NOTE 6 – VARIABLE INTEREST ENTITY AND RELATED PARTY TRANSACTIONS
RLP is owned 40% by RGL and 60% by Radiant Capital Partners, LLC ("RCP"), a company for which the Chief Executive Officer of the Company is the sole member. RLP is a certified minority business enterprise that was formed for the purpose of providing the Company with a national accounts strategy to pursue corporate and government accounts with diversity initiatives. RCP’s ownership interest entitles it to a majority of the profits and distributable cash, if any, generated by RLP. The operations of RLP are intended to provide certain benefits to the Company, including expanding the scope of services offered by the Company and participating in supplier diversity programs not otherwise available to the Company. In the course of evaluating and approving the ownership structure, operations and economics emanating from RLP, a committee consisting of the independent Board member of the Company, considered, among other factors, the significant benefits provided to the Company through association with a minority business enterprise, particularly as many of the Company’s largest current and potential customers have a need for diversity offerings. In addition, the Committee concluded that the economic relationship with RLP was on terms no less favorable to the Company than terms generally available from unaffiliated third parties.
Certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have the sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties are considered "variable interest entities". RLP qualifies as a variable interest entity and is included in the Company’s condensed consolidated financial statements. Non-controlling interest recorded as an expense on the statements of operations was $30,261 and $47,681 for the three months ended September 30, 2012 and 2011, respectively.
For the three months ended September 30, 2012, RLP recorded $50,435 in profits, of which Mr. Crain’s distributable share was $30,261. For the three months ended September 30, 2011, RLP recorded $79,469 in profits, of which Mr. Crain’s distributive share was $47,681.