Quarterly report pursuant to Section 13 or 15(d)

Related Party Transactions

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Related Party Transactions
9 Months Ended
Sep. 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 nine months ended September 30, 2016 and 2015 were $551,845 and $456,019 or 11% and 34% of total consolidated revenue, respectively. Total revenues generated from the related entity during the three months ended September 30, 2016 and 2015 were $179,955 and $177,570 or 10% and 37% of total consolidated revenue, respectively. Total related party accounts receivable as of September 30, 2016 and December 31, 2015 related to these sales were approximately $104,000 and $111,425, respectively, or 16% 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 nine months ended September 30, 2016 and 2015, were $98,957 and $0, respectively. Total expenses incurred from the related entity during the three months ended September 30, 2016 and 2015, were $24,044 and $0, respectively. Total related party accounts payable of the consolidated entity as of September 30, 2016 and December 31, 2015, related to these expenses were approximately $17,000 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 September 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. Total related party preferred stock was $2,000,000 and $0 as of September 30, 2016 and December 31, 2015, respectively. Total related party accrued dividends at September 30, 2016 and December 31, 2015 were $150,000 and $0, 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. As discussed above, $1,500,000 of this total was converted to preferred stock on approximately January 1, 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 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 only common stock consideration consisting of 1,500,000 and 1,650,000 shares of the Company’s restricted common stock, for a total of 3,150,000 restricted common shares of the Company. 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 Capital Market (“Strategic”), the financier of the cash portion of the acquisitions as described below in the stockholders’ deficit footnote (Note 9).

 

See note 10, “Acquisitions” for further information related to the acquisitions and the purchase price allocation for each acquired entity.

 

Related Party Consulting Agreement

 

The Chairman of the Board is a consultant for the Company and 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 nine months ended September 30, 2016 and 2015 were $104,000 and $0, respectively. Total related party consulting expenses incurred and paid to the Chairman for the three months ended September 30, 2016 and 2015 were $39,000 and $0, respectively.