Quarterly report pursuant to Section 13 or 15(d)

Related Party Transactions

v3.5.0.2
Related Party Transactions
6 Months Ended
Jun. 30, 2016
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 (Sand/Land) as its primary source of disposal for construction and demolition debris. Sand/Land 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 six months ended June 30, 2016 and 2015 were $456,245 and $224,485 or 15% and 26% of total consolidated revenue, respectively. Total revenues generated from the related entity during the three months ended June 30, 2016 and 2015 for disposal costs were $283,710 and $124,135 or 19% and 26% of total consolidated revenue, respectively. Total related party accounts receivable as of June 30, 2016 and December 31, 2015 related to these sales were approximately $114,000 and $91,000, respectively, or 17% and 16% of total net accounts receivable, respectively.

 

Related Party Disposal Costs and Accounts Payable

 

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 six months ended June 30, 2016 and 2015, were $67,058 and $0, respectively. Total expenses incurred from the related entity during the three months ended June 30, 2016 and 2015, were $32,279 and $0, respectively. Total related party accounts payable of the consolidated entity as of June 30, 2016 and December 31, 2015, related to these expenses were approximately $21,000 and $17,000, respectively.

 

Related Party Shareholder Loan

 

The Company had a note due the largest shareholder of the Company. This note was unsecured, had a maturity date of December 31, 2016 and carried a 1% interest rate. On approximately January 1, 2016, the Note was converted to 10% cumulative preferred stock and the Note was cancelled. The total converted debt was $2,000,000. The balance of the note as of June 30, 2016 and December 31, 2015 was $0 and $2,017,301, respectively. The residual balance of $17,301 that was not converted, was reclassified to a short term, unsecured, non-interest bearing short term payable, included with due to related party on our consolidated balance sheet.

 

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. As discussed above, $1,500,000 of this total was converted to Preferred Stock on approximately January 1, 2016.

 

Related Party Consulting Agreement

 

The Chairman of the Board is a consultant for the Company, meets with each subsidiary general manager on a regular basis, consulting on matters such as acquisitions and integration, growth plan objectives, operating effectiveness, organization structure, equipment and financing requirements, among other matters. Total related party consulting expenses incurred and paid to the Chairman for the six months ended June 30, 2016 and 2015 were $65,000 and $0, respectively. Total related party consulting expenses incurred and paid to the Chairman for the three months ended June 30, 2016 and 2015 were $42,000 and $0, respectively.

Expenses Paid on Behalf of the Company by a Related Party

 

Throughout the three months ended March 31, 2016 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 for the three months ended March 31, 2016 were $112,154, including approximately $62,000 in professional fees and $50,000 for a non-refundable deposit on a landfill that was written off in February of 2016 due to the acquisition not closing. During the three months ended March 31, 2016, $592,829 of the amount due to the related party at December 31, 2015 were settled for 592,829 shares of the Company’s restricted common stock ($1 per share conversion). The expenditures for professional fees and investment relations incurred during the three months ended March 31, 2016 of $112,154 were converted to the Company’s subscribed restricted common stock at $0.50 per share, or 224,308 subscribed shares as of June 30, 2016. The shares were not issued as of June 30, 2016 and thus are included on the Company’s consolidated balance sheet as shares subscribed. No expenses were paid on behalf of the Company by this related entity during the three months ended June 30, 2016 (period from April 1, 2016 through June 30, 2016).

 

Related Party Acquisitions

 

On October 15, 2015 and December 1, 2015, the Company closed on the Acquisition of WRE and Gateway, respectively. Each of these acquired entities was 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.

 

WRE was acquired for a $250,000 owner financed note that was paid in January of 2016 by a related entity on behalf of the Company and 2,750,000 shares of the Company’s restricted common stock. 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 were presented on the balance sheet as common stock subscribed in the equity section of the balance sheet through December 31, 2015. The shares were issued during 2016 and have been reclassified to additional paid in capital, 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.