Revenue and Profitability - Revenue for Q1 2023 was $380,767, with network marketing contributing $138,859 (36.5%) and complementary health therapies contributing $241,908 (63.5%)[192] - Revenue from network marketing decreased by $235,169 (62.9%) compared to Q1 2022, while revenue from complementary health therapies increased by $206,976 (592.5%)[192] - Gross profit for Q1 2023 was $252,408, with a gross margin of 66.3%, down from 82.0% in Q1 2022 due to lower margins in network marketing[194] - Net loss for Q1 2023 was $434,075, an increase of $135,629 compared to Q1 2022[200] Operating Expenses and Administrative Costs - Operating expenses decreased by $38,513 (33.6%) in Q1 2023, primarily due to reduced promotional activities for existing products[195] - General and administrative expenses increased by $217,212 (57.3%) in Q1 2023, driven by expenses related to complementary health therapies and Nasdaq uplisting efforts[197] Financial Position and Liquidity - The company had working capital of $374,149 as of March 31, 2023, down from $799,239 at the end of 2022[204] - Accumulated deficit reached $5,371,426 as of March 31, 2023, up from $4,945,586 at the end of 2022[204] - Management expressed substantial doubt about the company's ability to continue as a going concern due to net losses, low working capital, and slow recovery in sales[205] Expansion Plans - The company plans to expand into Thailand, Indonesia, and Taiwan, focusing on e-commerce and potential office setups in these markets[203] Cash Flow Activities - Net cash used in operating activities for Q1 2023 was $272,555, a significant increase from $151,122 in Q1 2022, primarily due to a higher net loss of $434,075 compared to $298,446 in the previous year[209][210] - Net cash used in investing activities for Q1 2023 was $38,768, attributed to equipment purchases, with no investing activities recorded in Q1 2022[211] - Net cash used in financing activities for Q1 2023 was $6,961, related to deferred offering costs, with no financing activities in Q1 2022[212] Assets and Impairment - The company's operating right-of-use assets and property, plant, and equipment had carrying amounts of $41,593 and $160,480 as of March 31, 2023, with no impairment losses recognized[216] Revenue Recognition and Accounting Policies - Revenue recognition for health and wellness products is based on the transfer of control to customers, with revenues recorded net of estimated discounts and return allowances[221] - The company issues product coupons to members and distributors, which are recorded as a reduction in revenue upon issuance and reversed when used or forfeited after the validity period[222] - The company's Wellness program includes health screening tests and health camp programs, with revenues recognized upon completion of these services[224] - The company adopted Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326), effective January 1, 2023, which introduced the current expected credit loss (CECL) methodology[226] Risk Management - The company's exposure to foreign exchange risk is limited, as most revenues and expenses are denominated in Malaysian Ringgit, U.S. dollar, and Hong Kong Dollar, with no hedging activities in place[229] - Credit risk is primarily associated with accounts receivable, mitigated by the company's credit evaluation process and short collection terms, with no collateral generally required from customers[230]
Agape ATP (ATPC) - 2023 Q1 - Quarterly Report