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Selge Construction Company, Inc.
<br />Notes to Financial Statements
<br />Note 9. Related Party Transactions
<br />The Company has entered into various month-to-month equipment lease agreements with Selge Leasing,
<br />Inc., a company related through common ownership. The leases have been accounted for as operating
<br />leases. The Company is responsible for all insurance, taxes and maintenance related to the operation of
<br />the equipment. Total rent paid by the Company for these leases to the related party for the years ended
<br />February 28, 2022 and 2021, was $780,000 and $1,080,000, respectively.
<br />The Company has advanced funds to Selge Properties, LLC, a company related through common
<br />ownership, to purchase land near the Company's corporate office. The balance due from Selge
<br />Properties, LLC is $169,945 at February 28, 2022 and 2021, and has no stated date of repayment. The
<br />Company has also advanced $7,242 and $77,214 at February 28, 2022 and 2021, respectively, to a
<br />stockholder that will be paid through future dividends. As a result of these terms and the nature of the
<br />relationship, these amounts due are reflected as a reduction of stockholders' equity in the accompanying
<br />balance sheets at February 28, 2022 and 2021.
<br />In addition, the Company has an unsecured note payable due to a stockholder at February 28, 2022 and
<br />2021, in the amount of approximately $877,000 and $523,000, respectively, bearing interest at 5%. The
<br />payable is reflected as a long-term liability as the stockholder has waived the right to demand payment
<br />prior to March 1, 2023.
<br />Note 10. Stockholders' Equity
<br />The Company has 92,366 shares of common stock outstanding at February 28, 2022 and 2021.
<br />Note 11. Employee Benefit Plans
<br />The Company has adopted a profit sharing plan, more commonly known as a 401(k) plan, for the benefit
<br />of all eligible nonunion employees. The plan allows for discretionary contributions by the Company to be
<br />determined on an annual basis. For the years ended February 28, 2022 and 2021, total Company
<br />contributions associated with the plan were approximately $135,000 and $151,000, respectively.
<br />The Company has also adopted a 401(k) plan, for the benefit of all eligible union and nonunion
<br />employees. The plan does not require Company contributions but allows for salary deferrals on the part of
<br />the eligible participants. The Company did not make any contributions to the plan for the years ended
<br />February 28, 2022 and 2021.
<br />Note 12. Variable Interest Entity
<br />Selge Leasing, Inc. owns and leases machinery and equipment to the Company as described in Note 9.
<br />Selge Leasing, Inc. is related to the Company through common ownership. The Company is Selge
<br />Leasing, Inc.'s only customer. The Company and Selge Leasing, Inc. entered into a cross collateralization
<br />agreement with a local bank. The Company can be required to perform on the guarantee in the event of
<br />nonpayment of a bank debt by Selge Leasing, Inc. During the year ended February 28, 2021, Selge
<br />Leasing, Inc. paid off all outstanding debt that was guaranteed by Selge Construction, Inc.
<br />Pursuant to the policy to apply the accounting alternative to certain lessor entities under common control,
<br />Selge Construction Company, Inc. did not apply the VIE guidance to ASC 810 to consolidate this certain
<br />lessor entity under common control into the Company's financial statements for the years ended
<br />February 28, 2022 and 2021.
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