Related Party Transactions

9 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Note 6 - Related Party Transactions

Parties, which can be a corporation or an individual, are considered to be related if we have the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.

A customer of the Company, Multichip Display, Inc. (“MULTICHIP DISPLAY, INC.”) is owned by a minority shareholder (1,000 shares or 0.029%) of the Company at June 30, 2017. In addition, MULTICHIP DISPLAY, INC. owns 2,165 shares or 0.0617%. The total direct and indirect ownership of the Company’s common stock by MULTICHIP DISPLAY, INC. is 0.090% at June 30, 2017.

The Company has an exclusive contract to manufacture products under contract from MULTICHIP DISPLAY, INC. MULTICHIP DISPLAY, INC. will be the sales agent for certain government and private company contracts; the Company manufactures products based on bid prices as agreed between the parties. The Company has also agreed to purchase parts from MULTICHIP DISPLAY, INC. As part of the agreement, MULTICHIP DISPLAY, INC. has agreed to support the operations of the Company through December 31, 2017. MULTICHIP DISPLAY, INC. is both a significant customer and significant vendor of the Company. For the nine months ended June 30, 2017 and 2016, almost all of the Company's sales and accounts receivable resulted from transactions with MULTICHIP DISPLAY, INC. See related party transactions below.

Nine months ending :	June 30, 2017		June 30, 2016
Sales to MD I	$	554,739	$	464,992
Receivables from MULTICHIP DISPLAY, INC.		1,163,053		494,666
Inventory bought from MULTICHIP DISPLAY, INC.		430,502		396,300
Accounts Payable to MULTICHIP DISPLAY, INC. *		995,637		292,617
Accrued Interest due to MULTICHIP DISPLAY, INC.		123,063		65,646
Convertible note due to MULTICHIP DISPLAY, INC.		109,785		60,992

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* Includes borrowings to pay for direct labor.

Accounts receivable and account payable with MULTICHIP DISPLAY, INC. have a net balance feature in the contract.

In prior periods, the Company acquired designs and technology for the light emitting diode manufacture from MULTICHIP DISPLAY, INC. 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 and $109,875 at June 30, 2017 and 2016, respectively. Accrued interest payable is $123,063 and $73,672 at June 30, 2017 and 2016, respectively.

During the nine months ended June 30, 2017 we issued 25,000,000 shares of our common stock to officers and directors as payment for accrued salaries. The price was $0.001, the par value of the shares.

These issuance of securities were made in reliance on Section 4(2) of the Securities Act of 1933, as amended (“Securities Act”) for transaction of an issuer not involving a public offering.

In addition to the above described related party transactions, the Company incurred $152,612 and $12,250 for the three months ended June 30, 2017 and 2016, respectively, and $257,231 and $41,165 for the nine months ended June 30, 2017 and 2016, respectively, consulting fees which are payable to three officers and to two shareholders of the Company. Consulting fees payable to these officers and shareholders at June 30, 2017 and 2016 were $377,725 and $194,136 respectively.

Also in prior periods a shareholder paid certain professional fees incurred by Company. The amount due to the shareholder at June 30, 2017 and 2016 was $49,110. This amount is also included in the figures immediately above.

Short-term loan payable to officer

During the year ended September 30, 2016, an officer advanced the Company $27,253. The payable to the officer totaled $56,874 and $25,901 at June 30, 2017 and September 30, 2016 respectively.

During the three months ended June 30, 2017 and 2016, an officer of the Company was repaid $2,000 and $9050, respectively, and $2,000 and $3,000, for the nine months ended June 30, 2017 and 2016, respectively. The balance due to the officer was $56,874 at June 30, 2017.