Notes
to Financial Statements
For
the Years Ended December 31, 2021, and 2020
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 (inception).
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.
On
March 5, 2019, the Company received its trading symbol “ILAL” from FINRA. On April 4, 2019, the Company was approved to have
its common stock traded on the OTCQB. On April 12, 2019, the Company became eligible for electronic clearing and settlement through the
Depository Trust Company (“DTC”) in the United States. The DTC is a subsidiary of the Depository Trust & Clearing Corporation
and manages the electronic clearing and settlement of publicly traded companies. Securities that are eligible to be electronically cleared
and settled through DTC are considered “DTC eligible.” This electronic method of clearing securities creates efficiency of
the receipt of stock and cash, and thus accelerates the settlement process for investors and brokers, enabling the stock to be traded
over a much wider selection of brokerage firms by coming into compliance with their requirements. Being DTC eligible has greatly simplify
the process of trading and transferring the Company’s common shares on the OTCQB.
On
October 25, 2020, the Company entered into a business agreement with A&F Agriculture LLC (“A&F”), in which the parties
agreed to operate a business for the purpose of commercially cultivating industrial hemp at the Company’s property in Southern
California. A&F will be the managing party of the business agreement. The Company will provide A&F with the land and water supply
for the purpose of the cultivation. All revenue and expenses associated with the cultivation will be split equally among parties. Franck
Ingrande is the Manager of A&F and is also the President of the Company.
On
December 14, 2021, the Company executed a rescission agreement with A&F, which terminated any and all of its interest, directly or
indirectly, in the lease of a small portion of its land in Southern California for the growing of hemp. The Company, who is a developer
of land for resorts and commercial buildings, will begin subdividing the property for the construction of residential homes. The Company
was never in the hemp business and acted strictly as a lessor. Pursuant to the rescission agreement the Company will be paid $150,000
over the next two years, which includes $100,000
previously loaned to the venture for the purposes
of improvements to the property.
Going
Concern
The
accompanying consolidated 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 December 31, 2021, the Company’s current liabilities exceeded its current assets by approximately $2,118,600.
The Company has recorded a net loss of $5,062,062
for the year ended December 31, 2021, has an accumulated deficit
of approximately $14,703,800
as of December 31, 2021. Net cash used in operating activities
for the year ended December 31, 2021, was approximately $1,036,000.
These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The
Company is currently raising additional capital through debt and equity in order to continue the funding of its operations, which may
have the effect of 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. If the Company is not successful with its marketing efforts to increase sales and weak
demand for purchase of plots continues, the Company will continue to experience a shortfall in cash, and it will be necessary to further
reduce its operating expenses in a manner or obtain funds through equity or debt financing in sufficient amounts to avoid the need to
curtail its future operations subsequent to December 31, 2021. 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 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).
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
consolidated financial statements of the Company are prepared in conformity with accounting principles generally accepted in the United
States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).
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 and 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. ILA Fund includes cash as its
only assets with minimal expenses as of December 31, 2021. The sole purpose of this entity is strategic funding for the operations of
the Company. ILA Mexico has lots held for sale for the Oasis Park Resort, no liabilities, and minimal expenses as of December 31, 2021.
All intercompany balances and transactions are eliminated in consolidation.
The
Company’s consolidated subsidiaries and/or entities were as follows:
SCHEDULE
OF CONSOLIDATED SUBSIDIARIES AND ENTITY
| 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 | % |
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. As of December 31, 2021, Management believes the carrying value of its equity method investments were recoverable
in all material respects.
Use
of Estimates
The
preparation of financial statements in conformity with US. 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 managements 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
lives of building. |
| |
■ |
Assumptions
used in valuing equity instruments. |
| |
■ |
Deferred
income taxes and related valuation allowance. |
| |
■ |
Going
concern. |
| |
■ |
Assessment
of long-lived asset for impairment. |
| |
■ |
Significant
influence or control over the Company’s equity-method 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 December 31, 2021, and 2020, respectively.
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
Level
1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level
2
Level
2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets
with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are
observable or can be derived principally from, or corroborated by, observable market data. If the asset or liability has a specified
(contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level
3
Level
3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement
of the fair value of the assets or liabilities.
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.
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 December 31, 2021, 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 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.
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 cost at date of acquisition.
Revenue
Recognition
On
January 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606),
which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition. Results for reporting periods beginning
after January 1, 2018, are presented under Topic 606.
Under
Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects
the consideration we expect to be entitled to in exchange for those goods or services. The new guidance sets forth a new five-step revenue
recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific
pieces of revenue recognition guidance that have historically existed in U.S. GAAP. The underlying principle of the new standard is that
a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount
that reflects what it expects to receive in exchange for the goods or services. The standard also requires more detailed disclosures
and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance.
The
Company determines revenue recognition through the following steps:
| ● |
identification
of the agreement, or agreements, with a buyer and/or investor; |
| ● |
identification
of the performance obligations in the agreement for the sale of lots including delivering title to the property being acquired from
ILA; |
| ● |
determination
of the transaction price; |
| ● |
allocation
of the transaction price to the lots purchased when issued with equity or warrants to purchase equity in the Company; and |
| ● |
recognition
of revenue when, or as, we satisfy a performance obligation such as delivering title to lots purchased. |
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 lot sales or the execution of terms and conditions contracts with third parties and investors. These contracts define each party’s
rights, payment terms and other contractual terms and conditions of the sale. Consideration was historically paid prior to transfer of
title as stated above and in future land sales, the Company plans to transfer title to buyers at the time consideration has been transferred
if the acquisition of the property has been completed by the Company. The Company applies judgment in determining the customer’s
ability and intention to pay, however collection risk is mitigated through collecting payment in advance or through escrow arrangements.
A
performance obligation is a promise in a contract or agreement to transfer a distinct product or item to the customer, which for us is
transfer of title to our buyers. 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. We have concluded the sale of property and delivering title
is accounted for as the single performance obligation.
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 to which we will be
entitled to receive in exchange for transferring title to the customer.
The
Company recognizes revenue when it satisfies a performance obligation in a contract by transferring control over property to a customer
when land title is legally transferred by the Company. The Company’s principal activities in the real estate development industry
which it generates its revenues is the sale of developed and undeveloped land.
On
September 30, 2019, the Company entered into a contract for deed agreement “Agreement” with IntegraGreen whose principal
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 of $3,780
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. Effective
on October 1, 2021, the Company determined that the agreement met the definition of a contract pursuant to the guidance in ASU 2014-09
and recognized to revenue approximately $496,800.
Prior
to October 1, 2021, the Company’s management deemed that there was an embedded lease feature in the Agreement in accordance with
ASC 842. The interest earned and accrued of the carry-back financing amounted to $25,899
and were recognized as lease income during the
year ended December 31, 2021
Advertising
Costs
The
Company expenses advertising costs when incurred. Advertising costs incurred amounted to $0
and $123,000
for the years ended December 31, 2021, and 2020,
respectively.
Debt
issuance costs and debt discounts
Debt
issuance costs and debt discounts are being amortized over the lives of the related financings on a basis that approximates the effective
interest method. Costs and discounts are presented as a reduction of the related debt in the accompanying consolidated balance sheets.
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. Following the adoption of Accounting Standards Update
ASU 2016-09, the Company elected to account 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.
Loss
Per Share
The
Company computes 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 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.
A beneficial conversion feature that arises from a contingent conversion feature has no accounting impact until the contingency occurs.
The Company evaluated whether it is necessary to recognize a beneficial conversion feature by comparing the adjusted effective conversion
price of the convertible preferred stock with the commitment-date fair value of the entity’s common stock. The Company determined
that a beneficial conversion feature existed, and recognized the beneficial conversion feature, creating a discount on the convertible
preferred stock instrument. This discount was amortized in accordance with ASC 470-20-35-7. The amortization of the discount created
by a beneficial conversion feature recognized as a result of the resolution of a contingency is treated as a dividend that reduced net
income in arriving at income available to common stockholders.
Securities
that are excluded from the calculation of weighted average dilutive common shares, because their inclusion would have been antidilutive
are:
SCHEDULE
OF POTENTIALLY DILUTIVE SHARES
| | |
For
the year ended December 31, 2021 | | |
For
the year ended December 31, 2020 | |
| | |
| | |
| |
| Options | |
| 3,850,000 | | |
| 2,900,000 | |
| Warrants | |
| 3,180,000 | | |
| 460,000 | |
| Total potentially dilutive
shares | |
| 7,030,000 | | |
| 3,360,000 | |
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 December 31, 2021. All of the Company accounts receivable is concentrated with
one customer.
Recently
Issued Accounting Pronouncements Not Yet Adopted
In
August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt-Debt with Conversion and Other Options (Subtopic
470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments
and Contracts in an Entity’s Own Equity.” ASU 2020-06 simplifies the accounting for convertible instruments by reducing the
number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results
in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments
that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related
to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting
and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. In addition,
ASU 2020-06 amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based
accounting conclusions. The Amendments also affects the diluted EPS calculation for instruments that may be settled in cash or shares
and for convertible instruments. The amendments are effective for public entities excluding smaller reporting companies for fiscal years
beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective
for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted,
but no earlier than fiscal years beginning after December 15, 2020, including interim periods. The Company is currently evaluating the
potential impact of the Update on its financial statements.
In
February 2016, the FASB issued ASU 2016-02 (Topic 842), Leases, and issued subsequent amendments to the initial guidance or implementation
guidance including ASU 2017-13, 2018-01, 2018-10, 2018-11, 2018-20 and 2019-01 (collectively, including ASU 2016-02, “ASC 842”),
which supersedes the guidance in topic ASC 840, Leases. The new standard requires lessees to classify leases as either finance or operating
based on whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether related
expenses are recognized based on the effective interest method or on a straight-line basis over the term of the lease. For any leases
with a term of greater than 12 months, ASU 2016-02 requires lessees to recognize a lease liability for the obligation to make the lease
payments arising from a lease, and a right-of-use asset for the right to use the underlying asset for the lease term. An election can
be made to account for leases with a term of 12 months or less similar to existing guidance for operating leases under ASC 840.
The
new standard will also require new disclosures, including qualitative and quantitative requirements, providing additional information
about the amounts recorded in the financial statements. For Emerging Growth Companies like ILA, ASU No. 2016-02 is effective for financial
statements issued for fiscal years beginning after December 15, 2021. Early adoption is permitted. Management is in the initial stage
of its assessment of the new standard and is currently evaluating the quantitative impact of adoption, and the related disclosure requirements.
Management expects that the adoption will result in the recognition of right-of-use assets and lease liabilities that were not previously
recognized, which will increase total assets and liabilities on the Company’s balance sheet. The Company does not expect the adoption
of Topic 842 to have a material impact to the statements of operations or to have any impact on its cash flows from operating, investing,
or financing activities.
NOTE
3 – ASSET PURCHASE AND TITLE TRANSFER
Emerald
Grove Asset Purchase
On
July 30, 2018, Jason Sunstein, the Chief Financial Officer, entered into a Residential Purchase Agreement (“RPA” or “the
Agreement”) to acquire real property located in Hemet, California, which included approximately 80
acres of land and a structure for $1.1
million from an unrelated seller. The property
includes the main parcel of land with an existing structure along with three additional parcels of land which are vacant lots to be used
for the purpose of development “vacant lots”. The purpose of the transaction was as an investment in real property to be
assigned to the Company subsequent to acquisition. The property was acquired by Mr. Sunstein since it was required by the seller to transfer
the property for consideration to an individual versus a separate legal entity. The transaction closed on March 18, 2019, and the consideration
included a loan financed in the amount of $605,000
in addition to cash consideration of $524,613
which came from a portion of funds loaned by
investors of the Company to be repaid as interest bearing notes payable. On March 18, 2019, Mr. Sunstein assigned the deed of the property
to the Company. The mortgage obligation was assumed by the Company, as approved by the Board of Directors in March 2019. The mortgage
loan was not assigned to the Company by the lender, however the lender acknowledged that the transfer of the property to the Company
did not trigger an event of default. The Company recorded the assets acquired and liabilities assumed at fair value on the date of assignment
and assumption. The Company completed the refinancing of its existing first and second mortgage loans on the 80
acres of land and existing structure of its Emerald
Grove property for aggregate principal amount of $1,787,000,
which provided a net funding of approximately $387,000
during the first fiscal quarter of 2021.
During
the year ended December 31, 2021, the Company recognized $496,797 of revenue related to the sale of 20 acres of vacant land and associated
improvements located at the Emerald Grove property in Hemet, California, to IntegraGreen.
The
Company has included all allowed acquisition costs of $22,050
in the value of the capitalized assets. The building
and land asset values were assigned using a purchase price allocation based on the appraised land values. The total of the consideration
plus acquisition costs assets of $1,122,050
was allocated to land and building in the following
amounts: $271,225
– Land; $850,826
– Building. The land is an indefinite long-lived
asset that were assessed for impairment as a grouped asset with the building on a periodic basis. The building has an estimated useful
life of 20
years and is being depreciated on a straight-line
basis.
Oasis
Park Title Transfer
On
June 18, 2019, Baja Residents Club SA de CV (“BRC”), a related party with common ownership and control by our CEO, Robert
Valdes, transferred title to the Company for the Oasis Park property which was part of a previously held land project consisting of 497
acres to be acquired and developed into Oasis
Park resort near San Felipe, Baja. It was previously subject to approval by the Mexican government in Baja, California which was finalized
in June 2019. As consideration for the promise to transfer title, the Company previously issued 7,500,000
shares of founder’s common stock that was
valued at $750,000
or $0.10
per common share. No prior accounting was recorded
for this issuance pending resolution of the contingency to transfer title, which was resolved during the year ended December 31, 2019.
A portion of this value was allocated to the Oasis Park resort and a portion was allocated to other properties as the Company continues
to receive transfer of title. ILA recorded the property held for sale on its balance sheet in the amount of $670,000
and accordingly reduced the value as lots are
sold. As of December 31, 2021, and 2020, the Company reported a balance for assets held for sale of $647,399.
The
Company transferred title to individual plots of land to the investors since the Company received this approval of change in transfer
of title to the ILA. As such, the Company recognized revenue for the plot sales previously executed during the year ended December 31
,2019.
During
the year ended December 31, 2021, the Company sold three (3) lots to an affiliate related party of the Company for a total purchase price
of $120,000,
of which $19,500
was funded as of December 31, 2021. The amount funded was recorded
and reported under contract liability in the Company’s consolidated financial statements as of December 31, 2021, as the collectability
terms were not sufficiently satisfied to qualify for recognition of revenue.
During
the year ended December 31, 2021, the Company received a down payment in the amount of $20,000
on the first new home construction to build a
two bedroom/two-bathroom home at the Oasis Park Resort. Such amount was recorded and reported under Deposits in the Company’s consolidated
financial statements.
NOTE
4 – LAND AND BUILDING
Land
and buildings, net as of December 31, 2021, and 2020:
LAND,
BUILDING, NET AND CONSTRUCTION IN PROCESS
| | |
Useful
life | |
December
31, 2021 | | |
December
31, 2020 | |
| Land –
Emerald Grove | |
| |
$ | 203,419 | | |
$ | 271,225 | |
| | |
| |
| | | |
| | |
| Land held for sale –
Oasis Park | |
| |
$ | 647,399 | | |
$ | 647,399 | |
| | |
| |
| | | |
| | |
| Construction in Process
(Divino – Bajamar) | |
| |
$ | 852,020 | | |
$ | 353,000 | |
| | |
| |
| | | |
| | |
| Furniture & equipment | |
5
years | |
$ | 2,682 | | |
$ | - | |
| | |
| |
| | | |
| | |
| Building – Emerald Grove | |
20
years | |
| 1,048,138 | | |
| 943,175 | |
| Less: Accumulated depreciation | |
| |
| (132,254 | ) | |
| (82,581 | ) |
| | |
| |
| | | |
| | |
| Building, net | |
| |
$ | 915,884 | | |
$ | 860,594 | |
Depreciation
expense was $49,673 and
$45,874 for
the year ended December 31, 2020, and 2020, 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 Chief Executive Officer 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
Company funded the construction by an additional $312,000
during the year ended December 31, 2021. The
construction contractor is also an entity controlled by our Chief Executive Officer. Construction began during the year ended December
31, 2020. The balance of construction in process for Valle Divino totaled $356,275
and $44,500
as of December 31, 2021, and 2020, respectively.
As
of December 31, 2021, the Company almost completed construction of the club house, the wine tasting room and sales office in anticipation
of beginning site tours. As of December 31, 2021, the company has presold 13 units, proceeds of which were recorded under contract liability
in the Company’s consolidated financial statements, since the Company has not met the criteria for the existence of a contract
pursuant to ASC 606.
Plaza
Bajamar
This
project is located within the internationally renowned Bajamar Ocean Front Hotel and golf resort. The Company partnered with CleanSpark
to provide sustainable, advanced solar-plus-storage power solutions. The Company has completed a 2BR/2BA model home, an enhanced entrance,
and interior roads as well as site preparation for four (4) new homes adjacent to the model home. The Company is moving to the next stage,
which will provide all units in the property with solar microgrid installations.
In
November and December 2019, $250,000
was paid to the Company’s Chief Executive
Officer, Roberto Valdes, $150,000
for constructing two model Villas at our planned
Plaza Bajamar development. The Company has not yet taken title to this property, which is currently owned by Valdeland, S.A. de
C.V., an entity controlled by Roberto Valdes. The Company intends to purchase the land from this entity and has paid $100,000
to Roberto Valdes as a down payment for this
purchase. The $150,000
is the total construction cost budget that is
intended to pay the construction contractor. For the year ended December 31, 2020, the Company has issued the 250,000
shares of the Company’s common stock for
total amount of $150,000
reported under Prepaid and other current assets
in the consolidated balance sheets.
The
Company funded the construction by an additional $111,000
during the year ended December 31, 2021. The
construction contractor is also an entity controlled by Roberto Valdes. Construction began during the year ended December 31, 2020. The
balance of construction in process for Plaza Bajamar totaled $419,147
and $308,500
as of December 31, 2021, and 2020, respectively.
NOTE
5 – RELATED PARTY TRANSACTIONS
Chief
Executive Officer
Effective
January 1, 2020, the Company executed an employment agreement with its Chief Executive Officer.
The
Company has not paid any salary to its Chief Executive Officer for the year ended December 31, 2021. The Company has accrued $135,232
of compensation costs in relation to the employment
agreement. The balance owed is $265,463
as of December 31, 2021.
On
October 2, 2021, the Company issued 500,000
stock options under the 2019 Plan with a strike
price of $0.50,
vesting six months after issuance with contractual term of 5
years for estimated fair value of $270,000.
The
Company paid to its Chief Executive Officer salary for services directly related to continued operations of $5,000
for the year ended December 31, 2020. The Company
has accrued $135,232
of compensation costs in relation to the employment
agreement. The balance owed is $130,232
as of December 31, 2020.
Chief
Financial Officer
Effective
January 1, 2020, the Company executed an employment agreement with its Chief Financial Officer.
The
Company paid to its Chief Financial Officer salary compensation for services directly related to continued operations of $25,667
for the year ended December 31, 2021. The Company
has accrued $135,232
of compensation cost in relation to the employment
agreement. The balance owed is $174,205
as of December 31, 2021.
The
Company paid to its Chief Financial Officer salary compensation for services directly related to continued operations of $64,971
for the year ended December 31, 2020. The Company
has accrued $135,232
of compensation cost in relation to the employment
agreement. The balance owed is $70,261
as of December 31, 2020.
On
October 2, 2021, the Company issued 500,000
stock options under the 2019 Plan with a strike
price of $0.50,
vesting six months after issuance with contractual term of 5
years for estimated fair value of $270,000.
The
Company’s Chief Financial Officer is also the managing member of Six Twenty Management LLC, an entity that has been providing ongoing
capital support to the Company (See Note 7).
The
Company’s Chief Financial Officer also facilitated the Emerald Grove asset purchase as described in Note 3.
President
On
May 10, 2021, the Company executed an employment agreement with Frank Ingrande, the Company’s President, for total annual compensation
of $120,000.
Pursuant to his employment agreement, the Company also issued 50,000
shares of common stock of the Company for total
fair value of $66,000.
On
October 2, 2021, the Company issued 250,000
stock options under the 2019 Plan with a strike
price of $0.50,
vesting six months after issuance with contractual term of 5
years for estimated fair value of $135,000.
Frank
Ingrande is the co-founder and owner of 25%
of the Company’s equity-method investee RCVD.
NOTE
6 – PROMISSORY NOTES
Promissory
notes consisted of the following at December 31, 2021, and 2020:
SCHEDULE
OF PROMISSORY NOTES
| | |
December
31, 2021 | | |
December
31, 2020 | |
| Note payable, due August
2020 – past maturity/settled | |
$ | 24,785 | | |
$ | 36,606 | |
| Note payable, due August
2020 – past maturity/settled | |
$ | 24,785 | | |
$ | 36,606 | |
| Note payable, 10%
interest, due March
2020 – past maturity | |
| 1,500 | | |
| 1,500 | |
| Note Payable, 15%
interest, due March
2021- past maturity | |
| 76,477 | | |
| 126,477 | |
| Note payable, 12%
interest, due February
2023 | |
| 1,787,000 | | |
| - | |
| Note payable, secured, 10%
interest, due October
2021 | |
| - | | |
| 975,000 | |
| Note payable, 15%
interest, due December
2020 | |
| - | | |
| 50,000 | |
| Note payable, 15%
interest, due December
2020 | |
| - | | |
| 50,000 | |
| Note payable, 15%
interest, due December
2020 | |
| - | | |
| 100,000 | |
| Note payable, 15%
interest, due December
2020 | |
| - | | |
| 100,000 | |
| Note payable, 15%
interest, due December
2020 | |
| - | | |
| 20,000 | |
| Note payable, 15%
interest, due December
2020 | |
| - | | |
| 25,000 | |
| Note payable, 13%
interest, due December
2021 | |
| - | | |
| 128,884 | |
| Note Payable, 12%
interest, due June
2021 | |
| - | | |
| 166,733 | |
| Note payable, 0%
interest, due December
2020 | |
| - | | |
| 142,100 | |
| Note Payable, 12%
interest, due February
2021 | |
| - | | |
| 10,000 | |
| Total Notes Payable | |
$ | 1,889,762 | | |
$ | 1,932,300 | |
| Less discounts | |
| (51,462 | ) | |
| (57,136 | ) |
| | |
| | | |
| | |
| Total Promissory notes, net of discount | |
| 1,838,300 | | |
| 1,875,164 | |
| | |
| | | |
| | |
| Less current portion | |
| (102,762 | ) | |
| (1,875,164 | ) |
| | |
| | | |
| | |
| Total Promissory notes,
net of discount - long term | |
$ | 1,735,538 | | |
$ | - | |
Interest
expense related to the amortization of the associated debt discount for the year ended December 31, 2021, and 2020 was $296,541
and $126,521,
respectively.
During
the year ended December 31, 2021, the Company incurred $122,450
of interest related to these notes and paid $117,779
in cash and $13,334
was paid by a related party on behalf of the
Company.
Redwood
Trust
On
January 21, 2021, the Company refinanced its existing first and second mortgage loans on the 80
acres of land and the structure located at Sycamore
Road in Hemet, California for aggregate amount of $1,787,000,
carrying coupon at twelve (12)
percent, payable in monthly interest installments of $17,870
starting on September 1st, 2021, and continuing
monthly thereafter until maturity on February
1st, 2023, at which time all sums of principal
and interest then remaining unpaid shall be due and payable. The balloon payment promissory note is secured by deed of trust. Upon execution,
the Company paid $53,610
of loan origination fees, presented as debt discount
in the consolidated balance sheets, and prepaid six (6) months of interest only installments totaling $107,220,
presented as Prepaid and other current assets in the consolidated balance sheets. The total amount of prepaid interest has been fully
recognized as interest expense during the year ended December 31, 2021. The refinanced amount paid off the first and second mortgage
loans with a net funding to the Company of approximately $387,000,
net of finders’ fees.
Promissory
Notes
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%,
matures on August
1, 2020. The Company also recorded a $7,500
debt discount due to origination fees due at
the beginning of the note. During the years ended December 31, 2021, and 2020, the Company amortized $0
and $1,617
of the debt discount into interest expense, leaving
a remaining total debt discount on the note of $0.
On December 12, 2019, the loan and outstanding interest was settled for $52,493.
As a result of the settlement, the Company recorded a gain on settlement of debt of $64,075
for the year ended December 31, 2019. The Company
paid down $11,821
and $10,054
of the principal during the year ended December
31, 2021, and 2020, respectively. As of December 31, 2021, and 2020, the remaining principal balance was $24,785
and $36,606,
respectively. The Company has not incurred any interest expense related to this promissory note during the year ended December 31, 2021,
and 2020.
Convertible
Notes
Labrys
Fund LP
On
February 25, 2021, the Company entered into a convertible promissory note pursuant to which it borrowed $500,000,
net of an issuance costs of $25,500
and original issuance discount of $50,000.
Interest under the convertible promissory note is 12%
per annum, and the principal and all accrued but unpaid interest is due on February
25, 2022. Additionally, as in incentive to the
note holder, the note includes the issuance of 85,000
commitment shares of common stock with fair value
of approximately $131,000
and additional 250,000
shares that must be returned to the Company if
the note is fully repaid and satisfied on or prior to the maturity date. The note is convertible upon an event of default after the issuance
date at the noteholder’s option into shares of our common stock at a fixed conversion price equal to $1.00,
subject to standard anti-dilutive rights. Portion of the proceeds were used to retire an existing convertible note with Labrys for total
amount of approximately $135,000.
During the year ended December 31, 2021, Six Twenty Management (related party) paid, on behalf of the Company, the first and second installments
for total amount of $124,444,
of which $111,110
was applied against the principal and $13,334
against accrued interest. During the year ended
December 31, 2021, the Company paid $435,556,
of which $388,885
was applied against the principal and $46,671
against accrued interest. The balance owed to
Labrys Fund LP is $0
as of December 31, 2021.
NOTE
7 – PROMISSORY NOTES – RELATED PARTIES
Related
party promissory notes consisted of the following at December 31, 2021, and 2020:
SCHEDULE
OF RELATED PARTY TRANSACTIONS
| | |
December
31, 2021 | | |
December
31, 2020 | |
| RAS Real Estate LLC – Past
maturity | |
$ | 365,590 | | |
$ | 361,989 | |
| Six-Twenty Management LLC – On demand | |
| 447,317 | | |
| - | |
| Lisa Landau –
On demand | |
| 22,077 | | |
| - | |
| Total On demand notes,
net of discount | |
$ | 834,984 | | |
$ | 361,989 | |
Six
Twenty Management LLC (“Six-Twenty”)
On
March 31, 2021, the Company executed a non-convertible promissory note with a related party for an initial amount funded of $288,611
and carrying a coupon of eight percent (8%)
and a maturity of twelve month. Six-Twenty subsequently funded the Company for additional cash of $609,200.
During the year ended December 31, 2021, the Company paid $544,468
in cash towards the non-convertible promissory
note. Six-Twenty paid two of the installments related to the Labrys note (See Note 6) for total amount of $124,444
and the Company paid $30,470
of expenses related to the related party, which
decreased the principal owed. As of December 31, 2021, the balance owed to Six-Twenty totals $447,317
and accrued interest amounts to $24,354.
RAS,
LLC (past maturity)
On
October 25, 2019, the Company issued a promissory note to RAS, LLC “RAS”, a company controlled by an employee, which is a
relative to the Company’s Chief Financial Officer for $440,803.
The proceeds of the note were largely used to repay shareholder loans and other liabilities. The loan bears interest at 10%,
and also carries a default coupon rate of 18%.
The loan matured on April 25, 2020, is secured by 2,500,000
common shares and a Second Deed of Trust for
property in Hemet, CA (Emerald Grove). Additionally, as in incentive to the note holder, the Company is required to issue to the holder
132,461
shares of common stock valued at $97,858,
which was recorded as a debt discount as of December 31, 2019. The outstanding balance is $365,589
and $361,989
at December 31, 2021, and 2020, respectively.
As of December 31, 2021, and 2020, $0
and $79,987
of the discount has been amortized and the note
is shown less unamortized discount of $0.
As
of December 31, 2019, the shares have not been issued and recorded as stock payable. The shares were issued in May 2020 and have been
removed from stock payable as of December 31, 2020. Interest expense for the year ended December 31, 2021, and 2020 was $64,590
and $61,255,
respectively. During the year ended December 31, 2021, the Company issued 29,727
shares of common stock against $10,999
of accrued interest. During the year ended December
31, 2021, the Company paid in cash $30,800
of interest and $17,600
was paid directly by RAS to the creditor, which
increased the principal owed to RAS as of December 31, 2021.
Lisa
Landau
Lisa
Landau is a relative to the Company’s Chief Financial Officer. Lisa Landau has advanced approximately $84,600
of additional improvements at Emerald Grove and
$25,462
of corporate expenses. The Company has repaid
$88,000
in cash during the year ended December 31, 2021,
which leaves a principal balance of $22,077
as of December 31, 2021. The advances are on
demand but do not carry any interest coupon.
NOTE
8 – EQUITY METHOD INVESTMENT
In
May 2021, the Company acquired a 25%
investment in Rancho Costa Verde Development, LLC (“RCVD”) in exchange for 3,000,000
shares of the Company’s common stock at
a determined fair value of $0.86
per share and $100,000
in cash for total consideration of $2,680,000.
The fair value of the non-monetary exchange was determined based on a valuation report obtained from an independent third-party valuation
firm. The fair value of the Company’s common stock was determined based on weighted combination of market approach and asset approach.
The market approach estimates fair value based on a weighted average between the listed price of the Company’s common share and
the Company’s recent private transaction adjusted for a lack of marketability discount.
The
investment has been accounted for under the equity method. It was determined that the Company does not have the power to direct the activities
that most significantly impact RCVD’s economic performance, and therefore, the Company is not the primary beneficiary of RCVD and
RCVD has not been consolidated under the variable interest model.
Rancho
Costa Verde 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, Mexico.
RCVD is a self-sustained solar powered green community that takes advantage of the advances in solar and other green technology.
The
investment was recorded at cost, which was determined to be $2,680,000.
A total of 3,000,000
shares of common stock were issued as of December
31, 2021.
The
following represents summarized financial information of RCVD for the year ended December 31, 2021:
SUMMARIZED
FINANCIAL INFORMATION OF RCVD
| Income statement | |
2021 | |
| Revenue | |
$ | 2,071,364 | |
| Cost of goods sold | |
| 587,520 | |
| Gross margin | |
| 1,483,844 | |
| Operating expenses | |
| (1,510,881 | ) |
| Interest expense | |
| (645,642 | ) |
| Net loss | |
$ | (672,679 | ) |
| | |
| | |
| Balance
sheet | |
| | |
| Current assets | |
$ | 2,204,129 | |
| Non-current assets | |
$ | 4,783,210 | |
| Current liabilities | |
$ | 1,026,660 | |
| Non-current liabilities | |
$ | 14,038,220 | |
Based
on its 25%
equity investment, the Company has recorded a loss from equity investment of $168,170
for the year ended December 31, 2021, which has
reduced the carrying value of the investment as of December 31, 2021, to $2,511,830.
Management determined that the carrying value of the investment was not impaired at December 31, 2021 due to the underlying appreciation
of the land.
NOTE
9 – COMMITMENTS AND CONTINGENCIES
Commitment
to Purchase Land
The
land project consisting of 20
acres
to be acquired from Baja Residents Club (a Company controlled by our CEO 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 Company third fiscal quarter
of 2022, 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. As of December 31, 2021, and 2020, the Company has entered into thirteen (13) and twelve (12) contracts
for deed agreements to sell lots of land, respectively.
The proceeds are presented under contract liability in the consolidated balance sheets as of December 31, 2021, and 2020.
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 CEO 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 preferred stock ($600,000);
common stock ($250,000/250,000
common shares at $1.00/share); a promissory note ($150,000);
and an initial construction budget of $150,000
payable upon closing. A recent appraisal valued
the land “as is” for $1,150,000.
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 December 31, 2021, and 2020, the agreement has not closed.
Commitment
to Sell Land
On
September 30, 2019, the Company entered into a contract for deed agreement “Agreement” with IntegraGreen whose principal
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 of $3,780
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.
Due
to the nature of the Agreement, the Company’s management deemed that there was an embedded lease feature in the agreement in accordance
with ASC 842. As a result, the initial payment of $63,000
was classified as a deposit. Upon an event of
default in which case the payment is non-refundable, and the Company no longer has any obligation to provide access to the land. The
interest payments will be recognized monthly as lease income. During the year ended December 31, 2021, and 2020, the Company recognized
$25,899
and $42,303
in lease income, respectively. Lease income is
presented as revenue in the consolidated statements of operations.
Effective
on October 1, 2021, the Company determined that the agreement met the definition of a contract pursuant to the guidance in ASU 2014-09
and recognized to revenue approximately $496,800.
Valle
Divino
On
October 2, 2019, the Company entered into a contract for deed agreement with a third-party investor. Under the contract the Company agreed
to the sale of 1 lot of vacant land and associated improvements located at the Valle Divino property in Ensenada, Mexico for a total
purchase price of $50,000,
$25,000
was paid upon execution and the balance was paid
on October 7, 2019. The total cash proceeds of $50,000
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $39,282;
and plot of land was valued at $10,718,
which was classified as a contract liability on the balance sheet as of December 31, 2021, and 2020.
On
November 6, 2019, the Company entered into a contract for deed agreement with a third-party investor. Under the contract the Company
agreed to the sale of 1 lot of vacant land and associated improvements located at the Valle Divino property in Ensenada, Mexico for a
total purchase price of $35,080,
$10,000
was paid upon execution, $9,580
was paid on December 23, 2019, and the balance
is due on February 4, 2020. The total cash proceeds of $35,080
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $25,258;
and plot of land was valued at $9,822,
which was classified as a contract liability on the balance sheet as of December 31, 2021, and 2020. The shares were issued on May 1,
2020.
On
January 13, 2020, the Company entered into a contract for deed agreement with a third-party investor. Under the contract the Company
agreed to the sale of 2 lots of vacant land and associated improvements located at the Valle Divino property in Ensenada, Mexico for
a total purchase price of $40,000,
paid upon execution. The total cash proceeds of $40,000
was allocated based upon the relative fair value
of the shares and two (2) promised plots of land in the following amounts: shares were valued at $23,780;
and plot of land was valued at $16,220,
which was classified as a contract liability on the balance sheet as of December 31, 2021, and 2020. The shares were issued on May 1,
2020.
On
January 24, 2020, the Company entered into a contract for deed agreement with a third-party investor. Under the contract the Company
agreed to the sale of 1 lot of vacant land and associated improvements located at the Valle Divino property in Ensenada, Mexico for a
total purchase price of $25,000,
paid upon execution. The total cash proceeds of $25,000
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $16,174;
and plot of land was valued at $8,826,
which was classified as a contract liability on the balance sheet as of December 31, 2021, and 2020. The shares were issued on May 1,
2020.
On
March 25, 2020, the Company entered into a contract for deed agreement with a third-party investor. Under the contract the Company agreed
to the sale of 1 lot of vacant land and associated improvements located at the Valle Divino property in Ensenada, Mexico for a total
purchase price of $25,000,
paid upon execution. The total cash proceeds of $25,000
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $16,174;
and plot of land was valued at $8,826,
which was classified as a contract liability on the balance sheet as of December 31, 2021, and 2020. The shares were issued on April
3, 2020.
On
April 28, 2020, the Company entered into a contract for deed agreement with a third-party investor. Under the contract the Company agreed
to the sale of 1 lot of vacant land and associated improvements located at the Valle Divino property in Ensenada, Mexico for a total
purchase price of $25,000,
paid upon execution. The total cash proceeds of $25,000
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $16,174;
and plot of land was valued at $8,826,
which was classified as a contract liability on the balance sheet as of December 31, 2021, and 2020.
On
June 19, 2020, the Company entered into a contract for deed agreement with a third-party investor. Under the contract the Company agreed
to the sale of 1 lot of vacant land and associated improvements located at the Valle Divino property in Ensenada, Mexico for a total
purchase price of $25,000,
paid upon execution. The total cash proceeds of $25,000
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $16,174;
and plot of land was valued at $8,826,
which was classified as a contract liability on the balance sheet as of December 31, 2021, and 2020.
On
July 14, 2020, the Company entered into a contract for deed agreement with a third-party investor. Under the contract the Company agreed
to the sale of 1 lot of vacant land and associated improvements located at the Valle Divino property in Ensenada, Mexico for a total
purchase price of $29,623,
paid upon execution. The total cash proceeds of $29,623
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $20,797;
and plot of land was valued at $4,203,
which was classified as a contract liability on the balance sheet as of December 31, 2021, and 2020.
On
September 30, 2020, the Company entered into a contract for deed agreement with a third-party investor. Under the contract the Company
agreed to the sale of 1 lot of vacant land and associated improvements located at the Valle Divino property in Ensenada, Mexico for a
total purchase price of $25,000,
paid upon execution. The total cash proceeds of $25,000
was allocated based upon the relative fair value
of the shares, one (1) promised plot of land and warrants in the following amounts: shares were valued at $12,882;
warrants were valued at $9,189
and plot of land was valued at $2,929,
which was classified as a contract liability on the balance sheet as of December 31, 2021, and 2020.
On
October 23, 2020, the Company entered into a contract for deed agreement with a third-party investor. Under the contract the Company
agreed to the sale of 1 lot of vacant land and associated improvements located at the Valle Divino property in Ensenada, Mexico for a
total purchase price of $15,000,
paid upon execution. The total cash proceeds of $15,000
was allocated to the plot of land, which was
classified as a contract liability on the balance sheet as of December 31, 2021, and 2020.
On
December 8, 2020, the Company entered into a contract for deed agreement with a third-party investor. Under the contract the Company
agreed to the sale of 2 lots of vacant land and associated improvements located at the Valle Divino property in Ensenada, Mexico for
a total purchase price of $50,000,
paid upon execution. The total cash proceeds of $50,000
was allocated based upon the relative fair value
of the shares and two (2) promised plot of land in the following amounts: shares were valued at $32,512;
and the plots of land was valued at $17,488,
which was classified as a contract liability on the balance sheet as of December 31, 2021, and 2020. The shares were issued on January
1, 2021.
During
the year ended December 31, 2021, the Company entered into a contract for deed agreement with a third-party investor. Under the contract
the Company agreed to the sale of 1 plot of vacant land and associated improvements located at the Valle Divino property in Ensenada,
Mexico for a total purchase price of $35,000,
paid upon execution. The total cash proceeds of $35,000,
of which $5,479
was allocated to the one promised plot of land.
70,000
shares of common stock were included in the contract
for deed.
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. 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 $76,500
has been paid, leaving a firm commitment of approximately
$435,500
as of December 31, 2021.
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
10 – STOCKHOLDERS’ EQUITY
The
Company’s equity at December 31, 2021 consisted of 75,000,000
authorized common shares and 2,000,000
authorized preferred shares, both with a par
value of $0.001 per
share. As of December 31, 2021, and 2020, there were 31,849,327
and 23,230,654
shares of common stock issued and outstanding,
respectively. As of December 31, 2021, and December 31, 2020, 28,000
shares of Series A Preferred Stock were issued
and outstanding and 1,000
shares of Series B Preferred Stock were issued
and outstanding, respectively.
On
August 26, 2020, the Company’s shareholders of record approved the increase of the Company’s authorized common stock, par
value $0.001,
from 75,000,000 shares
to 100,000,000
shares and the holders of a majority of the Company’s
outstanding voting securities approved the Company’s 2020 Equity Plan. On October 14, 2021, the Board of Directors approved an
amendment to the Company’s articles of incorporation to increase the Company’s authorized common stock, par value $0.001
from 75,000,000
shares to 150,000,000
and to effect a reverse split in a ratio of not
less than 1 for 2 and not more than 1 for 12. The Company has not yet amended its articles of incorporation at December 31, 2021, pending
definitive terms of a contemplated financing transation.
The
Company has reserved a total of 3,000,000
shares of the authorized common stock for issuance
under the 2020 Equity Plan. As of December 31, 2021, ILA has issued 1,700,000
stock options convertible into an equivalent
number of common stock but has not issued any shares under the 2020 Equity 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”. Pursuant to the 2019 Plan, the Company has reserved
a total of 3,000,000
shares of the Company’s common stock to
be available under the 2019 Plan. As of December 31, 2021, and 2020, ILA has granted 2,150,000
and 3,050,000
options, respectively.
All
shares of common stock issued during the years ended December 31, 2021, and 2020, were unregistered.
Common
Stock Issued for Services
On
May 19, 2021, the Company issued 200,000
shares per a consulting agreement valued at $280,000.
During
the year ended December 31, 2021, the Company issued 50,000
shares to the Company’s President in accordance
with an executed employment agreement valued at $66,000.
During
the year ended December 31, 2021, the Company issued an aggregate of 100,000
shares to two consultants in accordance with
executed consulting and real estate sales agreements valued at $132,000.
During
the year ended December 31, 2021, the Company issued 45,946
shares per advisory agreement with registered
broker-dealer valued at $61,108.
During
the year ended December 31, 2021, the Company issued 100,000
shares pursuant to a finders’ fee agreement
valued at $64,000.
During
the year ended December 31, 2021, the Company issued 100,000
shares pursuant to a service agreement valued
at $64,000.
On
January 1, 2020, the Company issued 50,000
shares of common stock and 150,000
warrants for services valued at $50,000
and $186,748,
respectively, for total amount of $236,748.
On
July 1, 2020, the Company issued 1,200,000
performance-based stock options to purchase an
equivalent number of common shares to one consultant with exercise price ranging from $0.25
to $1.00.
The grant date fair value of these options was $348,954,
of which $193,804
was recognized as performance was either met
or probable of achievement for the year ended December 31, 2020. During the year ended December 31, 2021, the parties cancelled the performance-based
stock options and approximately $103,000 of stock-based compensation was reversed.
On
July 6, 2020, the Company issued 400,000
shares of common stock for consulting services
valued at $192,600.
On
September 25, 2020, the Company issued 100,000
shares of common stock valued at $51,000
to renew a service agreement.
Common
Stock Issued for Cash
On
February 22, 2021, the Company received cash of $45,000
for 100,000
shares of common stock. These shares were issued
on April 1, 2021.
On
May 7, 2021, the Company received cash of $20,000
for 40,000
shares of common stock.
On
March 12, 2020, the Company received cash proceeds of $10,000
for 20,000
shares of common stock. These shares were issued
on May 1, 2020.
On
May 4, 2020, the Company received cash proceeds of $9,000
for 20,000
shares of common.
On
May 1, 2020, the Company received cash proceeds of $10,000
for 20,000
shares of common stock.
On
May 5, 2020, the Company received cash proceeds of $10,000
for 40,000
shares of common from warrant exercise. The shares
were issued on August 3, 2020.
On
May 16, 2020, the Company received cash proceeds of $16,000
for 40,000
shares of common.
On
May 18, 2020, the Company received cash proceeds of $20,000
for 80,000
shares of common. The shares were issued on August
3, 2020.
On
May 18, 2020, the Company received cash proceeds of $15,000
for 60,000
shares of common. The shares were issued on August
3, 2020.
On
July 23, 2020, the Company received cash proceeds of $7,500
for 30,000
shares of common stock by a third-party investor.
On
August 26, 2020, the Company received cash proceeds of $10,000
for 40,000
shares of common stock to be issued. The shares
were issued on October 23, 2020.
On
September 18, 2020, the Company received cash proceeds of $7,500
for 30,000
shares of common stock to be issued. The shares
were issued on October 23, 2020.
On
October 21, 2020, the Company received cash proceeds of $10,000
for 40,000
shares of common stock to be issued.
On
November 5, 2020, the Company received cash proceeds of $10,000
for 40,000
shares of common stock to be issued.
Common
Stock Issued from warrants and options exercise.
During
the year ended December 31, 2021, the Company issued 160,000
shares of common stock for total consideration
of $50,000
from warrants exercise.
During
the year ended December 31, 2021, the Company issued 1,000,000
shares of common stock from option exercise for
total consideration of $50,000.
On
January 31, 2020, the Company granted 150,000
stock options for services valued at $173,951.
The exercise price of outstanding options for common stock was $0.50
per option, and the term of exercise of the outstanding
options was one year from the date of grant. During the year ended December 31, 2020, 137,615
option were exercised for $68,808.
The Company cancelled 12,385
of the remaining unexercised options at December
31, 2020.
On
January 21, 2020, the Company received cash proceeds of $20,000
for 40,000
shares of common stock in an option exercise
by a third-party investor.
On
February 26, 2020, the Company received cash proceeds of $20,000
for 40,000
shares of common stock in an option exercise
by a third-party investor.
On
February 28, 2020, the Company received cash proceeds of $20,000
for 40,000
shares of common stock in an option exercise
by a third-party investor.
On
March 2, 2020, the Company received cash proceeds of $8,808
for 17,615
shares of common stock to be issued in an option
exercise by a third-party investor. The shares were issued on May 19, 2020.
On
June 20, 2020, the Company received cash proceeds of $12,500
following a warrant exercise for 50,000
shares of common stock.
Common
Stock sold with a Promise to Deliver Title to Plot of Land and Warrants
On
December 8, 2020, the Company received cash proceeds of $20,000
for 50,000
shares of common stock to be issued to a third-party
investor. In conjunction with this sale of shares, the Company also attached one (1) plot of land. The total cash proceeds of $20,000
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $11,890;
and plot of land was valued at $8,110.
The shares were issued on March 1, 2021.
On
December 31, 2020, the Company received cash proceeds of $30,000
for 50,000
shares of common stock to be issued to a third-party
investor. In conjunction with this sale of shares, the Company also attached one (1) plot of land. The total cash proceeds of $30,000
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $20,622;
and plot of land was valued at $9,378.
The shares were issued on March 1, 2021.
On
April 22, 2021, the Company received cash proceeds of $35,000
for 70,000
shares of common stock to be issued to a third-party
investor. In conjunction with this sale of shares, the Company also attached one (1) plot of land. The total cash proceeds of $35,000
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $29,521;
and plot of land was valued at $5,479.
On
October 10, 2019, the Company received cash proceeds of $50,000
for 100,000
shares of common stock to be issued to a third-party
investor. In conjunction with this sale of shares, the Company also attached one (1) plot of land. The total cash proceeds of $50,000
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $39,282;
and plot of land was valued at $10,718.
The shares were issued on May 1, 2020.
On
November 6, 2019, the Company received cash proceeds of $35,080
for 70,160
shares of common stock to be issued to a third-party
investor. In conjunction with this sale of shares, the Company also attached one (1) plot of land. The total cash proceeds of $35,080
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $25,258;
and plot of land was valued at $9,822.
The shares were issued on May 1, 2020.
On
January 13, 2020, the Company received cash proceeds of $40,000
for 80,000
shares of common stock to be issued to a third-party
investor. In conjunction with this sale of shares, the Company also attached two (2) plots of land. The total cash proceeds of $40,000
was allocated based upon the relative fair value
of the shares and two (2) promised plots of land in the following amounts: shares were valued at $23,780;
and plot of land was valued at $16,220.
The shares were issued on May 1, 2020.
On
January 13, 2020, the Company received cash proceeds of $50,000
for 100,000
shares of common stock to be issued to a third-party
investor. In conjunction with this sale of shares, the Company also attached two (2) plots of land. The total cash proceeds of $50,000
was allocated based upon the relative fair value
of the shares and two (2) promised plots of land in the following amounts: shares were valued at $39,282;
and plot of land was valued at $10,718.
The shares were issued on May 1, 2020.
On
January 24, 2020, the Company received cash proceeds of $25,000
for 50,000
shares of common stock to be issued to a third-party
investor. In conjunction with this sale of shares, the Company also attached one (1) plot of land. The total cash proceeds of $25,000
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $16,174;
and plot of land was valued at $8,826.
The shares were issued on May 1, 2020.
On
March 25, 2020, the Company received cash proceeds of $25,000
for 50,000
shares of common stock to be issued to a third-party
investor. In conjunction with this sale of shares, the Company also attached one (1) plot of land. The total cash proceeds of $25,000
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $16,174;
and plot of land was valued at $8,826.
The shares were issued on April 3, 2020.
On
April 01, 2020, the Company received cash proceeds of $25,000
for 50,000
shares of common stock to be issued to a third-party
investor. In conjunction with this sale of shares, the Company also attached one (1) plot of land. The total cash proceeds of $25,000
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $16,174;
and plot of land was valued at $8,826.
On
June 25, 2020, the Company received cash proceeds of $25,000
for 100,000
shares of common stock and 100,000 one-year warrants
to be issued to a third-party investor. In conjunction with this sale of shares, the Company also attached one (1) plot of land. The
total cash proceeds of $25,000
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares and warrants were valued at $16,174;
and plot of land was valued at $8,826.
On
July 14, 2020, the Company received cash proceeds of $25,000
for 150,000
shares of common stock to be issued to a third-party
investor. In conjunction with this sale of shares, the Company also attached one (1) plot of land. The total cash proceeds of $25,000
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares and warrants were valued at $20,797;
and plot of land was valued at $4,203.
On
November 15, 2020, the Company received cash proceeds of $25,000
for 100,000
shares of common stock to be issued to a third-party
investor. In conjunction with this sale of shares, the Company also attached one (1) plot of land and warrants. The total cash proceeds
of $25,000
was allocated based upon the relative fair value
of the shares, the warrants and one (1) promised plot of land in the following amounts: shares were valued at $12,882;
warrants were valued at $9,189
and plot of land was valued at $2,929.
On
December 8, 2020, the Company received cash proceeds of $20,000
for 50,000
shares of common stock to be issued to a third-party
investor. In conjunction with this sale of shares, the Company also attached one (1) plot of land. The total cash proceeds of $20,000
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $11,890;
and plot of land was valued at $8,110.
As of December 31, 2020, the shares had not been issued and were recorded as stock payable.
On
December 31, 2020, the Company received cash proceeds of $30,000
for 50,000
shares of common stock to be issued to a third-party
investor. In conjunction with this sale of shares, the Company also attached one (1) plot of land. The total cash proceeds of $30,000
was allocated based upon the relative fair value
of the shares and one (1) promised plot of land in the following amounts: shares were valued at $20,622;
and plot of land was valued at $9,378.
As of December 31, 2020, the shares had not been issued and were recorded as stock payable.
Common
Stock Issued for debt settlement
On
December 31, 2020, the Company executed amendments to promissory notes with six (6) existing investors to extend the maturity date for
the issuance of an aggregate of 23,000
shares of common stock with a fair value of approximately
$10,000.
These shares were issued on January 1, 2021.
On
January 1, 2021, the Company issued an aggregate of 95,000
shares of common stock in conjunction with previously
executed promissory notes. These shares were previously recorded as stock payable for aggregate fair value of approximately $75,600.
On
January 1, 2021, the Company issued an aggregate of 23,000
shares of common stock in conjunction with executed
amendments to previously executed promissory notes. These shares were issued with an estimated fair value of $8,970.
On
January 1, 2021, the Company issued 29,727
shares of common stock with fair value of $10,999
as payment for accrued interest related to a
promissory note with related party.
On
February 25, 2021, the Company issued 85,000
shares of common stock as commitment shares in
accordance with the terms of one of its senior secured self-amortization convertible note with aggregate fair value of $130,900.
On
July 1, 2021, the Company issued an aggregate of 35,000
shares of common stock in conjunction with executed
amendments to previously executed promissory notes. These shares were issued with an estimated fair value of $12,605.
During
the year ended December 31, 2021, the Company issued 285,000 shares of common stock with fair value of $136,800 following a late remittance
of an installment related to a prior self-amortization note.
On
June 4, 2020, the Company issued 39,462
shares valued at $29,202
in connection with securing a loan from a third-
party.
Common
Stock Issued for equity-method investment.
On
May 14, 2021, the Company issued 3,000,000
shares of common stock with a fair value of $2,580,000
for the acquisition of 25%
of the membership interest of Rancho Costa Verde
Development (See note 8).
Common
Stock issued following registered offering (July 2021 offering)
On
July 26, 2021, the Company entered into securities purchase agreements with certain institutional and accredited investors for the issuance
and sale of 3,000,000
shares of the Company’s common stock at a closing price
of $0.68 per
share. The issuance also includes an equivalent number of warrants convertible into an equivalent number of the Company’s common
stock at a strike price of $0.68.
The gross proceeds of the financing were $2,040,000
and the net proceeds were approximately $1,800,000.
Common
Stock Issued with Land Acquisition
On
September 30, 2020, the Company issued 250,000
shares of common stock valued at $150,000
to Valdeland, S.A. de C.V., a Company controlled
by its Chief Executive Officer, Roberto Valdes, towards the acquisition of Plaza Bajamar (Note 9).
Preferred
Stock
On
November 6, 2019, the Company authorized and issued 1,000
shares of Series B Preferred Stock (“Series
B”) and 350,000
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, 2019, even though the conversion would require the issuance of variable number of shares since such obligation
is not unconditional. As of December 31, 2021, and 2020, Management recorded the value attributable to the Series B of $293,500
as temporary equity on the consolidated balance
sheet 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 $60,000 of dividend on Series B during the fiscal year ended December
31, 2021, aggregating the total accrual to $130,000 since November 6, 2019. Such amount has been reported in Additional Paid In Capital
on the Company’s consolidated balance sheets.
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 additional 10% upon each occurrence of an event of default. At the date of this 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. The Company believes that it has never been in default of any covenant pursuant to the
terms of the Securities Purchase Agreement. The Company has not been served with any notice of default stating the specific default events.
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 share of preferred stock during the years ended December 31, 2021, and 2020.
Stock
Options
A
summary of the Company’s option activity during the year ended December 31, 2021, is presented below:
SCHEDULE
OF OPTION ACTIVITY
| | |
Number
of Options | | |
Weighted Average Exercise
Price | | |
Weighted Average Remaining Contract
Term (Year) | |
| | |
| | |
| | |
| |
| Outstanding at December 31, 2020 | |
| 2,900,000 | | |
$ | 0.43 | | |
| 3.35 | |
| Granted | |
| 3,150,000 | | |
| 0.30 | | |
| 3.43 | |
| Exercised | |
| (1,000,000 | ) | |
| 0.05 | | |
| 1.00 | |
| Forfeit/Canceled | |
| (1,200,000 | ) | |
| 0.58 | | |
| 0.50 | |
| Outstanding at December 31, 2021 | |
| 3,850,000 | | |
$ | 0.41 | | |
| 4.30 | |
| | |
| | | |
| | | |
| | |
| Exercisable at December 31, 2021 | |
| 1,487,500 | | |
| | | |
| | |
A
summary of the Company’s option activity during the year ended December 31, 2020, is presented below
| | |
Number
of Options | | |
Weighted Average Exercise
Price | | |
Weighted Average Remaining Contract
Term (Year) | |
| | |
| | |
| | |
| |
| Outstanding at December 31, 2019 | |
| - | | |
$ | - | | |
| - | |
| Granted | |
| 3,050,000 | | |
| 0.44 | | |
| 3.62 | |
| Exercised | |
| (137,615 | ) | |
| 0.50 | | |
| 0.87 | |
| Forfeit/Canceled | |
| (12,385 | ) | |
| 0.50 | | |
| - | |
| Outstanding at December 31, 2020 | |
| 2,900,000 | | |
$ | 0.43 | | |
| 3.35 | |
| | |
| | | |
| | | |
| | |
| Exercisable at December 31, 2020 | |
| 400,000 | | |
| | | |
| | |
Options
outstanding as of December 31, 2021, and 2020, had aggregate intrinsic value of $716,000
and $158,000,
respectively. At December 31, 2021, the total unrecognized deferred share-based compensation expected to be recognized over the remaining
weighted average vesting periods of 0.24
years for outstanding grants was approximately
$0.7 million.
At December 31, 2020, the total unrecognized deferred share-based compensation expected to be recognized over the remaining weighted
average vesting periods of 1.1
years for outstanding grants was approximately
$0.6 million.
The
following table summarizes information about stock options outstanding and vested at December 31, 2021:
SCHEDULE
OF INFORMATION ABOUT STOCK OPTIONS OUTSTANDING AND VESTED
| | | |
Options
Outstanding | | |
Options
Vested | |
| | | |
| | |
| | |
Weighted | | |
| | |
| | |
| | |
| |
| | | |
| | |
| | |
Average | | |
Weighted | | |
| | |
Weighted | | |
Weighted | |
| | | |
Number | | |
Number | | |
Remaining | | |
Average | | |
Number | | |
Remaining | | |
Average | |
| Exercise | | |
of Options | | |
of Options | | |
Contractual | | |
Exercise | | |
of | | |
Contractual | | |
Exercise | |
| Prices | | |
Outstanding | | |
Exercisable | | |
Life | | |
Price | | |
Options | | |
Life | | |
Price | |
| | | |
| | |
| | |
(In years) | | |
| | |
| | |
(In years) | | |
| |
| $ | 0.33 | | |
| 1,700,000 | | |
| 1,487,500 | | |
| 3.65 | | |
| 0.33 | | |
| 1,487,500 | | |
| 3.65 | | |
| 0.33 | |
| $ | 0.43 | | |
| 600,000 | | |
| - | | |
| 4.99 | | |
| 0.43 | | |
| - | | |
| - | | |
| - | |
| $ | 0.50 | | |
| 1,550,000 | | |
| - | | |
| 4.75 | | |
| 0.50 | | |
| - | | |
| - | | |
| - | |
| | | | |
| 3,850,000 | | |
| 1,487,500 | | |
| 4.30 | | |
$ | 0.41 | | |
| 1,487,500 | | |
| 3.65 | | |
$ | 0.33 | |
The
Company measured equity-based compensation using the Black-Scholes option valuation model using the following assumptions:
SCHEDULE
OF ASSUMPTIONS TO VALUE STOCK OPTIONS
| | |
| For
Years Ending December 31, | |
| | |
| 2021 | | |
| 2020 | |
| | |
| | | |
| | |
| Expected
term | |
| 2.75
years | | |
| 2-3
years | |
| Market
price | |
$ | 0.43
–
0.50 | | |
$ | 0.33
- 0.69 | |
| Expected
volatility | |
| 159%
-162% | | |
| 150%-160
% | |
| Expected
dividends | |
| None | | |
| None
| |
| Risk-free
interest rate | |
| 0.38%
- 0.87% | | |
| 0.18%-0.19% | |
| Forfeitures | |
| None | | |
| None
| |
Warrants
A
summary of the Company’s warrant activity during the year ended December 31, 2021, is presented below:
SCHEDULE
OF WARRANTS ACTIVITY
| | |
Number
of Warrants | | |
Weighted Average Exercise
Price | | |
Weighted Average Remaining Contract
Term (Year) | |
| | |
| | |
| | |
| |
| Outstanding at December 31, 2020 | |
| 460,000 | | |
$ | 0.38 | | |
| 0.70 | |
| Granted | |
| 3,180,000 | | |
| 0.69 | | |
| 5.08 | |
| Exercised | |
| (160,000 | ) | |
| 0.31 | | |
| 0.23 | |
| Forfeit/Canceled | |
| (300,000 | ) | |
| 0.42 | | |
| - | |
| Outstanding at December 31, 2021 | |
| 3,180,000 | | |
$ | 0.69 | | |
| 5.08 | |
| | |
| | | |
| | | |
| | |
| Exercisable at December 31, 2021 | |
| 3,180,000 | | |
| | | |
| | |
The
Company used the following assumptions to value the warrants issued during the year ended December 31, 2021:
SCHEDULE
OF ASSUMPTIONS TO VALUE WARRANTS
| | |
December 2021 | |
| | |
Warrants | |
| | |
| |
| Risk free rate | |
| 0.73 | % |
| Market price per share | |
$ | 1.06 | |
| Life of instrument in years | |
| 5.50
years | |
| Volatility | |
| 164.6 | % |
| Dividend yield | |
| 0 | % |
NOTE
11 – INCOME
TAX
Significant
components of the Company’s deferred tax assets and liabilities for federal and state income taxes as of December 31, 2021, and
2020 are as follows:
SCHEDULE
OF DEFERRED TAX ASSETS AND LIABILITIES
| | |
December
31, 2021 | | |
December
31, 2020 | |
| Deferred tax assets: | |
| | | |
| | |
| Stock compensation | |
$ | 435,685 | | |
$ | 139,198 | |
| Accruals | |
| 165,222 | | |
| 57,927 | |
| Net operating loss carry
forward | |
| 2,314,746 | | |
| 2,011,604 | |
| Total gross deferred tax assets | |
| 2,915,653 | | |
| 2,208,729 | |
| Less - valuation allowance | |
| (2,915,653 | ) | |
| (2,208,729 | ) |
| Net deferred tax assets | |
$ | - | | |
$ | - | |
As
of December 31,2021, and 2020, the Company had gross federal net operating loss carryforwards of approximately $11,023,000
and $9,579,000,
respectively. Management expects the limitation placed on the federal net operating loss carryforwards prior to the ownership change
will likely expire unused. As of December 31, 2021, all tax years are open for examination by the taxing authorities.
Due
to the enactment of the Tax Reform Act of 2017, the corporate tax rate for those tax years beginning with 2018 has been reduced to 21%.
NOTE
12 – SUBSEQUENT
EVENTS
Management
has evaluated subsequent events pursuant to the issuance of the consolidated financial statements and has determined that, other than
listed above, no other reportable subsequent events exist through the date of these consolidated financial statements.
Subsequent
to December 31, 2021, the Company issued 814,714
shares of common stock pursuant to a consulting
agreement executed on April 1, 2016, with an estimated fair value of approximately $447,000.
Such issuance relates to advisory services in connection with potential acquisitions, product development, marketing & promotion
of the Company’s real estate properties. Such liability was included in accounts payable and accrued liabilities in the Company’s
consolidated balance sheet as of December 31, 2021.
Subsequent
to December 31, 2021, the Company executed a consulting and real estate sales agreement with an initial six-month term. Pursuant to such
contract, the Company issued 600,000
options to purchase common stock of the Company
at $0.001
strike price. The consultant immediately exercised
the options and the Company issued 600,000
shares of Common Stock.
Subsequent
to December 31, 2021, the Company executed three securities purchase agreements with three investors, which included (i) the issuance
of three promissory notes for total principal amount of $616,200
and net funding of $522,500
and (ii) 687,500
warrants to purchase an equivalent number of
Common Stock at a strike price of $0.80.
In connection with the securities purchase agreements, the Company also issued a total of 450,000
commitment shares fully earned on issuance. Two
of the promissory notes are convertible into the Company’s common stock at a fixed conversion rate upon an event of default. One
of the convertible notes, is convertible at a discounted price to the closing bid price of the Company.