Intelligent Living Application Group Inc. Announces First Half 2025 Unaudited Financial Results

HONG KONG, Dec. 22, 2025 /PRNewswire/ -- Intelligent Living Application Group Inc. (Nasdaq: ILAG) (the "Company" or "Intelligent Living"), a premium lockset manufacturer and distributor headquartered in Hong Kong, today announced its unaudited financial results for the six months ended June 30, 2025.

First Half 2025 Financial Highlights

• Revenues were $2,305,265, a decrease of 48.5% from $4,473,031 for the six months ended June 30, 2024.
• Gross profit was $246,038, a decrease of 65.0% from $702,184 for the six months ended June 30, 2024.
• Net loss was $5,330,267, an increase of 137.0% from $2,249,307 for the six months ended June 30, 2024.
• Loss per basic and fully diluted share was $0.27 compared to loss per basic and fully diluted share of $0.12 for the six months ended June 30, 2024.

Mr. Bong Lau, Chairman and Chief Executive Officer of Intelligent Living, commented, "Facing heavy and non-directional U.S. tariff increase and slowdown in U.S. real estate market in 2025, our revenue for the first half of 2025 compared to the same period of last year decreased about 48.5%. We are striving to optimize our product mix and source of origin composition to improve our performance. Our formal release of smart locks has to be suspended and postponed for the cost saving reasons due to same impact on revenue."

"Our mission is to make life safer and smarter by designing and producing affordable, high-quality locksets and smart security systems. With our automated product lines and new craftsmanship in manufacturing locksets, we continue to provide our principal market of the US with a large variety of products with different functions, designs and colors. Although our sector has experienced lower-cost entrants, we believe the high quality of our products and our brand recognition over our 40-year history serving the U.S. market well position us to survive in the current down-turn and generate potential future growth" Mr. Lau concluded.

Financial Results For The Six Months Ended June 30, 2025 and 2024

Revenues

Revenues from sales of door locksets were $2,305,265 for the six months ended June 30, 2025, a decrease of $2,167,766, or 48.5% from $4,473,031 for the same period last year. The decrease was mainly due to a decrease in units sold for the six months ended June 30, 2025. Our total products sold were approximately 0.5 million units (including approximately 0.1 million units of spare parts) for the six months ended June 30, 2025 compared to 0.9 million units (including approximately 0.1 million units of spare parts) for the six months ended June 30, 2024.

Cost of Goods Sold

Cost of goods sold was $1,853,878 for the six months ended June 30, 2025 compared to $3,604,880 for the comparable period of 2024. Cost of goods sold was 80.4% and 80.6% of revenues for the six months ended June 30, 2025 and 2024, respectively.

Cost of goods sold includes raw materials (mainly copper, stainless steel, iron and zinc alloy), direct labor (including wages and social security contributions), manufacturing overhead (such as packing materials, direct rental expense and utilities) and taxes. As a small business with limited resources, we lack the ability to hedge our raw materials costs and we monitor raw material price trends 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 and work in process. Such costs are primarily depreciation of the Company's electroplating equipment that cannot be attributable to the production. Idle capacity expenses were $205,349 and $165,967 for the six months ended June 30, 2025 and 2024, respectively.

Gross Profit

Gross profit was $246,038 for the six months ended June 30, 2025, a decrease of $456,146, or 65.0% from $702,184 for the same period of 2024. Profit margin was 10.7% for the six months ended June 30, 2025, a decrease from 15.7% for the comparable period of 2024 as a result of a decline in average selling price, driven by competitive pricing pressures and heavy and non-directional tariff increases imposed by the U.S. for the six months ended June 30, 2025.

We believe we can enhance our profit margin as we (i) negotiate for volume rebates that would reduce our cost of raw materials, and (ii) optimize our product mix to focus our marketing efforts on our higher margin products.

Selling and Marketing Expenses

Selling and marketing expenses were $186,784 for the six months ended June 30, 2025, a decrease of $400,459, or 68.2% compared to $587,243 for the comparable period of 2024. The decrease during the six months ended June 30, 2025 compared to the same period of 2024 was due mainly to decrease in marketing research in Thailand and Southern East Asia market which we conducted to diversify our production bases and selling markets to reduce the negative impact by the U.S. tariffs.

General and Administrative Expenses

General and administrative expenses were $5,424,955 for the six months ended June 30, 2025, an increase of $3,643,332 or 204.5% compared to $1,781,623 for the comparable period in 2024. This increase was mainly due to $1,390,251 of ordinary shares issuance for equity compensation plan to officers and employees of the Company under the Company's 2022 Omnibus Equity Plan, and $1,943,297 of Series A Preferred Shares to Mr. Bong Lau, the Chief Executive Officer and Chairman of the Board.

Research and Development Expenses

Research and Development Expenses were nil and $648,413 for the six months ended June 30, 2025 and 2024. This decrease was mainly due to the suspension of further development on smart locks, the Internet of Things (IoT) applications, certain spending for AI robotic production due to impact from the US tariff increases in 2025 and slowdown in US real estate market.

Finance Costs

Finance costs were $23,283 for the six months ended June 30, 2025, an increase of $7,551 or 48.0% from $15,732 for the same period in 2024. The increase was mainly due to an increase in interest from bank borrowing during the six months ended June 30, 2025. During the six months ended 2025 and 2024, interest expense for bank borrowings was $17,257 and $8,707, respectively.

Provision for Income Taxes

Provision for income tax was $11,748 for the six months ended June 30, 2025, a decrease of $42,888 or 78.5% from $54,636 for the same period in 2024.

Our PRC entity in 2025 and 2024 was subject to the statutory PRC enterprise income tax rate of 25.0%. Our subsidiaries in Hong Kong are subject to Hong Kong taxation on income derived from their activities conducted in Hong Kong at a rate of 16.5%.

Net Loss

Net loss was $5,330,267 for the six months ended June 30, 2025, an increase of $3,080,960 or 137.0% from net loss of $2,249,307 for the same period in 2024.

Liquidity and Capital Resources

We are a holding company incorporated in the Cayman Islands. We conduct our operations through our subsidiaries in Hong Kong and China. As a result, our ability to pay dividends depends upon dividends paid by our subsidiaries. If our subsidiaries incur debt in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, Xingfa Hardware Products Co. Ltd. ("Xingfa"), an indirectly wholly-owned subsidiary of the Company in China, is permitted to pay dividends in accordance with PRC accounting standards and regulations. Under PRC law, Xingfa is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. Additionally, Xingfa may allocate a portion of its after-tax profits based on PRC accounting standards to its enterprise expansion fund and staff bonus and welfare funds, at its discretion. Xingfa may also allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior State Administration of Foreign Exchange of China ("SAFE") approval as long as certain routine procedural requirements are fulfilled. However, capital account transactions, which include foreign direct investment and loans, must be approved by and/or registered with SAFE and its local branches.

Our cost structure is relatively fixed and our working capital requirements are influenced by our order backlog. We need operating funds to pay for raw materials, maintain an appropriate level of work-in-process inventory, and keep the production facility open. To support our working capital needs, we maintain credit facilities with the Bank of China (Hong Kong) Limited of approximately $897,000 since 2021, and with Dongguan Rural Commercial Bank Co., Ltd of approximately $698,000 since 2025, which are guaranteed by our directors and their personal properties.

Our working capital was $6,265,691 and $7,395,318 as of June 30, 2025 and December 31, 2024. Our cash and cash equivalents were $793,969 and $1,280,911 as of June 30, 2025 and December 31, 2024, respectively. While our business was negatively impacted by the changes in U.S. tariffs in 2025, as well as high interest rates, COVID-19 and tariffs in 2023, 2022 and 2021, we believe we are able to obtain sufficient operating funds from our existing shareholders, potential investors or extend Hong Kong government guaranteed low interest bank borrowing to operate our business.

We believe our current working capital is sufficient to support our operations for the next 12 months. We may, however, need additional cash in the future if we experience changes in business conditions or other developments, or if we find and wish to pursue opportunities for investment, acquisition, capital expenditure or similar actions. If we determine our cash requirements exceed the cash, cash equivalents and restricted cash we have on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities. In the event that the Company requires additional funding to finance its operations, the Company's major shareholders have indicated their intent and ability to provide such financial support. In addition, the management is actively seeking investment from potential investors through investment banks to seek equity financing to raise our cash available for operations and for quick reaction to potential improved market condition. The issuance and sale of additional equity would result in dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. Our obligation to bear credit risk for certain financing transactions we facilitate may also strain our operating cash flow. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

Cash Flows

The following summarizes the key components of our cash flows for the six months ended June 30, 2025 and 2024:

Operating Activities

Net cash used in operating activities was $1,739,617 for the six months ended June 30, 2025 and was mainly attributable to (i) the net loss of $5,330,267, (ii) an increase in accounts receivable of $44,671, (iii) an increase in inventory of $21,176, (iv) a decrease in account payable of $222,276, (v) a decrease in other payables and accruals of $100,830 and (vi) a decrease in taxes payable of $14,656; and being offset by (i) a decrease in prepayments of $166,673, (ii) a decrease in deposits of $764, (iii) a decrease in other receivables of $71,164, (iv) an increase in advance from customers of $28,068, and (v) non-cash item of $394,042 of depreciation and amortization and $3,333,548 of shares issued for equity compensation plan.

Net cash used in operating activities was $2,044,513 for the six months ended June 30, 2024 and was mainly attributable to (i) the net loss of $2,249,307, (ii) a decrease in accounts receivable of $862,638, (iii) a decrease in deposits of $104, (iv) an increase in account payable of $5,789, (v) an increase in advance from customers of $6,895; and being offset by (i) an increase in inventory of $37,446, (ii) an increase in prepayments of $748,851, (iii) an increase in other receivables of $7,015, (iv) a decrease in other payables and accruals of $268,594, (v) a decrease in taxes payable of $6,644, and (vi) non-cash item of $397,918 of depreciation and amortization.

Investing Activities

Net cash used by investing activities was $20,439 for the six months ended June 30, 2025. The change was primarily attributable to reduced purchase of property and equipment.

Net cash used by investing activities was $34,507 for the six months ended June 30, 2024. The change was primarily attributable to reduced purchase of property and equipment.

Financing Activities

Net cash provided by financing activities was $1,272,969 for the six months ended June 30, 2025 and was primarily attributable to (i) proceeds of $422,000 from ordinary shares issued in equity financing, and (ii) net proceeds of $850,969 of bank borrowings.

Net cash used in financing activities was $87,578 for the six months ended June 30, 2024 and was primarily attributable to repayments of bank borrowings.

Capital Expenditures

We had capital expenditures of $20,439 and $34,507 for the six months ended June 30, 2025 and 2024, respectively. Our capital expenditures were mainly for the purchases of production equipment. We intend to fund our future capital expenditures with lease and other financings. We will continue to make capital expenditures as appropriate to support the growth of our business.

Recent development

On August 5, 2025, the Board of Directors (the "Board") of the Company, pursuant to the Articles of Association of the Company, designated 10,000,000 Preferred Shares of the Company as series B preferred shares of the Company, par value US$0.0001 each ("Series B Preferred Shares" or the "Subject Shares") and every holder of the Subject Shares present in person (or being a corporation, is present by a duly authorized representative), or by proxy shall have fifty (50) votes for every fully paid Subject Share at any general meeting.

On August 5, 2025, the Company entered into an Employment Agreement with Mr. Bong Lau, the Chief Executive Officer of the Company. The Agreement provides that Mr. Bong Lau will receive compensation in the amount of $204,000 per year, payable monthly and 10,000,000 Series B Preferred Shares for his services to the Company. The term of the Employment Agreement is for five years. The compensation to Mr. Bong Lau was approved by the Compensation Committee of the Board and the Board on August 5, 2025.

The Company held two extraordinary general meetings of the Company at 10:00 a.m. and 10:30am on December 15, 2025, local time, respectively, at Unit 2, 5/F, Block A, Profit Industrial Building, 1-15 Kwai Fung Crescent, Kwai Chung, New Territories, Hong Kong (the "Meetings"). At the Meetings, shareholders of the Company approved:

About Intelligent Living Application Group Inc.

Intelligent Living Application Group Inc. is a premium lockset manufacturer and distributor headquartered in Hong Kong. Intelligent Living manufactures and sells high quality mechanical locksets to customers mainly in the United States and Canada and has continued to diversify and refine its product offerings in the past 40 years to meet its customers' needs. Intelligent Living obtained the ISO9001 quality assurance certificate and various accredited quality and safety certificates including American National Standards Institute (ANSI) Grade 2 and Grade 3 standards that are developed by the Builders Hardware Manufacturing Association (BHMA) for ANSI. Intelligent Living keeps investing in self-designed automated product lines, new craftsmanship and developing new products including smart locks. For more information, visit the Company's website at http://www.i-l-a-g.com.

Forward-Looking Statements

This press release contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases, forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "target," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. The Company may also make written or oral forward-looking statements in its reports filed with, or furnished to, the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. These statements are subject to uncertainties and risks including, but not limited to, the following: the Company's goals and strategies; the Company's future business development; financial condition and results of operations; product and service demand and acceptance; reputation and brand; the impact of competition and pricing; changes in technology; government regulations; fluctuations in general economic and business conditions in U.S., Hong Kong and China and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the SEC. For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company's filings with the SEC, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

SOURCE Intelligent Living Application Group, Inc.