Impact Development Group — Interim / Quarterly Report 2024

Aug 24, 2024

Impact Development Group Inc.

Condensed Consolidated Interim Financial Statements

For the Three and Six Months ended June 30, 2024 and 2023

(Unaudited)

(Expressed in US Dollars)

NOTICE OF NO AUDITOR REVIEW OF CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the condensed consolidated interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying unaudited condensed interim consolidated financial statements have been prepared by and are the responsibility of management.

The Company's independent auditor has not performed a review of these financial statements in accordance with the standards established by the Chartered Professional Accountants of Canada for a review of condensed interim consolidated financial statements by an entity's auditor.

Page 1

Impact Development Group Inc.

Condensed Consolidated Interim Statements of Financial Position (Expressed in US Dollars) As at June 30, 2024

As at	Note		June 30, 2024	December 31, 2023
Assets
Current
Cash and cash equivalents	14	$	113,441$	71,523
Other accounts receivable	12		732,529	879,792
Property and other inventories	10		11,634,912	11,181,591
Land held for development	8		13,846,463	13,897,177
Prepayments and other short-term assets	11		677,897	458,355
Current assets			27,005,242	26,488,438
Non-current
Machinery and equipment	7		65,923	106,279
Right of use assets	9		1,694	18,101
Non-current assets			67,617	124,380
Total assets		$	27,072,859$	26,612,818
Liabilities and shareholder's equity
Current
Accounts payable and accrued liabilities	13	$	2,293,104$	3,239,877
Borrowings – Current	18		3,487,964	5,324,131
Lease Liabilities – Current	9		40,540	73,148
Advances received from customers			102,601	136,970
Current liabilities			5,924,209	8,774,126
Non-current
Provisions for employee benefits			59,395	50,741
Borrowings – Non-Current	18		5,376,410	1,644,553
Lease liabilities–Non-Current	9		-	10,850
Non-current liabilities			5,435,805	1,706,144
Share capital	15		51,607,675	50,269,701
Contributed surplus	15,16		1,565,186	1,440,926
Deficit			(37,329,822)	(35,442,474)
Accumulated other comprehensive income			5,411	-
Complementary tax			(135,605)	(135,605)
Total shareholder's equity			15,712,845	16,132,548
Total liabilities and shareholder's equity		$	27,072,859$	26,612,818

Nature of operations and continuance of business (Note 1) Going concern (Note 2)

Approved and authorized by the Board on August 23, 2024

“Sophie Galper-Komet” Sophie Galper-Komet

/s/Thomas Wenz

Director

Director

Director

Page 2

Condensed Consolidated Interim Statement of Earnings and Comprehensive Loss (Expressed in US Dollars)

Impact Development Group Inc.

Three and six months ended June 30, 2024 and 2023

			Three months ended June 30	Three months ended June 30	Three months ended June 30		Six months	Six months	ended June 30
	Note		2024		2023		2024		2023
Sales		$	869,491	$	1,812,496	$	2,511,458	$	2,596,485
Cost of sales			(913,414)		(2,081,180)		(2,265,636)		(2,850,864)
Sales expenses			(81,644)		(80,344)		(158,625)		(121,049)
Employee benefits expense			(43,138)		(58,108)		(85,683)		(131,811)
Depreciation	7,9		(13,754)		(45,304)		(35,941)		(101,426)
Overhead and administrative
expenses			(359,471)		(593,562)		(807,234)		(984,623)
Operating loss			(541,929)		(1,046,002)		(841,663)		(1,593,288)
Other income			95,747		31,122		109,469		104,839
Interest expense	18		(173,309)		(811,055)		(297,477)		(1,630,396)
Write-down of receivables	12		(241,044)		-		(322,544)		-
Accretion expense on debt	18		(112,981)		-		(112,981)		-
Share-based compensation	16		(251,596)		-		(422,152)		-
Loss before taxes			(1,225,113)		(1,825,935)		(1,887,348)		(3,118,845)
Comprehensive income			5,411		-		5,411
Net loss and comprehensive
income		$	(1,219,702)	$	(1,825,935)	$	(1,881,937)	$	(3,118,845)
Weighted average number of
shares outstanding			15,392,476		2,222,212		14,904,625		2,222,212
Net loss per share, basic	17	$	(0.08)	$	(0.82)	$	(0.13)	$	(1.40)
Net loss per share, diluted		$	(0.08)	$	(0.82)	$	(0.13)	$	(1.40)

See accompanying notes to the condensed consolidated interim financial statements

Page 3

Impact Development Group Inc.

Condensed Consolidated Interim Statement of Changes in Shareholder’s Equity (Deficiency) (Expressed in US Dollars)

Three and six months ended June 30, 2024 and 2023

				Contributed	Accumulated	AOCI		Complementary
		Share	capital	surplus	Deficit			tax	Total
	Note	Shares	Amount
Balance, January 1, 2023		33,333,433	33,333,433	-	(48,567,911)		-	(135,605)	(15,370,083)
Net loss		-	-	-	(3,118,845)		-	-	(3,118,845)
Balance, June 30, 2023		33,333,433	33,333,433	-	(51,686,756)		-	(135,605)	(18,488,928)
Balance, January 1, 2024		14,141,928	$ 50,269,701	$ 1,440,926	$ (35,442,474)	$	-	$ (135,605)	$ 16,132,548
							-
Warrants issued	16	-	-	1,040,081	-			-	1,040,081
Common shares issued on							-
exercise of warrants	15	1,250,548	1,337,974	(1,337,974)	-			-	-
Share-based compensation	16	-	-	422,152	-		-	-	422,152
Net loss		-	-	-	(1,887,348)		-	-	(1,887,348)
Other comprehensive income		-	-	-	-	5,411		-	5,411
Balance, June 30, 2024		15,392,476	$ 51,607,675	$ 1,550,994	$(37,329,822)	$ 5,411		$(135,605)	$ 15,712,844

See accompanying notes to the condensed consolidated interim financial statements

Page 4

Impact Development Group Inc.

Condensed Consolidated Interim Statement of Cash Flows

(Expressed in US Dollars)

Six months ended June 30, 2024 and 2023

For the six months ended	Note		June 30, 2024			June 30, 2023
Net loss		$	(1,887,348)		$	(3,118,845)
Adjustments:
Depreciation expense	7,9		48,855			167,661
Interest expense	18		296,941			1,630,396
Stock based compensation	16		422,152			-
Provision for warranties	13		45,107			-
Write-down of receivables	12		322,544			-
Accretion of debt	18		112,981			-
Changes in non-cash working capital			(1,815,024)			(1,731,188)
Other accounts receivables			(175,281)			(187,927)
Property and other inventories			(453,321)			(373,828)
Land held for development			50,714			-
Prepayments and other short-terms assets			(219,542)			(706,057)
Other account payables			(991,880)			(230,438)
Advances received from customers			(34,368)			(235,642)
Provisions for employee benefits			8,654			2,703
Other			167,636			154,856
Net Cash used in operating activities			(2,286,155)			(2,897,119)
Investing Activities
Proceeds from disposal of machinery and equipment	7		7,906			-
Net Cash from investing activities			7,906			-
Financing Activities
Proceeds from borrowings	18		3,620,000			5,195,745
Interests paid on borrowings	18		(207,073)			(768,838)
Repayments of borrowings	18		(1,046,413)			(1,300,000)
Interests paid on lease liabilities	9		(2,778)			(9,777)
Repayment of lease liabilities	9		(43,569)			(132,317)
Net Cash from financing activities			2,320,167			2,984,813
Net change in cash & equivalents			41,918			87,694
Cash and equivalents, January 1			71,523			14,910
Cash and cash equivalents, June 30		$	113,441	$		102,604
Income taxes paid		$	-	$		-

See accompanying notes to the condensed consolidated interim financial statements

Page 5

Impact Development Group Inc. Notes to the Condensed Consolidated Interim Financial Statements (Expressed in US Dollars) Three and six months ended June 30, 2024 and 2023

1. Nature of operations

Impact Development Group Inc. (“IDG” or the “Company”) formerly Yubba Capital Corp. (“Yubba”), was incorporated under the Ontario Business Corporations Act on January 8, 2021, and was a Capital Pool Company (“CPC”) as defined in the Policy 2.4 of the TSX Venture Exchange. Upon the closing of the Reverse Takeover (the “RTO Transaction), Yubba changed its name to Impact Development Group Inc. The registered head office of the Company is located at 1 Adelaide Street East Suite 801, Toronto, ON, M5C 2V9.

As described below, the Company completed the acquisition of Impact Housing Corporation ("IHC") through an acquisition agreement (the “RTO Transaction”) whereby the Company acquired all of the issued and outstanding shares of IHC on November 30, 2023, with the former shareholders of IHC obtaining control over the Company. As a result of the completion of the RTO Transaction, the shareholders of IHC held 98.59% of the issued and outstanding common shares of the Company and the shareholders of Yubba held the remaining 1.41%.

IHC was incorporated under the laws of the Commonwealth of The Bahamas as a limited liability company on September 5[th] , 2017, under the International Business Companies Act 2000. IHC is a Panamanian real estate developer that provides affordable housing solutions to middle class market in Panama. IHC acquires land and develops high-quality residential and commercial buildings. IHC also provides services including financing, architectural, engineering, off-site manufacturing, general contracting, property management, and administration.

The historical figures presented in these consolidated financial statements represent those of IHC and its subsidiaries. The acquired assets and liabilities and the results of operations and cash flows of Yubba are reflected only for the periods from the acquisition date of November 30, 2023.

On December 12, 2023, the common shares of the Company commenced trading on the TSX Venture Exchange under the trading symbol “IMPT”.

The condensed consolidated interim financial statements were approved by the Company’s Board of Directors on August 22, 2024.

2. Going concern assessment

These condensed consolidated interim financial statements have been prepared on a going concern basis which contemplates that the Company will continue in operation and be able to realize its assets and discharge its liabilities and commitments in the normal course of business for the foreseeable future. In assessing whether this going concern assumption is appropriate and whether there are material uncertainties that may cast significant doubt on the Company’s ability to continue as a going concern, management considers all available information and actions within its control with respect to the future which is at least, but not limited to, twelve months from the end of the reporting period.

During the three and six months ended June 30, 2024, the Company generated a net loss of $1,225,113 and $1,887,348 respectively (2023 – $1,825,935 and $3,118,845). For the six months ended June 30, 2024 and 2023, and net cash flows used in operating activities of $2,286,155 and $2,897,119. As of June 30, 2024, the Company has an accumulated deficit of $37,329,822 (December 31, 2023 – $35,442,474) and working capital surplus of $21,081,032 (2023 – $17,976,172). The continuation of the Company is dependent on its ability to achieve positive cash flow from operations, to obtain the necessary equity or debt financing to expand construction and operations, including continued support from its lenders, to ultimately attain and maintain profitable operations.

These condensed consolidated interim financial statements do not give effect to any adjustments to the carrying value of recorded assets and liabilities, revenue and expenses, the statement of financial position classifications used and disclosures that might be necessary should the Company be unable to continue its operations. Such adjustments could be material and there is no assurance that the Company will be successful in closing additional financings in the future or that the Company will achieve profitable operations.

Page 6

Impact Development Group Inc.

Notes to the Condensed Consolidated Interim Financial Statements (Expressed in US Dollars) Three and six months ended June 30, 2024 and 2023

3. Basis of preparation

a. Statement of compliance

The condensed consolidated interim financial statements have been prepared using accounting policies in compliance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”) applicable to the preparation of these consolidated financial statements.

b. Basis of measurement

These condensed consolidated interim financial statements have been prepared on a historical cost basis, except for financial instruments classified at fair value through profit or loss (“FVTPL”). In addition, these condensed consolidated interim financial statements have been prepared using the accrual basis of accounting except for cash flow information.

c. Basis of consolidation

These condensed consolidated interim financial statements are comprised of the financial statements of the Company and its wholly owned subsidiaries. Subsidiaries are entities controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of an entity to obtain benefits from its activities. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intercompany balances and transactions are eliminated upon consolidation in preparing the financial statements. The condensed consolidated interim financial statements of the Company include the following wholly owned subsidiaries.

Name of Subsidiary Principal activity Impact Housing Corporation Administrative services Impact Housing Management Corporation Administrative services Promotora Santiago Development Corp. Project Developer Promotora Soná, S. A. Project Developer Promotora Capellania, S. A. Project Developer Tekeros Santiago, S. A. Construction manager Tekeros Constructores, S. A. Construction manager Impact Equipos, S. A. Machinery and Equipment manager Comercializadora Soná, S. A. Payroll manager Impact Santiago, S. A. Payroll manager Impact Sona, S. A. Payroll manager Impact Construction, S. A. Payroll manager Promotora Los Faros de Santiago, S.A. Project Developer Impact Construction, S.A. Construction manager Promotora Villas de Vizcaya, S.A. Project Developer Promotora Villas de Valencia, S.A. Project Developer Promotora Villas de Alicante, S.A. Project Developer Promotora Santiago Comercial, S.A. Project Developer

Page 7

Impact Development Group Inc.

Notes to the Condensed Consolidated Interim Financial Statements (Expressed in US Dollars) Three and six months ended June 30, 2024 and 2023

3. B asis of preparation (continued)

• d. Functional and presentation currency

The financial statements are presented in United States Dollar. The Company’s functional currency is the United States Dollar, which is the currency transacted in Republic of Panama, the primary economic environment in which it operates.

Transactions in currencies other than the Company’s functional currency are recognized at the rates of exchange prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the prevailing exchange rate at the reporting date. Non-monetary assets and liabilities, and revenue and expense items denominated in foreign currencies are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Foreign exchange differences are recognized in profit or loss in the period in which they arise.

e. Reclassification

Certain prior year amounts have been reclassified for consistency with the current year presentation. There are reclasses between various expense line items on the Statement of Earnings and comprehensive loss for the three and six months ended June 30, 2023, for comparability with the account classifications used for the three and six months ended June 30, 2024.

These reclassifications had no effect on the reported net cash flows used in operating and financing activities included in the consolidated statements of cash flows and had no effect on the total reported loss and comprehensive loss for the period.

4. Summary of material accounting policies

These condensed interim consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to the presentation of interim financial statements, including IAS 34 Interim Financial Reporting. The condensed interim consolidated financial statements should be read in conjunction with the annual financial statements for the year ended December 31, 2023, which have been prepared in accordance with IFRS as issued by the IASB.

The Company uses the same accounting policies and methods of computation as in the annual financial statements for the year ended December 31, 2023.

5. Critical accounting judgments, assumptions and estimates

There have been no changes to the critical accounting estimates and judgements. Refer to the Company’s annual consolidated financial statements and notes for the year ended December 31, 2023.

6. Reverse acquisition

On April 14, 2023, Yubba and Impact Housing Corporation, incorporated in Bahamas and Impact Housing Corporation, incorporated in Panama (“IHC”) entered into an acquisition agreement pursuant to which Yubba indirectly acquired all the issued and outstanding common shares of IHC through a reverse take-over transaction. The transaction was closed on November 30, 2023.

Page 8

Notes to the Condensed Consolidated Interim Financial Statements (Expressed in US Dollars) Three and six months ended June 30, 2024 and 2023

Impact Development Group Inc.

6. Reverse acquisition (continued)

The transaction was considered a reverse takeover (“RTO” or “RTO Transaction”) as the legal acquiree’s (IHC) former shareholders control the consolidated entity after completion of the RTO. Consequently, the legal acquiree is the accounting acquirer.

At the time of the RTO Transaction, Yubba’s assets consisted primarily of cash, and did not have any processes capable of generating outputs; therefore, Yubba did not meet the definition of a business. Accordingly, as Yubba did not qualify as a business in accordance with IFRS 3 Business Combination , the transaction did not constitute a business combination; however, by analogy it has been treated as a reverse takeover. Therefore, IHC, the legal subsidiary, has been treated as the accounting acquirer and Yubba, the legal parent, has been treated as the accounting acquiree.

Upon completion of the RTO transaction, 5,220,000 common shares of Yubba were consolidated into 200,072 common shares of the Company on the basis on one post-consolidated share for every 26.091 pre-consolidation shares. The fair value of these shares of $214,077, was based on estimated fair value of $1.07 per share as at the RTO date.

In addition, 177,600 common share purchase warrants and 300,000 stock options of Yubba were exchanged on the RTO Transaction to 6,807 common share purchase warrants and 11,498 stock options of the Company and were valued at $910 and $1,537 respectively and included in the consideration paid by the Company. The Company used the Black-Scholes Option Pricing Model to determine the fair value of the common share purchase warrants and stock options with the following assumptions: expected life in years – 2.74, volatility – 41.92%, risk-free rate – 4.03%, share price – $1.07, dividend yield – 0%. In connection with the RTO Transaction, the Company issued 20,007 common shares to advisors. The fair value of these common shares amounting to $21,407 was determined based on estimated fair value of $1.07 per share at the RTO date.

As the acquisition was not considered a business combination, the excess of consideration paid over the net assets acquired together with any transaction costs incurred for the amalgamation is expensed as a listing expense in accordance with IFRS 2 Share-Based Payments .

Consideration paid:

Common shares deemed issued	$ 214,077
Fair value of warrants	910
Fair value of stock options	1,537
Total consideration paid	216,524
Net identifiable assets acquired:
Cash	65,227
Accounts payable and accrued liabilities	(67,162)
Total net identifiable assets acquired	(1,936)
Excess attributed to the cost of listing	218,459
Transaction costs related to RTO
Advisor shares	21,407
Professional fees and other expenses	597,875
Listing expense	$ 837,741

Page 9

Impact Development Group Inc.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US Dollars)

Three and six months ended June 30, 2024 and 2023

7. Machinery and equipment

Machinery and equipment consists of the following:

	Heavy	Rolling
Cost	equipment	equipment	Machinery		Molds	Total
Balance at January 1, 2024	$ 1,074,911	$ 257,098	$	100,901	$ 395,436	$ 1,828,346
Transfer from ROU assets
(Note 9)	187,250	-		-	-	187,250
Disposals	(435,312)	(173,950)		-	-	(609,262)
Balance at
June 30, 2024	$ 826,849	$ 83,148	$	100,901	$ 395,436	$ 1,406,334
Depreciation and impairment
Balance at January 1, 2024	$ 1,016,950	$ 256,484	$	89,309	$ 359,323	$ 1,722,066
Transfer from ROU assets	187,250	-		-	-	187,250
Depreciation	22,170	614		2,675	6,990	32,449
Disposals	(427,404)	(173,950)		-	-	(601,354)
Balance at
June 30, 2024	$ 798,966	$ 83,148	$	91,984	$ 366,313	$ 1,340,411
Net book value at
June 30, 2024	**$ 27,884 **	$ -		$8,917	$ 29,123	$65,923

	Heavy	Rolling
Cost	equipment	equipment	Machinery	Molds	Total
Balance at January 1, 2023	$ 882,532	$ 271,795	$ 44,405	$ 406,029	$ 1,604,761
Transfer from ROU assets
(Note 9)(2)	1,331,615	36,850	56,496	-	1,424,961
Disposals	(1,149,829)	(51,547)	-	-	(1,201,376)
Reclassifications	10,593	-	-	(10,593)	-
Balance at
December 31, 2023	$ 1,074,911	$ 257,098	$ 100,901	$ 395,436	$ 1,828,346
Depreciation and impairment
Balance at January 1, 2023	$ 660,394	$ 233,465	$ 23,932	$ 329,900	$ 1,247,691
Disposals	(972,161)	(45,767)	-	-	(1,017,928)
Transfer from ROU asset
(Note 9)(1)	1,233,066	30,708	49,905	-	1,313,679
Reclassifications	10,593	-	-	(10,593)	-
Depreciation	85,058	38,078	15,472	40,016	178,624
Balance at
December 31, 2023	$ 1,016,950	$ 256,484	$ 89,309	$ 359,323	$ 1,722,066
Net book value at
December 31, 2023	$ 57,961	$ 614	$ 11,592	$ 36,113	$ 106,280

Page 10

Impact Development Group Inc.

Notes to the Condensed Consolidated Interim Financial Statements (Expressed in US Dollars)

Three and six months ended June 30, 2024 and 2023

7. Machinery and equipment (continued)

(1) The assets were purchased by the Company from the lessor of the leased assets at the end of the lease period resulting in classification of assets from Right of Use assets to Machinery and Equipment.

8. Land held for development

Land held for development, held at the Sona, Santiago, and Capellania project sites, consists of the following:

June 30, 2024 December 31, 2023	June 30, 2024 December 31, 2023
Opening balance – January 1 $ 13,897,177 $ Additions - Transfer to Property and other inventories (Note 10) (50,714)	13,541,131 356,046 -
Closing balance $ 13,846,463 $	13,897,177

9. Leases

The company entered into long-term lease agreements for heavy rolling equipment and machinery with lease terms ranging from 3-5 years. The present value of future lease payments was measured using an incremental borrowing rate of 7.5% per annum. Generally, the Company’s lease agreements also include restrictions on the assignment and subleasing of the leased assets.

Right of Use Assets

	Heavy	Rolling
Cost	equipment	equipment	Machinery		Total
Balance at January 1, 2024	$ 288,900	$ 112,150	$ 78,741	$	479,791
Transfer to Machinery and Equipment
(Note 7)	(187,250)	-	-		(187,250)
Balance at
June 30, 2024	$ 101,650	$ 112,150	$ 78,741	$	292,541
Depreciation and impairment
Balance at January 1, 2024	$ 270,799	$ 112,150	$ 78,741	$	461,690
Transfer to Machinery and Equipment
(Note 7)	(187,250)	-	-		(187,250)
Depreciation	16,407	-	-		16,407
Balance at
June 30, 2024	$ 99,956	$ 112,150	$ 78,741	$ 290,847
Carrying amount at
June 30, 2024	$ 1,694	$-	$-		$ 1,694

Page 11

Impact Development Group Inc.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US Dollars)

Three and six months ended June 30, 2024 and 2023

9. Leases (continued)

	Heavy		Rolling
Cost	equipment	equipment		Machinery			Total
Balance at January 1, 2023	$ 1,620,515	$	149,000	$	135,237	$	1,904,752
Transfer to Machinery and equipment (Note 7)	(1,331,615)		(36,850)		(56,496)		(1,424,961)
Balance at
December 31, 2023	$ 288,900	$	112,150	$	78,741	$	479,791
Depreciation and impairment
Balance at January 1, 2023	$ 1,410,121	$	116,604	$	109,502	$	1,636,227
Transfer to Machinery and Equipment
(Note 7)	(1,233,066)		(30,708)		(49,905)		(1,313,679)
Depreciation	93,744		26,254		19,144		139,142
Balance at
December 31, 2023	$ 270,799	$	112,150	$	78,741	$	461,690
Carrying amount at
December 31, 2023	$ 18,101	$	-	$	-	$	18,101
Lease Obligations
							Total
Balance at December 31,2022							272,488
Interest expense							14,773
Lease payments							(203,263)
Balance at December 31, 2023						$ 83,998
Interest expense							2,889
Lease payments							(46,347)
Balance at June 30, 2024						$ 40,540

The maturity analysis of the lease liabilities as at June 30, 2024 is as follows:

he maturity analysis of the lease liabilities as at June 30, 2024 is as follows:
Maturity Analysis	June 30, 2024
Less than one year	$ 41,948
One to five years	-
Over fiveyears	-
Total undiscounted lease liabilities	41,948
Amount representingimplicit interest	(1,408)
	$ 40,540

Page 12

Impact Development Group Inc.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US Dollars)

Three and six months ended June 30, 2024 and 2023

10. Property and other inventories

Property and other inventories consist of the following:
Finished	June 30, 2024	December 31, 2023
Los Sueños de Santiago – Phase 4	$ 55,264	$	874,602
La Reserva de Santiago – Phase 1	-		411,698
Los Sueños de Santiago–Phase 5	121,400		822,369
	176,664		2,018,669
Under construction or development
Los Sueños de Santiago – Phase 4	6,185,955		4,781,356
Los Sueños de Santiago – Phase 5	864,446		562,067
Los Sueños de Santiago – Phase 8	3,012,981		2,700,873
Los Sueños de Santiago – Diamante	412,885		178,858
Los Sueños de Santiago – Phase 6-7	137,567		89,568
La Reserva Social–Phase 2	33,586		33,585
	10,647,330		8,346,307
Materials	810,918		726,615
Total property and other inventories	$ 11,634,912	$	11,181,591

Changes in the carrying value of property and other inventories as at June 30, 2024 and December 31, 2023 were as follows:

	June 30, 2024	December 31, 2023
Opening balance	$ 11,181,591	$ 12,400,980
Costs incurred in development	2,439,755	6,223,321
Capitalized interest	163,299	382,980
Write-down of cost to net realizable value(1)	(12,221)	(1,794,782)
Cost of goods sold(1)	(2,137,512)	(6,030,908)
Closing balance	$ 11,634,912	$11,181,591

(1) Recognized as cost of sales in the consolidated statements of earnings and comprehensive loss.

11. Prepayments and other short- term assets

Prepayment and other short-term assets were comprised as follows:

		June	30, 2024	December 31, 2023
Advances on expenses	$		580,471	$ 446,243
Others			97,426	12,112
Total	$		677,897	$ 458,355

Page 13

Impact Development Group Inc.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US Dollars)

Three and six months ended June 30, 2024 and 2023

12. Other accounts receivables

Other accounts receivable were comprised as follows:

	June 30, 2024	December 31, 2023
Solidarity bonus subsidy	$ 1,550,000	$ 1,410,000
Electrical system reimbursement	159,786	182,904
Customer and employee	152,900	94,500
Expected credit losses (Note 21)	**(1,130,157) **	(807,612)
Total	$ 732,529	$ 879,792

13. Warranty provision

Warranty provision, estimated for general warranties provided by the Company on the houses sold for a period of five years after the possession date, is included in accounts payable and accrued liabilities in the consolidated statements of financial position and cost of sales in the consolidated statements of earnings and comprehensive loss. The provision for six months ended June 30, 2024 and the year ended December 31, 2023 is as follows:

Balance – January 1, 2023	$	-
Additions		174,540
Balance – December 31, 2023		174,540
Additions		45,107
Reversal		(21,613)
Balance –June 30, 2024	$	**198,034 **

Provision for future development costs

Provision for future development costs, presented as accounts payable and accrued liabilities in the consolidated statements of financial position and Cost of Sales in the consolidated statements of earnings and comprehensive loss, as at June 30, 2024 and as at December 31, 2023 is as follows:

Balance – January 1, 2023	$	-
Additions		1,630,597
Balance–December 31, 2023	$	1,630,597
Costs spent in the period		(518,871)
Balance –June 30, 2024	$	1,111,726

14. Cash and cash equivalents

	June 30, 2024	December 31, 2023
Cash on hand	$ 316	$ 500
Deposits in bank	**113,125 **	71,023
Total	$ 113,441	$ 71,523

As of June 30, 2024, and December 31, 2023, the Company had no restrictions on its cash placed in deposits in the bank.

Page 14

Impact Development Group Inc.

Notes to the Condensed Consolidated Interim Financial Statements (Expressed in US Dollars) Three and six months ended June 30, 2024 and 2023

15. Share Capital

The Company has authorized an unlimited number of common shares and 10,882,225 shares are held in escrow as at June 30, 2024 (December 31, 2023 – 10,882,225). Outstanding common shares as at June 30, 2024 and December 31, 2023, are as follows:

		Common shares
	Common shares	in Escrow		Amount
Balance, December 31, 2022	33,333,433	-	$	33,333,433
Conversion of IHC shares(1)	(33,333,433)	-		-
Issuance of Company common shares(1)	1,585,611	636,601		-
Settlement of IHC borrowings(2)	1,531,511	8,504,212		10,738,224
Shares issued pursuant to RTO financing(3)	-	1,663,914		5,962,560
Advisor shares issued pursuant to RTO(4)	-	20,007		21,407
Shares acquired in RTO (Note 6)	142,581	57,491		214,077
Balance, December 31, 2023	3,259,703	10,882,225	$	50,269,701
Shares issued on exercise of warrants(5)	-	1,250,548		1,337,974
Balance, March 31, 2024	3,259,703	12,132,773	$	51,607,675
Balance, June 30, 2024	3,259,703	12,132,773	$	51,607,675

On November 30, 2023, the Company reorganized its share capital in conjunction with the RTO Transaction with the following steps:

• (1) 100 issued and outstanding management shares were cancelled. All remaining existing 33,333,333 shares of IHC were exchanged for 2,222,212 Company common shares on the basis of 15 Company common shares for each IHC share.

• (2) Prior to completion of RTO Transaction, $36,128,780 of borrowings with certain creditors were settled with issuance of 10,035,723 IHC common shares with fair value of $10,738,224). Upon completion of the RTO transaction, the IHC shares were exchanged for Company common shares on the basis of 1:1 exchange ratio.

• (3) On November 30, 2023, the Company issued convertible debentures to its existing shareholders for gross proceeds of $6,023,367. On the same day, the convertible debentures were converted to Units of the Company for issuance of 1,663,914 subscription units. Each Unit was comprised of 1 Company common share and 1 Company warrant. Each warrant entitles the holder thereof to purchase one common share of the Company at an exercise price of $3.62 for a period of three years from the RTO Transaction date. Upon completion of RTO Transaction, each Unit was automatically converted for one Company common share and one Company warrant for a total of 1,663,914 Company common shares and 1,663,914 Company warrants. These common shares and warrants are in escrow as at December 31, 2023. These warrants were valued at $0.04 using the Black Scholes pricing model with the following assumptions: expected life in years - 3, volatility – 41.92%, risk free rate – 4.03%, share price - $1.07, exercise price - $3.62, dividend yield - 0%. The Company allocated the gross proceeds between the Company common shares and Company warrants using a relative fair value approach of $5,962,560 and $60,806 respectively.

• (4) In connection with the RTO, the Company paid an advisor through issuance of 20,007 shares at a price of US$1.07 per share. These are accounted for as transaction fees. The shares are valued at $21,407 and are in escrow as at March 31, 2024.

• (5) The 1,250,548 warrants issued to management pursuant to the RTO Transaction on November 30, 2023, were exercised on March 12, 2024.

Page 15

Notes to the Condensed Consolidated Interim Financial Statements (Expressed in US Dollars) Three and six months ended June 30, 2024 and 2023

Impact Development Group Inc.

16. Share-based Compensation

Warrants

Outstanding warrants as at June 30, 2024 and December 31, 2023 are as follows:

				Weighted
			Weighted	average
			average	remaining
		Warrants in	exercise	contractual
	Warrants	escrow	price	life (years)
Balance, December 31, 2022	-	-	-	-
Warrants acquired pursuant to RTO(1)	6,807	-	$ 2.61	2.75
Warrants issued pursuant to RTO(2)	-	1,663,914	$ 3.62	3.00
Warrants issued to management pursuant to
RTO(3)	-	1,250,548	$ 0.0001	3.00
Balance, December 31, 2023	6,807	2,914,462	$ 2.07	2.92
Warrants issued(4)	921,645	-	$ 5.05	2.82
Warrants exercised–March 12, 2024(3)	-	(1,250,548)	-	-
Balance, March 31, 2024	928,452	1,663,914	$ 4.11	2.74
Warrants issued(4)	472,369	-	$ 4.65	2.83
Balance, June 30, 2024	1,400,821	1,663,914	$ 4.20	2.55
Number of warrants exercisable	**6,807 **	-

• (1) In connection with the RTO Transaction, the Company replaced all the outstanding warrants previously issued by Yubba on August 26, 2021, and expiry date of August 26, 2026. These warrants were fair valued at RTO Transaction date using the Black-Scholes pricing model and the following assumptions:

Risk free interest rate	4.03%
Expected life (years)	2.74
Expected dividend yield	0%
Expected volatility	41.92%
Share price	$ 1.07
Exercise price	$ 1.92
Fair value	$0.13

(2) See Note 15 – Shares issued pursuant to RTO financing.

(3) Pursuant to the Company issued 1,250,548 warrants to the Chief Executive Officer with an expiry date of November 30, 2026, and vested immediately on issuance. A stock compensation expense of $1,337,974, was recognized in the year ended December 31, 2023, based on fair value at RTO transaction date using the Black Scholes pricing model and the following assumptions. The warrants were exercised on March 12, 2024.

Risk free interest rate	3.67%
Expected life (years)	3.00
Expected dividend yield	0%
Expected volatility	41.92%
Share price	$ 1.07
Exercise price	$ 0.0001
Fair value	$1.07

Page 16

Impact Development Group Inc.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US Dollars)

Three and six months ended June 30, 2024 and 2023

(4) Pursuant to the Senior secured debenture agreement entered into on January 25, 2024, the Company issued 1,394,022 warrants on various dates in the six months ended June 30, 2024. The warrants were fair valued at $1,343,117 using Black-Scholes pricing model and the following assumptions:

Risk free interest rate	3.79% - 4.23%
Expected life (years)	3
Expected dividend yield	0%
Expected volatility	41.92%
Share price	$ 2.76 - $ 3.69
Exercise price	$ 3.04-$ 4.06
Fair value	$0.80 -$1.07

Stock options

Outstanding stock options as at June 30, 2024 and December 31, 2023, are as follows:

			Weighted average
		Weighted	remaining
		average	contractual life
	Options	exerciseprice	(years)
Balance, December 31, 2022	-	-	-
Stock options replaced pursuant to RTO(1)	11,498	$2.61	2.74
Balance, December 31, 2023	11,498	$2.61	2.74
Balance, March 31, 2024	11,498	$2.61	2.49
Balance, June 30, 2024	11,498	$2.61	2.24
Number of options exercisable	11,498

(1) In connection with the RTO, the Company acquired all the outstanding options previously issued by Yubba on August 26, 2021. These options were fair valued at the RTO Transaction date using the Black-Scholes Option Pricing Model and the following assumptions:

	Risk free interest rate 3.67% Expected life (years) 2.75 Expected dividend yield 0% Expected volatility 41.92% Share price $ 1.07 Exercise price $ 1.92 Fair value $0.13 Restricted share units	Risk free interest rate 3.67% Expected life (years) 2.75 Expected dividend yield 0% Expected volatility 41.92% Share price $ 1.07 Exercise price $ 1.92
		Fair value $0.13

Pursuant to the RTO Transaction, certain directors, management and employee personnel were granted 427,414 restricted share units (“RSUs”) which are held in escrow as at June 30, 2024. The RSU’s will vest 25% every six months over two years, with the first portion vesting after the first six months from grant date of November 30, 2023, and subsequent portions vesting every six months after that.

The fair value of the RSUs at grant date was $855,442. During the three and six months ended June 30, 2024, an expense of $251,596 and $422,152 (2023 – $nil) was recorded as share-based compensation.

Page 17

Impact Development Group Inc.

Notes to the Condensed Consolidated Interim Financial Statements (Expressed in US Dollars)

Three and six months ended June 30, 2024 and 2023

17. Earnings (loss) per share

Basic loss per share is calculated by dividing the net comprehensive loss by the weighted-average number of common shares outstanding during the period.

		For the	three months ended		For the six months ended	For the six months ended	For the six months ended
		June 30, 2024	June 30, 2023		June 30, 2024		June 30, 2023
Net loss	$	(1,219,702)	$ (1,825,935)	$	(1,881,937)	$	(3,118,845)
Weighted average number of
common shares outstanding		15,392,476	2,222,212		14,904,625		2,222,212
Loss per share, basic	$	(0.08)	$ (0.82)		$ (0.13)	$	(1.40)
Loss per share, diluted	$	(0.08)	$ (0.82)	$ (0.13)		$	(1.40)

The effect of dilution from stock options, warrants and RSUs was excluded from the calculation of weightedaverage number of shares outstanding for diluted loss per share for the three and six months ended June 30, 2024, as they are anti-dilutive.

18. Borrowings

Borrowings as at June 30, 2024 and December 31, 2023 are comprised as follows:

			Current				Non-current
	June 30, 2024		December 31, 2023		June 30, 2024		December 31, 2023
Banks' borrowings		3,161,964		4,008,131		-	-
Private Loans		-		-		1,527,610	1,644,553
Shareholder loans		-		990,000		3,848,800	-
Other loans		326,000		326,000		-	-
TOTAL	$	3,487,964	$	5,324,131	$	5,376,410	$ 1,644,553

Changes in the borrowings were as follows:

	June 30, 2024	December 31, 2023
Opening balance	$ 6,968,684	$ 41,360,116
Cash inflows from issuances	3,620,000	1,590,000
Cash outflows from repayments	(1,046,414)	(1,739,362)
Cash outflows from interest payments	(207,073)	(1,457,170)
Interest accrued	456,277	3,343,878
Financing cost(1)	(1,040,081)	-
Accretion expense on debt(1)	112,981	-
Debt settlement as part of RTO Transaction(2)	**- **	(36,128,778)
Closing balance	$8,864,374	$ 6,968,684

(1) Refer to Shareholder loans below and note 16 on the fair value of warrants issued pursuant to the secured debenture agreement which is offset against the debt fair value. The allocated debt value is accreted to the gross cash proceeds over the maturity term of the agreement.

(2) As part of the RTO Transaction, IHC debt with certain creditors was settled for a fair value of $10,738,224 through the issuance of 10,035,723 shares, resulting in a gain on settlement of debt of $25,390,556 for the year ended December 31, 2023.

Page 18

Impact Development Group Inc.

Notes to the Condensed Consolidated Interim Financial Statements (Expressed in US Dollars)

Three and six months ended June 30, 2024 and 2023

18. Borrowings (continued)

Bank borrowings

Bank borrowing comprises of a credit loan facility with Multibank Inc. to finance the Project Sueños de Santiago – Phase 4, which is secured by a mortgage on the land earmarked as Phase 4. The interest is paid monthly and the principal is repaid as the sale of houses build under Phase 4 project is completed with the full repayment expected to be completed by October 19, 2024.

						June 30,	December 31,
Description	Starting date	Expiry date	Amount	Interest rate		2024	2023
Houses Credit Line	Aug 24, 2019	Oct 19, 2024	$ 4,141,787	9.25%	$	1,923,852	$ 2,703,272
Infrastructure Credit
Line	Aug 24, 2019	Oct 19, 2024	$ 2,459,291	9.25%		829,256	898,015
Interests
Capitalization	Apr 9, 2021	Oct 19, 2024	$ 446,741	9.25%		408,856	406,844
Total					$	3,161,964	$ 4,008,131

Private Loans

Private Loans correspond to promissory notes executed on September 6, 2017, with the following counterparties and terms:

and terms:
	Principal	Months	Interest rate
DCIF Investment Fund	1,624,250	80	15%

Shareholder loan

On December 31, 2023, the Company signed an unsecured, non-interest bearing, on demand promissory note with a shareholder for $990,000. On January 25, 2024, the promissory note was cancelled and the Company replaced the promissory note with a senior secured debenture loan for proceeds of up to $4,500,000. Pursuant to the terms of the financing, the debenture bears an interest at rate of 12% per annum, payable quarterly, with a scheduled maturity date of November 30, 2025. Interest payments are deferred and accrued with the first interest payment occurring on January 31, 2025. Funds will be advanced to the Company each month with the final Tranche to be advanced on or before July 31, 2024. As at June 30, 2024 the Company received $4,610,000 (December 31, 2023 - $990,000). As at June 30, 2024, the Company allocated the gross proceeds between the shareholder loan and Company warrants using a relative fair value approach of $3,569,919 and $1,040,081 respectively. The allocated debt value of $3,569,919 is accreted to its gross proceeds over the maturity term of the agreement. The accretion expense for the three and six months ended June 30, 2024 was $112,981.

Other loans

On July 20, 2022, the Company amended its loan agreement with Panama Equities, Inc. originally entered into on July 27, 2020 to extend the maturity term to February 20, 2023 with an interest rate of 14% per annum. Post the maturity date of February 20, 2023, the loan became payable on demand.

Interest expense

Interest expense for the three and six months ended June 30, 2024 of $173,309 and $297,477 (June 30, 2023 - $811,055 and $1,630,396) comprised of interest on borrowings of $171,549 and $292,978 (June 30, 023 - $805,760 and $1,616,684) and accretion of lease liabilities of $1,177 and $2,889 (June 30, 2023 - $2,320 and $8,205) and other fees and charges of $583 and $1,610 (June 30, 2023 - $2,975 and $5,507).

Page 19

Impact Development Group Inc.

Notes to the Condensed Consolidated Interim Financial Statements (Expressed in US Dollars) Three and six months ended June 30, 2024 and 2023

19. Related party disclosures

The Company entered into several transactions with key management personnel and entities wholly owned by those personnel. The Company considers the executive officers and directors as the key management of the Company. The remuneration of key management personnel includes those persons having the authority and responsibility for the planning, directing, and controlling of the activities of the Company are as follows:

Three months ended Six months ended June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023	Three months ended Six months ended June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023
June 30, 2024 June 30, 2023 June 30, 2024
Remuneration for services Salaries and Wages $ 295,337 $ 224,921 $ 582,341 RSUs (Note 16) 251,596 - 422,152	$ 439,925 -
$546,933 $224,921 $ 1,004,493	$439,925

Amounts due to and from related parties as at June 30, 2024 and December 31, 2023 are as follows:

Related party assets (liabilities)	June 30, 2024	December 31, 2023
Key management personnel	$ (6,450)	$ (2,500)
Shareholder loan (note 18)	$ (4,775,900)	$ (990,000)

The amount due to key management personnel, included in other accounts payable, relates to unpaid remuneration and reimbursement of business-related travel expense.

20. Segment reporting

Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. For the purpose of segment reporting, the Company’s Chief Executive Officer (CEO) is the Chief Operating Decision Maker (CODM).

The Company has one operating and reporting segment. Although the Company prepares financial results at each subsidiary level, the overall financial and operational performance of the Company is analyzed, and forecasts are prepared at consolidated level due to the integrated nature of the construction of the homes. The Company has one product line which is the construction of houses in the interior of Republic of Panama. All current operations and assets are held in Panama with no revenues and business operations outside of Panama. There is no customer that amounts to 10 percent or more of the total revenues earned in the six months ended June 30, 2024, and 2023.

21. Capital and risk management

The objectives of capital management are to ensure the Company’s ability to continue as a going concern and provide an adequate return to shareholders, as well as to maintain an optimal capital structure that reduces the costs of raising capital. The Company’s capital as at June 30, 2024 comprises of shareholder’s equity of $15,712,845 (December 31, 2023 - $16,132,548) and total debt of $8,864,374 (December 31, 2023 - $6,968,684.) The Company manages its capital structure and makes changes based on economic conditions, risks that impact the consolidated operations and future significant capital investment opportunities. To maintain or adjust its capital structure, the Company may issue new equity instruments or considers other financing opportunities.

The Company is exposed to the symptoms and effects of global economic conditions and other factors that could adversely affect its business, financial condition, and operating results. Many of the risk factors are beyond the Company’s direct control. The Company’s management and Board of Directors plan an active role in monitoring the Company’s key risks and in determining the polices that are best suited to manage these risks. The Company does not actively participate in the business of financial assets for speculative purposes.

Page 20

Notes to the Condensed Consolidated Interim Financial Statements (Expressed in US Dollars) Three and six months ended June 30, 2024 and 2023

Impact Development Group Inc.

21. Capital and risk management (continued)

The Company’s strategy with respect to capital risk management has not changed since the year ended December 31, 2023.

Liquidity risk

Liquidity risk refers to the possibility that the Company will not meet its contractual obligations, mainly in respect of its accounts payable and repayment of principal and interest on borrowings.

The Company manages its liquidity needs by monitoring scheduled payments defined in the terms and conditions of each financing contract, as well as forecasts of cash inflows and outflows on a day-to-day basis. Long-term liquidity needs for a 180-day and 360-day monitoring period are identified monthly. The Company’s objective is to maintain cash to meet its liquidity requirements for periods of at least 30 days.

In the event of requiring additional contribution to its real estate development projects, the Company may choose to seek access to bank financing or equity funding. Additionally, it may be able to sell long-term non-financial assets.

Contractual obligations as at June 30, 2024 and December 31, 2023 are as follows:

June 30, 2024	Contractual obligations
	In 6 months 7 to 12 months More than 1 year up to 5years More than 5 years Total
Accounts payable Advances received from customers Lease liabilities Bank loans Private loans Shareholder loan Other loans	$ 2,067,778 $ 225,326 $ - $ - $ 2,293,104 102,601 - - - 102,601 41,948 - - - 41,948 3,161,963 - - - 3,161,963 - 1,527,610 - - 1,527,610 - - 4,775,900 - 4,775,900 326,000 - - - 326,000
TOTAL	$ 5,700,290 $ 1,752,936 $ 4,775,900 $ - $ 12,229,126
December 31, 2023	Contractual cash flows
	In 6 months 7 to 12 months More than 1 year up to 5 years More than 5 years Total
Accounts payable and accrued liabilities Advances received from customers Lease liabilities Bank loans Private loans Shareholder loan Other loans	$ 1,969,126 $ 1,270,751 $ - $ - $ 3,239,877 136,970 - - - 136,970 47,834 29,092 11,026 - 87,952 4,008,131 - - - 4,008,131 - - 1,644,553 - 1,644,553 990,000 - - - 990,000 326,000 - - - 326,000
TOTAL	$7,478,061 $1,299,843 $1,655,579 $- $10,433,483

Page 21

Impact Development Group Inc. Notes to the Condensed Consolidated Interim Financial Statements (Expressed in US Dollars) Three and six months ended June 30, 2024 and 2023

21. Capital and risk management (continued)

Foreign Currency risk

The Company's functional and reporting currency is the United States dollar but it is exposed to foreign currency risk with respect to the expenditures incurred by its Canadian parent entity which are denominated in Canadian dollar. As of March 31, 2024, the Company has not entered into any hedging agreements to mitigate foreign currency as the foreign currency risk was deemed to be low. A change in 10% in USD/CAD exchange rate as of June 30, 2024, would not have a material impact.

Interest rate risk

Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in the interest rates. In seeking to minimize the risks from interest rate fluctuations, the Company manages exposure through its normal operating and financing activities. As at June 30, 2024, the Company is not exposed to interest rate cash flow risk as none of the agreements have a floating interest rate, which will fluctuate with interest rates change. Fixed-interest instruments are subject to fair value risk but not interest rate cash flow risk. For each 0.25% change in the interest rate, the Company’s net loss for the three and six months ended June 30, 2024, would be impacted by $nil (three and six months ended June 30, 2023 - $2,992 and $6,412 respectively).

Credit Risk

Credit risk is the risk one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company’s main credit risks relate to its accounts receivable resulting from sale of finished properties in the normal course of its operations and cash deposited in the banks.

The credit risk of accounts receivable arising from the sale of property inventory is managed by mandating advance payments from customers or account credits prior to the transfer of the property, thus substantially eliminating the Company’s credit risk in this regard. The Company has the backing of the bank letters of promise to pay the differential not covered directly by the customers. A provision for expected credit loss is established based upon historic trends and forward-looking information and revised when there are changes in circumstances that would create doubt over the receipt of funds. Such reviews are conducted on a continued basis through the monitoring of outstanding balances as well as the frequency of payments received. Accounts receivables are completely written off once management determines the probability of collection to be remote. Such reviews are conducted on a forward-looking basis and reviewed when changes in client or economic circumstances exist that would create doubt over the receipt of funds within the next twelve months. For the three and six months ended June 30, 2024, $214,044 and $322,544 of receivables were written off (2023 – nil).

The aging for other accounts receivable as at June 30, 2024 are:

			Over 180
	Current	**60-180 days **	**days **	Total
Solidarity bonus receivable	$ 100,000	$ 230,000	$ 1,220,000	$ 1,550,000
Electrical systems reimbursement	42,463	-	117,323	159,786
Customers and employees	152,900	-	-	152,900
TOTAL	$ 295,363	$ 230,000	$ 1,337,323	$ 1,862,686

Page 22

Impact Development Group Inc.

Notes to the Condensed Consolidated Interim Financial Statements

(Expressed in US Dollars)

Three and six months ended June 30, 2024 and 2023

21. Capital and risk management (continued)

Changes in the provision for expected credit losses at June 30, 2024 result from the following:

Changes in the provision for expected credit losses at June 30, 2024	result from the following:
Balance–December 31, 2022	$-
Allowance made during the year	807,612
Receivable written off	-
Balance– December 31, 2023	$ 807,612
Allowance made	512,545
Provision reversed	(190,000)
Balance, June 30, 2024	$ 1,130,157

The Company maintains current bank accounts of less than one year, with local banks with a minimum credit rating of "A" and therefore, the risk of loss on cash and cash equivalents is immaterial.

22. Fair value measurement of financial instruments

The Company's financial instruments consist of cash, account payables and accrued liabilities, and borrowings.

Financial assets and liabilities measured at fair value in the consolidated statement of financial position are characterized into three levels of a fair value hierarchy depending on the degree to which the inputs are observable. During the three months ended March 31, 2024, no transfers between fair value hierarchy occurred. The fair value hierarchy is as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: items other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3: unobservable items for assets or liabilities.

A financial instrument is classified to the lowest level hierarchy for which a significant input has been used in measuring fair value.

The carrying amounts for cash, and accounts payable and accrued liabilities approximate their respective fair values based on level 1 due to the short-term maturities of those instruments.

The estimated fair value of current and long-term borrowings and loans, categorized as Level 2, has been estimated using discounted cash flow techniques, applying interest rates in effect for debts with similar remaining maturities and credit risk. As at June 30, 2024 and December 31, 2023, the fair value of borrowings is $10,941,975 and $7,460,410 respectively.

23. Contingencies

In the year ended December 31, 2022, the Company filed a lawsuit against a contractor for damages for noncompliance of contractual commitments and quality standards. The court ruled the decision in favor of the Company for damages of $474,458 and lawyer fees. However, the Company has so far not been successful in collecting the damages from the contractor. The Company has not recorded a contingency gain for this amount.

Page 23

Impact Development Group Inc.

Notes to the Condensed Consolidated Interim Financial Statements (Expressed in US Dollars) Three and six months ended June 30, 2024 and 2023

24. Subsequent events

On July 12, 2024, the Company amended the terms of an existing private loan with DCIF Investment Fund to mature on March 31, 2026. The applicable interest rate on the loan has been amended to accrue at the rate of 12 percent per annum. As consideration for amending the loan, the Company has issued to DCIF, 92,025 common shares of the Company. Under the terms of the amendment to the loan, the Company will make quarterly payments of accrued interest to DCIF until March 31, 2026, when the loan matures, and the outstanding principal will become due.

On August 19, 2024, the Company entered into a non-binding term sheet to acquire 100% of the issued and outstanding shares of Fusion Inc. (“Fusion”), a software company located in Ohio, the United States (“Transaction”). Fusion are the creators of an innovative software platform designed to streamline the administration of Low-Income Housing Tax Credits for asset managers, developers and syndicators.

The Company has agreed to issue to Fusion, or shareholders of Fusion, an aggregate of:

• a) 1,666,667 IDG common shares, each issued at a deemed price of USD $3.00 (“Consideration shares”);

• b) 1,166,668 IDG common shares (“Earn-Out Shares”), conditional upon the satisfaction of revenue milestones on the first, second, and third year anniversaries of the closing of this Transaction; and

• c) 1,000,000 warrants, each exercisable by the holder for the purchase of one IDG common share at a price equal to greater of (i) of USD$3.00; or (ii) the closing price of the IDG common shares on the closing date of the Transaction. If any of the revenue milestones are met after the applicable mandatory exercise date, then the warrants associated with such prior mandatory exercise date shall be required to be exercised within 15 days.

All securities issued pursuant to this Transaction will be subject to a hold period of four months and one day from the date of issuance.

Closing of this Transaction is subject to customary closing conditions as are standard for a Transaction of this nature, including, but not limited to (i) receipt of conditional approval from the TSXV; and (ii) receipt of all requisite corporate and shareholder consents and approvals.

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