Executive Summary / Key Takeaways

• High-Potential Niche in Baja Real Estate: International Land Alliance (ILAL) is uniquely positioned in the recovering Northern Baja California real estate market, offering master-planned communities like Rancho Costa Verde and Oasis Park, leveraging sustainable technologies like solar and microgrids to attract a growing market of second-home buyers and retirees.
• Recent Profitability Amidst Volatility: After achieving its first-ever profitability in 2024 with over $3 million in net revenue, ILAL experienced a significant reversal in Q1 2025, reporting a net loss of nearly $1 million and a substantial $4.54 million revenue decrease, highlighting the inherent volatility and capital intensity of its development cycle.
• Persistent Liquidity Challenges: The company faces "substantial doubt" about its going concern status, marked by an $11.6 million working capital deficit and a $25.1 million accumulated deficit as of March 31, 2025, necessitating continuous capital raises that risk shareholder dilution.
• Critical Title Transfer Hurdles: Key projects like Valle Divino and Plaza Bajamar are hampered by unresolved land title transfers, leading to significant impairment losses and delaying revenue realization, with management anticipating resolution by the end of fiscal year 2025.
• Competitive Positioning and Moats: ILAL's competitive edge lies in its regulatory expertise in Mexico and a cost-leadership strategy in underserved areas, allowing for quicker entitlements and more affordable plots compared to larger U.S. homebuilders, though it lags in scale, efficiency, and overall financial robustness.

The Baja Dream: ILAL's Vision in a Resurgent Market

International Land Alliance, Inc. (OTCQB:ILAL) operates as a residential land development company, strategically focused on the burgeoning real estate markets of Baja California, Mexico, and Southern California. Its core business model revolves around acquiring properties, navigating complex zoning and entitlement processes to subdivide land into residential and commercial plots, securing financing, enhancing infrastructure and amenities, and ultimately selling these plots to a diverse clientele including homebuyers, retirees, investors, and commercial developers. The company often facilitates sales by offering direct financing options to buyers, a key differentiator in its market.

The broader real estate market in Northern Baja California has shown significant improvement, fully recovering from prior economic impacts. This recovery, coupled with rising housing prices and severely low inventory in the Southwest U.S., has channeled increased demand towards second homes and vacation properties in ILAL's target regions. This macro trend provides a favorable backdrop for ILAL's ambitious development pipeline.

ILAL's strategic vision centers on developing large-scale, master-planned communities. A cornerstone of this strategy is the integration of sustainable technologies. For instance, Rancho Costa Verde Development (RCVD), a wholly-owned subsidiary, is touted as a "self-sustained solar powered green community." Similarly, the Valle Divino project is slated to feature "innovative microgrid solutions." While specific quantifiable metrics on energy yield, cost savings, or degradation rates for these technologies are not detailed, their strategic intent is clear: to offer modern, eco-conscious living environments. This approach aims to attract environmentally aware buyers, potentially reduce long-term utility costs for residents, and enhance the overall appeal and value proposition of ILAL's properties, thereby contributing to a competitive moat in the regional market.

In the competitive landscape, ILAL operates against a backdrop dominated by much larger, more established U.S. homebuilders such as Lennar Corporation (LEN), D.R. Horton (DHI), PulteGroup (PHM), and Toll Brothers (TOL). These industry giants benefit from immense scale, efficient supply chains, and advanced technological integration, often achieving superior profitability margins (e.g., LEN's gross margin around 25-28% compared to ILAL's TTM gross margin of 62.51% which is an outlier due to revenue recognition issues, or a more normalized 15-18% from the competitive analysis, and DHI's 28-30%). ILAL, with an estimated 1-2% aggregate market share in its primary regions, distinguishes itself through a niche focus on cross-border development. Its regulatory expertise in Mexico is a significant advantage, potentially enabling 20-30% faster entitlement processing compared to competitors navigating unfamiliar local regulations. Furthermore, ILAL's cost-leadership strategy in these underserved areas allows it to offer plots at 10-15% lower upfront costs than the premium offerings of companies like PHM or TOL, appealing to budget-conscious investors and retirees. However, ILAL's smaller scale translates to higher per-unit operating costs (estimated 15-20% higher than LEN's) and slower project cycles (10-15% longer than PHM's), posing challenges to its efficiency and overall financial performance.

A Decade of Development and Strategic Pivots

ILAL's journey began with its incorporation in Wyoming in September 2013. The early years, from 2015 to 2018, were characterized by foundational development, with low revenues and recurring net losses, typical of a nascent land development firm. A significant strategic shift commenced in 2019, marking the company's expansion into larger-scale projects. ILAL assumed title of the 497-acre Oasis Park Resort in San Felipe, Baja California, and initiated the acquisition of the 80-unit Plaza Bajamar property in Ensenada. The company also secured a contract for deed for the Emerald Grove property in Southern California, diversifying its portfolio. To fuel these ventures, ILAL began raising capital, including the issuance of Series B Preferred Stock.

The operational structure was further solidified in 2020 with the appointment of key executives, including Frank Ingrande as CEO, Jason Sunstein as CFO, and Roberto Valdes as Chairman of the Board. Development progressed with the groundbreaking of Valle Divino, a 20-acre wine country project in Ensenada, with plans for 187 homes in its first phase, representing an estimated $60 million in gross sales opportunity.

A transformative period unfolded from 2021 to 2023, centered on the strategic acquisition of Rancho Costa Verde Development (RCVD). In May 2021, ILAL acquired a 25% equity-method investment in RCVD, a 1,100-acre master-planned community. This was followed by the acquisition of the remaining 75% interest on January 3, 2023, for $13.5 million, making RCVD a wholly-owned subsidiary. RCVD has already sold over 1,000 residential lots and completed 55 single-family homes, with approximately 30 more under construction, alongside a boutique hotel and clubhouse. This acquisition significantly expanded ILAL's footprint and diversified its revenue streams to include lot sales, home construction, loan servicing, and utilities.

Despite these strategic expansions, ILAL has faced persistent operational challenges, particularly concerning land title transfers for its Valle Divino and Plaza Bajamar projects. The land for these projects is currently owned by entities controlled by the company's Chairman of the Board, Roberto Valdes. The necessary bank trust, or fideicomiso, required for title transfer to foreign entities in Mexico, has not yet been established. This uncertainty led to substantial impairment losses on accumulated development costs in both 2022 and 2023, impacting ILAL's balance sheet and raising questions about its ability to fully realize the value of these assets.

Recent Financial Performance and Liquidity Realities

ILAL achieved a significant milestone in 2024, reporting profitability for the first time, with net revenue exceeding $3 million for the year and record revenue in Q4. This marked a positive inflection point, suggesting the company's development efforts were beginning to yield results.

However, the first quarter of 2025 presented a stark reversal. Net revenues and lease income plummeted by $4.54 million, from $5.09 million in Q1 2024 to $548,624 in Q1 2025. This sharp decline was attributed to variations in real estate sales, interest from financed sales, financing fees, and components of home construction. Concurrently, the cost of revenue increased by $90,592 to $274,180. The company reported a net loss of $958,806 for the three months ended March 31, 2025, a significant downturn from the net income of $3.65 million in the prior year period.

Operating expenses rose by $460,044 to $1.11 million in Q1 2025. This increase was primarily driven by a $629,592 surge in general and administrative costs, largely due to a substantial increase in stock-based compensation expenses. Conversely, sales and marketing costs decreased by $19,622, a reduction management explicitly linked to "reduced marketing efforts incurred by RCVD and ILAL during the three months ended March 31, 2025 as the Company was in process of raising additional capital." This indicates that liquidity pressures directly impacted operational spending on growth initiatives. Other expenses saw a decrease of $481,932, mainly due to a reduction in the fair value of the company’s derivative liability.

The most pressing concern for ILAL remains its liquidity. As of March 31, 2025, the company's current liabilities exceeded its current assets by approximately $11.6 million, and it carries an accumulated deficit of $25.1 million. These factors collectively raise "substantial doubt about the Company’s ability to continue as a going concern."

Cash flows from operating activities were negative, using $116,409 in Q1 2025. While financing activities provided $277,302, primarily from new loans and promissory notes, this reliance on external capital carries the inherent risk of further diluting existing shareholders.

Comparing ILAL's financial health to its larger competitors reveals significant disparities. ILAL's TTM operating profit margin of -27.26% and net profit margin of -43.92% stand in stark contrast to the robust profitability of industry leaders like D.R. Horton (2024 operating margin 17%, net margin 13%) and PulteGroup (2024 operating margin 22%, net margin 17%). While ILAL's TTM gross profit margin of 62.51% appears high, it is likely skewed by revenue recognition complexities and impairment charges, rather than reflecting superior operational efficiency compared to the 25-30% gross margins of its peers. Furthermore, ILAL's debt-to-equity ratio of 0.90, while not excessively high, is considerably elevated compared to LEN (0.15), DHI (0.24), PHM (0.19), and TOL (0.39), underscoring its higher financial leverage and dependence on debt financing.

Outlook, Strategic Path, and Key Risks

Despite the recent financial setbacks, ILAL's management maintains a forward-looking stance, anticipating that capital resources will "significantly improve if its plots of land gain wider market recognition and acceptance resulting in increased plot sales and house construction." This outlook hinges on the successful execution of its sales and marketing initiatives, the perceived quality of its amenities, and favorable global economic conditions impacting demand for vacation homes.

Concrete guidance includes a projection of "total construction revenue in excess of $1.3M" from five new homes currently in the contract stage at Oasis Park Resort. Crucially, management expects the transfer of title for the Valle Divino and Plaza Bajamar projects "before the end of our fiscal year 2025." This resolution is paramount, as the ongoing title uncertainty has directly led to significant impairment losses and hindered revenue recognition. The company is actively leveraging a partnership with a similar development firm in Baja California Norte to utilize an "established and proven marketing plan" to drive residential plot sales and development, a strategic move to overcome its internal marketing expenditure reductions.

However, the path forward is fraught with significant risks. The "substantial doubt" about ILAL's ability to continue as a going concern remains the most critical challenge. Its persistent working capital deficit and accumulated deficit necessitate continuous capital raising, which, as acknowledged by management, "may have the effect of potentially diluting the holdings of existing shareholders." The unresolved title transfers for Valle Divino and Plaza Bajamar pose a fundamental risk to the company's asset base and its ability to fully recognize revenue from these projects. Furthermore, the company has identified "material weaknesses in internal control over financial reporting," including inadequate accounting and finance personnel and insufficient controls over transaction authorization and review. These weaknesses could lead to financial misstatements and hinder operational efficiency. The civil action initiated by CleanSpark, Inc. (CLSK) on April 8, 2025, alleging breach of a Securities Purchase Agreement and triggering pricing adjustments, adds another layer of legal and financial uncertainty.

ILAL's strategic response to these challenges involves leaning into its competitive advantages: its niche focus on the Baja California market, its regulatory expertise in navigating Mexican land laws, and its cost-leadership in offering more accessible property options. While its technological differentiators in solar and microgrid solutions are strategically important for attracting specific buyer segments, the company's smaller scale and operational inefficiencies compared to its larger, more technologically advanced competitors remain vulnerabilities. The ability to bridge these gaps through successful project execution, robust sales, and improved financial controls will be key to its long-term viability.

Conclusion

International Land Alliance, Inc. presents a compelling, albeit high-risk, investment narrative. The company has carved out a unique niche in the recovering Northern Baja California real estate market, boasting an attractive portfolio of master-planned communities that integrate sustainable technologies. The achievement of profitability in 2024 signaled a positive shift, demonstrating the potential of its development model.

However, the sharp reversal into a net loss in Q1 2025, coupled with a significant working capital deficit and an accumulated deficit, underscores the precarious financial position and the capital-intensive nature of its operations. The successful resolution of land title transfers for key projects and the ability to consistently generate substantial sales from its developed plots are paramount to alleviating its liquidity concerns and mitigating the risk of further shareholder dilution. While ILAL's regulatory expertise and cost-effective offerings provide a competitive edge in its chosen market, its long-term success hinges on its capacity to scale operations, enhance internal controls, and translate its strategic vision into sustained, positive cash flow.