Agape ATP (ATPC) - 2022 Q3 - Quarterly Report

PART I Unaudited Condensed Consolidated Financial Statements Presents Agape ATP Corporation's unaudited consolidated financial statements for Q3 2022, covering balance sheets, operations, equity, and cash flows Condensed Consolidated Balance Sheets Total assets decreased from $4.72 million to $3.10 million, primarily due to reduced cash, reflecting declines in both liabilities and equity Condensed Consolidated Balance Sheet Highlights (As of Sep 30, 2022 vs. Dec 31, 2021) | Metric | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $3,095,006 | $4,724,535 | | Cash and cash equivalents | $1,584,869 | $2,597,848 | | Total Liabilities | $850,429 | $1,411,899 | | Total Equity | $2,244,577 | $3,312,636 | Condensed Consolidated Statements of Operations and Comprehensive Loss Revenue increased to $1.47 million for the nine months ended September 30, 2022, with net loss improving to $943,007 from $1.55 million Statement of Operations Summary (Nine Months Ended Sep 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Revenue | $1,469,556 | $806,850 | | Gross Profit | $1,128,997 | $656,973 | | Loss from Operations | ($771,723) | ($1,116,503) | | Net Loss | ($943,007) | ($1,547,140) | | Loss Per Share (Basic & Diluted) | ($0.01) | $0.00 | Statement of Operations Summary (Three Months Ended Sep 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Revenue | $663,889 | $201,284 | | Gross Profit | $506,144 | $164,621 | | Loss from Operations | ($193,308) | ($364,996) | | Net Loss | ($240,217) | ($571,265) | | Loss Per Share (Basic & Diluted) | $0.00 | $0.00 | Condensed Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity decreased from $3.31 million to $2.24 million, driven by net loss and foreign currency adjustments, alongside a significant share forfeiture - A share forfeiture agreement dated January 20, 2022, resulted in the forfeiture of 215,008,035 shares of common stock by the CEO, Mr. How Kok Choong[17][147] Changes in Stockholders' Equity (Nine Months Ended Sep 30, 2022) | Metric | Amount | | :--- | :--- | | Balance as of Dec 31, 2021 | $3,312,636 | | Net Loss | ($943,007) | | Foreign currency translation adjustment | ($51,603) | | Balance as of Sep 30, 2022 | $2,244,577 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $737,456, contributing to a $1.01 million decrease in cash and an ending balance of $1.58 million Cash Flow Summary (Nine Months Ended Sep 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($737,456) | ($541,440) | | Net cash used in investing activities | ($5,777) | ($3,970) | | Net cash used in financing activities | ($184,466) | ($23,280) | | Decrease in Cash and Cash Equivalents | ($1,012,979) | ($636,923) | | Cash and Cash Equivalents, end of period | $1,584,869 | $2,880,677 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the company's organization, accounting policies, and financial accounts, including its health and wellness focus and VIE structure - The Company and its subsidiaries are principally engaged in the Health and Wellness Industry, supplying products for cell metabolism, detoxification, anti-aging, and overall health, primarily in Malaysia[23][28] - The company's main product and service lines include the ATP Zeta Health Program, ÉNERGÉTIQUE (dermal solutions), and BEAUNIQUE (nutrigenomic solutions)[29][30] - The financial statements are prepared in accordance with U.S. GAAP and consolidate the Company, its subsidiaries, and its variable interest entity (VIE), Agape S.E.A. Sdn. Bhd. ("SEA")[34][36] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial performance for the three and nine months ended September 30, 2022, analyzing key financial metrics, liquidity, and critical accounting policies Results of Operation Revenue grew 82.1% to $1.47 million for the nine months ended September 30, 2022, driven by recovery and new business, with net loss decreasing to $0.95 million Financial Performance (Nine Months Ended Sep 30, 2022 vs 2021) | Metric | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $1,469,556 | $806,850 | +82.1% | | Gross Profit | $1,128,997 | $656,973 | +71.9% | | Gross Margin | 76.8% | 81.4% | -4.6 p.p. | | Net Loss | ($954,711) | ($1,547,140) | -38.3% | - Revenue growth was primarily due to recovery from COVID-19 in Malaysia and the introduction of a complementary health therapies business, which contributed approximately 30% of total revenue[208] - The decrease in gross margin was attributed to the lower margin profile of the new complementary health therapies business compared to the company's traditional network marketing business[210] Liquidity and Capital Resources Working capital decreased to $1.51 million as of September 30, 2022, with accumulated deficit growing to $4.21 million, though management expects sufficient cash from operations Liquidity Position | Metric | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Working Capital | $1,505,169 | $2,599,281 | | Cash & Time Deposits | $1,545,527 | $2,530,211 | | Accumulated Deficit | ($4,213,396) | ($3,258,687) | - The company's operations are primarily in Malaysia, which officially transitioned to an endemic phase of COVID-19 on April 1, 2022, with minimal restrictions, aiding business recovery[220] - Net cash used in operating activities increased to $737,456 for the first nine months of 2022, compared to $541,440 in the same period of 2021[227][228] Critical Accounting Estimates and Policies Management outlines significant accounting estimates, such as allowances and asset impairment, and critical policies including revenue recognition and fair value measurement - Significant accounting estimates include allowances for doubtful accounts, inventory obsolescence, useful lives of assets, impairment assessments, and deferred tax assets[232] - The company recognizes revenue from the sale of health and wellness products at a point in time when control is transferred to the customer, and from wellness services when delivered or completed[248][249] - For the nine months ended September 30, 2021, the company recognized an inventory write-down of $36,636; no write-down was recognized in the same period of 2022[235] Quantitative and Qualitative Disclosures About Market Risk The company identifies foreign exchange risk from multi-currency operations and credit risk from accounts receivable, mitigated by credit evaluation - The company is exposed to foreign exchange risk as most revenues are in Malaysian Ringgit, while the common stock is traded in U.S. dollars[254] - Credit risk from accounts receivable is considered mitigated through credit evaluation processes; the company does not generally require collateral from customers[255] Controls and Procedures Management concluded disclosure controls and procedures were ineffective due to material weaknesses, including insufficient personnel, lack of internal audit, and inadequate segregation of duties - Management concluded that disclosure controls and procedures were not effective as of September 30, 2022[256] - Several material weaknesses were identified, including: (i) insufficient personnel with U.S. GAAP experience, (ii) lack of an internal audit department, (iii) inadequate segregation of duties, and (iv) deficiencies in IT controls and vendor management[261] - Remediation efforts include engaging a full-time CFO with U.S. GAAP experience and plans to form an internal audit function within the next 12 months[263][264] PART II Legal Proceedings The company reports that it is not aware of any material, active, or pending legal proceedings against it - There are no material active or pending legal proceedings against the company[267] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None reported[267] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None reported[267] Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and Inline XBRL documents - Exhibits filed include certifications by the principal executive officer and principal financial officer, as well as Inline XBRL data files[268]