Company: ILAG
Filing Date: 2025-04-28
Form Type: 20-F
Source: 0001641172-25-006445
Chunk: 107

Company: Intelligent Living Application Group Inc.
Filing Date: 2025-04-28
Form: 20-F
Item: Item 3
Chunk 107
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 we monitor raw material price trends closely to manage our production needs.

Cost of goods sold - idle capacity

Idle capacity consists of direct production costs
in excess of charges allocated to the Company’s finished goods in production. Such costs relate primarily to depreciation expense
related to the Company’s electroplating equipment that cannot be directly attributable to the production process. Idle capacity
expenses were $345,424 and nil for 2023 and 2022, respectively.

Gross Profit

Gross profit was $633,342 for 2023, a decrease
of $1,562,772, or 71.2% from $2,196,114 for 2022. Profit margin was 9.8% for 2023, decrease from 18.1%
for 2022 as a result of depreciation expense of new machinery, increase in direct labor cost and weak demand of
our major market in the US, during 2023.

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We believe that we can enhance our gross margin as
we are researching new processing procedures to use durable but lower cost materials.

Selling and marketing expenses

Major components of selling and marketing expenses
are transportation, custom declarations, sales commissions. Selling and marketing expenses decreased by $45,632, or 43.3% to $59,841 for 2023 from $105,473 for 2022. The decrease was due mainly to reduction in freight
and transportation fees.

General and Administrative Expenses

General and administrative expenses consist primarily
of personnel costs for our accounting and administrative support personnel and executives as well as legal and professional fees, depreciation
and amortization of non-production property and equipment. General and administrative expenses increased by $232,117, or 5.5%, to $4,440,314
for 2023 from $4,208,197 for 2022. This increase was due mainly to additional
amortization on leasehold improvement and stock options granted to officers and employees of the company under the Company’s 2022
Omnibus Equity Plan (the “ Equity Plan”).

Finance Costs

Finance costs decreased by $120,653, or 81.7%, to
$26,935 for 2023 from $147,588 for 2022. The decrease was mainly due reduced interest payment for a short-term loan to a third party during 2023. During the years ended December 31,
2023 and 2022, interest expense for bank borrowings was $18,