NOTE 6 – RELATED PARTY TRANSACTIONS

Expenses prepaid with common stock at December 31, 2016 and 2015 totaled $0 and $43,333, respectively. 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.

Through June 2016, the Company sub-leased 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 years ended December 31, 2016 and 2015 were $15,000 and $30,000, respectively. The sublease has been terminated as of June 27, 2016.

The Company also purchased much of its machined parts through Precision CNC up until June 2016. Precision CNC owns a non-controlling interest in the Company. For the years ended December 31, 2016 and 2015, the amounts paid to Precision CNC totaled $13,868 and $160,601, respectively, and 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 December 31, 2016 and December 31, 2015 include $0 and $31,048, respectively, to Precision CNC.

The Company also maintains an executive office in Florida, which is leased by GBC and is used by the Company’s CEO. The Company has no formal agreement for this space, but paid GBC $0 and $10,000 for the space for the years ended December 31, 2016 and 2015, respectively.

During 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 December 31, 2016, such advance is still outstanding.

● On April 29, 2016, the Company’s three independent Directors loaned 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 total original issuance discount of $5,800 was recognized as a component of financing costs in the consolidated statement of operations for the year ended December 31, 2016. The Notes matured 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. As of December 31, 2016, these notes are still outstanding.

● 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. The original issuance discount of $1,667 was recognized as a component of financing costs in the consolidated statement of operations for the year ended December 31, 2016. As of December 31, 2016, this note is still outstanding.

● In September 2016, three of the Company’s Directors advanced $1,000 each for payment of insurance premiums. In November and December 2016, the three Directors made six additional advances to the Company in the aggregate amount of $11,400. There were no formal terms for these advances; however, the Company imputed 8% per annum interest in connection with the March 2017 conversion advances into the Convertible Promissory Note Bridge offering (see below). As of December 31, 2016, these advances are still outstanding.

In March 2017, all outstanding Director notes and advances with an aggregate amount outstanding of $156,368 were converted into the Company’s new $1,500,000 Convertible Promissory Note Bridge offering (see Note 13, Subsequent Events).