NOTE 6 – RELATED PARTY TRANSACTIONS

Expenses prepaid with common stock at September 30, 2016 and December 31, 2015 totaled $43,333 and $135,321, respectively.  The balance at September 30, 2016 relates to stock issued to Greenblock Capital (“GBC”) for future services with a remaining amount of $43,333.  The balance at December 31, 2015 relates to stock issued to GBC for future services with a remaining amount of $119,167, and shares purchased by the CEO and paid for through salary deductions with a remaining amount of $16,154.  Our CEO is a Managing Director of GBC, although he has no equity or voting rights in GBC.

The Company previously sublet approximately 2,500 square feet of assembly, warehouse and office space within the Precision CNC facility located at 1858 Cedar Hill Road in Lancaster, Ohio.  The sublease provided for the Company to pay rent monthly in the amount of $2,500, which covered space and some utilities.  Occupancy costs for the quarter ended September 30, 2016 and 2015 were $0 and $7,500, respectively, and for the nine months ended September 30, 2016 and 2015 were $15,000 and $15,000, respectively.  The sublease has been terminated as of June 27, 2016, but may be reinstated at any time by the mutual agreement of the parties, and the Company is still able to use that facility in the short-term rent free.  The Company also purchases much of its machined parts through Precision CNC.  Precision CNC owns a non-controlling interest in the Company. The Company also maintains an executive office in Florida, which is leased by GBC. The Company has no formal agreement for this space and pays no rent.

For the three months ended September 30, 2016 and 2015, the amounts invoiced from Precision CNC totaled $0 and $39,040, respectively, and for the nine months ended September 30, 2016 and 2015, the amounts invoiced totaled $17,119 and $123,283, respectively. These amounts consisted of rent and research and development expenses for machined parts.

On June 27, 2016, the Company and Precision CNC entered into an agreement to eliminate $49,299 in payables owed to Precision CNC in return for the transfer of certain net assets of the Company with a remaining book value of $70,495, which included office furniture, software and computer systems, and 50,000 shares of restricted common stock valued at $10,500. The Company recorded a loss on this transaction in the amount of $31,696. Accounts payable and accrued expenses at September 30, 2016 and December 31, 2015 include $0 and $31,048, respectively, to Precision CNC.

During the first nine months of 2016, members of the Company’s Board of Directors made several loans and advances to the Company, as follows:

·

On January 8, 2016, a member of the Board of Directors made an advance to the Company totaling $10,500 with a 6% per annum rate, payable on demand.  As of September 30, 2016, such advance is still outstanding.  

·

On April 29, 2016, the Company’s three independent Directors loaned to the Company a total of $60,200 pursuant to three Convertible Notes which are automatically convertible into the equity securities issued in the Company’s next financing of at least $1,000,000 at the same price and same terms.  The Convertible Notes bear 8% interest and have a 10% Original Issuance Discount.  The total principal amount of all three Notes was $66,000. The Notes mature in October 2016, and can be converted to common stock at $0.26 per share if a qualified financing event has not occurred by such time.  

·

On June 13, 2016, one of the Company’s independent directors loaned $15,000 to the Company on the same terms as the April 2016 notes, with a principal amount of $16,667.

·

In September 2016, three of the Company’s Directors advanced $1,000 each for payment of insurance premiums. There were no formal terms for these advances; however, the Company started to impute 8% per annum interest in connection with the March 2017 conversion of the advances into the Convertible Promissory Note Bridge offering (see below).

In March 2017, all outstanding Director notes and advances with an aggregate amount of $168,152 were converted into the Company’s new $1,500,000 Convertible Promissory Note Bridge offering (see Note 12, Subsequent Events).