Agape ATP Corp

Previous wording

The information contained in this quarter report on Form 10-Q is intended to update the information contained in our Form 10-K, dated March 31, 2024, for the year ended December 31, 2023 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our unaudited condensed consolidated financial statements and the notes to the unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q.

Current wording

The information contained in this quarterly report on Form 10-Q is intended to update the information contained in our Form 10-K, dated April 1, 2024, for the year ended December 31, 2023 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our unaudited condensed consolidated financial statements and the notes to the unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q.

Previous wording

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.

Current wording

Agape ATP Corporation, a Nevada corporation (“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.

Previous wording

The Company is positioning itself for sustainable growth by diversifying its operations into the domain of renewable energy. This initiative is founded upon our commitment to environmental responsibility, long-term value creation, and proactive adaptation to global energy trends. On January 3, 2024, the Company formed an equity method investment entity, OIE ATPC Holdings (M) Sdn. Bhd. with Oriental Industries Enterprise (M) Sdn Bhd (“OIE”), which the Company and OIE each own 50% of the equity interest. On March 14, 2024, the Company acquired 50% of OIE ATPC Holdings (M) Sdn Bhd equity interest from OIE, subsequently the entity becomes a wholly owned subsidiary of the Company.

Current wording

The Company is positioning itself for sustainable growth by diversifying its operations into the domain of renewable energy. This initiative is founded upon our commitment to environmental responsibility, long-term value creation, and proactive adaptation to global energy trends. On January 3, 2024, the Company formed an equity method investment entity, OIE ATPC Holdings (M) Sdn. Bhd. with Oriental Industries Enterprise (M) Sdn Bhd (“OIE”), which the Company and OIE each own 50% of the equity interest. On March 14, 2024, the Company acquired 50% of OIE ATPC Holdings (M) Sdn Bhd equity interest from OIE, subsequently the entity becomes a wholly owned subsidiary of the Company. On June 7, 2024, the entity changed its name to ATPC Green Energy Sdn Bhd.

Previous wording

Cost of revenue typically comprise of freight-in, cost of goods purchased, packing materials and services acquired.

Current wording

Cost of revenue typically comprise of freight-in, cost of goods and services purchased, packing materials and services acquired.

Previous wording

Gross profit for the three months ended March 31, 2024 amounted to $203,420, represented a gross margin of 63.8% as compared to $252,408 for the three months ended March 31, 2023, equivalent to a gross margin of 66.3%. The decrease in gross margin was predominantly due to lower gross margin sustained by the Company’s network marketing business and the varying type of health therapies offered, gross margin associated with the provision of complementary health therapies.

Current wording

Gross profit for the three months ended June 30, 2024 amounted to $193,561, represented a gross margin of approximately 61.8% as compared to $196,004 for the three months ended June 30, 2023, equivalent to a gross margin of approximately 64.5%. The decrease in gross margin was predominantly due to lower gross margin sustained by the Company’s network marketing business and the varying type of health therapies offered, gross margin associated with the provision of complementary health therapies.

Previous wording

Our operating expenses consist of selling expenses, commission expenses and general and administrative expenses.

Current wording

Our operating expenses consist of selling expenses, commission expenses and general and administrative expenses (as defined below). Total operating expenses were $647,146 for the three months ended June 30, 2024, increased by $91,610 or approximately 16.5% from $555,537 for the three months ended June 30, 2023.

Previous wording

Selling expenses for the three months ended March 31, 2024 amounted to $50,348 as compared to $76,098 for the three months ended March 31, 2023, represented a decrease of $25,750 or approximately 33.8%, mainly due to the decrease in staff salaries. The Company’s selling expenses typically comprise ofsalaries and benefits expenses which represented approximately 80% to 85%of total selling expenses, credit card processing fees and promotional expenses.

Current wording

Selling expenses for the three months ended June 30, 2024 amounted to $38,008 as compared to $64,126 for the three months ended June 30, 2023, a decrease of $26,118, or approximately 40.7%. The Company’s selling expenses typically comprise salaries and benefits expenses which represented approximately 70% to 85% of total selling expenses, credit card processing fees and promotional expenses.

Previous wording

Commission expenses were $9,344 and $33,942 for the three months ended March 31, 2024 and 2023, respectively. The decrease in commission expenses was in line with the decrease in revenue.

Current wording

Commission expenses were $7,335 and $21,942 for the three months ended June 30, 2024 and 2023, respectively. The decrease in commission expenses was in line with the decrease in revenue in Company’s network marketing business.

Previous wording

G&A expenses for the three months ended March 31, 2024 amounted to $867,266, as compared to $596,253 for the three months ended March 31, 2023, represented an increase of $271,013 or approximately 45.5%. The increase in G&A expenses was mainly due to the salary incurred for one executive director and three independent directors, professional fees and the Nasdaq annual listing fees. The Company’s G&A expenses typically comprise ofsalaries and benefits expenses, rental expenses, professional expenses and depreciation expenses.

Current wording

G&A expenses for the three months ended June 30, 2024 amounted to $601,804, as compared to $469,469 for the three months ended June 30, 2023, an increase of $132,335, or approximately 28.2%. The Company’s G&A expenses typically comprise ofsalaries and benefits expenses, rental expenses, professional expenses and depreciation expenses. The increase in G&A expenses was mainly due to the salary incurred for one executive director and three independent directors, professional fees and the Nasdaq annual listing fees.

Previous wording

The net other income of $27,282 recorded during the three months ended March 31, 2024 comprised of foreign currency exchange loss of $842, unrealized holding gain on marketable securities of $1,173, other income of $4,142 and interest income of $22,809.

Current wording

The net other income of $31,110 generated during the three months ended June 30, 2024 comprised of foreign currency exchange gain of $62, unrealized holding loss on marketable securities of $6,639, other income, net of $18,355 and interest income of $19,332. The net other expenses of $22,355 incurred during the three months ended June 30, 2023 comprised foreign currency exchange loss of $33,700, unrealized holding gain on marketable securities of $3,790, other income, net of $4,134, interest income of $1,634 and gain on disposal of property and equipment of $1,787.

Previous wording

The Company recorded provision for income taxes of $6,838 and benefit of income taxes of $4,217 for the three months ended March 31, 2024 and 2023, respectively. Both the benefit of income taxes as well as the provision for income taxes were in respect of the Company’s operations in Malaysia.

Current wording

The Company recorded provision for income taxes of $9,840 and benefit of income taxes of $2,439 for the three months ended June 30, 2024 and 2023, respectively. Both the benefit of income taxes as well as the provision for income taxes were in respect of the Company’s operations in Malaysia.

Previous wording

Net loss increased by $269,019 from net loss of $434,075 for the three months ended March 31, 2023 to net loss of $703,094 for the three months ended March 31, 2024, mainly due to reasons as discussed above.

Current wording

Net loss increased by $52,867 from net loss of $379,449 for the three months ended June 30, 2023 to net loss of $432,315 for the three months ended June 30, 2024, mainly due to reasons as discussed above.

Previous wording

We generated revenue of $318,643, which comprised revenue from the Company’s network marketing business of $37,079 (approximately 11.6% of revenue); and revenue from the Company’s operations in the provision of complementary health therapies of $281,564 (approximately 88.4% of revenue) for the three months ended March 31, 2024 as compared to $380,767, which comprised revenue from the Company’s network marketing business of $138,859 (approximately 36.5% of revenue); and revenue from the Company’s operations in the provision of complementary health therapies of $241,908 (approximately 63.5% of revenue) for the three months ended March 31, 2023. Revenue from the Company’s network marketing business decreased significantly by $101,780 or approximately 73.3%. Revenue from the Company’s operations in the provision of complementary health therapies increased by $39,656 or approximately 16.4%. However, total revenue decreased by $62,124 or approximately 16.3%. The decrease was predominately due to the anticipated poor performance from the Company’s network marketing business owing to limited product range available as compared to the previous years, which limited the potential development of this revenue stream. The Company is in the process of introducing a whole new range of products for its networking marketing business.

Current wording

We generated revenue of $631,682, which comprised revenue from the Company’s network marketing business of $66,325 (approximately 10.5% of revenue); and revenue from the Company’s operations in the provision of complementary health therapies of $565,357 (approximately 89.5% of revenue) for the six months ended June 30, 2024 as compared to $684,703, which comprised revenue from the Company’s network marketing business of $229,521 (approximately 33.5% of revenue); and revenue from the Company’s operations in the provision of complementary health therapies of $455,182 (approximately 66.5% of revenue) for the six months ended June 30, 2023. Revenue from the Company’s network marketing business decreased significantly by $163,196, or approximately 71.1%. Revenue from the Company’s operations in the provision of complementary health therapies increased by $110,175, or approximately 24.2%. Total revenue decreased by $53,021, or approximately 7.7%. The decrease was predominately due to the anticipated poor performance from the Company’s network marketing business owing to limited product range available as compared to the previous years, which limited the potential development of this revenue stream.

Previous wording

Cost of revenue for the three months ended March 31, 2024 amounted to $115,223 as compared to $128,359 for the three months ended March 31, 2023, represented a decrease of $13,136 or approximately 10.2%. The decrease was due to the decrease in revenue in the Company’s network marketing business; and the varying gross profit margins in the Company’s operations in the provision of complementary health therapies.

Current wording

Cost of revenue for the six months ended June 30, 2024 amounted to $234,701 as compared to $236,289 for the six months ended June 30, 2023, a decrease of $1,588, or approximately 0.7%. The decrease was not in line with the decrease in revenue due to higher product cost in the Company’s network marketing business and the varying gross profit margins in the Company’s operations in the provision of complementary health therapies.

Previous wording

As of March 31, 2024, we had working capital of $3,428,530 consisting of cash and cash in bank of $244,045 and time deposits of $3,336,481 as compared to working capital of $4,113,614 consisted of cash and cash in bank of $510,019 and time deposits of $4,322,441 as of December 31, 2023. The Company had a net loss of $703,094 for the three months ended March 31, 2024 and accumulated deficits of $7,757,278 as of March 31, 2024 as compared to net loss of $2,109,935 for the year ended December 31, 2023 and accumulated deficits of $7,047,571 as of December 31, 2023.

Current wording

As of June 30, 2024, we had working capital deficit of $3,017,911, consisting of cash and cash in bank of $420,887 and time deposits of $2,740,097 as compared to working capital of $4,113,614 consisted of cash and cash in bank of $510,019 and time deposits of $4,322,441 as of December 31, 2023. The Company had a net loss of $1,135,410 for the six months ended June 30, 2024 and accumulated deficits of $8,199,977 as of June 30, 2024 as compared to net loss of $2,109,935 for the year ended December 31, 2023 and accumulated deficits of $7,047,571 as of December 31, 2023.

Previous wording

The following summarizes the key components of our cash flows for the three months ended March 31, 2024 and 2023:

Current wording

The following summarizes the key components of our cash flows for the six months ended June 30, 2024 and 2023:

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024 was $1,243,460, and were mainly comprised of the net loss of $703,094, the non-cash unrealized holding gain on marketable securities of $1,173, the increase in inventories of $10,246, increase in prepaid taxes of $2,797, the increase in prepayments and deposits of $354,839, decrease in accounts payables (including related parties) of $29,757, the decrease in customer deposits of $526, the payment of operating lease liabilities of $32,630, the decrease in other payables (including related parties) and accrued liabilities of $188,182. The net cash used in operating activities was mainly offset by non-cash depreciation and amortization expense of $13,779, amortization of operating right-of-use assets of $33,007, amortization of finance assets of $4,256, deferred tax benefit of $212, the decrease in accounts receivables of $16,227, the decrease in other receivables of $5,677 (including related parties), and the increase of income tax payable of $6,626.

Current wording

Net cash used in operating activities for the six months ended June 30, 2024 was $1,656,000, comprised of net loss of $1,135,410, the increase in inventories of $6,747, the increase in prepaid taxes of $3,979, the increase in prepayments and deposits of $344,434, the increase in other receivables $1,470, the decrease in account payable (including related parties) $35,488, the decrease in customer deposits of $12,683, the payment of operating lease liabilities of $65,880, the decrease in other payables (including related parties) and accrued liabilities of $210,524. The net cash used in operating activities was mainly offset by non-cash depreciation and amortization expense of $27,683, amortization of finance assets of $8,519, amortization of operating right-of-use assets of $66,509, unrealized holding loss on marketable securities of $5,466, deferred tax benefit of $212, provision for credit losses $16,960, the decrease in accounts receivables of $12,312, the decrease in other receivables (including related parties) of $6,723 and the increase of income tax payable of $16,231.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2023 was $272,555, comprised of net loss of $434,075, increase in accounts receivables of $1,211, decrease in accounts payable of $5,054, decrease in customer deposits of $18,176, payment of operating lease liabilities of $40,399, decrease in other payables and accrued liabilities of $125,763, decrease in other payable – a related party of $4,632, the non-cash income on unrealized holding gain on marketable securities of $4,920, deferred tax benefit of $4,217; offset by the non-cash depreciation and amortization expense of $21,422, amortization of operating right-of-use assets of $39,672, decrease in amount due from related parties of $9,595, decrease in inventories of $1,007, decrease in prepaid taxes of $254,128, decrease in prepayments and deposits of $23,584, and increase in accounts payable of $16,484.

Current wording

Net cash used in operating activities for the six months ended June 30, 2023 was $742,175, comprised of net loss of $813,524, increase in accounts receivables of $2,751, increase in amount due from related parties of $209, increase in inventories of $23,013, decrease in accounts payable –related parties of $4,758, decrease in customer deposits of $31,655, decrease in other payables and accrued liabilities of $228,812, payment of operating lease liabilities of $79,551, decrease in other payable –related parties of $3,457, the non-cash expenses on unrealized holding gain on marketable securities of $8,710, deferred tax benefit of $6,655, offset by the non-cash depreciation and amortization expense of $39,264, amortization of operating right-of-use assets of $78,333, decrease in prepaid taxes of $238,064, decrease in prepayments and deposits of $80,651 and increase in accounts payable of $24,608.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2023 was $38,768, which was due to purchase of equipment.

Current wording

Net cash used in investing activities for the six months ended June 30, 2024 was $3,567, which was due to purchase of equipment.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2024 was $899, which was the reduction of finance lease liability.

Current wording

Net cash used in financing activities for the six months ended June 30, 2024 was $2,847, which was the reduction of finance lease liability.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2023 was $6,961, which was due to the payment of deferred offering cost.

Current wording

Net cash used in financing activities for the six months ended June 30, 2023 was $22,861, which was due to the payment of deferred offering cost.

Previous wording

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. The Company did not recognize any inventory write-downs nor inventory write-off for the three months ended March 31, 2024 and 2023.

Current wording

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. The Company did not recognize any inventory write-downs nor inventory write-off for the six months ended June 30, 2024 and 2023.

Previous wording

As of March 31, 2024, the carrying amounts of operating right-of-use assets and property, plant and equipment amounted to $314,390 and $63,080 (March 31, 2023: $41,593 and 160,480). No impairment losses on operating right-of-use assets and property, plant and equipment were recognized as of March 31, 2024 and 2023.

Current wording

As of June 30, 2024, the carrying amounts of operating right-of-use assets and property and equipment amounted to $281,256 and $53,990 as compared to December 31, 2023, the carrying amounts of operating right-of-use assets and property and equipment amounted to $357,301 and $77,858, respectively. No impairment losses on operating right-of-use assets and property and equipment were recognized as of June 30, 2024 and 2023.

Previous wording

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 based on the health screening test contracts with customers, establishes the selling price for the health screening test and place order to the health screening center. The Company obtains control of the test report before they are delivered to the customers. The Company analyze the test report, provides consultations to the customers, bundle it with the Company’s products and services depending on the customer’s needs. 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.

Current wording

The Company carries out its Wellness program, where the Company’s products are bundled with health screening test. The health screening test is considered as separate performance obligations. The promises to deliver the health screening test report is separately identifiable, which is evidenced by the fact that the Company provides separate services of delivering the health screening test report.

Previous wording

In March 2023, the FASB issued ASU No. 2023-01 “Leases (Topic 842) Common Control Arrangements”. This ASU provides guidance in ASC Topic 842 that Leasehold improvements associated with common control leases should be (i) amortized by the lessee over the useful life of the leasehold improvements to the common control group, regardless of the lease term, as long as the lessee controls the use of the underlying asset through a lease, and (ii) accounted for as a transfer between entities under common control through an adjustment to equity if and when the lessee no longer controls the use of the underlying asset. The ASU 2023-01 is effective for reporting periods beginning after December 15, 2023. The adoption of this accounting standard has no material impact on the unaudited condensed consolidated financial statements for the three months ended and as at March 31, 2024.

Current wording

In March 2023, the FASB issued ASU No. 2023-01 “Leases (Topic 842) Common Control Arrangements”. This ASU provides guidance in ASC Topic 842 that Leasehold improvements associated with common control leases should be (i) amortized by the lessee over the useful life of the leasehold improvements to the common control group, regardless of the lease term, as long as the lessee controls the use of the underlying asset through a lease, and (ii) accounted for as a transfer between entities under common control through an adjustment to equity if and when the lessee no longer controls the use of the underlying asset. The ASU 2023-01 is effective for reporting periods beginning after December 15, 2023. The adoption of this accounting standard has no material impact on the unaudited condensed consolidated financial statements for the six months ended and as at June 30, 2024.

Previous wording

The adoption of these ASUs did not have a material impact on the unaudited condensed consolidated financial statements for the three months end and as at March 31, 2024.

Current wording

The adoption of these ASUs did not have a material impact on the unaudited condensed consolidated financial statements for the six months end and as at June 30, 2024.