Related Party Transactions

6 Months Ended

Jun. 30, 2012

Related Party Transactions

Note 14 - Related Party Transactions

Michael Dodd

Mr. Dodd, who was a member of our board of directors from September 2010 until his resignation in August 2012, is currently serving as the Chief Executive Officer of 3D Global Solutions Inc. (3D).  3D provides professional program management services to governments, corporations and global organizations. During the year ended December 31, 2011, 3D purchased approximately $102,200 of our composite rail ties on terms similar to our other customers and which remains uncollected at June 30, 2012.

Samuel G. Rose

Samuel G. Rose beneficially owns in excess of 5% of our outstanding stock.

Convertible Revolving Credit Agreement. During the year ended December 31, 2011, we entered into a convertible revolving credit agreement (the Agreement”) with Mr. Rose. Under the terms of the Agreement, Mr. Rose had agreed to lend us up to $2,000,000 on a revolving basis (the Loan”). The Loan carried interest at 12% per annum on the outstanding principal amount. The Loan had an original maturity date of September 30, 2012. In consideration for the Loan, we paid all legal and accounting costs associated with the documentation of the Loan and issued to Mr. Rose 250,000 shares of our restricted common stock. We have agreed to register the common stock issued to Mr. Rose within six months from date of closing provided, however, if such common stock is not registered we will redeem all of Mr. Rose’s unregistered stock in cash at a price equal to the greater of (a) the average VWAP for the thirty days ending one trading day prior to the date of issuance or (b) $0.90 per share.

We gave Mr. Rose a security interest in our inventory and accounts receivable pursuant to terms of a security agreement. During the year ended December 31, 2011, we borrowed $466,000 under the Agreement.

During the three months ended June 30, 2012 we repaid the outstanding principal and accrued interest and the Agreement was cancelled.

Demand Promissory Notes. Effective April 25, 2012 we entered into a Memorandum of Understanding (the “MOU”) with Mr. Rose and several other investors. Pursuant to the MOU, we issued to Mr. Rose a demand promissory note (the “Note”) in the principal amount of $1,666,667.  Interest accrues on the unpaid principal balance of the Note at a rate of 8.00% per annum. The principal balance of the Note, together with accrued and unpaid interest, is due and payable at any time after June 30, 2012 on demand.

Melvin Lenkin

Melvin Lenkin beneficially owns in excess of 5% of our outstanding stock.

Demand Promissory Notes. Effective April 25, 2012 we entered into a Memorandum of Understanding (the “MOU”) with Mr. Lenkin and several other investors. Pursuant to the MOU, we issued to Mr. Lenkin a demand promissory note (the “Note”) in the principal amount of $1,426,667.  Interest accrues on the unpaid principal balance of the Note at a rate of 8.00% per annum. The principal balance of the Note, together with accrued and unpaid interest, is due and payable at any time after June 30, 2012 on demand.