Multichip Display, Inc. (MDI)

3 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Note 4 - Multichip Display, Inc. (MDI)

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, 2018. MDI is both a significant customer and significant vendor of the Company. For the three months ending December 31, 2017 and 2016, much of the Company's sales resulted from transactions with MDI. The Company had the following related party transactions through December 31, 2017 for the time periods shown in the tables below. 

	Three Months Ending December 31,
	2017		2016
Sales to MDI	$	112,500	$	160,000
Inventory purchases from MDI*		150,705		149,990
Interest expense to MDI		440		2,195
Receivable from MDI		1,448,320		783,650
Accounts payable to MDI		1,453,274		797,200
Accrued interest payable to MDI		440		71,180
Convertible note payable to MDI, net of discount of $18,298 in 2016		25,000		91,487

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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. The Company issued three new 8% Convertible Promissory Notes in the amounts of $15,000, $5,000 and $5,000 during the current quarter. These notes mature on December 31, 2018 and are convertible at the lower of common stock par value of $0.001 per share or 50% of the current market price at the time of conversion. During the quarter ended December 31, 2017, two unrelated lenders purchased the prior convertible note and accrued interest from MDI. The lenders exercised the conversion rights stipulated in the note and the Company issued an aggregate of 288,052,345 shares of $.001 par value common stock related thereto.