RELATED PARTY TRANSACTIONS

During the period ended December 31, 2015 and 2014, the Company was involved in various transactions with related parties. A summary of transactions and related balances are as follows. The table at the end of this note should be used in referencing all below paragraphs.

K&R and 7100 Grade Lane, LLC ("7100 LLC"):

The Company was involved in various transactions with K&R, which is wholly-owned by Kletter Holdings LLC, the sole member of which was Harry Kletter, our founder and former Chief Executive Officer. After Mr. Kletter's passing in January 2014, our Chairman of the Board and interim Chief Executive Officer, Orson Oliver, assumed the roles of executor of Mr. Kletter’s estate and President of Kletter Holdings LLC. As of December 31, 2015, Mr. Kletter’s estate, K&R and the Harry Kletter Family Limited Partnership collectively, beneficially own in excess of 20% of the Company's issued and outstanding shares.

The Company leases a portion of our Louisville, Kentucky facility from K&R under an operating lease expiring December 2017 (the "7100 Lease"). Additionally, the Company leases equipment from K&R under operating leases that expired November 2015 and expire May 2016. See Note 4 - Lease Commitments for additional information relating to the rent and lease agreements with K&R. During 2014, and to a lesser extent 2015, the Company deferred a portion of these lease payments.

On September 13, 2013, K&R made a $500.0 thousand refundable, non-interest bearing deposit with the Company related to K&R's potential purchase of the Company's real property located at 1565 East 4th Street in Seymour, Indiana. The Company was permitted and has used the deposited funds for general corporate purposes. K&R did not acquire the property. Under the Company's lending arrangements, a refund of the deposit to K&R must be approved by the Company's lenders.

As of December 31, 2015 and 2014, the Company had balances related to K&R pertaining to refundable lease and property deposits, rents payable to K&R, and rent expense.

On February 29, 2016, K&R assigned its interest in the 7100 Lease to another entity, 7100 LLC, also controlled by Mr. Kletter’s estate. At that time, the total amount due to the estate’s various entities, which amounted to approximately $1,504.0 thousand, became a subordinated, unsecured debt (the "Kletter Notes") owed by the Company. A portion of the amount, approximately $620.3 thousand, is owed to K&R, with the remaining amount, approximating $883.8 thousand, is owed to 7100 LLC. Interest will accrue monthly at a per annum rate of five percent (5.00%). Interest will accrue until April 30, 2017 at which time interest will be paid monthly. Until maturity on December 31, 2020, the Kletter Notes are subject to intercreditor agreements between the respective Note holder and MidCap. This amount of $1,504.0 thousand represents all net amounts due to Kletter estate entities as of February 29, 2016 with the exception of a $32.0 thousand deposit owed by K&R to the Company. If the Company sells property it owns at 7110 Grade Lane, it shall make a principal payment to K&R of $500.0 thousand. Otherwise, all remaining principal is due at maturity.

Algar, Inc. ("Algar"):

Management Services Agreement with Algar:

See Note 2 - Management Services Agreement with Algar, Inc. for details relating to the Management Agreement, the Stock Option Agreement and Mr. Garber's appointment as President.

As of December 31, 2015 and 2014, the Company expensed management fees to Algar for the portion of Mr. Garber's salary, along with other management fees in connection with the Management Agreement.

For the year ending December 31, 2014, Algar earned a bonus of $428.0 thousand. This amount was reduced by $50.0 thousand related to the real estate sale to SG&D Ventures, LLC described below. The bonus payable was further reduced on August 5, 2015, when the Company entered into a Stock Purchase Agreement with Algar, whereby the Company issued 50.7 thousand shares of its common stock to Algar for aggregate consideration equal to $189.0 thousand based on the fair value of our common stock. The consideration was payable in the form of a reduction of the Company’s $378.0 thousand accrued but unpaid bonus compensation due to Algar, leaving a remainder of $189.0 thousand in the accrued but unpaid bonus compensation. For additional information see Note 12 - Share Based Compensation.

Other transactions with Algar:

During 2015 and 2014, the Company participated in various other transactions with Algar. The Company sold scrap to Algar, bought scrap from Algar, and provided logistical and IT services to Algar. Related to these transactions, the Company has accounts receivable balances from Algar, an accounts payable balance to Algar, along with related income and expense as of December 31, 2015 and 2014.

Board of Directors' fees and consulting fees:

The Company pays board fees to non-employee directors. Additionally, the Company paid financial consulting fees to one of its directors in 2015 and 2014. All director compensation during 2015 was deferred and the Company plans to pay subsequent to December 31, 2015. Related to these transactions, the Company has accounts payable balances to the Board of Directors for fees and consulting fees, along with related expense at and as of December 31, 2015 and 2014.

LK Property Investments, LLC:

On April 30, 2015, ISA Real Estate LLC agreed to sell to LK Property, an entity principally owned by Daniel M. Rifkin, CEO of MetalX and the principal owner of RCP, a 4.4 acre parcel of real estate, located at 6709 Grade Lane, Louisville, Kentucky, for a purchase price of $1.0 million. The Company used the proceeds from the sale primarily for debt reduction and working capital. The loss on sale of this asset was $102.0 thousand. See Note 14 - Financing and Related Matters for discussion related to Mr. Rifkin.

On April 30, 2015, the Company entered into a lease agreement with LK Property, for a portion of the 4.4 acre parcel of real estate located at 6709 Grade Lane, Louisville, Kentucky in the amount of $3.0 thousand per month. The lease terminates on April 14, 2019, but the Company has the right to terminate the lease and vacate the leased premises upon 90 days notice. The Company is required to reimburse the lessor for 40% of the property taxes on the parcel during the term.

Metal X, LLC:

During 2015 and 2014, the Company sold scrap material to MetalX and held accounts receivables balances from MetalX related to scrap sales. For additional information regarding MetalX, see Note 14 - Financing and Related Matters.

SG&D Ventures, LLC.

On May 18, 2015, ISA Real Estate LLC agreed to sell to SG&D Ventures, LLC (SG&D), an entity owned by shareholders of Algar, including Mr. Garber, an approximately 1-acre parcel of non-essential real estate, located at 7017 Grade Lane, Louisville, Kentucky, for an aggregate purchase price equal to independent third-party appraisal amount of $350.0 thousand. The Company received this appraisal before the sale. The purchase consideration consisted of $300.0 thousand in cash from SG&D and a credit of $50.0 thousand against bonus compensation previously accrued but not paid to Algar. The gain on sale of this asset was $1.1 thousand.

Related party balances as of and for the years ended December 31, 2015 and 2014 are as follows, in thousands:



		2015			2014
K&R, LLC:
Deposit amounts owed to the Company by K&R	(1)	$	74		$	74
Property deposit payable to K&R	(2)	500			500
Facility rent payable to K&R	(2)	821			462
Equipment rent payable to K&R	(2)	132			116
Facility rent expense to K&R		646			646
Equipment rent expense to K&R		126			126

Algar, Inc.:
Accounts receivable from Algar for scrap transactions	(1)	$	93		$	80
Accounts receivable from Algar for logistical services	(1)	19			5
Accounts payable to Algar	(2)	28			39
Bonus payable to Algar	(2)	189			428
Revenue from scrap sales to Algar		117			442
Revenue from logistical services to Algar		69			59
Revenue from IT services to Algar		23			7
Scrap material purchases from Algar		1,225			1,542
Management fee expense		250			250
Bonus expense to Algar		—			428
Other expenses to Algar		30			109

Board of Directors: *
Accounts payable to the Board of Directors for fees	(2)	$	250		$	55
Accounts payable to the Board of Directors for consulting fees	(2)	—			40
Board of director fee expense		180			100
Board of director consulting expense		25			15

LK Property Investments, LLC:
Lease deposit to LK Property	(1)	$	3		$	—
Accounts payable to LK Property	(2)	2			—
Loss on the sale of assets to LK Property		(102		)	—
Rent expense to LK Property**		24			—

Metal X, LLC:
Accounts receivable from Metal X	(1)	$	19		$	250
Revenue from product sales to Metal X		1,905			1,982

SG&D Ventures, LLC:
Gain on the sale of assets to SG&D		$	1		$	—

* Excludes insignificant amount of travel reimbursement.

**Excludes amounts reimbursed to LK Properties for utilities and property tax.

(1) Included in receivable from related parties on balance sheets

(2) Included in payable to related parties on balance sheets