Company: ILAG
Filing Date: 2025-04-28
Form Type: 20-F
Source: 0001641172-25-006445
Chunk: 101

Company: Intelligent Living Application Group Inc.
Filing Date: 2025-04-28
Form: 20-F
Item: Item 3
Chunk 101
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 lower our costs such as raw materials and direct labor. Normally, when there is no disruption on logistics such as the
ones caused by COVID-19 or significant increase on tariff of products to the United States,
raw materials and packaging consumables will be kept at a safe level that may sustain potential production needs
for about two months. Potential production needs include quantities from purchase orders received and projected sales. Taking into account
production time, inventory turnover and accounts receivable turnover and our cash position, we then project our working capital needs
and also identify potential sales sources.

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The number of purchase orders from our
customers for 2024 were higher than those in 2023. Units of product shipped during 2024 were approximately 1.6 million units
(including approximately 0.2 million units of spare parts) compared to approximately 1.3 million units (including approximately 0.1 million
units of spare parts) in 2023.

Starting in 2020, we are studying and hope to improve
our sales mix, namely more ODM and more self-branded products, geographic market mix, namely the US, South-east Asia and China, cost structure
and procurement options in order to further optimize our profit performance. However, as the combined effect of slow recovery post COVID-19
and the amortization of our electroplating production line, we have incurred a lower profit margin during the fiscal year 2023. We continue
to promote higher value products to our customers and develop smart lock product series in 2024. Despite our efforts
to optimize our product mix and cost structure, purchase orders from our customers were slowed down as the reasons discussed above. As
we have to keep our factory running and employees working, we have stocked up to achieve the expected short delivery time to meet potential
new customers demand, therefore, our inventory turnover in days was negatively affected. We believe that we can further reduce our cost
of raw materials with new processing techniques, to maintain volume rebates of raw materials and enhance our gross margin as we optimize
our product-mix to focus our marketing efforts on higher margin products and new products. To better manage our profit margin in light
of rising cost of raw materials, we leverage extensive product quality testing to identify alternative raw materials mix that are designed
to lower our production costs. Since the second half of 2021, we have used stainless steel to substitute brass. Since February 1, 2025,
President Trump has increased tariff lev