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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For The Quarterly Period Ended June 30, 2023

 

or

 

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 333-220144

 

AGAPE ATP CORPORATION

(Exact name of registrant issuer as specified in its charter)

 

Nevada   36-4838886

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1705 - 1708, Level 17, Tower 2, Faber Tower, Jalan Desa Bahagia,

Taman Desa, 58100 Kuala Lumpur, Malaysia.

(Address of principal executive offices, including zip code)

 

Registrant’s phone number, including area code (60) 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.

 

Yes ☒ No ☐

 

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).

 

Yes ☒ No ☐

 

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 ☐ Non-accelerated Filer ☒ Smaller reporting company

Emerging growth company

 

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. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ☐ No

 

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 11, 2023
Common Stock, $0.0001 par value   75,452,012

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
PART I FINANCIAL INFORMATION  
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:  
  Unaudited Condensed Consolidated Balance Sheets F-1
  Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss F-2
  Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity F-3
  Unaudited Condensed Consolidated Statements of Cash Flows F-4
  Notes to Unaudited Condensed Consolidated Financial Statements F-5 - F-33
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 14
ITEM 4. CONTROLS AND PROCEDURES 14
PART II OTHER INFORMATION  
ITEM 1 LEGAL PROCEEDINGS 17
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 17
ITEM 3 DEFAULTS UPON SENIOR SECURITIES 17
ITEM 4 MINE SAFETY DISCLOSURES 17
ITEM 5 OTHER INFORMATION 17
ITEM 6 EXHIBITS 17
  SIGNATURES 18

 

2

 

 

PART I FINANCIAL INFORMATION

 

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

 

AGAPE ATP CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

  

June 30, 2023

  

December 31, 2022

 
   As of 
  

June 30, 2023

  

December 31, 2022

 
ASSETS        
CURRENT ASSETS          
Cash and cash equivalents (Included $1,146 and $1,609 in the consolidated VIE that can be used only to settle obligations of the consolidated VIE as of June 30, 2023 and December 31, 2022, respectively.)  $653,754   $1,438,430 
Accounts receivable   5,303    2,826 
Amount due from related parties   1,417    10,534 
Inventories   66,056    46,277 
Prepaid taxes (Included $1,643 and $1,741 in the consolidated VIE that can be used only to settle obligations of the consolidated VIE as of June 30, 2023 and December 31, 2022, respectively.)   91,968    339,367 
Prepayments and deposits (Included $28 and $0 in the consolidated VIE that can be used only to settle obligations of the consolidated VIE as of June 30, 2023 and December 31, 2022, respectively.)   122,938    191,100 
Total Current Assets   941,436    2,028,534 
           
OTHER ASSETS          
Property and equipment, net   105,674    142,149 
Intangible assets, net   19,728    24,044 
Operating right-of-use assets   284,670    81,133 
Investment in marketable securities   25,331    16,687 
Deferred offering costs   522,062    499,202 
Deferred tax assets   6,382    - 
Total other assets   963,847    763,215 
           
TOTAL ASSETS  $1,905,283   $2,791,749 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
CURRENT LIABILITIES          
Accounts payable  $50,800   $28,833 
Accounts payable – related parties   19,605    25,611 
Customer deposits   312,189    363,018 
Operating lease liabilities   98,688    82,708 
Other payables and accrued liabilities ($1,028 and $1,090 are included in the consolidated VIE that are without recourse to the credit of Agape ATP Corporation as of June 30, 2023 and December 31, 2022, respectively.)   475,667    713,277 
Other payable – related parties   1,030    4,880 
Income tax payable   10,350    10,968 
Total Current Liabilities   968,329    1,229,295 
           
NON-CURRENT LIABILITIES          
Operating lease liabilities   186,300    - 
Total Non-current Liabilities   186,300    - 
           
TOTAL LIABILITIES  $1,154,629   $1,229,295 
           
STOCKHOLDERS’ EQUITY          
Preferred stock, $0.0001 par value; 200,000,000 shares authorized; None issued and outstanding   -    - 
Common Stock, par value $0.0001; 1,000,000,000 shares authorized, 75,452,012 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively.   7,545    7,545 
Additional paid in capital   6,470,716    6,470,716 
Accumulated deficit   (5,746,112)   (4,945,586)
Accumulated other comprehensive income   11,612    9,266 
TOTAL AGAPE CORPORATION STOCKHOLDERS’ EQUITY   743,761    1,541,941 
           
NON-CONTROLLING INTERESTS   6,893    20,513 
           
TOTAL EQUITY   750,654    1,562,454 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $1,905,283   $2,791,749 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

F-1

 

 

AGAPE ATP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

   2023   2022   2023   2022 
   For the three months ended   For the six months ended 
   June 30,   June 30, 
   2023   2022   2023   2022 
                 
REVENUE  $303,935   $396,707   $684,703   $805,667 
                     
COST OF REVENUE   (107,931)   (109,383)   (236,289)   (182,814)
                     
GROSS PROFIT   196,004    287,324    448,414    622,853 
                     
SELLING   (64,126)   (79,587)   (140,224)   (194,198)
COMMISSION   (21,942)   (62,557)   (55,884)   (176,666)
GENERAL AND ADMINISTRATIVE   (469,469)   (451,363)   (1,065,723)   (830,404)
TOTAL OPERATING EXPENSES   (555,537)   (593,507)   (1,261,831)   (1,201,268)
                     
LOSS FROM OPERATIONS   (359,533)   (306,183)   (813,417)   (578,415)
                     
OTHER (EXPENSES) INCOME                    
Other income, net   4,134    1,341    12,500    12,826 
Interest income   1,634    3,526    4,817    8,251 
Unrealized holding gain (loss) on marketable securities   3,790    (35,219)   8,710    (52,889)
Gain on disposal of property and equipment   1,787    -    1,787    - 
Exchange loss, net   (33,700)   (67,417)   (34,576)   (83,883)
TOTAL OTHER EXPENSES, NET   (22,355)   (97,769)   (6,762)   (115,695)
                     
LOSS BEFORE INCOME TAXES   (381,888)   (403,952)   (820,179)   (694,110)
                     
BENEFIT OF (PROVISION FOR) INCOME TAXES   2,439    (392)   6,655    (8,680)
                     
NET LOSS   (379,449)   (404,344)   (813,524)   (702,790)
                     
LESS: NET (LOSS) INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS   (4,763)   10,556    (12,998)   11,207 
                     
NET LOSS ATTRIBUTABLE TO AGAPE ATP CORPORATION  $(374,686)  $(414,900)  $(800,526)  $(713,997)
                     
NET LOSS  $(379,449)  $(404,344)  $(813,524)  $(702,790)
                     
OTHER COMPREHENSIVE INCOME (LOSS)                    
Foreign currency translation adjustment   269    (61,156)   2,346    (73,179)
                     
TOTAL COMPREHENSIVE LOSS   (379,180)   (465,500)   (811,178)   (775,969)
                     
Less: Comprehensive loss attributable to non-controlling interests   (5,401)   (271)   (13,619)   (270)
                     
COMPREHENSIVE LOSS ATTRIBUTABLE TO AGAPE ATP CORPORATION  $(373,779)  $(465,229)  $(797,559)  $(775,699)
                     
LOSS PER SHARE                    
Basic and diluted  $(0.00)  $(0.01)  $(0.01)  $(0.01)
                     
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                    
Basic and diluted   75,452,012    75,452,012    75,452,012    100,397,696 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

F-2

 

 

AGAPE ATP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF

CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

  

Number of

shares

  

Par

value

  

PAID IN

CAPITAL

  

ACCUMULATED

DEFICIT

  

COMPREHENSIVE

INCOME

  

CONTROLLING

INTERESTS

  

STOCKHOLDERS’

EQUITY

 
   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   290,460,047   $29,046   $6,449,215   $(3,258,687)  $93,398   $(336)  $3,312,636 
Forfeiture of common stock   (215,008,035)   (21,501)   21,501    -    -    -    - 
Net loss   -    -    -    (299,097)   -    651    (298,446)
Foreign currency translation adjustment   -    -    -    -    (12,023)   1    (12,022)
Balance as of March 31, 2022   75,452,012   $7,545   $6,470,716   $(3,557,784)  $81,375   $316   $3,002,168 
Net loss   -    -    -    (414,900)   -    10,556    (404,344)
Foreign currency translation adjustment   -    -    -    -    (61,156)   (271)   (61,427)
Balance as of June 30, 2022   75,452,012   $7,545   $6,470,716   $(3,972,684)  $20,219   $10,601   $2,536,397 

 

    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, 2022     75,452,012     $     7,545     $ 6,470,716     $ (4,945,586 )   $ 9,266     $ 20,513     $ 1,562,454  
Net loss     -       -       -       (425,840 )     -       (8,235 )     (434,075 )
Foreign currency translation adjustment     -       -       -       -       2,077       17       2,094  
Balance as of March 31, 2023     75,452,012     $ 7,545     $ 6,470,716     $ (5,371,426 )   $ 11,343     $ 12,295     $ 1,130,473  
Net loss     -       -       -       (374,686 )     -       (4,763 )     (379,449 )
Foreign currency translation adjustment     -       -       -       -       269       (639 )     (370 )
Balance as of June 30, 2023     75,452,012     $ 7,545     $ 6,470,716     $ (5,746,112 )   $ 11,612     $ 6,893     $ 750,654  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

F-3

 

 

AGAPE ATP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”)

 

   2023   2022 
  

For the six months ended

June 30,

 
   2023   2022 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(813,524)  $(702,790)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation   36,177    36,661 
Amortization   3,087    897 
Amortization of operating right-of-use assets   78,333    75,241 
Unrealized holding (gain) loss on marketable securities   (8,710)   52,889 
Deferred tax (benefit) provision   (6,655)   - 
Changes in operating assets and liabilities:          
Accounts receivables   (2,751)   (214)
Amount due from related parties   (209)   2,201 
Inventories   (23,013)   28,790 
Prepaid taxes   238,064    296,219 
Prepayments and deposits   80,651    102,099 
Accounts payable   24,608    7,804 
Accounts payable –related parties   (4,758)   14,407 
Customer deposits   (31,655)   (175,936)
Operating lease liabilities   (79,551)   (75,200)
Other payables and accrued liabilities   (228,812)   (166,137)
Other payable – related parties   (3,457)   2,081 
Income tax payable   -    5,261 
Net cash used in operating activities   (742,175)   (495,727)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of equipment   (6,499)   (750)
Net cash used in investing activities   (6,499)   (750)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Deferred offering costs   (22,861)   (178,926)
Net cash used in financing activities   (22,861)   (178,926)
           
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS   (13,141)   (115,008)
           
DECREASE IN CASH AND CASH EQUIVALENTS   (784,676)   (790,411)
           
CASH AND CASH EQUIVALENTS, beginning of period   1,438,430    2,597,848 
           
CASH AND CASH EQUIVALENTS, end of period  $653,754   $1,807,437 
           
SUPPLEMENTAL CASH FLOWS INFORMATION          
Income taxes paid  $20,849   $77,117 
           
SUPPLEMENTAL NON-CASH FLOWS INFORMATION          
Increase in right-of-use assets and lease liabilities due to lease renewal  $283,220   $- 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

F-4

 

 

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

 

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 (“AATP LB”), 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 (“AATP HK”), 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.

 

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.

 

Details of the Company’s subsidiaries:

   Subsidiary company name  Place and date of incorporation  Particulars of issued capital  Principal activities  Proportional of ownership interest and voting power held 
                 
1.  Agape ATP Corporation  Labuan,
March 6, 2017
  100 shares of ordinary share of US$1 each  Investment holding   100%
                  
2.  Agape ATP International Holding Limited  Hong Kong,
June 1, 2017
  1,000,000 shares of ordinary share of HK$1 each  Wholesaling of health and wellness products; and health solution advisory services   100%
                  
3.  Agape Superior Living Sdn. Bhd.  Malaysia,
August 8, 2003
  9,590,598 shares of ordinary share of RM1 each  Health and wellness products and health solution advisory services via network marketing   99.99%
                  
4.  Agape S.E.A. Sdn. Bhd.  Malaysia,
March 4, 2004
  2 shares of ordinary share of RM1 each  VIE of Agape Superior Living Sdn. Bhd.   VIE 
                  
5.  Wellness ATP International Holdings Sdn, Bhd  Malaysia,
September 11, 2020
  100 shares of ordinary share of RM1 each  The promotion of wellness and wellbeing lifestyle of the community by providing services that includes online editorials, programs, events and campaigns   100%
                  
6.  DSY Wellness International Sdn Bhd.  Malaysia,
November 11, 2021
  1,000 shares of ordinary share of RM1 each  Provision of complementary health therapies   60%

 

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 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.

 

F-6

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

2. GOING CONCERN

 

In assessing the Company’s liquidity, the Company monitors and analyzes its cash on-hand and its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. Equity financing is used to supplement working capital requirements of the Company.

 

The Company’s management has considered whether there is substantial doubt about its ability to continue as a going concern due to (1) the net loss of $379,449 and $813,524 for the three and six months ended June 30, 2023; (2) accumulated deficit of $5,746,112 as of June 30, 2023; (3) working capital deficit of $26,892 as of June 30, 2023; and (4) the unexpectedly long turnaround time that the Company’s distributors and members are taking to revert to pre-pandemic mode to generate sales.

 

Management has determined there is substantial doubt about its ability to continue as a going concern. If the Company is unable to generate significant revenue, the Company may be required to curtail or cease its operations. Management is trying to alleviate the going concern risk through the following sources:

 

Equity financing from the Company’s second listing on NASDAQ to support its working capital and future growth;
   
Other available sources of financing (including debt) from banks and other financial institutions; and
   
Financial support and credit guarantee commitments from the Company’s related parties.

 

Based on the above measures, management is of the opinion that the Company will probably not have sufficient funds to meet its working capital requirements and debt obligations as they become due one year from the filing date of these unaudited condensed consolidated financial statements.

 

There is no assurance that the Company will be successful in implementing the foregoing plans or that additional financing will be available to the Company on commercially reasonable terms, or at all. There are a number of factors that could potentially arise that could undermine the Company’s plans, such as (i) undue delay in the Company’s current pursuit in seeking second listing on NASDAQ, (ii) the slow rate in which the Company’s distributors and members re-ignite their sales activities, (iii) changes in the demand for the Company’s products and services due to the diminishing effect on the purchasing power of the public in general, as a result of the COVID-19 pandemic, and (iv) if the Company’s new business in the provision of complementary health therapies fail to grow in the manner and at the rate as planned. The Company’s inability to secure needed financing when required could require material changes to the Company’s business plans and could have a material adverse effect on the Company’s viability and results of operations.

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation

 

The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

The interim unaudited financial information as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 have been prepared without audit, pursuant to the rules and regulations of the SEC and pursuant to Regulation S-X. Certain information and footnote disclosures, which are normally included in annual consolidated financial statements prepared in accordance with U. S. GAAP, have been omitted pursuant to those rules and regulations. The interim unaudited financial information should be read in conjunction with the audited consolidated financial statements and the notes thereto, included in the Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on March 31, 2023.

 

In the opinion of management, all adjustments (including normal recurring adjustments) necessary to present a fair statement of the Company’s unaudited financial position as of June 30, 2023, its unaudited results of operations for the three and six months ended June 30, 2023 and 2022, and its unaudited cash flows for the six months ended June 30, 2023 and 2022, as applicable, have been made. The unaudited interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

 

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.

 

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, 2023, SEA, the only VIE of the Company has no significant operations.

 

Use of estimates

 

The preparation of unaudited 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 unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s unaudited condensed consolidated financial statements include allowance for inventories obsolescence, impairment of long-lived assets and allowance for deferred tax assets. Actual results could differ from these estimates.

 

Cash and cash equivalents

 

Cash and cash equivalents 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.

 

F-7

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

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. 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, 2023 and December 31, 2022, no allowance of doubtful accounts was recorded.

 

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 three and six months ended June 30, 2023 and 2022, the Company did not recognize any inventory write-downs nor write-off.

 

Prepaid taxes

 

Prepaid taxes include prepaid income taxes that will either be refunded or utilized to offset future income tax.

 

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 allowance policy and update it if necessary. There was no allowance for doubtful accounts recorded nor doubtful accounts written-off during the three and six months ended June 30, 2023 and 2022. There was no allowance for doubtful accounts balances as of June 30, 2023 and December 31, 2022.

 

Property and equipment, net

 

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:

 

F-8

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

   Useful Life
Computer and office equipment  5-7 years
Furniture & fixtures  6-7 years
Leasehold improvements  Shorter of the remaining lease terms or the estimated useful lives
Vehicle  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 unaudited condensed consolidated statements of operations and comprehensive loss. 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.

 

Intangible assets, net

 

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:

 

Classification  Useful Life
    
Computer software  5 years

 

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, 2023 and December 31, 2022, no impairment of long-lived assets was recognized.

 

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 proposed offering for uplisting.

 

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.

 

F-9

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

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.

 

Customer deposits

 

Customer deposits represent amounts advanced by customers on product orders and unapplied unexpired coupons. Customer deposits are reduced when the related sale is recognized in accordance with the Company’s revenue recognition policy.

 

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.

 

F-10

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

3. 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.

 

Under the Company’s network marketing business, the Company issues product coupons to members and distributors when these customers made purchases above certain thresholds set by the Company. Depending on the type of product coupons issued, the coupons carry varying values and can be used by the customers for reduction in the transaction price of product purchases within the coupon validity period. The value of the product coupons issued is recorded as a reduction of the Company’s revenue account upon issuance; the corresponding amount credited to the customer deposits account. Amounts in customer deposits will be reversed when the coupons are used. The Company’s coupons have a validity period of between six and twelve months. If the Company’s customers did not utilize the coupons after the validity period, the Company would recognize the forfeiture of the originated sales value of the coupons as net revenues.

 

For the three months ended June 30, 2023 and 2022, the Company recognized $6,422 and $4,824, as forfeited coupon income, respectively. For the six months ended June 30, 2023 and 2022, the Company recognized $28,872 and $5,777, as forfeited coupon income, respectively.

 

The Company had contracts for the sales of health and wellness products amounting to $7,790 which it is expected to fulfill within 12 months from June 30, 2023.

 

Sales of products for the provision of complementary health therapies

 

Products for the provision of complementary health therapies are predominantly Chinese herbs in different forms, processed or otherwise, for prescriptions for treating non-communicable diseases.

 

Provision 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 session 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, 2023 and 2022, revenues from health and wellness services were $58,862 and $30,072 respectively. For the six months ended June 30, 2023 and 2022, revenues from health and wellness services were $124,214 and $31,139 respectively.

 

F-11

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Disaggregated information of revenues by products are as follows:

 

   2023   2022   2023   2022 
   For the three months ended   For the six months ended 
   June 30,   June 30, 
   2023   2022   2023   2022 
Survivor Select  $-   $13,941   $28,210   $22,753 
Ionized Cal-Mag   37,221    14,278    84,802    62,368 
Omega Blend   -    42,747    22,471    179,177 
Beta Maxx   -    23,564    21,206    47,637 
Iron   9,929    3,118    21,617    7,186 
Young Formula   -    1,075    -    34,269 
ATPR Mito+   -    76,605    -    187,926 
Hyaluronic Acid Serum   -    1,698    -    3,006 
Mousse Facial Cleanser   -    4,355    -    7,394 
Trim+   3,702    2,765    9,587    6,236 
LIVO 5   21,812    -    21,812    - 
Others – Products for the provision of complementary health therapies   154,411    182,101    330,968    216,188 
Others   17,998    388    19,816    388 
Total revenues - products   245,073    366,635    560,489    774,528 
Health and Wellness services   58,862    30,072    124,214    31,139 
Total revenues - products and services  $303,935   $396,707   $684,703   $805,667 

 

Cost of revenue

 

Cost of revenue comprised freight-in, the purchase cost of manufactured goods for sale to customers and products for the provision of complementary health therapies. For the three and six months ended June 30, 2023, cost of revenue were $107,931 and $236,289, respectively. For the three and six months ended June 30, 2022, cost of revenue were $109,383 and $182,814, respectively.

 

Shipping and handling

 

Shipping and handling charges amounted to $1,131 and $4,272 for the three months ended June 30, 2023 and 2022, respectively. Shipping and handling charges amounted to $2,656 and $7,179 for the six months ended June 30, 2023 and 2022, respectively. Shipping and handling charges are expensed as incurred and included in selling expenses.

 

Advertising costs

 

There were no advertising costs incurred for the three and six months ended June 30, 2023. Advertising costs amounted to $4,765 and $4,765 for the three and six months ended June 30, 2022. Advertising costs are expensed as incurred and included in selling expenses.

 

F-12

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

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 $21,942 and $62,557 for the three months ended June 30, 2023 and 2022, respectively. Commission expenses amounted to $55,884 and $176,666 for the six months ended June 30, 2023 and 2022, respectively.

 

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 plans were $35,759 and $35,936 for the three months ended June 30, 2023 and 2022, respectively. Total expenses for the plans were $79,472 and $63,408 for the six months ended June 30, 2023 and 2022, respectively.

 

The related contribution plans include:

 

  - Social Security Organization (“SOSCO”) – 1.75% based on employee’s monthly salary capped of RM 5,000;
  - Employees Provident Fund (“EPF”) –based on employee’s monthly salary, 13% for employee earning RM5,000 and below; and 12% for employee earning RM5,001 and above.
  - Employment Insurance System (“EIS”) – 0.2% based on employee’s monthly salary capped of RM 5,000;
  - Human Resource Development Fund (“HRDF”) – 1% based on employee’s monthly salary

 

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.

 

F-13

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

3. 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 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. No penalties and interest incurred related to underpayment of income taxes for the three and six months ended June 30, 2023 and 2022.

 

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.

 

Comprehensive income (loss)

 

Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). Net 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.

 

Non-controlling interest

 

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.

 

Earnings (loss) per share

 

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 ordinary share 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, 2023 and 2022, there were no dilutive shares.

 

F-14

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

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 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.

 

Translation of foreign currencies into US$1 have been made at the following exchange rates for the respective periods:

 

   June 30, 2023   December 31, 2022 
   As of 
   June 30, 2023   December 31, 2022 
Period-end MYR : US$1 exchange rate   4.67    4.41 
Period-end HKD : US$1 exchange rate   7.84    7.80 

 

   2023   2022   2023   2022 
  

For the three months ended

June 30,

  

For the six months ended

June 30,

 
   2023   2022   2023   2022 
Period-average MYR : US$1 exchange rate   4.58    4.37    4.48    4.28 
Period-average HKD : US$1 exchange rate   7.84    7.85    7.84    7.83 

 

F-15

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

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.

 

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.

 

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.

 

F-16

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

3. 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.

 

Recent accounting pronouncements

 

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

 

In March 2023, the FASB issued ASU No. 2023-01, “Leases (Topic 842) Common Control Arrangements”. This ASU provides guidance in ASC Topic 842 that leasehold improvements associated with common control leases should be (i) amortized by the lessee over the useful life of the leasehold improvements to the common control group, regardless of the lease term, as long as the lessee controls the use of the underlying asset through a lease, and (ii) accounted for as a transfer between entities under common control through an adjustment to equity if and when the lessee no longer controls the use of the underlying asset. The ASU 2023-01 is effective for reporting periods beginning after December 15, 2023. Early adoption is permitted for both interim and annual financial statements that have not yet been issued. When adopted in an interim period, it must be adopted from the beginning of the year that includes that interim period. The Company is currently evaluating the impact of this ASU may have on its unaudited condensed consolidated financial statements.

 

Except for the above-mentioned pronouncements, there are no other new recent issued accounting standards that will have a material impact on the consolidated financial position, statements of operations and cash flows.

 

Recently adopted Accounting Pronouncements

 

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 has accordingly adopted ASUs 2016-13 and 2019-05 in the preparation of its unaudited condensed consolidated financial statements. The adoption of the accounting standards has no material impact on the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2023.

 

4. 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 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.

 

F-17

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

4. VARIABLE INTEREST ENTITY (“VIE”) (Continued)

 

The carrying amount of the VIE’s assets and liabilities were as follows:

 

   June 30, 2023   December 31, 2022 
   As of 
   June 30, 2023   December 31, 2022 
Current assets  $2,817   $3,350 
Current liabilities   (41,057)   (43,512)
Net deficit  $(38,240)  $(40,162)

 

   June 30, 2023   December 31, 2022 
   As of 
   June 30, 2023   December 31, 2022 
Current assets:          
Cash  $1,146   $1,609 
Prepaid taxes   1,643    1,741 
Prepayment and deposits   28    - 
Total current assets  $2,817   $3,350 
           
Current liabilities:          
Accounts payable – intercompany  $40,029   $42,422 
Other payables and accrued liabilities   1,028    1,090 
Total current liabilities  $41,057   $43,512 
Net deficit  $(38,240)  $(40,162)

 

The summarized operating results of the VIE’s are as follows:

 

   2023   2022   2023   2022 
   For the three months ended
June 30,
  

For the six months ended

June 30,

 
   2023   2022   2023   2022 
                 
Operating revenues  $-   $-   $-   $- 
Gross profit  $-   $-   $-   $- 
Profit (Loss) from operations  $(81)  $1,723   $(359)  $(3,219)
Net loss  $(81)  $1,723   $(359)  $(3,219)

 

F-18

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

5. CASH AND CASH EQUIVALENTS

 

As of June 30, 2023 and December 31, 2022 the Company has $653,754 and $1,438,430, respectively, of cash and cash equivalents, which consists of $332,431 and $523,619, respectively, of cash and cash in banks and $321,323 and $914,811, 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 1.22% to 1.88% per annum for the three and six months ended June 30, 2023. The effective interest rate ranged between 1.10% to 1.17% per annum for the three and six months ended June 30, 2022. As of June 30, 2023 and December 31, 2022, $397,809 and $231,187 of these balances are not covered by deposit insurance, respectively.

 

6. ACCOUNTS RECEIVABLE

 

   June 30, 2023   December 31, 2022 
   As of 
   June 30, 2023   December 31, 2022 
         
Accounts receivable  $5,303   $2,826 
Allowance for doubtful accounts   -    - 
Total accounts receivable  $5,303   $2,826 

 

7. INVENTORIES

 

Inventories consist of the following:

   June 30, 2023   December 31, 2022 
   As of 
   June 30, 2023   December 31, 2022 
           
Finished goods  $66,056   $46,277 

 

There were no inventory write-downs nor write-off for the three and six months ended June 30, 2023 and 2022, respectively.

 

8. PREPAYMENTS AND DEPOSITS

 

   June 30, 2023   December 31, 2022 
   As of 
   June 30, 2023   December 31, 2022 
           
Receivables from sales distributors  $28,219   $43,596 
Deposits to suppliers   94,719    147,504 
Subtotal   122,938    191,100 
Less: Allowance for doubtful accounts   -    - 
Total  $122,938   $191,100 

 

F-19

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

8. PREPAYMENTS AND DEPOSITS (Continued)

 

Movements of allowance for doubtful accounts are as follows:

 

   For the
six months ended
June 30, 2023
   For the
year ended
December 31, 2022
 
         
Beginning balance  $-   $121,095 
Addition   -    - 
Write off   -    (120,372)
Exchange rate effect        -    (723)
Ending balance  $-   $- 

 

9. PROPERTY AND EQUIPMENT, NET

 

Property and equipment, net consist of the following:

 

   June 30, 2023   December 31, 2022 
   As of 
   June 30, 2023   December 31, 2022 
           
Computer and office equipment  $88,641   $87,428 
Furniture & fixtures   109,342    115,789 
Leasehold improvements   181,136    191,965 
Vehicle   88,259    93,535 
Subtotal   467,378    488,717 
Less: accumulated depreciation   (361,704)   (346,568)
Total  $105,674   $142,149 

 

Depreciation expense for the three months ended June 30, 2023 and 2022 amounted to $18,124 and $17,954, respectively. Depreciation expense for the six months ended June 30, 2023 and 2022 amounted to $36,177 and $36,661, respectively.

 

10. INTANGIBLE ASSETS, NET

 

Intangible assets, net, consist of the following:

 

   June 30, 2023   December 31, 2022 
   As of 
   June 30, 2023   December 31, 2022 
           
Computer software  $52,225   $55,348 
Less: accumulated amortization   (32,497)   (31,304)
Total  $19,728   $24,044 

 

Amortization expense for the three months ended June 30, 2023 and 2022 amounted to $1,506 and $439, respectively. Amortization expense for the six months ended June 30, 2023 and 2022 amounted to $3,087 and $897, respectively.

 

F-20

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

11. INVESTMENT IN MARKETABLE SECURITIES

 

  (i) On May 17, 2018, the Company purchased 83,333 shares of common stock in Greenpro Capital Corp. for $500,000 at a purchase price of $6 per share.
     
  (ii) On July 30, 2018, the Company disposed 20 shares of common stock in Greenpro Capital Corp. for $125 at a purchase price of $6.2613 per share.
     
  (iii) On October 16, 2018, the Company purchased 33,333 shares of common stock in Greenpro Capital Corp. for $1,000 at a purchase price of $0.03 per share.
     
  (iv) 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 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 July 28, 2022, the Company has an investment of 116,646 common stock of Greenpro Capital Corp. The Company’s investment of 116,646 common stock of Greenpro Capital Corp. was reduced to 11,665 subsequent to the reverse stock split.
     
  (v) On November 3, 2020, the Company received dividend of 6,667 shares of common stock in DSwiss, Inc. for $76,671 at fair value of $11.50 per share from Greenpro Capital Corporation as result of its Spin-off of DSwiss, Inc.’s shares
     
  (vi) On December 9, 2020, the Company received dividend of 16,663 shares of common stock in DSwiss, Inc. for $83,315 at fair value of $5 per share from Greenpro Capital Corporation as result of its Spin-off of DSwiss, Inc.’s shares.
     
  (vii) On September 27, 2021, the Company received dividend of 11,665 shares of common stock in SEATech Ventures Corp. for $18,874 at fair value of $1.62 per share from Greenpro Capital Corp as a dividend income since Greenpro Capital Corp previously owned these shares.
     
  (viii) On April 3, 2019, the Company purchased a 5% of stock or 15,000,000 shares of common stock in Phoenix Plus Corp. (a non-marketable security) for $1,500 at purchase price of $0.0001 per share. Phoenix Plus Corp. obtained approval for Depository Trust Company eligibility on April 26, 2022. Since the commencement of trading of common stock of Phoenix Plus Corp. on May 18, 2022, to July 13, 2023, there were only 200 shares of common stock of the company traded. The Company deems there is an absence of a readily determinable fair value of the common stock of Phoenix Plus Corp. and has continued to value its investment in the company Phoenix Plus Corp. at cost.

 

         
   As of 
   June 30, 2023  

December 31, 2022

 
Cost of investment  $16,687   $89,001 
Transfer from non-marketable security   -    1,500 
Dividend income from Greenpro Capital Corp.   -    - 
Unrealized holding gain (loss)   8,710    (73,519)
Exchange rate effect   (66)   (295)
Investment in marketable securities  $25,331   $16,687 

 

12. INVESTMENT IN NON-MARKETABLE SECURITIES

 

On April 3, 2019, the Company purchased a 5% of stock or 15,000,000 shares of common stock in Phoenix Plus Corp. for $1,500 at purchase price of $0.0001 per share. Phoenix Plus Corp. attained its effective date with the Securities Exchange Commission for listing on OTC (Pink Sheet), U.S. on March 12, 2021, and obtained approval for Depository trust Company (“DTC”) eligibility on April 26, 2022. Accordingly, stocks of Phoenix Plus Corp. can be traded on OTC. As such the investment in Phoenix Plus Corp. was transferred to marketable securities.

 

         
   As of 
Phoenix Plus Corporation  June 30, 2023  

December 31, 2022

 
Cost of investment  $-   $1,500 
Less: Transfer to investment in marketable securities   -    (1,500)
Investment in non-marketable securities  $-   $- 

 

F-21

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

13. CUSTOMER DEPOSITS

         
   As of 
   June 30, 2023   December 31, 2022 
           
Customer deposits  $265,300   $289,487 
Unexpired product coupons   46,889    73,531 
Total  $312,189   $363,018 

 

Customer deposits represent amounts advanced by customers on product orders and unexpired product coupons issued to the Company’s members and distributors of its network marketing business.

 

14. OTHER PAYABLES AND ACCRUED LIABILITIES

         
   As of 
   June 30, 2023   December 31, 2022 
           
Professional fees  $140,672   $324,629 
Promotion expenses   38,583    38,583 
Payroll   17,944    21,164 
Amounts held in eWallets (a)   195,000    216,049 
Tax penalty   75,000    75,000 
Others   8,468    37,852 
Total  $475,667   $713,277 

 

(a)The Company requires all members and distributors of its network marketing business to maintain an electronic wallet (eWallet) account with the Company. The eWallet is primarily for the crediting of any commission payment that falls below RM100 (or $22.70). Commission payment exceeding the RM100 threshold shall only be credited into the member’s or distributor’s eWallet upon request. The eWallet functionality allows the members to place new product orders utilizing eWallet available balance and/or request commission payout via multiple payment methods provided that each of the withdrawal amount exceeds RM100. Amounts held in eWallets are reflected on the balance sheet as a current liability.

 

15. RELATED PARTY BALANCES AND TRANSACTIONS

 

Related party balances

 

Amount due from related parties

        As of 
Name of Related Party  Relationship  Nature  June 30, 2023   December 31, 2022 
               
TH3 Technology Sdn Bhd (“TH3”)  Mr. How Kok Choong, the CEO and director of the Company is also a director of TH3  Prepayment of IT expenses  $1,178   $1,273 
SY Welltech Sdn Bhd (“Welltech”) (formerly known as DSY Beauty Sdn Bhd)  The directors and shareholders of Welltech are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd  Deposits for products purchases   -    9,261 
DSY Wellness and Longevity Center Sdn Bhd (“DSYWLC”)  Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd is also a director of DSYWLC  Expenses paid for DSYWLC   239    - 
                 
Total        $1,417   $10,534 

 

Accounts payable – related parties

 

        As of 
Name of Related Party  Relationship  Nature  June 30, 2023   December 31, 2022 
                 
CTA Nutriceuticals (Asia) Sdn Bhd (“CTA”)  The directors and shareholders of CTA are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY International Wellness Sdn Bhd  Purchases of products for the provision of complementary health therapies  $19,601   $25,387 
SY Welltech Sdn Bhd (“Welltech”) (formerly known as DSY Beauty Sdn Bhd)  The directors and shareholders of Welltech are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd  Purchases of beauty products   4    224 
Total        $19,605   $25,611 

 

F-22

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

15. RELATED PARTY BALANCES AND TRANSACTIONS (Continued)

 

Related party balances

 

Other payable - related parties

 

        As of 
Name of Related Party  Relationship  Nature  June 30, 2023   December 31, 2022 
               
CTA Nutriceuticals (Asia) Sdn Bhd (“CTA”)  The directors and shareholders of CTA are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY International Wellness Sdn Bhd  Purchase of products for general use  $391   $2,149 
SY Welltech Sdn Bhd (“Welltech”) (formerly known as DSY Beauty Sdn Bhd)  The directors and shareholders of Welltech are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd  Purchase of products for general use   316    2,147 
Mr. How Kok Choong  Mr. How Kok Choong, the CEO and director of the Company  Commission expense   323    584 
Total        $1,030   $4,880 

 

Related party transactions

 

Purchases

 

        For the three months ended June 30, 
Name of Related Party  Relationship  Nature  2023   2022 
               
CTA Nutriceuticals (Asia) Sdn Bhd (“CTA”)  The directors and shareholders of CTA are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY International Wellness Sdn Bhd  Purchases of products for the provision of complementary health therapies  $55,614   $63,142 
SY Welltech Sdn Bhd (“Welltech”) (formerly known as DSY Beauty Sdn Bhd)  The directors and shareholders of Welltech are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd  Purchases of beauty products   212    395 
DSY Wellness and Longevity Center Sdn Bhd (“DSYWLC”)  Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd is also a director of DSYWLC  Purchases of products for the provision of complementary health therapies   -    127 
Total        $55,826   $63,664 

 

F-23

 

 

AGAPE ATP CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

15. RELATED PARTY BALANCES AND TRANSACTIONS (Continued)

 

Related party transactions

 

        For the six months ended June 30, 
Name of Related Party  Relationship  Nature  2023   2022 
               
CTA Nutriceuticals (Asia) Sdn Bhd (“CTA”)  The directors and shareholders of CTA are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY International Wellness Sdn Bhd