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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 8/11/22 Agape ATP Corp. 10-Q 6/30/22 91:6.9M M2 Compliance LLC/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 1.27M
2: EX-31.1 Certification -- §302 - SOA'02 HTML 27K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 27K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 24K
5: EX-32.2 Certification -- §906 - SOA'02 HTML 24K
11: R1 Cover HTML 76K
12: R2 Condensed Consolidated Balance Sheets (Unaudited) HTML 169K
13: R3 Condensed Consolidated Balance Sheets (Unaudited) HTML 47K
(Parenthetical)
14: R4 Condensed Consolidated Statements of Operations HTML 139K
and Comprehensive Loss (Unaudited)
15: R5 Condensed Consolidated Statements of Changes in HTML 63K
Stockholders' Equity (Unaudited)
16: R6 Condensed Consolidated Statements of Cash Flows HTML 110K
(Unaudited)
17: R7 Organization and Business Background HTML 64K
18: R8 Summary of Significant Accounting Policies HTML 166K
19: R9 Variable Interest Entity (?Vie?) HTML 53K
20: R10 Cash and Cash Equivalents HTML 33K
21: R11 Accounts Receivable HTML 30K
22: R12 Inventories HTML 30K
23: R13 Prepayments and Deposits HTML 39K
24: R14 Property and Equipment, Net HTML 36K
25: R15 Intangible Assets, Net HTML 37K
26: R16 Investment in Marketable Securities HTML 45K
27: R17 Investment in Non-Marketable Securities HTML 38K
28: R18 Other Payables and Accrued Liabilities HTML 34K
29: R19 Related Party Balances and Transactions HTML 154K
30: R20 Stockholders? Equity HTML 39K
31: R21 Non-Controlling Interest HTML 33K
32: R22 Income Taxes HTML 75K
33: R23 Concentrations of Risks HTML 50K
34: R24 Commitments and Contingencies HTML 53K
35: R25 Subsequent Event HTML 29K
36: R26 Summary of Significant Accounting Policies HTML 236K
(Policies)
37: R27 Organization and Business Background (Tables) HTML 46K
38: R28 Summary of Significant Accounting Policies HTML 69K
(Tables)
39: R29 Variable Interest Entity (?Vie?) (Tables) HTML 51K
40: R30 Accounts Receivable (Tables) HTML 30K
41: R31 Inventories (Tables) HTML 29K
42: R32 Prepayments and Deposits (Tables) HTML 39K
43: R33 Property and Equipment, Net (Tables) HTML 33K
44: R34 Intangible Assets, Net (Tables) HTML 35K
45: R35 Investment in Marketable Securities (Tables) HTML 30K
46: R36 Investment in Non-Marketable Securities (Tables) HTML 35K
47: R37 Other Payables and Accrued Liabilities (Tables) HTML 31K
48: R38 Related Party Balances and Transactions (Tables) HTML 151K
49: R39 Non-Controlling Interest (Tables) HTML 32K
50: R40 Income Taxes (Tables) HTML 56K
51: R41 Commitments and Contingencies (Tables) HTML 30K
52: R42 Schedule of Subsidiaries and Associates (Details) HTML 51K
53: R43 Organization and Business Background (Details HTML 35K
Narrative)
54: R44 Schedule of Estimated Useful Lives of Property and HTML 39K
Equipment (Details)
55: R45 Schedule of Estimated Useful Lives of Intangible HTML 27K
Assets, Net (Details)
56: R46 Schedule of Dis-Aggregated Information of Revenues HTML 71K
(Details)
57: R47 Schedule of Foreign Currencies Translation HTML 36K
Exchange Rates (Details)
58: R48 Summary of Significant Accounting Policies HTML 84K
(Details Narrative)
59: R49 Schedule of Variable Interest Entity (Details) HTML 90K
60: R50 Variable Interest Entity (?Vie?) (Details HTML 25K
Narrative)
61: R51 Cash and Cash Equivalents (Details Narrative) HTML 37K
62: R52 Schedule of Accounts Receivables - Related Party HTML 31K
(Details)
63: R53 Schedule of Inventories (Details) HTML 25K
64: R54 Inventories (Details Narrative) HTML 25K
65: R55 Schedule of Prepaid Expenses and Deposits HTML 33K
(Details)
66: R56 Schedule of Changes in Allowance for Doubtful HTML 33K
Accounts (Details)
67: R57 Schedule of Property and Equipment, Net (Details) HTML 40K
68: R58 Property and Equipment, Net (Details Narrative) HTML 26K
69: R59 Schedule of Intangible Assets, Net (Details) HTML 30K
70: R60 Intangible Assets, Net (Details Narrative) HTML 26K
71: R61 Schedule of Investment in Marketable Securities HTML 32K
(Details)
72: R62 Investment in Marketable Securities (Details HTML 37K
Narrative)
73: R63 Schedule of Investment in Non Marketable HTML 27K
Securities (Details)
74: R64 Investment in Non-Marketable Securities (Details HTML 33K
Narrative)
75: R65 Schedule of Other Payables and Accrued Liabilities HTML 38K
(Details)
76: R66 Schedule of Related Parties (Details) HTML 91K
77: R67 Stockholders? Equity (Details Narrative) HTML 49K
78: R68 Schedule of Non Controlling Interest (Details) HTML 38K
79: R69 Schedule of Components of Income/(Loss) Before HTML 36K
Income Tax (Details)
80: R70 Schedule of Provision for Income Tax (Details) HTML 40K
81: R71 Schedule of Deferred Tax Assets (Details) HTML 34K
82: R72 Income Taxes (Details Narrative) HTML 65K
83: R73 Concentrations of Risks (Details Narrative) HTML 65K
84: R74 Schedule of Lease Commitments (Details) HTML 36K
85: R75 Commitments and Contingencies (Details Narrative) HTML 50K
86: R76 Subsequent Event (Details Narrative) HTML 37K
89: XML IDEA XML File -- Filing Summary XML 164K
87: XML XBRL Instance -- form10-q_htm XML 1.90M
88: EXCEL IDEA Workbook of Financial Reports XLSX 168K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
i ☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended i June 30, i 2022 /
or
i ☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number i 333-220144
(Exact name of registrant issuer as specified in its charter)
| i Nevada | i 36-4838886 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
1705
- 1708, Level 17, i Tower 2, i Faber
Tower, i Jalan Desa Bahagia,
Taman Desa, i 58100 i Kuala
Lumpur, i Malaysia.
(Address of principal executive offices, including zip code)
Registrant’s phone number, including area code i (60) i 192230099
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding twelve months (or shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☐ Accelerated Filer ☐ i Non-accelerated Filer ☒ Smaller reporting company i ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. i ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes ☐ No ☐
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at August 9, 2022 | |
| Common Stock, $0.0001 par value |
C:
TABLE OF CONTENTS
C:
| C: 2 |
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents (Included $ i 7,626 and $ i 17,493 in the consolidated VIE that can be used only to settle obligations of the consolidated VIE as of June 30, 2022 and December 31, 2021, respectively) | $ | i 1,807,437 | $ | i 2,597,848 | ||||
| Accounts receivable | i 214 | - | ||||||
| Amount due from related parties | i 4,548 | i 7,004 | ||||||
| Inventories | i 346,744 | i 375,535 | ||||||
| Prepaid taxes (Included $ i 1,744 and $ i 1,357 in the consolidated VIE that can be used only to settle obligations of the consolidated VIE as of June 30, 2022 and December 31, 2021, respectively) | i 339,999 | i 636,218 | ||||||
| Prepayments and deposits | i 178,697 | i 295,517 | ||||||
| Total Current Assets | i 2,677,639 | i 3,912,122 | ||||||
| OTHER ASSETS | ||||||||
| Property and equipment, net | i 169,915 | i 215,799 | ||||||
| Intangible assets, net | i 2,601 | i 3,660 | ||||||
| Operating right-of-use assets | i 158,630 | i 237,718 | ||||||
| Investment in marketable securities | i 35,707 | i 89,001 | ||||||
| Investment in non-marketable securities | i 1,500 | i 1,500 | ||||||
| Deferred offering costs | i 443,661 | i 264,735 | ||||||
| Total Other Assets | i 812,014 | i 812,413 | ||||||
| TOTAL ASSETS | $ | i 3,489,653 | $ | i 4,724,535 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | i 21,519 | $ | i 13,715 | ||||
| Accounts payable – a related party | i 14,407 | - | ||||||
| Customer deposits | i 89,606 | i 279,689 | ||||||
| Operating lease liabilities | i 150,573 | i 157,094 | ||||||
| Other payables and accrued liabilities ($ i 787 and $ i 1,548 are included in the consolidated VIE that are without recourse to the credit of Agape ATP Corporation as of June 30, 2022 and December 31, 2021, respectively) | i 637,033 | i 858,355 | ||||||
| Other payable – a related party | i 2,082 | - | ||||||
| Income tax payable | i 9,249 | i 3,988 | ||||||
| Total Current Liabilities | i 924,469 | i 1,312,841 | ||||||
| NON-CURRENT LIABILITIES | ||||||||
| Operating lease liabilities | i 10,812 | i 83,484 | ||||||
| Deferred tax liabilities | i 17,975 | i 15,574 | ||||||
| Total Non-current Liabilities | i 28,787 | i 99,058 | ||||||
| TOTAL LIABILITIES | i 953,256 | i 1,411,899 | ||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, $ par value; shares authorized; issued and outstanding | - | - | ||||||
| Common Stock, par value $; shares authorized, and shares issued and outstanding as of June 30, 2022 and December 31, 2021 respectively | i 7,545 | i 29,046 | ||||||
| Additional paid in capital | i 6,470,716 | i 6,449,215 | ||||||
| Accumulated deficit | ( i 3,972,684 | ) | ( i 3,258,687 | ) | ||||
| Accumulated other comprehensive income | i 20,219 | i 93,398 | ||||||
| TOTAL AGAPE CORPORATION STOCKHOLDERS’ EQUITY | i 2,525,796 | i 3,312,972 | ||||||
| NON-CONTROLLING INTERESTS | i 10,601 | ( i 336 | ) | |||||
| TOTAL EQUITY | i 2,536,397 | i 3,312,636 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | i 3,489,653 | $ | i 4,724,535 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
C:
| F-1 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| For the three months ended | For the six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| REVENUE | $ | i 396,707 | $ | i 303,786 | $ | i 805,667 | $ | i 605,566 | ||||||||
| COST OF REVENUE | ( i 109,383 | ) | ( i 35,623 | ) | ( i 182,814 | ) | ( i 113,214 | ) | ||||||||
| GROSS PROFIT | i 287,324 | i 268,163 | i 622,853 | i 492,352 | ||||||||||||
| SELLING | ( i 79,587 | ) | ( i 100,838 | ) | ( i 194,198 | ) | ( i 216,952 | ) | ||||||||
| COMMISSION | ( i 62,557 | ) | ( i 92,774 | ) | ( i 176,666 | ) | ( i 181,213 | ) | ||||||||
| GENERAL AND ADMINISTRATIVE | ( i 451,363 | ) | ( i 361,862 | ) | ( i 830,404 | ) | ( i 724,008 | ) | ||||||||
| PROVISION FOR DOUBTFUL ACCOUNTS | - | ( i 121,686 | ) | - | ( i 121,686 | ) | ||||||||||
| TOTAL OPERATING EXPENSES | ( i 593,507 | ) | ( i 677,160 | ) | ( i 1,201,268 | ) | ( i 1,243,859 | ) | ||||||||
| LOSS FROM OPERATIONS | ( i 306,183 | ) | ( i 408,997 | ) | ( i 578,415 | ) | ( i 751,507 | ) | ||||||||
| OTHER (EXPENSES) INCOME | ||||||||||||||||
| Other income (expenses), net | i 1,341 | i 11,770 | i 12,826 | ( i 48,546 | ) | |||||||||||
| Interest income | i 3,526 | - | i 8,251 | - | ||||||||||||
| Unrealized holding loss on marketable securities | ( i 35,219 | ) | ( i 241,027 | ) | ( i 52,889 | ) | ( i 165,731 | ) | ||||||||
| Exchange loss, net | ( i 67,417 | ) | - | ( i 83,883 | ) | - | ||||||||||
| TOTAL OTHER EXPENSES, NET | ( i 97,769 | ) | ( i 229,257 | ) | ( i 115,695 | ) | ( i 214,277 | ) | ||||||||
| LOSS BEFORE INCOME TAXES | ( i 403,952 | ) | ( i 638,254 | ) | ( i 694,110 | ) | ( i 965,784 | ) | ||||||||
| PROVISION FOR INCOME TAXES | ( i 392 | ) | ( i 3,971 | ) | ( i 8,680 | ) | ( i 10,091 | ) | ||||||||
| NET LOSS | ( i 404,344 | ) | ( i 642,225 | ) | ( i 702,790 | ) | ( i 975,875 | ) | ||||||||
| LESS: NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS | i 10,556 | - | i 11,207 | - | ||||||||||||
| NET LOSS ATTRIBUTABLE TO AGAPE ATP CORPORATION | $ | ( i 414,900 | ) | $ | ( i 642,225 | ) | $ | ( i 713,997 | ) | $ | ( i 975,875 | ) | ||||
| NET LOSS | $ | ( i 404,344 | ) | $ | ( i 642,225 | ) | $ | ( i 702,790 | ) | $ | ( i 975,875 | ) | ||||
| OTHER COMPREHENSIVE LOSS | ||||||||||||||||
| Foreign currency translation adjustment | ( i 61,156 | ) | ( i 36,347 | ) | ( i 73,179 | ) | ( i 74,631 | ) | ||||||||
| TOTAL COMPREHENSIVE LOSS | ( i 465,500 | ) | ( i 678,572 | ) | ( i 775,969 | ) | ( i 1,050,506 | ) | ||||||||
| Less: Comprehensive loss attributable to non-controlling interests | ( i 271 | ) | - | ( i 270 | ) | - | ||||||||||
| COMPREHENSIVE LOSS ATTRIBUTABLE TO AGAPE ATP CORPORATION | $ | ( i 465,229 | ) | $ | ( i 678,572 | ) | $ | ( i 775,699 | ) | $ | ( i 1,050,506 | ) | ||||
| LOSS PER SHARE | ||||||||||||||||
| Basic and diluted | $ | ( i 0.01 | ) | $ | i 0.00 | $ | ( i 0.01 | ) | $ | i 0.00 | ||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||||||
| Basic and diluted | i 75,452,012 | i 376,452,047 | i 100,397,696 | i 376,452,047 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
C:
| F-2 |
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
| COMMON STOCK | ADDITIONAL | ACCUMULATED OTHER | TOTAL | |||||||||||||||||||||
Number of shares | Par value | PAID IN CAPITAL | ACCUMULATED DEFICIT | COMPREHENSIVE INCOME | STOCKHOLDERS’ EQUITY | |||||||||||||||||||
| Balance as of December 31, 2020 | i 376,452,047 | $ | i 37,645 | $ | i 6,440,616 | $ | ( i 734,443 | ) | $ | i 181,016 | - | $ | i 5,924,834 | |||||||||||
| Net loss | - | - | - | ( i 333,650 | ) | - | ( i 333,650 | ) | ||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | ( i 38,284 | ) | - | ( i 38,284 | ) | |||||||||||||||
| Balance as of March 31, 2021 | i 376,452,047 | $ | i 37,645 | $ | i 6,440,616 | $ | ( i 1,068,093 | ) | $ | i 142,732 | - | $ | i 5,552,900 | |||||||||||
| Net loss | - | - | - | ( i 642,225 | ) | - | ( i 642,225 | ) | ||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | ( i 36,347 | ) | - | ( i 36,347 | ) | |||||||||||||||
| Balance as of June 30, 2021 | i 376,452,047 | $ | i 37,645 | $ | i 6,440,616 | $ | ( i 1,710,318 | ) | $ | i 106,385 | - | $ | i 4,874,328 | |||||||||||
| COMMON STOCK | ADDITIONAL | ACCUMULATED OTHER | NON- | TOTAL | ||||||||||||||||||||||||
Number of shares | Par value | PAID IN CAPITAL | ACCUMULATED DEFICIT | COMPREHENSIVE INCOME | CONTROLLING INTERESTS | STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||
| Balance as of December 31, 2021 | i 290,460,047 | $ | i 29,046 | $ | i 6,449,215 | $ | ( i 3,258,687 | ) | $ | i 93,398 | $ | ( i 336 | ) | $ | i 3,312,636 | |||||||||||||
| Forfeiture of common stock | ( i 215,008,035 | ) | ( i 21,501 | ) | i 21,501 | - | - | - | - | |||||||||||||||||||
| Net loss | - | - | - | ( i 299,097 | ) | - | i 651 | ( i 298,446 | ) | |||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | ( i 12,023 | ) | i 1 | ( i 12,022 | ) | |||||||||||||||||||
| Balance as of March 31, 2022 | i 75,452,012 | $ | i 7,545 | $ | i 6,470,716 | $ | ( i 3,557,784 | ) | $ | i 81,375 | $ | i 316 | $ | i 3,002,168 | ||||||||||||||
| Net loss | - | - | - | ( i 414,900 | ) | - | i 10,556 | ( i 404,344 | ) | |||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | ( i 61,156 | ) | ( i 271 | ) | ( i 61,427 | ) | ||||||||||||||||||
| Balance as of June 30, 2022 | i 75,452,012 | $ | i 7,545 | $ | i 6,470,716 | $ | ( i 3,972,684 | ) | $ | i 20,219 | $ | i 10,601 | $ | i 2,536,397 | ||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
C:
| F-3 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”)
For
the six months ended | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( i 702,790 | ) | $ | ( i 975,875 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | i 36,661 | i 38,179 | ||||||
| Amortization | i 897 | i 1,006 | ||||||
| Amortization of operating right-of-use assets | i 75,241 | i 75,387 | ||||||
| Unrealized holding loss on marketable securities | i 52,889 | i 165,731 | ||||||
| Deferred tax provision (benefit) | i 2,401 | ( i 53,299 | ) | |||||
| Inventory write-downs | - | i 36,636 | ||||||
| Provision for doubtful accounts | - | i 121,686 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivables | ( i 214 | ) | i 169,393 | |||||
| Amount due from related parties | i 2,201 | - | ||||||
| Inventories | i 28,790 | i 80,969 | ||||||
| Prepaid taxes | i 296,219 | i 448,054 | ||||||
| Prepayments and deposits | i 102,099 | ( i 15,120 | ) | |||||
| Accounts payable | i 7,804 | - | ||||||
| Accounts payable – a related party | i 14,407 | - | ||||||
| Customer deposits | ( i 175,936 | ) | ( i 60,618 | ) | ||||
| Operating lease liabilities | ( i 75,200 | ) | ( i 74,399 | ) | ||||
| Other payables and accrued liabilities | ( i 166,137 | ) | ( i 129,355 | ) | ||||
| Amount due to a related party | i 2,081 | - | ||||||
| Income tax payable | i 5,261 | i 36,877 | ||||||
| Net cash used in operating activities | ( i 493,326 | ) | ( i 134,748 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of equipment | ( i 750 | ) | ( i 1,220 | ) | ||||
| Net cash used in investing activities | ( i 750 | ) | ( i 1,220 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Deferred offering costs | ( i 178,926 | ) | ( i 14,160 | ) | ||||
| Advances to related parties | - | ( i 2,428 | ) | |||||
| Net cash used in financing activities | ( i 178,926 | ) | ( i 16,588 | ) | ||||
| EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS | ( i 117,409 | ) | ( i 64,244 | ) | ||||
| DECREASE IN CASH AND CASH EQUIVALENTS | ( i 790,411 | ) | ( i 216,800 | ) | ||||
| CASH AND CASH EQUIVALENTS, beginning of period | i 2,597,848 | i 3,517,600 | ||||||
| CASH AND CASH EQUIVALENTS, end of period | $ | i 1,807,437 | $ | i 3,300,800 | ||||
| SUPPLEMENTAL CASH FLOWS INFORMATION | ||||||||
| Income taxes paid | $ | i 77,117 | $ | i 249,583 | ||||
| SUPPLEMENTAL NON-CASH FLOWS INFORMATION | ||||||||
| Changes in right-of-use assets and lease liabilities due to lease modifications | $ | - | $ | i 3,286 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
C:
| F-4 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
i
1. ORGANIZATION AND BUSINESS BACKGROUND
Agape ATP Corporation, a Nevada corporation (“the Company”) was incorporated under the laws of the State of Nevada on June 1, 2016.
Agape ATP Corporation operates through its subsidiaries, namely, Agape ATP Corporation, a company incorporated in Labuan, Malaysia, and Agape Superior Living Sdn. Bhd. (“ASL”), a company incorporated in Malaysia. .
Agape ATP Corporation, incorporated in Labuan, Malaysia, is an investment holding company with i 100% equity interest in Agape ATP International Holding Limited, a company incorporated in Hong Kong.
On May 8, 2020, the Company entered into a Share Exchange Agreement with Mr. How Kok Choong, CEO and director of the Company to acquire ordinary shares, no par value, equivalent to approximately i 99.99% of the equity interest in Agape Superior Living Sdn. Bhd., a network marketing entity incorporated in Malaysia.
Agape Superior Living Sdn. Bhd. is a limited company incorporated on August 8, 2003, under the laws of Malaysia.
On September 11, 2020, the Company incorporated Wellness ATP International Holdings Sdn, Bhd. (“WATP”), a wholly owned subsidiary under the laws of Malaysia, to pursue the business of promoting wellness and wellbeing lifestyle of the community by providing services that includes online editorials, programs, events and campaigns on how to achieve positive wellness and lifestyle.
On November 11, 2021, Agape ATP Corporation (Labuan) formed a joint-venture entity, DSY Wellness International Sdn. Bhd. (“DSY Wellness”) with an independent third party which Agape ATP Corporation (Labuan) owns i 60% of the equity interest, to pursue the business of providing complementary health therapies.
The Company and its subsidiaries are principally engaged in the Health and Wellness Industry. The principal activity of the Company is to supply high-quality health and wellness products, including supplements to assist in cell metabolism, detoxification, blood circulation, anti-aging and products designed to improve the overall health system of the human body and various wellness programs.
The accompanying consolidated financial statements reflect the activities of the Company, AATP LB, AATP HK, WATP, ASL and its variable interest entity (“VIE”), Agape S.E.A. Sdn. Bhd. (“SEA”) (See Note 3), and DSY Wellness.
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Details of the Company’s subsidiaries:
SCHEDULE OF SUBSIDIARIES AND ASSOCIATES
Subsidiary company name | Place and date of incorporation | Particulars
of issued capital | Principal activities | Proportional of ownership interest and voting power held | ||||||||
| 1. | i Agape ATP Corporation | i Labuan, March 6, 2017 | i 100 shares of ordinary share of US$1 each | i Investment holding | i 100 | % | ||||||
| 2. | i Agape ATP International Holding Limited | i Hong Kong, June 1, 2017 | i 1,000,000 shares of ordinary share of HK$1 each | i Wholesaling of health and wellness products; and health solution advisory services | i 100 | % | ||||||
| 3. | i Agape Superior Living Sdn. Bhd. | i Malaysia, August 8, 2003 | i 9,590,598 shares of ordinary share of RM1 each | i Health and wellness products and health solution advisory services via network marketing | i 99.99 | % | ||||||
| 4. | i Agape S.E.A. Sdn. Bhd. | i Malaysia, March 4, 2004 | i 2 shares of ordinary share of RM1 each | i VIE of Agape Superior Living Sdn. Bhd. | VIE | |||||||
| 5. | i Wellness ATP International Holdings Sdn, Bhd | i Malaysia, September 11, 2020 | i 100 shares of ordinary share of RM1 each | i The promotion of wellness and wellbeing lifestyle of the community by providing services that includes online editorials, programs, events and campaigns | i 100 | % | ||||||
| 6. | i DSY Wellness International Sdn Bhd. | i Malaysia, November 11, 2021 | i 1,000 shares of ordinary share of RM1 each | i Provision of complementary health therapies | i 60 | % | ||||||
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| F-5 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
1. ORGANIZATION AND BUSINESS BACKGROUND (Continued)
Business Overview
Agape ATP Corporation is a company that provides health and wellness products and health solution advisory services to our clients. The Company primarily focus its efforts on attracting customers in Malaysia. Its advisory services center on the “ATP Zeta Health Program”, which is a health program designed to effectively prevent diseases caused by polluted environments, unhealthy dietary intake and unhealthy lifestyles, and promotion of health. The program aims to promote improved health and longevity in our clients through a combination of modern medicine, proper nutrition and advice from skilled nutritionists and/or dieticians.
In order to strengthen the Company’s supply chain, on May 8, 2020, the Company has successfully acquired approximately i 99.99% of ASL, with the goal of securing an established network marketing sales channel that has been established in Malaysia for the past 15 years. ASL has been offering the Company’s ATP Zeta Health Program as part of its product lineup. As such, the acquisition creates synergy in the Company’s operation by boosting the Company’s retail and marketing capabilities. The newly acquired subsidiary allows the Company to fulfill its mission of “helping people to create health and wealth” by providing a financially rewarding business opportunity to distributors and quality products to distributors and customers who seek a healthy lifestyle.
Via ASL, the Company offers three series of programs which consist of different services and products: ATP Zeta Health Program, ÉNERGÉTIQUE and BEAUNIQUE.
The ATP Zeta Health Program is a health program designed to promote health and general wellbeing designed to prevent health diseases caused by polluted environments, unhealthy dietary intake and unhealthy lifestyles. The program aims to promote improved health and longevity through a combination of modern health supplements, proper nutrition and advice from skilled dieticians as well as trained members and distributors.
The ÉNERGÉTIQUE series aims to provide a total dermal solution for a healthy skin beginning from the cellular level. The series is comprised of the Energy Mask series, Hyaluronic Acid Serum and Mousse Facial Cleanser.
The BEAUNIQUE product series focuses on the research of our diet’s impact on modifying gene expressions in order to address genetic variations and deliver a nutrigenomic solution for every individual.
The Company deems creating public awareness on wellness and wellbeing lifestyle as essential to enhance the provision of its health solution advisory services; and therefore, incorporated WATP. Upon its establishment, WATP started collaborating with ASL to carry out various wellness programs.
To further its reach in the Health and Wellness Industry, on November 11, 2021, Agape ATP Corporation (Labuan) formed a joint-venture entity, DSY Wellness International Sdn. Bhd. (“DSY Wellness”) with an independent third party which Agape ATP Corporation (Labuan) owns 60% of the equity interest, to pursue the business of providing complementary health therapies.
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| F-6 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for information pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”), and include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operation results. Interim results are not necessarily indicative of results to be expected for any other interim period or for the full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 28, 2022.
The unaudited condensed consolidated financial statements include the financial statements of the Company, its subsidiaries and its variable interest entity (“VIE”) over which the Company exercises control and, where applicable, entities for which the Company has a controlling financial interest or is the primary beneficiary. All transactions and balances among the Company, its subsidiaries and its VIE have been eliminated upon consolidation.
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Principles of consolidation
Subsidiaries are those entities in which the Company, directly or indirectly, controls more than one half of the voting power; or has the power to govern the financial and operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of directors.
A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. As of and for the three and six months ended June 30, 2022, SEA, the only VIE of the Company has no significant operations.
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Use of estimates
The preparation of audited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s consolidated financial statements include allowance for doubtful accounts, allowance for inventories obsolescence, useful lives of property and equipment, useful lives of intangible assets, impairment of long-lived assets, allowance for deferred tax assets, operating right-of-use assets, operating lease liabilities and uncertain tax position and impairment of investment in non-marketable securities. Actual results could differ from these estimates.
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Cash and cash equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, time deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less.
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| F-7 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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Accounts receivable
Accounts receivable are recorded at the invoiced amount less an allowance for any uncollectible accounts and do not bear interest, which are due on credit term. Accounts receivable also include money due from a third-party e-commerce platform acting as a collection agent for the Company on the sales through their platform. Management reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical collection trends and aging of receivables. Management also periodically evaluates individual customer’s financial condition, credit history, and the current economic conditions to make adjustments in the allowance when it is considered necessary. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company’s management continues to evaluate the reasonableness of the valuation allowance policy and update it if necessary. As of June 30, 2022 and December 31, 2021, no allowance of doubtful accounts was recorded.
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Inventories
Inventories consist of finished goods and are stated at the lower of cost or net realizable value using the first-in first-out method. Management reviews inventory on hand for estimated obsolescence or unmarketable items, as compared to future demand requirements and the shelf life of the various products. Based on the review, the Company records inventory write-downs, when necessary, when costs exceed expected net realizable value. For the six months ended June 30, 2022 and 2021, the Company recognized inventory write-downs of $0 and $ i 36,636, respectively.
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Prepaid taxes
Prepaid taxes include prepaid income taxes that will either be refunded or utilized to offset future income tax.
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Prepayments and deposits
Prepayments and deposits are mainly cash deposited or advanced to suppliers for future inventory purchases or service providers for future services. This amount is refundable and bears no interest. For any prepayments and deposits determined by management that such advances will not be in receipts of inventories, services, or refundable, the Company will recognize an allowance account to reserve such balances. Management reviews its prepayments and deposits on a regular basis to determine if the allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. The Company’s management continues to evaluate the reasonableness of the valuation allowance policy and update it if necessary. As of June 30, 2022 and December 31, 2021, there was $ i 120,372 and $ i 121,095 allowance for doubtful accounts recorded, respectively.
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| F-8 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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Property and equipment, net
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Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets with no residual value. The estimated useful lives are as follows:
SCHEDULE OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT
| Useful Life | ||
| Computer and office equipment | i 5- i 7 years | |
| Furniture & fixtures | i 6- i 7 years | |
| Leasehold improvements | i Lease Term | |
| Vehicle | i 5 years |
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of income and comprehensive income. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.
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Intangible assets, net
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Intangible assets, net, are stated at cost, less accumulated amortization. Amortization expense is recognized on the straight-line basis over the estimated useful lives of the assets as follows:
SCHEDULE OF ESTIMATED USEFUL LIVES OF INTANGIBLE ASSETS, NET
| Classification | Useful Life | |
| Computer software | i 5 years |
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Impairment for long-lived assets
Long-lived assets, including property and equipment, and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. As of June 30, 2022 and December 31, 2021, i i no / impairment of long-lived assets was recognized.
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Deferred offering costs
Deferred offering costs represents costs associated with the Company’s current offering which will be netted against the proceeds from the Company’s current offering.
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Investment in marketable equity securities
The Company follows the provisions of ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. Investments in marketable equity securities (non-current) are reported at fair value with changes in fair value recognized in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss in the caption of “unrealized holding gain loss on marketable securities” in each reporting period.
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| F-9 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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Investment in non-marketable equity securities
The Company follows the provisions of ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. Due to the Company’s non-marketable equity securities (non-current) does not qualify for the practical expedient to estimate fair value in accordance with ASC 820-10-35-59, the Company has selected to record its investments in non-marketable equity securities (non-current) at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issue.
At each reporting period, the Company will make a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired. The qualitative assessment indicators include, but are not limited to: (1) A significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee; (ii) A significant adverse change in the regulatory, economic, or technological environment of the investee; (iii) A significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates; (iv) A bona fide offer to purchase, an offer by the investee to sell, or a completed auction process for the same or similar investment for an amount less than the carrying amount of that investment; and (v) Factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements or debt covenants. If the qualitative assessment indicators indicated that the non-marketable equity securities (non-current) is deemed to be impaired, the Company would recognize the impairment loss equal to the difference between the fair value of the investment and its carrying amount.
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Customer deposits
Customer deposits represent amounts advanced by customers on product orders and discounted value of unapplied coupons. Customer deposits are reduced when the related sale is recognized in accordance with the Company’s revenue recognition policy.
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Revenue recognition
The Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (ASC Topic 606). The core principle underlying the revenue recognition of this ASU allows the Company to recognize - revenue that represents the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company’s revenue streams are recognized at a point in time for the Company’s sale of health and wellness products.
The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.
The Company accounts for a contract with a customer when the contract is committed in writing, the rights of the parties, including payment terms, are identified, the contract has commercial substance and consideration is probable of substantially collection.
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| F-10 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Sales of Health and Wellness products
- Performance obligations satisfied at a point in time
The Company derives its revenues from sales contracts with its customers with revenues being recognized when control of the health and wellness products are transferred to its customer at the Company’s office or shipment of the goods. The revenue is recorded net of estimated discounts and return allowances. Products are given 60 days for returns or exchanges from the date of purchase. Historically, there were insignificant sales returns.
The Company also sells coupons to its customers for cash at a discounted price of the value of the coupons. Customers can apply the value of the coupons for a reduction in the transaction price paid by the customer are recorded as a reduction of sales. The cash proceeds resulted from the sale of coupons are recognized as customer deposits until the coupons to be applied as a reduction of the health and wellness products transaction price upon such sales transactions occurred. The Company’s coupons have a validity period of six months. If the Company’s customers did not utilize the coupons after six months, the Company would recognize the forfeiture of the originated sales value of the coupons as net revenues. For the three months ended June 30, 2022 and 2021, the Company recognized $ i 4,824 and $ i 4,115, as forfeited coupon income, respectively. For the six months ended June 30, 2022 and 2021, the Company recognized $ i 5,777 and $ i 11,226, as forfeited coupon income, respectively.
The Company had contracts for the sales of health and wellness products amounting to $ i 16,084 which it is expected to fulfill within 12 months from June 30, 2022.
Sales of Health and Wellness services
- Performance obligations satisfied at a point in time
The Company carries out its Wellness program, where the Company’s products are bundled with health screening test and a health camp program. The health screening test and the health camp programs are considered as separate performance obligations. The promises to deliver the health screening test report and the attendance at the health camp are separately identifiable, which are evidenced by the fact that the Company provides separate services of delivering the health screening test report and allowing admission of the customers to attend the health camp. The Company derives its revenues from sales contracts with its customers with revenues being recognized when the test reports are completed and delivered to its customers during the consultation section in person.
The Company also separately derives its revenues from sales contracts with its customers with revenues being recognized when the health camp program was completed in the final day of the health camp. For the three months ended June 30, 2022 and 2021, revenues from health and wellness services were $ i 30,072 and $ i 653 respectively. For the six months ended June 30, 2022 and 2021, revenues from health and wellness services were $ i 31,139 and $ i 5,746 respectively.
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| F-11 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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Disaggregated information of revenues by products are as follows:
SCHEDULE OF DIS-AGGREGATED INFORMATION OF REVENUES
| For the three months ended | For the six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Survivor Select | $ | i 13,941 | $ | i 24,415 | $ | i 22,753 | $ | i 37,641 | ||||||||
| Energized Mineral Concentrate | - | i 8,291 | - | i 52,183 | ||||||||||||
| Ionized Cal-Mag | i 14,278 | i 18,485 | i 62,368 | i 40,298 | ||||||||||||
| Omega Blend | i 42,747 | i 89,066 | i 179,177 | i 185,361 | ||||||||||||
| Beta Maxx | i 23,564 | i 55,943 | i 47,637 | i 89,800 | ||||||||||||
| Iron | i 3,118 | i 8,431 | i 7,186 | i 16,715 | ||||||||||||
| Young Formula | i 1,075 | i 14,458 | i 34,269 | i 25,901 | ||||||||||||
| Organic Youth Care Cleansing Bar | - | i 2,990 | - | i 2,990 | ||||||||||||
| ATPR Mito+ | i 76,605 | i 70,148 | i 187,926 | i 106,843 | ||||||||||||
| Lipomask | - | i 4,279 | - | i 8,401 | ||||||||||||
| Hyaluronic Acid Serum | i 1,698 | i 1,362 | i 3,006 | i 3,353 | ||||||||||||
| Mousse Facial Cleanser | i 4,355 | i 3,042 | i 7,394 | i 7,660 | ||||||||||||
| Trim+ | i 2,765 | i 2,223 | i 6,236 | i 22,674 | ||||||||||||
| Others – Products for the provision of complementary health therapies | i 182,101 | - | i 216,188 | - | ||||||||||||
| Others | i 388 | - | i 388 | - | ||||||||||||
| Total revenues - products | i 366,635 | i 303,133 | i 774,528 | i 599,820 | ||||||||||||
| Health and Wellness services | i 30,072 | i 653 | i 31,139 | i 5,746 | ||||||||||||
| Total revenues - products and services | $ | i 396,707 | $ | i 303,786 | $ | i 805,667 | $ | i 605,566 | ||||||||
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Cost of revenue
Cost of revenue for the three and six months ended June 30, 2022 were $ i 109,383, and $ i 182,814, respectively, and comprised freight-in, purchase cost of manufactured goods for sale to customers and products for the provision of complementary health therapies. Cost of revenue for the three months and six months ended June 30, 2021, were $ i 35,623, and $ i 113,214, respectively, and comprised freight-in, purchase cost of manufactured goods for sale to customers. For the six months ended June 30, 2021, cost of revenue also included inventory write-downs of $ i 36,636.
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Shipping and handling
Shipping and handling charges amounted to $ i 4,272 and $ i 2,990 for the three months ended June 30, 2022 and 2021, respectively. Shipping and handling charges amounted to $ i 7,179 and $ i 5,272 for the six months ended June 30, 2022 and 2021, respectively. Shipping and handling charges are expensed as incurred and included in selling expenses.
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Advertising costs
Advertising costs amounted to $ i 4,765 and $ i 8,721 for the three months ended June 30, 2022 and 2021, respectively. Advertising costs amounted to $ i 4,765 and $ i 16,658 for the six months ended June 30, 2022 and 2021, respectively. Advertising costs are expensed as incurred and included in selling expenses.
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| F-12 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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Commission expenses
Commission expenses are the Company’s most significant expenses. As with all companies in the network marketing industry, the Company’s sales channel is external to the Company. The Company’s “external sales force” is stratified into two levels based on priority recruitment. First, there are sales distributors. Second, all members recruited by a sales distributor, directly or indirectly, are referred to as “sales network members”. The Company pays commission to every sales distributor based on purchases made by its sales network members which includes the independent direct sales members. Top performing distributors with their own physical stores may also become stockists of the Company, whereby they enjoy benefits such as maintaining a certain amount of the Company’s inventory on their store premises. The stockists shall account to the Company for all products sales from their store premises as monitored through the Company’s centralized stock tracking system. The Company pays a separate commission to stockists based on revenue generated from the stockists’ physical stores. Commission expenses amounted to $ i 62,557 and $ i 92,774 for the three months ended June 30, 2022 and 2021, respectively. Commission expenses amounted to $ i 176,666 and $ i 181,213 for the six months ended June 30, 2022 and 2021, respectively.
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Defined contribution plan
The full-time employees of the Company are entitled to the government mandated defined contribution plan. The Company is required to accrue and pay for these benefits based on certain percentages of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant government regulations, and make cash contributions to the government mandated defined contribution plan. Total expenses for the plan were $ i 35,936 and $ i 27,067 for the three months ended June 30, 2022 and 2021, respectively. Total expenses for the plan were $ i 63,408 and $ i 53,034 for the six months ended June 30, 2022 and 2021, respectively.
The related contribution plans include:
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Income taxes
The Company accounts for income taxes in accordance with U.S. GAAP for income taxes. The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred taxes is accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled.
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| F-13 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is i greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. i i No / penalties and interest related to underpayment of income taxes were incurred for the three and six months ended June 30, 2022. $ i i 395 / in penalties and interest related to underpayment of income taxes were incurred for the three and six months ended June 30, 2021.
The Company conducts much of its business activities in Hong Kong and Malaysia and is subject to tax in each of these jurisdictions. As a result of its business activities, the Company will file separate tax returns that are subject to examination by the foreign tax authorities.
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Comprehensive income (loss)
Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains and losses that under GAAP are recorded as an element of stockholders’ equity but are excluded from net income. Other comprehensive income (loss) consists of a foreign currency translation adjustment resulting from the Company not using the U.S. dollar as its functional currencies.
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Non-controlling interest
i Non-controlling interest consists of 40% of the equity interests of DSY Wellness held by an individual and approximately 0.01% (2 ordinary shares out of 9,590,598 shares) of the equity interests of ASL held by two individuals. The non-controlling interests are presented in the consolidated balance sheets, separately from equity attributable to the shareholders of the Company. Non-controlling interests in the results of the Company are presented on the face of the consolidated statements of operations as an allocation of the total income or loss for the periods between non-controlling interest holders and the shareholders of the Company.
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The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average common stocks outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of the potential common stocks (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common stocks that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the three and six months ended June 30, 2022 and 2021, there were dilutive shares.
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| F-14 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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Foreign currencies translation and transaction
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statements of operations and comprehensive income (loss).
The reporting currency of the Company is United States Dollars (“US$”) and the accompanying financial statements have been expressed in US$. The Company’s subsidiary in Labuan maintains its books and record in United States Dollars (“US$”) albeit its functional currency being the primary currency of the economic environment in which the entity operates, which is the Malaysian Ringgit (“MYR” or “RM”). The Company’s subsidiary in Hong Kong maintains its books and record in Hong Kong Dollars (“HK$”), similar to its functional currency. The Company’s subsidiary and VIE in Malaysia conducts its businesses and maintains its books and record in the local currency, Malaysian Ringgit (“MYR” or “RM”), as its functional currency.
In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of stockholders’ equity. Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.
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Translation of foreign currencies into US$1 have been made at the following exchange rates for the respective periods:
SCHEDULE OF FOREIGN CURRENCIES TRANSLATION EXCHANGE RATES
| As of | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| Period-end MYR : US$1 exchange rate | i 4.40 | i 4.18 | ||||||
| Period-end HKD : US$1 exchange rate | i 7.85 | i 7.80 | ||||||
| Foreign currency exchange rate, translation | i 7.85 | i 7.80 | ||||||
| For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Period-average MYR : US$1 exchange rate | i 4.37 | i 4.13 | i 4.28 | i 4.10 | ||||||||||||
| Period-average HKD : US$1 exchange rate | i 7.85 | i 7.77 | i 7.83 | i 7.76 | ||||||||||||
| Foreign currency exchange rate period average | i 7.85 | i 7.77 | i 7.83 | i 7.76 | ||||||||||||
C:
| F-15 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
/ i
Related parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
i
Fair value of financial instruments
The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company.
The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:
| ● | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. | |
| ● | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value. |
Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at face value or cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.
i
Leases
The Company adopted ASU 2016-02, “Leases” (Topic 842), and elected the practical expedients that does not require the Company to reassess: (1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. For lease terms of twelve months or fewer, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. The Company also adopts the practical expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. Some of the Company’s leases include one or more options to renew, which is typically at the Company’s sole discretion. The Company regularly evaluates the renewal options, and, when it is reasonably certain of exercise, it will include the renewal period in its lease term. New lease modifications result in re-measurement of the right of use (“ROU”) assets and lease liabilities. Operating ROU assets and lease liabilities are recognized at the commencement date, based on the present value of lease payments over the lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company use its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and over a similar term.
C:
| F-16 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Lease terms used to calculate the present value of lease payments generally do not include any options to extend, renew, or terminate the lease, as the Company does not have reasonable certainty at lease inception that these options will be exercised. The Company generally considers the economic life of its operating lease ROU assets to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception, therefore operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Its leases generally do not provide a residual guarantee. The operating lease ROU asset also excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term.
The Company reviews the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of operating lease liabilities in any tested asset group and includes the associated operating lease payments in the undiscounted future pre-tax cash flows.
i
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. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company, or EGC, and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
In November 2019, the FASB issued ASU No. 2019-10, which to update the effective date of ASU No. 2016-13 for private companies, not-for-profit organizations and certain smaller reporting companies applying for credit losses, leases, and hedging standard. The new effective date for these preparers is for fiscal years beginning after December 15, 2022. ASU 2019-05 is effective for the Company for annual and interim reporting periods beginning January 1, 2023 as the Company is qualified as a smaller reporting company. The Company is currently evaluating the impact ASU 2019-05 may have on its unaudited condensed consolidated financial statements.
Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have a material impact on the consolidated financial position, statements of operations and cash flows.
/ i
3. VARIABLE INTEREST ENTITY (“VIE”)
SEA is a trading company incorporated on March 4, 2004, under the laws of Malaysia. SEA provided majority of ASL’s purchases. Its equity at risk was insufficient to finance its activities and i 100% of its business is transacted with ASL. Therefore, it was considered to be a VIE and ASL is the primary beneficiary since it has both of the following characteristics:
| a. | The power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and | |
| b. | The obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. |
Accordingly, the accounts of SEA is consolidated in the accompanying financial statements.
C:
| F-17 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
3. VARIABLE INTEREST ENTITY (“VIE”) (Continued)
i
The carrying amount of the VIE’s assets and liabilities were as follows:
SCHEDULE OF VARIABLE INTEREST ENTITY
| As of | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| Current assets | $ | i 9,370 | $ | i 18,850 | ||||
| Current liabilities | ( i 43,288 | ) | ( i 51,272 | ) | ||||
| Net deficit | $ | ( i 33,918 | ) | $ | ( i 32,422 | ) | ||
| As of | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| Current assets: | ||||||||
| Cash | $ | i 7,626 | $ | i 17,493 | ||||
| Prepaid taxes | i 1,744 | i 1,357 | ||||||
| Total current assets | $ | i 9,370 | $ | i 18,850 | ||||
| Current liabilities: | ||||||||
| Accounts payable – intercompany | $ | i 42,501 | $ | i 49,724 | ||||
| Other payables and accrued liabilities | i 787 | i 1,548 | ||||||
| Total current liabilities | $ | i 43,288 | $ | i 51,272 | ||||
| Net deficit | $ | ( i 33,918 | ) | $ | ( i 32,422 | ) | ||
The summarized operating results of the VIE’s are as follows:
| For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Operating revenues | $ | - | $ | - | $ | - | $ | - | ||||||||
| Gross profit | $ | - | $ | - | $ | - | $ | - | ||||||||
| Profit (loss) from operations | $ | i 1,723 | $ | ( i 5,019 | ) | $ | ( i 3,219 | ) | $ | ( i 11,967 | ) | |||||
| Net income (loss) | $ | i 1,723 | $ | i 1,912 | $ | ( i 3,219 | ) | $ | ( i 9,949 | ) | ||||||
/ i
As of June 30, 2022 and December 31, 2021 the Company has $ i 1,807,437 and $ i 2,597,848, respectively, of cash and cash equivalents, which consists of $ i 666,779 and $ i 554,864, respectively, of cash in banks and $ i 1,134,542 and $ i 1,975,347, respectively, of time deposits placed with banks or other financial institutions and are all highly liquid investments with an original maturity of three months or less. The effective interest rate for the time deposits ranged between i 1.10% to i 1.17% per annum for the three and six months ended June 30, 2022. The effective interest rate for the time deposits ranged between i 1.80% to i 2.15% per annum for the three and six months ended June 30, 2021. As of June 30, 2022 and December 31, 2021, $ i 319,994 and $ i 295,761 of these balances are not covered by deposit insurance, respectively.
C:
| F-18 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
/ i i
SCHEDULE OF ACCOUNTS RECEIVABLES - RELATED PARTY
| As of | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| Accounts receivable | $ | i 214 | $ | - | ||||
| Allowance for doubtful accounts | - | - | ||||||
| Total accounts receivable | $ | i 214 | $ | - | ||||
/ i
i
Inventories consist of the following:
| As of | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| Finished goods | $ | i 346,744 | $ | i 375,535 | ||||
For the three months ended June 30, 2022, and 2021, the Company did not recognize any inventory write-downs. For the six months ended June 30, 2022, and 2021, the Company recognized inventory write-downs of $0 and $36,636 respectively.
/ i i
SCHEDULE OF PREPAID EXPENSES AND DEPOSITS
| As of | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| Receivables from sales distributors | $ | i 58,477 | $ | i 115,379 | ||||
| Deposits to suppliers | i 240,592 | i 301,233 | ||||||
| Subtotal | i 299,069 | i 416,612 | ||||||
| Less: Provision for doubtful accounts | ( i 120,372 | ) | ( i 121,095 | ) | ||||
| Total | $ | i 178,697 | $ | i 295,517 | ||||
i
Movements of allowance for doubtful accounts are as follows:
SCHEDULE OF CHANGES IN ALLOWANCE FOR DOUBTFUL ACCOUNTS
For the six months ended | For the year ended | |||||||
| Beginning balance | $ | i 121,095 | $ | - | ||||
| Addition | - | i 121,514 | ||||||
| Write off | - | - | ||||||
| Exchange rate effect | ( i 723 | ) | ( i 419 | ) | ||||
| Ending balance | $ | i 120,372 | $ | i 121,095 | ||||
C:
| F-19 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
/ i
8. PROPERTY AND EQUIPMENT, NET
i
Property and equipment, net consist of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT, NET
| As of | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| Computer and office equipment | $ | i 78,885 | $ | i 82,298 | ||||
| Furniture & fixtures | i 116,004 | i 122,185 | ||||||
| Leasehold improvements | i 192,323 | i 202,570 | ||||||
| Vehicle | i 93,709 | i 98,702 | ||||||
| Subtotal | i 480,921 | i 505,755 | ||||||
| Less: accumulated depreciation | ( i 311,006 | ) | ( i 289,956 | ) | ||||
| Total | $ | i 169,915 | $ | i 215,799 | ||||
Depreciation expense for the three months ended June 30, 2022 and 2021 amounted to $ i 17,954 and $ i 19,009, respectively. Depreciation expense for the six months ended June 30, 2022 and 2021 amounted to $ i 36,661 and $ i 38,179, respectively.
/ i
i
Intangible assets, net, consist of the following:
SCHEDULE OF INTANGIBLE ASSETS, NET
| As of | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| Computer software | $ | i 32,710 | $ | i 34,453 | ||||
| Less: accumulated amortization | ( i 30,109 | ) | ( i 30,793 | ) | ||||
| Total | $ | i 2,601 | $ | i 3,660 | ||||
Amortization expense for the three months ended June 30, 2022 and 2021 amounted to $ i 439 and $ i 496, respectively. Amortization expense for the six months ended June 30, 2022 and 2021 amounted to $ i 897 and $ i 1,006, respectively.
/ i
10. INVESTMENT IN MARKETABLE SECURITIES
| (i) | On May 17, 2018, the Company purchased shares of common stock in Greenpro Capital Corp. for $ i 500,000 at a purchase price of $ per share. | |
| (ii) | On July 30, 2018, the Company disposed shares of common stock in Greenpro Capital Corp. for $ i 125 at a purchase price of $ per share. | |
| (iii) | On October 16, 2018, the Company purchased shares of common stock in Greenpro Capital Corp. for $ i 1,000 at a purchase price of $ per share. | |
| (iv) | On November 3, 2020, the Company received dividend of shares of common stock in DSwiss, Inc. for $ i 76,671 at fair value of $ per share from Greenpro Capital Corporation as result of its Spin-off of DSwiss, Inc.’s shares | |
| (v) | On December 9, 2020, the Company received dividend of shares of common stock in DSwiss, Inc. for $ i 83,315 at fair value of $ per share from Greenpro Capital Corporation as result of its Spin-off of DSwiss, Inc.’s shares. | |
| (vi) | On September 27, 2021, the Company received dividend of shares of common stock in SEATech Ventures Corp. for $ i 18,874 at fair value of $ per share from Greenpro Capital Corp as a dividend income since Greenpro Capital Corp previously owned these shares. |
C:
| F-20 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
10. INVESTMENT IN MARKETABLE SECURITIES (Continued)
iSCHEDULE OF INVESTMENT IN MARKETABLE SECURITIES
| As of | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| Cost of investment | $ | i 89,001 | $ | i 577,035 | ||||
| Dividend income from Greenpro Capital Corp. | - | i 18,939 | ||||||
| Unrealized holding loss | ( i 52,889 | ) | ( i 505,231 | ) | ||||
| Exchange rate effect | ( i 405 | ) | ( i 1,742 | ) | ||||
| Investment in marketable securities | $ | i 35,707 | $ | i 89,001 | ||||
/ i
11. INVESTMENT IN NON-MARKETABLE SECURITIES
On April 3, 2019, the Company purchased a i 5% of stock or shares of common stock in Phoenix Plus Corp. for $ i 1,500 at purchase price of $ per share.
iSCHEDULE OF INVESTMENT IN NON MARKETABLE SECURITIES
| As of | ||||||||
| Phoenix Plus Corporation | June 30, 2022 | December 31, 2021 | ||||||
| Cost of investment | $ | i 1,500 | $ | i 1,500 | ||||
| Investment in non-marketable securities | $ | i 1,500 | $ | i 1,500 | ||||
/ i
12. OTHER PAYABLES AND ACCRUED LIABILITIES
iSCHEDULE OF OTHER PAYABLES AND ACCRUED LIABILITIES
| As of | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| Professional fees | $ | i 142,622 | $ | i 436,541 | ||||
| Promotion expenses | i 40,360 | i 36,024 | ||||||
| Payroll | i 54,018 | i 22,669 | ||||||
| Commissions | i 247,645 | i 219,721 | ||||||
| Tax penalty | i 75,000 | i 75,000 | ||||||
| Others | i 77,388 | i 68,400 | ||||||
| Total | $ | i 637,033 | $ | i 858,355 | ||||
Certain amounts have been reclassified to conform to current period presentation.
C:
| F-21 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
/ i
13. RELATED PARTY BALANCES AND TRANSACTIONS
Related party balances
Accounts payable – related parties
i
| Name of Related Party | Relationship | Nature | As of | As of December 31, 2021 | ||||||||
| CTA Nutriceuticals (Asia) Sdn Bhd (“CTA”) | i i The directors and shareholders of CTA are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY International Wellness Sdn Bhd / | i i Purchases of products for the provision of complementary health therapies / | $ | i 14,322 | $ | - | ||||||
| DSY Wellness and Longevity Center Sdn Bhd (“DSYWLC”) | i i Mr. Yap Foo Ching (Steve Yap), a director of DSY International Wellness Sdn Bhd is also a director of DSYWLC / | i i Purchases of products for the provision of complementary health therapies / | i 85 | - | ||||||||
| Total | $ | i 14,407 | $ | - | ||||||||
Amount due from related parties
Name of Related Party | Relationship | Nature | As of | As
of December 31, 2021 | ||||||||
| Agape ATP (Asia) Limited (“AATP Asia”) | i i Mr. How Kok Choong, the CEO and director of the Company is also the sole shareholder and director of AATP Asia / | i i Expenses paid for AATP Asia / | $ | - | $ | i 2,214 | ||||||
| Hostastay Sdn. Bhd. (“Hostastay”) | i i Mr. How Kok Choong, the CEO and director of the Company is also the director of Hostastay. Mr. How Kok Choong ceased to be the director of Hostastay as of April 21, 2021 / | i i Sublease rent due from Hostastay / | i 4,548 | i 4,790 | ||||||||
| Total | $ | i 4,548 | $ | i 7,004 | ||||||||
C:
| F-22 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
13. RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
Related party balances
Amount due to related parties
Name of Related Party | Relationship | Nature | As of | As of December 31, 2021 | ||||||||
| DSY Wellness and Longevity Center Sdn Bhd (“DSYWLC”) | i i Mr. Yap Foo Ching (Steve Yap), a director of DSY International Wellness Sdn Bhd is also a director of DSYWLC / | i i Rental due and expenses paid by DSYWLC / | $ | i 2,015 | $ | - | ||||||
| DSY Beauty Sdn Bhd (“DSY Beauty”) | i i The directors and shareholders of DSY Beauty are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd / | Purchase of beauty products | i 67 | - | ||||||||
| Total | $ | i 2,082 | $ | - | ||||||||
Related party transactions
Purchases
| Name of Related | For the three months ended | |||||||||||
| Party | Relationship | Nature | June 30, 2022 | June 30, 2021 | ||||||||
| CTA Nutriceuticals (Asia) Sdn Bhd (“CTA”) | i i The directors and shareholders of CTA are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY International Wellness Sdn Bhd / | i i Purchases of products for the provision of complementary health therapies / | $ | i 63,142 | $ | - | ||||||
| DSY Beauty Sdn Bhd (“DSY Beauty”) | i i The directors and shareholders of DSY Beauty are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd / | i i Purchases of beauty products / | i 395 | - | ||||||||
| DSY Wellness & Longevity Center Sdn Bhd (“DSYWLC”) | i i Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd is also a director of DSYWLC. / | i i Purchases of products for the provision of complementary health therapies / | i 127 | - | ||||||||
| Total | $ | i 63,664 | $ | - | ||||||||
C:
| F-23 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
13. RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
Related party transactions
Purchases
| Name of Related | For the six months ended | |||||||||||
| Party | Relationship | Nature | June 30, 2022 | June 30, 2021 | ||||||||
| CTA Nutriceuticals (Asia) Sdn Bhd (“CTA”) | i i The directors and shareholders of CTA are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY International Wellness Sdn Bhd / | i i Purchases of products for the provision of complementary health therapies / | $ | i 74,909 | $ | - | ||||||
| DSY Beauty Sdn Bhd (“DSY Beauty”) | i i The directors and shareholders of DSY Beauty are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd / | i i Purchases of beauty products / | i 395 | - | ||||||||
| DSY Wellness & Longevity Center Sdn Bhd (“DSYWLC”) | i i Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd is also a director of DSYWLC. / | i i Purchases of products for the provision of complementary health therapies / | i 127 | - | ||||||||
| Total | $ | i 75,431 | $ | - | ||||||||
C:
| F-24 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
13. RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
Related party transactions
Other purchases
| Name of Related | For the three months ended | |||||||||||
| Party | Relationship | Nature | June 30, 2022 | June 30, 2021 | ||||||||
| DSY Beauty Sdn Bhd (“DSY Beauty”) | i i The directors and shareholders of DSY Beauty are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd / | i i Purchases of beauty products / | $ | i 69 | $ | - | ||||||
| Total | $ | i 69 | $ | - | ||||||||
| Name of Related | For the six months ended | |||||||||||
| Party | Relationship | Nature | June 30, 2022 | June 30, 2021 | ||||||||
| DSY Beauty Sdn Bhd (“DSY Beauty”) | i i The directors and shareholders of DSY Beauty are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd / | i i Purchases of beauty products / | $ | i 69 | $ | - | ||||||
| Total | $ | i 69 | $ | - | ||||||||
Commission
| Name of Related | For the three months ended | |||||||||||
| Party | Relationship | Nature | June 30, 2022 | June 30, 2021 | ||||||||
| Mr. How Kok Choong | i i Mr. How Kok Choong, the CEO and director of the Company / | i i Commission expense / | $ | i 2,443 | $ | - | ||||||
| Total | $ | i 2,443 | $ | - | ||||||||
| Name of Related | For the six months ended | |||||||||||
| Party | Relationship | Nature | June 30, 2022 | June 30, 2021 | ||||||||
| Mr. How Kok Choong | i i Mr. How Kok Choong, the CEO and director of the Company / | i i Commission expense / | $ | i 5,148 | $ | - | ||||||
| Total | $ | i 5,148 | $ | - | ||||||||
C:
| F-25 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
13. RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
Related party transactions
Office rental expense
| Name of Related | For the three months ended | |||||||||||
| Party | Relationship | Nature | June 30, 2022 | June 30, 2021 | ||||||||
| DSY Wellness and Longevity Center Sdn Bhd (“DSYWLC”) | i i Mr. Yap Foo Ching (Steve Yap), a director of DSY International Wellness Sdn Bhd is also a director of DSYWLC / | i i Office
rental expense / | $ | i 5,602 | $ | - | ||||||
| Total | $ | i 5,602 | $ | - | ||||||||
| Name of Related | For the six months ended | |||||||||||
| Party | Relationship | Nature | June 30, 2022 | June 30, 2021 | ||||||||
| DSY Wellness and Longevity Center Sdn Bhd (“DSYWLC”) | i i Mr. Yap Foo Ching (Steve Yap), a director of DSY International Wellness Sdn Bhd is also a director of DSYWLC / | i i Office
rental expense / | $ | i 11,203 | $ | - | ||||||
| Total | $ | i 11,203 | $ | - | ||||||||
Related party transactions
Other income
| Name of Related | For the three months ended | |||||||||||
| Party | Relationship | Nature | June 30, 2022 | June 30, 2021 | ||||||||
| Hostastay Sdn. Bhd. (“Hostastay”) | i i Mr. How Kok Choong, the CEO and director of the Company is also the director of Hostastay. Mr. How Kok Choong ceased to be the director of Hostastay as of April 21, 2021 / | i i Sublease rental income due from Hostastay / | $ | - | $ | i 1,458 | ||||||
| Total | $ | - | $ | i 1,458 | ||||||||
| Name of Related | For the six months ended | |||||||||||
| Party | Relationship | Nature | June 30, 2022 | June 30, 2021 | ||||||||
| Hostastay Sdn. Bhd. (“Hostastay”) | i i Mr. How Kok Choong, the CEO and director of the Company is also the director of Hostastay. Mr. How Kok Choong ceased to be the director of Hostastay as of April 21, 2021 / | i i Sublease rental income due from Hostastay / | $ | - | $ | i 2,929 | ||||||
| Total | $ | - | $ | i 2,929 | ||||||||
/ i
Preferred stock
As of June 30, 2022, and December 31, 2021, there were preferred stocks authorized but were issued and outstanding.
Common stock
As of June 30, 2022, and December 31, 2021, there were common stocks authorized, and shares issued and outstanding, respectively.
A share forfeiture agreement (the “Share Forfeiture Agreement”) dated January 20, 2022, between the Company and Mr. How Kok Choong, the CEO and director of the Company, pursuant to which Mr. How Kok Choong agreed to forfeit shares of common stock of the Company. As a result, the outstanding shares was reduced by shares of common stock.
There were stock options, warrants or other potentially dilutive securities outstanding as of June 30, 2022 and December 31, 2021.
C:
| F-26 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
/ i
i
The Company’s non-controlling interest consists of the following:
SCHEDULE OF NON CONTROLLING INTEREST
| As of | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| DSY Wellness: | ||||||||
| Paid-in capital | $ | i 97 | $ | i 97 | ||||
| Retained earnings (Accumulated deficit) | i 10,773 | ( i 436 | ) | |||||
| Accumulated other comprehensive (loss) income | ( i 269 | ) | i 3 | |||||
| Non Controlling interest Gross | i 10,601 | ( i 336 | ) | |||||
| ASL | - | - | ||||||
| Total | $ | i 10,601 | $ | ( i 336 | ) | |||
/ i
i
The United States and foreign components of loss before income taxes were comprised of the following:
SCHEDULE OF COMPONENTS OF INCOME/(LOSS) BEFORE INCOME TAX
| For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Tax jurisdictions from: | ||||||||||||||||
| Local – United States | $ | ( i 187,379 | ) | $ | ( i 96,370 | ) | $ | ( i 293,804 | ) | $ | ( i 204,295 | ) | ||||
| Foreign – Malaysia | ( i 189,395 | ) | ( i 177,983 | ) | ( i 354,459 | ) | ( i 469,675 | ) | ||||||||
| Foreign – Hong Kong | ( i 27,178 | ) | ( i 363,901 | ) | ( i 45,847 | ) | ( i 291,814 | ) | ||||||||
| Loss before income tax | $ | ( i 403,952 | ) | $ | ( i 638,254 | ) | $ | ( i 694,110 | ) | $ | ( i 965,784 | ) | ||||
i
The provision for income taxes consisted of the following:
SCHEDULE OF PROVISION FOR INCOME TAX
| For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Current: | ||||||||||||||||
| - Local | $ | - | $ | ( i 22,205 | ) | $ | - | $ | ( i 22,205 | ) | ||||||
| - Foreign | ( i 392 | ) | ( i 14,461 | ) | ( i 8,680 | ) | ( i 41,185 | ) | ||||||||
| Deferred: | ||||||||||||||||
| - Local | - | - | - | - | ||||||||||||
| - Foreign | - | i 32,695 | - | i 53,299 | ||||||||||||
| Provision for income tax | $ | ( i 392 | ) | $ | ( i 3,971 | ) | $ | ( i 8,680 | ) | $ | ( i 10,091 | ) | ||||
The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. The Company and its subsidiary that operate in various countries: United States, Malaysia (including Labuan) and Hong Kong that are subject to taxes in the jurisdictions in which they operate, as follows:
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| F-27 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
16. INCOME TAXES (Continued)
United States of America
Agape ATP Corporation was incorporated in the State of Nevada and is subject to the tax laws of the United States of America with a corporate tax rate of i 21% on its taxable income. Agape ATP Corporation also subject to controlled foreign corporations Subpart F income (“Subpart F”) tax, which is a tax primarily on passive income from controlled foreign corporations with a tax rate of i 35%. i In addition, the Tax Cuts and Jobs Act imposed a global intangible low-taxed income (“GILTI”) tax, which is a tax on certain off-shore earnings at an effective rate of 10.5% for tax years (50% deduction of the current enacted tax rate of 21%) with a partial offset for 80% foreign tax credits. If the foreign tax rate is 13.125% or higher, there will be no U.S. corporate tax after the 80% foreign tax credits are applied.
For the three and six months ended June 30, 2022 and 2021, the Company’s foreign subsidiaries did not generate any income that are subject to Subpart F tax and GILTI tax.
As of June 30, 2022 and December 31, 2021, the operations in the United States of America incurred approximately $ i 914,000 and $ i 620,000, respectively, of cumulative net operating losses (“NOL”) which can be carried forward to offset future taxable income or Subpart F and GILTI taxes. These balances can be carried forward indefinitely. The deferred tax valuation allowance as of June 30, 2022 and December 31, 2021 were approximately $ i 192,000 and $ i 130,000, respectively.
Malaysia
Changes to the Labuan Business Activity Tax Act (LBATA) 1990 which was gazetted and came into operation on January 1, 2019 mandates companies incorporated in Labuan to satisfy the “substantial activity requirements” to qualify for the preferential tax rate of i 3% on net audited profit. Subsequently, on April 29, 2020, a circular setting out revisions to the “substantial activity requirements” was issued. As Agape ATP Corporation did not maintain a permanent establishment in Labuan, and therefore did not satisfy the said requirements, the company was subjected to tax at i 24% on its net audited profit. On June 11, 2021, Agape ATP Corporation made an irrevocable election to be taxed under the Malaysian Income Tax Act 1967 as the elected tax regime is more tax efficient to the entity compare to LBATA.
Agape Superior Living Sdn Bhd, Agape S.E.A Sdn Bhd., Wellness ATP International Holdings Sdn Bhd. and DSY Wellness International Sdn. Bhd. are governed by the income taxes laws of Malaysia and the income taxes provision in respect of operations in Malaysia is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Income Tax Act of Malaysia, enterprises that incorporated in Malaysia are usually subject to a unified 24% enterprise income taxes rate while preferential tax rates, tax holidays and even tax exemption may be granted on case-by-case basis. i The tax rate for small and medium sized companies (generally companies incorporated in Malaysia with paid-in capital of RM i 2,500,000 or less) is i 17% for the first RM i 600,000 (or approximately $ i 150,000) for the three months ended June 30, 2022 and 2021, with the remaining balance being taxed at the 24% rate / .
As of June 30, 2022 and December 31, 2021, the operations in Malaysia incurred approximately $ i 1,311,000 and $ i 946,000, respectively, of cumulative net operating losses (“NOL”) which can be carried forward to offset future taxable income. Approximately $ i i 944,000 / of the net operating loss carry forwards will i expire in 2028, if unutilized. The deferred tax valuation allowance as of June 30, 2022 and December 31, 2021 were approximately $ i 309,000 and $ i 227,000, respectively.
Hong Kong
Agape ATP International Holding (HK) Limited is subject to Hong Kong Profits Tax, which is charged at the statutory income rate of i 16.5% on its assessable income derived from Hong Kong. Business income derived or business expenses incurred outside the Special Administrative Region is not subject to Hong Kong Profits Tax or deduction. As Agape ATP International Holding (HK) Limited is an investment holding company without operating activities, the net operating loss for Hong Kong is considered immaterial.
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| F-28 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
16. INCOME TAXES (Continued)
i
The following table sets forth the significant components of the aggregate deferred tax assets of the Company:
SCHEDULE OF DEFERRED TAX ASSETS
| As of | ||||||||
| June 30, 2022 | December 31, 2021 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carry forwards in U.S. | $ | i 191,976 | $ | i 130,277 | ||||
| Net operating loss carry forwards in Malaysia | i 309,415 | i 227,106 | ||||||
| Less: valuation allowance | ( i 501,391 | ) | ( i 357,383 | ) | ||||
| Deferred tax liabilities: | ||||||||
| Depreciation | ( i 17,975 | ) | ( i 15,574 | ) | ||||
| Deferred tax liabilities, net | $ | ( i 17,975 | ) | $ | ( i 15,574 | ) | ||
Uncertain tax positions
The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of June 30, 2022 and December 31, 2021, the Company did not have any significant unrecognized uncertain tax positions. The Company did not incur interest and penalties tax for the three and six months ended June 30, 2022 and 2021.
/ i
(a) Major customers
For the three months ended June 30, 2022, and 2021, no customer accounted for i i 10 / % or more of the Company’s total revenues. For the six months ended June 30, 2022, and 2021, no customer accounted for i i 10 / % or more of the Company’s total revenues.
As of June 30, 2022, one individual customer accounted for i 100.0% of the Company’s balance of accounts receivable. There was no accounts receivable balance as of December 31, 2021.
(b) Major vendors
For the three months ended June 30, 2022, three vendors accounted for approximately i 70%, i 11% and i 17% of the Company’s total purchases, respectively. For the six months ended June 30, 2022, two vendors accounted for approximately i 46% and i 43% of the Company’s total purchases, respectively. For the three and six months ended June 30, 2021, one vendor accounted for i i 100 / % of the Company’s total purchases.
As of June 30, 2022, three vendors accounted for approximately i 36%, i 40% and i 20% of the Company’s total balance of accounts payable, respectively. The vendor which accounted for i 40% of the Company’s total balance of accounts payable is a related company, i.e. CTA Nutriceuticals (Asia) Sdn Bhd. As of December 31, 2021, one vendor accounted for i 100% of the total balance of accounts payable.
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| F-29 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
17. CONCENTRATIONS OF RISKS (Continued)
(c) Commission Expenses to Sales Distributors and Stockists
For the three months ended June 30, 2022, one sales distributor accounted for i 10% of the Company’s commission expense. For the three months ended June 30, 2021, one sales distributor accounted for approximately i 21.9% of the Company’s commission expense.
For the six months ended June 30, 2022, no sales distributor accounted for i 10% or more of the Company’s commission expense. For the six months ended June 30, 2021, one distributor accounted for approximately i 16.2% of the Company’s total purchases.
(d) Credit risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. As of June 30, 2022, and December 31, 2021, $ i 666,779 and $ i 554,864 were deposited with financial institutions, respectively, $ i 319,994 and $ i 295,761 of these balances are not covered by deposit insurance, respectively. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness.
Financial instruments that are potentially subject to credit risk consist principally of accounts receivable. The Company believes the concentration of credit risk in its account receivable is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. Historically, the Company did not have any bad debt on its account receivable.
(e) Exchange rate risk
The Company cannot guarantee that the current exchange rate will remain steady; therefore, there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of RM and HK$ converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.
/ i
18. COMMITMENTS AND CONTINGENCIES
Lease commitments
On April 1, 2020, the Company adopted ASC 842 for ASL’s office space lease and sales and training center as the lease commencement date upon the acquisition of ASL. The Company recognized lease liabilities of approximately $ i 490,000, with a corresponding right-of-use (“ROU”) asset in the same amount based on the present value of the future minimum rental payments of the lease, using an effective interest rate of i 5.5%, which was determined using the Company’s estimated incremental borrowing rate.
On May 31, 2021, the Company entered into two separate two-year leases extension with the modified lease expiring i May 31, 2023 for its office space and expiring i August 31, 2023 for its training center. The lease modification required the Company to re-measure the ROU assets and lease liabilities based on the modified leases. The Company recognized a reduction of $ i 3,250 in ROU assets and lease liabilities upon lease modifications based on the present value of the future minimum rental payments of the lease, using an effective interest rate of i 5.5%, which was determined using the Company’s estimated incremental borrowing rate.
The weighted remaining term of the lease is approximately i 1.17 years.
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| F-30 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
18. COMMITMENTS AND CONTINGENCIES (Continued)
i
The five-year maturity of the Company’s operating lease liabilities is as follow:
/
The Company also leases one office and operation center, and one shophouse with an expiring term of twelve months or less, which were classified as operation leases. Since the lease terms for these leases were twelve months or less, a lessee is permitted to elect not to recognize lease assets and liabilities. The Company has elected not to recognize lease assets and liabilities on these leases. As of June 30, 2022, the Company’s commitment for minimum lease payment under these operating leases within the next twelve months were $ i 11,416.
Rent expense for the three months ended June 30, 2022 and 2021 was $ i 54,237 and $ i 45,560, respectively. Rent expense for the six months ended June 30, 2022, and 2021 was $ i 98,312 and $ i 91,521, respectively.
Contingencies
Legal
From time to time, the Company is party to certain legal proceedings, as well as certain asserted and un-asserted claims. Amounts accrued, as well as the total amount of reasonably possible losses with respect to such matters, individually and in the aggregate, are not deemed to be material to the consolidated financial statements.
COVID-19
Since the declaration of the COVID-19 pandemic on March 11, 2020 by the World Health Organization or WHO, Malaysia has been put through various stages of lockdowns such as (1) full movement control orders (“MCO”), under which, quarantines, travel restrictions, and the temporary closure of stores and facilities in Malaysia were made mandatory, (2) MCO were eased to a Conditional Movement Control Order (“CMCO”) where most business sectors were allowed to operate under strict rules and Standard Operating Procedures mandated by the government of Malaysia and (3) CMCO were further relaxed to Recovery Movement Control Order (“RMCO”). On January 12, 2021, due to a resurgence of COVID-19 cases, the Malaysian government declared a state of emergency nationwide to combat COVID-19. Intermittent lockdowns were imposed in various states and districts in the country. February 2021 marked a significant month for Malaysia as all frontline staff of the country, which comprised those in healthcare, police, the Volunteers Department of Malaysia, the Fire and Rescue Department of Malaysia and civil defense sectors were vaccinated. On February 16, 2021, Prime Minister Tan Sri Muhyiddin Yassin announced that a National COVID-19 Immunization Plan will be implemented for one year after February 2021, which 80% of the Malaysia population will be vaccinated to achieve herd immunization.
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| F-31 |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars (“US$”), except for number of shares)
18. COMMITMENTS AND CONTINGENCIES (Continued)
On March 5, 2021, lockdowns in most part of the country was eased to a CMCO, nevertheless, COVID-19 cases in the country continue to rise. i On May 12, 2021, Malaysia was again put under a full lockdown nationwide, until the earlier of (i) daily COVID-19 cases infection of the country fall below 4,000; (ii) intensive Unit Care, or ICU, wards start operating at a moderate level; or (iii) 10% of the Malaysian population is fully vaccinated. The country was administering over 400,000 doses of COVID-19 vaccines daily. On July 17, 2021, the full lockdown was slightly eased as 13.9% of the Malaysian population was fully vaccinated, with another 30% having received at least one dose of the vaccine. The COVID-19 situation in the country showed no sign of abating. Kuala Lumpur and Selangor remained the epicenter of the latest wave of infections. Total COVID-19 cases in the country surpassed the one million mark on July 25, 2021, and daily cases hit a record high of 24,599 on August 26, 2021. Despite the deteriorating COVID-19 state, the government lifted Kuala Lumpur from Enhanced Movement Control Order (“EMCO”) ahead of schedule and ended the nationwide state of emergency on August 1, 2021. Parliament met for the first time this year on July 26, 2021. Malaysia pressed on with its National COVID-19 Immunization Plan, fast inoculating of its residents. COVID-19 infections started to drop below the 10,000 mark daily, beginning October 3, 2021. Effective October 11, 2021, interstate and international travel restrictions were lifted for residents who had been fully vaccinated against COVID-19 as the country achieved its target of inoculating 90% of its adult population.
Malaysia officially transitioned to the endemic phase of COVID-19 effective April 1, 2022. Restrictions on businesses and people are minimal. Meanwhile, the government continues to encourage inoculation for those between the ages of 5 to 11 years and its adolescent group which comprised those between the ages 12 to 17. Adults who have been fully vaccinated, i.e. received two doses of the COVID-19 vaccine are encouraged to take booster shots.
Substantially all of our revenues are concentrated in Malaysia. Consequently, our results of operations will likely be adversely, and may be materially, affected, to the extent that the COVID-19 or any other epidemic harms the Malaysia and global economy in general. Any potential impact to our results will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity of the COVID-19 and the actions taken by government authorities and other entities to contain the COVID-19 or treat its impact, almost all of which are beyond our control. Potential impacts include, but are not limited to, the following:
| ● | temporary closure of offices, travel restrictions, financial impact of the Company’s customers or suspension supplies may be negatively affected, and could continue to negatively affect the demand for the Company’s product; | |
| ● | the Company may have to provide significant sales incentives to its customers during the outbreak, which may in turn materially adversely affect its financial condition and operating results; and | |
| ● | any disruption of the Company’s supply chain, logistics providers or customers could adversely impact its business and results of operations, including causing the Company or its suppliers to cease manufacturing for a period of time or materially delay delivery to its customers, which may also lead to loss of its customers. |
Because of the uncertainty surrounding the COVID-19 outbreak, the financial impact related to the outbreak of and response to the COVID-19 cannot be reasonably estimated at this time. There is no guarantee that the Company’s total revenues will grow or remain at similar levels year over year in 2022 and beyond.
/ i
On July 19, 2022, Greenpro Capital Corp. filed a certificate of change with the Secretary of State of Nevada to effect a reverse split of i the company’s common stock at the ratio of 10-for-1 effective July 28, 2022. Under the reverse stock split, each 10 pre-split share of common stock outstanding will automatically combine into 1 new share of common stock of the company. As at June 30, 2022, the Company has an investment of common stock of Greenpro Capital Corp. valued at $ i 24,853.45. The Company’s investment of common stock of Greenpro Capital Corp. shall be reduced to as a result of the reverse stock split. However, the value of the Company’s investment in Greenpro Capital Corp. as at June 30,2022 remained unchanged despite the reduction in the number of common stock.
/
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| F-32 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information contained in this quarter report on Form 10-Q is intended to update the information contained in our Form 10-K, dated March 28, 2022, for the year ended December 31, 2021 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our unaudited condensed consolidated financial statements and the notes to the unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q.
The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this transition report on Form 10-Q. The following should also be read in conjunction with the unaudited condensed Consolidated Financial Statements and notes thereto that appear elsewhere in this report.
Company Overview
Agape ATP Corporation, a Nevada corporation (“the Company”) was incorporated under the laws of the State of Nevada on June 1, 2016.
Agape ATP Corporation operates through its subsidiaries, namely, Agape ATP Corporation, a company incorporated in Labuan, Malaysia, and Agape Superior Living Sdn. Bhd. (“ASL”), a company incorporated in Malaysia. .
Agape ATP Corporation, incorporated in Labuan, Malaysia, is an investment holding company with 100% equity interest in Agape ATP International Holding Limited, a company incorporated in Hong Kong.
On May 8, 2020, the Company entered into a Share Exchange Agreement with Mr. How Kok Choong, CEO and director of the Company to acquire 9,590,596 ordinary shares, no par value, equivalent to approximately 99.99% of the equity interest in Agape Superior Living Sdn. Bhd., a network marketing entity incorporated in Malaysia.
Agape Superior Living Sdn. Bhd. is a limited company incorporated on August 8, 2003, under the laws of Malaysia.
On September 11, 2020, the Company incorporated Wellness ATP International Holdings Sdn, Bhd. (“WATP”), a wholly owned subsidiary under the laws of Malaysia, to pursue the business of promoting wellness and wellbeing lifestyle of the community by providing services that includes online editorials, programs, events and campaigns on how to achieve positive wellness and lifestyle.
On November 11, 2021, Agape ATP Corporation (Labuan) formed a joint-venture entity, DSY Wellness International Sdn. Bhd. (“DSY Wellness”) with an independent third party which Agape ATP Corporation (Labuan) owns 60% of the equity interest, to pursue the business of providing complementary health therapies.
The Company and its subsidiaries are principally engaged in the Health and Wellness Industry. The principal activity of the Company is to supply high-quality health and wellness products, including supplements to assist in cell metabolism, detoxification, blood circulation, anti-aging and products designed to improve the overall health system of the human body and various wellness programs.
Agape ATP Corporation is a company that provides health and wellness products and health solution advisory services to our clients. The Company primarily focus its efforts on attracting customers in Malaysia. Its advisory services center on the “ATP Zeta Health Program”, which is a health program designed to effectively prevent diseases caused by polluted environments, unhealthy dietary intake and unhealthy lifestyles, and promotion of health. The program aims to promote improved health and longevity in our clients through a combination of modern medicine, proper nutrition and advice from skilled nutritionists and/or dieticians.
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In order to strengthen the Company’s supply chain, on May 8, 2020, the Company has successfully acquired approximately 99.99% of ASL, with the goal of securing an established network marketing sales channel that has been established in Malaysia for the past 15 years. ASL has been offering the Company’s ATP Zeta Health Program as part of its product lineup. As such, the acquisition creates synergy in the Company’s operation by boosting the Company’s retail and marketing capabilities. The newly acquired subsidiary allows the Company to fulfill its mission of “helping people to create health and wealth” by providing a financially rewarding business opportunity to distributors and quality products to distributors and customers who seek a healthy lifestyle.
Via ASL, the Company offers three series of programs which consist of different services and products: ATP Zeta Health Program, ÉNERGÉTIQUE and BEAUNIQUE.
The ATP Zeta Health Program is a health program designed to promote health and general wellbeing designed to prevent health diseases caused by polluted environments, unhealthy dietary intake and unhealthy lifestyles. The program aims to promote improved health and longevity through a combination of modern health supplements, proper nutrition and advice from skilled dieticians as well as trained members and distributors.
The ÉNERGÉTIQUE series aims to provide a total dermal solution for a healthy skin beginning from the cellular level. The series is comprised of the Energy Mask series, Hyaluronic Acid Serum and Mousse Facial Cleanser.
The BEAUNIQUE product series focuses on the research of our diet’s impact on modifying gene expressions in order to address genetic variations and deliver a nutrigenomic solution for every individual.
The Company deems creating public awareness on wellness and wellbeing lifestyle as essential to enhance the provision of its health solution advisory services; and therefore, incorporated WATP. Upon its establishment, WATP started collaborating with ASL to carry out various wellness programs.
To further its reach in the Health and Wellness Industry, on November 11, 2021, Agape ATP Corporation (Labuan) formed a joint-venture entity, DSY Wellness International Sdn. Bhd. (“DSY Wellness”) with an independent third party which Agape ATP Corporation (Labuan) owns 60% of the equity interest, to pursue the business of providing complementary health therapies.
Results of Operation
For the three months ended June 30, 2022 and 2021
Revenue
We generated revenue of $396,707 for the three months ended June 30, 2022 as compared to $303,786 for the three months ended June 30, 2021, representing an increase of $92,921 or approximately 30.6%. The increase was predominately due to the Company’s operations in the provision of complementary health therapies which have taken off during the quarter and the business segment contributed approximately 54% of the Company’s total revenue for the three months ended June 30, 2022.
Cost of Revenue
Cost of revenue for the three months ended June 30, 2022 amounted to $109,383 as compared to $35,623 for the three months ended June 30, 2021, representing a significant increase of $73,760 or approximately 207.1%. The significant increase in cost of revenue is due to higher cost of revenue associated with the provision of complementary health therapies.
The Company’s cost of revenue typically comprised of freight-in, cost of goods purchased, and packing materials for the three months ended June 30, 2022 and 2021, respectively.
Gross Profit
Gross profit for the three months ended June 30, 2022 amounted to $287,324, representing a gross margin of approximately 72.4% as compared to $268,163 for the three months ended June 30, 2021, equivalent to a gross margin of approximately 88.3%. The decrease in gross margin was predominately due to lower gross margin associated with the provision of complementary health therapies as compared to the Company’s network marketing business.
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Operating Expenses
Our operating expenses consist of selling expenses, commission expenses and general and administrative expenses.
Selling expenses
Selling expenses for the three months ended June 30, 2022 amounted to $79,587 as compared to $100,838 for the three months ended June 30, 2021, a reduction of $21,251 or approximately 21.1%, predominantly due to a reduction in head count. The Company’s selling expenses typically comprise salaries and benefits expenses which makes up as much as approximately 70% to 80% of total selling expenses, credit card processing fees and promotional expenses.
Commission expenses
Commission expenses were $62,557 and $92,774 for the three months ended June 30, 2022 and 2021, respectively. The decrease in commission expenses was in line with the decrease in revenue contribution from the Company’s network marketing business.
General and administrative expenses
General and administrative (“G&A”) expenses for the three months ended June 30, 2022 amounted to $451,363, as compared to $361,862 for the three months ended June 30, 2021, an increase of $89,501 or approximately 24.7%. The increase in G&A expenses for the three months ended June 30, 2022 was mainly due to G&A expenses associated with the provision of complementary health therapies. The Company’s G&A expenses typically comprise salaries and benefits expenses, rental expenses, professional expenses and depreciation expenses.
Provision for doubtful accounts
Provision for doubtful accounts were $0 and $121,686 for the three months ended June 30, 2022 and 2021, respectively, a significant decrease of $121,686 or 100.0%. The provision for doubtful accounts was in respect of prepayments to a supplier. As the prepayments remain outstanding for over a year, the likelihood of recovering the prepayments is remote.
Other Expenses, Net
For the three months ended June 30, 2022, we recorded an amount of $97,769 as other expenses, net as compared to $229,257 as other expenses, net for the three months ended June 30, 2021, a decrease of $131,488 or approximately 57.4%.
The net other expenses of $97,769 incurred during the three months ended June 30, 2022 comprised foreign currency exchange loss of $67,417, unrealized holding loss on marketable securities of $35,219, other income of $1,341 and interest income of $3,526. The net other expense of $229,257 incurred during the three months ended June 30, 2021 comprised other income of $11,770 and unrealized holding loss on marketable securities of $241,027.
Provision for Income Taxes
The Company recorded provision for income taxes of $392 and $3,971 for the three months ended June 30, 2022 and 2021, respectively. The Company’s provision for income taxes for the three months ended June 30,2022, was in respect of its operations in Malaysia. During the three months ended June 30, 2021, we recorded income taxes from our U.S. Subpart F and GILTI taxes on the stock dividend from Greenpro Capital Corp as a result of its Spin-off of DSwiss Inc.’s shares in 2020 and income taxes on Labuan’s interest income, offset by ASL’s taxable losses that can be carried forward for 7 years, which resulted in recognition of deferred tax assets on net operating loss and income tax benefits.
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Net Loss
Net loss reduced by $237,881 from net loss of $642,225 for the three months ended June 30, 2021 to net loss of $404,344 for the three months ended June 30, 2022, mainly due to reasons as discussed above.
For the six months ended June 30, 2022 and 2021
Revenue
We generated revenue of $805,667 for the six months ended June 30, 2022 as compared to $605,566 for the six months ended June 30, 2021, representing an increase of $200,101 or approximately 33.0%. The increase in revenue was predominantly contributed by the Company’s business sector in the sales of complementary health therapies.
Cost of Revenue
Cost of revenue for the six months ended June 30, 2022 amounted to $182,814 as compared to $113,214 for the six months ended June 30, 2021, representing a significant increase of $69,600 or approximately 61.5%. As explained in the above, the significant increase in cost of revenue is due to higher cost of revenue associated with the purchases of complementary health therapies.
The Company’s cost of revenue typically comprised of freight-in, cost of goods purchased, and packing materials for the six months ended June 30, 2022 and 2021 respectively. However, there was an inventory write-down of $36,809 in addition to those mentioned above for the six months ended June 30, 2021.
Gross Profit
Gross profit for the six months ended June 30, 2022 amounted to $622,853 as compared to $492,352 for the six months ended June 30, 2021. Gross margin for the six months ended June 30, 2022 was approximately 77.3% as compared to approximately 81.3% for the six months ended June 30, 2021. As explained in the above, the decrease in gross margin was due to lower gross margin associated with the provision of complementary health therapies as compared to the Company’s network marketing business.
Operating Expenses
Our operating expenses consist of selling expenses, commission expenses, G&A expenses and provision for doubtful accounts.
Selling expenses
Selling expenses for six months ended June 30, 2022 amounted to $194,198 as compared to $216,952 for the six months ended June 30, 2021, representing a decrease of $22,754 or approximately 10.5%. As explained in the above, the lower selling expenses was mainly due to reduction in headcount.
Commission expenses
Commission expenses were $176,666 and $181,213 for the six months ended June 30, 2022 and 2021, respectively, a minor decrease of $4,547 or 2.5%. Commission expenses of the Company’s network marketing business follow a fixed sales plan, as is in line with the revenue generated from the Company’s network marketing activities.
General and administrative expenses
G&A expenses for six months ended June 30, 2022, amounted to $830,404 as compared to $724,008 for the six months ended June 30, 2021, an increase of $106,396 or approximately 14.7%. The increase in G&A expenses for the six months ended June 30, 2022 was mainly due to G & A expenses associated with the provision of complementary health therapies.
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Other Income (Expenses)
For the six months ended June 30, 2022, we recorded an amount of $115,695 as other expenses, net as compared to $214,277 other expenses, net for the six months ended June 30, 2021, representing a decrease of $98,582 or approximately 46.0%. The net other expenses of $115,695 incurred during the six months ended June 30, 2022 comprised of other income of $12,826, interest income of $8,251, unrealized holding loss on marketable securities of $52,889 and foreign currency exchange loss of $83,883. The net other expenses of $214,277 incurred during the six months ended June 30, 2021 comprised of other expenses of $48,546 and unrealized holding loss on marketable securities of $165,731.
Provision for Income Taxes
The Company recorded provision for income taxes $8,680 and $10,091 for the six months ended June 30, 2022 and 2021, respectively. The Company’s provision for income taxes for the six months ended June 30,2022, was in respect of its operations in Malaysia. During the six months ended June 30, 2021, we recorded income taxes from our U.S. Subpart F and GILTI taxes on the stock dividend from Greenpro Capital Corp as a result of its Spin-off of DSwiss Inc.’s shares in 2020 and income taxes on Labuan’s interest income, offset by ASL’s taxable losses that can be carried forward for 7 years, which resulted in recognition of deferred tax assets on net operating loss and income tax benefits.
Net Loss
Net loss decreased by $273,085 from net loss of $975,875 for the six months ended June 30, 2021 to $702,790 for the six months ended June 30, 2022, mainly due to reasons as discussed above.
Liquidity and Capital Resources
On March 11, 2020, the World Health Organization or WHO declared the corona virus or COVID-19 a pandemic. To help counter the transmission of COVID-19, the government of Malaysia initiated movement control orders (“MCO”), the first effective March 18, 2020. The MCO had resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities in Malaysia. The first MCO was extended three times, each for a two-weeks period, until May 12, 2020. On May 13, 2020, the MCO was eased to a Conditional Movement Control Order (“CMCO”) where most business sectors were allowed to operate under strict rules and Standard Operating Procedures mandated by the government of Malaysia. The CMCO was further relaxed, and on June 8, 2020, Malaysia moved into the Recovery Movement Control Order (“RMCO”). Due to a resurgence of COVID-19, CMCO was reimposed in the state of Sabah, Selangor, Kuala Lumpur and Putrajaya effective October 14, 2020. On November 7, 2020, the CMCO was extended to a wider geographical area to include another six states in the country. Effectively, ten of thirteen states in Malaysia were placed under CMCO with the exceptions of Perlis, Pahang and Kelantan. On January 1, 2021, the Government of Malaysia extended the Recovery Movement Control Order (“RMCO”) through March 31, 2021. On January 12, 2021, the Malaysian government declared a state of emergency nationwide to combat COVID-19. Intermittent lockdowns were imposed in various states and districts in the country.
On March 5, 2021, lockdowns in most part of the country was eased to a CMCO, nevertheless, COVID-19 cases in the country continue to rise. On May 12, 2021, Malaysia was again put under a full lockdown nationwide, until the earlier of (i) daily COVID-19 cases infection of the country fall below 4,000; (ii) intensive Unit Care, or ICU, wards start operating at a moderate level; or (iii) 10% of the Malaysian population is fully vaccinated. The country is administering over 400,000 doses of COVID-19 vaccines daily. On July 17, 2021, the full lockdown was slightly eased as 13.9% of the Malaysian population was fully vaccinated, with another 30% having received at least one dose of the vaccine. The COVID-19 situation in the country showed no sign of abating. Kuala Lumpur and Selangor remained the epicenter of the latest wave of infections. Total COVID-19 cases in the country surpassed the one million mark on July 25, 2021, and daily cases hit a record high of 24,599 on August 26, 2021. Despite the deteriorating COVID-19 state, the government lifted Kuala Lumpur from Enhanced Movement Control Order (“EMCO”) ahead of schedule and ended the nationwide state of emergency on August 1, 2021. Parliament met for the first time this year on July 26, 2021. Malaysia pressed on with its National COVID-19 Immunization Plan, fast inoculating its residents. COVID-19 infection started to drop below the 10,000 mark daily since beginning October 3, 2021. Effective October 11, 2021, interstate and international travel restrictions were lifted for residents who had been fully vaccinated against COVID-19 as the country achieved its target of inoculating 90% of its adult population.
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Malaysia officially transitioned to the endemic phase of COVID-19 effective April 1, 2022. Restrictions on businesses and people are minimal. Meanwhile the government continues to encourage inoculation for those between the ages of 5 to 11 years and its adolescent group which comprised those between the ages 12 to 17. Adults who have been fully vaccinated, i.e. received two doses of the COVID-19 vaccine are encouraged to take booster shots.
Substantially all of our revenues are concentrated in Malaysia. Consequently, our results of operations will likely be adversely, and may be materially, affected, to the extent that the COVID-19 or any other epidemic harms the Malaysia and global economy in general. Any potential impact to our results will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity of the COVID-19 and the actions taken by government authorities and other entities to contain the COVID-19 or treat its impact, almost all of which are beyond our control. Potential impacts include, but are not limited to, the following:
| ● | temporary closure of offices, travel restrictions, disruption or suspension of supplies, our customers may be negatively impacted financially resulting in which the demand for our products may be adversely affected; | |
| ● | we may have to provide significant sales incentives to our customers during the outbreak, which may in turn materially adversely affect our financial condition and operating results; and | |
| ● | any disruption of our supply chain, logistics providers or customers could adversely impact our business and results of operations, including causing us or our suppliers to cease manufacturing for a period of time or materially delay delivery to our customers, which may also lead to loss of our customers. |
Although some of the countries from which our products are sourced are experiencing lockdowns, industries involve in the provision of food especially health products and pharmaceuticals are normally exempted. We may experience slight delay in products delivery lead time but barring unforeseen circumstances, the setback should be temporary.
We are currently operating primarily in Malaysia and anticipate expanding into the Asian markets in the future, with a particular focus, at least initially, on expanding into Thailand, Indonesia and Taiwan. We will explore expansion via e-commerce. When the pandemic has subsided or is over and restrictions on travelling between nations are uplifted, we will set up offices in the countries in which we operate to better service our customers.
Because of the uncertainty surrounding the COVID-19 outbreak, the financial impact related to the outbreak of and response to the COVID-19 cannot be reasonably estimated at this time. There is no guarantee that our total revenues will grow or remain at the similar level year over year in 2022 and beyond.
The Company entered into a share forfeiture agreement with Mr. How Kok Choong, the CEO and director of the Company on January 20, 2022 in which Mr. How agreed to forfeit 215,008,035 shares of common stock of the Company. The forfeiture of shares has no effect on the Company’s liquidity and capital resources.
As of June 30, 2022, we had working capital of $1,753,170, consisting of cash in bank of $666,779 and time deposits of $1,134,542 as compared to working capital of $2,599,281 consisting of cash in bank of $554,864 and time deposits of $1,975,347 as of December 31, 2021.
Accumulated deficit of the company was $3,972,684 and $3,258,687, as of June 30, 2022 and December 31, 2021, respectively. In assessing our liquidity and going concern, management is projecting that the company’s revenue will revert to pre-pandemic level and growth generated from the Company’s foray in other sectors of the health and wellness industry such as the provision of complementary health therapies business, etc., generating sufficient cash therefrom to cover our operating expenses.
If we are unable to generate sufficient cash flow within the normal operating cycle of a twelve-month period to pay for the Company’s future payment obligations, we may have to consider supplementing our available sources of funds through the following avenues:
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| ● | other available sources of financing from Malaysia banks and other financial institutions; and | |
| ● | financial support from our related parties and shareholders. |
Based on the above initiatives, management is of the opinion that the company should have sufficient funds to meet its working capital requirements and debt obligations as they become due in the foreseeable future from the date of issuance of this Form 10-Q. However, there is no assurance that management will be successful in its plans.
The following summarizes the key components of our cash flows for the six months ended June 30, 2022 and 2021:
| For the six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Net cash used in operating activities | $ | (493,326 | ) | $ | (134,748 | ) | ||
| Net cash used in investing activities | (750 | ) | (1,220 | ) | ||||
| Net cash used in financing activities | (178,926 | ) | (16,588 | ) | ||||
| Effect of exchange rate on cash and cash equivalents | (117,409 | ) | (64,244 | ) | ||||
| Net change in cash and cash equivalents | $ | (790,411 | ) | $ | (216,800 | ) | ||
Operating activities
Net cash used in operating activities for the six months ended June 30, 2022 was $493,326 and were mainly comprised of the net loss of $702,790, increase in accounts receivables of $214, decrease in customer deposits of $175,936, payment of operating lease liabilities of $75,200 and decrease in other payables and accrued liabilities (including related party) of $164,056. The net cash used in operating activities was mainly offset by the non-cash depreciation and amortization expense of $37,558, amortization of operating right-of-use assets of $75,241, unrealized holding loss on marketable securities of $52,889, deferred tax provision of $2,401, decrease in amount due from related parties of $2,201, the decrease in inventories of $28,790, refund in prepaid taxes of $296,219, decrease in prepayments and deposits of $102,099, increase in accounts payable (including related party) of $22,211 and increase in income tax payables of $5,261.
Net cash used in operating activities for the six months ended June 30, 2021 was $134,748 and were mainly comprised of the net loss of $975,875, deferred tax benefit of $53,299 increase in prepayments and deposits of $15,120, the decrease in customer deposits of $60,618, the payment of operating lease liabilities of $74,399 and the decrease in other payables and accrued liabilities of $129,355. The net cash used in operating activities was mainly offset by the non-cash depreciation and amortization expense of $39,185, amortization of operating right-of-use assets of $75,387, unrealized holding loss on marketable securities of $165,731, inventories write-down of $36,636, provision for doubtful accounts of $121,686, the decrease of accounts receivables of $169,393, the decrease in inventories of $80,969, the refund in prepaid taxes of $448,054 and the increase in income tax payables of $36,877.
Investing activities
Net cash used in investing activities for the six months ended June 30, 2022 was $750, which was in respect of purchase of equipment.
Net cash used in investing activities for the six months ended June 30, 2021 was $1,220, which was in respect of purchase of equipment.
Financing activities
Deferred offering cost made up the entire net cash used in financing activities for the six months ended June 30, 2022 of $178,926.
Net cash used in financing activities for the six months ended June 30, 2021 was $16,588 which were mainly comprised of payment of deferred offering cost of $14,160 and advances to related parties of $2,428.
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Credit Facilities
We do not have any credit facilities or other access to bank credit.
Off-Balance Sheet Arrangements
As of June 30, 2022, we have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.
Critical Accounting Polices
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s consolidated financial statements include allowance for doubtful accounts, allowance for inventories obsolescence, useful lives of property and equipment, useful lives of intangible assets, impairment of long-lived assets, allowance for deferred tax assets, operating right-of-use assets, operating lease liabilities and uncertain tax position and impairment of investment in non-marketable securities. Actual results could differ from these estimates.
Revenue recognition
The Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (ASC Topic 606) using the modified retrospective method for contracts that were not completed as of June 30, 2019. This did not result in an adjustment to retained earnings upon adoption of this new guidance as the Company’s revenue was recognized based on the amount of consideration expected to receive in exchange for satisfying the performance obligations.
The core principle underlying the revenue recognition of this ASU allows the Company to recognize - revenue that represents the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company’s revenue streams are recognized at a point in time for the Company’s sale of health and wellness products.
The Company accounts for a contract with a customer when the contract is committed in writing, the rights of the parties, including payment terms, are identified, the contract has commercial substance and consideration is probable of substantially collection.
Sales of Health and Wellness products
- Performance obligations satisfied at a point in time
The Company derives its revenues from sales contracts with its customers with revenues being recognized when control of the health and wellness products are transferred to its customer at the Company’s office or shipment of the goods. The revenue is recorded net of estimated discounts and return allowances. Products are given 60 days for returns or exchanges from the date of purchase. Historically, there were insignificant sales returns.
The Company also sells coupons to its customers for cash at a discounted price of the value of the coupons. Customers can apply the value of the coupons for a reduction in the transaction price paid by the customer are recorded as a reduction of sales. The cash proceeds resulted from the sale of coupons are recognized as customer deposits until the coupons to be applied as a reduction of the health and wellness products transaction price upon such sales transactions occurred. The Company’s coupons have a validity period of six months. If the Company’s customers did not utilize the coupons after six months, the Company would recognize the forfeiture of the originated sales value of the coupons as net revenues.
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Sales of Health and Wellness services
- Performance obligations satisfied at a point in time
The Company carries out its Wellness program, where the Company’s products are bundled with health screening test and a health camp program. The health screening test and the health camp programs are considered as separate performance obligations. The promises to deliver the health screening test report and the attendance at the health camp are separately identifiable, which are evidenced by the fact that the Company provides separate services of delivering the health screening test report and allowing admission of the customers to attend the health camp. The Company derives its revenues from sales contracts with its customers with revenues being recognized when the test reports are completed and delivered to its customers during the consultation section in person. The Company also separately derives its revenues from sales contracts with its customers with revenues being recognized when the health camp program was completed in the final day of the health camp.
Fair value of financial instruments
The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company.
The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:
| ● | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. | |
| ● | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value. |
Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at face value or cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.
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. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company, or EGC, and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
In November 2019, the FASB issued ASU No. 2019-10, which to update the effective date of ASU No. 2016-13 for private companies, not-for-profit organizations and certain smaller reporting companies applying for credit losses, leases, and hedging standard. The new effective date for these preparers is for fiscal years beginning after December 15, 2022. ASU 2019-05 is effective for the Company for annual and interim reporting periods beginning January 1, 2023 as the Company is qualified as a smaller reporting company. The Company is currently evaluating the impact ASU 2019-05 may have on its unaudited condensed consolidated financial statements.
Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have a material impact on the consolidated financial position, statements of operations and cash flows.
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ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign exchange risk. Substantially most of our revenues are denominated in the Malaysian Ringgit while most of our expenses are denominated in U.S. dollar, Malaysian Ringgit and Hong Kong Dollar. We do not believe that we currently have any significant direct foreign exchange risk and have not hedged exposures denominated in foreign currencies or any other derivative financial instruments. Although in general, our exposure to foreign exchange risks should be limited, the value of an investment in our Common Stock may be affected by the foreign exchange rate between U.S. dollar and Malaysian Ringgit; and U.S. dollar and Hong Kong Dollar because the value of our business is effectively denominated in Malaysian Ringgit and Hong Kong Dollar, while the Common Stock is traded in U.S. dollars.
Credit risk. Financial instruments that are potentially subject to credit risk consist principally of accounts receivable. The Company believes the concentration of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.
ITEM 4 CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Report, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures(as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on the foregoing evaluation, our chief executive officer and chief financial officer concluded that, as of June 30, 2022, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.
Internal Control Over Financial Reporting
Our management, including our chief executive officer and chief financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
| ● | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; | |
| ● | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and | |
| ● | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
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As of June 30, 2022, our management, including our chief executive officer and chief financial officer, assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on such evaluation, the Company’s management, including our chief executive and chief financial officer, concluded that, during the period covered by this Report, internal controls and procedures over financial reporting were not effective. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
Identified Material Weakness
A material weakness in internal control over financial reporting is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.
Management, including our chief executive officer and chief financial officer identified the following material weakness during its assessment of internal controls over financial reporting as of June 30, 2022:
(i) insufficient full-time personnel with appropriate levels of accounting knowledge and experience to monitor the daily recording of transactions, address complex U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP; (ii) lack of a functional internal audit department or personnel that monitors the consistencies of the preventive internal control procedures and lack of adequate policies and procedures in internal audit function to ensure that the Company’s policies and procedures have been carried out as planned; (iii) lack of adequate segregation of duties and effective risk assessment, which in turn may cause the Company to face the likelihood of fraud or theft, due to poor oversight, governance and review to detect errors; (iv) we lack of proper procedures developed for system change management policies. Change management policies and procedures have not been developed. Critical change management control processes and procedures, such as change request and approval, periodic status reporting, user testing and acceptance, post-implementation review, etc., were either not performed or formally documented; (v) we lack of the following internal control procedures in relation of Third-Party (Service Organization) Vendor Management – (a) service evaluation and qualification assessment of third-party vendors were not performed for the period ended June 30, 2022 and (b) Management was not able to provide evidence of their review of their service providers’ SOC 1 and SOC 2, or ISO 27001 certificate reports and therefore unable to provide evidence of their review of the physical security and environmental controls in place at IP Serverone cloud server (which the Company’s financial system is hosted on; (vi) we lack of the following internal control procedures in relation of User Account Management – (a) Evidence relating to the authorization of database administrator user accounts and access was not preserved for the MLM System during the period ended June 30, 2022 and (b) Evidence relating to periodic recertification of MLM and SQL Finance System end user are privileged accounts and related access rights were preserved during the period ended June 30, 2022; (vii) we lack of the following internal control procedures in relation of Audit Logs and Segregation of Duty (“SOD”) Management – (a) MLM-DB level system/audit logs were not preserved. Procedures for periodic review and analysis of application (“AP”), operating system (“OS”), and database (“DB”) level audit logs were not established and performed and (b) An SOD conflict was identified, where administrative rights to AP, OS and DB levels of the MLM system were assigned to the CTO and (viii) we lack of qualified person to be able to provide the tax provision for the U.S. income taxes in connection with the Subpart F and GILTI taxable income.
Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.
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Management’s Remediation Initiatives
In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we will prepare written policies and procedures for accounting and financial reporting with respect to the requirements and application of both U.S. GAAP and SEC guidelines, to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity and debt transactions.
To further strengthen the Company’s internal controls, we plan to initiate the following measures going forward:
| 1. | We intend to establish an internal audit function with assessment of Sarbanes-Oxley compliance requirements and improvement of overall internal control. |
| 2. | Once we hire additional employees, we intend to initiate a comprehensive training program and development plan to provide ongoing company-wide trainings regarding internal control and requirements of U.S. GAAP financial statements and related disclosures, with particular emphasis on our accounting staff. |
| 3. | We are seeking a U.S. tax professional to assist in the preparation of the Subpart F and GILTI tax provisions. |
We anticipate that these initiatives will be at least partially, if not fully, implemented by the end of fiscal year 2022.
Changes in Internal Control over Financial Reporting:
There were no changes in our internal control over financial reporting during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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We know of no materials, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any beneficial shareholder are an adverse party or has a material interest averse to us.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
None.
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| Exhibit No. | Description | |
| 31.1 | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer* | |
| 32.1 | Section 1350 Certification of principal executive officer * | |
| 101.INS | Inline XBRL Instance Document* | |
| 101.SCH | Inline XBRL Schema Document* | |
| 101.CAL | Inline XBRL Calculation Linkbase Document* | |
| 101.DEF | Inline XBRL Definition Linkbase Document* | |
| 101.LAB | Inline XBRL Label Linkbase Document* | |
| 101.PRE | Inline XBRL Presentation Linkbase Document* | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| AGAPE ATP CORPORATION | ||
| (Name of Registrant) | ||
| Date: August 11, 2022 | ||
| By: | /s/ How Kok Choong | |
| Title: | Chief Executive Officer, President, Director, Secretary and Treasurer | |
| (Principal Executive Officer and Principal Financial Officer) | ||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| AGAPE ATP CORPORATION | ||
| (Name of Registrant) | ||
| Date: August 11, 2022 | ||
| By: | /s/ Andrew Lee Kam Fan | |
| Title: | Chief Financial Officer, | |
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| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
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| 8/31/23 | ||||
| 5/31/23 | ||||
| 1/1/23 | ||||
| 12/31/22 | ||||
| 12/15/22 | ||||
| Filed on: | 8/11/22 | |||
| 8/9/22 | ||||
| 7/28/22 | ||||
| 7/19/22 | ||||
| For Period end: | 6/30/22 | |||
| 4/1/22 | ||||
| 3/31/22 | 10-Q | |||
| 3/28/22 | 10-K | |||
| 1/20/22 | ||||
| 12/31/21 | 10-K, 10-K/A | |||
| 11/11/21 | ||||
| 10/11/21 | ||||
| 10/3/21 | ||||
| 9/27/21 | ||||
| 8/26/21 | ||||
| 8/1/21 | ||||
| 7/26/21 | ||||
| 7/25/21 | ||||
| 7/17/21 | ||||
| 6/30/21 | 10-Q | |||
| 6/11/21 | ||||
| 5/31/21 | ||||
| 5/12/21 | ||||
| 4/21/21 | ||||
| 3/31/21 | 10-K, 10-Q | |||
| 3/5/21 | ||||
| 2/16/21 | ||||
| 1/12/21 | ||||
| 1/1/21 | ||||
| 12/31/20 | 10-K | |||
| 12/9/20 | ||||
| 11/7/20 | ||||
| 11/3/20 | ||||
| 10/14/20 | ||||
| 9/11/20 | ||||
| 6/8/20 | ||||
| 5/13/20 | ||||
| 5/12/20 | 8-K, 8-K/A | |||
| 5/8/20 | ||||
| 4/29/20 | ||||
| 4/1/20 | ||||
| 3/18/20 | ||||
| 3/11/20 | ||||
| 6/30/19 | 10-K, 10-K/A | |||
| 4/3/19 | ||||
| 1/1/19 | ||||
| 10/16/18 | ||||
| 7/30/18 | ||||
| 5/17/18 | ||||
| 6/1/17 | ||||
| 3/6/17 | ||||
| 6/1/16 | ||||
| 3/4/04 | ||||
| 8/8/03 | ||||
| List all Filings | ||||