDI	$	494,666		1,554,400
Accounts payable to MDI		292,617		1,429,046
Accrued interest payable to MDI		65,646		58,333
Convertible note payable to MDI, Net of discount of 48,793		60,992		250,000

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* 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. On November 11, 2015, the company and MDI agreed to offset the receivable from MDI of $1,609,401 with the accounts payable to MDI of $1,474,186 and $135,215 of the convertible note pay able to MDI to balance the accounts. The Company issued a new 8% Convertible Promissory Note for the remaining convertible note payable balance of $109,785. This new note matures on December 31, 2016 and is convertible at the common stock par value of $0.001 per share.