Agape ATP (ATPC) - 2021 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and related management discussion for the period ended March 31, 2021 Unaudited Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for Agape ATP Corporation, including balance sheets, statements of operations, equity changes, and cash flows, showing a net loss and asset decrease for the quarter ended March 31, 2021 Unaudited Condensed Consolidated Balance Sheets Total assets decreased to $6.67 million from $7.21 million as of March 31, 2021, primarily due to reduced current assets, alongside decreases in total liabilities and stockholders' equity Condensed Consolidated Balance Sheet Data (Unaudited) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $5,122,995 | $5,684,271 | | Total Assets | $6,666,027 | $7,210,607 | | Total Current Liabilities | $916,983 | $1,038,542 | | Total Liabilities | $1,113,127 | $1,285,773 | | Total Stockholders' Equity | $5,552,900 | $5,924,834 | Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss The company reported $301,780 in revenue for Q1 2021, a significant increase from zero in Q1 2020, yet incurred a higher net loss of $333,650 due to increased operating expenses Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Revenue | $301,780 | $0 | | Gross Profit | $224,189 | $0 | | Total Operating Expenses | ($566,699) | ($159,516) | | Loss from Operations | ($342,510) | ($159,516) | | Net Loss | ($333,650) | ($231,750) | | Net Loss Per Share (Basic and Diluted) | $0.00 | $0.00 | Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity decreased to $5.55 million from $5.92 million by March 31, 2021, primarily due to the net loss and foreign currency translation adjustments - The accumulated deficit increased to $1,068,093 as of March 31, 2021, from $734,443 at December 31, 2020, reflecting the net loss for the quarter[16] Unaudited Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $129,297 in Q1 2021, with no investing activities and minimal financing cash usage, resulting in an overall decrease of $163,042 in cash and cash equivalents Cash Flow Summary (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($129,297) | ($230,431) | | Net cash provided by investing activities | $0 | $70,173 | | Net cash used in financing activities | ($6,423) | $0 | | Net change in cash and cash equivalents | ($163,042) | ($156,250) | Notes to Unaudited Condensed Consolidated Financial Statements These notes detail the company's Health and Wellness business in Malaysia, including the ASL acquisition, VIE consolidation, accounting policies, and significant risks such as those related to COVID-19 - The company is principally engaged in the Health and Wellness Industry, supplying products and programs like the 'ATP Zeta Health Program' and operates mainly in Malaysia[22][26] - On May 8, 2020, the Company acquired approximately 99.99% of Agape Superior Living Sdn Bhd (ASL) to secure an established network marketing sales channel in Malaysia[21][27] - The company consolidates a Variable Interest Entity (VIE), Agape S.E.A. Sdn Bhd (SEA), which serves as a trading company for ASL's purchases[102] - The company faces significant risks from the COVID-19 pandemic, as substantially all revenues are concentrated in Malaysia, which has been subject to various movement control orders, potentially affecting demand, supply chains, and overall results[172][173] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the Q1 2021 financial results, highlighting revenue generation from the ASL acquisition, an increased net loss due to higher operating expenses, and sufficient liquidity despite COVID-19 challenges, while also addressing critical accounting policies and internal control weaknesses Results of Operation Q1 2021 revenue of $301,780 from ASL operations led to a gross profit of $224,189, but a surge in operating expenses, particularly G&A, resulted in a wider net loss of $333,650 Q1 2021 vs Q1 2020 Performance | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Revenue | $301,780 | $0 | | Gross Profit | $224,189 | $0 | | G&A Expenses | $362,146 | $159,516 | | Net Loss | ($333,650) | ($231,750) | - The increase in G&A expenses by $202,630 (127%) was predominantly due to increased salary and employee benefit expenses from the ASL acquisition[190] Liquidity and Capital Resources Working capital decreased to $4.2 million by March 31, 2021, yet management deems resources sufficient for the next 12 months, despite ongoing COVID-19 impacts in Malaysia and plans for e-commerce expansion into other Asian markets - Working capital was $4,206,012 as of March 31, 2021, and management believes cash resources are sufficient for the next 12 months[198] - The company's operations are significantly impacted by COVID-19 related movement control orders in Malaysia, its primary revenue source[194][196] - Net cash used in operating activities improved to $129,297 in Q1 2021 from $230,431 in Q1 2020[201][202] Quantitative and Qualitative Disclosures About Market Risk The company faces unhedged foreign exchange risk between the U.S. dollar, Malaysian Ringgit, and Hong Kong Dollar, while managing credit risk from accounts receivable through evaluation and short collection terms - The company faces foreign exchange risk between the U.S. dollar, Malaysian Ringgit, and Hong Kong Dollar, but does not currently hedge this risk[220] - Credit risk from accounts receivable is managed through credit evaluations and short collection terms, and the company does not generally require collateral[221] Controls and Procedures Management identified material weaknesses in internal controls over financial reporting as of March 31, 2021, including insufficient U.S. GAAP expertise and inadequate segregation of duties, with remediation efforts underway including a new CFO appointment and plans for an internal audit function - Management concluded that internal controls over financial reporting were not effective as of March 31, 2021[225] - Identified material weaknesses include: (i) lack of sufficient U.S. GAAP accounting expertise, (ii) lack of an internal audit function, (iii) inadequate segregation of duties, (iv) poor system change management, (v) weak data security access controls, and (vi) lack of qualified personnel for U.S. tax provisions (Subpart F and GILTI)[227] - Remediation efforts include the appointment of a CFO on January 12, 2021, and plans to establish an internal audit function, engage consultants, and hire a U.S. tax professional[229][230][231] PART II OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, equity sales, and exhibits Legal Proceedings The company reports no material, active, or pending legal proceedings against it - There are no known material, active, or pending legal proceedings against the company[233] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the reporting period - None[233] Other Information The company reported no other information required to be disclosed in this item - None[233] Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications (31.1, 32.1) and XBRL data files - Exhibits filed include Rule 13(a)-14(a)/15(d)-14(a) Certification, Section 1350 Certification, and various XBRL documents[234]