{"url_path":"/sec/aaql/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-07-14","source_url":"https://www.sec.gov/Archives/edgar/data/1672571/0001493152-26-033212-index.html","accession_number":"0001493152-26-033212","cik":"0001672571","ticker":"AAQL","issuer_name":"Antiaging Quantum Living Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1672571/0001493152-26-033212-index.html","primary_entity_key":"0001672571","primary_entity_name":"Antiaging Quantum Living Inc."},"word_count":3233,"has_tables":true,"body_markdown":"**Item\n7. Management’s Discussion and Analysis of Financial Condition and Results of Operations**\n\n \n\nThe\nfollowing discussion of our results of operations and cash flows for the years ended March 31, 2026 and 2025, and financial conditions\nas of March 31, 2026, and 2025 should be read in conjunction with our consolidated financial statements and the related notes included\nelsewhere in this Form 10-K.\n\n \n\n**Overview**\n\n \n\nAntiaging\nQuantum Living Inc. (FKA: Achison Inc.) (the “Company”, “us”, “we” or “our”) was incorporated\nunder the laws of the State of New York on December 29, 2014.\n\n \n\nOn\nJuly 1, 2019, Lansdale Inc., the principal stockholder of the Company (“Seller”) and an entity controlled by the Company’s\nformer President, Mr. Wanjun Xie, entered into a Stock Purchase Agreement (the “Agreement”) with Dazhong 368 Inc., (the “Buyer”),\npursuant to which, a total of 9,000,000 shares of Class A common stock of the Company were transferred to the Buyer, representing approximately\n90% of the Company’s issued and outstanding shares of Class A common stock, resulting in a change of the control of the Company.\nMr. Dingshan Zhang was appointed as the President and CEO of the Company on the same date.\n\n \n\nOn\nApril 10, 2023, Mr. Barry Wan acquired control of 29,215,000 restricted shares of Class A common stock (the “Purchased Shares”)\nof the Company, representing approximately 97% of the Company’s total issued and outstanding common stock from Dazhong 368 Inc\nand Sophia 33 Inc, two New York corporations controlled by the Company’s then President, Chief Executive Officer and sole director,\nDingshan Zhang (the former President) pursuant to the terms of a Stock Purchase Agreement by and among the parties thereto (the “Stock\nPurchase Agreement”). Pursuant to the Stock Purchase Agreement, Mr. Wan paid an aggregate purchase price of four hundred thousand\ndollars ($400,000.00) to Mr. Zhang in exchange for the purchased shares. The foregoing transaction resulted in a change of control of\nthe Company, with Mr. Wan acquiring 97% of the Company’s outstanding Class A common stock held through New Lite Ventures LLC, a\nNew York LLC. Both before and after the transactions, the Company had 29,995,000 shares of its Class A common stock outstanding.\n\n \n\nIn\nconnection with the transaction, on April 10, 2023, Mr. Dingshan Zhang resigned from all positions he held with the Company. On April\n10, 2023, Ms. Jing Wan was appointed by our majority shareholder as our Chief Executive Officer, Chief Financial Officer, President and\nDirector. On June 16, 2023, Mr. Barry Wan consented to act as the new Chief Executive Officer and Chief Financial Officer after Ms. Jing\nWan resigned. The Company changed its name to Antiaging Quantum Living Inc. on June 14, 2023.\n\n \n\nThe\nchange in control with respect to the Company was effectuated to better reflect its new business direction, with the intention of acquiring\nbusinesses involved in healthcare management and insurance services.\n\n \n\nIn\nline with this expansion, the Company established AAQL Inc. AAQL HK Limited Dao Ling Doctor Hangzhou, Dao Ling Doctor Zhejiang, and Dao\nLing Doctor Huzhou entities.\n\n \n\n8\n\n \n\n \n\nOn\nJuly 25, 2024, the Board of Directors of the Company approved the appointment of J&S Associate PLT to be the new independent registered\npublic accounting firm for the financial period ending June 30, 2024. This appointment addressed the vacancy created by the resignation\nof PWN LLP as the Company’s former independent registered public accounting firm.\n\n \n\nOn\nSeptember 6, 2024, the holders of a majority of the issued and outstanding voting securities of the Company approved an amendment to\nits Certificate of Incorporation increase in the number of authorized shares of common stock of the Company from thirty million (30,000,000)\nshares of common stock, par value $0.001 per share, to six billion (6,000,000,000) shares of common stock, par value $0.00001 per share.\nUpon the effectiveness of the Authorized Capital Increase, the shares of common stock will be categorized as follows: 1,200,000,000 Class\nA shares, 1,200,000,000 Class B shares, 1,200,000,000 Class C shares, 1,200,000,000 Class D shares, and 1,200,000,000 Class E shares.\nOn the same day, the Certificate of Amendment to the Certificate of Incorporation of the Company was filed with New York State Department\neffectuating the Authorized Capital Increase.\n\n \n\nDuring\nthe fiscal year ended March 31, 2026, the Company initiated a strategic transition to shift its core business model away from third-party\nagency and technical platform operations to focus exclusively on the supply and distribution of proprietary brand health products and\ntherapy services. Pursuant to board authorization in June 2025, the Company ceased its online platform technical operation support and\nmaintenance services in staggered phases, concluding in September 2025 and January 2026.\n\n \n\nWe\nview this transition as a vital strategic pivot to enhance our brand value and establish long-term control over our product supply chain.\nHowever, this shift materially impacts our near-term consolidated financial results and the comparability of our historical financial\nstatements to future periods.\n\n \n\n**Results\nof Operation for the years ended March 31, 2026 and 2025**\n\n \n\n  \n2026  \n2025  \n$\nChanged  \n%\nChanged \n\nRevenue \n 1,034,385  \n 817,898  \n 216,487  \n 26.47%\n\nCost of revenues \n 332,262  \n 389,381  \n (57,119) \n -14.67%\n\nGross profit \n 702,123  \n 428,517  \n 273,606  \n 63.85%\n\nGross margin \n 67.9% \n 52.4% \n    \n   \n\nSelling, general and administrative expenses \n 1,537,524  \n 1,218,476  \n 319,048  \n 26.18%\n\nLoss from operations \n (835,401) \n (789,959) \n (45,442) \n 5.75%\n\nOther income (loss) \n 14,415  \n 69,550  \n (55,135) \n -79.27%\n\nIncome tax expenses \n 16,660  \n -  \n 16,660  \n 100.0%\n\nNet loss \n (837,646) \n (720,409) \n (117,237) \n 16.27%\n\n \n\nDuring\nthe years ended March 31, 2026 and 2025, the Company generated revenues of $1,034,385 and $817,898, respectively. Of this total, $711,607\n(or 68.8%) in FY 2026 and $817,898 (or 100%) in FY 2025 was derived from our historical online platform technical operation support and\nmaintenance services. The increase in revenue was primarily driven by the introduction of new therapy services and health/beauty product\nsales in FY 2026. As part of a strategic transition during the year, the Company ceased its historical online platform services to\nfocus entirely on therapy services (which generated $141,828 in FY 2026) and\nproprietary health/beauty products (which generated $180,950 in FY 2026).\n\n \n\nCost\nof revenues was $332,262 and $389,381 for the years ended March 31, 2026 and 2025, respectively. Gross profit increased to $702,123 (gross\nmargin of 67.9%) for the year ended March 31, 2026, as compared to gross profit of $428,517 (gross margin of 52.4%) for the year ended\nMarch 31, 2025. Gross margin improved from 52.4% to 67.9% primarily because our new therapy\nservices and proprietary products carry higher profit margins compared to the labor-intensive technical operation support and maintenance\nservices we provided in FY 2025.\n\n \n\nThe\nCompany incurred operating expenses of $1,537,524 and $1,218,476 for the years ended March 31, 2026 and 2025, respectively. Operating\nexpenses generally consists of rent and facility expenses, wages and salaries, legal and professional fees. The increase in operating\nexpenses was mainly due to the increase in rental and facility costs.\n\n \n\n9\n\n \n\n \n\nFor\nthe year ended March 31, 2026, the Company had gain from extinguishment of liability of $10,771, in addition to interest income of $163\nand subsidy income of $3,480, as compared to year ended March 31, 2025, the Company received renovation subsidy of $69,471 in addition\nto interest income of $79.\n\n \n\nFor\nthe year ended March 31, 2026, our net loss was $837,646 compared to a net loss of $720,409 for the year ended March 31, 2025. The increase\nin net loss is mainly due to the increased operating expenses.\n\n \n\nHistorically,\nthe delivery of our technical and platform services did not utilize dedicated, standalone operational teams or separate infrastructure.\nInstead, these services were supported by highly integrated, centralized corporate resources, including shared administrative personnel,\ncentralized accounting and sales teams, and shared server infrastructure.\n\n \n\nFollowing\nthe cessation of the technical services, the Company has retained these shared personnel and infrastructural resources in their entirety.\nWe have repurposed these assets to support the expansion and scaling of our continuing proprietary health products and therapy service\nlines. Consequently, while our consolidated revenues will materially decrease in the near term due to the loss of the technical service\nrevenue, our general and administrative (G&A) expenses and overall operating cost structure will not experience a proportional decrease.\n\n \n\nBecause\nthese centralized resources have been retained and absorbed by our continuing operations, and should expect near-term margin compression\nas our retained organizational overhead is now supported by a smaller, albeit strategically refocused, revenue base.\n\n \n\n**Equity\nand Capital Resources**\n\n \n\nAs\nof March 31, 2026, we had an accumulated deficit of $2,247,358 and working capital deficit of $459,038, compared to accumulated deficit\nof $1,409,712 and a working capital of $132,689 as of March 31, 2025. The decrease in the working capital was primarily driven by a $460,000\nincrease in due to related parties.\n\n \n\nHistorically, the Company has financed its operations\nand alleviated working capital deficiencies primarily through advances from a principal shareholder and director. While there is no formal\nwritten commitment or binding agreement in place, the shareholder has historically provided necessary funding and has indicated the intent\nto continue providing financial support to fund the Company’s operations and meet its obligations as they become due.\n\n \n\n**Promissory\nNotes and November 2025 Assignments and Amendments**\n\n \n\nDuring\nfiscal 2025 and continuing into fiscal 2026, the Company funded a portion of its operations through the issuance of several promissory\nnotes to multiple lenders. These included: (i) a note issued to Barry Wan in the principal amount of $428,789.50; (ii) a note issued\nto New Lite Ventures LLC in the principal amount of $29,571.00; (iii) two notes originally issued by the Company’s PRC subsidiaries,\nAntiaging Doctor Hangzhou Holding Ltd. and Dao Ling Doctor (Zhejiang) Health Management Limited, to Hemeihui E-Commerce Co., Ltd., in\nthe principal amounts of $538,568.00 and $287,174.00, respectively; and (iv) a note issued to Tairan Baohe Insurance Sales Co., Ltd.\nin the principal amount of $383,598.00. The Tairan Baohe note was subsequently repaid in full and is no longer outstanding.\n\n \n\nOn\nNovember 25, 2025, the Company entered into four separate Assignment and Amendment of Promissory Note agreements with respect to the\noutstanding notes other than the repaid Tairan Baohe note. Under these agreements, each applicable noteholder assigned its rights and\ninterests in the notes to either Atlantic Equity Holdings Inc. or Empire Street Capital Inc., and the notes were amended to provide for\nthe automatic conversion of the outstanding principal balances into shares of the Company’s Class A Common Stock at a fixed conversion\nprice of $0.30 per share. No additional proceeds were received by the Company in connection with these amendments, assignments, or conversions.\nUpon the issuance of the conversion shares, the applicable notes were deemed fully satisfied and extinguished.\n\n \n\n10\n\n \n\n \n\nThe\nCompany’s net loss was partially offset by non-cash expenses which primarily included $134,792 in depreciation and amortization,\nand $332,320 in amortization related to right-of-use (ROU) assets associated with leased office and retail spaces and leasehold improvements.\nOperating cash activities was further impacted by an $216,624 increase in inventories and a $92,753 increase in advances to suppliers,\nwhich were partially offset by a $317,479 increase in accounts payables and accrued expense, resulting in net cash used in operating\nactivities for the years ended March 31, 2026.\n\n \n\nDuring\nthe years ended March 31, 2026 and 2025, the Company purchased fixed assets and intangible assets totaling $162,434 and $63,345, respectively.\n\n \n\nDuring\nthe years ended March 31, 2026 and 2025, the Company received advances of $460,000 and $364,303 from related parties for working capital\npurposes, which shareholders are prepared to provide additional funding as needed. The Company also borrowed $nil and $803,734 from an\nunrelated third party during the years ended March 31, 2026 and 2025, respectively.\n\n \n\nOn\nDecember 31, 2024, a total of $1,284,103 debt owed to related party and third party were converted into long-term notes payable, representing\na non-cash financing activity. On March 31, 2025, the Company entered into Tripartite Debt Assignment Agreements with Mr. Barry Wan (a\nrelated party) and the unrelated third-party original lender, pursuant to which certain loans and notes totaling $1,216,440 were legally\nassigned to Mr. Wan.\n\n \n\nAs\nof March 31, 2026, we held approximately $503,486 in cash and cash equivalents. Our liabilities are primarily funded by shareholder loans\nand unrelated parties’ loans, which do not require immediate repayment. Operations are continuing as usual, and management is committed\nto implementing expense control measures in the near term to support liquidity.\n\n \n\n**Going\nConcern Assessment**\n\n \n\nThe\nCompany demonstrates adverse conditions that raise substantial doubt about the Company’s ability to continue as a going concern.\nThese adverse conditions are negative financial trends, specifically cash outflow from operating activities, operating losses, accumulated\ndeficit and other adverse key financial ratios.\n\n \n\nManagement’s\nplan to alleviate the substantial doubt about the Company’s ability to continue as a going concern include attempting to improve\nits business profitability, its ability to generate sufficient cash flow from its operations and execute the business plan of the Company\nin order to meet its operating needs on a timely basis. However, there can be no assurance that these plans and arrangements will be\nsufficient to fund the Company’s ongoing capital expenditures and other requirements.\n\n \n\nHistorically, the Company\nhas financed its operations and alleviated working capital deficiencies primarily through advances from a principal shareholder and director.\nWhile there is no formal written commitment or binding agreement in place, the shareholder has historically provided necessary funding\nand has indicated the intent to continue providing financial support to fund the Company’s operations and meet its obligations as they\nbecome due.\n\n \n\nThe\nfinancial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts\nand classification of liabilities that might be necessary in the event that the Company cannot continue as a going concern.\n\n \n\n**Off-Balance\nSheet Arrangements**\n\n \n\nWe\nhave no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,\nchanges in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that\nis material to stockholders.\n\n \n\n**Critical\nAccounting Policies**\n\n \n\nThe\ndiscussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been\nprepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements\nrequires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses.\nThese estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding\nthe basis and nature of the estimates and assumptions included in footnote 2 of our financial statements is critical to an understanding\nof our financial statements.\n\n \n\nRevenue Recognition\n\n \n\nRevenue is recognized when control of the promised\ngoods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange\nfor those goods or services. The Company determines revenue recognition by applying the following steps: 1) identification of the contract,\nor contracts, with a customer; 2) identification of the performance obligations in the contract; 3) determination of the transaction price;\n4) allocation of the transaction price to the performance obligations in the contract; and 5) recognition of revenue when, or as, we satisfy\na performance obligation.\n\n \n\n11\n\n \n\n \n\n*Sales of goods*\n\n \n\nThe Company generates revenue from the sale of health\nand beauty products, dietary supplements, and proprietary branded health foods. Goods are sold directly to consumers through the Company’s\nmobile application (“App”) and physical retail stores, as well as distributed wholesale to third-party e-commerce platforms\nand partners. In January 2026, the Company began transitioning its business model to become a primary product supplier of proprietary\nbrands to enhance its control over the health and wellness supply chain.\n\n \n\nA formal contract is established when a customer places\nan order. The Company’s single performance obligation is the delivery of the ordered goods. The transaction price is generally fixed\nat the time of the order. Revenue is recognized at a point in time when the goods are delivered to (or physically purchased at) retail\nstores, drop-shipped, and accepted by the customer, as control transfers at that time.\n\n \n\nThe Company’s policy allows for product returns,\nwhich are treated as variable consideration. Provisions for estimated sales returns are assessed and adjusted at the end of each reporting\nperiod based on historical return rates and experience, which are generally immaterial. The Company records contract liabilities, such\nas customer advances, when payments are received prior to the delivery and acceptance of goods.\n\n \n\n*Offline physical therapy services*\n\n \n\nThe Company provides offline physical therapy and\nrelated health services through its physical retail stores. Customers may purchase these services on a single-use (pay-on-demand) basis\nor through multi-session package deals that are valid for a one-year period. A formal contract is established upon payment.\n\n \n\nFor single-use services, the Company has a single\nperformance obligation to provide the therapy session. Revenue is recognized at a point in time when the service is rendered to the customer.\n\n \n\nFor multi-session package deals, the Company has a\nstand-ready obligation to provide services over the one-year validity period. Payments received in advance are initially recorded as contract\nliabilities (customer advances). Revenue is recognized over time as the services are utilized by the customer.\n\n \n\nDuring the systems transition period for the year\nended March 31, 2026, precise customer-level usage tracking was limited. Consequently, management utilized a critical accounting estimate\nto determine the proportional performance of these obligations based on a sample of available historical usage records applied to cohorts\nof contracts grouped by payment date. Management applies a constraint to these estimates to ensure it is highly probable that a significant\nreversal of cumulative revenue recognized will not occur. Revenue is recognized ratably based on this constrained estimate, with any remaining\nunconstrained balance recognized when the rights legally expire at the end of the one-year period. Changes to these estimation methods\ncould materially impact the timing of revenue recognition.\n\n \n\n*Online platform technical operation support and\nmaintenance services*\n\n \n\nPrior to January 2026, the Company provided technical\noperation support and maintenance services for online platforms, ensuring platform functionality, continuous availability, and technical\nsupport for end-users.\n\n \n\nRevenue from these services was recognized ratably\nover each service period as the services were rendered, or upon completion of the service, depending on the nature of the arrangement.\nBilling frequency varied (e.g., weekly, monthly, quarterly, or upon completion) as specified in the respective contracts. Service fees\nwere determined based on contract terms and structured as fixed fees, milestone-based pricing, or as a percentage of gross transaction\nvalue (GTV) generated from the customer’s e-commerce platform. Each billing period or completed service cycle represented a distinct\nperformance obligation, with revenue recognized upon completion and invoicing. The major direct cost of providing these services was wages\nand salaries. In instances where payments were received in advance, they were recorded as contract liabilities (deferred revenue) until\nthe services were delivered.\n\n \n\nEffective January 2026, the Company formally ceased\nproviding these technical operation support and maintenance services. Because these services were supported by highly integrated, centralized\ncorporate resources that have been retained by the Company, the cessation of this service line does not qualify for presentation as a\ndiscontinued operation.\n\n \n\nPrincipal vs. Agent Consideration\n\n \n\nFor each revenue stream, the Company is a principal\nbecause it controls the specified goods or services before they are transferred to the customer. As a principal, the Company is primarily\nresponsible for fulfilling the contractual obligations, has discretion in establishing the price, and bears the risk of inventory or service\nprovision until completion; therefore, revenue is recognized on a gross basis for each active revenue stream."}