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 March 31, 2022 and 2021
Revenue
We generated revenue of $408,960 for the three months ended March 31, 2022 as
compared to $301,780 for the three months ended March 31, 2021, representing an
increase of $107,180 or approximately 35.5%. It is to be noted that these are
periods under the confines of the COVID-19 pandemic. The Company made progress
in revenue generating as Malaysia, where the Company's operations predominantly
resides, is moving to a COVID-19 endemic phase with minimal restrictions on
businesses and people movements in the country.
Cost of Revenue
Cost of revenue for the three months ended March 31, 2021 amounted to $73,431 as
compared to $77,591 for the three months ended March 31, 2021, representing a
decrease of $4,160 or approximately 5.4%.
The cost of revenue for the three months ended March 31, 2022, comprised of
freight-in, cost of goods purchased, and packing materials. The cost of revenue
for the three months ended March 31, 2021, comprised of freight-in, cost of
goods purchased, packing materials and inventory write-down of $36,809.
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Gross Profit
Gross profit for the three months ended March 31, 2022 amounted to $335,529,
representing a gross margin of 82.0% as compared to $224,189 for the three
months ended March 31, 2021, equivalent to a gross margin of 74.3%. The increase
in gross margin was due to a one-time inventory write-down of $36,809 in the
three months ended March 31, 2021. There was no inventory write-down in the
three months ended March 31, 2022.
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 March 31, 2022 amounted to $114,611
as compared to $116,114 for the three months ended March 31, 2021, a minor
reduction of $1,503 or approximately 1.3%. The Company's selling expenses
typically comprise salaries and benefits expenses which makes up as much as
approximately 62% to 70% of total selling expenses, credit card processing fees
and promotional expenses.
Commission expenses
Commission expenses were $114,109 and $88,439 for the three months ended March
31, 2022 and 2021, respectively. The increase in commission expenses was in line
with the increase in revenue.
General and administrative expenses
General and administrative ("G&A") expenses for the three months ended March 31,
2022 amounted to $379,041, as compared to $362,146 for the three months ended
March 31, 2021, an increase of $16,895 or approximately 4.7%. The Company's G&A
expenses typically comprise salaries and benefits expenses, rental expenses,
professional expenses and depreciation expenses. The increase in G&A expenses
for the three months ended March 31, 2022 was mainly due to increase in salaries
and benefits expenses for management and administrative staff.
Other Income (Expenses), Net
For the three months ended March 31, 2022, we recorded an amount of $17,926 as
other expenses, net as compared to $14,980 as other income, net for the three
months ended March 31, 2021, a change of $32,906 or approximately 219.7%.
The net other expenses of $17,926 incurred during the three months ended March
31, 2022 comprised foreign currency exchange loss of $16,466, unrealized holding
loss on marketable securities of $17,670, other income of $4,725 and interest
income of $11,485. The net other income of $14,980 generated during the three
months ended March 31, 2021 comprised foreign currency exchange loss of $72,128,
other income of $4,457, interest income of $7,355, and unrealized holding gain
on marketable securities of $75,296.
Provision for Income Taxes
The Company recorded provision for income taxes of $8,288 and $6,120 for the
three months ended March 31, 2022 and 2021, respectively. The Company's
provision for income taxes for the three months ended March 31,2022, was in
respect of its operations in Malaysia. During the three months ended March 31,
2021, we did not generate any taxable income that is subjected to a unified 24%
income tax rate in Malaysia. The tax provision was attributable to the under
accrual of tax from year ended December 31, 2020.
Net Loss
Net loss reduced by $35,204 from net loss of $333,650 for the three months ended
March 31, 2021 to net loss of $298,446 for the three months ended March 31,
2022, mainly due to reasons as discussed above.
5
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.
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.
6
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 March 31, 2022, we had working capital of $2,328,550, consisting of cash
in bank of $850,435 and time deposits of $1,582,151 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 $3,557,784 and $3,258,687, as of March
31, 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, 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:
? 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 three
months ended March 31, 2022 and 2021:
For the three months ended March 31,
2022 2021
Net cash used in operating activities $ (151,122 ) $ (129,297 )
Net cash used in financing activities - (6,423 )
Effect of exchange rate on cash and cash equivalents (4,835 ) (27,322 )
Net change in cash and cash equivalents $ (155,957 ) $ (163,042 )
7
Operating activities
Net cash used in operating activities for the three months ended March 31, 2022
was $151,122, comprised of net loss of $298,446, increase in accounts
receivables of $3,363, increase in inventories of $4,429, decrease in accounts
payable of $93, decrease in customer deposits of $173,543, decrease in other
payables and accrued liabilities of $119,291, payment of operating lease
liabilities of $38,987, offset by the non-cash depreciation and amortization
expense of $19,165, amortization of operating right-of-use assets of $39,079,
the non-cash expenses on unrealized holding loss on marketable securities of
$17,670, deferred tax provision of $7,832, decrease in amount due from related
parties of $2,207, decrease in prepaid taxes of $319,946, decrease in
prepayments and deposits of $53,176, increase in accounts payable - a related
party of $8,281, increase in other payable - a related party of $19,341 and
increase in income tax payable of $333.
Net cash used in operating activities for the three months ended March 31, 2021
was $127,297, comprised of net loss of $333,650, the non-cash income on
unrealized holding gain on marketable securities of $75,296, deferred tax
benefit of $20,604, decrease in customer deposits of $50,353, decrease in other
payables and accrued liabilities of $67,839, payment of operating lease
liabilities of $37,074, offset by the non-cash depreciation and amortization
expense of $19,680, amortization of operating right-of-use assets of $37,606,
inventories write-down of $36,809, decrease in accounts receivables of $172,739,
increase in inventories of $9,218, decrease in prepaid taxes of $174,705 and
decrease in prepayments and deposits of $4,762.
Financing activities
There were no financing activities for the three months ended March 31, 2022.
Net cash used in financing activities for the three months ended March 31, 2021,
solely comprised of payment of deferred offering cost of $6,423.
Credit Facilities
We do not have any credit facilities or other access to bank credit.
Off-Balance Sheet Arrangements
As of March 31, 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.
8
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.
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.
9
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, accounting
pronouncements and do not believe the future adoption of such any pronouncements
may be expected to cause a material impact on its financial condition or the
results of its operations, as follow:
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.
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AGAPE ATP CORPORATION 
