{"url_path":"/sec/ilal/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operation.**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-04-27","source_url":"https://www.sec.gov/Archives/edgar/data/1657214/0001493152-26-019199-index.html","accession_number":"0001493152-26-019199","cik":"0001657214","ticker":"ILAL","issuer_name":"International Land Alliance Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1657214/0001493152-26-019199-index.html","primary_entity_key":"0001657214","primary_entity_name":"International Land Alliance Inc."},"word_count":2349,"has_tables":true,"body_markdown":"**Item\n7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.**\n\n \n\n**This\nAnnual Report on Form 10-K contains forward-looking statements. Our actual results could differ materially from those set forth as a\nresult of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion\nand analysis of our financial condition and results of operations should be read together with the audited financial statements and accompanying\nnotes and the other financial information appearing elsewhere in this Annual Report on Form 10-K. The analysis set forth below is provided\npursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future\nevents.**\n\n \n\n**Overview\nof Our Company**\n\n \n\nThe\nCompany was incorporated pursuant to the laws of the State of Wyoming on September 26, 2013. We are based in San Diego, California. We\nare a residential land development company with target properties located primarily in the Baja California Norte region of Mexico and\nSouthern California. Our principal activities are purchasing properties, obtaining zoning and other entitlements required to subdivide\nthe properties into residential and commercial building plots, securing financing for the purchase of the plots, improving the properties’\ninfrastructure and amenities, and selling the lots to homebuyers, retirees, investors, and commercial developers. We offer the option\nof financing (i.e. taking a promissory note from the buyer for all or part of the purchase price) with a guaranteed acceptance on any\npurchase for every customer.\n\n \n\n22\n\n \n\n \n\nOverview\n\n \n\nThe\nreal estate market in Northern Baja California has continued to significantly improve and has fully recovered from the negative impact\nof Covid-19. The housing prices has continued to rise in the Southwest U.S., and inventory has remained severely low, which generated\nadditional attraction from home buyers seeking second homes or vacation homes.\n\n \n\nThe\nCompany’s current portfolio includes residential, resort and commercial properties comprising the following projects:\n\n \n\n \n■\n**Oasis\nPark Resort** is a 497-acres master planned real estate community including 1,344 residential home sites, south of San Felipe,\nBaja California, which offers a 180-degree sea and mountain views. In addition to the residential lots, there is a planned boutique\nhotel, a spacious commercial center, and a nautical center. As of the date of this report, 85 of the 1,344 planned residential lots\nwere pre-sold to initial shareholders. The Company has made significant progress on the project, which included the completion of\nthe two-mile access road and the community entrance structure. The Company also started construction of the waterfront clubhouse,\nand model homes.\n\n \n \n \n\n \n■\n**Valle\nDivino** is a self-contained solar 650-home site project in Ensenada, Baja California, with test vineyard at the property.\nThis resort includes 137 residential lots and 3 commercial lots on 20 acres of land. This represents an estimated $60 million in\ngross sales opportunity.\n\n \n \n \n\n \n■\n**Plaza\nBajamar Resort**is an 80-unit project located at the internationally renowned Bajamar Ocean front hotel and golf resort. The\nBajamar oceanfront golf resort is a master planned golf community located 45 minutes south of the San Diego-Tijuana border along\nthe scenic toll road to Ensenada. The first Phase will include 22 “Merlot” 1,150 square-foot single-family homes that\nfeatures two bedrooms and two baths. The home includes two primary bedroom suites - one on the first floor and one upstairs, as well\nas fairway and ocean views from a rooftop terrace. The Merlot villas will come with the installation of solar packages.\n\n \n \n \n\n \n■\n**Emerald\nGrove Estates**is the Company’s newly renovated Southern California property, used for organized events at this 8,000\nsquare foot event venue.\n\n \n \n \n\n \n■\n\n**Rancho\nCosta Verde (“RCVD”)** is a 1,100-acre master planned second home, retirement home and vacation home real estate\ncommunity located on the east coast of Baja California. RCVD is a self-sustained solar powered green community that takes advantage\nof the advances in solar and other green technology. In May 2021, the Company acquired a 25% investment in RCVD in exchange for $100,000\nand 60,000 shares of the Company’s common stock, and such investment was initially recorded as an equity-method investment\nin the Company’s condensed consolidated financial statements. On January 3, 2023, the Company acquired the remaining 75% membership\ninterest in RCVD for a contractual consideration of $13.5 million, paid through $8,900,000 secured convertible note, 400,000 shares\nof common stock and 660,000 common stock warrants. This transaction was recorded pursuant to ASC 805 *Business Combinations*.\n\n \n\nIn\nDecember 2025, the Company acquired an additional 300 acres of land for their RCVD location for a total consideration of $1.65 million.\nThis purchase is subdivided into 7 parcels and consists of approximately 300 residential homesites, 12 existing tiny homes, and 2\ncompleted homes.\n\n \n\n23\n\n \n\n \n\nSummary\nof key operational and financial events:\n\n \n\n \n■\nThe\nCompany has collected an aggregate amount of $312,175 from house construction at the Plaza Bajamar project, which was initially recorded\nand presented as contract liability in the consolidated balance sheets. However, the Company offset the balance with the additional\ncash funded for the construction of amenities at Bajamar, with the net balance presented as impairment loss in the consolidated statement\nof operations in the previous year. There were no collections during 2025.\n\n \n \n \n\n \n■\nContinued\nour research and marketing efforts to identify potential home buyers in the United States, Canada, Europe, and Asia. Through the\nformation of a partnership with a similar development company in the Baja California Norte Region of Mexico, we have been able to\nleverage additional resources with the use of their established and proven marketing plan which can help us with sophisticated execution\nand the desired results for residential plot sales and development.\n\n \n \n \n\n \n■\nTitle\nof Oasis Park Resort in San Felipe was assumed during 2019. We are expecting the transfer of title on Valle Divino in Ensenada, Baja\nCalifornia and Plaza Bajamar in Ensenada, Baja California before the end of our second fiscal quarter of 2026, as we continue to follow\nthe necessary steps to complete this legal process.\n\n \n\n**Results\nof Operations for the year ended December 31, 2025, compared to the year ended December 31, 2024**\n\n \n\n  \nFor the years ended \n\n  \nDecember 31,\n2025  \nDecember 31,\n2024 \n\nRevenues and lease income \n$2,434,413  \n$8,094,940 \n\n  \n    \n   \n\nCost of revenue \n 1,618,529  \n 1,242,057 \n\n  \n    \n   \n\nGross profit \n 815,884  \n 6,852,883 \n\n  \n    \n   \n\nOperating expenses \n    \n   \n\nSales and marketing \n 848,140  \n 866,607 \n\nImpairment loss \n -  \n - \n\nGeneral and administrative expenses \n 7,129,788  \n 1,864,249 \n\nTotal operating expenses \n 7,977,928  \n 2,730,857 \n\n  \n    \n   \n\nIncome (loss) from operations \n (7,162,044) \n 4,122,027 \n\n  \n    \n   \n\nOther income (expense) \n    \n   \n\nLoss from conversion of debt to equity \n (1,976,914) \n - \n\nRecapture of debt \n 228,950  \n   \n\nChange in fair value derivative liability \n (2,800,243) \n 338,311 \n\nInterest expense \n (2,587,933) \n (1,412,556)\n\nTotal other expense, net \n (7,136,140) \n (1,074,245)\n\n  \n    \n   \n\nNet income (loss) \n$(14,298,184) \n$3,047,782 \n\n \n\n**Revenues**\n\n \n\nRevenue\ndecreased by $5,660,527 to $2,434,413 for the year ended December 31, 2025, from $8,094,940 for the year ended December 31, 2024. The\nrevenue recognized during the year ended December 31, 2025, includes real estate sales, interest from financed sales, financing fees,\nand components of home construction.\n\n \n\n24\n\n \n\n** **\n\n**Cost\nof Revenues**\n\n \n\nCost\nof revenue increased by $376,472 to $1,618,529 for the year ended December 31, 2025, from $1,242,057 for the year ended December 31,\n2024. Cost of revenue includes land cost and related land improvements including infrastructure, construction and subdivision costs.\n\n \n\n**Operating\nExpenses**\n\n \n\nOperating expenses increased by $5,247,071 to $7,977,928\nfor the year ended December 31, 2025, from $2,730,857 for the year ended December 31, 2024.\n\n \n\nSuch\nincrease mainly relates to a large increase in stock-based compensation expenses of $2,794,632 during 2025 which totaled $3,702,669 compared to $908,037\nin the prior year. In addition, general and administrative\nincreased for professional fees and other general and administrative expenses during 2025, due to the lack of capital available during\nthe year ended December 31, 2024. Sales and marketing remained relatively flat, decreasing $18,468 during 2025, from the year ended December\n31, 2024. Sales costs are related to real estate’s sales commissions. Marketing costs include advertising, prospective customers’\neducation, travel, and accommodation.\n\n \n\n**Other\nexpenses**\n\n \n\nOther expenses increased by $6,061,895 to $7,136,140\nfor the year ended December 31, 2025, from $1,074,245 during ended December 31, 2024. Such change is primarily due to the change in fair\nvalue of the Company’s derivative liability of $2,800,243 and loss on debt extinguishment of $1,976,914, with interest expense increasing\n$1,175,377 year over year.\n\n \n\n**Net\nLoss**\n\n \n\nAs\na result of the foregoing, the Company finished the year ended December 31, 2025, with net loss of $14,298,184, as compared to net income\nof $3,047,781 for the year ended December 31, 2024.\n\n \n\nThe\nfactors that will most significantly affect future operating results will be:\n\n \n\n■\nThe\npositive effect of implemented sales and marketing initiatives to drive opportunities into our various projects.\n\n■\nThe\nquality of our amenities.\n\n■\nThe\nglobal economy and the demand for vacation homes.\n\n■\nThe\nsale price of future plots and home construction compared to the sale price in other resorts in Mexico.\n\n■\nThe\nprime location of our projects.\n\n \n\nOther\nthan the foregoing we do not know of any trends, events or uncertainties that have had, or are reasonably expected to have, a material\nimpact on our revenues or expenses.\n\n \n\n25\n\n \n\n \n\n**Capital\nResources and Liquidity**\n\n \n\nCash\nwas $4,186 and $26,120 as of December 31, 2025 and 2024, respectively. As shown in the accompanying financial statements, we recorded\nloss of $14.3 million for year ended December 31, 2025. Our working capital deficit as of December 31, 2025, was $24.3 million. These\nfactors and our ability to raise additional capital to accomplish our objectives, raises substantial doubt about our ability to continue\nas a going concern. We expect our expenses will continue to increase during the foreseeable future as a result of increased operations,\nincreased construction activity and the development of current and future projects which include our current business operations.\n\n \n\nWe\nanticipate generating increased revenues over the next twelve months, as we continue to market the sale of plots held for sale at our\nvarious projects, generate cash from the sale of house construction at our properties.\n\n \n\nIf\nthe Company is not successful with its marketing efforts to increase sales, the Company will continue to experience a shortfall in cash,\nand it will be necessary to obtain funds through equity or debt financing in sufficient amounts or to further reduce its operating expenses\nin a manner to avoid the need to curtail its future operations.\n\n \n\n**Operating\nActivities**\n\n \n\nNet\ncash flows used in operating activities for the year ended December\n31, 2025, was $998,582 which resulted primarily due to net loss of $14,298,184, off-set by non-cash\nshare-based compensation of $3,702,669, loss on debt conversion of $1,976,914, change in\nfair value of derivative liability of $2,800,243, and by a positive net change in assets and liabilities of $3,035,516.\n\n \n\nNet\ncash flows used in operating activities for the year ended December\n31, 2024, was $384,680 which resulted primarily due to net income of $3,047,781, non-cash\nshare-based compensation of $908,037, depreciation of $87,250,\nand change in fair value of derivative liability of $338,311, offset by a negative net change in assets and liabilities of $4,089,436.\n\n \n\n26\n\n \n\n \n\n**Investing\nActivities**\n\n \n\nNet\ncash flows used in investing activities was $3,101,938 for the year ended December 31, 2025. The funds were used for the development\nof the various projects and additional investment for land development, as well as an increase in long-term accounts receivable.\n\n \n\nNet\ncash flows used in investing activities was $513,138 for the year ended December 31, 2024. The funds were used for the development of\nthe various projects and additional investment for land development.\n\n \n\n**Financing\nActivities**\n\n \n\nNet\ncash flows provided by financing activities for the year ended December 31, 2025, was $4,078,586, primarily from cash proceeds from other\nloans of $1,497,217, cash proceeds from convertible notes of $4,297,100, cash proceeds from the issuance of Series C Preferred stock\nof $250,000, and cash proceeds from promissory notes of $100,000, primarily offset by cash payments on other loans of $1,751,465, dividends\npaid of $132,054, and cash payments on convertible notes of $329,414.\n\n \n\nNet\ncash flows provided by financing activities for the year ended December 31, 2024, was $738,691, primarily from cash proceeds from related\nparties for aggregate amount of $242,875, cash proceeds from convertible notes of $456,130, cash proceeds from other loans for $666,363,\ncash proceeds from promissory notes of $75,000, dividends paid of $91,678, and cash payments on promissory notes of $565,000.\n\n \n\nAs\na result of these activities, we experienced a decrease in cash of $21,934 for the year ended December 31, 2025. Our ability to continue\nas a going concern is dependent on our success in obtaining additional financing from investors or from the sale of our common shares.\n\n \n\n**Critical\nAccounting Polices**\n\n \n\nIn\nDecember 2001, the SEC requested that all registrants list their “critical accounting polices” in the Management Discussion\nand Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a\ncompany’s financial condition and results, and requires management’s most difficult, subjective, or complex judgments, often\nas a result of the need to make estimates about the effect of matters that are inherently uncertain. Our accounting policies are disclosed\nin Note 2 of our audited consolidated financial statements included herein. We consider the following accounting policies critical to\nthe understanding of the results of our operations:\n\n \n\n■\nGoing\nconcern. It requires to rely on management’s representation on financial forecast.\n\n■\nRevenue\nrecognition. It requires judgement to determine when a contract exists, when performance obligations are met and the estimated variable\nconsideration if any.\n\n■\nIssuance\nof debt with attached financial instruments. Some instruments carry embedded features that require bifurcation from host instrument\nand accounting as derivative liability.\n\n■\nAccounting\nof the Company’s equity-method investment. Indeed, it requires judgement by management to determine whether there is significant\ninfluence or control over the Company’s investee. Significant influence is the power to participate in the financial and operating\npolicy decisions of the investee but is not control or joint control over these policies.\n\n \n\n**Off-balance\nSheet Arrangements**\n\n \n\nDuring\nthe year ended December 31, 2025, we have not engaged in any off-balance sheet arrangements.\n\n \n\n**Recent\nAccounting Pronouncements**\n\n \n\nThe\nrecent accounting pronouncements that are material to our financial statements are disclosed in Note 2 of our consolidated audited financial\nstatements included herein."}