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, a company incorporated in Labuan, Malaysia, and Agape
Superior Living Sdn. Bhd. (“ASL”), a company incorporated in Malaysia. .
Agape
ATP Corporation, incorporated in Labuan, Malaysia, is an investment holding company with 100% equity interest in Agape ATP International
Holding Limited, a company incorporated in Hong Kong.
On
May 8, 2020, the Company entered into a Share Exchange Agreement with Mr. How Kok Choong, CEO and director of the Company to acquire
9,590,596 ordinary shares, no par value, equivalent to approximately 99.99% of the equity interest in Agape Superior Living Sdn. Bhd.,
a network marketing entity incorporated in Malaysia.
Agape
Superior Living Sdn. Bhd. is a limited company incorporated on August 8, 2003, under the laws of Malaysia.
On
September 11, 2020, the Company incorporated Wellness ATP International Holdings Sdn, Bhd. (“WATP”), a wholly owned subsidiary
under the laws of Malaysia, to pursue the business of promoting wellness and wellbeing lifestyle of the community by providing services
that includes online editorials, programs, events and campaigns on how to achieve positive wellness and lifestyle.
On
November 11, 2021, Agape ATP Corporation (Labuan) formed a joint-venture entity, DSY Wellness International Sdn. Bhd. (“DSY Wellness”)
with an independent third party which Agape ATP Corporation (Labuan) owns 60% of the equity interest, to pursue the business of providing
complementary health therapies.
The
Company and its subsidiaries are principally engaged in the Health and Wellness Industry. The principal activity of the Company is to
supply high-quality health and wellness products, including supplements to assist in cell metabolism, detoxification, blood circulation,
anti-aging and products designed to improve the overall health system of the human body and various wellness programs.
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:
SCHEDULE OF SUBSIDIARIES AND ASSOCIATES
| |
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$1 each | |
Wholesaling of health and wellness products; and health solution advisory services | |
| 100 | % |
| |
| |
| |
| |
| |
| | |
3. | |
Agape Superior Living Sdn. Bhd. | |
Malaysia, August 8, 2003 | |
9,590,598 shares of ordinary share of RM1 each | |
Health and wellness products and health solution advisory services via network marketing | |
| 99.99 | % |
| |
| |
| |
| |
| |
| | |
4. | |
Agape S.E.A. Sdn. Bhd. | |
Malaysia, March 4, 2004 | |
2 shares of ordinary share of RM1 each | |
VIE of Agape Superior Living Sdn. Bhd. | |
| VIE | |
| |
| |
| |
| |
| |
| | |
5. | |
Wellness ATP International Holdings Sdn, Bhd | |
Malaysia, September 11, 2020 | |
100 shares of ordinary share of RM1 each | |
The promotion of wellness and wellbeing lifestyle of the community by providing services that includes online editorials, programs, events and campaigns | |
| 100 | % |
| |
| |
| |
| |
| |
| | |
6. | |
DSY Wellness International Sdn Bhd. | |
Malaysia, November 11, 2021 | |
1,000 shares of ordinary share of RM1 each | |
Provision of complementary health therapies | |
| 60 | % |
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), 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.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) for information pursuant to the rules and regulations of the Securities
Exchange Commission (“SEC”), and include all normal and recurring adjustments that management of the Company considers necessary
for a fair presentation of its financial position and operation results. Interim results are not necessarily indicative of results to
be expected for any other interim period or for the full year. The information included in this Form 10-Q should be read in conjunction
with information included in the Company’s annual report on Form 10-K for the year ended December 31, 2021, filed with the Securities
and Exchange Commission on March 28, 2022.
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, 2022, SEA, the only
VIE of the Company has no significant operations.
Use
of estimates
The
preparation of audited 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 consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant
accounting estimates reflected in the Company’s consolidated financial statements include allowance for doubtful accounts, allowance
for inventories obsolescence, useful lives of property and equipment, useful lives of intangible assets, impairment of long-lived assets,
allowance for deferred tax assets, operating right-of-use assets, operating lease liabilities and uncertain tax position and impairment
of investment in non-marketable securities. Actual results could differ from these estimates.
Cash
and cash equivalents
Cash
and cash equivalents are carried at cost and 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.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
2.
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. Accounts receivable also include money due from a third-party e-commerce platform acting as a collection agent for the
Company on the sales through their platform. 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, 2022 and December 31, 2021, 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 six months ended June 30, 2022 and 2021, the Company recognized inventory write-downs of $0 and $36,636, respectively.
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 valuation allowance policy
and update it if necessary. As of June 30, 2022 and December 31, 2021, there was $120,372 and $121,095 allowance for doubtful accounts
recorded, respectively.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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:
SCHEDULE OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT
| |
Useful Life |
| |
|
Computer and office equipment | |
5-7 years |
Furniture & fixtures | |
6-7 years |
Leasehold improvements | |
Lease Term |
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 consolidated statements of income and comprehensive income. 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:
SCHEDULE OF ESTIMATED USEFUL LIVES OF INTANGIBLE ASSETS, NET
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, 2022 and December
31, 2021, 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 current offering.
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.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
2.
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 discounted value of unapplied 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.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
2.
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.
The
Company also sells coupons to its customers for cash at a discounted price of the value of the coupons. Customers can apply the value
of the coupons for a reduction in the transaction price paid by the customer are recorded as a reduction of sales. The cash proceeds
resulted from the sale of coupons are recognized as customer deposits until the coupons to be applied as a reduction of the health and
wellness products transaction price upon such sales transactions occurred. The Company’s coupons have a validity period of six
months. If the Company’s customers did not utilize the coupons after six months, the Company would recognize the forfeiture of
the originated sales value of the coupons as net revenues. For the three months ended June 30, 2022 and 2021, the Company recognized
$4,824 and $4,115, as forfeited coupon income, respectively. For the six months ended June 30, 2022 and 2021, the Company recognized
$5,777 and $11,226, as forfeited coupon income, respectively.
The
Company had contracts for the sales of health and wellness products amounting to $16,084 which it is expected to fulfill within 12 months
from June 30, 2022.
Sales
of Health and Wellness services
-
Performance obligations satisfied at a point in time
The
Company carries out its Wellness program, where the Company’s products are bundled with health screening test and a health camp
program. The health screening test and the health camp programs are considered as separate performance obligations. The promises to deliver
the health screening test report and the attendance at the health camp are separately identifiable, which are evidenced by the fact that
the Company provides separate services of delivering the health screening test report and allowing admission of the customers to attend
the health camp. The Company derives its revenues from sales contracts with its customers with revenues being recognized when the test
reports are completed and delivered to its customers during the consultation section in person.
The
Company also separately derives its revenues from sales contracts with its customers with revenues being recognized when the health camp
program was completed in the final day of the health camp. For the three months ended June 30, 2022 and 2021, revenues from health and
wellness services were $30,072 and $653 respectively. For the six months ended June 30, 2022 and 2021, revenues from health and wellness
services were $31,139 and $5,746 respectively.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Disaggregated
information of revenues by products are as follows:
SCHEDULE OF DIS-AGGREGATED INFORMATION OF REVENUES
| |
| | | |
| | | |
| | | |
| | |
| |
For the three months ended | | |
For the six months ended | |
| |
June 30, | | |
June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
Survivor Select | |
$ | 13,941 | | |
$ | 24,415 | | |
$ | 22,753 | | |
$ | 37,641 | |
Energized Mineral Concentrate | |
| - | | |
| 8,291 | | |
| - | | |
| 52,183 | |
Ionized Cal-Mag | |
| 14,278 | | |
| 18,485 | | |
| 62,368 | | |
| 40,298 | |
Omega Blend | |
| 42,747 | | |
| 89,066 | | |
| 179,177 | | |
| 185,361 | |
Beta Maxx | |
| 23,564 | | |
| 55,943 | | |
| 47,637 | | |
| 89,800 | |
Iron | |
| 3,118 | | |
| 8,431 | | |
| 7,186 | | |
| 16,715 | |
Young Formula | |
| 1,075 | | |
| 14,458 | | |
| 34,269 | | |
| 25,901 | |
Organic Youth Care Cleansing Bar | |
| - | | |
| 2,990 | | |
| - | | |
| 2,990 | |
ATPR Mito+ | |
| 76,605 | | |
| 70,148 | | |
| 187,926 | | |
| 106,843 | |
Lipomask | |
| - | | |
| 4,279 | | |
| - | | |
| 8,401 | |
Hyaluronic Acid Serum | |
| 1,698 | | |
| 1,362 | | |
| 3,006 | | |
| 3,353 | |
Mousse Facial Cleanser | |
| 4,355 | | |
| 3,042 | | |
| 7,394 | | |
| 7,660 | |
Trim+ | |
| 2,765 | | |
| 2,223 | | |
| 6,236 | | |
| 22,674 | |
Others – Products for the provision of complementary health therapies | |
| 182,101 | | |
| - | | |
| 216,188 | | |
| - | |
Others | |
| 388 | | |
| - | | |
| 388 | | |
| - | |
Total revenues - products | |
| 366,635 | | |
| 303,133 | | |
| 774,528 | | |
| 599,820 | |
Health and Wellness services | |
| 30,072 | | |
| 653 | | |
| 31,139 | | |
| 5,746 | |
Total revenues - products and services | |
$ | 396,707 | | |
$ | 303,786 | | |
$ | 805,667 | | |
$ | 605,566 | |
Cost
of revenue
Cost
of revenue for the three and six months ended June 30, 2022 were $109,383, and $182,814, respectively, and comprised freight-in, purchase
cost of manufactured goods for sale to customers and products for the provision of complementary health therapies. Cost of revenue for
the three months and six months ended June 30, 2021, were $35,623, and $113,214, respectively, and comprised freight-in, purchase cost
of manufactured goods for sale to customers. For the six months ended June 30, 2021, cost of revenue also included inventory write-downs
of $36,636.
Shipping
and handling
Shipping
and handling charges amounted to $4,272 and $2,990 for the three months ended June 30, 2022 and 2021, respectively. Shipping and handling
charges amounted to $7,179 and $5,272 for the six months ended June 30, 2022 and 2021, respectively. Shipping and handling charges are
expensed as incurred and included in selling expenses.
Advertising
costs
Advertising
costs amounted to $4,765 and $8,721 for the three months ended June 30, 2022 and 2021, respectively. Advertising costs amounted to $4,765
and $16,658 for the six months ended June 30, 2022 and 2021, respectively. Advertising costs are expensed as incurred and included in
selling expenses.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
2.
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 $62,557 and $92,774 for the three months ended June 30, 2022
and 2021, respectively. Commission expenses amounted to $176,666 and $181,213 for the six months ended June 30, 2022 and 2021, 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 plan were $35,936 and $27,067 for the three months ended June 30, 2022 and 2021, respectively. Total expenses
for the plan were $63,408 and $53,034 for the six months ended June 30, 2022 and 2021, respectively.
The
related contribution plans include:
|
- |
Social Security Organization
(“SOSCO”) – 1.75% based on employee’s monthly salary capped of RM 4,000; |
|
- |
Employees Provident Fund
(“EPF”) – 12% based on employee’s monthly salary; |
|
- |
Employment Insurance System
(“EIS”) – 0.2% based on employee’s monthly salary capped of RM 4,000; |
|
- |
Human Resource Development
Fund (“HRDF”) – 1% based on employee’s monthly salary |
Income
taxes
The
Company accounts for income taxes in accordance with U.S. GAAP for income taxes. The charge for taxation is based on the results for
the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted
or substantively enacted by the balance sheet date.
Deferred
taxes is accounted for using the asset and liability method in respect of temporary differences arising from differences between the
carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation
of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets
are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences
can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the
liability is settled.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
2.
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 related to underpayment of income taxes were incurred for the three and six months
ended June 30, 2022. $395 in penalties and interest related to underpayment of income taxes were incurred for the three and six months
ended June 30, 2021.
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). Other comprehensive 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
common stocks 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, 2022 and 2021, there were no
dilutive shares.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
2.
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 income (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:
SCHEDULE OF FOREIGN CURRENCIES TRANSLATION EXCHANGE RATES
| |
| | | |
| | |
| |
As of | |
| |
June 30, 2022 | | |
December 31, 2021 | |
| |
| | |
| |
Period-end MYR : US$1 exchange rate | |
| 4.40 | | |
| 4.18 | |
Period-end HKD : US$1 exchange rate | |
| 7.85 | | |
| 7.80 | |
Foreign currency exchange rate, translation | |
| 7.85 | | |
| 7.80 | |
| |
| | | |
| | | |
| | | |
| | |
| |
For the three months ended
June 30, | | |
For the six months ended
June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
Period-average MYR : US$1 exchange rate | |
| 4.37 | | |
| 4.13 | | |
| 4.28 | | |
| 4.10 | |
Period-average HKD : US$1 exchange rate | |
| 7.85 | | |
| 7.77 | | |
| 7.83 | | |
| 7.76 | |
Foreign currency exchange rate period average | |
| 7.85 | | |
| 7.77 | | |
| 7.83 | | |
| 7.76 | |
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
2.
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.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
2.
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. Under the Jumpstart Our Business Startups
Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company, or EGC, and has
elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting
standards until they would apply to private companies.
In
November 2019, the FASB issued ASU No. 2019-10, which to update the effective date of ASU No. 2016-13 for private companies, not-for-profit
organizations and certain smaller reporting companies applying for credit losses, leases, and hedging standard. The new effective date
for these preparers is for fiscal years beginning after December 15, 2022. ASU 2019-05 is effective for the Company for annual and interim
reporting periods beginning January 1, 2023 as the Company is qualified as a smaller reporting company. The Company is currently evaluating
the impact ASU 2019-05 may have on its unaudited condensed consolidated financial statements.
Except
for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have a material impact on the consolidated
financial position, statements of operations and cash flows.
3.
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.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
3.
VARIABLE INTEREST ENTITY (“VIE”) (Continued)
The
carrying amount of the VIE’s assets and liabilities were as follows:
SCHEDULE OF VARIABLE INTEREST ENTITY
| |
| | | |
| | |
| |
As of | |
| |
June 30, 2022 | | |
December 31, 2021 | |
| |
| | |
| |
Current assets | |
$ | 9,370 | | |
$ | 18,850 | |
Current liabilities | |
| (43,288 | ) | |
| (51,272 | ) |
Net deficit | |
$ | (33,918 | ) | |
$ | (32,422 | ) |
| |
As of | |
| |
June 30, 2022 | | |
December 31, 2021 | |
| |
| | |
| |
Current assets: | |
| | | |
| | |
Cash | |
$ | 7,626 | | |
$ | 17,493 | |
Prepaid taxes | |
| 1,744 | | |
| 1,357 | |
Total current assets | |
$ | 9,370 | | |
$ | 18,850 | |
| |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable – intercompany | |
$ | 42,501 | | |
$ | 49,724 | |
Other payables and accrued liabilities | |
| 787 | | |
| 1,548 | |
Total current liabilities | |
$ | 43,288 | | |
$ | 51,272 | |
| |
| | | |
| | |
Net deficit | |
$ | (33,918 | ) | |
$ | (32,422 | ) |
The
summarized operating results of the VIE’s are as follows:
| |
| | | |
| | | |
| | | |
| | |
| |
For the three months ended
June 30, | | |
For the six months ended
June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
Operating revenues | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
Gross profit | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
Profit (loss) from operations | |
$ | 1,723 | | |
$ | (5,019 | ) | |
$ | (3,219 | ) | |
$ | (11,967 | ) |
Net income (loss) | |
$ | 1,723 | | |
$ | 1,912 | | |
$ | (3,219 | ) | |
$ | (9,949 | ) |
4.
CASH AND CASH EQUIVALENTS
As
of June 30, 2022 and December 31, 2021 the Company has $1,807,437
and $2,597,848,
respectively, of cash and cash equivalents, which consists of $666,779
and $554,864,
respectively, of cash in banks and $1,134,542
and $1,975,347,
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 1.10%
to 1.17%
per annum for the three and six months ended June 30, 2022. The effective interest rate for the time deposits ranged between 1.80%
to 2.15%
per annum for the three and six months ended June 30, 2021. As of June 30, 2022 and December 31, 2021, $319,994 and $295,761 of these
balances are not covered by deposit insurance, respectively.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
5.
ACCOUNTS RECEIVABLE
SCHEDULE OF ACCOUNTS RECEIVABLES - RELATED PARTY
| |
| | | |
| | |
| |
As of | |
| |
June 30, 2022 | | |
December 31, 2021 | |
| |
| | |
| |
Accounts receivable | |
$ | 214 | | |
$ | - | |
Allowance for doubtful accounts | |
| - | | |
| - | |
Total accounts receivable | |
$ | 214 | | |
$ | - | |
6.
INVENTORIES
Inventories
consist of the following:
SCHEDULE OF INVENTORIES
| |
| | | |
| | |
| |
As of | |
| |
June 30, 2022 | | |
December 31, 2021 | |
| |
| | | |
| | |
Finished goods | |
$ | 346,744 | | |
$ | 375,535 | |
For
the three months ended June 30, 2022, and 2021, the Company did not recognize any inventory write-downs. For the six months ended June
30, 2022, and 2021, the Company recognized inventory write-downs of $0 and $36,636 respectively.
7.
PREPAYMENTS AND DEPOSITS
SCHEDULE OF PREPAID EXPENSES AND DEPOSITS
| |
| | | |
| | |
| |
As of | |
| |
June 30, 2022 | | |
December 31, 2021 | |
| |
| | |
| |
Receivables from sales distributors | |
$ | 58,477 | | |
$ | 115,379 | |
Deposits to suppliers | |
| 240,592 | | |
| 301,233 | |
Subtotal | |
| 299,069 | | |
| 416,612 | |
Less: Provision for doubtful accounts | |
| (120,372 | ) | |
| (121,095 | ) |
Total | |
$ | 178,697 | | |
$ | 295,517 | |
Movements
of allowance for doubtful accounts are as follows:
SCHEDULE OF CHANGES IN ALLOWANCE FOR DOUBTFUL ACCOUNTS
| |
| | | |
| | |
| |
For
the six
months
ended
June
30, 2022 | | |
For
the
year
ended
December
31, 2021 | |
| |
| | |
| |
Beginning balance | |
$ | 121,095 | | |
$ | - | |
Addition | |
| - | | |
| 121,514 | |
Write off | |
| - | | |
| - | |
Exchange rate effect | |
| (723 | ) | |
| (419 | ) |
Ending balance | |
$ | 120,372 | | |
$ | 121,095 | |
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
8.
PROPERTY AND EQUIPMENT, NET
Property
and equipment, net consist of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT, NET
| |
| | | |
| | |
| |
As of | |
| |
June 30, 2022 | | |
December 31, 2021 | |
| |
| | |
| |
Computer and office equipment | |
$ | 78,885 | | |
$ | 82,298 | |
Furniture & fixtures | |
| 116,004 | | |
| 122,185 | |
Leasehold improvements | |
| 192,323 | | |
| 202,570 | |
Vehicle | |
| 93,709 | | |
| 98,702 | |
Subtotal | |
| 480,921 | | |
| 505,755 | |
Less: accumulated depreciation | |
| (311,006 | ) | |
| (289,956 | ) |
Total | |
$ | 169,915 | | |
$ | 215,799 | |
Depreciation
expense for the three months ended June 30, 2022 and 2021 amounted to $17,954 and $19,009, respectively. Depreciation expense for the
six months ended June 30, 2022 and 2021 amounted to $36,661 and $38,179, respectively.
9.
INTANGIBLE ASSETS, NET
Intangible
assets, net, consist of the following:
SCHEDULE OF INTANGIBLE ASSETS, NET
| |
| | | |
| | |
|
|
As
of |
|
|
|
June
30, 2022 |
|
|
December
31, 2021 |
|
|
|
|
|
|
|
|
Computer software |
|
$ |
32,710 |
|
|
$ |
34,453 |
|
Less: accumulated amortization |
|
|
(30,109 |
) |
|
|
(30,793 |
) |
Total |
|
$ |
2,601 |
|
|
$ |
3,660 |
|
Amortization
expense for the three months ended June 30, 2022 and 2021 amounted to $439 and $496, respectively. Amortization expense for the six months
ended June 30, 2022 and 2021 amounted to $897 and $1,006, respectively.
10.
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 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 |
|
|
|
|
(v) |
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. |
|
|
|
|
(vi) |
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 $1.62 per share
from Greenpro Capital Corp as a dividend income since Greenpro Capital Corp previously owned these shares. |
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
10.
INVESTMENT IN MARKETABLE SECURITIES (Continued)
SCHEDULE OF INVESTMENT IN MARKETABLE SECURITIES
| |
| | | |
| | |
| |
As of | |
| |
June 30, 2022 | | |
December 31, 2021 | |
| |
| | |
| |
Cost of investment | |
$ | 89,001 | | |
$ | 577,035 | |
Dividend income from Greenpro Capital Corp. | |
| - | | |
| 18,939 | |
Unrealized holding loss | |
| (52,889 | ) | |
| (505,231 | ) |
Exchange rate effect | |
| (405 | ) | |
| (1,742 | ) |
Investment in marketable securities | |
$ | 35,707 | | |
$ | 89,001 | |
11.
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.
SCHEDULE
OF INVESTMENT IN NON MARKETABLE SECURITIES
|
|
As
of |
|
Phoenix Plus
Corporation |
|
June
30, 2022 |
|
|
December
31, 2021 |
|
|
|
|
|
|
|
|
Cost of investment |
|
$ |
1,500 |
|
|
$ |
1,500 |
|
|
|
|
|
|
|
|
|
|
Investment in non-marketable
securities |
|
$ |
1,500 |
|
|
$ |
1,500 |
|
12.
OTHER PAYABLES AND ACCRUED LIABILITIES
SCHEDULE OF OTHER PAYABLES AND ACCRUED LIABILITIES
| |
| | | |
| | |
| |
As of | |
| |
| June 30, 2022 | | |
| December 31, 2021 | |
Professional fees | |
$ | 142,622 | | |
$ | 436,541 | |
Promotion expenses | |
| 40,360 | | |
| 36,024 | |
Payroll | |
| 54,018 | | |
| 22,669 | |
Commissions | |
| 247,645 | | |
| 219,721 | |
Tax penalty | |
| 75,000 | | |
| 75,000 | |
Others | |
| 77,388 | | |
| 68,400 | |
Total | |
$ | 637,033 | | |
$ | 858,355 | |
Certain
amounts have been reclassified to conform to current period presentation.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
13.
RELATED PARTY BALANCES AND TRANSACTIONS
Related
party balances
Accounts
payable – related parties
SCHEDULE OF RELATED PARTIES
Name of Related Party | |
Relationship | |
Nature | |
As of June 30, 2022 | | |
As of December 31, 2021 | |
| |
| |
| |
| | |
| |
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 | |
$ | 14,322 | | |
$ | - | |
DSY Wellness and Longevity Center Sdn Bhd (“DSYWLC”) | |
Mr. Yap Foo Ching (Steve Yap), a director of DSY International Wellness Sdn Bhd is also a director of DSYWLC | |
Purchases of products for the provision of complementary health therapies | |
| 85 | | |
| - | |
Total | |
| |
| |
$ | 14,407 | | |
$ | - | |
Amount
due from related parties
Name
of Related Party | |
Relationship | |
Nature | |
As
of June
30, 2022 | | |
As
of December 31, 2021 | |
| |
| |
| |
| | |
| |
Agape
ATP (Asia) Limited (“AATP Asia”) | |
Mr.
How Kok Choong, the CEO and director of the Company is also the sole shareholder and director of AATP Asia | |
Expenses
paid for AATP Asia | |
$ | - | | |
$ | 2,214 | |
Hostastay
Sdn. Bhd. (“Hostastay”) | |
Mr. How
Kok Choong, the CEO and director of the Company is also the director of Hostastay. Mr. How Kok Choong ceased to be the director of
Hostastay as of April 21, 2021 | |
Sublease
rent due from Hostastay | |
| 4,548 | | |
| 4,790 | |
Total | |
| |
| |
$ | 4,548 | | |
$ | 7,004 | |
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
13.
RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
Related
party balances
Amount
due to related parties
Name of Related Party | |
Relationship | |
Nature | |
As of June 30, 2022 | | |
As of December 31, 2021 | |
| |
| |
| |
| | |
| |
DSY Wellness and Longevity Center Sdn Bhd (“DSYWLC”) | |
Mr. Yap Foo Ching (Steve Yap), a director of DSY International Wellness Sdn Bhd is also a director of DSYWLC | |
Rental due and expenses paid by DSYWLC | |
$ | 2,015 | | |
$ | - | |
DSY Beauty Sdn Bhd (“DSY Beauty”) | |
The directors and shareholders of DSY Beauty are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd | |
Purchase of
beauty products | |
| 67 | | |
| - | |
Total | |
| |
| |
$ | 2,082 | | |
$ | - | |
Related
party transactions
Purchases
Name of Related | |
| |
| |
For the three months ended | |
Party | |
Relationship | |
Nature | |
June 30, 2022 | | |
June 30, 2021 | |
| |
| |
| |
| | |
| |
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 | |
$ | 63,142 | | |
$ | - | |
DSY Beauty Sdn Bhd (“DSY Beauty”) | |
The directors and shareholders of DSY Beauty are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd | |
Purchases of beauty products | |
| 395 | | |
| - | |
DSY Wellness & 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 | |
| |
| |
$ | 63,664 | | |
$ | - | |
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
13.
RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
Related
party transactions
Purchases
Name of Related | |
| |
| |
For the six months ended | |
Party | |
Relationship | |
Nature | |
June 30, 2022 | | |
June 30, 2021 | |
| |
| |
| |
| | |
| |
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 | |
$ | 74,909 | | |
$ | - | |
DSY Beauty Sdn Bhd (“DSY Beauty”) | |
The directors and shareholders of DSY Beauty are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd | |
Purchases of beauty products | |
| 395 | | |
| - | |
DSY Wellness & 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 | |
| |
| |
$ | 75,431 | | |
$ | - | |
AGAPE ATP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency expressed in United States Dollars
(“US$”), except for number of shares)
13. RELATED PARTY BALANCES AND TRANSACTIONS
(Continued)
Related party transactions
Other
purchases
Name of Related | |
| |
| |
For the three months ended | |
Party | |
Relationship | |
Nature | |
June 30, 2022 | | |
June 30, 2021 | |
| |
| |
| |
| | |
| |
DSY Beauty Sdn Bhd (“DSY Beauty”) | |
The directors and shareholders of DSY Beauty are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd | |
Purchases of beauty products | |
$ | 69 | | |
$ | - | |
Total | |
| |
| |
$ | 69 | | |
$ | - | |
Name of Related | |
| |
| |
For the six months ended | |
Party | |
Relationship | |
Nature | |
June 30, 2022 | | |
June 30, 2021 | |
| |
| |
| |
| | |
| |
DSY Beauty Sdn Bhd (“DSY Beauty”) | |
The directors and shareholders of DSY Beauty are related parties to Mr. Yap Foo Ching (Steve Yap), a director of DSY Wellness International Sdn Bhd | |
Purchases of beauty products | |
$ | 69 | | |
$ | - | |
Total | |
| |
| |
$ | 69 | | |
$ | - | |
Commission
Name of Related | |
| |
| |
For the three months ended | |
Party | |
Relationship | |
Nature | |
June 30, 2022 | | |
June 30, 2021 | |
| |
| |
| |
| | |
| |
Mr. How Kok Choong | |
Mr. How Kok Choong, the CEO and director of the Company | |
Commission expense | |
$ | 2,443 | | |
$ | - | |
Total | |
| |
| |
$ | 2,443 | | |
$ | - | |
Name of Related | |
| |
| |
For the six months ended | |
Party | |
Relationship | |
Nature | |
June 30, 2022 | | |
June 30, 2021 | |
| |
| |
| |
| | |
| |
Mr. How Kok Choong | |
Mr. How Kok Choong, the CEO and director of the Company | |
Commission expense | |
$ | 5,148 | | |
$ | - | |
Total | |
| |
| |
$ | 5,148 | | |
$ | - | |
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
13.
RELATED PARTY BALANCES AND TRANSACTIONS (Continued)
Related
party transactions
Office
rental expense
Name of Related | |
| |
| |
For the three months ended | |
Party | |
Relationship | |
Nature | |
June 30, 2022 | | |
June 30, 2021 | |
| |
| |
| |
| | |
| |
DSY Wellness and Longevity Center Sdn Bhd (“DSYWLC”) | |
Mr. Yap Foo Ching (Steve Yap), a director of DSY International Wellness Sdn Bhd is also a director of DSYWLC | |
Office rental expense
| |
$ | 5,602 | | |
$ | - | |
Total | |
| |
| |
$ | 5,602 | | |
$ | - | |
Name of Related | |
| |
| |
For the six months ended | |
Party | |
Relationship | |
Nature | |
June 30, 2022 | | |
June 30, 2021 | |
| |
| |
| |
| | |
| |
DSY Wellness and Longevity Center Sdn Bhd (“DSYWLC”) | |
Mr. Yap Foo Ching (Steve Yap), a director of DSY International Wellness Sdn Bhd is also a director of DSYWLC | |
Office rental expense
| |
$ | 11,203 | | |
$ | - | |
Total | |
| |
| |
$ | 11,203 | | |
$ | - | |
Related
party transactions
Other
income
Name of Related | |
| |
| |
For the three months ended | |
Party | |
Relationship | |
Nature | |
June 30, 2022 | | |
June 30, 2021 | |
| |
| |
| |
| | |
| |
Hostastay Sdn. Bhd. (“Hostastay”) | |
Mr. How Kok Choong, the CEO and director of the Company is also the director of Hostastay. Mr. How Kok Choong ceased to be the director of Hostastay as of April 21, 2021 | |
Sublease rental income due from Hostastay | |
$ | - | | |
$ | 1,458 | |
Total | |
| |
| |
$ | - | | |
$ | 1,458 | |
Name of Related | |
| |
| |
For the six months ended | |
Party | |
Relationship | |
Nature | |
June 30, 2022 | | |
June 30, 2021 | |
| |
| |
| |
| | |
| |
Hostastay Sdn. Bhd. (“Hostastay”) | |
Mr. How Kok Choong, the CEO and director of the Company is also the director of Hostastay. Mr. How Kok Choong ceased to be the director of Hostastay as of April 21, 2021 | |
Sublease rental income due from Hostastay | |
$ | - | | |
$ | 2,929 | |
Total | |
| |
| |
$ | - | | |
$ | 2,929 | |
14.
STOCKHOLDERS’ EQUITY
Preferred
stock
As
of June 30, 2022, and December 31, 2021, there were 200,000,000 preferred stocks authorized but none were issued and outstanding.
Common
stock
As
of June 30, 2022, and December 31, 2021, there were 1,000,000,000 common stocks authorized, 75,452,012 and 290,460,047 shares issued
and outstanding, respectively.
A
share forfeiture agreement (the “Share Forfeiture Agreement”) dated January 20, 2022, between the Company and Mr. How Kok
Choong, the CEO and director of the Company, pursuant to which Mr. How Kok Choong agreed to forfeit 215,008,035 shares of common stock
of the Company. As a result, the outstanding shares was reduced by 215,008,035 shares of common stock.
There
were no stock options, warrants or other potentially dilutive securities outstanding as of June 30, 2022 and December 31, 2021.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
15.
NON-CONTROLLING INTEREST
The
Company’s non-controlling interest consists of the following:
SCHEDULE OF NON CONTROLLING INTEREST
| |
| | | |
| | |
| |
As of | |
| |
June 30, 2022 | | |
December 31, 2021 | |
DSY Wellness: | |
| | | |
| | |
Paid-in capital | |
$ | 97 | | |
$ | 97 | |
Retained earnings (Accumulated deficit) | |
| 10,773 | | |
| (436 | ) |
Accumulated other comprehensive (loss) income | |
| (269 | ) | |
| 3 | |
Non Controlling interest Gross | |
| 10,601 | | |
| (336 | ) |
ASL | |
| - | | |
| - | |
Total | |
$ | 10,601 | | |
$ | (336 | ) |
16.
INCOME TAXES
The
United States and foreign components of loss before income taxes were comprised of the following:
SCHEDULE OF COMPONENTS OF INCOME/(LOSS) BEFORE INCOME TAX
| |
| | | |
| | | |
| | | |
| | |
| |
For the three months ended
June 30, | | |
For the six months ended
June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
Tax jurisdictions from: | |
| | | |
| | | |
| | | |
| | |
Local – United States | |
$ | (187,379 | ) | |
$ | (96,370 | ) | |
$ | (293,804 | ) | |
$ | (204,295 | ) |
Foreign – Malaysia | |
| (189,395 | ) | |
| (177,983 | ) | |
| (354,459 | ) | |
| (469,675 | ) |
Foreign – Hong Kong | |
| (27,178 | ) | |
| (363,901 | ) | |
| (45,847 | ) | |
| (291,814 | ) |
The
provision for income taxes consisted of the following:
SCHEDULE OF PROVISION FOR INCOME TAX
| |
| | | |
| | | |
| | | |
| | |
| |
For the three months ended
June 30, | | |
For the six months ended
June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
Current: | |
| | | |
| | | |
| | | |
| | |
- Local | |
$ | - | | |
$ | (22,205 | ) | |
$ | - | | |
$ | (22,205 | ) |
- Foreign | |
| (392 | ) | |
| (14,461 | ) | |
| (8,680 | ) | |
| (41,185 | ) |
| |
| | | |
| | | |
| | | |
| | |
Deferred: | |
| | | |
| | | |
| | | |
| | |
- Local | |
| - | | |
| - | | |
| - | | |
| - | |
- Foreign | |
| - | | |
| 32,695 | | |
| - | | |
| 53,299 | |
Provision for income tax | |
$ | (392 | ) | |
$ | (3,971 | ) | |
$ | (8,680 | ) | |
$ | (10,091 | ) |
The
effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad
range of income tax rates. The Company and its subsidiary that operate in various countries: United States, Malaysia (including Labuan)
and Hong Kong that are subject to taxes in the jurisdictions in which they operate, as follows:
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
16.
INCOME TAXES (Continued)
United
States of America
Agape
ATP Corporation was incorporated in the State of Nevada and is subject to the tax laws of the United States of America with a corporate
tax rate of 21% on its taxable income. Agape ATP Corporation also subject to controlled foreign corporations Subpart F income (“Subpart
F”) tax, which is a tax primarily on passive income from controlled foreign corporations with a tax rate of 35%. In addition, the
Tax Cuts and Jobs Act imposed a global intangible low-taxed income (“GILTI”) tax, which is a tax on certain off-shore earnings
at an effective rate of 10.5% for tax years (50% deduction of the current enacted tax rate of 21%) with a partial offset for 80% foreign
tax credits. If the foreign tax rate is 13.125% or higher, there will be no U.S. corporate tax after the 80% foreign tax credits are
applied.
For
the three and six months ended June 30, 2022 and 2021, the Company’s foreign subsidiaries did not generate any income that are
subject to Subpart F tax and GILTI tax.
As
of June 30, 2022 and December 31, 2021, the operations in the United States of America incurred approximately $914,000 and $620,000,
respectively, of cumulative net operating losses (“NOL”) which can be carried forward to offset future taxable income or
Subpart F and GILTI taxes. These balances can be carried forward indefinitely. The deferred tax valuation allowance as of June 30, 2022
and December 31, 2021 were approximately $192,000 and $130,000, respectively.
Malaysia
Changes
to the Labuan Business Activity Tax Act (LBATA) 1990 which was gazetted and came into operation on January 1, 2019 mandates companies
incorporated in Labuan to satisfy the “substantial activity requirements” to qualify for the preferential tax rate of 3%
on net audited profit. Subsequently, on April 29, 2020, a circular setting out revisions to the “substantial activity requirements”
was issued. As Agape ATP Corporation did not maintain a permanent establishment in Labuan, and therefore did not satisfy the said requirements,
the company was subjected to tax at 24% on its net audited profit. On June 11, 2021, Agape ATP Corporation made an irrevocable election
to be taxed under the Malaysian Income Tax Act 1967 as the elected tax regime is more tax efficient to the entity compare to LBATA.
Agape
Superior Living Sdn Bhd, Agape S.E.A Sdn Bhd., Wellness ATP International Holdings Sdn Bhd. and DSY Wellness International Sdn. Bhd.
are governed by the income taxes laws of Malaysia and the income taxes provision in respect of operations in Malaysia is calculated at
the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect
thereof. Under the Income Tax Act of Malaysia, enterprises that incorporated in Malaysia are usually subject to a unified 24% enterprise
income taxes rate while preferential tax rates, tax holidays and even tax exemption may be granted on case-by-case basis. The tax rate
for small and medium sized companies (generally companies incorporated in Malaysia with paid-in capital of RM 2,500,000 or less) is 17%
for the first RM 600,000 (or approximately $150,000) for the three months ended June 30, 2022 and 2021, with the remaining balance being
taxed at the 24% rate.
As
of June 30, 2022 and December 31, 2021, the operations in Malaysia incurred approximately $1,311,000 and $946,000, respectively, of cumulative
net operating losses (“NOL”) which can be carried forward to offset future taxable income. Approximately $944,000 of the
net operating loss carry forwards will expire in 2028, if unutilized. The deferred tax valuation allowance as of June 30, 2022 and December
31, 2021 were approximately $309,000 and $227,000, respectively.
Hong
Kong
Agape
ATP International Holding (HK) Limited is subject to Hong Kong Profits Tax, which is charged at the statutory income rate of 16.5% on
its assessable income derived from Hong Kong. Business income derived or business expenses incurred outside the Special Administrative
Region is not subject to Hong Kong Profits Tax or deduction. As Agape ATP International Holding (HK) Limited is an investment holding
company without operating activities, the net operating loss for Hong Kong is considered immaterial.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
16.
INCOME TAXES (Continued)
The
following table sets forth the significant components of the aggregate deferred tax assets of the Company:
SCHEDULE OF DEFERRED TAX ASSETS
| |
| | | |
| | |
| |
As of | |
| |
June 30, 2022 | | |
December 31, 2021 | |
Deferred tax assets: | |
| | | |
| | |
Net operating loss carry forwards in U.S. | |
$ | 191,976 | | |
$ | 130,277 | |
Net operating loss carry forwards in Malaysia | |
| 309,415 | | |
| 227,106 | |
Less: valuation allowance | |
| (501,391 | ) | |
| (357,383 | ) |
Deferred tax liabilities: | |
| | | |
| | |
Depreciation | |
| (17,975 | ) | |
| (15,574 | ) |
Deferred tax liabilities, net | |
$ | (17,975 | ) | |
$ | (15,574 | ) |
Uncertain
tax positions
The
Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical
merits, and measure the unrecognized benefits associated with the tax positions. As of June 30, 2022 and December 31, 2021, the Company
did not have any significant unrecognized uncertain tax positions. The Company did not incur interest and penalties tax for the three
and six months ended June 30, 2022 and 2021.
17.
CONCENTRATIONS OF RISKS
(a)
Major customers
For
the three months ended June 30, 2022, and 2021, no customer accounted for 10% or more of the Company’s total revenues. For the
six months ended June 30, 2022, and 2021, no customer accounted for 10% or more of the Company’s total revenues.
As
of June 30, 2022, one individual customer accounted for 100.0% of the Company’s balance of accounts receivable. There was no accounts
receivable balance as of December 31, 2021.
(b)
Major vendors
For
the three months ended June 30, 2022, three vendors accounted for approximately 70%, 11% and 17% of the Company’s total purchases,
respectively. For the six months ended June 30, 2022, two vendors accounted for approximately 46% and 43% of the Company’s total
purchases, respectively. For the three and six months ended June 30, 2021, one vendor accounted for 100% of the Company’s total
purchases.
As
of June 30, 2022, three vendors accounted for approximately 36%, 40% and 20% of the Company’s total balance of accounts payable,
respectively. The vendor which accounted for 40% of the Company’s total balance of accounts payable is a related company, i.e.
CTA Nutriceuticals (Asia) Sdn Bhd. As of December 31, 2021, one vendor accounted for 100% of the total balance of accounts payable.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
17.
CONCENTRATIONS OF RISKS (Continued)
(c)
Commission Expenses to Sales Distributors and Stockists
For
the three months ended June 30, 2022, one sales distributor accounted for 10% of the Company’s commission expense. For the three
months ended June 30, 2021, one sales distributor accounted for approximately 21.9% of the Company’s commission expense.
For
the six months ended June 30, 2022, no sales distributor accounted for 10% or more of the Company’s commission expense. For the
six months ended June 30, 2021, one distributor accounted for approximately 16.2% of the Company’s total purchases.
(d)
Credit risk
Financial
instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. As of June 30,
2022, and December 31, 2021, $666,779 and $554,864 were deposited with financial institutions, respectively, $319,994 and $295,761 of
these balances are not covered by deposit insurance, respectively. While management believes that these financial institutions are of
high credit quality, it also continually monitors their credit worthiness.
Financial
instruments that are potentially subject to credit risk consist principally of accounts receivable. The Company believes the concentration
of credit risk in its account receivable is substantially mitigated by its ongoing credit evaluation process and relatively short collection
terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful
accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. Historically,
the Company did not have any bad debt on its account receivable.
(e)
Exchange rate risk
The
Company cannot guarantee that the current exchange rate will remain steady; therefore, there is a possibility that the Company could
post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower
profit depending on exchange rate of RM and HK$ converted to US$ on that date. The exchange rate could fluctuate depending on changes
in political and economic environments without notice.
18.
COMMITMENTS AND CONTINGENCIES
Lease
commitments
On
April 1, 2020, the Company adopted ASC 842 for ASL’s office space lease and sales and training center as the lease commencement
date upon the acquisition of ASL. The Company recognized lease liabilities of approximately $490,000, with a corresponding right-of-use
(“ROU”) asset in the same amount based on the present value of the future minimum rental payments of the lease, using an
effective interest rate of 5.5%, which was determined using the Company’s estimated incremental borrowing rate.
On
May 31, 2021, the Company entered into two separate two-year leases extension with the modified lease expiring May 31, 2023 for its office
space and expiring August 31, 2023 for its training center. The lease modification required the Company to re-measure the ROU assets
and lease liabilities based on the modified leases. The Company recognized a reduction of $3,250 in ROU assets and lease liabilities
upon lease modifications based on the present value of the future minimum rental payments of the lease, using an effective interest rate
of 5.5%, which was determined using the Company’s estimated incremental borrowing rate.
The
weighted remaining term of the lease is approximately 1.17 years.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
18.
COMMITMENTS AND CONTINGENCIES (Continued)
The
five-year maturity of the Company’s operating lease liabilities is as follow:
SCHEDULE OF LEASE COMMITMENTS
| |
| | |
Twelve Months Ending June 30, | |
Operating lease
liabilities | |
| |
| |
2023 | |
$ | 155,474 | |
2024 | |
| 10,898 | |
Thereafter | |
| - | |
Total lease payments | |
| 166,372 | |
Less: interest | |
| (4,987 | ) |
Present value of lease liabilities | |
$ | 161,385 | |
The
Company also leases one office and operation center, and one shophouse with an expiring term of twelve months or less, which were classified
as operation leases. Since the lease terms for these leases were twelve months or less, a lessee is permitted to elect not to recognize
lease assets and liabilities. The Company has elected not to recognize lease assets and liabilities on these leases. As of June 30, 2022,
the Company’s commitment for minimum lease payment under these operating leases within the next twelve months were $11,416.
Rent
expense for the three months ended June 30, 2022 and 2021 was $54,237 and $45,560, respectively. Rent expense for the six months ended
June 30, 2022, and 2021 was $98,312 and $91,521, respectively.
Contingencies
Legal
From
time to time, the Company is party to certain legal proceedings, as well as certain asserted and un-asserted claims. Amounts accrued,
as well as the total amount of reasonably possible losses with respect to such matters, individually and in the aggregate, are not deemed
to be material to the consolidated financial statements.
COVID-19
Since
the declaration of the COVID-19 pandemic on March 11, 2020 by the World Health Organization or WHO, Malaysia has been put through various
stages of lockdowns such as (1) full movement control orders (“MCO”), under which, quarantines, travel restrictions, and
the temporary closure of stores and facilities in Malaysia were made mandatory, (2) MCO were eased to a Conditional Movement Control
Order (“CMCO”) where most business sectors were allowed to operate under strict rules and Standard Operating Procedures mandated
by the government of Malaysia and (3) CMCO were further relaxed to Recovery Movement Control Order (“RMCO”). On January 12,
2021, due to a resurgence of COVID-19 cases, the Malaysian government declared a state of emergency nationwide to combat COVID-19. Intermittent
lockdowns were imposed in various states and districts in the country. February 2021 marked a significant month for Malaysia as all frontline
staff of the country, which comprised those in healthcare, police, the Volunteers Department of Malaysia, the Fire and Rescue Department
of Malaysia and civil defense sectors were vaccinated. On February 16, 2021, Prime Minister Tan Sri Muhyiddin Yassin announced that a
National COVID-19 Immunization Plan will be implemented for one year after February 2021, which 80% of the Malaysia population will be
vaccinated to achieve herd immunization.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
18.
COMMITMENTS AND CONTINGENCIES (Continued)
On
March 5, 2021, lockdowns in most part of the country was eased to a CMCO, nevertheless, COVID-19 cases in the country continue to rise.
On May 12, 2021, Malaysia was again put under a full lockdown nationwide, until the earlier of (i) daily COVID-19 cases infection of
the country fall below 4,000; (ii) intensive Unit Care, or ICU, wards start operating at a moderate level; or (iii) 10% of the Malaysian
population is fully vaccinated. The country was administering over 400,000 doses of COVID-19 vaccines daily. On July 17, 2021, the full
lockdown was slightly eased as 13.9% of the Malaysian population was fully vaccinated, with another 30% having received at least one
dose of the vaccine. The COVID-19 situation in the country showed no sign of abating. Kuala Lumpur and Selangor remained the epicenter
of the latest wave of infections. Total COVID-19 cases in the country surpassed the one million mark on July 25, 2021, and daily cases
hit a record high of 24,599 on August 26, 2021. Despite the deteriorating COVID-19 state, the government lifted Kuala Lumpur from Enhanced
Movement Control Order (“EMCO”) ahead of schedule and ended the nationwide state of emergency on August 1, 2021. Parliament
met for the first time this year on July 26, 2021. Malaysia pressed on with its National COVID-19 Immunization Plan, fast inoculating
of its residents. COVID-19 infections started to drop below the 10,000 mark daily, beginning October 3, 2021. Effective October 11, 2021,
interstate and international travel restrictions were lifted for residents who had been fully vaccinated against COVID-19 as the country
achieved its target of inoculating 90% of its adult population.
Malaysia
officially transitioned to the endemic phase of COVID-19 effective April 1, 2022. Restrictions on businesses and people are minimal.
Meanwhile, the government continues to encourage inoculation for those between the ages of 5 to 11 years and its adolescent group which
comprised those between the ages 12 to 17. Adults who have been fully vaccinated, i.e. received two doses of the COVID-19 vaccine are
encouraged to take booster shots.
Substantially
all of our revenues are concentrated in Malaysia. Consequently, our results of operations will likely be adversely, and may be materially,
affected, to the extent that the COVID-19 or any other epidemic harms the Malaysia and global economy in general. Any potential impact
to our results will depend on, to a large extent, future developments and new information that may emerge regarding the duration and
severity of the COVID-19 and the actions taken by government authorities and other entities to contain the COVID-19 or treat its impact,
almost all of which are beyond our control. Potential impacts include, but are not limited to, the following:
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temporary closure of offices,
travel restrictions, financial impact of the Company’s customers or suspension supplies may be negatively affected, and could
continue to negatively affect the demand for the Company’s product; |
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● |
the Company may have to
provide significant sales incentives to its customers during the outbreak, which may in turn materially adversely affect its financial
condition and operating results; and |
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● |
any disruption of the Company’s
supply chain, logistics providers or customers could adversely impact its business and results of operations, including causing the
Company or its suppliers to cease manufacturing for a period of time or materially delay delivery to its customers, which may also
lead to loss of its customers. |
Because
of the uncertainty surrounding the COVID-19 outbreak, the financial impact related to the outbreak of and response to the COVID-19 cannot
be reasonably estimated at this time. There is no guarantee that the Company’s total revenues will grow or remain at similar levels
year over year in 2022 and beyond.
19.
SUBSEQUENT EVENT
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 June 30, 2022, the Company
has an investment of 116,646 common stock of Greenpro Capital Corp. valued at $24,853.45. The Company’s investment of 116,646 common
stock of Greenpro Capital Corp. shall be reduced to 11,665 as a result of the reverse stock split. However, the value of the Company’s
investment in Greenpro Capital Corp. as at June 30,2022 remained unchanged despite the reduction in the number of common stock.