The 8.5% 'Digital Bond' Just Filed Its First Audited Year: $91,642 Earned, $693,190 Owed to Bondholders, and Liabilities $1.38 Million Above Assets
Some links pay us a referral fee; each one says so. Disclosure
Vehicle file: COMPOUND REAL ESTATE BONDS II INC. — assets, distributions, repurchases and every filing, as filed with the SEC.Open the file →Quick Answer
On September 3, 2026, Compound Real Estate Bonds II, Inc. (SEC CIK 2078250, Commission File 024-12644) filed its first annual report — a Form 1-K for the fiscal year ended June 30, 2026. This is the entity currently selling the 8.50% APY "Compound Bonds" advertised at a $500 minimum (per its marketing site; its offering circular sets a $1,000 minimum initial investment), no fees, no lock-ins, to accredited and non-accredited investors alike. The audited numbers, all from the filing: total assets $19,761,427 against total liabilities $21,137,844, a shareholders' deficit of $1,376,417 — and those liabilities are bonds that are repayable on demand at any time. For the year, the company's assets earned $91,642 of interest income while the bonds accrued $693,190 of interest to bondholders — 7.6x more paid than earned — and the company spent $519,113 on marketing and advertising, more than five times what its assets earned. Net loss: $1,376,417. The auditor states that conditions "raise substantial doubt about the Company's ability to continue as a going concern." Three further things stand out. The company says outright that it needs new bond sales to pay old bondholders: "we will need to continue to sell Compound Bonds in order to maintain a steady portfolio of assets while allowing for periodic redemption by bondholders." The previous auditor was dismissed on July 27, 2026, the same day the new one was engaged, and the new auditor signed the report eleven days later. And a verbal agreement grants the parent a license fee of 2% of all bonds sold per year, at the parent's sole discretion — $542,422 if it had been declared at July 31, 2026 — which is not on the balance sheet. None of this is hidden. All of it is in a document almost no bondholder will read.
Key Takeaways
- First audited annual report for the entity now selling the 8.50% bond. Fiscal year ended June 30, 2026; filed September 3, 2026.
- Total assets $19,761,427. Total liabilities $21,137,844 ($20,496,129 of bonds plus $641,715 of accrued interest). Liabilities exceed assets by $1,376,417.
- The bonds have no maturity date and are repayable on demand at any time, so the entire $21.1 million is a current liability.
- Interest income for the year: $91,642. Interest accrued to bondholders: $693,190. The company paid out 7.6x what its assets earned.
- Only $19,047 of that income came from mortgage investments. About $42,000 came from FDIC-insured bank accounts and about $25,000 from Treasury bills.
- Marketing and advertising: $519,113 — 5.7x the total interest income, and the single largest operating cost after interest owed to bondholders.
- Net loss $1,376,417, which is exactly the size of the shareholders' deficit. The company has never had retained earnings.
- At June 30, $14,034,406 of the $19,761,427 in assets — 71% — was sitting in cash. Only $3,205,000 (16.2%) was in mortgage investments.
- By July 31 the loan book had grown to $5,500,000, but 63.6% of it was two loans: $2,000,000 on an Ontario industrial property and $1,500,000 on a Florida residential property.
- 70% of the loan principal was originated by the company's own affiliate at 12-13%; 30% was bought from a third party at 11-13%.
- Redemptions are already material: of 2,712,110 bonds sold at $10 each, 598,021 had been redeemed by July 31 — a 22.0% redemption rate.
- At July 31, liquid assets of $16,767,293 stood against $21,870,885 of on-demand bond liability. Liquid coverage: 76.7%.
- The going-concern language appears three times: in the MD&A, in Note 2 to the financial statements, and in the auditor's report.
- Auditor change: Umair AK CPA LLC was dismissed July 27, 2026; Joseph Komolafe, CPA LLC was engaged the same day and signed the audit on August 7, 2026 — eleven days later.
- A verbal agreement with the parent allows a license fee of 2% of the value of all bonds sold per year, at the parent's discretion, which would have been $542,422 at July 31, 2026. It is not accrued as a liability.
- One improvement on last year: the cash is now on the company's own balance sheet. Its earlier interim filing had disclosed roughly 70% of assets sitting in a bank account in an affiliate's name.
CSV · 25 rows
Compound Real Estate Bonds II, audited FY2026 line items
Balance sheet, income statement and MD&A liquidity figures from the first Form 1-K of Compound Real Estate Bonds II (fiscal year ended June 30, 2026), one row per line item with statement and source.
What the product is
Compound Real Estate Bonds — the app stores list it as Compound Banc — sells a "digital bond" at a $500 minimum (per its marketing site; its offering circular sets a $1,000 minimum initial investment), paying a fixed 8.50% APY with interest credited daily, marketed with the phrases "No Lock-Ins" and "No Management Fees." It is sold under Regulation A, which means non-accredited investors can buy it. It is not a bank account: it is not FDIC insured, not SIPC insured, and the issuer is not a bank or a broker.
We reviewed the business in our forensic review of Compound Real Estate Bonds, which was built on the predecessor entity's audited 2025 report and the successor's interim figures. The document filed on September 3 is different and more important: it is the first audited annual report of the entity that is actually selling bonds today.
Regulation A Tier 2 annual reports contain audited financial statements. That makes this the most reliable document about Compound Real Estate Bonds II that exists.
The balance sheet
| Consolidated balance sheet, June 30, 2026 | Amount |
|---|---|
| Cash and cash equivalents | $14,034,406 |
| Mortgage investments | $3,205,000 |
| Treasury bills | $2,421,510 |
| Other investments | $91,681 |
| Accounts receivable | $8,830 |
| TOTAL ASSETS | $19,761,427 |
| Compound bonds | $20,496,129 |
| Accrued interest | $641,715 |
| TOTAL LIABILITIES | $21,137,844 |
| SHAREHOLDERS' DEFICIT | ($1,376,417) |
The company owes $1,376,417 more than it owns. That is not an interpretation; it is the bottom line of an audited balance sheet, and the company presents it as a shareholders' deficit.
Two features make that gap matter more than it would at an ordinary early-stage business.
The liabilities are due whenever anyone asks. Note 5 states the bonds "have no maturity date" and "are subject to repayment at the demand of the bond holders, at any time." Every dollar is a current liability. A start-up with negative equity and five-year debt has time; this one has none contractually.
The assets are mostly not working yet. Of $19,761,427 in assets, $14,034,406 — 71% — was cash, and only $3,205,000, or 16.2%, was in mortgage investments. The company confirms it "began deploying assets into real estate loans in April of 2026" and had deployed "approximately 25% of its assets" by July 31.
The income statement is the clearest thing in the filing
| Year ended June 30, 2026 | Amount | vs interest income |
|---|---|---|
| Interest income | $91,642 | — |
| Other income | $322 | — |
| Interest accrued to bondholders | ($693,190) | 7.6x |
| Marketing and advertising | ($519,113) | 5.7x |
| Compensation and related | ($192,127) | 2.1x |
| Office and administrative | ($63,951) | 0.7x |
| Total expenses | ($1,468,381) | 16.0x |
| NET LOSS | ($1,376,417) | — |
The company's assets earned $91,642 over the year. The bonds it sold accrued $693,190 of interest to their holders. And of the money it did earn, only $19,047 came from mortgages — the actual business. The rest came from a bank account (about $42,000) and Treasury bills (about $25,000).
A fair caveat, and it matters: this was a ramp-up year. The offering was only qualified in September 2025, lending only began in April 2026, and money raised late in the year had little time to earn. A first-year gap between 8.5% owed and what a half-deployed balance sheet earns is not by itself evidence of anything wrong. The question the filing raises is not "why was year one lossmaking" — it is what closes a 7.6x gap, on a book where the loans yield 11-13% and the bonds cost 8.5%, when only about a quarter of the assets are lent out and the marketing bill alone was $519,113.
The sentence bondholders should read
Under "Liquidity and Capital Resources," the company writes:
It is important to note that we will need to continue to sell Compound Bonds in order to maintain a steady portfolio of assets while allowing for periodic redemption by bondholders, since Compound Bonds are repayable on demand and borrowers can redeem their bonds shortly after purchase.
And in Note 2:
The Company has not yet generated sufficient revenues to fully cover all principal and interest obligations on its outstanding bonds from operating cash flow alone, and there can be no assurance that it will do so in future periods.
We are not going to put a label on that. We are going to state what it says and what the numbers around it show, because the label people reach for is a criminal allegation and nothing in this filing supports one. What the filing does support is a plain description: at present, redemptions are met substantially out of new bond sales rather than out of investment income, the company says so itself, and it says its ability to keep operating depends on continuing to sell bonds.
The redemption figures show this is not theoretical. Of 2,712,110 bonds sold at $10 each, 598,021 had been redeemed by July 31 — 22.0%. More than one bond in five sold has already been cashed out.
| Liquidity at July 31, 2026 | Amount |
|---|---|
| Cash and cash equivalents | $14,253,112 |
| U.S. government bonds | $2,421,510 |
| Readily tradable real estate securities | $92,671 |
| Total liquid assets | $16,767,293 |
| Bonds outstanding, with compounded interest | $21,870,885 |
| Liquid coverage of on-demand liability | 76.7% |
| Total assets | $19,972,293 |
| Assets minus bond liability | ($1,898,592) |
If bondholders holding more than 77% of the outstanding balance asked for their money at once, the liquid assets would not cover it. That is a statement about the product's structure — demand liabilities funded by term loans — and it is the same mismatch that makes any bank run possible. The difference is that a bank has deposit insurance and this does not.
The loan book: two loans are two thirds of it
By July 31 the company had $5,500,000 in real estate backed loans. It describes them as one-year terms with no principal due until the end of the term, average LTV 50%, in Ontario and Florida.
| Loan | Amount | Share of book | Security | LTV |
|---|---|---|---|---|
| Single largest | $2,000,000 | 36% | Industrial property, Ontario, Canada | 50% |
| Second largest | $1,500,000 | 27% | Residential property, Florida | 38% |
| Two loans combined | $3,500,000 | 63% | — | — |
| All others | approx. $2,000,000 | 37% | None above 15% individually | 15-50% |
A saver who puts $500 into this product is, in economic substance, taking a roughly two-thirds concentrated position in two mortgages — one on an industrial building in Ontario, one on a house in Florida — with the remaining third in cash and Treasuries.
And 70% of the loan principal was originated by the company's own affiliate, at 12-13%. That is a related-party origination channel: the entity that decides the loan is affiliated with the entity that holds it, and the bondholders bear the credit risk. The filing discloses it and does not describe an independent credit review.
Three things in the fine print
The auditor was changed eleven days before the report was signed. Item 6 discloses that on July 27, 2026 the company dismissed Umair AK CPA LLC and engaged Joseph Komolafe, CPA LLC the same day. Komolafe's report is dated August 7, 2026. The company reports no disagreements with the prior auditor, and Umair AK's own letter to the SEC is filed as Exhibit 9.1. Changing auditors is legitimate and common. Changing auditors eleven days before a first annual audit is signed is worth a bondholder's attention, and the disclosure is the reason it can be.
The auditor's report contains the wrong kind of financial statements. The opinion paragraph says the firm audited statements "which comprises the statement of financial position as of June 30, 2026, and the related statements of activities, and functional expenses." Statements of activities and functional expenses are not-for-profit financial statements. A for-profit corporation files a statement of operations, a statement of changes in equity and a statement of cash flows — which is exactly what the filing actually contains. The same report is headed "Auditor's Responsibilities for the Review of the Financial Statements" and refers to "a review conducted in accordance with GAAS," while the opinion says "audited." These are inconsistencies in the audit report's own language. They do not tell us the numbers are wrong, and we are not suggesting they are. They are the kind of boilerplate error that ordinarily does not survive a review at a larger firm.
A 2% fee to the parent exists on a verbal agreement. From Item 5:
On June 30, 2025, we entered into a verbal agreement with CH to pay a license fee to CH in the amount of 2% of the value of the total Compound Bonds sold on the Compound Fintech Platform per year... CH has the discretion to impose a license fee of 2% of the value of Compound Bonds sold through the platform. The license fee does not become due or payable unless CH elects the fee. There are no other terms to such verbal agreement.
Had it been declared at July 31, 2026, that fee would have been $542,422. It is not accrued as a liability, because the parent has not elected it. If the parent elected it tomorrow, the deficit would widen from about $1.9 million to roughly $2.44 million — a discretionary charge, on an unwritten agreement, payable to the party that controls the company, ahead of nobody but sitting on the same balance sheet as the bondholders.
Credit where it is due
Our earlier review flagged that CREB II's interim filing showed roughly 70% of the assets standing behind bondholders sitting in a bank account in the name of an affiliate, with no disclosed escrow, trust or security interest.
That is no longer the case. The audited balance sheet reports $14,034,406 of cash as the company's own, and the notes describe cash balances held at FDIC-insured financial institutions that may exceed insurance limits. The affiliate-held-cash disclosure does not reappear. On the single point we criticised most sharply, the position has improved, and a report that only tallies the bad news is not a report worth trusting.
Two other fair points. The disclosure quality itself is good — the going-concern language, the concentration, the affiliate origination, the verbal license fee and the redemption statistics are all volunteered in a document the company was obliged to file but could have written far more thinly. And the underlying model is not incoherent: loans at 11-13% against an 8.5% coupon is a real spread if deployment gets high enough and the cost base is spread across a much bigger book. The problem is not the idea. It is that at $20 million of bonds, one-quarter deployed, with $519,113 of annual marketing, the arithmetic does not yet reach.
What we would want a bondholder to take away
Repayment on demand is a contractual right, not a funded guarantee. The bonds are repayable on demand. At July 31 the company held 76.7% of that demand liability in liquid assets and said it depends on new sales to meet redemptions. Both things are true at once.
The 8.50% is being paid out of capital, not earnings, for now. $91,642 earned against $693,190 accrued. In a ramp year that can be normal. It is worth knowing which it is.
The going-concern warning is a technical term, not a figure of speech. It means the auditor concluded there is substantial doubt the business can meet its obligations over the next twelve months. It is the first item on our real estate platform red-flags list, and it is the same language we flagged at Groundfloor across two consecutive audits.
Size the position accordingly. This is not a savings account substitute, whatever the yield comparison suggests. It is unsecured, on-demand, uninsured lending to a $20 million start-up whose loan book is two thirds two mortgages.
Method
Every figure comes from Compound Real Estate Bonds II, Inc.'s Form 1-K for the fiscal year ended June 30, 2026, filed with the SEC on September 3, 2026 (accession 0001829126-26-009702) and read directly on EDGAR. We quote the going-concern language, the liquidity language and the license-fee language verbatim rather than paraphrasing, because paraphrase is where this kind of story usually goes wrong.
Where the company's own document is internally inconsistent we say so rather than picking a number: the MD&A gives the affiliate expense share as $605,602 and Item 5 gives it as $605,062, a $540 difference. It changes nothing, and a reader checking our figures against the filing deserves to know why the two do not match.
We have deliberately not used the word most people reach for when new investor money funds prior investors' withdrawals. The company discloses the mechanism itself, and readers can weigh it. Nothing in the filing establishes intent to defraud, and the disclosure quality argues against it.
This piece updates our Compound Real Estate Bonds review, which was written on the predecessor entity's FY2025 audit and this entity's interim numbers. The bond liability, principal plus interest, has grown from $7,939,037 at that interim date to $21,137,844 audited at June 30, 2026.
Sources
Primary, read on SEC EDGAR:
- Compound Real Estate Bonds II, Inc., Form 1-K for the fiscal year ended June 30, 2026, filed September 3, 2026, accession 0001829126-26-009702 (CIK 2078250, Commission File 024-12644) — every financial figure, all quoted language, the auditor change disclosure and the related-party disclosures
- Exhibit 9.1 to the same filing — the former auditor's letter to the SEC
- Company marketing claims (8.50% APY, $500 minimum, "No Lock-Ins", "No Management Fees"; the offering circular's minimum initial investment is $1,000) are from compoundrealestatebonds.com and the Compound Banc app store listings, cited as the issuer's own marketing rather than as filings
Retrieved September 4, 2026. Figures are as of June 30, 2026 except the liquidity, loan book and redemption figures, which the company gives as of July 31, 2026 and which are labelled as such throughout.
Keep reading.
- 0127 min read
Alexandria Real Estate (ARE) Stock: Dividend Cut, FFO, Debt (2026)
Alexandria Real Estate Equities (NYSE: ARE) cut its dividend 45% to $0.72 a quarter. FFO as adjusted fell to $1.73 a share in Q2 2026. Quarter-by-quarter payout, 2026 guidance, debt maturities, top tenants and lease expirations, from the filings.
- 0217 min read
Americold (COLD) Stock: $0.23 Dividend vs AFFO and Debt (2026)
Americold pays $0.23 a quarter. Compare it with AFFO and Core FFO, the $309.6 million write-down, the $1.15 billion EQT proceeds, debt maturities and the November 5 results date.
- 0320 min read
Apollo Commercial (ARI) Stock: Liquidation, $3.75 and $4.10 Paid
ARI sold its $9 billion loan book to Apollo's Athene, paid $3.75 and then $4.10 a share, and is liquidating. Estimate $7.75 to $8.50 more, NYSE delisting Nov 6, 2026. From SEC filings.