Related Party Transactions

3 Months Ended

Mar. 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions

Note 14 - Related Party Transactions

Samuel G. Rose and Julie Walters

Samuel G. Rose and Julie Walters beneficially own in excess of 5% of our outstanding stock.

8% Convertible Promissory Notes. During the three months ended March 31, 2013, we issued and sold to Mr. Rose an aggregate principal amount of $416,667 of our 8.0% convertible promissory notes (the “8% Notes”) which are initially convertible into shares of our common stock, at a conversion price equal to $0.40 per share of common stock, subject to adjustment as provided on the terms of the 8% Notes, and associated warrants (the “8% Note Warrants”) to purchase, in the aggregate, 1,041,668 shares of common stock, subject to adjustment as provided on the terms of the 8% Note Warrants.

The 8% Notes, including all outstanding principal and accrued and unpaid interest, are due and payable on the earlier of five years from date of issuance or upon the occurrence of an Event of Default (as defined in the 8% Notes). We may prepay the 8% Notes, in whole or in part, upon 60 calendar days prior written notice to the holders thereof. Interest accrues on the 8% Notes at a rate of 8.0% per annum, payable during the first three years that the 8% Notes are outstanding in shares of common stock, valued at the weighted average price of a share of common stock for the twenty consecutive trading days prior to the interest payment date, pursuant to the terms of the 8% Notes. During the fourth and fifth years that the 8% Notes are outstanding, interest that accrues under the 8% Notes shall be payable in cash.

Accrued but unpaid interest due on March 31, 2013 for the three months ended March 31, 2013, was paid in lieu of cash, with approximately 84,400 shares of common stock, which were issued subsequent to March 31, 2013 with a value of approximately $57,400.

The 8% Note Warrants are exercisable at an exercise price of $0.60 per share of common stock, subject to adjustment as provided for by the terms thereof, for a period commencing on the date of issuance and ending on the earlier to occur of the date that is (i) three years after the date upon which the weighted average price of a share of Common Stock for the 90 consecutive trading days prior to such date is at least $2.00 per share, and (ii) five years after the date on which the 8% Notes to which the applicable 8% Note Warrant is related has been repaid in full.

In connection with the entry into the Purchase Agreement, pursuant to the terms thereof, on August 24, 2012, we granted to the Note Purchase Agreement Investors (i) certain demand and piggyback registration rights with respect to the registration of certain Company securities under the Securities Act and the rules and regulations promulgated thereunder, and (ii) a security interest and lien in all of our assets and rights to secure our obligations under the 8% Notes.

MLTM Lending, LLC and the ML Dynasty Trust

MLTM Lending, LLC and the ML Dynasty Trust beneficially own in excess of 5% of our outstanding stock. Pursuant to the Schedule 13D filings made by MLTM Lending, LLC and the ML Dynasty Trust, the ML Dynasty Trust shares with MLTM the power to vote or direct the vote of, and to dispose or direct the disposition of, greater than 5% of our outstanding stock. Thomas Bowersox, a member of our board of directors, is a trustee of the ML Dynasty Trust.

8% Convertible Promissory Notes. During the three months ended March 31, 2013, we issued and sold to MLTM Lending, LLC an aggregate principal amount of $391,667 of our 8% Notes and associated 8% Note Warrants to purchase, in the aggregate, 979,168 shares of common stock, subject to adjustment as provided on the terms of the 8% Note Warrants.

Accrued but unpaid interest due on March 31, 2013 for the three months ended March 31, 2013, was paid in lieu of cash, with approximately 75,100 shares of common stock, which were issued subsequent to March 31, 2013 with a value of approximately $51,100.

The terms of the 8% Notes and the 8% Note Warrants are described above.

Judy Lenkin Lerner Revocable Trust

The Judy Lenkin Lerner Revocable Trust beneficially owns in excess of 5% of our outstanding stock.

8% Convertible Promissory Notes. During the three months ended March 31, 2013, we issued and sold to the Lerner Trust an aggregate principal amount of $25,000 of our 8% Notes and associated 8% Note Warrants to purchase, in the aggregate, 62,500 shares of common stock, subject to adjustment as provided on the terms of the 8% Note Warrants.

Accrued but unpaid interest due on March 31, 2013 for the three months ended March 31, 2013, was paid in lieu of cash, with approximately 5,100 shares of common stock, which were issued subsequent to March 31, 2013 with a value of approximately $3,400.

The terms of the 8% Notes and the 8% Note Warrants are described above.

Allen Kronstadt

Allen Kronstadt beneficially owns in excess of 5% of our outstanding stock, and was appointed to our board of directors on September 11, 2012 pursuant to the terms of the Purchase Agreement.

8% Convertible Promissory Notes. During the three months ended March 31, 2013, we issued and sold to Mr. Kronstadt an aggregate principal amount of $916,667 of our 8% Notes and 8% Note Warrants to purchase, in the aggregate, 2,291,668 shares of common stock, subject to adjustment as provided on the terms of the 8% Note Warrants.

Accrued but unpaid interest due on March 31, 2013 for the three months ended March 31, 2013, was paid in lieu of cash, with approximately 83,800 shares of common stock, which were issued subsequent to March 31, 2013 with a value of approximately $57,000.

The terms of the 8% Notes and the 8% Note Warrants are described above.

Michael Dodd

Mr. Dodd, who was a member of our board of directors from September 2010 until his resignation in August 2012, was also serving as the Chief Executive Officer of 3D Global Solutions Inc. (3D).  3D provided 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. We have provided an allowance due to its prospect for collectability. We have initiated legal action in an effort to collect the balance due.