UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐

 

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

 

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

 

 

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

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

 

As of August 20, 2018:  there were 15,463,901 common shares of common stock, $0.001 par value per share, outstanding.

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

 

PART I — FINANCIAL INFORMATION

  

Item 1.     Financial Statements (Unaudited)

 

 

INTERNATIONAL LAND ALLIANCE, INC.

Notes to Financial Statements

 

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, Norte region of Mexico. The Company has a 100% equity interest in International Land Alliance, S.A. de C.V., a corporation organized in Mexico. 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.

 

Going Concern

 

These financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has generated recurring losses and a working capital deficit and anticipates future losses in the development of its business raising substantial doubt about the Company's ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand, loans from directors and/or issuance of common shares. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

The Company's financial instruments consist principally of cash, accounts payable, accrued liabilities, and note payable to a third party. Pursuant to ASC 820, "Fair Value Measurements and Disclosures" and ASC 825, "Financial Instruments", the fair value of our cash equivalents is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all the other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

 

The following table presents assets and liabilities that were measured and recognized at fair value as of June 30, 2018 on a recurring basis:

 

 

 

Net revenue includes product sales, less excise taxes and customer programs and incentives. The Company recognizes revenue by applying the following steps in accordance with Accounting Standards Codification ("ASC") Topic 606 – Revenue from Contracts with Customers: (i) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.

 

 

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.

 

The Company follows the provisions of ASC 740, "Income Taxes". 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. The Company 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.

 

 

The Company computes net earnings (loss) per share in accordance with ASC 260, "Earnings per Share". ASC 260 requires presentation of both basic and diluted net earnings per share ("EPS") on the face of the statement of operations. Basic EPS is computed by dividing earnings (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 preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At June 30, 2018 and December 31, 2017, total warrants issued and outstanding convertible into common stock amounted to 827,000 shares and 848,000 shares, respectively.

 

 

 

The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through June 30, 2018 and December 31, 2017. The Company's bank balance did not exceed FDIC insured amounts at June 30, 2018 or at December 31, 2017, respectively.

 

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard will be effective for the Company in the first quarter of 2018. Early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.

 

In November 2016, the FASB issued Accounting Standards Update No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash" ("ASU 2016-18"). The new guidance is intended to reduce diversity in practice by adding or clarifying guidance on classification and presentation of changes in restricted cash on the statement of cash flows. ASU 2016-18 is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted. The amendments in this update should be applied retrospectively to all periods presented. The Company is currently evaluating the impact of adopting ASU 2016-18 noting it will only impact the Company to the extent it has restricted cash in the future.

 

In June 2016, the FASB issued Accounting Standards Update ("ASU") 2016-13, "Financial  Instruments - Credit  Losses (Topic 326)." The new standard amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact it may have on its financial statements.

 

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Company is currently evaluating this guidance to determine the impact it may have on its financial statements.

  

NOTE 3 – ACCRUED EXPENSES

 

On September 1, 2016, the Company issued 250,000 shares of common stock to a third-party investor for cash proceeds of $187,500. In conjunction with this sale of shares, the Company also attached five (5) plots of land (the title to which not currently owned by the Company as its promise to transfer title to the investor once the Company owns the land) and issued 250,000 warrants at an exercise price of $0.75 per share, exercisable over a term of one year from the date of issuance (Note 6). The total cash proceeds of $187,500 was allocated based upon the relative fair market value of the shares, warrants and five (5) plots of land in the following amounts: shares were valued at $115,091; warrants were valued at $26,372, and five (5) plots of land was valued at $46,037.

 

 

On October 2, 2017, the Company entered into an agreement with this third-party investor and agreed to buy back the 5 (five) plots of land for an agreed sale price of $206,250 due by February 28, 2018. The Company has recorded a loss of $160,213 on the purchase of these 5 (five) plots of land, in the accompany financial statements for the year ended December 31, 2017. The Company has paid $106,250 of the purchase price as of December 31, 2017 and $100,000 remained payable and recorded as accrued expense as of December 31, 2017 (Note 8). The remaining balance of $100,000 was paid during the six months ended June 30, 2018 leaving a $0 balance at June 30, 2018.

 

The Company recorded accrued expenses the relative fair market value of plots of land sold by the Company to investors in conjunction with the sale of common stock to raise capital (Note 6). Total accrued expenses were $381,550 and $378,061 as of June 30, 2018 and December 31, 2017, respectively.

 

 

On October 1, 2013, the Company issued 3,750,000 shares of its common stock as founder shares to its Chief Executive Officer valued at its fair value of $3,750. In addition, the Company issued 3,500,000 shares of its common stock as founder shares to its Chief Financial Officer valued at its fair value of $3,500.

 

On October 1, 2013, the Company executed an agreement with Grupo Valcas/Baja Residents Club, S.A. de C.V., an architectural and planning firm controlled by Roberto Jesus Valdes, one of the Company's officer and director. Pursuant to the terms of the agreement, Grupo Valcas agreed to provide a conceptual site plan for the Oasis Park project which will include buildings and plot layouts, final grades for plots, streets and common areas, drainage, locations of buildings on plots, slab or floor elevations, delineation of off-street parking and open space/recreation areas), as well as construction management for common areas and commercial buildings. Grupo Valcas will also be responsible for obtaining all federal, state and municipal permits required for the project. For its services, Grupo Valcas was paid $100,000 in cash and was issued 28,000 shares of our Series A preferred stock (Note 6) valued at its fair value of $2,260,496 which was recorded as stock-based compensation. Each Series A preferred stock is convertible, at the option of Grupo Valcas at any time, into 100 shares of our common stock. At any time on or before October 1, 2018, the Company has the option to redeem the preferred shares at a price of $100 per share. The Company has not redeemed any preferred stock as of June 30, 2018 and December 31, 2017, respectively.

 

The Company paid to its Chief Executive Officer consulting fees of $30,000 and $227,000 ($102,000 in cash and 250,000 shares of common stock valued at the its fair market value of $125,000) for six months ended June 30, 2018 and the year ended December 31, 2017 respectively (Note 6). The Company paid to its Chief Financial Officer consulting fees of $66,360 and $264,987 ($139,987 in cash and 250,000 shares of common stock valued at its fair market value of $125,000) for the six months ended June 30, 2018 and year ended December 31, 2017 respectively (Note 6).

 

The Company paid to its Secretary consulting fees of $25,706 and $155,505 ($30,505 in cash and 250,000 shares of common stock valued at its fair market value of $125,000) for the six months ended June 30, 2018 and year ended December 31, 2017, respectively (Note 6).

 

NOTE 5 – COMMITMENTS AND CONTINGENCIES

 

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 May 1, 2028. The Company also recorded a $7,500 debt discount due to origination fees due at the beginning of the note.  During the six months ended June 30, 2018, the company amortized $209 of the debt discount into interest expense leaving a remaining total debt discount on the note of $7,291 as of June 30, 2018.  

 

On Deck

 

On April 4, 2018 the Company issued a promissory note to On Deck for $35,000 of cash consideration.  The note bears interest at 94%, matures on January 6, 2019. The Company also recorded a $14,140 debt discount due to origination fees due at the beginning of the note.  During the six months ended June 30, 2018, the company amortized $4,451 of the debt discount into interest expense leaving a remaining total debt discount on the note of $9,689 as of June 30, 2018.  

 

Commitment to purchase land

 

The Company anticipates transfer of ownership title to the resort properties in Baja, California, to the Company over the next sixty days. The two land projects consisting of 497 acres and 20 acres to be acquired and developed into Oasis Park resort near San Felipe, Baja and Valle Divino resort in Ensenada, is subject to approval by the Mexican government in Baja, California. 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.

On October 2, 2017, the Company entered into an agreement to purchase five (5) plots of land for $206,250 that it originally sold to a third-party investor on September 1, 2016 (Note 3). The Company paid the remaining balance $100,000 owed to this third-party investor on February 28, 2018 (Note 8).

 

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. Other than as set forth below, 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.

 

In the normal course of business, the Company incurs costs to hire and retain external legal counsel to advise it on regulatory, litigation and other matters. The Company expenses these costs as the related services are received. If a loss is considered probable and the amount can be reasonable estimated, the Company recognizes an expense for the estimated loss.

   

NOTE 6 – STOCKHOLDERS' EQUITY

 

The Company's capitalization at June 30, 2018 was 75,000,000 authorized common shares and 100,000 authorized preferred shares, both with a par value of $0.001 per share.

 

 

 

 

 

 

 

 

 Warrant Exercise

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

  

 

 

 

At June 30, 2018, 827,000 warrants were exercisable into common stock. The exercise price of warrants to convert into common stock ranged from $0.10 to $0.50 per warrant, and term of exercise of warrants was one year from the date of issuance.

 

At December 31, 2017, 848,000 warrants were exercisable into common stock. The exercise price of warrants to convert into common stock ranged from $0.10 to $0.50 per warrant, and term of exercise of warrants was one year from the date of issuance.

 

NOTE 7 – INCOME TAX

 

Income tax expense for the years ended December 31, 2017 and June 30, 2018 is summarized as follows:

  

 

 

 

The following is a reconciliation of the provision for income taxes at the U.S. federal income tax rates of 21% and 21%, and the state income tax rates net of federal tax benefit of 0% for the years ended December 31, 2017 and June 30, 2018, respectively, to the income taxes reflected in the Statements of Operations:

 

The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at December 31, 2017 and June 30, 2018 are as follows:

 

 

Deferred income taxes are provided for the tax effects of transactions reported in the financial statements and consist of deferred taxes related primarily to differences between the bases of certain assets and liabilities for financial and tax reporting. The deferred taxes represent the future tax return consequences of those differences, which will either be deductible or taxable when the assets and liabilities are recovered or settled.

In the normal course of business, the Company's income tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessment by these taxing authorities. Accordingly, the Company believes that it is more likely than not that it will realize the benefits of tax positions it has taken in its tax returns or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with FASB ASC 740. Differences between the estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material adverse effect on the company's financial position. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. As of December 31, 2017, tax years 2014, 2015, 2016 and 2017 remain open for examination by the IRS and California. The Company has received no notice of audit from the Internal Revenue Service or California for any of the open tax years.

 

NOTE 8 – DEBT

 

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 May 1, 2028. The Company also recorded a $7,500 debt discount due to origination fees due at the beginning of the note.  During the six months ended June 30, 2018, the company amortized $209 of the debt discount into interest expense leaving a remaining total debt discount on the note of $7,291 as of June 30, 2018. 

 

On Deck Capital

 

On April 4, 2018 the Company issued a promissory note to On Deck for $35,000 of cash consideration.  The note bears interest at 94%, matures on January 6, 2019. The Company also recorded a $14,140 debt discount due to origination fees due at the beginning of the note.  During the six months ended June 30, 2018, the company amortized $4,451 of the debt discount into interest expense leaving a remaining total debt discount on the note of $9,689 as of June 30, 2018.  

 

NOTE 9 – SUBSEQUENT EVENTS

 

Management has evaluated the subsequent events through August 13, 2018, the date which the financial statements were available to be issued noting no items, except the following, that would impact the accounting for events or transactions in the current period or require additional disclosures.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Overview of Our Company

 

As of June 30, 2018, we had:

 

 

 

 

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If we are unable to raise the capital as required by our Plan of Operations, our acquisition of property may need to be changed.

 

 

 

 

 

 

 

 

 

 

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The acquisition of land with lots for sale;

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The sale price of future lots, compared to the sale price of lots in other resorts in Mexico;

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The cost to construct a home on the lots to be transferred, and the quality of construction;

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The quality of our amenities; and

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The global economy and the demand for vacation homes.

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

 

 

 

 

 

 

 

 

 

 

 

 

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