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International Land Alliance (ILAL) widens loss and flags going-concern risk

Filing Impact
(High)
Filing Sentiment
(Neutral)
Form Type
10-Q

Rhea-AI Filing Summary

International Land Alliance, Inc. reported weak results for the three and six months ended June 30, 2026. Net revenues for the first half were $1,099,332, down from $1,323,995 in 2025, while the net loss widened to $6,700,018 from $2,937,448. Operating loss for the six months was $5,805,193, driven largely by $6,357,546 of stock-based compensation and higher general and administrative expenses.

Liquidity remains strained. Cash stood at $37,542 on June 30, 2026, and cash used in operating activities was $1,297,179. Current liabilities were $22,664,666 versus current assets of $676,967, leaving a working capital deficit of about $22.0 million. The company has an accumulated deficit of roughly $45.1 million, and management states that these factors raise substantial doubt about its ability to continue as a going concern.

To fund operations, the company relied heavily on debt and equity. Convertible notes, net of discounts, totaled $7,604,496, and a derivative liability tied to variable-rate conversion features was $1,731,049. Common shares outstanding increased to 4,821,818 from 2,666,311 at December 31, 2025, reflecting significant equity issuance for cash, debt conversions, compensation, and services, which may dilute existing shareholders.

Positive

  • None.

Negative

  • Going-concern uncertainty: Management discloses that substantial doubt exists about the company’s ability to continue as a going concern, citing a $22.0 million working capital deficit, a $6.7 million six‑month net loss, and an accumulated deficit of about $45.1 million.
  • Losses significantly increased: Net loss for the six months ended June 30, 2026 rose to $6,700,018 from $2,937,448 a year earlier, while basic and diluted loss per share for the period was $(1.88), up from $(1.53).
  • Very limited cash and high leverage: Cash was only $37,542 at June 30, 2026, versus current liabilities of $22,664,666. Convertible notes, net of discounts, totaled $7,604,496, indicating heavy reliance on short-term, dilutive financing.

Filing Explained

Convertible debt remains outstanding with holder conversion rights that could increase common shares beyond the existing count.

The Form 10-Q reports $9,102,621 of convertible notes outstanding at June 30, 2026, with conversion rights described in the notes; conversion, if it occurs, could add common shares and reduce existing holders’ percentage ownership.

The notes include holder conversion at fixed prices or discounts to market prices, while variable-rate conversion features are recorded separately as a $1,731,049 derivative liability. The filing therefore describes both a debt obligation and a possible share-settlement mechanism, not a completed conversion of every outstanding note.

The supplied March 31, 2026 quarterly record showed $0 of cash, equal to 0 days of the last reported operating cash use.

Material checkpoints are the listed maturities for Mast Tranche 1 on November 17, 2026, the Mast Emerald Grove note on December 17, 2026, and Quick Capital Note #5 in December 2026.

Sources and calculations
  • Cash and equivalents vs quarterly operating cash outflow, in days of cash use $0 / ($324,884 / 90) = [object Object]
Net revenues (six months) $1,099,332 Net revenues for the six months ended June 30, 2026 versus $1,323,995 in 2025
Net loss (six months) $6,700,018 Net loss for the six months ended June 30, 2026 versus $2,937,448 in 2025
Working capital deficit approximately $22.0 million Current liabilities exceeded current assets by about this amount at June 30, 2026
Cash balance $37,542 Cash as of June 30, 2026
Convertible notes, net of discount $7,604,496 Convertible notes outstanding, all classified as current at June 30, 2026
Derivative liability $1,731,049 Fair value of derivative liability at June 30, 2026
Stock-based compensation $6,357,546 Stock-based compensation expense for the six months ended June 30, 2026
Cash from operating activities $(1,297,179) Net cash used in operating activities for the six months ended June 30, 2026
going concern financial
"Management determined that substantial doubt exists about the Company’s ability to continue as a going concern."
Going concern is the accounting assumption that a company will keep operating and meeting its obligations for the foreseeable future. The phrase matters most when a company or its auditors disclose substantial doubt about it, a formal warning that the business may not have enough resources to continue without raising money, restructuring, or selling assets. That language in a filing or press release signals elevated financial risk.
derivative liability financial
"This resulted in the recognition of a derivative liability as the conversion feature failed the scope exception."
A derivative liability is an obligation a company owes because of a derivatives contract—such as an option, future, swap, or forward—that has moved against it and now has negative value. Think of it like a settled bet that turned into a bill: if market moves go the other way, the company may have to pay cash or deliver assets. Investors care because these liabilities can create sudden losses, add leverage or counterparty risk, and change a company’s true financial exposure beyond its everyday operations.
convertible promissory note financial
"The Company issued a convertible promissory note pursuant to which it borrowed gross proceeds."
A convertible promissory note is a loan a company takes now that can later be turned into shares instead of being repaid in cash. Think of it as lending money with the option to accept ownership in the business down the road; that matters to investors because it affects who gets paid first, how much ownership existing shareholders keep, and the company’s future valuation and cash needs. Terms such as conversion price, interest and maturity determine the financial impact.
stock-based compensation financial
"Stock-based compensation expense was a significant adjustment in reconciling net loss to net cash."
Stock-based compensation is when a company pays employees, directors or consultants with shares or the right to buy shares instead of or in addition to cash. It matters to investors because issuing stock or options spreads ownership thinner (like cutting a pie into more slices), which can reduce each existing share’s claim on profits and can also change reported earnings; investors watch it to assess true cost of running the business and how management is incentivized.
fair value hierarchy financial
"ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence."
restricted zone regulatory
"Within the “restricted zone,” a foreigner can purchase the beneficial interest in real property through a bank trust."
Net revenues (six months) $1,099,332 vs $1,323,995 Net revenues decreased compared with the six months ended June 30, 2025.
Net loss (six months) $6,700,018 vs $2,937,448 Net loss increased versus the same period in 2025.
Net loss per share (six months, basic and diluted) $(1.88) vs $(1.53) Loss per share widened year over year.
Operating cash flow (six months) $(1,297,179) vs $(491,464) Net cash used in operating activities increased from the prior year period.
Total assets $32,188,673 vs $32,335,890 Total assets were relatively flat versus December 31, 2025.

FAQ

How did International Land Alliance (ILAL) perform financially for the six months ended June 30, 2026?
ILAL reported a net loss of $6,700,018 for the six months ended June 30, 2026, compared with $2,937,448 in the prior-year period. Net revenues were $1,099,332 versus $1,323,995, reflecting higher expenses and lower revenues.

What is International Land Alliance’s (ILAL) liquidity position as of June 30, 2026?
As of June 30, 2026, ILAL had cash of $37,542 and current assets of $676,967 against current liabilities of $22,664,666. Cash used in operating activities during the first half of 2026 was $1,297,179, indicating tight liquidity.

Does International Land Alliance (ILAL) face going-concern risks?
Yes. Management states that substantial doubt exists about ILAL’s ability to continue as a going concern, citing a working capital deficit of about $22.0 million, a $6.7 million six‑month net loss, and an accumulated deficit of roughly $45.1 million.

How much debt and derivative liability does International Land Alliance (ILAL) have?
At June 30, 2026, ILAL reported $7,604,496 of convertible notes, net of discounts, all classified as current, and a derivative liability of $1,731,049 related to variable-rate conversion features, reflecting substantial financial obligations and complexity in its capital structure.

How much dilution have International Land Alliance (ILAL) shareholders experienced recently?
Common shares outstanding increased to 4,821,818 at June 30, 2026, from 2,666,311 at December 31, 2025. Shares were issued for cash, debt conversions, employee compensation, services, and inducement agreements, which dilutes existing shareholders’ ownership percentages.

What were International Land Alliance’s (ILAL) key operating expenses for the first half of 2026?
For the six months ended June 30, 2026, ILAL incurred $6,455,608 in total operating expenses, including $6,082,474 of general and administrative expenses, $354,302 in sales and marketing, and an $18,832 impairment loss, contributing to a larger operating loss.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2026

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

 

Commission file number: 000-56111

 

INTERNATIONAL LAND ALLIANCE, INC.

 

(Exact name of registrant as specified in its charter)

 

Wyoming   46-3752361

(State or other jurisdiction of

incorporation or organization)

  

(I.R.S. Employer

Identification No.)

 

350 10th Avenue, Suite 1000, San Diego, California 92101

 

(Address of principal executive offices) (Zip Code)

 

(877) 661-4811

 

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act: None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large-accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large-accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large-accelerated filer ☐ Accelerated filer ☐
  Non-accelerated filer ☒ Smaller reporting company ☒
      Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

 

As of August 13, 2026, the registrant had 4,821,818  shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

Part I. Financial Information 3
Item 1. Consolidated Financial Statements 3
Consolidated Balance Sheets – As of June 30, 2026 (unaudited) and December 31, 2025 (audited) 3
Consolidated Statements of Operations – For the three and six months ended June 30, 2026, and 2025 (unaudited) 4
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2026, and 2025 (unaudited) 5
Consolidated Statements of Cash Flows for the six months ended June 30, 2026, and 2025 (unaudited) 7
Notes to Consolidated Financial Statements 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 36
Item 3. Quantitative and Qualitative Disclosures about Market Risk 40
Item 4. Controls and Procedures 40
   
Part II. Other Information 41
Item 1. Legal Proceedings 41
Item 1A. Risk Factors 41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 41
Item 3. Defaults upon Senior Securities 41
Item 4. Mine Safety Disclosures 41
Item 5. Other Information 41
Item 6. Exhibits 41
   
Signatures 42

 

2

 

 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

 

INTERNATIONAL LAND ALLIANCE, INC.

CONSOLIDATED BALANCE SHEETS

 

  

June 30, 2026

(unaudited)

   December 31, 2025 
ASSETS          
Current assets          
Cash  $37,542   $4,186 
Accounts receivable   612,859    488,409 
Prepaid and other current assets   26,566    115,138 
Total current assets   676,967    607,733 
          
Land   17,793,970    17,662,657 
Buildings, net   1,567,055    1,616,117 
Furniture and equipment, net   -    - 
Other non-current assets   121,704    311,367 
Long-term accounts receivable, net   910,790    1,019,829 
Goodwill   11,118,187    11,118,187 
           
Total assets  $32,188,673   $32,335,890 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities          
Accounts payable and accrued liabilities  $1,610,915   $1,435,249 
Accounts payable and accrued liabilities related parties   358,000    2,164,515 
Accrued interest   1,629,478    1,753,445 
Deferred revenue   46,500    46,500 
Contract liability   -    143,680 
Escrow deposits   970,653    1,032,550 
Derivative liability   1,731,049    2,961,379 
Convertible notes, net of debt discounts   7,604,496    6,681,925 
Promissory notes, net of debt discounts   448,747    513,532 
Promissory notes, net discounts – Related Parties   526,567    586,567 
Other loans   7,738,261    7,622,729 
Total current liabilities   22,664,666    24,942,071 
           
Convertible notes, net of current portion   -    - 
           
Total liabilities   22,664,666    24,942,071 
           
Commitments and Contingencies (Note 8)   -    - 
           
Preferred Stock Series B (Temporary Equity)   293,500    293,500 
Preferred Stock Series C (Temporary Equity)   331,523    331,523 
Total Temporary Equity   625,023    625,023 
           
Stockholders’ Equity          
           
Preferred stock; $0.001 par value; 2,010,000 shares authorized; 117,000 Series A shares issued and outstanding as of June 30, 2026, and December 31, 2025, respectively   117    117 
1,000 Series B shares issued and outstanding as of June 30, 2026 and December 31, 2025   1    1 
3,316 Series C shares issued and outstanding as of June 30, 2026 and 3,100 issued and outstanding as of December 31, 2025   3    3 
17,000 Series D shares issued and outstanding as of June 30, 2026 and December 31, 2025   17    17 
Common stock; $0.001 par value; 250,000,000 shares authorized; 4,821,818 and 4,761,818 shares issued and outstanding as of June 30, 2026, respectively, and 2,666,311 and 2,606,311 shares issued and outstanding as of December 31, 2025, respectively   4,822    133,316 
Additional paid-in capital   54,006,182    43,772,482 
Common stock payable   307,000    1,582,000 
Treasury stock (3,000,000 shares as of June 30, 2026 and December 31, 2025)   (300,000)   (300,000)
Accumulated deficit   (45,119,158)   (38,419,140)
Total stockholders’ equity   8,898,984    6,768,796 
           
Total liabilities and stockholders’ equity  $32,188,673   $32,335,890 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

3

 

 

INTERNATIONAL LAND ALLIANCE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

             
   For the three months ended   For the six months ended 
   June 30, 2026   June 30, 2025   June 30, 2026   June 30, 2025 
Net revenues and lease income  $142,496   $775,371   $1,099,332   $1,323,995 
                     
Cost of revenues   129,174    441,844    448,917    716,024 
                     
Gross profit   13,322    333,527    650,415    607,971 
                     
Operating expenses                    
Sales and marketing   170,182    189,939    354,302    377,450 
Impairment loss   18,832    -    18,832    - 
General and administrative expenses   3,457,836    1,121,829    6,082,474    2,046,423 
Total operating expenses   3,646,850    1,311,768    6,455,608    2,423,873 
                     
Income (loss) from operations   (3,633,528)   (978,241)   (5,805,193)   (1,815,902)
                     
Other income (expense)                    
Loss from debt extinguishment   (164,198)   -    (815,441)   - 
Change in fair value derivative liability   996,939    (608,496    2,278,320    (550,470 
Interest expense   (1,162,586)   (391,905)   (2,357,704)   (571,076)
Total other income (expense), net   (329,845)   (1,000,401)   (894,825)   (1,121,546)
                     
Net income (loss)  $(3,963,373)  $(1,978,642)  $(6,700,018)  $(2,937,448)
                     
Preferred stock dividends   173,053    132,054    368,553    132,054 
                     
Net income (loss) applicable to common shareholders  $(4,136,426)  $(2,110,696)  $(7,068,571)  $(3,069,502)
                     
Income (loss) per common share - basic and diluted  $(1.10)  $(1.05)  $(1.88)  $(1.53)
                     
Weighted average common shares outstanding - basic and diluted   3,745,711    2,007,895    3,745,711    2,007,895 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

4

 

 

INTERNATIONAL LAND ALLIANCE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

For the Three and Six Months Ended June 30, 2026 and 2025

(unaudited)

 

Activity for the Three and Six Months Ended June 30, 2026

 

   Shares      Shares      Shares      Shares      Shares                     
  

Series A

Preferred Stock

  

Series B

Preferred Stock

 

 

 

Series C

Preferred Stock

  

Series D

Preferred Stock

   Common Stock   Treasury  

Additional

Paid-in

  

Common

Stock

   Accumulated    

Total

Stockholders’

 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Stock   Capital   Payable   Deficit     Equity 
Balance, December 31, 2025   117,000   $17    1,000   $1    3,316    3    17,000   $17    2,666,311   $133,316   $(300,000)  $43,772,482   $1,582,000   $(38,419,140)    $6,768,796 
Dividend on Series A Preferred   -    -    -    -    -    -    -    -    -    -    -    (163,000)   -    -      (163,000)
Dividend on Series D Preferred   -    -    -    -    -    -    -    -    -    -    -    (32,500)   -    -      (32,500)
Adjustment for 50-1 stock split   -    -    -    -    -    -    -    -    -    (130,650)   -    130,650    -    -      - 
Common shares issued pursuant to employment agreement   -    -    -    -    -    -    -    -    -    -    -    -    129,750    -      129,750 
Common shares issued for employee compensation   -    -    -    -    -    -    -    -    955,829    956    -    3,222,152    (1,557,000)   -      1,666,108 
Common shares issued for services   -    -    -    -    -    -    -    -    524,668    525    -    1,976,584    -    -      1,977,109 
Common shares issued from debt conversion   -    -    -    -    -    -    -    -    308,290    308    -    1,606,603    -    -      1,606,911 
Common shares issued for inducement agreements   -    -    -    -    -    -    -    -    97,426    98    -    582,499    -    -      582,597 
Net income   -    -    -    -    -    -    -    -    -    -    -    -    -    (2,736,645)     (2,736,645)
Balance, March 31, 2026   117,000   $117    1,000   $1    3,316    3    17,000   $17    4,552,524   $4,553   $(300,000)  $51,095,470   $154,750   $(41,155,785)    $9,799,126 
Dividend on Series A Preferred   -    -    -    -    -    -    -    -    -    -    -    (121,853)   -    -      (121,853)
Dividend on Series D Preferred   -    -    -    -    -    -    -    -    -    -    -    (51,200)   -    -      (51,200)
Common shares issued for Series C dividends   -    -    -    -    -    -    -    -    1,662    2    -    -    -    -      2 
Settlement of derivative liability on convertible debt   -    -    -    -    -    -    -    -    -    -    -    (86,113)   -    -      (86,113)
Common shares issued pursuant to employment agreement   -    -    -    -    -    -    -    -    -    -    -    -    129,750    -      129,750 
Common shares issued for cash   -    -    -    -    -    -    -    -    -    -    -    -    47,500    -      47,500 
Warrants issued pursuant to convertible debt   -    -    -    -    -    -    -    -    -    -    -    1,635,010    -    -      1,635,010 
Common shares issued for cashless warrants   -    -    -    -    -    -    -    -    18,790    19    -    (19)   -    -      - 
Common shares issued from debt conversion   -    -    -    -    -    -    -    -    68,699    68    -    464,145    -    -      464,213 
Common shares issued for inducement agreements   -    -    -    -    -    -    -    -    23,000    23    -    152,477    -    -      152,500 
Common shares issued for services   -    -    -    -    -    -    -    -    157,143    157    -    918,265    (25,000)   -      893,422 
Net income   -    -    -    -    -    -    -    -    -    -    -    -    -    (3,963,373)     (3,963,373)
Balance, June 30, 2026   117,000   $117    1,000   $1    3,316    3    17,000   $17    4,821,818   $4,822   $(300,000)  $54,006,182   $307,000   $(45,119,158)    $8,898,984 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

5

 

 

Activity for the Three and Six Months Ended June 30, 2025

 

    Shares     Shares     Shares       Shares     Shares              
  

Series A

Preferred Stock

  

Series B

Preferred Stock

  

Series C

Preferred Stock

  

Series D

Preferred Stock

   Common Stock   Treasury  

Additional

Paid-in 

   Accumulated  

Total

Stockholders’

 
    Shares  Amount   Shares  Amount   Shares  Amount     Shares  Amount   Shares   Amount   Stock  Capital   Deficit  Equity 
Balance, December 31, 2024   117,000   $117    1,000   $1    3,100    3    17,000   $17    1,952,054   $97,603   $(300,000)  $38,803,819   $(24,146,956)  $14,454,604 
Common shares issued pursuant to promissory notes and consulting services   -    -    -    -    -    -    -    -    135,655    6,782    -    671,492    -    678,275 
Net income   -    -    -    -    -    -    -    -    -    -    -    -    (958,806)   (958,806 
Balance, March 31, 2025   117,000   $117    1,000   $1    3,100    3    17,000   $17    2,087,709   $104,385   $(300,000)  $39,475,312   $(25,105,764)  $14,174,071 
Dividend on Series D Preferred   -    -    -    -    -    -    -    -    -    -    -    (24,500)   -    (24,500)
Dividend on Series A Preferred   -    -    -    -    -    -    -    -    -    -    -    (107,554)   -    (107,554)
Common stock issued for consulting services   -    -    -    -    -    -    -    -    123,700    6,185    -    612,315    -    618,500 
Net income   -    -    -    -    -    -    -    -    -    -    -    -    (1,978,642)   (1,978,642)
Balance, June 30, 2025   117,000   $117    1,000   $1    3,100    3    17,000   $17    2,211,409   $110,570   $(300,000)  $39,955,573   $(27,084,406)  $12,681,875 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

6

 

 

INTERNATIONAL LAND ALLIANCE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

       
   For the six months ended 
   June 30, 2026   June 30, 2025 
         
Cash Flows from Operating Activities          
Net income (loss)  $(6,700,018)  $(2,937,448)
Adjustments to reconcile net income (loss) to net cash used in operating activities:          
Stock-based compensation   6,357,546    1,296,776 
Fair value of commitment shares   734,976    - 
Impairment loss   18,832    - 
Loss from conversion of debt   815,441    - 
Depreciation   66,629      
Amortization of debt discount   556,866    - 
Interest expense   956,308    - 
Bad debt expense   102,041      
Change in fair value of derivative liability   (2,278,320)   550,470 
Changes in operating assets and liabilities          
Accounts Receivable   (226,491)   66,961 
Prepaid and other current assets   88,573    (2,430)
Other non-current assets   170,831    91,678)
Accounts payable and accrued liabilities   175,668    422,106 
Accounts payable and accrued liabilities related parties   (1,806,515)   (326,947)
Deferred revenue   -    - 
Accrued interest   (123,967)   347,370 
Escrow deposit liability   (205,579)   - 
Net cash provided by (used in) operating activities   (1,297,179)   (491,464)
           
Cash Flows from Investing Activities          
Additional expenditures on land and building   (148,881)   - 
Change in long-term accounts receivable   109,040    - 
Net cash used in investing activities   (39,841)   - 
           
Cash Flows from Financing Activities          
Series A Preferred Stock dividends paid   (284,853)   (107,554)
Series D Preferred Stock dividends paid   (83,700)   (24,500)
Cash payments on promissory notes – related parties   (60,000)   - 
Cash payments on promissory notes   (64,785)   - 
Cash proceeds from convertible notes   2,641,529    - 
Cash payments on convertible notes   (539,791)   - 
Cash proceeds from other loans   491,700    584,575 
Cash payments on other loans   (729,724)   - 
Cash proceeds from promissory notes- related parties   -    112,561 
Net cash provided by financing activities   1,370,376    565,082 
           
Net increase (decrease) in Cash   33,356    73,618 
           
Cash, beginning of period   4,186    26,120 
           
Cash, end of period  $37,542   $99,738 
           
Supplemental disclosure of cash flow information          
Cash paid for interest  $493,295   $39,500 
           
Non-Cash investing and financing transactions          
Dividend on Series A  $284,853   $107,554 
Dividend on Series C  $-   $- 
Dividend on Series D  $83,700   $24,500 
Common shares issued for inducements  $2,070,748   $- 
Common shares issued with convertible debt  $734,976   $400,000 
Common shares issued for employee compensation agreements  $3,222,152   $- 
Settlement of derivative liability  $86,113   $- 
Common shares issued for services  $2,894,289   $889,992 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

7

 

 

INTERNATIONAL LAND ALLIANCE, INC.

Notes to the Consolidated Financial Statements

For the three and six months ended June 30, 2026

 

NOTE 1 – NATURE OF OPERATIONS AND GOING CONCERN

 

Nature of Operations

 

International Land Alliance, Inc. (the “Company”) was incorporated under the laws of the State of Wyoming on September 26, 2013. The Company is a residential land development company with target properties located in the Baja California, Northern region of Mexico and Southern California. The Company’s principal activities are purchasing properties, obtaining zoning and other entitlements required to subdivide the properties into residential and commercial building plots, securing financing for the purchase of the plots, improving the properties infrastructure and amenities, and selling the plots to homebuyers, retirees, investors, and commercial developers.

 

In May 2021, the Company acquired a 25% investment in Rancho Costa Verde Development LLC (“RCVD”). RCVD is a 1,100-acre master planned second home, retirement home and vacation home real estate community located on the east coast of Baja California. RCV is a self-sustained solar powered green community that takes advantage of the advances in solar and other green technology. On January 3, 2023, the Company completed the acquisition of the remaining 75% interest in RCVD for a contractual price of $13.5 million, paid through a combination of a promissory note, common stock and common stock purchase warrants. As a result of the transaction, RCVD became a wholly owned subsidiary of the Company. The transaction was accounted for as a business acquisition pursuant to ASC 805 Business Combinations.

 

Certain information and note disclosures included in the financial statements prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP” or “GAAP”) have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2026, are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. For further information, refer to the audited financial statements and notes for the year ended December 31, 2025, included in the Company’s Annual Report on Form 10-K filed with the SEC on April 27, 2026.

 

Liquidity and Going Concern

 

The accompanying consolidated unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

 

Management evaluated all relevant conditions and events that are reasonably known or reasonably knowable, in the aggregate, as of the date the consolidated financial statements were available to be issued and determined that substantial doubt exists about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on the Company’s ability to generate revenues and raise capital. The Company has faced significant liquidity shortages as shown in the accompanying financial statements. As of June 30, 2026, the Company’s current liabilities exceeded its current assets by approximately $22.0 million. The Company has recorded a net loss of $6.7 million for the six months ended June 30, 2026, and has an accumulated deficit of approximately $45.1 million as of June 30, 2026. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company continues to raise additional capital through the issuance of debt instruments and equity to fund its ongoing operations, which may have the effect of potentially diluting the holdings of existing shareholders.

 

Management anticipates that the Company’s capital resources will significantly improve if its plots of land gain wider market recognition and acceptance resulting in increased plot sales and house construction. If the Company is not successful with its marketing efforts to increase sales, the Company will continue to experience a shortfall in cash, and it will be necessary to obtain funds through equity or debt financing in sufficient amounts or to further reduce its operating expenses in a manner to avoid the need to curtail its future operations subsequent to June 30, 2026. The direct impact of these conditions is not fully known.

 

However, there can be no assurance that the Company would be able to secure additional funds if needed and that if such funds were available on commercially reasonable terms or in the necessary amounts, and whether the terms or conditions would be acceptable to the Company. In such a case, the reduction in operating expenses might need to be substantial in order for the Company to generate positive cash flow to sustain the operations of the Company. (See Note 10 regarding subsequent events).

 

8

 

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The Company maintains its accounting records on an accrual basis in accordance with GAAP. These consolidated financial statements are presented in United States dollars. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein.

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, ILA Fund I, LLC (the “ILA Fund”), a company incorporated in the State of Wyoming, International Land Alliance, S.A. de C.V., a company incorporated in Mexico (“ILA Mexico”), Emerald Grove Estates LLC, incorporated in the State of California, Oasis Park Resort, LLC, incorporated in the state of Wyoming, Plaza Bajamar, LLC, incorporated in State of Wyoming, Plaza Valle Divino, LLC, incorporated in the State of Wyoming and Rancho Costa Verde Development, LLC incorporated in State of Nevada.

 

ILA Fund includes cash as its only assets with minimal expenses as of June 30, 2026. The sole purpose of this entity is strategic funding for the operations of the Company. ILA Mexico has plots held for sale for the Oasis Park Resort, no liabilities, and minimal expenses as of June 30, 2026. As of June 30, 2026, Emerald Grove Estates LLC, Plaza Bajamar LLC, and Plaza Valle Divino LLC have no operations. All intercompany balances and transactions are eliminated in consolidation.

 

The Company’s consolidated subsidiaries and/or entities were as follows:

 

Name of Consolidated Subsidiary or Entity 

State or Other

Jurisdiction of

Incorporation or

Organization

 

Attributable

Interest

 
ILA Fund I, LLC  Wyoming   100%
International Land Alliance, S.A. de C.V. (ILA Mexico)  Mexico   100%
Emerald Grove Estates, LLC  California   100%
Oasis Park Resort LLC  Wyoming   100%
Plaza Bajamar LLC  Wyoming   100%
Plaza Valle Divino, LLC  Wyoming   100%
Rancho Costa Verde Development, LLC  Wyoming   100%

 

On January 1, 2023, the Company executed a securities purchase agreement pursuant to which the Company acquired all of the issued and outstanding units of Rancho Costa Verde Development, LLC, for a total contractual consideration of $13,500,000, paid through a combination of a promissory note, common stock and common stock purchase warrants.

 

Reclassification

 

Certain numbers from 2025 have been reclassified to conform with the current year presentation.

 

Investments - Equity Method

 

The Company accounts for equity method investments at cost, adjusted for the Company’s share of the investee’s earnings or losses, which are reflected in the consolidated statements of operations. The Company periodically reviews the investments for other than temporary declines in fair value below cost and more frequently when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. On January 3, 2023, the Company acquired a controlling financial interest in its previous equity method investment, which resulted in the consolidation pursuant to ASC 805 Business Combinations of such entity on the effective date.

 

9

 

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP 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. Management regularly evaluates estimates and assumptions related to the valuation of assets and liabilities. Management 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 management’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates include:

 

  ■ Liability for legal contingencies.
  ■ Useful life of buildings.
  ■ Assumptions used in valuing equity instruments.
  ■ Deferred income taxes and related valuation allowances.
  ■ Going concern.
  ■ Assessment of long-lived assets for impairment.
  ■ Significant influence or control over the Company’s investee.
  ■ Revenue recognition.

 

Segment Reporting

 

The Company operates as one reportable segment under ASC 280, Segment Reporting. The Chief Operating Decision Maker (“CODM”) regularly reviews the financial information of the Company at a consolidated level in deciding how to allocate resources and in assessing performances.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. The Company did not have any cash equivalents as of June 30, 2026, and December 31, 2025.

 

Fair Value of Financial Instruments and Fair Value Measurements

 

Accounting Standards Codification (“ASC”) 820 Fair Value Measurements and Disclosures, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1: uses quoted market prices in active markets for identical assets or liabilities.

 

Level 2: uses observable market-based inputs or unobservable inputs that are corroborated by market data.

 

Level 3: uses unobservable inputs that are not corroborated by market data.

 

As defined by ASC 820, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale, which was further clarified as the price that would be received to sell an asset or paid to transfer a liability (“an exit price”) in an orderly transaction between market participants at the measurement date.

 

10

 

 

The reported fair values for financial instruments that use Level 2 and Level 3 inputs to determine fair value are based on a variety of factors and assumptions. Accordingly, certain fair values may not represent actual values of the Company’s financial instruments that could have been realized as of any balance sheet dates presented or that will be recognized in the future, and do not include expenses that could be incurred in an actual settlement.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid, and other current assets, accounts payable and accrued liabilities, contracts liability, deposits, promissory notes, net of debt discounts and promissory notes related party, deferred revenue, other notes approximate fair value due to their relatively short maturities. Equity-method investment is recorded at cost, which approximates its fair value since the consideration transferred includes cash and a non-monetary transaction, in the form of the Company’s common stock, which was valued based on a combination of a market and asset approach.

 

The fair value of the Company’s recorded derivative liability is determined based on unobservable inputs that are not corroborated by market data, which require a Level 3 classification. A Black-Sholes option valuation model was used to determine the fair value. The Company records derivative liability on the consolidated balance sheets at fair value with changes in fair value recorded in the consolidated statements of operation.

 

The following table presents balances of the liabilities with significant unobservable inputs (Level 3) as of June 30, 2026:

 

   Fair Value Measurements at June 30, 2026 Using 
  

Quoted Prices

in Active

Markets for Identical

Assets

  

Significant

Other

Observable

Inputs

  

Significant

Unobservable

Inputs

     
   (Level 1)   (Level 2)   (Level 3)   Total 
                 
Derivative liability  $-   $-   $1,731,049   $1,731,049 
Total  $-   $-   $1,731,049   $1,731,049 

 

The following table presents changes of the liabilities with significant unobservable inputs (Level 3) for the three months ended June 30, 2026:

 

   Derivative 
   Liability 
Balance December 31, 2025  $2,961,379 
      
Increase in derivative liability from new convertible debt   1,134,103 
Settlement of derivative liability   (86,113)
Change in estimated fair value   (2,278,320)
Balance June 30, 2026  $1,731,049 

 

Derivative Liability

 

As of June 30, 2026, the Company has variable rate convertible promissory notes, which contained variable conversion rates based on unknown future prices of the Company’s common stock. This resulted in the recognition of a derivative liability as the conversion feature failed the scope exception for derivative accounting due to the variability of its conversion price. The Company measures the derivative liability using the Black-Scholes option valuation model using the following assumptions:

 

    

For the Six Months Ending

June 30,

 
    2026    2025 
           
Expected term   1 month – 1 year    1 month – 1 year 
Exercise price   $2.55 - $7.50    $5.00 - $7.00 
Expected volatility   64% - 159%   176% - 232%
Expected dividends   None    None 
Risk-free interest rate   3.92% - 4.56%   5.03% - 5.55%
Forfeitures   None    None 

 

11

 

 

The assumptions used in determining fair value represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change, including changes in the market value of the Company’s common stock, managements’ assessment, or significant fluctuations in the volatility of the trading market for the Company’s common stock, the Company’s fair value estimates could be materially different in the future.

 

The Company computes the fair value of the derivative liability at each reporting period and the change in the fair value is recorded as non-cash expense or non-cash income. The key component in the value of the derivative liability is the Company’s stock price, which is subject to significant fluctuation and is not under its control, and the assessment of volatility. The resulting effect on net loss is therefore subject to significant fluctuation and will continue to be so until the Company’s variable convertible notes, which the convertible feature is associated with, are converted into common stock or paid in full with cash. Assuming all other fair value inputs remain constant, the Company will record non-cash expense when its stock price increases and non-cash income when its stock price decreases.

 

Cost Capitalization

 

The cost of buildings and improvements includes the purchase price of the property, legal fees, and other acquisition costs. Costs directly related to planning, developing, initial leasing and constructing a property are capitalized and classified as Buildings in the consolidated balance sheets. Capitalized development costs include interest, property taxes, insurance, and other direct project costs incurred during the period of development are also capitalized.

 

A variety of costs are incurred in the acquisition, development, and leasing of properties. After determination is made to capitalize a cost, it is allocated to the specific component of a project that is benefited. Determination of when a development project is substantially complete, and capitalization must cease involves a degree of judgment. Our capitalization policy on development properties is guided by ASC 835-20 Interest – Capitalization of Interest and ASC 970 Real Estate - General. The costs of land and buildings under development include specifically identifiable costs. The capitalized costs include pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs and other costs incurred during the period of development. We consider a construction project as substantially completed and held available for occupancy or sale upon the receipt of certificates of occupancy, but no later than one year from cessation of major construction activity. We cease capitalization on the portion (1) substantially completed and (2) occupied or held available for occupancy, and we capitalize only those costs associated with the portion under construction.

 

Land Held for Sale

 

The Company considers properties to be assets held for sale when (1) management commits to a plan to sell the property; (2) the property is available for immediate sale in its present condition and (3) the property is actively being marketed for sale at a price that is reasonable given our estimate of current market value. Upon designation of a property as an asset held for sale, we record the property’s value at the lower of its’ carrying value or its estimated net realizable value.

 

Land and Buildings

 

Land and buildings are stated at cost. Depreciation is provided by the use of the straight-line and accelerated methods for financial and tax reporting purposes, respectively, over the estimated useful lives of the assets. Buildings have an estimated useful life of 20 years. Land is an indefinite-lived asset that is stated at fair value at date of acquisition.

 

Construction in progress (“CIP”)

 

A CIP asset reflects the cost of construction work undertaken, but not yet completed on land not currently owned by the Company. For construction in progress assets, no depreciation is recorded until the asset is placed in service. When construction is completed, the assets should be reclassified as building, building improvement, infrastructure or land improvement and should be capitalized and depreciated. The land is currently owned by companies controlled by our chairman of the board.

 

Fixed Assets

 

Fixed assets are stated at cost, less accumulated depreciation, and amortization. Depreciation is computed using the double declining balance method over the estimated useful lives of the respective assets:

 

Classification   Life 
Buildings   20 years 
Furniture and equipment   5 years 

 

12

 

 

Revenue Recognition

 

The Company determines revenue recognition pursuant to Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, through the following steps:

 

  ■ Identification of the contract, or contracts, with a customer.
  ■ Identification of the performance obligations in the agreement(s) for the sale of plots or house construction.
  ■ Determination of the transaction price.
  ■ Allocation of the transaction price to the performance obligation(s) in the contract.
  ■ Recognition of revenue when, or as the Company satisfies a performance obligation.

 

Revenue is measured based on considerations specified in the agreements with our customers. A contract exists when it becomes a legally enforceable agreement with a customer. The contract is based on either the acceptance of standard terms and conditions as stated in our agreement of plot sales or house construction with customers. These contracts define each party’s rights, payment terms and other contractual terms and conditions of the sale. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The transaction price is determined based on the consideration which we will expect to receive in exchange for execution of the performance obligation(s).

 

The Company applies judgment in determining the customer’s ability and intention to pay the consideration which the Company is entitled to. A performance obligation is a promise in a contract or agreement to transfer a distinct product or item to the customer. Performance obligations promised in a contract are identified based on the property that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract, whereby the transfer of the property is separately identifiable from other promises in the contract. Management considers the retention of title as merely a protective right, which would not disallow revenue recognition for the full consideration to which the Company is entitled upon the execution of a contract for deed.

 

Currently, upon execution of each contract for deed, the Company has not developed sufficient controls and procedures to provide reasonable assurance that collection of the consideration, which the Company is entitled to, is probable. In addition, the title of the land for the various projects (Bajamar and Divino) is held by an entity that is controlled by the Company’s chairman of the board.

 

The Company’s principal activities in the real estate development industry from which it generates its revenues, are the sale of developed and undeveloped land and house construction.

 

Rancho Costa Verde Development or RCVD generates revenue from the following sources: (1) lot sales, (2) home construction calculated as a set percentage of builders’ costs, (3) administrative income for loan servicing, (4) interest income resulting from monthly payments from financed loans made to customers on lot sales, (5) resale income as commission for selling homes for owners that have purchased lots at RCVD and (6) utilities revenue from waste water systems and solar systems.

 

The Company identified the following performance obligations related to the operations of RCVD: (1) subdivision of the developer parcel, (ii) casita free week for each customer allowing them to enjoy a free week to a casita per year. The Company determined that there was a significant financing component in most arrangements with customers, which results in the recognition of interest income.

 

The Company recognized $1,099,332 and $1,323,995 of net revenue during the six months ended June 30, 2026, and 2025, respectively.

 

Advertising costs

 

The Company expenses advertising costs when incurred. Advertising costs incurred amounted to $167,482 and $351,602 for the three and six months ended June 30, 2026, respectively, and $189,939 and $377,450 for the three and six months ended June 30, 2025, respectively.

 

Debt issuance costs and debt discounts

 

Debt issuance costs and debt discounts are being amortized over the term of the related financings on a straight-line approach, which approximates the effective interest method. Costs and discounts are presented as a reduction of the related debt in the accompanying consolidated balance sheets.

 

13

 

 

Stock-Based Compensation

 

The fair value of stock options is estimated on the grant date using the Black-Scholes option pricing model, based on weighted average assumptions. Expected volatility is based on historical volatility of our common stock. The Company has elected to use the simplified method described in the Securities and Exchange Commission Staff Accounting Bulletin Topic 14C to estimate the expected term of employee stock options. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The value of stock awards is determined using the fair value of the Company’s common stock on the date of grant. The Company accounts for forfeitures as they occur. Any compensation cost previously recognized for an unvested award that is forfeited because of a failure to satisfy a service condition is reversed in the period of the forfeiture. Compensation expense is recognized on a straight-line basis over the requisite service period of the award. Stock-based compensation includes the fair value of options, warrants and restricted stocks issued to employees, directors, and non-employees.

 

Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Income Taxes. The asset and liability method provide that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Management makes estimates and judgments about our future taxable income that are based on assumptions that are consistent with our plans and estimates. Should the actual amounts differ from our estimates, the amount of our valuation allowance could be materially impacted. Any adjustment to the deferred tax asset valuation allowance would be recorded in the income statement for the periods in which the adjustment is determined to be required. Management does not believe that it has taken any positions that would require the recording of any additional tax liability, nor does it believe that there are any unrealized tax benefits that would either increase or decrease within the next year.

 

Net Earnings (Loss) Per Share

 

The Company computes earnings (loss) per share in accordance with ASC 260 – Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the consolidated statements of operations. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible notes payable using the if-converted method. Diluted EPS excludes all dilutive potential shares if their effect is antidilutive. During periods of net loss, all common stock equivalents are excluded from the diluted EPS calculation because they are antidilutive.

 

14

 

 

Securities that are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been antidilutive are:

 

  

For the six

months ended

June 30, 2026

  

For the six

months ended

June 30, 2025

 
         
Options   146,000    - 
Warrants   1,233,863    762,150 
Total potentially dilutive shares   1,379,863    762,150 

 

Concentration of Credit Risk

 

The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through June 30, 2026.

 

Impairment of Long-lived Assets

 

The Company reviews its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. If impairment is indicated, the asset is written down to its estimated fair value. The Company fully impaired its long-lived assets due to the uncertainty in title transfer of the land not currently owned by the Company and the estimated fair value of its construction in progress during the six months ended June 30, 2026.

 

Accounts Receivable

 

The Company uses the specific identification method for recording the provision for doubtful accounts, which was $766,678 and $887,662 at June 30, 2026 and December 31, 2025, respectively. Account receivables are written off when all collection attempts have failed.

 

Convertible Promissory Note

 

The Company accounts for convertible promissory notes in accordance with ASC 470-20, Debt with Conversion and Other Options. The Company evaluates embedded conversion features within convertible debt to determine whether the embedded conversion feature should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in the Income Statement. If the conversion feature does not require recognition of a bifurcated derivative, the convertible debt instrument is evaluated for consideration of any beneficial conversion feature (“BCF”) requiring separate recognition. When the Company records a BCF, the intrinsic value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument with an offset to additional paid-in capital and amortized to interest expense over the life of the debt using the effective interest method.

 

15

 

 

NOTE 3 – LAND, BUILDING, NET AND CONSTRUCTION IN PROCESS

 

Land, buildings, net and construction in process as of June 30, 2026, and December 31, 2025:

 

   Useful life  June 30, 2026   December 31, 2025 
Land – Emerald Grove     $203,419   $203,419 
              
Land – Rancho Costa Verde Development     $17,590,551   $17,459,238 
              
Building  20 years   2,665,944    2,648,378 
Less: Accumulated depreciation      (1,098,889)   (1,032,261)
              
Building, net     $1,567,055   $1,616,117 

 

Depreciation expense was approximately $66,629 and $nil for the six months ended June 30, 2026, and 2025, respectively.

 

Valle Divino

 

The Valle Divino is the Company’s premier wine country development project in Ensenada, Baja California. This land project consists of 20 acres to be acquired from Baja Residents Club, a Company controlled by our chairman of the board and developed into Valle Divino resort. The acquisition of title to the land for this project is subject to approval from the Mexican government in Baja, California. The Company broke ground of the Valle Divino development in July 2020 and has commenced site preparation for two model homes including a 1-bedroom and 2- bedroom option. The first Phase of the development includes 187 homes. This development will also have innovative microgrid solutions by our partner to power the model home and amenities.

 

The construction contractor is also an entity controlled by our chairman of the board. Construction began during the year ended December 31, 2020. The balance of construction in process for Valle Divino was $0 as of June 30, 2026, and December 31, 2025. The Company fully impaired the accumulated costs related to its Valle Divino project due to the uncertainty pertaining to the title transfer for a total amount of $457,275 during a previous reporting period.

 

Plaza Bajamar

 

The Plaza Bajamar community is an 80-unit development located within the internationally renowned Bajamar Ocean Front Hotel and Golf Resort. The Bajamar Ocean Front Golf Resort is an expertly planned, well-guarded, and gated wine and golf community located 45 minutes South of the San Diego-Tijuana Border along the scenic toll road to Ensenada on the Pacific Ocean.

 

Phase I will include 22 “Merlot” 1,150 square-foot single-family homes that feature two bedrooms and two baths. The home includes two primary bedroom suites – one on the first floor and one upstairs, as well as fairway and ocean views from a rooftop terrace. The Merlot villas will come with the installation of solar packages construction in mind. Planned amenities include a pool, wellness and fitness center and available office space.

 

The Company has not yet taken title to this property, which is currently owned by Valdeland, S.A. de C.V. (“Valdeland”), an entity controlled and 100% owned by Roberto Valdes, the Company’s chairman of the board. In September 2019, the Company executed a land purchase agreement with Valdeland, under which the Company is to acquire from Valdeland the Plaza Bajamar property free of liens and encumbrances for a total consideration of $1,000,000.

 

16

 

 

In November and December 2019, $250,000 was paid to the Company’s chairman of the board, Roberto Valdes, of which $150,000 was used for the construction of two model Villas at our planned Plaza Bajamar development and $100,000 as a down payment towards the acquisition of the land from Valdeland. As of June 30, 2026 and December 31, 2025, the Company has issued 5,000 shares of the Company’s common stock for a total amount of $150,000 reported under Prepaid and other current assets in the consolidated balance sheets towards the purchase of the land. The balance was fully impaired in a previous reporting period.

 

Valdeland has completed a two-bedroom model home, an enhanced entrance, and interior roads as well as site preparation for four (4) new homes adjacent to the model home. It has commenced construction on four residential lots following the payment of the required minimum deposits from buyers.

 

The Company funded the construction by an additional $179,700 during a previous reporting period. Valdeland is the construction contractor is also an entity controlled and owned by Roberto Valdes.

 

The balance of construction in process for Plaza Bajamar totaled $0 as of June 30, 2026, and December 31, 2025. The Company fully impaired the accumulated costs related to Plaza Bajamar in a previous reporting period, due to the uncertainty pertaining to title transfer for a total amount of $179,700.

 

Within the “restricted zone,” a foreigner can purchase the beneficial interest in real property through a bank trust or “fideicomiso.” Indeed, a bank trust must be used when acquiring property within the restricted zone. In this bank trust, the buyer of the property is designated as the “fideicomisario” or the beneficiary of the trust. While legal title is held by the bank, (specifically the trustee of the trust or the “fiduciario,”) the trustee must administer the property in accordance with the instructions of the buyer (the beneficiary of the trust). The property is not an asset of the bank, and the trustee is obligated to follow every lawful instruction given by the beneficiary to perform legal action. The Company has not yet established the bank trust, which is anticipated to occur before the end of the fiscal year 2026.

 

As of June 30, 2026, Valdeland sold six (6) house constructions on residential lots for estimated price of $1.5 million, of which $0.5 million has been paid and collected by the Company and initially presented under contract liability in the consolidated balance sheets. However, the Company offset the balance of construction in process with the contract liability with the net balance written off due to the uncertainty pertaining to the transfer of title.

 

Rancho Costa Verde Development (“RCVD”)

 

RCVD is a 1,000 acre, 1,200 lot master planned community in Baja, California, located few miles from the Company’s Oasis Park resort on the sea of Cortez. To date, RCVD has sold over 1,000 residential lots and built 55 single-family homes with approximately 30 under construction. This is in addition to a completed boutique hotel and clubhouse.

 

On December 16, 2025, the Company closed on the acquisition of 300 acres of land and structures located adjacent to the Company’s Rancho Costa Verde development for a total consideration of $1.65 million. This purchase is subdivided into 7 parcels and consists of approximately 300 residential homesites, 12 existing tiny homes, and 2 completed homes.

 

NOTE 4 – RELATED PARTY TRANSACTIONS

 

Chief Executive Officer – Frank Ingrande

 

In May 2021, the Company executed an employment agreement with Frank Ingrande.

 

During the six months ended June 30, 2026, the Company accrued $63,000 of salary expense to Frank Ingrande. Additionally, during March 2026, the Company paid Mr. Ingrande $393,038 via stock issuances, to compensate for accrued, unpaid salary from previous years. The Company did not pay any salary to Frank Ingrande during the six months ended June 30, 2026. The accrued compensation balance owed is $63,000 and $393,038 as of June 30, 2026, and December 31, 2025, respectively.

 

Frank Ingrande was the co-founder and owner of 33% of the Company’s equity-method investee RCVD. During the year ended December 31, 2023, the Company acquired the remaining 75% interest in RCVD, which became the Company’s wholly owned subsidiary as of January 2023.

 

On December 1, 2022, the Company issued 9,317 stock options under the 2022 Plan with a strike price of $10.00, vesting 25% on grant date and the remaining 75% monthly over a twelve-month period from grant date with an estimated fair value of approximately $90,188. These shares have expired as of June 30, 2026.

 

17

 

 

Chief Financial Officer – Jason Sunstein

 

Effective January 1, 2020, the Company executed an employment agreement with Jason Sunstein.

 

During the six months ended June 30, 2026, the Company accrued $63,000 of salary expense to Jason Sunstein. Additionally, during March 2026, the Company paid Mr. Sunstein $393,038 via stock issuances, to compensate for accrued, unpaid salary from previous years. The Company did not pay any salary to Jason Sunstein during the six months ended June 30, 2026. The accrued compensation balance owed is $63,000 and $393,038 as of June 30, 2026, and December 31, 2025, respectively.

 

On December 1, 2022, the Company issued 9,317 stock options under the 2022 Plan with a strike price of $10.00, vesting 25% on grant date and the remaining 75% monthly over a twelve-month period from grant date with an estimated fair value of approximately $90,188. These shares have expired as of June 30, 2026.

 

Jason Sunstein is also the managing member of Six Twenty Management LLC, an entity that has been providing ongoing capital support to the Company.

 

Jason Sunstein also facilitated the Emerald Grove asset purchase.

 

Chairman of the Board – Roberto Valdes

 

Effective January 1, 2020, the Company executed an employment agreement with Roberto Valdes.

 

During the six months ended June 30, 2026, the Company accrued $63,000 of salary expense to Roberto Valdes. Additionally, during March 2026, the Company paid Mr. Valdes $393,038 via stock issuances, to compensate for accrued, unpaid salary from previous years. The Company did not pay any salary to Roberto Valdes during the six months ended June 30, 2026. The accrued compensation balance owed is $63,000 and $393,038 as of June 30, 2026, and December 31, 2025, respectively.

 

As of June 30, 2026, the Company funded an aggregate amount of $1.4 million for construction on residential lots, projects amenities and towards the acquisition of land to companies controlled by Roberto Valdes. The land for the Plaza Bajamar and Valle Divino is currently owned by two entities controlled by Roberto Valdes (Valdeland S.A de C.V. and Valdetierra S.A de C.V) and all parties executed a land purchase agreement for each project to transfer title of the land to a bank trust or “fideicomiso”, in which the Company will be named the beneficiary of the trust (“fideicomisario”).

 

The Company has funded an aggregate amount of approximately $251,000 to the construction companies owned by Roberto Valdes for the two projects in Ensenada, Baja California. The Company has not yet established the bank trust, which is anticipated to occur before the end of the 2026 fiscal year. The properties at Valle Divino and Plaza Bajamar have executed promise to purchase agreements between the Company and Roberto Valdes, which require the transfer of titles of the land free of liens and encumbrances to the Company. There can be no assurance as to what and if any profit might have been received by Roberto Valdes, in his separate company as a result of these transactions.

 

On December 1, 2022, the Company issued 9,317 stock options under the 2022 Plan with a strike price of $10.00, vesting 25% on grant date and the remaining 75% monthly over a twelve-month period from grant date with an estimated fair value of approximately $90,188. These shares have expired as of June 30, 2026.

 

18

 

 

International Real Estate Development, LLC. (“IRED”)

 

Frank Ingrande was an owner of 33% of IRED at the time of the 25% initial investment in RCVD in May 2021 and subsequent to this transaction became a shareholder and President of the Company. On January 3, 2023, the remaining 75% interest was acquired by the Company and as of June 30, 2026, and December 31, 2025, Mr. Ingrande was still the President of the Company and a 33% owner in IRED. As such, any transactions with IRED are deemed to be related party transactions.

 

On January 1, 2023, the Company issued a convertible promissory note pursuant to the acquisition of RCVD for a total principal of $8,900,000, carrying a 5% coupon and maturing on September 30, 2024. The convertible note was payable in quarterly installment of $2,225,000 starting on March 31, 2023. The convertible note includes a twelve percent (12%) default interest. Although, this convertible promissory note payable is part of the consideration to the business combination in stages which is not deemed a related party transaction, the convertible promissory note payable is with a related party and deemed a related party convertible promissory note payable. During a previous reporting period, the Company converted the entire principal and interest balance of the promissory note into 89,000 Series A Preferred Shares.

 

Lisa Landau

 

Lisa Landau is the sister of Company CFO, Jason Sunstein, and she is also a shareholder who assists with some of the Company’s accounting function. From time to time, Ms. Landau has either paid certain costs on the Company’s behalf or provided funding to the Company to bridge the gap in our capital needs until another debt or equity funding can be closed. The amounts due to Ms. Landau are approximately $530,000 and $590,000 as of June 30, 2026, and December 31, 2025, respectively. We plan to reimburse Ms. Landau in 2026 as our major capital infusions take place. During the six months ended June 30, 2026, the Company repaid Ms. Landau approximately $60,000 of her advances.

 

R-MAC Properties, Inc. (“R-MAC”)

 

R-MAC is an international and domestic real estate sales and marketing firm that specializes in selling vacation homes in Baja, California. R-MAC is owned by Michael A. Cresci and Robert Rios, who are beneficial owners and Vice Presidents of the Company. R-MAC provided marketing and sales support services to the Company, which amounted to $313,037 and $389,316 during the six months ended June 30, 2026, and 2025, respectively. Such costs are included in marketing and sales commission expenses in the accompanying consolidated statements of operation.

 

NOTE 5 – PROMISSORY NOTES

 

Promissory notes consisted of the following at June 30, 2026, and December 31, 2025:

 

   June 30, 2026   December 31, 2025 
         
Cash Call note payable, due June 30, 2026  $-   $24,785 
Cash Call note payable, due June 30, 2026  $-   $24,785 
Elder note payable, 10% interest, due September 30, 2026   1,500    1,500 
Elder note Payable, 15% interest, due September 30, 2026   76,477    76,477 
Griffith note Payable, 15% interest, due September 30, 2026   250,000    250,000 
Banker note Payable, 15% interest, due September 30, 2026   3,270    23,270 
Robles note Payable, 10% interest, due September 30, 2026   17,500    37,500 
Kitchner note payable, 15% interest, due June 30, 2026   100,000    100,000 
Total Promissory notes payable  $448,747   $513,532 
Less discounts   -    - 
           
Total Promissory notes, net of discount   448,747    513,532 
           
Less current portion   (448,747)   (513,532)
           
Total Promissory notes, net of discount - long term  $-   $- 

 

Cash Call, Inc.

 

On March 19, 2018, the Company issued a promissory note to CashCall, Inc. for $75,000 of cash consideration. The note bears interest at 94%. The Company also recorded a $7,500 debt discount due to origination fees due at the beginning of the note, which was fully amortized as of December 31, 2023.

 

19

 

 

On August 2, 2022, the Company and Cash Call settled for an aggregate principal of $23,641 payable in one lump sum or a series of 9 installments of $3,152. During the six months ended June 30, 2026, the note balance with Cash Call was settled in full.

 

As of June 30, 2026 and December 31, 2025, the remaining principal balance was $0 and $24,785, respectively. The Company did not incur any interest expense related to this promissory note during the six months ended June 30, 2026, due to the agreed upon settlement amount.

 

Christopher Elder

 

On December 15, 2020, the Company entered into a promissory note pursuant to which the Company borrowed $126,477. Interest under the promissory note in default is 18%, and the principal and all accrued but unpaid interest is due upon maturity.

 

The Company incurred approximately $6,000 in interest expense during the six months ended June 30, 2026. As of both June 30, 2026, and December 31, 2025, the remaining principal balance was $76,477.

 

Accrued interest was $63,651 and 57,915 as of June 30, 2026 and December 31, 2025, respectively.

 

Bobbie Allen Griffith

 

On September 5, 2023, the Company entered into a promissory note pursuant to which the Company borrowed $215,000. Interest under the promissory note is 15% per annum, and the principal and all accrued but unpaid interest is due upon maturity.

 

The Company repaid the note in full during the year ended December 31, 2023. During the year ended December 31, 2023, the Company was advanced an additional $250,000. As of June 30, 2026, and December 31, 2025, the remaining principal balance was $250,000.

 

The Company incurred approximately $25,000 of interest during the six months ended June 30, 2026, and 2025, respectively. During the six months ended June 30, 2026, the Company converted $144,753 of accrued and unpaid interest into 30,157 common shares of the Company’s stock using a conversion price of $4.80. The difference between the conversion price and the Company’s fair value of common stock at the time of conversion was recorded as a loss on settlement of debt in the accompanying consolidated statements of operations for the six months ended June 30, 2026. Accrued interest on the promissory note was $12,500 and $132,250 as of June 30, 2026, and December 31, 2025, respectively.

 

George Banker

 

On August 11, 2023, the Company entered into a promissory note pursuant to which the Company borrowed $150,000. Interest under the promissory note is 15% per annum, and the principal and all accru2026,ut unpaid interest was due on October 11, 2023. The note is in technical default as it is past maturity date, and the Company failed to repay the outstanding principal and accrued interest. During the six months ended June 30, 2026, the Company repaid $20,000 of principal due on the promissory note to George Banker. As of June 30, 2026, and December 31, 2025, the remaining principal balance was $3,270 and $23,270, respectively.

 

The Company incurred approximately $7,000 and $18,000 of interest during the six months ended June 30, 2026, and 2025, respectively. During the six months ended June 30, 2026, the Company converted $71,041 of accrued and unpaid interest into 14,800 common shares of the Company’s stock using a conversion price of $4.80. The difference between the conversion price and the Company’s fair value of common stock at the time of conversion was recorded as a loss on settlement of debt in the accompanying consolidated statements of operations for the six months ended June 30, 2026. Accrued interest on the promissory note was $2,649 and $66,224 as of June 30, 2026, and December 31, 2025, respectively.

 

George Robles

 

On September 1, 2023, the Company entered into a promissory note pursuant to which the Company borrowed $100,000. Interest under the promissory note is 5% per month with a default rate of 10% per month, and the principal and all accrued but unpaid interest is due upon maturity. During the six months ended June 30, 2026, the Company repaid $20,000 of principal due on the promissory note to George Robles. As of June 30, 2026, and December 31, 2025, the remaining principal balance was $17,500 and $37,500, respectively.

 

The Company incurred approximately $1,500 and $4,000 of interest during the six months ended June 30, 2026, and 2025, respectively. Accrued interest on the promissory note was $20,125 and $18,750 as of June 30, 2026, and December 31, 2025, respectively.

 

John Kitchner

 

On January 31, 2025, the Company entered into a promissory note pursuant to which the Company borrowed $100,000. Interest under the promissory note is 15% with a three-month maturity term. The note was due on May 1, 2025, and carried an effective interest rate of 60% per annum.

 

The Company incurred approximately $30,000 of interest expense during the six months ended June 30, 2026. Accrued interest was approximately $108,000 and $78,000 as of June 30, 2026, and December 31, 2025, respectively. As of both June 30, 2026, and December 31, 2025, the remaining principal balance was $100,000.

 

20

 

 

NOTE 6 – CONVERTIBLE NOTES

 

Convertible notes consisted of the following at June 30, 2026, and December 31, 2025:

 

   June 30, 2026   December 31, 2025 
         
GW Capital Investments convertible note, 12% interest, due June 2027   138,889    - 
Willow Creek Capital convertible note, 10% interest, due May 2027   340,000    - 
Monroe Street #2 convertible note, 10% interest, due May 2027   385,000    - 
Prizm Investments convertible note, 12% interest, due May 2027   100,000    - 
Auctus Fund #2 convertible note, 12% interest, due April 2027   250,000    - 
Coventry Enterprises convertible note, 10% interest, due March 2027   300,000    - 
Monroe Street #1 convertible note, 10% interest, due December 2026   110,000    - 
GS Capital convertible note, 12% interest, due March 2027   152,000    - 
FirstFire Global convertible note, 10% interest, due March 2027   168,000    - 
Silver Crest convertible note, 12% interest, due March 2027   125,000    - 
Quick Capital note #1, 12% interest, due December 2025   -    - 
Quick Capital note #2, 12% interest, due April 2026   -    155,556 
Quick Capital note #3, 12% interest, due May 2026   -    31,111 
Quick Capital note #4, 12% interest, due February 2027   153,846    - 
Quick Capital note #5, 10% interest, due December 2026   568,352    - 
Lendspark Corporation note, due March 2026   -    111,110 
Vista Capital note #1, 12% interest, due March 2026   -    - 
Vista Capital note #2, 12% interest, due September 2026   48,200    110,000 
Auctus Fund #1 note, 12% interest, due August 2026   -    250,000 
CFI Capital note #1, 6% interest, due September 2026   -    150,000 
CFI Capital note #2, 6% interest, due March 2027   150,000    - 
Jefferson Street note, 10% interest, due September 2026   137,500    137,500 
Crom Structured Fund note, 10% interest, due September 2026   137,500    137,500 
Mast convertible note, Tranche 1, due November 2026   3,573,333    3,573,333 
Mast convertible note, Emerald Grove, due December 2026   2,265,001    2,752,509 
Cobra convertible note, 20% interest, due January 2026   -    75,000 
           
Total convertible notes  $9,102,621   $7,483,619 
Less discounts   (1,498,125)   (801,694)
           
Total convertible notes, net of discount   7,604,496    6,681,925 
           
Less current portion   (7,604,496)   (6,681,925)
           
Total convertible notes, net of discount - long term  $-   $- 

 

21

 

 

Mast Emerald Grove convertible note payable (“Mast Emerald Grove note”)

 

In December 2024, the Company issued a convertible promissory note pursuant to which it borrowed gross proceeds of $3,127,500 for net proceeds of $2,502,000, net of issuance costs of $625,500. Interest under the convertible promissory note is 12% per year and a default coupon of 16%.

 

The maturity date of the note is December 17, 2026. At any time after issuance, the note is convertible into shares of our common stock at the greater of a fixed conversion rate or discount to the market price.

 

The Company initially recognized $625,500 of debt discount resulting from the original issue discount and the deferred financing costs. The Company amortized $154,233 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $142,153 as of June 30, 2026. Interest expenses, including the amortization of discount amounted to $341,883 during the six months ended June 30, 2026.

 

Additionally, during the six months ended June 30, 2026, the Company converted $591,520 into 107,549 common shares of the Company’s stock using a conversion price of $5.50. The converted debt amount consisted of $489,258 of note balance principal, $100,512 of accrued interest and $1,750 in legal fees. The difference between the conversion price and the Company’s fair value of common stock at the time of conversion was recorded as a loss on settlement of debt in the accompanying consolidated statements of operations for the six months ended June 30, 2026. The Company did not convert any of this convertible note during the six months ended June 30, 2025.

 

The principal balance owed on the Mast Emerald Grove note was $2,122,848 and $2,456,123 as of June 30, 2026, and December 31, 2025, respectively.

 

Mast Hill LP Convertible Note – Tranche 1 (“Mast Tranche 1”)

 

In November 2025, the Company issued a convertible promissory note, Tranche 1, pursuant to which it borrowed gross proceeds of $3,573,333 for net proceeds of $3,051,000, net of issuance costs of $522,333. Interest under the convertible promissory note is 12% per year and a default coupon of 16%.

 

The maturity date of the note is November 17, 2026. At any time after issuance, the note is convertible into shares of our common stock at the greater of a fixed conversion rate or discount to the market price.

 

The Company initially recognized $522,333 of debt discount resulting from the original issue discount and the deferred financing costs. The Company amortized $257,589 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $170,400 as of June 30, 2026. Interest expenses, including the amortization of discount amounted to $471,989 during the six months ended June 30, 2026.

 

The principal balance owed on the Mast Tranche 1 note was $3,402,933 and $3,145,344 as of June 30, 2026, and December 31, 2025, respectively.

 

Cobra (“Cobra convertible note”)

 

In August 2024, the Company issued a convertible promissory note pursuant to which it borrowed gross proceeds of $125,000 for net proceeds of $100,000, net of issuance costs of $25,000.

 

The Company initially recognized $25,000 of debt discount resulting from the original issue discount and the deferred financing costs, which was fully amortized by December 31, 2025.

 

Interest charged on the Cobra convertible note amounted to $1,829 during the six months ended June 30, 2026. During February 2026, the entire amount of principal and accrued interest, totaling $76,829, was repaid to the lender.

 

The balance of the Cobra convertible note was $0 and $75,000 as of June 30, 2026, and December 31, 2025, respectively.

 

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Quick Capital, LLC (“Quick Capital Notes”)

 

Quick Notes 1 – 3

 

On March 13, 2025, July 16, 2025, and August 18, 2025, the Company issued to Quick Capital LLC (“Quick Capital”), a Wyoming limited liability company, convertible promissory notes for the principal amounts of a $250,000, $155,555.56 and $31,111.11, respectively, for an aggregate principal amount of $436,666.67 (each a “Note” and collectively the “Notes”). Each Note was issued pursuant to a Note Purchase Agreement dated therewith. The Company received an aggregate of $347,100 gross proceeds from the sale of the Notes, after deductions for original issue discounts from 10% to 20%, broker fees of $8,400, and lender legal fees from $2,500 to $5,000.

 

The principal amount of the Notes (together with accrued interest) mature nine (9) months from issuance. The Notes bear a guaranteed interest at a rate of 12%. Upon an event of a default under a Note (as more fully described in the Notes), the Notes shall accrue interest at annual rate of the lesser of 24% or maximum rate allowed by law. The Note issued in March 2025 (Quick Capital Note 1) was due on December 13, 2025, and has total aggregate repayments due of $280,000. The Note issued in July (Quick Capital Note 2) was due on April 16, 2026, and has total aggregate repayments due of $174,222. The Note issued in August (Quick Capital Note 3) was due on May 18, 2026, and has total aggregate repayments due of $34,844.

 

The Notes are convertible at the holder’s option at any time after 180 days from issuance or upon event of default, into shares of the Company’s Common Stock at a conversion price equal to $5.50 per share, or in the case of event of default, at a price equal to the lower of $5.50 or 65% of the lowest trading price for the proceeding 20 days prior to conversion. Additionally, as an incentive to Quick Capital, the Notes contain securities purchase agreements which provided for the issuance of 9,900 shares of common stock with a fair value of approximately $83,000, which were fully earned at issuance, and 33,333 warrants for the purchase of an equivalent number of shares of common stock at an exercise price of $7.50 and a term of five years.

 

During October and November 2025, the Company converted the entire principal and accrued interest balance on Quick Capital Note 1 for a total amount of $176,658, into 40,484 common shares of the Company’s stock using the conversion prices of $4.75 and $4.25. The difference between the conversion price and the Company’s fair value of common stock at the time of conversion was recorded as a loss on settlement of debt in the consolidated statements of operations for the year ended December 31, 2025.

 

During January and February 2026, the Company converted the entire principal and accrued interest balance on Quick Capital Note 2, into 40,141 common shares of the Company’s stock using the conversion prices of $5.00, $4.50 and $2.76. The difference between the conversion price and the Company’s fair value of common stock at the time of conversion was recorded as a loss on settlement of debt in the accompanying consolidated statements of operations for the six months ended June 30, 2026.

 

During March 2026, the Company converted the entire principal and accrued interest balance on Quick Capital Note 3 for a total amount of $35,694, into 12,140 common shares of the Company’s stock using the conversion price of $2.94. The difference between the conversion price and the Company’s fair value of common stock at the time of conversion was recorded as a loss on settlement of debt in the accompanying consolidated statements of operations for the six months ended June 30, 2026.

 

The Company initially recognized $89,567 of debt discount resulting from the original issue discounts, the deferred financing costs, and the fair value assigned to the commitment shares and the warrants. The balance of the unamortized debt discount on the outstanding Notes was $0 as of June 30, 2026.

 

Quick Capital Note #4

 

On February 25, 2026, the Company issued a convertible promissory note, pursuant to which it borrowed gross proceeds of $153,846 for net proceeds of $135,000, net of an issue discount and legal fees of $18,846. Guaranteed interest under the Note is 12% which accrues immediately upon execution of the agreement, and the principal amount of the note (together with accrued interest) is due twelve (12) months from issuance, on February 25, 2027. Upon an event of a default (as more fully described in the Quick Capital Note #4), the Note shall accrue interest at annual rate of the lesser of 24% or maximum rate allowed by law.

 

The Quick Capital Note #4 is convertible at the holder’s option at any time after the issue date, into shares of the Company’s Common Stock at a conversion price equal to $6.00 per share, or at 70% of the lowest trading price for the proceeding 10 days prior to conversion.

 

The Company initially recognized $18,846 of debt discount resulting from the original issue discount and legal fees. The Company amortized $6,282 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $12,564 as of June 30, 2026. Interest expenses, including the amortization of discount amounted to $24,744 during the six months ended June 30, 2026. Accrued interest on the Note was $18,462 as of June 30, 2026.

 

The principal balance of the Quick Capital Note #4 was $141,282 as of June 30, 2026.

 

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Quick Capital Note #5

 

On March 9, 2026, the Company issued a convertible promissory note, pursuant to which it borrowed gross proceeds of $568,352 for net proceeds of $507,200, net of an issue discount and legal fees of $61,152. Guaranteed interest under the Note is 10% which accrues immediately upon execution of the agreement, and the principal amount of the note (together with accrued interest) is due nine (9) months from issuance, during December 2026.

 

The Quick Capital Note #5 is convertible at the holder’s option at any time after the issue date, into shares of the Company’s Common Stock at a conversion price equal to $5.25 per share, or at 65% of the lowest trading price for the proceeding 15 days prior to conversion. Additionally, as an incentive to the holder, the Quick Capital Note #5 contains a securities purchase agreement which provided for the issuance of 71,044 warrants for the purchase of an equivalent number of shares of common stock at an exercise price of $8.00 (subject to adjustment as more fully described in the securities purchase agreement) and a term of five years. During the six months ended June 30, 2026, Quick Capital exercised 20,000 warrants for an equivalent number of common stock.

 

The Company initially recognized $61,152 of debt discount resulting from the original issue discount and legal fees. The Company amortized $27,179 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $33,973 as of June 30, 2026. Interest expenses, including the amortization of discount amounted to $84,014 during the six months ended June 30, 2026. Accrued interest on the Note was $56,835 as of June 30, 2026.

 

The principal balance of the Quick Capital Note #5 was $534,379 as of June 30, 2026.

 

Lendspark Corporation (“Lendspark Note”)

 

On June 10, 2025, the Company issued Lendspark a convertible promissory note pursuant to which it borrowed gross proceeds of $140,000 for net proceeds of $100,000, net of issuance costs of $40,000. The principal amount of the Lendspark Note (together with the amortized discount of $40,000) is due nine (9) months from issuance. Upon an event of a default (as more fully described in the Lendspark Note), the outstanding balance shall immediately increase to 125% of the outstanding balance immediately prior to the occurrence of the event of default and default interest of 18% of the outstanding balance per annum shall accrue. If there is no event of default, the Lendspark Note shall not be charged interest, other than the $40,000 original issue discount. The Lendspark Note requires thirty-six (36) weekly payments of $3,889 starting in June 2025.

 

The Lendspark Note is convertible at the holder’s option at any time after the issue date, into shares of the Company’s Common Stock at a conversion price equal to $5.00 per share.

 

The Company initially recognized $40,000 of debt discount resulting from the original issue discount. The Company amortized $10,219 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $0 as of June 30, 2026. Interest expense charged to the Lendspark Note, including the amortization of discount amounted to $22,819 during the six months ended June 30, 2026. The Company repaid Lendspark $111,110 in principal and interest payments during the six months ended June 30, 2026.

 

The principal balance of the Lendspark Note was $0 and $100,891 as of June 30, 2026, and December 31, 2025, respectively.

 

On June 12, 2025, the Company entered into a Consulting Agreement with Lendspark, in order for Lendspark to provide consulting related to the development, financing and operations of the Company’s business. The arrangement is an equity compensation agreement, where the Company shall pay Lendspark in common stock, where the amounts of shares issued is calculated as $35,000 divided by the average of the ten (10) lowest closing prices of the ILAL Common Stock of the trading days during the applicable payment period.

 

24

 

 

Vista Capital Investments, LLC (“Vista Capital Notes”)

 

Vista Capital Note #1

 

On March 11, 2025, the Company issued Vista Capital a convertible promissory note, pursuant to which it borrowed gross proceeds of $110,000 for net proceeds of $94,000, net of issuance costs of $16,000. The note contains a one-time interest charge of 12%, due at maturity. The principal amount of the note, together with the interest is due twelve (12) months from issuance. Upon an event of a default (as more fully described in the Vista Capital Note #1), the outstanding balance shall immediately increase to 125% of the outstanding balance immediately prior to the occurrence of the event of default

 

The note is convertible at the holder’s option at any time after the issue date, into shares of the Company’s Common Stock at a conversion price equal to $17.50 per share. Additionally, as an incentive to the holder, the note contains a securities purchase agreement which provided for the issuance of 3,056 warrants for the purchase of an equivalent number of shares of common stock at an exercise price of $40.00 and a term of five years.

 

During the fourth quarter of 2025, the Company converted the entire principal and accrued interest balance on Vista Capital Note 1 for a total amount of $123,200, into 24,640 common shares of the Company’s stock using the conversion price of $5.00. The difference between the conversion price and the Company’s fair value of common stock at the time of conversion was recorded as a loss on settlement of debt in the accompanying consolidated statements of operations for the year ended December 31, 2025.

 

The Company initially recognized $16,000 of debt discount resulting from the original issue discount and deferred financing costs, which was fully amortized through interest expenses during the year ended December 31, 2025.

 

The principal balance of the Vista Capital Note #1 was $0 as of both June 30, 2026, and December 31, 2025, respectively.

 

Vista Capital Note #2

 

On September 12, 2025, the Company issued Vista Capital a convertible promissory note, pursuant to which it borrowed gross proceeds of $110,000 for net proceeds of $94,000, net of issuance costs of $16,000. The note contains a one-time interest charge of 12% due at maturity. The principal amount of the note, together with the interest is due twelve (12) months from issuance. Upon an event of a default (as more fully described in the Vista Capital Note #2), the outstanding balance shall immediately increase to 125% of the outstanding balance immediately prior to the occurrence of the event of default and default interest of 18% of the outstanding balance per annum shall accrue.

 

The note is convertible at the holder’s option at any time after the issue date, into shares of the Company’s Common Stock at a conversion price equal to $5.00 per share. Additionally, as an incentive to the holder, the note contains a securities purchase agreement which provided for the issuance of 3,000 warrants for the purchase of an equivalent number of shares of common stock at an exercise price of $50.00 and a term of five years.

 

The Company initially recognized $16,000 of debt discount resulting from the original issue discount and deferred financing costs. The Company amortized $8,000 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $4,000 and $12,000 as of June 30, 2026, and December 31, 2025, respectively. Interest expenses, including the amortization of discount amounted to $8,000 during the six months ended June 30, 2026.

 

Additionally, during the six months ended June 30, 2026, the Company converted $75,000 of principal and accrued interest into 35,613 common shares of the Company’s stock using a conversion price of $2.11. The difference between the conversion price and the Company’s fair value of common stock at the time of conversion was recorded as a loss on settlement of debt in the accompanying consolidated statements of operations for the six months ended June 30, 2026.

 

The principal balance of the Vista Capital Note #2 was $44,200 and $98,000 as of June 30, 2026, and December 31, 2025, respectively.

 

25

 

 

Auctus Fund, LLC (“Auctus Notes”)

 

Auctus Note 1

 

On August 6, 2025, the Company issued a promissory note with a convertible feature to Auctus Fund, pursuant to which it borrowed gross proceeds of $250,000 for net proceeds of $241,000, net of issuance costs for legal and management fees of $9,000. Interest under the Auctus Note 1 is 12% per year and the principal amount of the note (together with accrued interest) is due twelve (12) months from issuance. Upon an event of a default (as more fully described in the loan agreements), the Auctus Note 1 shall accrue interest at annual rate of the lesser of 22% or maximum rate allowed by law.

 

The Auctus Note 1 is convertible at the holder’s option at any time after 90 days from issuance, into shares of the Company’s Common Stock at a conversion price equal to $5.00 per share, or at 75% of the volume-weighted average price during the five trading days immediately preceding the conversion date. Additionally, as an incentive to the holder, the Auctus Note 1 contains a securities purchase agreement which provided for the issuance of 10,000 warrants for the purchase of an equivalent number of shares of common stock at an exercise price of $12.50 and a term of five years.

 

The Company initially recognized $9,000 of debt discount resulting from the deferred financing and legal costs. The Company amortized $5,000 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $0 and $5,000 as of June 30, 2026, and December 31, 2025, respectively. Interest expenses, including the amortization of debt discount and a prepayment penalty, amounted to $61,200 during the six months ended June 30, 2026.

 

In March 2026, the Company fully repaid the Auctus Note 1, including principal and accrued interest. The principal balance of the Auctus note was $0 and $245,000 as of June 30, 2026, and December 31, 2025, respectively.

 

Auctus Note 2

 

On April 1, 2026, the Company issued a promissory note with a convertible feature to Auctus Fund, pursuant to which it borrowed gross proceeds of $250,000 for net proceeds of $241,000, net of issuance costs for legal and management fees of $9,000. Guaranteed interest under the Auctus Note 2 is 12% which accrues immediately upon execution of the agreement, and the principal amount of the note (together with accrued interest) is due twelve (12) months from issuance, on March 31, 2027. Upon an event of a default (as more fully described in the Auctus Note 2), the Auctus Note 2 shall accrue interest at annual rate of the lesser of 22% or maximum rate allowed by law.

 

The Auctus Note 2 is convertible at the holder’s option at any time after the issuance date, into shares of the Company’s Common Stock at a conversion price equal to $4.25 per share, or at 75% of the volume-weighted average price during the five trading days immediately preceding the conversion date. Additionally, as an incentive to the holder, the Auctus Note 2 contains a securities purchase agreement which provided for the issuance of 20,833 warrants for the purchase of an equivalent number of shares of common stock at an exercise price of $6.00 and a term of five years. During the six months ended June 30, 2026, Auctus Fund exercised 8,790 warrants for an equivalent number of common stock.

 

The Company initially recognized $220,062 of debt discount resulting from the deferred financing and legal costs, and the fair value assigned to the convertible feature and warrants. The Company amortized $55,016 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $165,046 as of June 30, 2026. Interest expenses, including the amortization of debt discount, amounted to $85,016 during the six months ended June 30, 2026.

 

The principal balance of the Auctus Note 2 was $84,954 as of June 30, 2026.

 

CFI Capital LLC (“CFI Capital Notes”)

 

CFI Capital Note 1

 

On September 18, 2025, the Company issued CFI Capital a convertible redeemable note pursuant to which it borrowed gross proceeds of $150,000 for net proceeds of $130,000, net of issuance costs of $20,000. Interest under the convertible note is 6% per year and the principal amount of the note (together with accrued interest) is due twelve (12) months from issuance, on September 18, 2026. The note is convertible at the holder’s option at any time after 180 days from issuance or upon event of default, into shares of the Company’s Common Stock at a conversion price equal to 60% of the lowest trading price for the proceeding 20 days prior to conversion.

 

The Company initially recognized $20,000 of debt discount resulting from the original issue discount and the deferred financing costs, which was fully amortized as of June 30, 2026. Interest expenses, including the amortization of discount amounted to $76,341 during the six months ended June 30, 2026, due to prepayment clause in the agreement, which was charged through interest expense.

 

In March 2026, the Company fully repaid the CFI Capital Note 1, including principal and interest. The principal balance of the CFI Capital Note 1 was $0 and $137,000 as of June 30, 2026, and December 31, 2025, respectively.

 

CFI Capital Note 2

 

On March 24, 2026, the Company issued CFI Capital a convertible redeemable note pursuant to which it borrowed gross proceeds of $150,000 for net proceeds of $130,000, net of issuance costs of $20,000. Interest under the convertible note is 6% per year and the principal amount of the note (together with accrued interest) is due twelve (12) months from issuance, on March 24, 2027. The note is convertible at the holder’s option at any time after 180 days from issuance or upon event of default, into shares of the Company’s Common Stock at a conversion price equal to 60% of the lowest trading price for the proceeding 20 days prior to conversion.

 

The Company initially recognized $20,000 of debt discount resulting from the original issue discount and the deferred financing costs. The Company amortized $5,000 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $15,000 as of June 30, 2026. Interest expenses, including the amortization of debt discount, amounted to $9,673 during the six months ended June 30, 2026.

 

The principal balance of the CFI Capital Note 2 was $135,000 as of June 30, 2026.

 

26

 

 

Jefferson Street Capital, LLC (“Jefferson Note”)

 

On September 24, 2025, the Company issued a promissory note with a convertible feature, pursuant to which it borrowed gross proceeds of $137,500 for net proceeds of $120,000, net of an issue discount and legal fees of $17,500. Interest under the Jefferson Note is 10% per year and the principal amount of the note (together with accrued interest) is due twelve (12) months from issuance, on September 24, 2026. Upon an event of a default (as more fully described in the Jefferson Note), the Jefferson Note shall accrue interest at annual rate of the lesser of 18% or maximum rate allowed by law.

 

The Jefferson Note is convertible at the holder’s option at any time after the issue date, into shares of the Company’s Common Stock at a conversion price equal to $7.50 per share, or at 75% of the lowest trading price for the proceeding 15 days prior to conversion. Additionally, as an incentive to the holder, the Jefferson Note contains a securities purchase agreement which provided for the issuance of 9,167 warrants for the purchase of an equivalent number of shares of common stock at an exercise price of $15.00 and a term of five years.

 

The Company initially recognized $17,500 of debt discount resulting from the original issue discount and the deferred financing costs. The Company amortized $9,000 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $4,125 as of June 30, 2026. Interest expenses, including the amortization of discount amounted to $9,000 during the six months ended June 30, 2026.

 

The principal balance of the Jefferson Note was $133,375 and $124,500 as of June 30, 2026, and December 31, 2025, respectively.

 

Crom Structured Opportunities Fund I, LP (“Crom Note”)

 

On September 24, 2025, the Company issued a promissory note with a convertible feature, pursuant to which it borrowed gross proceeds of $137,500 for net proceeds of $120,000, net of an issue discount and legal fees of $17,500. Interest under the Crom Note is 10% per year and the principal amount of the note (together with accrued interest) is due twelve (12) months from issuance, on September 24, 2026. Upon an event of a default (as more fully described in the Crom Note), the Crom Note shall accrue interest at annual rate of the lesser of 18% or maximum rate allowed by law.

 

The Crom Note is convertible at the holder’s option at any time after the issue date, into shares of the Company’s Common Stock at a conversion price equal to $7.50 per share, or at 75% of the lowest trading price for the proceeding 15 days prior to conversion. Additionally, as an incentive to the holder, the Crom Note contains a securities purchase agreement which provided for the issuance of 9,167 warrants for the purchase of an equivalent number of shares of common stock at an exercise price of $15.00 and a term of five years.

 

The Company initially recognized $17,500 of debt discount resulting from the original issue discount and the deferred financing costs. The Company amortized $9,000 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $4,125 as of June 30, 2026. Interest expenses, including the amortization of discount amounted to $9,000 during the six months ended June 30, 2026.

 

The principal balance of the Crom Note was $133,375 and $124,500 as of June 30, 2026, and December 31, 2025, respectively.

 

Coventry Enterprises, LLC (“Coventry Note”)

 

On March 23, 2026, the Company issued a promissory note with a convertible feature, pursuant to which it borrowed gross proceeds of $300,000 for net proceeds of $260,000, net of an issue discount and legal fees of $40,000. Guaranteed interest under the Coventry Note is 10% which accrues immediately upon execution of the agreement. The Coventry Note is payable in 10 monthly installments of $33,000 of principal and accrued guaranteed interest, commencing in April 2026, through January 24, 2027. Upon an event of a default (as more fully described in the Coventry Note), the Coventry Note shall accrue interest at annual rate of the lesser of 22% or maximum rate allowed by law.

 

27

 

 

The Coventry Note is convertible at the holder’s option at any time after the issue date, into shares of the Company’s Common Stock at a conversion price equal to 102% of the lowest trading price for the proceeding 20 days prior to conversion.

 

The Company initially recognized $40,000 of debt discount resulting from the original issue discount and legal costs. The Company amortized $12,000 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $28,000 as of June 30, 2026. Interest expenses, including the amortization of discount amounted to $42,000 during the six months ended June 30, 2026. Accrued interest on the Coventry Note was $30,000 as of June 30, 2026.

 

The principal balance of the Coventry Note was $272,000 as of June 30, 2026.

 

FirstFire Global Opportunities Fund, LLC (“FirstFire Note”)

 

On March 12, 2026, the Company issued a promissory note with a convertible feature, pursuant to which it borrowed gross proceeds of $168,000 for net proceeds of $144,000, net of an issue discount and legal fees of $24,000. Guaranteed interest under the FirstFire Note is 10% which accrues immediately upon execution of the agreement, and the principal amount of the note (together with accrued interest) is due twelve (12) months from issuance, on March 12, 2027. Upon an event of a default (as more fully described in the FirstFire Note), the FirstFire Note shall accrue interest at annual rate of the lesser of 24% or maximum rate allowed by law.

 

The FirstFire Note is convertible at the holder’s option at any time after the issue date, into shares of the Company’s Common Stock at a conversion price equal to $4.00 per share, or at 65% of the lowest trading price for the proceeding 10 days prior to conversion. Additionally, as an incentive to the holder, the FirstFire Note contains a securities purchase agreement which provided for the issuance of 28,000 warrants for the purchase of an equivalent number of shares of common stock at an exercise price of $6.00 (subject to adjustment as more fully described in the FirstFire securities purchase agreement) and a term of five years.

 

The Company initially recognized $24,000 of debt discount resulting from the original issue discount and legal costs. The Company amortized $6,000 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $18,000 as of June 30, 2026. Interest expenses, including the amortization of discount amounted to $22,800 during the six months ended June 30, 2026. Accrued interest on the FirstFire Note was $16,800 as of June 30, 2026.

 

The principal balance of the FirstFire Note was $150,000 as of June 30, 2026.

 

Monroe Street Capital Partners, LP (“Monroe Notes”)

 

Monroe Note 1

 

In January 2026, the Company issued a promissory note with a convertible feature, pursuant to which it borrowed gross proceeds of $110,000 for net proceeds of $92,500, net of an issue discount and legal fees of $17,500. Guaranteed interest under the Monroe Note 1 is 10% which accrues immediately upon execution of the agreement, and the principal amount of the note (together with accrued interest) is due twelve (12) months from issuance, during December 2026. Upon an event of a default (as more fully described in the loan agreements), Monroe Note 1 shall accrue interest at annual rate of the lesser of 18% or maximum rate allowed by law.

 

The Monroe Note 1 is convertible at the holder’s option at any time after the issue date, into shares of the Company’s Common Stock at a conversion price equal to $7.50 per share, or at 75% of the lowest trading price for the proceeding 15 days prior to conversion. Additionally, as an incentive to the holder, the Monroe Note 1 contains a securities purchase agreement which provided for the issuance of 7,333 warrants for the purchase of an equivalent number of shares of common stock at an exercise price of $15.00 (subject to adjustment as more fully described in the Monroe Note 1 securities purchase agreement) and a term of five years.

 

The Company initially recognized $17,500 of debt discount resulting from the original issue discount and legal fees. The Company amortized $8,750 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $8,750 as of June 30, 2026. Interest expenses, including the amortization of discount amounted to $19,750 during the six months ended June 30, 2026. Accrued interest on the Monroe Note 1 was $11,000 as of June 30, 2026.

 

The principal balance of the Monroe Note 1 was $101,250 as of June 30, 2026.

 

Monroe Note 2

 

In May 2026, the Company issued a promissory note with a convertible feature, pursuant to which it borrowed gross proceeds of $385,000 for net proceeds of $305,000, net of an issue discount and legal and issuance fees of $80,000. Guaranteed interest under the Monroe Note 2 is 10% which accrues immediately upon execution of the agreement, and the principal amount of the note (together with accrued interest) is due twelve (12) months from issuance, during May 2027. Upon an event of a default (as more fully described in the loan agreements), Monroe Note 2 shall accrue interest at annual rate of the lesser of 18% or maximum rate allowed by law.

 

The Monroe Note 2 is convertible at the holder’s option at any time after the issue date, into shares of the Company’s Common Stock at a conversion price equal to $6.00 per share, or at 65% of the lowest trading price for the proceeding 20 days prior to conversion. Additionally, as an incentive to the holder, the Monroe Note 2 contains a securities purchase agreement which provided for the issuance of 48,125 warrants for the purchase of an equivalent number of shares of common stock at an exercise price of $8.00 (subject to adjustment as more fully described in the Monroe Note 2 securities purchase agreement) and a term of five years.

 

The Company initially recognized $394,425 of debt discount resulting from the original issue discount, legal fees, other issuance costs, and the fair value assigned to the convertible feature and warrants. The Company amortized $46,467 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $347,958 as of June 30, 2026. Interest expenses, including the amortization of discount amounted to $84,967 during the six months ended June 30, 2026. Accrued interest on the Monroe Note 2 was $38,500 as of June 30, 2026.

 

The principal balance of the Monroe Note 2 was $37,042 as of June 30, 2026.

 

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Silvercrest Hybrid Capital, LLC (“Silvercrest Note”)

 

On March 6, 2026, the Company issued a convertible redeemable note, pursuant to which it borrowed gross proceeds of $125,000 for net proceeds of $107,500, net of an issue discount and legal fees of $17,500. Interest under the convertible note is 12% per year and the principal amount of the note (together with accrued interest) is due twelve (12) months from issuance, on March 6, 2027. The note is convertible at the holder’s option at any time after 180 days from issuance or upon event of default, into shares of the Company’s Common Stock at a conversion price equal to 60% of the lowest trading price for the proceeding 20 days prior to conversion.

 

The Company initially recognized $17,500 of debt discount resulting from the original issue discount and legal fees. The Company amortized $5,875 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $11,625 as of June 30, 2026. Interest expenses, including the amortization of discount amounted to $10,875 during the six months ended June 30, 2026. Accrued interest on the Silvercrest Note was $5,000 as of June 30, 2026.

 

The principal balance of the Silvercrest Note was $113,375 as of June 30, 2026.

 

GS Capital Partners, LLC (“GS Note”)

 

On March 2, 2026, the Company issued a promissory note with a convertible feature, pursuant to which it borrowed gross proceeds of $152,000 for net proceeds of $130,000, net of an issue discount and legal fees of $22,000. Guaranteed interest under the GS Note is 12% which accrues immediately upon execution of the agreement. The GS Note is payable in 8 monthly installments of $21,280 of principal and accrued guaranteed interest, commencing 121 days after signing the agreement, through March 2, 2027. Upon an event of a default (as more fully described in the GS Note), the GS Note shall accrue interest at annual rate of the lesser of 24% or maximum rate allowed by law.

 

The GS Note is convertible at the holder’s option at any time after the issue date, into shares of the Company’s Common Stock at a conversion price equal to 60% of the lowest trading price for the proceeding 20 days prior to conversion.

 

The Company initially recognized $22,000 of debt discount resulting from the original issue discount and legal fees. The Company amortized $7,500 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $14,500 as of June 30, 2026. Interest expenses, including the amortization of discount amounted to $25,740 during the six months ended June 30, 2026. Accrued interest on the GS Note was $18,240 as of June 30, 2026.

 

The principal balance of the GS Note was $137,500 as of June 30, 2026.

 

Prizm Investments, LLC (“Prizm Note”)

 

On May 13, 2026, the Company issued a promissory note with a convertible feature, pursuant to which it borrowed gross proceeds of $100,000 for net proceeds of $92,500, net of issuance costs and legal fees of $7,500. Guaranteed interest under the Prizm Note is 12% which accrues immediately upon execution of the agreement, and the principal amount of the note (together with accrued interest) is due twelve (12) months from issuance, during May 2027. Upon an event of a default (as more fully described in the Prizm Note), the Prizm Note shall accrue interest at annual rate of the lesser of 22% or maximum rate allowed by law.

 

The Prizm Note is convertible at the holder’s option at any time after the issue date, into shares of the Company’s Common Stock at a conversion price equal to $4.25, or 75% of the lowest trading price for the proceeding 5 days prior to conversion. Additionally, as an incentive to the holder, the Prizm Note contains a securities purchase agreement which provided for the issuance of 25,499 warrants for the purchase of an equivalent number of shares of common stock at an exercise price of $6.00 (subject to adjustment as more fully described in the Prizm securities purchase agreement) and a term of five years.

 

The Company initially recognized $89,291 of debt discount resulting from the issuance costs, legal fees, and the fair value assigned to the convertible feature and warrants. The Company amortized $11,742 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $77,549 as of June 30, 2026. Interest expenses, including the amortization of discount amounted to $23,742 during the six months ended June 30, 2026. Accrued interest on the Prizm Note was $12,000 as of June 30, 2026.

 

The principal balance of the Prizm Note was $22,451 as of June 30, 2026.

 

GW Capital Investments, LLC (“GW Note”)

 

On June 15, 2026, the Company issued a convertible redeemable note, pursuant to which it borrowed gross proceeds of $138,889 for net proceeds of $120,000, net of an issue discount and legal fees of $18,889. Interest under the convertible note is 12% per year and the principal amount of the note (together with accrued interest) is due twelve (12) months from issuance, on June 15, 2027. Interest accrued on the unpaid principal balance shall be paid by the Company in Common Stock, referred to as “Interest Shares.” Upon an event of a default (as more fully described in the GW Note), the GW Note shall accrue interest at annual rate of the lesser of 24% or maximum rate allowed by law.

 

The GW Note is convertible at the holder’s option at any time after the issue date, into shares of the Company’s Common Stock at a conversion price equal to $6.00, or 65% of the lowest trading price for the proceeding 20 days prior to conversion. Upon an event of default, the conversion price will be adjusted from 65% to 50% of the lowest trading price for the proceeding 20 days prior to conversion.

 

The Company initially recognized $139,665 of debt discount resulting from the original issue discount, legal fees, and the fair value assigned to the convertible feature. The Company amortized $5,740 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $133,925 as of June 30, 2026. Interest expenses, including the amortization of discount amounted to $6,424 during the six months ended June 30, 2026. Accrued interest on the GW Note was $685 as of June 30, 2026.

 

The principal balance of the GW Note was $4,964 as of June 30, 2026.

 

Willow Creek Capital Holdings, LLC (“Willow Creek Note”)

 

On May 22, 2026, the Company issued a convertible promissory note, pursuant to which it borrowed gross proceeds of $340,000 for net proceeds of $300,000, net of an issue discount and legal and issuance fees of $40,000. Interest under the convertible promissory note is 10% per year and the principal amount of the note (together with accrued interest) is due twelve (12) months from issuance, on May 22, 2027. Upon an event of a default (as more fully described in the loan agreements), the Willow Creek Note shall accrue interest at annual rate of the lesser of 22% or maximum rate allowed by law.

 

The Willow Creek Note is convertible at the holder’s option at any time after the issue date, into shares of the Company’s Common Stock at a conversion price equal to $4.35 per share, or at 70% of the lowest trading price for the proceeding 10 days prior to conversion. Additionally, as an incentive to the holder, the Willow Creek Note contains a securities purchase agreement which provided for the issuance of 140,000 warrants for the purchase of an equivalent number of shares of common stock at an exercise price of $4.35 (subject to adjustment as more fully described in the Willow Creek securities purchase agreement) and a term of five years.

 

The Company initially recognized $343,088 of debt discount resulting from the original issue discount, legal fees, and the fair value assigned to the convertible feature and warrants. The Company amortized $36,659 through interest expenses during the six months ended June 30, 2026. The balance of the unamortized debt discount was $306,429 as of June 30, 2026. Interest expenses, including the amortization of discount amounted to $740,292 during the six months ended June 30, 2026. Accrued interest on the Willow Creek Note was $3,633 as of June 30, 2026.

 

The principal balance of the Willow Creek Note was $33,571 as of June 30, 2026.

 

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NOTE 7 – PROMISSORY NOTE – RELATED PARTY

 

Related party promissory notes consisted of the following at June 30, 2026, and December 31, 2025:

 

   June 30, 2026   December 31, 2025 
Lisa Landau – On demand   526,567    586,567 
Total related party promissory notes, current  $526,567   $586,567 

 

Lisa Landau

 

Lisa Landau is a relative of the Company’s Chief Financial Officer. During the six months ended June 30, 2026 and the year ended December 31, 2025, Ms. Landau advanced funds to the Company for general corporate expenses and paid directly towards certain promissory notes. During the six months ended June 30, 2026, the Company repaid Ms. Landau approximately $60,000 of her advances.

 

The principal balance was $526,567 and $586,567 as of June 30, 2026, and December 31, 2025, respectively. The advances are on demand.

 

NOTE 8 – COMMITMENTS AND CONTINGENCIES

 

Commitment to Purchase Land (Valle Divino)

 

The land project consisting of 20 acres to be acquired from Baja Residents Club (a Company controlled by our chairman of the board Roberto Valdes) and developed into Valle Divino resort in Ensenada, Baja California, the acquisition of title to the land for this project is subject to approval from the Mexican government in Baja, California. Although management believes that the transfer of title to the land will be approved before the end of the 2026 fiscal year, there is no assurance that such transfer of title will be approved in that time frame or at all. The Company has promised to transfer title to the plots of land to the investors who have invested in the Company once the Company receives an approval of change in transfer of title to the Company through a Fideicomiso.

 

Land purchase- Plaza Bajamar.

 

On September 25, 2019, the Company, entered into a definitive Land Purchase Agreement with Valdeland, S.A. de C.V., a Company controlled by our chairman of the board Roberto Valdes, to acquire approximately one acre of land with plans and permits to build 34 units at the Bajamar Ocean Front Golf Resort located in Ensenada, Baja California. Pursuant to the terms of the Agreement, the total purchase price is $1,000,000, payable in a combination of a new series of preferred stock (with a stated value of $600,000), 5,000 shares of common stock, a promissory note in the amount of $150,000, and an initial construction budget of $150,000 payable upon closing. The closing is subject to obtaining the necessary approval by the City of Ensenada and transfer of title, which includes the formation of a wholly owned Mexican subsidiary. As of June 30, 2026, and December 31, 2025, the agreement has not yet closed.

 

The total budget was established at approximately $1,556,000, inclusive of lots construction, of which approximately $995,747 has been paid, leaving a firm commitment of approximately $560,250 as of June 30, 2026, and December 31, 2025.

 

Commitment to Sell Land (IntegraGreen)

 

On September 30, 2019, the Company entered into a contract for deed agreement “Agreement” with IntegraGreen whose principal, Christopher Elder, is also a creditor. Under the agreement the Company agreed to the sale of 20 acres of vacant land and associated improvements located at the Emerald Grove property in Hemet, California for a total purchase price of $630,000, $63,000 was paid upon execution and the balance is payable in a balloon payment on October 1, 2026, with interest only payments due on the 1st of each month beginning April 1, 2020. During the duration of the Agreement the Company retains title and is allowed to encumber the property with a mortgage at its discretion, however IntegraGreen has the right to use the property. The Company may also evict IntegraGreen from the premises in the case of default under the agreement.

 

The Company has fully impaired the carrying balance of its account receivable owed by IntegraGreen in the accompanying consolidated balance sheets.

 

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Oasis Park Resort construction budget

 

During the year ended December 31, 2021, the Company engaged a general contractor to complete phase I of the project including the two-mile access road and the community entrance structure. The contractor also commenced phase II construction including the waterfront clubhouse, casitas, and model homes. The total budget was established at approximately $512,000, of which approximately $118,600 has been paid, leaving a firm commitment of approximately $393,400 as of June 30, 2026, and December 31, 2025.

 

Litigation Costs and Contingencies

 

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. Management is currently not aware of any such legal proceedings or claims that could have, individually or in the aggregate, a material adverse effect on our business, financial condition, or operating results.

 

NOTE 9 – STOCKHOLDERS’ EQUITY (DEFICIT)

 

The Company’s equity at June 30, 2026, consisted of 250,000,000 authorized common shares and 2,010,000 authorized preferred shares, all with a par value of $0.001 per share. As of June 30, 2026, there were 4,821,818 shares issued and 4,761,818 shares outstanding. As of December 31, 2025, there were 2,666,311 shares issued and 2,606,311 shares outstanding.

 

As of both June 30, 2026 and December 31, 2025, there were 117,000 shares of Series A Preferred Stock issued and outstanding, 1,000 shares of Series B Preferred Stock issued and outstanding, 3,316 shares of Series C Preferred Stock issued and outstanding and 17,000 of Series D Preferred Stock issued and outstanding.

 

Equity Incentive Plans

 

2024 Equity Incentive Plan

 

On November 29, 2024, the Company’s board of directors approved the 2024 equity incentive plan (the “2024 Plan”). The 2024 Plan enables the Company’s board of directors to provide equity-based incentives through grants of awards to the Company’s present and future employees, directors, consultants, and other third-party service providers. The Company has reserved a total of 300,000 shares of the Company’s common stock for issuance under the 2024 Plan. The Company had 60,000 options issued and outstanding under the 2024 Plan as of June 30, 2026, and December 31, 2025.

 

2022 Equity Incentive Plan

 

On December 1, 2022, the Company’s Board of Directors approved a 2022 Equity Incentive Plan (the “2022 Plan”). The 2022 Plan enables the Company’s board of directors to provide equity-based incentives through grants of awards to the Company’s present and future employees, directors, consultants, and other third-party service providers. The Company has reserved a total of 100,000 shares of the Company’s common stock to be available under the 2022 Plan. The Company had 43,000 options issued and outstanding as of June 30, 2026, and December 31, 2025.

 

2020 Equity Incentive Plan

 

On August 26, 2020, the Company’s Board of Directors approved the 2020 Equity Incentive Plan (the “2020 Plan”). The 2020 Plan enables the Company’s board of directors to provide equity-based incentives through grants of awards to the Company’s present and future employees, directors, consultants, and other third-party service providers. The Company had reserved a total of 60,000 shares of the Company’s common stock to be available under the 2020 Plan. The Company had no options issued and outstanding under the 2020 Plan as of June 30, 2026, and December 31, 2025.

 

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2019 Equity Incentive Plan

 

On February 11, 2019, the Company’s Board of Directors approved a 2019 Equity Incentive Plan (the “2019 Plan”). In order for the 2019 Plan to grant “qualified stock options” to employees, it required approval by the Corporation’s shareholders within 12 months from the date of the 2019 Plan. The 2019 Plan was never approved by the shareholders. Therefore, any options granted under the 2019 Plan prior to shareholder approval will be “non-qualified”. The Company has reserved a total of 60,000 shares of the Company’s common stock to be available under the 2019 Plan. The Company has a total of 43,000 options issued and outstanding under the 2019 Plan as of June 30, 2026, and December 31, 2025.

 

Activity during the six months ended June 30, 2026

 

During the six months ended June 30, 2026, the Company issued 681,811 shares of common stock pursuant to services and consulting agreements.

 

During the six months ended June 30, 2026, the Company issued 376,989 shares of common stock pursuant to the conversion of convertible notes payable.

 

During the six months ended June 30, 2026, the Company issued 120,426 shares of common stock pursuant to inducement agreements on convertible notes.

 

During the six months ended June 30, 2026, the Company issued 18,790 shares of common stock pursuant to the exercise of cashless warrants.

 

During the six months ended June 30, 2026, the Company issued 955,829 shares of common stock for accrued employee compensation and repayment of stock payable to employees.

 

During the six months ended June 30, 2026, the Company issued 1,662 shares of common stock for dividend payments related to preferred Series C Stock.

 

Activity during the six months ended June 30, 2025

 

During the six months ended June 30, 2025, the Company issued 259,355 shares of common stock pursuant to consulting agreements, services and debt terms for a total fair value of approximately $1,296,775.

 

Preferred Stock

 

During 2019, the Company authorized and issued 1,000 shares of Series B Preferred Stock (“Series B”) and 7,000 shares of common stock to CleanSpark Inc. in a private equity offering for $500,000. Management determined that the Series B should not be classified as liability per the guidance in ASC 480 Distinguishing Liabilities from Equity as of December 31, 2022, even though the conversion would require the issuance of variable number of shares since such obligation is not unconditional. In a previous reporting period, Management recorded the value attributable to the Series B of $293,500 as temporary equity on the consolidated balance sheets since the instrument is contingently redeemable at the option of the holder. The Company recognized the beneficial conversion feature (“BCF”) that arises from a contingent conversion feature, since the instrument reached maturity during the year ended December 31, 2020. The Company recognized such BCF as a discount on the convertible preferred stock. The amortization of the discount created by a BCF recognized as a result of the resolution of the contingency is treated as a deemed dividend that reduced net income in arriving at income available to common stockholders. The holder can convert the Series B into shares of common stock at a discount of 35% to the market price.

 

The terms and conditions of the Series B include an in-kind accrual feature, which provides for a cumulative accrual at a rate of 12% per annum of the face amount of the Series B. The Company has recognized $1,212,822 of deemed dividends on Series B for a total accrual of $737,822 and $1,212,822 as of June 30, 2026, and December 31, 2025, respectively. The recognition of the in-kind accrual was reported in Additional Paid In Capital on the Company’s consolidated balance sheets.

 

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The Securities Purchase Agreement (“SPA”) states that the in-kind accrual rate should be increased by10% per annum upon each occurrence of an event of default. In addition, the SPA further states that the conversion price initially set at a discount of 35% to the market price should be further increased by an additional 10% upon each occurrence of an event of default. At the date of their Annual Report, CleanSpark claims that the Company was in default in three instances triggering further discount to the market price for the conversion feature and additional accrual rate. Management has recorded for this additional default and interest expense as noted in the previous paragraph. The Company has not been served with any notice of default stating the specific default events but will continue to accrue the additional default interest until the matter is resolved. As of the date of the filing of this Annual Report, the parties are cooperating to resolve this matter. The Company did not issue any shares of Series B preferred stock during the six months ended June 30, 2026.

 

During the year ended December 31, 2024, the Company issued 89,000 shares of Series A preferred stock pursuant to the conversion of the note payable to IRED for $8,900,000. The total principal balance along with accrued interest of $556,250 has been converted. The Company did not issue any shares of Series A preferred stock during the six months ended June 30, 2026. The Company paid dividends on the Series A preferred stock in the amount of $284,853 during the six months ended June 30, 2026. There was no activity during the six months ended June 30, 2025.

 

On September 2, 2023, the Company authorized and issued 10,000 and 3,100 shares, respectively, of Series C Preferred Stock (“Series C”) to Bigger Capital Fund, LP in a private equity offering for $310,000. Management determined that the Series C should not be classified as liability per the guidance in ASC 480 Distinguishing Liabilities from Equity as of December 31, 2024, even though the conversion would require the issuance of variable number of shares since such obligation is not unconditional. As of December 31, 2024, Company management recorded the value attributable to the Series C of $310,000 as temporary equity on the consolidated balance sheets since the instrument is contingently redeemable at the option of the holder. The Company recognized the beneficial conversion feature (“BCF”) that arises from a contingent conversion feature. The Company recognized such BCF as a discount on the convertible preferred stock. The discount created by a BCF recognized as a result of the resolution of the contingency is treated as a deemed dividend. The holder can convert the Series C into shares of common stock at a variable discount to the market price.

 

The terms and conditions of the Series C include an in-kind accrual feature, which provides for a cumulative accrual at a rate of 12% per annum of the face amount of the Series C. The Company recognized a deemed dividend of $60,003 based on a discount to the purchase price on the Series C during the year ended December 31, 2023. The recognition of the in-kind accrual was reported in Additional Paid In Capital on the Company’s consolidated balance sheets. During the year ended December 31, 2024, the Company issued 1,897 shares of common stock pursuant to the stock dividend terms in the agreement.

 

Concurrently with this SPA, the Company entered into a Warrant Inducement Agreement (“Inducement”). Previously, on July 26, 2021, the Company entered into a Warrant Purchase Agreement with Bigger Capital Fund, LP where the Company issued common stock purchase warrants at an exercise price of $34.00 (the “Existing Warrants”). As further consideration for Bigger Capital Fund, LP agreeing to enter in the Series C Preferred Stock Securities Purchase Agreement (the “New Purchase Agreement”), the Company offered an additional 24,800 Warrant Shares, and (b) a reduction of the exercise price of the Existing Warrants to $3.50 per Warrant Share. As such, upon accepting this offer, the terms to the Existing Warrant issued pursuant to the Inducement have been amended and restated to refer to 54,800 Warrant Shares in the aggregate and all Existing Warrants issued pursuant to the Inducement will have an updated exercise price per share of $3.50.

 

On July 29, 2025, Bigger Capital Fund, LP exercised the 24,800 Warrants and converted their 3,100 shares of Series C preferred stock purchased for $310,000 into 88,571 shares of the Company’s common stock, using the conversion price of $3.50 per share.

 

On October 6, 2025, the Company issued 3,316 shares of Series C to Bigger Capital Fund, LP in a private equity offering for $331,523, comprised of $250,000 in cash received and $81,526 of a deemed dividend on the prior Series C Stock offering. Management determined that the Series C should not be classified as liability per the guidance in ASC 480 Distinguishing Liabilities from Equity as of December 31, 2025, even though the conversion would require the issuance of variable number of shares since such obligation is not unconditional. As of June 30, 2026 and December 31, 2025, Company management recorded the value attributable to the Series C of $331,523 as temporary equity on the consolidated balance sheets since the instrument is contingently redeemable at the option of the holder. The Company recognized the beneficial conversion feature (“BCF”) that arises from a contingent conversion feature. The Company recognized such BCF as a discount on the convertible preferred stock. The discount created by a BCF recognized as a result of the resolution of the contingency is treated as a deemed dividend. The holder can convert the Series C into shares of common stock at a variable discount to the market price. The terms and conditions of the Series C include an in-kind accrual feature, which provides for a cumulative accrual at a rate of 12% per annum of the face amount of the Series C.

 

The Company recognized a deemed dividend of $81,526 based on a discount to the purchase price on the Series C during the year ended December 31, 2025. The recognition of the in-kind accrual was reported in Additional Paid In Capital on the Company’s consolidated balance sheets.

 

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In October 2023, the Company filed and adopted a Certificate of Designations, Preferences and Rights of the Series D Convertible Preferred Stock (the “Certificate of Designations”) with the Wyoming Secretary of State, authorizing the issuance of up to 20,000 shares of Series D Convertible Preferred Stock, par value $0.001 per share (the “Series D Preferred Stock”), each having a stated value equal to $100.00 (the “Stated Value”). The Series D Preferred Stock has no stated maturity and is subject to a mandatory redemption at 110% of the Stated Value, plus all unpaid dividends in respect of such share (the “Additional Amount”) thereon.

 

The Series D Preferred Stock ranks senior with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company to all other shares of capital stock of the Company, including all other outstanding shares of preferred stock as of the filing date of the Certificate of Designations, except, however, the Series D Preferred Stock is subordinate to the series of preferred stock of the Company designated as “Series C Convertible Preferred Stock.” The Company shall be permitted to issue capital stock, including preferred stock, that is junior in rank to the Series D Preferred Stock with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.

 

Holders of shares of Series D Preferred Stock are entitled to receive, on each dividend payment date, (i) cumulative cash dividends on each share of Series D Preferred Stock, on a quarterly basis, at a rate of 12% per annum of the Stated Value, plus the Additional Amount thereon, and (ii) dividends in the form of shares of common stock on each share of Series D Preferred Stock, on a quarterly basis, at a rate of 8% per annum on the Stated Value.

 

At any time after the earlier of (i) a Qualified Offering (as defined below) or (ii) the date that is 18 months from the date the first share of Series D Preferred Stock is issued to any holder thereof, each holder of Series D Preferred Stock shall be entitled to convert any portion of the outstanding Series D Preferred Stock, including any Additional Amount, held by such holder into shares of common stock at the Conversion Price (as defined below) by following the mechanics of conversion set forth in the Certificate of Designations.

 

The amount of shares of common stock issuable upon a conversion for each Series D Preferred Stock shall be the Stated Value of such share plus the Additional Amount divided by the Conversion Price (as defined below). The “Conversion Price” for each Series D Preferred Stock is, the lower of the price per share at which a Qualified Offering (as defined below) is made (the “Qualified Offering Price”) or 80% of the average of the closing sale price for the 10 consecutive trading days immediately preceding, but not including, the effective date of the applicable conversion notice. A “Qualified Offering” means an offering of common stock (or units consisting of common stock and warrants to purchase common stock) resulting in the listing for trading of the common stock on the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).

 

During a previous reporting period, the Company converted $1,414,338 of principal and $171,825 of interest payable due to Six Twenty Management LLC into 17,000 shares of Series D Convertible Preferred Stock. During the six months ended June 30, 2026, the Company paid a dividend of $83,700 on the Series D Preferred Stock. There was no activity during the six months ended June 30, 2025.

 

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Warrants

 

A summary of the Company’s warrant activity during the six months ended June 30, 2026, is presented below:

 

  

Number of

Warrants

  

Weighted

Average

Exercise Price

  

Weighted Average

Remaining

Contract Term

(Year)

 
Outstanding at December 31, 2025   911,819   $11.40    3.26 
Granted   340,834    6.22    4.79 
Exercised   (18,790)   -    - 
Forfeited-Canceled   -    -    - 
Outstanding at June 30, 2026   1,233,863   $10.03    3.66 
                
Exercisable at June 30, 2026   1,233,863          

 

The aggregate intrinsic value as of June 30, 2026, and December 31, 2025, was $0.

 

Options

 

A summary of the Company’s option activity during the six months ended June 30, 2026, is presented below:

 

  

Number of

Options

  

Weighted

Average

Exercise Price

  

Weighted Average

Remaining

Contract Term

(Year)

 
Outstanding at December 31, 2025   146,000   $12.08    2.42 
Granted   -    -    - 
Exercised   -    -    - 
Forfeited-Canceled   -    -    - 
Outstanding at June 30, 2026   146,000   $12.08    1.92 
                
Exercisable at June 30, 2026   146,000           

 

Options outstanding as of June 30, 2026, and December 31, 2025, had aggregate intrinsic value of $0.

 

NOTE 10 – SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events for adjustment to or disclosure in its consolidated financial statements through the date of this report, and has not identified any recordable or disclosable events, not otherwise reported in these consolidated financial statements or the notes thereto, except those noted below.

 

During July 2026, part of the debt balance owed on the Jefferson Note, as described above in Note 6 for convertible debt, was converted into 21,517 shares of the Company’s common stock.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Overview of Our Company

 

The Company was incorporated pursuant to the laws of the State of Wyoming on September 26, 2013. We are based in San Diego, California. We are a residential land development company with target properties located primarily in the Baja California Norte region of Mexico and Southern California. Our principal activities are purchasing properties, obtaining zoning and other entitlements required to subdivide the properties into residential and commercial building plots, securing financing for the purchase of the plots, improving the properties’ infrastructure and amenities, and selling the lots to homebuyers, retirees, investors, and commercial developers. We offer the option of financing (i.e. taking a promissory note from the buyer for all or part of the purchase price) with a guaranteed acceptance on any purchase for every customer.

 

Overview

 

The real estate market in Northern Baja California has continued to significantly improve and has fully recover from the negative impact of Covid-19. The housing prices has continued to rise in the Southwest U.S., and inventory has remained severely low, which generated additional attraction from home buyers seeking second homes or vacation homes.

 

The Company’s current portfolio includes residential, resort and commercial properties comprising the following projects:

 

  ■ Oasis Park Resort is a 497-acres master planned real estate community including 1,344 residential home sites, south of San Felipe, Baja California, which offers a 180-degree sea and mountain views. In addition to the residential lots, there is a planned boutique hotel, a spacious commercial center, and a nautical center. As of the date of this report, 85 of the 1,344 planned residential lots were pre-sold to initial shareholders. The Company has made significant progress on the project, which included the completion of the two-mile access road and the community entrance structure. The Company also started construction of the waterfront clubhouse, and model homes.
     
  ■ Valle Divino is a self-contained solar 650-home site project in Ensenada, Baja California, with test vineyard at the property. This resort includes 137 residential lots and 3 commercial lots on 20 acres of land. This represents an estimated $60 million in gross sales opportunity.
     
  ■ Plaza Bajamar Resort is an 80-unit project located at the internationally renowned Bajamar Ocean front hotel and golf resort. The Bajamar oceanfront golf resort is a master planned golf community located 45 minutes south of the San Diego-Tijuana border along the scenic toll road to Ensenada. The first Phase will include 22 “Merlot” 1,150 square-foot single-family homes that features two bedrooms and two baths. The home includes two primary bedroom suites - one on the first floor and one upstairs, as well as fairway and ocean views from a rooftop terrace. The Merlot villas will come with the installation of solar packages.
     
  ■ Emerald Grove Estates is the Company’s newly renovated Southern California property, used for organized events at this 8,000 square foot event venue.
     
  ■ Rancho Costa Verde (“RCVD”) is a 1,100-acre master planned second home, retirement home and vacation home real estate community located on the east coast of Baja California. RCVD is a self-sustained solar powered green community that takes advantage of the advances in solar and other green technology. In May 2021, the Company acquired a 25% investment in RCVD in exchange for $100,000 and 60,000 shares of the Company’s common stock, and such investment was initially recorded as an equity-method investment in the Company’s condensed consolidated financial statements. On January 3, 2023, the Company acquired the remaining 75% membership interest in RCVD for a contractual consideration of $13.5 million, paid through $8,900,000 secured convertible note, 400,000 shares of common stock and 660,000 common stock warrants. This transaction was recorded pursuant to ASC 805 Business Combinations.

 

Summary of key operational and financial events:

 

  ■ The Company has collected an aggregate amount of $312,175 from house construction at the Plaza Bajamar project, which was initially recorded and presented as contract liability in the consolidated balance sheets. However, the Company offset the balance with the additional cash funded for the construction of amenities at Bajamar, with the net balance presented as impairment loss in the consolidated statement of operations in the previous year. There were no collections during the six months ended June 30, 2026.
     
  ■ Continued our research and marketing efforts to identify potential home buyers in the United States, Canada, Europe, and Asia. Through the formation of a partnership with a similar development company in the Baja California Norte Region of Mexico, we have been able to leverage additional resources with the use of their established and proven marketing plan which can help us with sophisticated execution and the desired results for residential plot sales and development.
     
  ■ Title of Oasis Park Resort in San Felipe was assumed during 2019. We are expecting the transfer of title on Valle Divino in Ensenada, Baja California and Plaza Bajamar in Ensenada, Baja California before the end of our fiscal year 2026, as we continue to follow the necessary steps to complete this legal process.

 

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Results of Operations for the Three and Six Months Ended June 30, 2026, compared to the Three and Six Months Ended June 30, 2025

 

   For the three months ended   For the six months ended 
   June 30, 2026   June 30, 2025   June 30, 2026   June 30, 2025 
Net revenues and lease income  $142,496   $775,371   $1,099,332   $1,323,995 
                     
Cost of revenues   129,174    441,844    448,917    716,024 
                     
Gross profit   13,322    333,527    650,415    607,971 
                     
Operating expenses                    
Sales and marketing   170,182    189,939    354,302    377,450 
Impairment loss   18,832    -    18,832    - 
General and administrative expenses   3,457,836    1,121,829    6,082,474    2,046,423 
Total operating expenses   3,646,850    1,311,768    6,455,608    2,423,873 
                     
Income (loss) from operations   (3,633,528)   (978,241)   (5,805,193)   (1,815,902)
                     
Other income (expense)                    
Loss from debt extinguishment   (164,198)   -    (815,441)   - 
Change in fair value derivative liability   996,939    (608,496)   2,278,320    (550,470 
Interest expense   (1,162,586)   (391,905)   (2,357,704)   (571,076)
Total other income (expense), net   (329,845)   (1,000,401)   (894,825)   (1,121,546)
                     
Net income (loss)  $(3,963,373)  $(1,978,642)  $(6,700,018)  $(2,937,448)

 

Revenue

 

Revenue decreased by $632,875 to $142,496 for the three months ended June 30, 2026, from $775,371 for the three months ended June 30, 2025. The revenue recognized during the three months ended June 30, 2026, includes real estate sales, interest from financed sales, financing fees, and components of home construction.

 

Revenue decreased by $224,663 to $1,099,332 for the six months ended June 30, 2026, from $1,323,995 for the six months ended June 30, 2025. The revenue recognized during the six months ended June 30, 2026, includes real estate sales, interest from financed sales, financing fees, and components of home construction.

 

Cost of revenue

 

Cost of revenue decreased by $312,670 to $129,174 for the three months ended June 30, 2026, from $441,874 for the three months ended June 30, 2025. Cost of revenue includes land cost and related land improvements and construction costs, including infrastructure and subdivision costs.

 

Cost of revenue decreased by $267,107 to $448,917 for the six months ended June 30, 2026, from $716,024 for the six months ended June 30, 2025. Cost of revenue includes land cost and related land improvements and construction costs, including infrastructure and subdivision costs.

 

Operating Expenses

 

Operating expenses increased by $2,335,082 to $3,646,850 for the three months ended June 30, 2026, from $1,311,768 for the three months ended June 30, 2025.

 

Operating expenses increased by $4,301,735 to $6,455,608 for the six months ended June 30, 2026, from $2,423,873 for the six months ended June 30, 2025.

 

Sales and marketing costs decreased by $19,757 to $170,182 for the three months ended June 30, 2026, from $189,939 for three months ended June 30, 2025. Sales and marketing costs decreased by $23,148 to $354,302 for the six months ended June 30, 2026, from $377,450 for the six months ended June 30, 2025. Sales costs are related to real estate’s sales commissions. Marketing costs include advertising, prospective customers’ education, travel, and accommodation.

 

General and administrative costs increased by $2,336,007 to $3,457,836 for the three months ended June 30, 2026, from $1,121,829 for the three months ended June 30, 2025. General and administrative costs increased by $4,036,051 to $6,082,474 for the six months ended June 30, 2026, from $2,046,423 for the six months ended June 30, 2025. General and administrative increased mainly due to a large increase in stock-based compensation expenses during the six months ended June 30, 2026. Other general and administrative costs mainly include commissions paid attributable to sales, consulting, and professional fees such as legal and accounting.

 

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Other expense

 

Other expenses decreased by $670,556 to $329,845 for the three months ended June 30, 2026, from other income of $1,000,401 for the three months ended June 30, 2025. Such change is primarily due to the change in fair value of the Company’s derivative liability, offset by an increase in interest expense and increase in losses on debt conversion, during the three months ended June 30, 2026.

 

Other expenses decreased by $226,721 to $894,825 for the six months ended June 30, 2026, from $1,121,546, in the six months ended June 30, 2025. Such change is primarily due to the change in fair value of the Company’s derivative liability, offset by an increase in interest expense and increase in losses on debt conversion, during the six months ended June 30, 2026.

 

Net Income (Loss)

 

The Company finished the three months ended June 30, 2026, with a net loss of $3,963,373, as compared to a net loss of $1,978,642 for the three months ended June 30, 2025. The decrease in our net income resulted from the reasons outlined above.

 

The Company finished the six months ended June 30, 2026, with a net loss of $6,700,818 as compared to a net loss of $2,937,448 for the six months ended June 30, 2025. The decrease in our net income resulted from the reasons outlined above.

 

The factors that will most significantly affect future operating results will be:

 

  ■ The positive effect of implemented sales and marketing initiatives to drive opportunities into our various projects.
  ■ The quality of our amenities.
  ■ The global economy and the demand for vacation homes.
  ■ The sale price of future plots and home construction compared to the sale price in other resorts in Mexico.
  ■ The prime location of our projects.

 

Other than the foregoing we do not know of any trends, events or uncertainties that have had, or are reasonably expected to have, a material impact on our revenues or expenses.

 

Capital Resources and Liquidity

 

Cash was $37,542 and $4,186 as of June 30, 2026, and December 31, 2025, respectively. As shown in the accompanying financial statements, we recorded net loss of $6.7 million for the six months ended June 30, 2026. Our working capital deficit as of June 30, 2026, was $22.0 million. These factors and our ability to raise additional capital to accomplish our objectives, raises substantial doubt about our ability to continue as a going concern. We expect our expenses will continue to increase during the foreseeable future as a result of increased operations, increased construction activity and the development of current and future projects which include our current business operations.

 

We anticipate generating increased revenues over the next twelve months, as we continue to market the sale of plots held for sale at our various projects, generate cash from the sale of house construction at our properties.

 

If the Company is not successful with its marketing efforts to increase sales, the Company will continue to experience a shortfall in cash, and it will be necessary to obtain funds through equity or debt financing in sufficient amounts or to further reduce its operating expenses in a manner to avoid the need to curtail its future operations.

 

Operating Activities

 

Net cash flows used in operating activities for the six months ended June 30, 2026, was $1,297,179 which resulted primarily due to a net loss of $6,700,018, non-cash share-based compensation of $6,357,546, loss from debt extinguishment of $815,441, stock issued for commitment shares of $734,976, non-cash interest and amortization of OID expense of $1,513,174, offset by a change in fair value of derivative of $2,278,320 and net change in assets and liabilities of $1,927,479.

 

Net cash flows used in operating activities for the six months ended June 30, 2025, was $491,464 which resulted primarily due to net loss of $2,937,448, offset by non-cash share-based compensation of $1,296,777, change in fair value of derivative liability of $550,470, and by net change in assets and liabilities of $598,738.

 

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Investing Activities

 

Net cash flows used in investing activities was $39,841 for the six months ended June 30, 2026. The funds were primarily used for the development of the various projects and additional investment for land development, offset by cash inflows from the change in the long-term accounts receivable balance.

 

There was no activity during the six months ended June 30, 2025.

 

Financing Activities

 

Net cash flows provided by financing activities for the six months ended June 30, 2026, was $1,370,376, primarily from cash proceeds from convertible debt for $2,641,529 and cash proceeds from other loans of $491,700, offset by cash payments on other loans of $729,724 cash payments on convertible debt of $539,791, along with payments on promissory notes and cash dividends on the Series A and Series D preferred stock.

 

Net cash flows provided by financing activities for the six months ended June 30, 2025, was $565,082, primarily from cash proceeds from other loans for $584,575 and cash proceeds from related party promissory notes of $112,561, offset by dividends paid on preferred stock.

 

As a result of these activities, we experienced an increase in cash of $33,356 for the six months ended June 30, 2026.

 

Our ability to continue as a going concern is dependent on our success in obtaining additional financing from investors or from the sale of our common shares.

 

Critical Accounting Polices

 

In December 2001, the SEC requested that all registrants list their “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our accounting policies are disclosed in Note 2 of our audited consolidated financial statements included herein. We consider the following accounting policies critical to the understanding of the results of our operations:

 

■ Going concern. It requires to rely on management’s representation on financial forecast.
■ Revenue recognition. It requires judgement to determine when a contract exists, when performance obligations are met and the estimated variable consideration if any.
■ Issuance of debt with attached financial instruments. Some instruments carry embedded features that require bifurcation from host instrument and accounting as derivative liability.
■ Accounting of the Company’s equity-method investment. Indeed, it requires judgement by management to determine whether there is significant influence or control over the Company’s investee. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over these policies.

 

There have been no material changes to our critical accounting policies as compared to the critical accounting policies and significant judgments and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on April 27, 2026.

 

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Off-balance Sheet Arrangements

 

During the period ended June 30, 2026, we have not engaged in any off-balance sheet arrangements.

 

New and Recently Adopted Accounting Standards

 

For a listing of our new and recently adopted accounting standards, see Note 2, Summary of Significant Accounting Policies, to the Notes to the condensed consolidated financial statements in “Part I, Item 1. condensed consolidated financial statements” of this Quarterly Report.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not required under Regulation S-K for “smaller reporting companies.”

 

Item 4. Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer (Principal Executive Officer) and the Chief Financial Officer (Principal Financial Officer), to allow for timely decisions regarding required disclosure. In designing and evaluating disclosure controls and procedures, the Company recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

The Company conducted an evaluation under the supervision and with the participation of management, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of its disclosure controls and procedures as of June 30, 2026, as defined in Rule 13a -15(e) and Rule 15d -15(e) under the Exchange Act. This evaluation was carried out under supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2026, our disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting related to the lack of adequate accounting and finance personnel, inadequate controls over maintenance of records, inadequate internal controls relating to the authorization, recognition, capture, and review of transactions, facts, circumstances, and events that could have a material impact on the Company’s financial reporting process as further discussed in our Annual Report on Form 10-K for the year ended December 31, 2025, and which the Company determined continued to exist as of June 30, 2026.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the six months ended June 30, 2026, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

 

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PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

 

On April 8, 2025, CleanSpark, Inc. (“CleanSpark”) initiated a civil action against the Company in the United States District Court for the Southern District of California (Civil Action No. ‘25CV829 RBMMSB) (the “Action”), in which CleanSpark alleges that the Company had breached the Securities Purchase Agreement, dated October 31, 2019, by and through which CleanSpark purchased shares of Series B Preferred Stock from the Company. As of the date of this filing, the Company is in settlement discussions, which includes the redemption of the Series B Preferred Stock.

 

Other than as set forth above, the Company is not currently involved in any material disputes or litigation matters.

 

Item 1A. Risk Factors

 

You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth under Part I, Item 1A, Risk Factors, contained in our Annual Report on Form 10-K for Fiscal 2025, as filed with the SEC on April 27, 2026. The risk factors described in the fiscal year ended 2025 Form 10-K have not materially changed.

 

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

 

During the six months ended June 30, 2026, the Company issued 681,811 shares of common stock pursuant to services and consulting agreements.

 

During the six months ended June 30, 2026, the Company issued 376,989 shares of common stock pursuant to the conversion of convertible notes payable.

 

During the six months ended June 30, 2026, the Company issued 120,426 shares of common stock pursuant to inducement agreements on convertible notes.

 

During the six months ended June 30, 2026, the Company issued 18,790 shares of common stock pursuant to the exercise of cashless warrants.

 

During the six months ended June 30, 2026, the Company issued 955,829 shares of common stock for accrued employee compensation and repayment of stock payable to employees.

 

During the six months ended June 30, 2026, the Company issued 1,662 shares of common stock for dividend payments related to preferred Series C Stock.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

  (a) Exhibits

 

Exhibit No.   Description
31.1*   Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2*   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2022
32.1*   Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*   Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
101*   Inline XBRL Document set for the financial statements and accompanying notes in Part I, Item 1, of this Quarterly Report on Form 10-Q
     
104*   Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.
     
    Exhibits designated by the symbol * are filed or furnished with this Quarterly Report on Form 10-Q

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Dated: August 13, 2026   International Land Alliance, Inc.
         
      By: /s/ Frank Ingrande
        Chief Executive Officer, (Principal Executive Officer)
         
      By: /s/ Jason Sunstein
        Chief Financial Officer, (Principal Financial and Accounting Officer)

 

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Source: View Original Filing on SEC EDGAR