Annual report pursuant to Section 13 and 15(d)

Related Party Transactions

v3.3.1.900
Related Party Transactions
12 Months Ended
Dec. 31, 2015
Related Party Transactions [Abstract]  
Related Party Transactions

Note 8 – Related Party Transactions

 

Related Party Sales and Accounts Receivable

 

The Company generates a significant portion of their revenue from a related entity Transfer Station, owned by the majority shareholder of the Company. This related entity uses the Company’s landfill (Sandland) as its primary source of disposal for trash, debris and waste and collected. Sandland also trucks the disposal costs from the Company’s site, either directly or through a third party and bills the Company accordingly for trucking services. Total revenue generated from the related entity during the years ended December 31, 2015 and 2014 for disposal costs were $674,320 and $523,250 or 27% and 31% of total consolidated revenue, respectively. Total revenue generated from the related entity during the years ended December 31, 2015 and 2014 for trucking services were $216,222 and $144,834, or 9% and 9% of consolidated revenue, respectively. Total revenue generated from the related entity during the years ended December 31, 2015 and 2014 was $890,542 and $668,084, or 36% and 40% of consolidated revenue, respectively. Total related party accounts receivable as of December 31, 2015 and 2014 related to these sales were approximately $91,000 and $75,000, or 16% and 71% of total net accounts receivable, respectively.

  

On December 1, 2015, the Company acquired Gateway, a related entity that was previously owned 50% by the largest shareholder of the Company. See note 10, Acquisitions for details. Gateway disposes a large portion of their construction and debris collected in the related entities transfer station. Total expenses incurred from the related entity during the years by the Consolidated entity during the years ended December 31, 2015 and 2014 were $56,331 and $0, respectively. Total related party accounts payable of the consolidated entity as of December 31, 2015 and 2014 related to these expenses were approximately $17,000 and $0, respectively.

 

Related Party Shareholder Loan

 

The Company has a note due the largest shareholder of the Company. This note is unsecured, matures on December 31, 2016 and carries a 1% interest rate. The balance of the note as of December 31, 2015 and 2014 was $504,547 and $756,337 respectively. During 2015, the Company paid down the Shareholder note by approximately $250,000. During the years ended December 31, 2015 and 2014, the Company incurred related party interest expense of $6,304 and $8,472. Total related party accrued interest related to this note as of December 31, 2015 and 2014 was $28,612 and$22,308, respectively.

 

On October 15, 2015, the Company acquired a related entity that was 50% owned by the largest shareholder of the Company. As part of that acquisition, the Company acquired a shareholder note owed to the same majority shareholder of the Company. The balance of the note, including accrued interest on the acquisition date was $1,512,753.

 

The combined balances of these related party notes at December 31, 2015 were $2,017,301. Subsequent to year end, the Board and the Shareholder mutually agreed to convert $2,000,000 of the Notes balance to 10% cumulative preferred stock; these notes have been included in long-term liabilities due to the conversion subsequent to year end. The remaining balance of the related party note after conversion was approximately $13,000.

 

Expenses Paid on Behalf of the Company by a Related Party

 

Throughout the year ended December 31, 2015, Strategic Capital Markets (“Strategic”), a related party, paid for expenditures of the Company as well as deposits on a landfill acquisition on behalf of the Company. These expenditures primarily related to professional fees incurred for compliance related to being a public company as well as marketing the Company’s investment strategy. Total expenses incurred for these services were $203,607. Total deposits on the landfill (see note 10) paid by Strategic totaled $300,000 through December 31, 2015. Strategic also incurred costs to build the Company’s investor relations website of $4,704during the fiscal year ended December 31, 2015. Strategic paid the cash portion of the acquisition of Gateway Rolloff Services, LP on December 1, 2015, totaling $450,000. Total cash outlays by Strategic were $958,311 during the year ended December 31, 2015. As of December 31, 2015, $365,482 was settled for 365,482 shares of the Company’s restricted common stock ($1 per share conversion). The remaining $592,829 is included in the due from related party account. Subsequent to year end, this amount was settled for 592,829 shares of the Company’s restricted common stock ($1 per share conversion).

  

Related Party Acquisitions

 

On October 15, 2015 and December 1, 2015, the Company closed on the Acquisition of Waste Recovery Enterprises, LLC and Gateway Rolloff Services, LP, respectively. Each of these acquired entities were owned 50% by the majority shareholder of the Company prior to the acquisitions. In each acquisition, a second owner owned 50% of the each acquired entity.

 

Waste Recovery Enterprises, LLC (“WRE”), was acquired for a $250,000 owner financed note that was paid in January of 2016 and 2,750,000 shares of the Company’s restricted common stock. Gateway Rolloff Services, LP (“Gateway”) was acquired for $450,000 in cash and a total of 2,400,000 shares of the Company’s restricted common stock. The majority shareholder of the Company received no cash or notes; he received 1,500,000 and 1,650,000 shares of the Company’s restricted common stock. The 3,150,000 shares of the Company’s restricted common stock were not issued as of December 31, 2015, and thus have been presented in the balance sheet as common stock subscribed in the equity section of the balance sheet. The shares were valued at $1 per share, equivalent with the settlement with Strategic as described above in the related party note section describing the expenses paid on behalf of the Company.

 

See note 10, Acquisitions for further information related to the acquisitions and the purchase price allocation.