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Related party transactions

9 Months Ended

Sep. 30, 2017

American Realty Partners (“ARP”), the Company’s former subsidiary, 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 September 30, 2017, the Company discovered that $267,841 of improvement costs for a property owned by the Manager of ARP were erroneously capitalized by and paid by the Company during the fiscal years 2014 – 2016 ($52,000 in 2014, $201,932 in 2015 and $13,909 in 2016). The error was corrected during the six months ended September 30, 2017. Before the adjustment, ARP was indebted to the Manager of ARP for $164,275, which represents advances provided by the Manager of ARP for daily operations. The correction of the error resulted in a receivable from the Manager of APR in the amount of $103,566. As at December 31, 2016, ARP is indebted to the Manager of APR for $363,698, which represents advances provided by the Manager of ARP for daily operations.

On May 15, 2015, the Company entered into an Advisory Board Consulting and Compensation Agreement with a former director of the Company pursuant to which the Company agreed to issue 1,000,000 shares of common stock to the former director. In addition, the Company agreed to pay the former 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. 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.

On February 25, 2016, the Company entered into an employment agreement with the former CFO of the Company for a period of three years. The Company agreed to pay the former 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. On December 30, 2016, the Company amended the employment agreement and the former CFO of the Company agreed to serve as the CFO of the Company at no cost. The former CFO also agreed to waive his rights to the share issuance in favor of a reduced issuance of 616,180 shares of the Company’s common stock for the period of February 25, 2016 through October 7, 2016. On August 1, 2016, before the amendment, the Company issued 439,401 shares of common stock to PRM, pursuant to a Designation and Acceptance of Rights entered into between PRM, the Company, and the former CFO. The former CFO agreed to waive his rights to the issuance of the remaining 176,779 shares of common stock.

On July 28, 2016, PRM was issued 439,401 shares of common stock in the Company pursuant to a Designation and Acceptance of Rights (the “Designation”) entered into between PRM, the Company, and the former CFO of the Company.

On August 15, 2016, as part of a restructuring of related parties, PRM and the Company closed on a Stock Exchange and Restructuring Agreement (the “Exchange Agreement”). As a result of the closing of the Exchange Agreement, those prior members of PRM were issued shares of common stock in the Company.

On August 31, 2017, the Company entered into an employment agreement with the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of the Company for a period of three years. The Company agreed to pay the CEO 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 September 30, 2017, the Company recorded management fees of $10,000 and stock based compensation of $8,333. As of September 30, 2017, the Company is indebted to the CEO of the Company for $10,000 (December 31, 2016 - $nil), which represents management fees owed to the CEO.