Annual report pursuant to Section 13 and 15(d)

Related Party Transactions

v2.4.1.9
Related Party Transactions
12 Months Ended
Dec. 31, 2014
Related Party Transactions [Abstract]  
Related Party Transactions

NOTE 13 – RELATED PARTY TRANSACTIONS

 

Expenses Paid by President

 

From time to time, the President of the Company will pay for expenses on behalf of the Company, which are recorded as expenses in the accompanying consolidated statement of operations and as a liability to the President of the Company under accounts payable - related parties in the accompanying consolidated balance sheet.

 

As of December 31, 2014 and 2013, the Company owed $0 to the Company president for expenses incurred on behalf of the Company. These amounts are non-interest bearing, unsecured and due on demand.

 

During the twelve months ended December 31, 2014 and 2013, the Company president advanced $0 to the Company to fund operations and the Company repaid $0 and $41,705, respectively, of the total amount advanced during the years ended December 31, 2014 and 2013, respectively.

 

Short Term Debt - Related Parties

 

During the twelve months ended December 31, 2014 and 2013, the Company’s President advanced $88,500 and $62,000, respectively, to the Company to fund operations and the Company repaid such advances of $55,000 and $27,500 in 2014 and 2013, respectively.

 

As of December 31, 2014 and 2013, the outstanding balance of short-term debt – related parties was $221,000 and $187,500 respectively. Included in the 2013 year-end balance, is $100,000 loaned to the Company to fund operations by a Board member, and no repayments were made by the Company while the individual was a Board member. This Board member resigned in 2013, and upon his resignation, the outstanding amounts were reclassified from short term debt – related parties to short term debt – third parties.

 

The amounts accrue interest at 10% and are due on demand. Interest expense incurred and accrued on Short Term Debt – Related Parties was approximately $15,000 and $10,000 for the twelve months ended December 31, 2014 and 2013, respectively.

 

Chief Operating Officer and the City of North Vernon

 

The Company’s Chief Operating Officer is a relative of the mayor of North Vernon. The City of North Vernon loaned the Company $1,400,000 as described in Note 12. The terms of the loan are at fair market value and were presented to and approved by the city council. The related party officer is an employee under the terms of an employment contract and his continued employment is based solely on performance. Management believes all compensation paid to the Chief Operating Officer is based on market value comparisons and is not impacted at all by the related party officer’s relationship with the mayor of the lender.

 

During 2013, the Company advanced $65,000 to the Chief Operating Officer, of which $22,369 represented back wages that had not been paid. The remaining $42,631, was not repaid as of December 31, 2013. This transaction violated Section 402 (A) of the Sarbanes-Oxley Act of 2002, as amended in the Securities Exchange Act of 1934. As a result, the Company and the Chief Operating Officer agreed that the remaining amount was not an advance, was not going to be repaid, would be treated as compensation expense for 2013 and was included in general and administrative expenses within the accompanying consolidated statement of operations as of December 31, 2013.