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

12 Months Ended

Sep. 30, 2016

Notes to Financial Statements

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

MDI is owned by a minority shareholder (1,000 shares or 0.45%) of the Company at September 30, 2016 and 2.7% at September 30, 2016. In addition, MDI owns 2,165 shares or 1.05%. The total direct and indirect ownership of REAP by MDI is 1.54% at September 30, 2016 and 8.7% at September 30, 2015.

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, 2017. MDI is both a significant customer and significant vendor of the Company. For the years ended September 30, 2016 and 2015, almost all of the Company's sales and accounts receivable resulted from transactions with MDI. See related party transactions below.

*Shares reflect the balance after the reverse stock split

	September 30, 2016					September 30, 2015
	Amount		Percent			Amount		Percent
Sales to MDI	$	675,000		98.4	%	$	603,821		100	%
Receivable from MDI	$	623,650		100	%		930,900		100	%
Inventory purchases from MDI*	$	676,831		99.6	%		586,205		51	%
Accounts payable to MDI	$	631,691		100	%		1,018,831		100	%
Accrued interest payable to MDI	$	68,985		100	%		58,333		100	%
Convertible note payable to MDI	$	109,785		100	%		250,000		100	%

* Includes borrowings to pay for direct labor.

Accounts receivable and account payable with MDI have a net balance feature in the contract.

Acquisition of intangibles from MDI

On November 2, 2012, the Company acquired designs and technology for the light emitting diode manufacture from MDI totaling $250,000 through the issuance of a convertible note payable. The Company obtained an appraisal of intangibles dated October 25, 2012 to determine the fair market value which approximated the cost. The convertible note payable bears an interest rate of 8% and matured on December 31, 2014. On October 29, 2015, the maturity date was extended to December 31, 2016. A new note was written in December 2016 which extends the agreement to December 31, 2017.The rate of conversion is $0.001 per share and is convertible at the option of the lender. If the lender converts, all accrued interest is forfeited. The note balance outstanding is $109,785 at September 30, 2016 and $250,000 at September 30, 2015 and accrued interest payable is $68,985 and $58,333 at September 30, 2016 and 2015, respectively.