What changed in this filing

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Item 9A. Controls and Procedures

2025-03-20 compared with 2024-03-21 · 55 added, 92 removed, 339 unchanged (30% of the section changed)

21 unchanged sentences

Not applicable .

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

5 unchanged sentences

The independence guidelines are set forth in our “Corporate Governance Guidelines”.

The text of this document has been posted on our internet website at www.americanrealty-invest.com ("Investor Relations Website") and is available in print to any shareholder who requests it.

The text of this document has been posted on our website at www.americanrealtyinvest.com ("Investor Relations Website") and is available in print to any shareholder who requests it.

In addition to applying these guidelines, the Board will consider all relevant facts and circumstances in making an independence determination.

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He holds Series 7 (General Securities Representative), Series 63 (Uniform Securities Agent State Law) and Series 65 (Investment Advisor) licenses issued by Financial Industry Regulatory Authority (“FINRA”).

Hogan has also served as as a Director of TCI since February 2020 .

Hogan has also served as a Director of TCI since February 2020 .

JAKUSZEWSKI, age 62, Director, Independent, since November 2005

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Munselle is a Certified Public Accountant.

PHILLIPS, age 58, Director, since March 2021

Phillips has been the Chief Executive Officer and Chairman of LBL Group of Insurance Companies since 1999.

He has served as President of Midland Securities, LLC, a Dallas, TX based broker/dealer since 2002.

Prior to joining LBL Group, he served as President of InterFirst Capital Corporation of Los Angeles, California.

Phillips holds a number of securities licenses, including the Series 4 (Options Principal), Series 7 (General Securities License), Series 24 (General Securities Principal), Series 27 (Financial and Operations Principal), Series 53 (Municipal Securities Principal), Series 55 (Equity Trading Principal), and Series 63 (Blue Sky Securities License).

He has also served as a Director of TCI since March 2021 .

Board Meetings and Committees

49 unchanged sentences

No family relationships exist among any of the executive officers or directors of the Company.

Johnson has served as Executive Vice President and Chief Financial Officer of the Company and TCI since August 2020.

He has also served Pillar as Chief Financial Officer since June 2020 and as Interim President since April 2023.

In addition, he has served as the Executive Vice President and Chief Financial Officer of IOR since December 2021.

Johnson has served as President and Chief Executive Officer of the Company since May 2024.

Previously, he served as the Interim Chief Executive Officer from April 2023 and as Executive Vice President and Chief Financial Officer from August 2020.

Prior to joining the Company, he served as Vice President of Financial Reporting at Macerich (NYSE:

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He began his career as an auditor with PricewaterhouseCoopers and is a CPA.

Johnson also serves as President and Chief Executive Officer of Pillar, TCI and IOR.

Corna has served as Executive Vice President, General Counsel/Tax Counsel and Secretary of the Company, TCI and IOR since February 2004.

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He is also a CPA.

In addition to the foregoing executive officers, we have several vice presidents and assistant secretaries that are not listed herein.

Since the April 14, 2023 resignation of Bradley J.

Muth, age 67, the offices of President and Chief Executive Officer has been vacant.

Johnson currently serves as the principal executive officer of the Company.

At the time of his resignation, Mr.

Muth advised that his resignation was not the result of any disagreement with the Company, its management, the Board of Directors, or any committee of the Board with respect to procedure, policies or operations.

ALLA DZYUBA, 47

Dzyuba has served as the Senior Vice President and Chief Accounting Officer of the Company since July 2019 .

She also serves as Senior Vice President and Chief Accounting Officer of Pillar, TCI and IOR.

Dzyuba has over twenty-one years of real estate accounting and financial reporting experience, including six years of broker-dealer regulatory reporting experience.

Code of Ethics

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In making these statements, we have relied on the written representations of our incumbent directors and executive officers, 10% holders and copies of the reports that they have filed with the SEC.

Pillar has been our Advisor and Cash Manager since April 30, 2011.

In December 2021, the Board of Directors adopted the Company's Insider Trading Policy, a copy of which is available on our website at www.americanrealtyinvest.com, at Investor Relations.

Pillar has been our Advisor and Cash Manager since April 30, 2011 in accordance with an Advisory Agreement and a Cash Management Agreement.

On May 7, 2024, the Advisory Agreement was amended and restated to clarify and revised several separate fees into a single gross asset value fee and a net income fee plus certain specified allocated reimbursements.

The Amended Agreement, did not change any duties or responsibilities of either Pillar or the Company.

Although the Board of Directors is directly responsible for managing the affairs of the Company, and for setting the policies which guide it, our day-to-day operations are performed by Pillar, as the contractual advisor, under the supervision of the Board.

Pillar’s duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities and arranging debt and equity financing for the Company with third party lenders and investors.

Pillar’s duties include, but are not limited to asset management, accounting, legal, capital market, administrative and executive services.

Capital market services include locating, evaluating and recommending real estate and real estate-related investment opportunities and arranging debt and equity financing for the Company with third party lenders and investors.

Additionally, Pillar serves as a consultant to the Board with regard to their decisions in connection with our business plan and investment policy.

Pillar also serves as an Advisor and Cash Manager to TCI and IOR.

As the contractual advisor, Pillar is compensated under an Advisory Agreement that is more fully described in Part III, Item 10.

“Directors, Executive Officers and Corporate Governance – The Advisor”.

We have no employees and as such, employees of Pillar render services to us in accordance with the terms of the Advisory Agreement.

Pillar is a Nevada corporation, the sole stockholder of which is Realty Advisors, LLC, a Nevada limited liability company, the sole member of which is RAI, a Nevada corporation, the sole stockholder of which is MRHI, a Delaware corporation, the sole stockholder of which is a trust known as the May Trust.

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Under the Advisory Agreement, Pillar is required to annually formulate and submit, for Board approval, a budget and business plan containing a twelve-month forecast of operations and cash flow, a general plan for asset sales and purchases, lending, foreclosure and borrowing activity, and other investments.

Pillar is required to report quarterly to the Board on TCI’s performance against the business plan.

Pillar is required to report quarterly to the Board on the Company's performance against the business plan.

In addition, all transactions require prior Board approval, unless they are explicitly provided for in the approved business plan or are made pursuant to authority expressly delegated to Pillar by the Board.

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and contains guidelines for Pillar’s allocation of investment opportunities as among itself, the Company and other entities it advises.

Pillar is a company of which Messrs.

Johnson and Corna serve as executive officers.

The Advisory Agreement provides for Pillar to be responsible for our day-to-day operations and to receive, as compensation for basic management and advisory services, a gross asset fee of 0.0625% per month (0.75% per annum) of the average of the gross asset value (total assets less allowance for amortization, depreciation or depletion and valuation reserves).

In addition to base compensation, Pillar receives the following forms of additional compensation:

(1) an annual net income fee equal to 7.5% of our net income as an incentive for successful investment and management of our assets;

(2) an annual incentive sales fee to encourage periodic sales of appreciated real property at optimum value equal to 10.0% of the amount, if any, by which the aggregate sales consideration for all real estate sold by us during such fiscal year exceeds the sum of:

(a) the cost of each such property as originally recorded in our books for tax purposes (without deduction for depreciation, amortization or reserve for losses);

(b) capital improvements made to such assets during the period owned;

provided however, no incentive fee shall be paid unless (a) such real estate sold in such fiscal year, in the aggregate, has produced an 8.0% simple annual return on the net investment including capital improvements, calculated over the holding period before depreciation and inclusive of operating income and sales consideration, and (b) the aggregate net operating income from all real estate owned for each of the prior and current fiscal years shall be at least 5.0% higher in the current fiscal year than in the prior fiscal year;

(3) an acquisition commission, from an unaffiliated party of any existing mortgage or loan, for supervising the acquisition, purchase or long-term lease of real estate equal to the lesser of:

(a) up to 1.0% of the cost of acquisition, inclusive of commissions, if any, paid to non-affiliated brokers;

(b) the compensation customarily charged in arm’s-length transactions by others rendering similar property acquisition services as an ongoing public activity in the same geographical location and for comparable property, provided that the aggregate purchase price of each property (including acquisition fees and real estate brokerage commissions) may not exceed such property’s appraised value at acquisition;

(4) reimbursement of certain expenses incurred by the advisor in the performance of advisory services.

The Advisory Agreement also provides that Pillar receive the following forms of compensation:

(1) a mortgage or loan acquisition fee with respect to the acquisition or purchase from an unaffiliated party of any existing mortgage loan by us equal to the lesser of:

(a) 1.0% of the amount of the mortgage or loan purchased;

(b) a brokerage or commitment fee which is reasonable and fair under the circumstances.

Such fee will not be paid in connection with the origination or funding of any mortgage loan by us;

(2) a mortgage brokerage and equity refinancing fee for obtaining loans or refinancing on properties equal to the lesser of:

(a) 1.0% of the amount of the loan or the amount refinanced;

(b) a brokerage or refinancing fee which is reasonable and fair under the circumstances;

provided, however, that no such fee shall be paid on loans from Pillar, or a related party of Pillar, without the approval of our Board of Directors.

No fee shall be paid on loan extensions.

Under the Advisory Agreement, all or a portion of the annual advisory fee must be refunded by the Advisor if our operating expenses (as defined in the Advisory Agreement) exceed certain limits specified in the Advisory Agreement based on our book value, net asset value and net income during the fiscal year.

The Advisory Agreement requires Pillar to pay us, one-half of any compensation received from third parties with respect to the origination, placement or brokerage of any loan made by us;

provided, however, that the compensation retained by Pillar, or any affiliate of Pillar, shall not exceed the lesser of (1) 2.0% of the amount of the loan commitment or (2) a loan brokerage and commitment fee which is reasonable and fair under the circumstances.

The Advisory Agreement provides for Pillar to be responsible for our day-to-day operations and to receive, as compensation for basic management and advisory services, a gross asset fee ("GAV Fee") of 0.0625% per month (0.75% per annum) of the average of the gross asset value (total assets less allowance for amortization, depreciation or depletion and valuation reserves) and excludes any receivables from the Advisor.

In addition, Pillar receives an annual net income fee ("Net Income Fee") equal to 7.5% of our adjusted net income, which is defined as our net income before the effect of income tax and interest on any receivables from the Advisor.

The GAV Fee and the Net Income Fee are collectively referred to herein as the Advisory Fee.

The Advisory Agreement further provides that Pillar shall bear the cost of certain expenses of its employees, excluding fees paid to our Directors;

2 unchanged sentences

and miscellaneous administrative expenses relating to the performance by Pillar of its duties under the Advisory Agreement.

If and to the extent that we request Pillar, or any director, officer, partner, or employee of Pillar, to render services for us other than those required to be rendered by the Advisory Agreement, Pillar separately would be compensated for such additional services on terms to be agreed upon between such party and us from time to time.

As discussed below, under “Property Management and Real Estate Brokerage,” Regis Realty Prime, LLC, (“Regis”) manages our commercial properties and provides brokerage services.

We have a Cash Management Agreement with Pillar that provides that all of our funds are delivered to Pillar which has a deposit liability to us and is responsible for payment of all payables and investment of all excess funds which earned interest at the Wall Street Journal prime rate plus 1.0% per annum, as set quarterly on the first day of each calendar quarter.

We do not have any employees and rely upon Pillar for employee related services, including but not limited to asset management, legal services, accounting services, capital markets, administrative and executive services.

We reimburse the Advisor on a monthly basis, for our pro-rata portion (as reasonably agreed to between the Advisor and a majority of the Company’s Independent Directors) of all expenses related to (i) employment of the Advisor’s personnel who are actively engaged in the services to the Company (“Service Employees”) and (ii) the reasonable travel and other out-of-pocket costs of the Service Employees.

Such expenses shall include, but are not limited to, salary, wages, payroll taxes and the cost of employee benefit plans.

We have entered into Development Agreements on certain ground-up development projects for Pillar to provide development and construction management services.

These agreements provide for a development fee of 4% of the hard cost associated with the project and are paid out over the construction period.

We have a Cash Management Agreement with Pillar that provides that all of our funds are delivered to Pillar which has a deposit liability to us and is responsible for payment of all payables and investment of all excess funds which earned interest at the Secured Overnight Financing Rate (" SOFR") , as set quarterly on the first day of each calendar quarter.

Borrowings for our benefit bear the same interest rate.

11 unchanged sentences

Name Officers

Johnson Interim President

Johnson President and Chief Executive Officer

Corna Executive Vice President and Secretary

Kay Executive Vice President and Chief Accounting Officer

Kyles Executive Vice President

Johnson is one of two directors of Pillar.

Property Management

Regis manages three of our commercial properties for a fee of 3.0% or less of the monthly gross rents collected on the commercial properties it manages, and leasing commissions of 6.0% or less in accordance with the terms of its property-level management agreement.

Real Estate Brokerage

Regis provides real estate brokerage services to us on a non-exclusive basis, and is entitled to receive a real estate commission for property purchases and sales in accordance with the following sliding scale of total fees to be paid:

(1) maximum fee of 4.5% on the first $2.0 million of any purchase or sale transaction of which no more than 3.5% is to be paid to Regis;

(2) maximum fee of 3.5% on transaction amounts between $2.0 million-$5.0 million of which no more than 3.0% is to be paid to Regis;

(3) maximum fee of 2.5% on transaction amounts between $5.0 million-$10.0 million of which no more than 2.0% is to be paid to Regis;

(4) maximum fee of 2.0% on transaction amounts in excess of $10.0 million of which no more than 1.5% is to be paid to Regis.

EXECUTIVE COMPENSATION

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Lara Celis, $20,000;

Munselle, $20,500 and Raymond D.

Roberts, Sr., $15,000.

Munselle, $20,500.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

22 unchanged sentences

Percent of Class**

Alla Dzyuba — — %

Jakuszewski — — %

2 unchanged sentences

Munselle — — %

Phillips (***) 4,315 0.02 %

All Directors and Executive Officers as a group (8 individuals) — — %

1 unchanged sentence

** Percentages are based upon 16,152,043 shares of Common Stock outstanding at March 19, 2025.

*** The shares are owned directly by PSII Management, LLC, of which Mr.

Phillips is the sole manager.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

18 unchanged sentences

All of our direct ors also serve as Directors of TCI, and with the exception of Mr.

Hogan and Mr.

Phillips, serve as Directors of IOR .

Hogan, serve as Directors of IOR .

Our executive officers also serve as executive officers of TCI and IOR .

1 unchanged sentence

TCI and IOR have the same relationship with Pillar, as does the Company.

Effective since January 1, 2011, Regis manages our commercial properties for a fee of 3.0% or less of the monthly gross rents collected on the commercial properties it manages, and leasing commissions of 6.0% or less in accordance with the terms of its property-level management agreement.

Regis manages three of our commercial properties for a fee of 3.0% or less of the monthly gross rents collected on the commercial properties it manages in accordance with the terms of its property-level management agreement.

We are part of a tax sharing and compensating agreement with respect to federal income taxes among ARL, TCI and IOR and their subsidiaries.

In accordance with the agreement, o ur expense (benefit) in each year is calculated based on the amount of losses absorbed by taxable income multiplied by the maximum statutory tax rate of 21%.

We have a development agreement with Unified Housing Foundation, Inc.

“UHF” a non-profit corporation that provides management services for the development of residential apartment projects in the future.

We have also invested in surplus cash notes receivables from UHF and have sold several residential apartment properties to UHF in prior years.

Due to this ongoing relationship and the significant investment in the performance of the collateral secured under the notes receivable, UHF has been determined to be a related party.

Related Party Transactions

4 unchanged sentences

In connection with our ongoing development projects, we paid development fees of $2.9 million to Pillar in 2024.

In 2023, we also acquired parcels land in connection with these projects at aggregate appraised values of $8.8 million from Pillar in exchange for a reduction in our related party receivable with Pillar .

In addition, we acquired land parcels in connection with these projects in 2024 at aggregate appraised values of $6.2 million from Pillar.

As of December 31, 2024, we had notes and interest receivables of $71.4 million and $1.9 million, respectively, due from related parties.

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We received rental revenue of $0.7 million for the year ended December 31, 2024 for office space leased to Pillar and Regis.

From time to time, we have made advances and/or borrowing to/from other related parties, which generally have not had specific repayment terms, did not bear interest, are unsecured, and have been reflected our financial statements as other assets or other liabilities.

We charge interest on the outstanding balance of funds advanced from us.

The interest rate, set at the beginning of each quarter, is the prime rate plus 1.0% on the average daily cash balances advanced.

From time to time, we have made advances and/or borrowings to/from Pillar in accordance with our Cash Management Agreement.

These borrowings bear interest at SOFR , as set quarterly on the first day of each calendar quarter.

At December 31, 2024, we had a receivable from related parties of $97.5 million and recognized interest income of $5.2 million during the current period.

4 unchanged sentences

for services in the following categories:

Fees for audit services were $118,125 and $104,042 for the years ended December 31, 2023 and 2022 , respectively.

Audit Fees.Fees for audit services were $122,625 and $118,125 for the years ended December 31, 2024 and 2023 , respectively.

These are fees for professional services performed by the principal auditor for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s 10-Q filings and services that are normally provided in connection with statutory and regulatory filing or engagement.

No fees for tax services were paid for the years ended December 31, 2024 and 2023.

These are fees for professional services performed by the principal auditor with respect to tax compliance, tax planning, tax consultation, returns preparation and review of returns.

The review of tax returns includes the Company and its consolidated subsidiaries.

Audit-Related Fees.

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The Audit Committee has also delegated to any member of the Audit Committee designated by the Board or the financial expert member of the Audit Committee responsibilities to pre-approve services to be performed by the independent auditor not exceeding $25,000 in value or cost per engagement of audit and non-audit services, and such authority may only be exercised when the Audit Committee is not in session.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Report:

23 unchanged sentences

4.4 Certificate of Designation for Nevada Profit Corporations designating the Series J 8% Cumulative Convertible Preferred Stock as filed with the Secretary of State of Nevada on March 16, 2006 (incorporated by reference to Registrant current report on Form 8-K for event of March 16, 2006).

10.1 Advisory Agreement between American Realty Investors, Inc.

and Pillar Income Asset Management, LLC, dated April 30, 2011 (incorporated by reference to Exhibit 10.0 to the Registrant’s Current Report on Form 8-K, dated April 30, 2011).

10.2 Second Amendment to Modification of Stipulation of Settlement dated October 17, 2001 (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-4, dated February 24, 2002).

10.1 Amended and Restated Advisory Agreement between American Realty Investors, Inc.

and Pillar Income Asset Management, Inc., dated May 7, 2024 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, dated May 7, 2024).

14.0 Code of Ethics for Senior Financial Officers (incorporated by reference to Exhibit 14.0 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004).

Insider Trading Policy

Subsidiaries of the Registrant.

Purchases of Equity Securities by the Issuer and Affiliated Purchases

Rule 13a-14(a) Certification by Principal Executive Officer.

Certification Pursuant to 18 U.S.C.

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Section 302 Certification of Erik L.

Johnson, Chief Executive Officer.

Section 302 Certification of Alla Dzyuba, Chief Accounting Officer.

Section 906 Certifications of Erik L.

Johnson and Alla Dzyuba.

Number Description

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March 20, 2025 By:

Executive Vice President and Chief Financial Officer

(Principal Executive and Financial Officer)

President and Chief Executive Officer

(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

8 unchanged sentences

MUNSELLE Director March 20, 2025

/s/ BRADFORD A.

PHILLIPS Director March 21, 2024

JOHNSON Executive Vice President and Chief Financial Officer March 21, 2024

Johnson (Principal Executive and Financial Officer)

JOHNSON President and Chief Executive Officer March 20, 2025

Johnson (Principal Executive Officer)

/s/ ALLA DZYUBA Senior Vice President and Chief Accounting Officer March 20, 2025

Alla Dzyuba (Principal Financial Officer)

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures