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EX-32.1 - CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - Corix Bioscience, Inc.e321.htm
EX-32.2 - CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - Corix Bioscience, Inc.e322.htm
EX-31.2 - CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - Corix Bioscience, Inc.e312.htm
EX-31.1 - CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - Corix Bioscience, Inc.e311.htm

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

 

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2016

 

OR

 

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number: 333-150548

 

AMERICAN HOUSING INCOME TRUST, INC. 
(Exact name of registrant as specified in its charter)

 

Maryland   333-150548   75-3265854

(STATE OR OTHER JURISDICTION OF

INCORPORATION OR ORGANIZATION)

  (COMMISSION FILE NO.)   (IRS EMPLOYEE IDENTIFICATION NO.)

 

34225 N. 27th Drive Building 5, Phoenix, Arizona 85085
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) 

(623) 551-5808

 

(ISSUER TELEPHONE NUMBER)

Registrant's telephone number, including area code: (888) 406 2713

(Former name, former address and former fiscal year, if changed since last report)

-1- 

 

 

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]  No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X]   No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [ X ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ]   No [X]

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 9,012,703 shares of common stock issued and outstanding as of August 15, 2016.

-2-

 

 

 

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION 3
     
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
Item 4. Controls and Procedures 11
     
PART II    
     
Item 1. Legal Proceedings 12
Item 1A. Risk Factors 12
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Mine Safety Disclosures 12
Item 5. Other Information 12
Item 6. Exhibits 13
Signatures   13

 

 

-3- 

 

 

 

 PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.

American Housing Income Trust, Inc.
Financial Statements
June 30, 2016 (Unaudited)

Contents

 

American Housing Income Trust, Inc.

June 30, 2016

 Index

Consolidated Balance Sheets (unaudited)   F-1  
Consolidated Statements of Operations (unaudited)   F-2  
Consolidated Statements of Cash Flows   F-3  
Notes to the Consolidated Financial Statements (unaudited)   F-4  

 

-4- 

 

 

 American Housing Income Trust, Inc.

Consolidated Balance Sheets

(unaudited)

 

    June 30,
2016
  December 31,
2015
ASSETS                
Investment in real estate:                
Land   $ 6,510,384     $ 5,539,877  
Building and improvements     4,156,708       3,680,502  
      10,667,092       9,220,379  
Less: accumulated depreciation     (283,624 )     (223,450 )
Investment in real estate, net     10,383,468       8,996,929  
Cash     8,420       199,570  
Accounts receivable     1,550       —    
Other assets     213,213       221,033  
Equipment, net     4,876       —    
Total Assets   $ 10,611,527     $ 9,417,532  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY                
LIABILITIES                
Accounts payable and accrued liabilities   $ 208,525     $ 88,210  
Due to related parties     265,030       14,895  
Prepaid rent received     23,853       39,598  
Notes payable     5,126,657       4,271,665  
Total Liabilities     5,624,065       4,414,368  
Commitments (Note 10)                
                 
SHAREHOLDERS’ EQUITY                
Preferred Stock, 9,980,000 shares authorized, $0.001 par value; no shares issued and outstanding (December 31, 2015 – no shares)     —         —    
Preferred Stock – Series A, 20,000 shares authorized, $0.001 par value; no shares issued and outstanding (December 31, 2015 – no shares)     —         —    
Common stock, 500,000,000 shares authorized, par value $0.01; 8,288,301 shares outstanding (December 31, 2015 – 7,566,815 shares)     82,883       75,668  
Additional paid-in capital     15,109,807       12,390,239  
Accumulated deficit     (10,737,132 )     (7,994,647 )
                 

 

Total American Housing Income Trust, Inc.’s Shareholders’ Equity     4,455,558       4,471,260  
Non-controlling interest     531,904       531,904  
Total Shareholders’ Equity     4,987,462       5,003,164  
Total Liabilities and Shareholders’ Equity   $ 10,611,527     $ 9,417,532  

 

F-1

 

 

American Housing Income Trust, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

 

    For the   For the   For the   For the
    Three Months Ended   Three Months Ended   Six Months
Ended
  Six Months Ended
    June 30,   June 30,   June 30,   June 30,
    2016   2015   2016   2015
Revenue                                
Rental revenues   $ 165,615     $ 101,285     $ 327,382     $ 188,444  
Interest income     —         2,400       —         4,802  
Other Income     —         —         133       500  
                                 
Total revenue     165,615       103,685       327,515       193,746  
                                 
Expenses                                
Depreciation     37,813       21,013       65,395       40,281  
General and administrative     1,951,065       486,724       2,814,098       953,360  
Interest expense     130,219       61,970       195,488       113,964  
Acquisition expense     —         —         —         325,000  
                                 
Total expenses     (2,119,097 )     (569,707 )     (3,074,981 )     (1,432,605 )
                                 
Net loss before gain on sale of properties     (1,953,482 )     (466,022 )     (2,747,466 )     (1,238,859 )
                                 
Gain on sale of properties     —         71,293       4,981       71,293  
                                 
Net Loss     (1,953,482 )     (394,729 )     (2,742,485 )     (1,167,566 )
                                 
Net loss attributable to non-controlling interest     —         —         —         —    
                                 
Net loss attributable to common stockholders   $ (1,953,482 )   $ (394,729 )   $ (2,742,485 )   $ (1,167,566 )
                                 
Basic and diluted loss per share:                                
Net loss per share attributable to common stockholders   $ (0.24 )   $ (0.09 )   $ (0.35 )   $ (0.27 )
                                 
Weighted average shares outstanding – basic and diluted     8,200,919       4,621,365       7,883,175       4,380,037  
                                 

 

F-2

 

 

American Housing Income Trust, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

    For the
Six Months Ended
June 30,
2016
  For the
Six Months Ended
June 30,
2015
Cash Flows from Operating Activities                
Net loss   $ (2,742,485 )   $ (1,167,566 )
Items not affecting cash:                
Depreciation     65,395       40,281  
Stock-based compensation     1,641,058       —    
Gain on sale of assets     (4,981 )     (71,293 )
Changes in operating assets and liabilities:                
Accounts receivable     (1,550 )     (1,340 )
Due from related parties     —         (134,578 )
Prepaid expenses     7,820       17,345  
Accounts payable     60,260       18,003  
Accrued liabilities     60,054       5,541  
Prepaid rent     (15,745 )     2,950  
Due to related parties     (8,330 )     (9,640 )
Net Cash Used In Operating Activities     (938,504 )     (1,300,297 )
Cash Flows from Investing Activities                
Purchase of real estate properties and improvements     (8,432 )     (898,660 )
Proceeds from sale of real estate properties     211,200       111,000  
Purchase of equipment     (5,116 )     —    
                 
Net Cash Provided by (Used in) Investing Activities     197,652       (787,660 )
Cash Flows from Financing Activities                
Proceeds from the sale of common stock     —         1,809,503  
Advances from related parties, net     258,465       —    
Proceeds from notes payable     325,232       120,000  
Repayment of notes payable     (33,995 )     (15,722 )
                 
Net Cash Provided by Financing Activities     549,702       1,913,781  
Change in Cash     (191,150 )     (174,176 )
Cash – Beginning of Period     199,570       304,371  
Cash – End of Period   $ 8,420     $ 130,195  

 

Supplemental disclosures of cash flow information:                
Interest paid   $ 134,485     $ 113,964  
Income taxes paid   $ —       $ —    
Non-cash investing and financing activities:                
Stock issued for acquisition of real properties   $ 1,085,726     $ 300,000  
Notes payable issued with acquisition of real properties   $ 563,755     $ 990,000  
Notes payable settled from sale of real properties   $ —       $ 350,000  

 

F-3

 

 

 

  1. Nature of Operations

American Housing Income Trust, Inc. (“we”, “our”, the “Company”) was incorporated on December 17, 2007 under the laws of the State of Nevada. On February 13, 2015, following the acquisition of the majority and controlling shares of the Company by American Realty Partners, LLC (“ARP”), a change of control of the Company took place. On May 11, 2015, the Company converted into a Maryland corporation and changed its name to American Housing Income Trust, Inc.

On August 3, 2015, the Company, and Valfre Holdings, LLC, an Arizona limited liability company, and James A. Valfre and Pamela J. Valfre, f/k/a Pruitt (collectively, "Valfre") closed on the Company's acquisition of nine single family residences in Arizona through an umbrella limited liability partnership organized in Maryland called "AHIT Valfre, LLP" (“AHIT Valfre”). Pursuant to the AHIT Valfre Agreements, in consideration for the conveyance of the nine single family residences, which were acquired by AHIT Valfre “subject to” existing mortgages, AHIT Valfre issued limited partnership interests to Valfre. On April 8, 2016, AHIT Valfre completed its internal restructuring and the partners in AHIT Valfre restructured their respective interests in the partnership resulting in AHIT Valfre GP, LLC (“AHIT Valfre GP”) and AHIT Valfre Limiteds, LLC (“AHIT Valfre Limiteds”) serving as General Partner and Limited Partner respectively, of AHIT Valfre.

The Company is in the business of acquiring and operating residential properties. As of the date of this filing, the Company holds title to 47 residential properties and 1 commercial property.

2.Summary of Significant Accounting Policies

a) Basis of Presentation and Principles of Consolidation

These unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US”) and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited financial statements and notes for the years ended December 31, 2015 and 2014 contained in the Company’s Form 10-K filed on March 30, 2016.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows for the periods shown have been reflected herein.  The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the years ended December 31, 2015 and 2014 as reported in the Company's Form 10-K have been omitted.

These consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries ARP, and its subsidiary special purpose entities, ARP Pledgor, LLC, ARP Borrower, LLC, ARP Pledgor II, LLC, APR Borrower II, LLC, AHIT Valfre, LLP and AHIT Valfre GP, LLC. All significant intercompany transaction and balances have been eliminated. 

F-4

 

 

 

b) Use of Estimates

The preparation of financial statements in conformity with US generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets, and income taxes. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

c) Fair Value of Financial Instruments

The carrying amounts reported in the consolidated balance sheets for accounts payable and accrued liabilities, amounts due to/from related parties and notes payable are reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and if, applicable, the stated rate of interest is equivalent to rates currently available.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a three-level valuation hierarchy for disclosures of fair value measurements, defined as follows:

Level 1   Financial assets and liabilities for which values are based on unadjusted quoted prices for identical assets or liabilities in an active market that management has the ability to access.

Level 2   Financial assets and liabilities for which values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability (commodity derivatives and interest rate swaps).

Level 3   Financial assets and liabilities for which values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.  These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

The Company does not have any financial instruments that are required to be measured and recorded at fair value on a recurring basis.

F-5

 

 

 

d) Non-controlling Interest

Limited partnership units in AHIT-Valfre that are not owned by the Company are presented as non-controlling interest in the equity section of our consolidated balance sheets.

Our limited partners do not have the right to share in the net income or losses of AHIT Valfre but have the right to convert all or part of their partnership units to common shares of the Company on a one-for-one basis following the one-year anniversary of issuance. At the time of redemption, we have the right to determine whether to redeem the non-controlling limited partnership units of AHIT Valfre for cash, based upon the fair value of an equivalent number of shares of our common stock at the time of redemption. As of June 30, 2016, there were 300,026 limited partnership units outstanding in AHIT Valfre.

  e) Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes ASC 840, Leases.  This ASU is based on the principle that entities should recognize assets and liabilities arising from leases.  The ASU does not significantly change the lessees’ recognition, measurement and presentation of expenses and cash flows from the previous accounting standard.  Leases are classified as finance or operating.  The ASU’s primary change is the requirement for entities to recognize a lease liability for payments and a right of use asset representing the right to use the leased asset during the term on operating lease arrangements.  Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases with a term of twelve months or less.  Lessors’ accounting under the ASC is largely unchanged from the previous accounting standard.  In addition, the ASU expands the disclosure requirements of lease arrangements.  Lessees and lessors will use a modified retrospective transition approach, which includes a number of practical expedients.  The effective date will be the first quarter of fiscal year 2019 with early adoption permitted.  Management continues to assess the overall impact the adoption of ASU 2016-02 will have on the Company’s financial statements

  3. Going Concern

These interim consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has never paid any dividends and is unlikely to pay dividends in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. During the six months ended June 30, 2016, the Company incurred a net loss of $2,742,485, and as at June 30, 2016, the Company has accumulated losses of $10,737,132 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company has been successful in raising cash through equity offerings in the past. The Company has financing efforts in place to continue to raise cash through equity offerings.

Management has developed a plan to continue operations. This plan includes obtaining equity financing and reducing expenses. Although the Company has successfully completed financings in the past fiscal years, the Company cannot assure that the plans to address these matters in the future will be successful.

F-6

 

 

4.       Investment in Real Estate

 

   

June 30,

2016

 

December 31,

2015

                 
                 
Cost of real estate properties   $ 10,667,092     $ 9,220,379  
Accumulated depreciation     (283,624 )     (223,450 )
                 
Balance at the end of the period   $ 10,383,468     $ 8,996,929  

 

On April 11, 2016, the Company purchased two single family homes and two parcels of land for the purchase price of $1,650,000. Consideration given for the purchase consisted of 722,883 shares of common stock issued worth $1,085,726, the assumption of debt totaling to $563,755 and cash paid of $519. Of the $1,650,000 purchase price for the real estate, $1,039,420 was allocated to land and $610,580 was allocated to buildings.

 

During the six month period ended June 30, 2016, the Company recorded depreciation expense of $65,155 (2015 - $40,281).

 

  5. Prepaid Rent Received

 

   

June 30,

2016

 

December 31,

2015

                 
                 
Balance, beginning of period   $ 39,598     $ 7,450  
Prepaid rent recognized as revenue during the period     (90,555 )     (7,450 )
Prepaid rent received during the period     74,810       39,598  
                 
Balance, end of period   $ 23,853     $ 39,598  

 

  6. Related party transactions

a)   ARP has been advised and managed by Performance Realty Management, LLC (“PRM”), an Arizona limited liability company (the “Manager”). At the formation of ARP, ARP agreed to pay the Manager of ARP quarterly management fees equal to the greater of: (a) $120,000 on an annual basis, or (b) 1% of the total assets of ARP in consideration for the management services to be rendered to or on behalf of ARP by the Manager. Commencing January 1, 2016, PRM started to serve as the Manager of ARP at no cost. During the six months ended June 30, 2016, the Company recorded management fees of $nil (2015 - $60,000). As at June 30, 2016, ARP is indebted to the Manager of ARP for $192,914 (December 31, 2015 – ARP is owed $2,455 from the Manager of ARP), which represents advances provided by the Manager of ARP for daily operations. The amount due is unsecured, non-interest bearing and due on demand.

F-7

 

 

b)   On May 15, 2015, the Company entered into an Advisory Board Consulting and Compensation Agreement with a director of the Company pursuant to which the Company agreed to issue 1,000,000 shares of common stock to the director. In addition, the Company agreed to pay the director an annual fee equal to $120,000 or 1% of the Company’s assets as reported on its year-end balance sheet, whichever is greater. The Company will also issue an aggregate of 3,000,000 shares of common stock of the Company on the first, second and third anniversary. During the six months ended June 30, 2016, the Company recorded management fees of $18,276 (2015 - $nil). The 1,000,000 shares of AHIT were issued on July 6, 2015. On February 25, 2016, the Company amended the Advisory Board Consulting and Compensation Agreement and the director agreed to serve on the Board of Directors at no cost.

 c)  On February 25, 2016, the Company entered into an employment agreement with the CFO of the Company for a period of three years. The Company agreed to pay the CFO an annual salary equal to $120,000 or 1% of the Company’s assets as reported on its year-end balance sheet, whichever is greater. The Company will also issue an aggregate of 3,000,000 shares of common stock of the Company on the first, second and third anniversary. During the six months ended June 30, 2016, the Company recorded stock-based compensation of $1,041,058 (2015 - $nil), which is included in general and administrative expense.

d)    As of June 30, 2016, the Company is indebted to the CFO of the Company, and a company owned by the CFO of the Company, for a net $68,551 (December 31, 2015 - $3,050), which represents advances of $65,551 made to the Company by the CFO and $3,000 of management fees owed to the CFO. The amount due is unsecured, non-interest bearing and due on demand. 

e)    As of June 30, 2016, the Company is indebted to the Chief Executive Officer of the Company (the “CEO”) for a net of $11,158 (December 31, 2015 - $14,164), which represents $16,158 of management fees owed to the CEO and a $5,000 advance provided to the CEO for travel and general and administrative expenses. The amount due is unsecured, non-interest bearing and due on demand.

f)    As of June 30, 2016, the Company is owed $7,729 (December 31, 2015 - $nil) from the limited partner of AHIT Valfre, LLP, which represents refunds received on behalf of the Company from mortgage companies. On July 5, 2016, the Company received the total amount owed. In addition, the Company owed $136 to the limited partner of AHIT Valfre, LLP for repair expenses paid on behalf of the Company.

  g) On March 18, 2016, the Company sold its interest in one of the Company’s properties to PRM for $211,200 and recognized a gain of $4,981 on sale of asset.

 

F-8

 

 

7.       Notes payable

 

     

June 30,

2016

$

     

December 31,

2015

$

 
                 
Mortgages payable on February 20, 2034, bearing interest at a variable rate, collateralized by a deed of trust on the real estate properties purchased with the loan.     199,159       203,343  
Promissory note payable on November 1, 2019, bearing interest at 5.371% per annum, collateralized by the real estate properties titled to ARP Borrower, LLC and 100% equity ownership in ARP Borrower, LLC. The note is also secured by the Company.     1,639,885       1,651,183  
Promissory note payable on December 1, 2020, bearing interest at 5.88% per annum, collateralized by the real estate properties titled to ARP Borrower II, LLC and 100% equity ownership in ARP Borrower II, LLC.     962,490       968,000  
Promissory note payable on May 27, 2016, bearing interest at 16% per annum, collateralized by a deed of trust on the real estate property purchased with the loan. The maturity date was extended to November 27, 2016 subsequent to June 30, 2016. Refer to Note 11(f).     180,000       180,000  
Promissory note payable on July 8, 2016, bearing interest at 18% per annum initially and at 12% per annum after four months, collateralized by a deed of trust on the real estate property purchased with the loan. The maturity date was extended to July 7, 2017 subsequent to June 30, 2016.  Refer to Note 11(b).     80,000       80,000  
Promissory note payable on October 1, 2016, bearing interest at 16% per annum, collateralized by a deed of trust on the real estate properties titled to ARP.     300,000       —    
Promissory note payable on April 1, 2021, bearing interest at 10% per annum, collateralized by a deed of trust on the real estate properties purchased with the loan.     314,831       —    
Mortgage payable on October 1, 2053, bearing interest at 2% per annum, collateralized by a deed of trust on the real estate properties purchased with the loan.     247,671       —    
Promissory note payable on May 1, 2021, bearing interest at 6.07% per annum, collateralized by the real estate properties titled to AHIT Valfre, LLP and ARP Borrower, LLC.     1,202,621       —    
                 

 

Mortgage payable on April 1, 2018, bearing interest at 5% per annum, collateralized by a deed of trust on the real estate properties purchased with the loan.  The note was refinanced on April 18, 2016.  Refer to disclosure below.     —         18,861  
Mortgage payable on July 1, 2029, bearing interest at 4.125% per annum, collateralized by a deed of trust on the real estate properties purchased with the loan. The note was refinanced on April 18, 2016.  Refer to disclosure below.     —         91,943  
                 

 

F-9

 

 

 

Home Equity Line-of-credit, bearing interest at a variable interest rate, collateralized by a deed of trust on the real estate properties purchased with the loan. The note was refinanced on April 18, 2016.  Refer to disclosure below.     —         46,108  
Mortgage payable on October 1, 2035, bearing interest at a variable rate, collateralized by a deed of trust on the real estate properties purchased with the loan. The note was refinanced on April 18, 2016.  Refer to disclosure below.     —         140,512  
Mortgage payable on June 1, 2043, bearing interest at 4.125% per annum, collateralized by a deed of trust on the real estate properties purchased with the loan. The note was refinanced on April 18, 2016.  Refer to disclosure below.     —         113,036  
Mortgage payable on July 1, 2041, bearing interest at 5.25% per annum, collateralized by a deed of trust on the real estate properties purchased with the loan. The note was refinanced on April 18, 2016.  Refer to disclosure below.     —         274,905  
Home Equity Line-of-credit, bearing interest at 8.25% per annum, collateralized by a deed of trust on the real estate properties purchased with the loan. The note was refinanced on April 18, 2016.  Refer to disclosure below.     —         34,484  
Mortgage payable on June 1, 2043, bearing interest at 4.125% per annum, collateralized by a deed of trust on the real estate properties purchased with the loan. The note was refinanced on April 18, 2016.  Refer to disclosure below.     —         132,362  
Mortgage payable on December 1, 2034, bearing interest at a variable rate, collateralized by a deed of trust on the real estate properties purchased with the loan. The note was refinanced on April 18, 2016.  Refer to disclosure below.     —         111,168  
Mortgage payable on January 1, 2022, bearing interest at 4.375% per annum, collateralized by a deed of trust on the real estate properties purchased with the loan.  The note was refinanced on April 18, 2016.  Refer to disclosure below.     —         16,683  
Mortgage payable on September 1, 2033, bearing interest at a variable rate, collateralized by a deed of trust on the real estate properties purchased with the loan.  The note was refinanced on April 18, 2016.  Refer to disclosure below.     —         76,336  
Home Equity Line-of-credit payable on January 13, 2040, bearing interest at 2.76% per annum, collateralized by a deed of trust on the real estate properties purchased with the loan.  The note was refinanced on April 18, 2016.  Refer to disclosure below.     —         50,215  
Mortgage payable on November 1, 2026, bearing interest at 4.5% per annum, collateralized by a deed of trust on the real estate properties purchased with the loan.  The note was refinanced on April 18, 2016.  Refer to disclosure below.     —         82,526  
                 
      5,126,657       4,271,665  

 

F-10

 

 

On April 18, 2016, AHIT-Valfre closed financing with FirstKey Mortgage, LLC and entered into a balloon note for approximately $1,203,000, bearing interest at 6.07% per annum and due on May 1,2012. The note is collateralized by the real estate properties titled to AHIT Valfre. The proceeds from the balloon note were used to pay off mortgages previously assumed by AHIT-Valfre on August 3, 2015.

The following table schedules the principal payments on the notes payable for the next five years and thereafter as of June 30, 2016:

  Year       Amount  
  2016     $ 589,736  
  2017       62,892  
  2018       66,253  
  2019       1,620,580  
  2020       948,641  
  thereafter       1,838,555  
             
  Total     $ 5,126,657  


At June 30, 2016, the weighted-average interest rate on short-term borrowings outstanding was 15.43%. The average amount of short-term borrowings during the six months ended June 30, 2016 was $186,667. The average interest on short-term borrowings during the six months ended June 30, 2016 was $10,551.

8.       Common Stock

  a) On January 1, 2016, the Company cancelled 1,398 shares of common stock due to rounding errors in share issuances from year ended December 31, 2015.

 

  b) During the six months ended June 30, 2016, the Company recognized stock-based compensation of $1,641,058 pursuant to the employment agreements as disclosed in Notes 6(c) and 10. The fair value of $1,641,058 is included in additional paid-in capital as at June 30, 2016.

 

  c) On April 11, 2016, the Company issued 722,883 shares of restricted common stock of the Company with a fair value of $1,085,726 in exchange for real estate properties.

 

  d) On April 4, 2016, the Board of Directors approved a Stock Repurchase Program. The Stock Repurchase Program became effective on April 5, 2016 and will allow the Company to repurchase up to $2,000,000 of its common stock.  The Stock Repurchase Program expires on the earlier of November, 1, 2016 or a determination by the Board of Directors that the original conclusions and determinations by the Board of Directors in support of the Stock Repurchase Program are no longer valid or no longer consistent with the Company’s short-term and long-term objectives. As of June 30, 2016, the Company had not repurchased any shares as part of the Stock Repurchase Program.

 

F-11
 
 

 

 

9.       Single Family Residence Acquisitions

 

As of June 30, 2016, the Company owns 48 single family homes. The estimated useful life of the buildings and improvements related to these assets is 27 years. The following table sets forth the metropolitan statistical area, metropolitan division, number of homes, aggregate net investment, and average investment for each home acquired.

MSA / Metro Division     Number of Homes       Aggregate Investment       Average Investment per Home  
Arizona     42     $ 8,651,406     $ 205,986  
California     3       1,650,000       550,000  
Texas     3       365,686       121,895  
                         
Total and Weighted Average     48     $ 10,667,092     $ 222,231  

 

The Company computes depreciation using the straight-line method over the estimated useful lives of 27 years for building cost. The Company makes this determination based on subjective assessments as to the useful lives of the Company’s properties for purposes of determining the amount of depreciation to record on an annual basis with respect to our investments in single family real estate.

10.    Commitments and Contingencies

 

Employment Agreements

On April 15, 2016, the Company entered into employment agreements with two individuals for a term of one year. The Company agreed to issue an aggregate 200,000 restricted shares as compensation and weekly monetary compensation that is on par with the value of the services provided employees.

 

Lease Agreements

 

The Company rents properties under non-cancellable lease agreements with a term of one year. Future minimum rental revenues under leases existing on our properties at June 30, 2016 through the end of their term, are as follows:

 

Fiscal Year 2016   $ 253,273  
Fiscal Year 2017     122,021  
Fiscal Year 2018     10,350  
Fiscal Year 2019     2,913  
         
Total   $ 388,557  

 

F-12
 
 

 

 

 

Litigation

 

Other than the litigation identified herein, the Company is not presently subject to any material litigation nor, to its knowledge, is any material litigation threatened against the Company, which if determined unfavorably to the Company, would have a material adverse effect on the Company's consolidated financial position, consolidated results of operations, or consolidated cash flows.

a)   The Company is a defendant in a civil matter pending in San Joaqin County, California brought by a current shareholder – Ronald Trinchitella and Billie Jean Trinchitella TTEE Trinchitella Family Trust DTD 7/15/1999. The plaintiff was a member in American Realty prior to the Share Exchange Agreement with the Company was effectuated. The plaintiff is seeking rescission damages against American Realty, i.e. a return of his investment, on the premise that Performance Realty was required to honor his demand for redemption of his units when, according to American Realty, honoring the redemption was at the sole discretion of Performance Realty. The Company is a defendant by virtue of its relationship with American Realty. The Company has denied all allegations and is defending the case.

  b) The Company is a defendant in a civil matter pending in Maricopa county, Arizona brought by a current shareholder – Raymond and Winne Yule. The plaintiff was a member in American Realty prior to the Share Exchange Agreement with the Company was effectuated. The plaintiff alleges that American Realty promised a particular real estate investment strategy and were assured a certain rate of return. The plaintiff alleges that American Realty failed in these matters and seeks an unspecified claim for damages. The Company has denied all allegations and is defending the case.

 

 Environmental Matters

The Company follows a policy of monitoring its properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at its properties, the Company is not currently aware of any environmental liability with respect to its properties that would have a material effect on its consolidated balance sheets, consolidated statements of operations, or consolidated cash flows. Additionally, the Company is not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability that management believes would require additional disclosure or the recording of a loss contingency.

  11. Subsequent Events

a)   Subsequent to June 30, 2016, the Company received proceeds of $166,500 pursuant to stock subscription agreements, whereby the Company sold 55,503 shares of common stock of the Company at $3.00 per share.

b)   Effective July 8, 2016, the deed of trust and $80,000 promissory note owed by the Company was amended such that the maturity date was extended from July 8, 2016 to July 8, 2017. Commencing July 8, 2016, the promissory note will bear interest 18% per annum initially and then 12% per annum after four months.

F-13

 

 

 c)  Effective July 13, 2016, the Company entered into the Master UPREIT Formation Agreement with Northern NM Properties, LLC (“Northern”), a New Mexico limited liability company, resulting in the formation of AHIT Northern NM Properties, LLP (“AHIT Northern”), a Maryland limited liability partnership. The Company is the General Partner of the limited liability partnership. AHIT Northern is intended to serve as an umbrella partnership real estate investment trust, commonly referred to as an “UPREIT”. Upon closing, AHIT Northern will acquire from the Northern limited partners, six single family residences, four apartments and sixteen mobile homes spaces (the “Homes”) located in New Mexico in exchange for a total consideration of approximately $1,333,000 consisting of 500,614 common units in the UPREIT valued at approximately $1,126,381, which carry with them certain option rights into shares of common stock in the Company, and the assumption of certain mortgage notes totaling to approximately $206,619. In addition, the Company agreed to retain the designee of the Limited Partner to serve as property manager of the Homes during the period from the closing of the transaction to the exercise of the conversion option. In consideration for the property management services, the Limited Partner or its designee shall receive a property management fee equal to a mutually agreeable yearly fee based on a good faith analysis of net profits from the operation of the partnership for the year, but under no circumstances in excess of $120,000. The agreement closed on August 2, 2016.

  d) On July 15, 2016, the Company entered into an Employment Agreement with the Vice President of the Company for a term of one year. In addition to a $30,000 signing bonus, the Company issued 25,000 restricted shares as compensation and bi-weekly monetary compensation that is on par with the value of the services provided by the Vice President.

e)   On July 15 and 21, 2016, the Company entered into two Board Director Agreements whereby the Company agreed to issue an aggregate of 20,000 shares of common stock to the two Directors.

  f) Effective July 18, 2016, the $180,000 promissory note owed by the Company was amended to extend the maturity date for another six months.

 

  g) Subsequent to June 30, 2016, the Company issued 200,000 shares to two employees pursuant to the employment agreements as disclosed in Note 10.

 

  h) Subsequent to June 30, 2016, the Company issued 439,401 shares of common stock to the CFO of the Company pursuant to the employment agreement as disclosed in Note 6(c).

 

  i) Subsequent to June 30, 2016, the Company issued 25,000 shares of common stock to an employee for services rendered.

 

F-14

 

 

ITEM 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD LOOKING STATEMENTS

Certain statements in this report, including statements of our expectations, intentions, plans and beliefs, including those contained in or implied by "Management's Discussion and Analysis" and the Notes to Financial Statements, are "forward-looking statements", within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are subject to certain events, risks and uncertainties that may be outside our control. The words "believe", "expect", "anticipate", "optimistic", "intend", "will", and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements. These forward-looking statements include statements of management's plans and objectives for our future operations and statements of future economic performance, information regarding our expansion and possible results from expansion, our expected growth, our capital budget and future capital requirements, the availability of funds and our ability to meet future capital needs, the realization of our deferred tax assets, and the assumptions described in this report underlying such forward-looking statements. Actual results and developments could differ materially from those expressed in or implied by such statements due to a number of factors, including, without limitation, those described in the context of such forward-looking statements.

General Description of Business

The Company was incorporated on December 17, 2007 under the laws of the State of Nevada. On February 13, 2015, following the acquisition of the majority and controlling shares of the Company by American Realty Partners, LLC ("ARP"), a change of control of the Company took place. On May 11, 2015, the Company converted into a Maryland corporation and changed its name to American Housing Income Trust, Inc.

The Company is currently in the business of acquiring, renovating, rehabilitating and, in turn, renting single family residence. The Company intends on continuing with this business plan, but with the proceeds from the offering set forth in its pending registration statement on Form S-11/A, it intends on growing its portfolio, adding more diversity and independence to its Board of Directors, and securing more favorable terms on its debt service. The Company intends on operating as a REIT in 2016, and if it meets the qualifications of a REIT, the Company intends on complying with the dividend policy announced in its registration statement on Form S-11/A.

-5-

 

 

 

The Company currently operates through related-party/affiliate entities in holding title to those single family residences in its portfolio – American Realty, ARP Borrower, ARP Borrower II and AHIT Valfre, LLP, a limited liability partnership commonly referred to as an UPREIT, or operating umbrella partnership. The Company's commitment to raise additional capital, as set forth in the prospectus under its registration statement on Form S-11/A, underscores its intention of aggressively pursuing its short-term and long-term business plan. The Company believes it is still positioned to declare status as a real estate investment trust for tax year 2016. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns.

Results of Operations for the three and six months ended June 30, 2016 and 2015

The following table sets forth the summary income statement for the three and six month period ended June 30, 2016 and 2015:

    Three Months Ended   Six Months Ended
    June 30, 2016   June 30, 2015   June 30, 2016   June 30, 2015
Revenue   $ 165,615     $ 103,685     $ 327,515     $ 193,746  
Operating Expense   $ 2,119,097     $ 569,707     $ 3,074,981     $ 1,432,605  
Other Income   $ —       $ 71,293     $ 4,981     $ 71,293  
Net Loss   $ (1,953,482 )   $ (394,729 )   $ (2,742,485 )   $ (1,167,566 )

 

For the three months ended June 30, 2016 and 2015, we reported a net loss of $1,953,482 and $394,729, respectively. The change in net loss between the three months ended June 30, 2016 and 2015 was primarily attributable to the increase of $1,549,390 in operating expense offset by the increase of $61,930 in revenue. During the three months ended June 30, 2016, depreciation increased by $16,800, general and administrative expense increased by $1,464,341, interest expense increased by $68,249. The increase in operating expense is a result of increased professional and consulting fees incurred in relation to our reporting requirements as a public company and preparing the registration statement and stock-based compensation of $1,350,000 recognized during the three months ended June 30, 2016 in relation to shares issuable to the Company’s management pursuant to an employment agreement. The net increase of $1,464,341 in general and administrative expense is mainly related to the increase of $1,337,736 in management and consulting fees, $61,082 in professional fees, $49,390 in advertising and marketing costs, $37,325 in overhead costs, $38,574 in rental property expenses, and offset by a decrease of $10,003 in refinancing costs and a decrease of $49,763 in sales expense. During the three months ended June 30, 2016, the Company recognized stock-based compensation of $1,350,000 pursuant to three employment agreements. The fair value of $1,350,000 is included in general and administrative expense.

 

-6-

 

 

For the six months ended June 30, 2016 and 2015, we reported a net loss of $2,742,485 and $1,167,566, respectively. The change in net loss between the six months ended June 30, 2016 and 2015 was primarily attributable to the increase of $1,642,376 in operating expense offset by the increase of $133,769 in revenue. During the six months ended June 30, 2016, depreciation increased by $25,114, general and administrative expense increased by $1,860,738, interest expense increased by $81,524. The increase in operating expense is a result of increased professional and consulting fees incurred in relation to our reporting requirements as a public company and preparing the registration statement and stock-based compensation of $1,641,058 recognized during the six months ended June 30, 2016 in relation to shares issuable to the Company’s management pursuant to three employment agreements. The net increase of $1,860,738 in general and administrative expense is mainly related to the increase of $1,621,309 in management and consulting fees, $247,821 in professional fees, $10,467 in overhead costs and $38,985 in rental property expenses and $1,922 in advertising and marketing costs and offset by a decrease of $10,003 in refinancing costs and a decrease of $49,763 in sales expenses. During the six months ended June 30, 2016, the Company recognized stock-based compensation of $1,641,058 pursuant to an employment agreement. The fair value of $1,641,058 is included in general and administrative expense.

 

Revenue - Net sales for the three months ended June 30, 2016, were $165,615, compared to $103,685 for the three months ended June 30, 2015. This resulted in an increase of approximately $61,930 or 60% from the comparable period. The increase in revenue is primarily a result of the Company having more rental properties rented out and generating revenue during the six months ended June 30, 2016 as compared to the same period in 2015.

 

Revenue - Net sales for the six months ended June 30, 2016, were $327,515, compared to $193,746 for the six months ended June 30, 2015. This resulted in an increase of approximately $133,769 or 69% from the comparable period. The increase in revenue is primarily a result of the Company having more rental properties rented out and generating revenue during the six months ended June 30, 2016 as compared to the same period in 2015.

 

Operating Expenses - Operating expenses for the three months ended June 30, 2016, was $2,119,097, as compared to $569,707 for the three months ended June 30, 2015. The $1,549,390 increase is primarily attributable to the increase of $1,464,341 in general and administrative expense which is mainly related to the increase of $1,337,736 in management and consulting fees, $61,082 in professional fees, $49,390 in advertising and marketing costs, $38,453 in overhead costs, $38,574 in rental property expenses, and offset by a decrease of $10,003 in refinancing costs and a decrease of $49,763 in sales expense. During the three months ended June 30, 2016, the Company recognized stock-based compensation of $1,350,000 pursuant to three employment agreements. The fair value of $1,350,000 is included in general and administrative expense.

Operating Expenses - Operating expenses for the six months ended June 30, 2016, was $3,074,981, as compared to $1,432,605 for the six months ended June 30, 2015. The $1,642,376 increase is primarily attributable to the increase of $1,860,738 in general and administrative expense which is mainly related to the increase of $1,621,309 in management and consulting fees, $247,821 in professional fees, $10,467 in overhead costs and $38,985 in rental property expenses and $1,922 in advertising and marketing costs and offset by a decrease of $10,003 in refinancing costs and a decrease of $49,763 in sales expenses. The Company also incurred acquisition cost of $325,000 during the six months ended June 30, 2015 in relation to the reverse acquisition that closed on July 6, 2015. During the six months ended June 30, 2016, the Company recognized stock-based compensation of $1,641,058 pursuant to an employment agreement. The fair value of $1,641,058 is included in general and administrative expense.

-7-

 

 

Liquidity and Capital Resources

 

Liquidity is a measure of our ability to meet potential cash requirements, maintain our assets, fund our operations and other general business needs. Our liquidity, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control. Our near-term liquidity requirements consist primarily of purchasing our target assets, restoring and leasing properties and funding our operations.

Our long-term liquidity needs primarily of funds necessary to pay for the acquisition and maintenance of properties; non-recurring capital expenditures; interest and principal payments on our indebtedness; and general and administrative expenses. We seek to satisfy our long-term liquidity needs through cash flow from operations, long-term secured and unsecured indebtedness, the issuance of debt and equity securities, and property dispositions. We have financed our operations and acquisitions to date through the funding by members of our subsidiaries and third party loans, including the debt service identified above in the section titled "Description of Business."

We believe our current available cash along with anticipated revenues may be insufficient to meet our cash needs for the near future if we do not receive additional funding. Our assets are illiquid by their nature. Thus, a timely liquidation of assets might not be a viable source of short-terms liquidity should a cash flow shortfall arise that cause a need for additional liquidity. It could be necessary to source liquidity from other financing alternatives should any such scenario arise. There can be no assurance that financing will be available in amounts or terms acceptable to us, if at all. In that event, we would be required to change our growth strategy and seek funding on that basis, if at all.

Cash Flow Information

 

Net cash used for operating activities for the six months ended June 30, 2016 and 2015 was $938,504 and $1,300,297, respectively. The decrease in cash used in operating activities was primarily related to the increase in revenue and from the timing of payments of accounts payable and accrued liabilities and amounts due to related parties.

Net cash provided by investing activities for the six month ended June 30, 2016 was $197,652 as compared to $787,660 of net cash used in investing activities for the six months ended June 30, 2015. The change was due to the proceeds from sale of real estate properties of $211,200 during the six months ended June 30, 2016 as compared to $111,000 in the six months ended June 30, 2015. In addition, during the six months ended June 30, 2016, the Company spent $8,432 in improving existing rental properties as compared to $898,660 spent during the six months ended June 30, 2015 on purchase of real estate properties and improvements. The Company also purchased $5,116 of property and equipment during the six months ended June 30, 2016 as compared to $0 during the six months ended June 30, 2015.

Net cash used in all financing activities for the six months ended June 30, 2016 was $549,702 as compared to cash provided by financing activities of $1,913,781 for the six months ended June 30, 2015. The change was due to proceeds from sale of common stock of $1,809,503 during the six months ended June 30, 2015 as compared to $0 in the six months ended June 30, 2016, and proceeds from issuance of notes payable of $120,000 in the six months ended June 30, 2015 as compared to $325,232 in the six months ended June 30, 2016, offset by the repayment of notes payable of $15,722 in the six months ended June 30, 2015 as compared to $33,995 in the six months ended June 30, 2016. The Company also received net advance from related parties of $258,465 during the six months ended June 30, 2016 as compared to zero in the six months ended June 30, 2015.

-8-

 

 

Our estimated working capital requirement for the next 12 months is $1,330,000 with an estimated burn rate of $111,000 per month. As reflected in the accompanying financial statements, we had cash of $8,420 at June 30, 2016.

Quantitative and Qualitative Disclosures about Market Risk

We have not utilized any derivative financial instruments such as futures contracts, options and swaps, forward foreign exchange contracts or interest rate swaps and futures. We believe that adequate controls are in place to monitor any hedging activities. We do not have any borrowings (however, our wholly-owned subsidiary does service debt related to the properties owned by the subsidiary), and, consequently, we are not affected by changes in market interest rates. We do not currently have any sales or own assets and operate facilities in countries outside the United States and, consequently, we are not affected by foreign currency fluctuations or exchange rate changes. Overall, we believe that our exposure to interest rate risk and foreign currency exchange rate changes is not material to our financial condition or results of operations.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

Our financial statements and related financial information are based on the application of accounting principles generally accepted in the United States ("GAAP"). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements. Our significant accounting policies are summarized in Note 2 of our financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report. We believe the following critical accounting policies and procedures, among others, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

-9-

 

 

Investment in Real Estate - We allocate the purchase price to tangible assets of an acquired property (which includes land and building) based on the estimated fair values of those tangible assets. Fair value for land and building is based on the purchase price for these properties.

Property/SFRs acquired not subject to an existing lease are accounted for as an asset acquisition, with the property recorded at the purchase price, including acquisition costs. We incur costs to prepare our acquired properties to be rented. These costs are capitalized and allocated to building costs. Costs related to the restoration or improvement of our properties that improve and extend their useful lives are capitalized and depreciated over their estimated useful lives. Expenditures for ordinary repairs and maintenance are expensed as incurred.

Depreciation is computed on a straight-line basis over the useful lives of the properties (building and improvements - 27 years).

Revenue Recognition - Rental income for property leases is recorded when due from residents and is recognized monthly as it is earned. We lease single-family residences that we own and manage directly to tenants who occupy the properties under operating leases, generally, with terms of one year. We perform credit investigations on prospective tenants and obtains security deposits. Sales and the associated gains or losses of real estate assets are recognized in accordance with the provisions of ASC Topic 360-20, Property, Plant and Equipment - Real Estate Sale. The specific timing of a sale is measured against various criteria in ASC 360-20 related to the terms of the transaction and any continuing involvement in the form of management or financial assistance associated with the properties. If the sales criteria for the full accrual method are not met, we defer some or all of the gain recognition and accounts for continued operations of the property by applying the finance, leasing, deposit, installment or cost recovery methods, as appropriate, until the sales criteria are met.

Related Party - A party is considered to be related to us if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with ourselves. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

-10- 

 

 

 Recent Accounting Pronouncements

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's results of operations, financial position, or cash flow.

Properties

We currently lease an office at the address set forth above. We believe that this space will be sufficient for our initial needs, although as funding and revenues become available, and the Company's operations grow, we anticipate finding other office space as needed.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

None.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

As required by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and principal financial officer evaluated our company's disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and to ensure that such information is accumulated and communicated to our company's management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both United States generally accepted accounting principles and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.

As described in Basis of Presentation in the Annual Report for fiscal year 2015, the Company recently determined that a material weakness existed in the Firm's internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) as of December 31, 2015. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

As a result of that determination, the Company's Chief Executive Officer and Chief Financial Officer have since concluded that the Firm's disclosure controls and procedures were not effective as of June 30, 2016.

We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes subject to obtaining additional financing: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out above are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

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Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2016 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None as required under Item 103 of Regulation S-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

 

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

The Company incorporates by reference all prior disclosures for the period identified herein, more specifically, the following:

   

a)  Form S-11/A filed on April 6, 2016, and as subsequently amended on May 27, 2016, June 16, 2016, June 20, 2016 and effective as of June 23, 2016;

b) Form 8-K filed on April 4, 2016 (Stock Repurchase Program);

c)  Form 8-K filed on April 11, 2016 (Manley Purchase Agreement); and

d)  Form 8-K filed on April 18, 2016 (Disclosure of AHIT Valfre, LLP restructuring and financing agreement with agreement with FirstKey Mortgage, LLC).

See also Part II, Item 6.

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Item 6. Exhibits.

                    Incorporated by reference        
              Filed     Period     Filing  
  Exhibit     Exhibit Description     herewith     ending     date  
  31.1     Certification of the Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
    X              
  32.1     Certification of the Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
    X              
  33.1     Certification of the Chief Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
    X              
  34.1     Certification of the Chief Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
    X              

 

SIGNATURES

 

       Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Jeff Howard                
American Housing Income Trust, Inc.
By:           Jeff Howard
Its:           Chief Executive Officer and President
Date:        August 15, 2016

 

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