10-Q: International Land Alliance Reports Steep Revenue Decline and Net Loss Amidst Going Concern Doubts

Sentiment:

Quarterly Report 6 June 2025 3:05 PM

📋All filings for International Land Alliance INC

International Land Alliance, Inc. (ILAL) reported a significant drop in net revenues and a substantial net loss for the first quarter of 2025, raising substantial doubt about its ability to continue as a going concern.

Delay expectedThe acquisition of title to the land for the Valle Divino project is subject to approval from the Mexican government in Baja, California, and while management anticipates approval before the end of fiscal year 2025, there is no assurance it will occur.The Plaza Bajamar land purchase agreement has not yet closed as of March 31, 2025, and December 31, 2024, with the closing subject to necessary approvals and transfer of title, including the formation of a Mexican subsidiary.The company has not yet established the bank trust (fideicomiso) for the Plaza Bajamar and Valle Divino properties, which is anticipated to occur before the end of fiscal year 2025, delaying the transfer of title to investors.

Capital raiseThe company continues to raise additional capital through the issuance of debt instruments and equity to fund its ongoing operations.Management states that if marketing efforts are not successful, it will be necessary to obtain funds through equity or debt financing in sufficient amounts.During the three months ended March 31, 2025, the company received cash proceeds from other loans for $179,167 and from promissory notes for $98,135, totaling $277,302 in financing activities.The company issued 6,782,751 shares of common stock during Q1 2025 pursuant to consulting agreements, services, and debt terms, which can be considered a form of capital raise or debt conversion into equity.

Worse than expectedNet revenues decreased by approximately 89.2% from $5.09 million in Q1 2024 to $0.55 million in Q1 2025.The company reported a net loss of $0.96 million in Q1 2025, a significant deterioration from a net income of $3.65 million in Q1 2024.Operating expenses increased by 70.5%, primarily due to a substantial rise in general and administrative costs, indicating a lack of cost control relative to declining revenue.The company's working capital deficit of $11.6 million and accumulated deficit of $25.1 million highlight severe liquidity and profitability issues.The explicit 'going concern' warning indicates a high risk of financial distress and inability to meet obligations in the normal course of business.

Summary

International Land Alliance, Inc. (ILAL) recorded net revenues of $548,624 for the three months ended March 31, 2025, a sharp decrease from $5,088,874 in the same period of 2024.
The company reported a net loss of $958,806 for Q1 2025, a significant reversal from a net income of $3,650,150 in Q1 2024.
Operating expenses surged to $1,112,105 in Q1 2025 from $652,059 in Q1 2024, primarily driven by a large increase in general and administrative costs.
General and administrative expenses increased by $629,592 to $924,593 in Q1 2025, compared to $295,001 in Q1 2024, mainly due to higher stock-based compensation.
The company's working capital deficit stood at approximately $11.6 million as of March 31, 2025, with an accumulated deficit of approximately $25.1 million.
Cash balance increased to $187,013 as of March 31, 2025, from $26,120 at December 31, 2024, primarily due to financing activities.
Net cash used in operating activities was $116,409 for Q1 2025, a shift from net cash provided of $191,688 in Q1 2024.
The company issued 6,782,751 shares of common stock during Q1 2025 for consulting agreements, services, and debt terms, valued at approximately $678,275.
As of March 31, 2025, 104,470,465 shares of common stock were outstanding.
The company continues to face uncertainty regarding the transfer of land titles for its Valle Divino and Plaza Bajamar projects, which are currently owned by entities controlled by the company's chairman of the board.
A civil action was initiated by CleanSpark, Inc. on April 8, 2025, alleging breach of a Securities Purchase Agreement and triggering pricing adjustments related to Series B Preferred Stock.

Sentiment

Score: 2

Explanation: The sentiment is highly negative due to a drastic decline in revenue, a significant net loss, increasing operating expenses, a substantial working capital deficit, and an explicit 'going concern' warning. The ongoing legal proceedings and internal control weaknesses further contribute to a poor outlook, despite some cash inflow from financing activities.

Positives

Cash balance significantly increased to $187,013 as of March 31, 2025, from $26,120 at December 31, 2024, primarily through financing activities.
Interest expense decreased to $179,171 in Q1 2025 from $580,329 in Q1 2024.
The company recognized a positive change in the fair value of derivative liability of $58,026 in Q1 2025, compared to a negative change of $22,748 in Q1 2024.

Negatives

Net revenues and lease income plummeted by 89.2% to $548,624 in Q1 2025 from $5,088,874 in Q1 2024.
The company swung to a net loss of $958,806 in Q1 2025 from a net income of $3,650,150 in Q1 2024.
Operating expenses increased substantially by 70.5% to $1,112,105 in Q1 2025.
General and administrative expenses more than tripled, rising to $924,593 in Q1 2025 from $295,001 in Q1 2024.
The company's working capital deficit expanded to $11.6 million as of March 31, 2025.
An accumulated deficit of approximately $25.1 million as of March 31, 2025, indicates significant historical losses.
Net cash flow from operating activities turned negative, using $116,409 in Q1 2025 compared to providing $191,688 in Q1 2024.
Significant dilution occurred with weighted average common shares outstanding increasing to 97,574,930 in Q1 2025 from 79,308,430 in Q1 2024.
Accrued interest increased to $1,655,407 as of March 31, 2025, from $1,394,889 at December 31, 2024.
Promissory notes from related parties increased to $445,509 as of March 31, 2025, from $347,374 at December 31, 2024.

Risks

Substantial doubt exists about the company's ability to continue as a going concern due to significant liquidity shortages, a net loss of $1.0 million for the quarter, and an accumulated deficit of $25.1 million.
The company's ability to continue as a going concern is dependent on generating revenues and raising additional capital, with no assurance that sufficient funds will be secured on commercially reasonable terms.
Ongoing reliance on debt and equity financing may lead to further dilution of existing shareholders' holdings.
Uncertainty regarding the transfer of land titles for the Valle Divino and Plaza Bajamar projects, which are currently owned by entities controlled by the company's chairman, poses a risk to project completion and revenue recognition.
The company has material weaknesses in internal control over financial reporting, including inadequate accounting and finance personnel, and insufficient controls over transaction authorization, recognition, capture, and review.
A civil action initiated by CleanSpark, Inc. alleges breach of contract and seeks pricing adjustments related to Series B Preferred Stock, which could result in significant financial liabilities or further dilution.
The company has not accrued or paid salaries to its CEO, CFO, and Chairman, leading to accumulated compensation balances owed, which could impact management stability or financial obligations.
The company's variable rate convertible promissory notes contain conversion features that result in derivative liabilities, whose fair value is subject to significant fluctuation based on the company's stock price and volatility, impacting net loss.
The company has not received specific default notices from CleanSpark regarding alleged breaches of the Securities Purchase Agreement, but continues to accrue additional default interest, indicating potential unresolved disputes.

Future Outlook

Management anticipates that capital resources will significantly improve with wider market recognition and acceptance of its land plots, leading to increased sales and house construction. The company expects to generate increased revenues over the next twelve months by marketing plot sales and house construction. However, if marketing efforts are unsuccessful, the company will continue to face cash shortfalls, necessitating further equity or debt financing or substantial reductions in operating expenses to avoid curtailing future operations. The company expects the transfer of title for Valle Divino and Plaza Bajamar properties to a bank trust before the end of fiscal year 2025.

Management Comments

"Management anticipates that the Company’s capital resources will significantly improve if its plots of land gain wider market recognition and acceptance resulting in increased plot sales and house construction."
"If the Company is not successful with its marketing efforts to increase sales, the Company will continue to experience a shortfall in cash, and it will be necessary to obtain funds through equity or debt financing in sufficient amounts or to further reduce its operating expenses in a manner to avoid the need to curtail its future operations."
"The real estate market in Northern Baja California has continued to significantly improve and has fully recover from the negative impact of Covid-19."
"The housing prices has continued to rise in the Southwest U.S., and inventory has remained severely low, which generated additional attraction from home buyers seeking second homes or vacation homes."
"Through the formation of a partnership with a similar development company in the Baja California Norte Region of Mexico, we have been able to leverage additional resources with the use of their established and proven marketing plan which can help us with sophisticated execution and the desired results for residential plot sales and development."
"We are expecting the transfer of title on Valle Divino in Ensenada, Baja California and Plaza Bajamar in Ensenada, Baja California before the end of our fiscal year 2025, as we continue to follow the necessary steps to complete this legal process."
"The factors that will most significantly affect future operating results will be: The positive effect of implemented sales and marketing initiatives to drive opportunities into our various projects; The quality of our amenities; The global economy and the demand for vacation homes; The sale price of future plots and home construction compared to the sale price in other resorts in Mexico; The prime location of our projects."

Industry Context

The company operates in the residential land development sector, primarily in Baja California, Mexico, and Southern California. Management notes a significant improvement and recovery in the Northern Baja California real estate market post-COVID-19, driven by rising housing prices and low inventory in the Southwest U.S., which attracts buyers seeking second or vacation homes. This suggests a favorable market backdrop for the company's projects, despite its internal financial struggles. The company's strategy to leverage partnerships with similar development companies in the region indicates an attempt to capitalize on established market strategies and resources.

Comparison to Industry Standards

The document does not provide specific comparable companies, projects, or industry benchmarks to assess the company's financial results against global or regional standards. Therefore, a direct comparison is not possible based on the provided information.
The significant decline in revenue and shift to a net loss, coupled with a substantial working capital deficit and going concern warning, suggest performance that is likely below industry averages for healthy real estate development companies, especially given the stated positive market conditions in Northern Baja California.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Internal Control Weaknesses	Management concluded that disclosure controls and procedures were not effective as of March 31, 2025, due to material weaknesses in internal control over financial reporting. These include lack of adequate accounting and finance personnel, inadequate controls over maintenance of records, and inadequate internal controls relating to the authorization, recognition, capture, and review of transactions, facts, circumstances, and events that could have a material impact on the company's financial reporting process.	2025-03-31	These weaknesses indicate a high risk of financial misstatement and operational inefficiencies, potentially impacting investor confidence and regulatory compliance. They continued from the prior fiscal year.

Legal Proceedings

On April 8, 2025, CleanSpark, Inc. initiated a civil action (Civil Action No. 25CV829 RBMMSB) against the company in the United States District Court for the Southern District of California. CleanSpark alleges that the company breached the Securities Purchase Agreement dated October 31, 2019, related to the purchase of Series B Preferred Stock, and claims that thirty-four events have occurred triggering pricing adjustments. CleanSpark asserts claims for breach of contract and breach of the implied duty of good faith and fair dealing. The company denies liability and intends to vigorously defend the action.

Related Party Transactions

Frank Ingrande (CEO) has accrued compensation of $66,846 as of March 31, 2025, with no salary paid for the three months ended March 31, 2025 and 2024.
Jason Sunstein (CFO) has accrued compensation of $66,846 as of March 31, 2025, with no salary paid for the three months ended March 31, 2025 and 2024. He is also the managing member of Six Twenty Management LLC, which provides ongoing capital support.
Roberto Valdes (Chairman of the Board) has accrued compensation of $66,846 as of March 31, 2025, with no salary paid for the three months ended March 31, 2025 and 2024. The company funded an aggregate of $1.4 million for construction and land acquisition to companies controlled by Roberto Valdes (Valdeland S.A de C.V. and Valdetierra S.A de C.V.) for the Plaza Bajamar and Valle Divino projects. The company has not yet established the bank trust for title transfer for these properties.
Lisa Landau, a relative of the CFO, advanced funds to the company for general corporate expenses and direct payments towards Diagonal convertible notes. The principal balance owed to Lisa Landau was $445,509 as of March 31, 2025, an increase from $347,374 at December 31, 2024. These advances are on demand and do not carry interest.

Stakeholder Impact

**Shareholders**: Face significant dilution risk from ongoing equity issuances to raise capital and convert debt. The substantial net loss and going concern warning indicate potential for significant share price depreciation and loss of investment value. The legal dispute with CleanSpark could also negatively impact shareholder value.
**Employees (Management)**: CEO, CFO, and Chairman have accrued unpaid compensation, which could affect morale and retention, although they continue to serve.
**Customers/Homebuyers**: Uncertainty regarding land title transfers for Valle Divino and Plaza Bajamar projects could impact customers who have made deposits or purchased lots, potentially leading to delays or legal issues for them.
**Creditors**: The company's significant working capital deficit and going concern warning indicate increased credit risk. Convertible note holders and promissory note holders face risks related to repayment and conversion terms, especially with default clauses and related party debt increasing.
**Suppliers/Contractors**: Companies controlled by the chairman are significant contractors, indicating concentrated business risk and potential for conflicts of interest. Other suppliers may face payment delays due to liquidity issues.

Next Steps

Continue marketing efforts to identify potential home buyers in the United States, Canada, Europe, and Asia.
Leverage additional resources through a partnership with a similar development company in Baja California Norte to enhance marketing and sales.
Continue following necessary steps to complete the legal process for title transfer of Valle Divino and Plaza Bajamar properties, including establishing a bank trust (fideicomiso) before the end of fiscal year 2025.
Vigorously defend against the civil action initiated by CleanSpark, Inc. regarding alleged breaches of the Securities Purchase Agreement.
Address material weaknesses in internal control over financial reporting, including improving accounting and finance personnel, and strengthening controls over transactions.

Key Dates

Date	Description
2013-09-26	Company incorporated under the laws of the State of Wyoming.
2018-03-19	Company issued a promissory note to CashCall, Inc. for $75,000.
2019-02-11	Company's Board of Directors approved a 2019 Equity Incentive Plan (never approved by shareholders).
2019-09-25	Company entered into a definitive Land Purchase Agreement with Valdeland, S.A. de C.V. for Plaza Bajamar property.
2019-09-30	Company entered into a contract for deed agreement with IntegraGreen for Emerald Grove property.
2019-11-06	Company authorized and issued 1,000 shares of Series B Preferred Stock and 350,000 shares of common stock to CleanSpark Inc.
2019-11-01	$150,000 paid to Roberto Valdes for construction of two model Villas at Plaza Bajamar.
2019-12-01	$100,000 paid to Roberto Valdes as a down payment for Plaza Bajamar land acquisition.
2020-01-01	Employment agreements effective with Jason Sunstein and Roberto Valdes.
2020-08-26	Company's Board of Directors approved the 2020 Equity Incentive Plan.
2020-12-15	Company entered into a promissory note with Christopher Elder for $126,477.
2021-05-31	Company acquired a 25% investment in Rancho Costa Verde Development LLC (RCVD).
2021-07-26	Company entered into a Warrant Purchase Agreement with Bigger Capital Fund, LP.
2022-03-23	Company issued a convertible promissory note to Mast Hill Fund, L.P. for $250,000.
2022-03-28	Company issued a convertible promissory note to Blue Lake Partners LLC for $250,000.
2022-08-02	Company and Cash Call settled for an aggregate principal of $23,641.
2022-12-01	Company's Board of Directors approved a 2022 Equity Incentive Plan.
2023-01-03	Company completed the acquisition of the remaining 75% interest in RCVD for $13.5 million.
2023-06-02	Company authorized and issued Series C Preferred Stock to Bigger Capital Fund, LP for $310,000.
2023-08-11	Company entered into a promissory note with George Banker for $150,000.
2023-09-01	Company entered into a promissory note with George Robles for $100,000.
2023-09-05	Company entered into a promissory note with Bobbie Allen Griffith for $215,000.
2023-09-06	Company issued a convertible promissory note to 1800 Diagonal Lending Inc. (Diagonal note #6) for $92,000.
2023-09-13	Company issued a convertible promissory note to 1800 Diagonal Lending Inc. (Diagonal note #5) for $55,000.
2023-10-31	Company filed and adopted a Certificate of Designations for Series D Convertible Preferred Stock.
2023-12-05	Company issued a convertible promissory note to 1800 Diagonal Lending Inc. (Diagonal note #7) for $61,600.
2024-03-31	Company converted the entire principal and interest balance of the IRED promissory note into 89,000 Series A Preferred Shares.
2024-08-01	Company issued a convertible promissory note to Cobra for $125,000.
2024-11-29	Company's board of directors approved the 2024 Equity Incentive Plan.
2024-12-01	Company issued a convertible promissory note to Mast Emerald Grove for $2,780,000.
2025-03-31	End of the quarterly reporting period.
2025-04-08	CleanSpark, Inc. initiated a civil action against the Company.
2025-06-06	Date of the 10-Q filing and common stock outstanding count.

Recommendation

strong sell

Keywords

Real Estate Development, Land Development, Baja California, Mexico Real Estate, Residential Properties, Vacation Homes, SEC Filing, 10-Q, Financial Performance, Going Concern, Liquidity, Share Dilution, Corporate Governance, Related Party Transactions, Convertible Notes, Legal Proceedings

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