Dswiss Inc - 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the notes to those financial statements appearing elsewhere in this Report.

Certain statements in this Report constitute forward-looking statements. These forward-looking statements include statements, which involve risks and uncertainties, regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategy, (c) anticipated trends in our industry, (d) our future financing plans, and (e) our anticipated needs for, and use of, working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plan,” “potential,” “project,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend,” or the negative of these words or other variations on these words or comparable terminology. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements.

The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.

Overview

DSwiss, Inc. (“the Company”), a Nevada corporation was incorporated under the laws of the State of Nevada on May 28, 2015. DSwiss Holding Limited owns 100% of DSwiss (HK) Limited, a Hong Kong Company, which owns 100% of DSwiss Sdn Bhd, the operating Malaysia Company of which is described below. In 2016, DSwiss (HK) Limited invested in DSwiss Biotech Sdn Bhd, incorporated in Malaysia, and owned 40% equity interest. We have incorporated a new company namely DSwiss International Trading (Shenzhen) Limited in China, with 100% equity interest owned by DSwiss (HK) Limited. On November 9, 2020, DSwiss International Trading (Shenzhen) Limited was officially deregistered. On January 18, 2023, DSwiss (HK) Limited acquired 150,000 shares, representing 60% equity interest in DSwiss Biotech Sdn. Bhd., from the other party with consideration of RM 1. After such acquisition, DSwiss Biotech Sdn. Bhd. became a wholly owned subsidiary of DSwiss (HK) Limited.

Our Company is a beauty supply company formed with the goal of supplying high quality beauty products directly to our clients. Our beauty supplies include, but are not limited to, beverages to assist in burning and reducing fat, anti-aging creams, and products designed to improve the overall health and physical appearance of our clients. Currently we supply our products in Malaysia, Singapore, Indonesia, Hong Kong and China. However, we have intentions to expand to Myanmar, Macau, Vietnam and Cambodia, and subsequent to that we will make efforts to expand throughout the world a premier biotech-nutraceutical company, supplying high-quality health and beauty products, including beverages to assist in weight management, anti-aging creams, and products designed to improve the overall health system in our body.

At this time, we operate exclusively online through our website: http://www.dswissbeauty.com/

Our Company continuously strives to improve the already high standard of our goods and services through ongoing research and market development. We are going to penetrate into South East Asia markets through the recruitment of distributors and via the social media like Facebook and Instagram. We foresee to spend a substantial amount in marketing and advertising in the coming year. At DSwiss we are determined to bring new products to markets that we have not yet explored.

Products which meet the definition of a functional food and cosmetics related products need to be registered or notified with the Drug Control Authority (DCA), Ministry of Health Malaysia. Manufacturing, marketing, importation and the sale of unregistered products is a violation of the Drug Control Regulations and Cosmetics Act 1984 of Malaysia and enforcement action can be taken.

At DSwiss, research and development is an ongoing effort whose purpose is to ensure our products on the forefront of quality and effectiveness. Equipped with state-of-the-art machinery, our innovative research and development team are constantly exploring on new development and product lines that will enable us to provide the highest quality standard and remain competitive in the industry.

DSwiss’s products are certified and approved by the Ministry of Health (“MOH”) Malaysia. Due to the stringent requirements from MOH Malaysia, we strive to upkeep the highest possible standard in our products to provide assurance and as a prove of our continuing commitment to providing quality products.

We always strive to offer products as high quality as possible, and hope that this assurance from an esteemed regulatory body will also serve to prove our continuing commitment to providing quality goods.

DSwiss have own brand Quantum Resonant Magnetic Analyzer which is DSwiss Quantum Resonant Magnetic Analyzer. DSwiss Quantum Resonant Magnetic Analyzer is a Hi-tech innovation project, which is related to medical, bio-informatics, electronic engineering, etc. It is based on quantum medical, and scientifically analyzes the human cell’s weak magnetic field collected by advanced electronic device. The analyzer can work out the customer’s health situation and main problem. According to the checking result, the analyzer can figure out the reasonable treatment recommendation. The quantum resonant magnetic analyzer is the individualized guide of comprehensive healthy consulting and updated healthy sciences, and its characteristics and advantages are comprehensive, non-invasive, practical, simple, quick, economical and easy to popularize. We can see DSwiss Quantum Resonant Magnetic Analyzer can help our customers to more concern about their health and skin condition.

Our expected growth is planned to occur primarily through the implementation of our social media marketing strategy. DSwiss already has a strong relationship with social media (eg. Facebook, Instagram and Wechat). The global presence social media has helped provide to us has been an invaluable resource, and as we continue to expand our business operations and spread our brand awareness, we intend to primarily utilize social media to reach our customers. The benefits of social media are countless, but perhaps the most imperative to our future success is our ability to connect with customers directly, to receive their feedback almost instantaneously. On that note, the feedback we have received from our clients has been overwhelmingly positive, which has helped us to create a robust brand image.

While DSwiss has been focused almost exclusively upon pursuing operations within Asia, we do have plans to expand outward and become a household name across the world. Our strategy to do so going forward is by forming partnerships with local companies in various countries that may be willing to stock our products or promote them to their own customers. We believe that by forging strategic relationships and partnerships we can expand our operations across the globe at a greater pace and with greater certainty than we would if we tried to expand on our own.

Results of Operations

Revenues for the year ended December 31, 2025 and 2024

The Company generated revenue of $2,920,986 and $3,112,887 for the year ended December 31, 2025 and 2024 respectively. Revenue has decreased by $191,901 which is a 6.16% decrease comparatively. The revenue mainly represented OEM/ODM sales of Nutraceutical and Skincare Supplies to the customers.

Cost of Revenue and Gross Margin

Cost of revenue for the Company year ended December 31, 2025, amounted to $2,356,424 as compared to $2,489,616 for the year ended December 31, 2024. The decrease of $133,192 in cost of revenue was in line with the decrease in revenue. As a result, the gross profit has decreased from $623,271 for the year ended December 31, 2024 to $564,562 for the year ended December 31, 2025.

Gross margin of the Company has decreased from 20.02% in year ended December 31, 2024 to 19.33% in year ended December 31, 2025, which is a net decrease of 0.69%.

Cost of revenue comprise of freight-in, cost of goods purchased and packing material cost.

Operating Expenses

Selling, general and administrative expenses for the year ended December 31, 2025 and 2024 amounted to $630,645 and $603,720 respectively, the increase of $26,925 which is 4.46% higher comparatively.

Operating expenses for the year ended December 31, 2025 and 2024 amounted to $1,167 and $1,203 respectively, the decrease of $36 which is 2.99 % lower comparatively.

Other Income

The Company recorded an amount of $40,175 and $13,300 as other income for the year ended December 31, 2025 and 2024 respectively. This income is derived from the gain on disposal of plant and equipment, interest income earned and exchange gain.

Net (Loss)/ Profit and Net (Loss)/ Profit Margin

Net loss for the year ended December 31, 2025 was $76,860 as compared to net profit for the year ended December 31, 2024 was $22,223. The decrease in net profit of $99,083 was resulted from the decrease in revenue. Taking into the loss for the year ended December 31, 2025, the accumulated loss for the Company has increased from $1,387,930 to $1,464,790.

Liquidity and Capital Resources

As of December 31, 2025, we had working capital deficit of $133,691 consisting of cash and cash equivalent of $285,034 as compared to working capital surplus of $13,645 and our cash and cash equivalent of $397,476 as of December 31, 2024.

Net cash used in operating activities for the year ended December 31, 2025 was $94,303 as compared to net cash generated from operating activities of $182,556 for the year ended December 31, 2024. The decrease in cash generated from operating activities are mainly resulted from the decrease in accounts payable, other payables and accrued liabilities.

Net cash used in investing activities for the year ended December 31, 2025 was $8,482 as compared to net cash used in investing activities for the year ended December 31, 2024 were $105,258. The cash used in investing activities are mainly for purchase of plant and equipment.

Net cash used in financing activities for the year ended December 31, 2025 was $34,728 as compared to net cash generated from financing activities $68,306 for the year ended December 31, 2024. The net cash (used in)/ generated from financing activities are mainly for the addition and repayment of finance lease.

The revenues generated from our current business operations alone was sufficient to fund our operations or planned growth. However, we will consider acquiring additional funding to continue to operate our business, and to further expand our business. Sources of additional capital through various financing transactions or arrangements with third parties may include equity or debt financing, bank loans or revolving credit facilities. We may not be successful in locating suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means. Our inability to raise additional funds when required may have a negative impact on our operations, business development and financial results.

Critical Accounting Policies and Estimates

Use of estimates

In preparing our Consolidated Financial Statements in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC, we make assumptions, judgments and estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. We evaluate our assumptions, judgments and estimates on a regular basis. We also discuss our critical accounting policies and estimates with the Board of Director.

We believe that the assumptions, judgments and estimates involved in the accounting for leases, revenue recognition and expected credit loss have the greatest potential impact on our Consolidated Financial Statements. These areas are key components of our results of operations and are based on complex rules requiring us to make judgments and estimates, and consequently, we consider these to be our critical accounting policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results.

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating in operating lease right-of-use (“ROU”) as assets, operating lease non-current liabilities, and operating lease current liabilities in our consolidated balance sheet. Finance leases are property and equipment, other current liabilities, and other non-current liabilities in the consolidated balance sheet.

The Company applies significant judgement in accounting for its leases and determining the related right-of-use assets (ROUA) and lease liabilities. Key judgements include:

Lease term –The Company assesses the period for which the Company is reasonably certain to exercise renewal or termination options, including consideration of operational needs and business plans.

Discount rate – In determining the present value of lease payments, management selects an appropriate discount rate, reflecting the rate implicit in the lease, or if not readily determinable, the Company’s incremental borrowing rate.

Lease classification – Management evaluates whether each lease should be classified as a finance or operating lease based on the lease terms and conditions.

Revenue Recognition

In accordance with the Accounting Standard Codification Topic 606 “Revenue Recognition” (“ASC 606”), the Company recognizes revenue when the following four criteria are met: (1) delivery has occurred or services rendered; (2) persuasive evidence of an arrangement exists; (3) there are no continuing obligations to the customer; and (4) the collection of related accounts receivable is probable.

The Company’s revenue is primarily derived from the sale of healthcare goods and the services.

Sale of goods (retail trading)

Revenue from the sale of goods is recognized when control of the goods is transferred to the customer, which generally occurs at a point in time when the customer collects the products from the Company’s premises. At that point, the customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the goods, and the Company has no remaining performance obligations.

The Company applies significant judgement in determining whether it acts as a principal or an agent in its revenue arrangements. (Refer to the principal vs agent paragraph below)

The Company has assessed that it acts as a principal in the sale of goods, as it obtains control of the goods before they are transferred to the customer. Indicators supporting this assessment include that the Company is primarily responsible for fulfilling the promise to provide the goods, has discretion in establishing selling prices, and bears inventory and credit risks.

Rendering of services (healthcare services)

Revenue from healthcare services is recognized over time as the customer simultaneously receives and consumes the benefits provided by the Company’s performance. The Company’s performance obligation is to perform the agreed-upon services as specified in the signed purchase order.

Revenue is recognised as the services are performed. The Company applies judgement in determining whether performance obligations are satisfied over time, assessing the appropriate method to measure progress, and evaluating when sampling and testing procedures are substantially completed. The Company also considers the impact of any variable consideration, such as discounts or rebates, in determining the transaction price.

Principal vs Agent

The Company evaluates whether it acts as a principal or an agent in transactions involving non-exclusive distributor arrangements.

The Company is considered a principal when it controls the specified goods before they are transferred to the customer. In making this assessment, the Company considers indicators including, but not limited to:

The Company is primarily responsible for fulfilling the promise to provide goods to the customer

The Company has inventory risk, including bearing the loss if goods are missing or damaged during delivery

The Company has discretion in establishing prices

Although the supplier may ship goods directly to the customer (drop shipment arrangement), the Company retains control of the goods prior to transfer due to its exposure to inventory risk and pricing discretion. Accordingly, revenue is recognized on a gross basis.

Expected credit loss

The Company assesses expected credit losses (“ECL”) on its financial assets, including trade receivables and amounts owing from related parties, in accordance with the applicable credit loss model. The determination of expected credit loss requires the company to assess the timing and extent of recoverability of receivables and the relevance of forward-looking information The assessments involve significant judgement and estimation in evaluating credit risk and the probability of default.

As of the reporting date, no material allowance for expected credit losses has been recognized. This is primarily due to:

Trade receivables are largely secured by advance payments, reducing the Company’s exposure to credit risk

Outstanding balances have been substantially collected after year-end, indicating strong recoverability

Amounts owing from related parties are eliminated upon consolidation, and therefore do not give rise to credit risk at the consolidated financial statement level

Based on the above factors, management has assessed that the risk of default is minimal and that any potential credit losses are not material.

Recent accounting pronouncements

The Company has reviewed all recently issued, but not yet effective, considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses. The new standard requires entities to disclose additional information about certain expenses, such as purchases of inventory, employee compensation, depreciation, intangible asset amortization, as well as selling expenses included in commonly presented expense captions on the income statement. The FASB further clarified the effective date in January 2025 with the issuance of ASU 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Companies have the option to apply this guidance either on a retrospective or prospective basis, and early adoption is permitted.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in the ASU provide (1) all entities with a practical expedient and (2) entities other than public business entities (PBEs) with an accounting policy election when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606. The ASU is effective for fiscal years and interim periods beginning after December 15, 2025. Companies should apply this guidance on a prospective basis, and early adoption is permitted.

The Company reviews new accounting standards as issued. Management has not identified any other new standards that it believes will have a significant impact on the Company’s financial statements.