Multichip Display, Inc. (MDI)

6 Months Ended

Mar. 31, 2018

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 six months ending March 31, 2018 and 2017, much of the Company's sales resulted from transactions with MDI. The Company had the following related party transactions through March 31, 2018 for the time periods shown in the tables below.

	Six Months Ending March 31,
	2018		2017
Sales to MDI	$	306,756	$	374,901
Inventory purchases from MDI*		29,315		323,945
Interest expense to MDI		1,000		120,868
Receivable from MDI		1,613,320		610,000
Accounts payable to MDI		1,453,274		1,047,314
Accrued interest payable to MDI		1,000		120,868
Convertible note payable to MDI, net of discount of $18,298 in 2017		25,000		109,765

____________

* 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. 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 March 31, 2018, 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.