Agape ATP Corp

Previous 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.

Current 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, 2025, for the year ended December 31, 2024 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

To further its reach in the Health and Wellness Industry, on November 11, 2021, Agape ATP Corporation (Labuan) formed an 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.

Current wording

On November 11, 2021, AATP LB formed an entity, DSY Wellness International Sdn. Bhd. (“DSY Wellness”) with an independent third party which AATP LB owns 60% of the equity interest, to pursue the business of providing complementary health therapies.

Previous 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.

Current 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.

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. On June 7, 2024, the entity changed its name to ATPC Green Energy Sdn Bhd.

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 (“AGE”).

Previous wording

On January 8, 2024, OIE ATPC Holdings (M) Sdn Bhd formed a wholly own entity, OIE ATPC Exim (M) Sdn Bhd. However, the Company had decided not to proceed with the continued development of OIE ATPC Exim (M) Sdn Bhd.

Current wording

On January 8, 2024, AGE formed a wholly own entity, OIE ATPC Exim (M) Sdn. Bhd (“ATPC Exim”). However, the Company had decided not to proceed with the continued development of ATPC Exim. There is no impact to the Group’s operation.

Previous wording

We generated revenue of $962,971, which comprised revenue from the Company’s network marketing business of $95,458 (approximately 9.9% of revenue); revenue from the Company’s operations in the provision of complementary health therapies of $849,109 (approximately 88.2% of revenue) and revenue from Company’s operation in wellness and wellbeing lifestyle of $18,404 (approximately 1.9% of revenue) for the nine months ended September 30, 2024 as compared to $1,040,017, which comprised revenue from the Company’s network marketing business of $318,729 (approximately 30.6% of revenue); and revenue from the Company’s operations in the provision of complementary health therapies of $721,288 (approximately 69.4% of revenue) for the nine months ended September 30, 2023. Revenue from the Company’s network marketing business decreased significantly by $223,271, or approximately 70.1%. Revenue from the Company’s operations in the provision of complementary health therapies increased by $127,821, or approximately 17.7%. The Company generated $18,404 from skin care and health products, a new revenue stream from the Company’s operations in wellness and wellbeing lifestyle. Total revenue decreased by $77,046, or approximately 7.4%. The decrease was predominately due to the 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.

Current wording

We generated revenue of $289,037, which comprised revenue from the Company’s network marketing business of $26,547 (approximately 9.2% of revenue); and revenue from the Company’s operations in the provision of complementary health therapies of $252,246 (approximately 87.3% of revenue); $8,679 from skin care and healthcare products (approximately 3.0% of revenue) and $1,565 from the operation in green energy (approximately 0.5% of revenue) for the three months ended March 31, 2025 as compared to $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. Revenue from the Company’s network marketing business decreased by $10,532 or approximately 28.4%. Revenue from the Company’s operations in the provision of complementary health therapies decreased by $29,318 or approximately 10.4%, new revenue streams $8,679 from the Company’s operations in wellness and wellbeing lifestyle and $1,565 from the operation in green energy. Total revenue decreased by $29,606 or approximately 9.3%.

Previous wording

Cost of revenue for the three months ended September 30, 2024 amounted to $147,104 as compared to $120,586 for the three months ended September 30, 2023, an increase of $26,518 or approximately 22.0%. The increase was due to the 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.

Current wording

Cost of revenue for the three months ended March 31, 2025 amounted to $132,751 as compared to $115,223 for the three months ended March 31, 2024, represented an increase of $17,528 or approximately 15.2%. The increase was due to the inventory write off 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

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

Current wording

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

Previous wording

Gross profit for the three months ended September 30, 2024 amounted to $184,185, represented a gross margin of approximately 55.6% as compared to $234,728 for the three months ended September 30, 2023, equivalent to a gross margin of approximately 66.1%. 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 March 31, 2025 amounted to $156,286, represented a gross margin of 54.1% as compared to $203,420 for the three months ended March 31, 2024, equivalent to a gross margin of 63.8%. The decrease in gross margin was due to the inventory write off in 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 (as defined below). Total operating expenses were $732,295 for the three months ended September 30, 2024, increased by $180,489 or approximately 32.7% from $551,806 for the three months ended September 30, 2023.

Current wording

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

Previous wording

Selling expenses for the three months ended September 30, 2024 amounted to $41,582 as compared to $49,285 for the three months ended September 30, 2023, a decrease of $7,703, or approximately 15.6%. The Company’s selling expenses typically comprise salaries 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 March 31, 2025 amounted to $63,052 as compared to $50,348 for the three months ended March 31, 2024, represented an increase of $12,704 or approximately 25.2%, mainly due to the increase in advertisement cost. The Company’s selling expenses typically comprise ofsalaries and benefits expenses, credit card processing fees, advertisement and promotional expenses.

Previous wording

Commission expenses were $6,894 and $14,002 for the three months ended September 30, 2024 and 2023, respectively. The decrease in commission expenses was in line with the decrease in revenue in Company’s network marketing business.

Current wording

Commission expenses were $7,945 and $9,344 for the three months ended March 31, 2025 and 2024, respectively. The decrease in commission expenses was in line with the decrease in revenue in the Company’s network marketing business.

Previous wording

G&A expenses for the three months ended September 30, 2024 amounted to $683,819, as compared to $488,519 for the three months ended September 30, 2023, an increase of $195,300, or approximately 40.0%. 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.

Current wording

G&A expenses for the three months ended March 31, 2025 amounted to $805,693, as compared to $867,266 for the three months ended March 31, 2024, represented a decrease of $61,573 or approximately 7.1%. The decrease in G&A expenses was mainly due to the decrease in company event and activities. The Company’s G&A expenses typically comprise ofsalaries and benefits expenses, rental expenses, professional expenses, depreciation expenses and other expenses.

Previous wording

The Company recorded benefit of income taxes of $2,875 and provision for income taxes of $3,943 for the three months ended September 30, 2024 and 2023, respectively. Both the provision for income taxes as well as the benefit of income taxes were in respect of the Company’s operations in Malaysia.

Current wording

The Company recorded provision for income taxes of $0 and $6,838 for the three months ended March 31, 2025 and 2024, respectively. The provision for income taxes were in respect of the Company’s operations in Malaysia.

Previous wording

Net loss increased by $199,304 from a net loss of $324,735 for the three months ended September 30, 2023 to a net loss of $524,039 for the three months ended September 30, 2024, mainly due to reasons as discussed above.

Current wording

Net loss increased by $9,825 from net loss of $703,094 for the three months ended March 31, 2024 to net loss of $712,919 for the three months ended March 31, 2025, mainly due to reasons as discussed above.

Previous wording

As of September 30, 2024, we had working capital of $2,452,343, consisting of cash and cash in bank of $266,173 and time deposits of $2,452,860 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 $1,659,449 for the nine months ended September 30, 2024 and accumulated deficits of $8,709,605 as of September 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.

Current wording

As of March 31, 2025, the Company had working capital of $23,775,576 consisting of cash and cash in bank of $277,507 and time deposits of $301,287 as compared to working capital of $1,656,571 consisted of cash and cash in bank of $240,243 and time deposits of $1,800,000 as of December 31, 2024. The Company had a net loss of $712,919 for the three months ended March 31, 2025 and accumulated deficits of $10,216,994 as of March 31, 2025 as compared to net loss of $2,486,044 for the year ended December 31, 2024 and accumulated deficits of $9,518,045 as of December 31, 2024.

Previous wording

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

Current wording

The following summarizes the key components of our cash flows for the three months ended March 31, 2025 and 2024:

Previous wording

Net cash used in operating activities for the nine months ended September 30, 2023 was $995,706, comprised of net loss of $1,138,259, increase in accounts receivables of $20,800, increase in amount due from related parties of $782, increase in inventories of $13,484, decrease in customer deposits of $45,083, payment of operating lease liabilities of $114,943, decrease in other payables and accrued liabilities of $219,676, decrease in other payable – related parties of $1,959, decrease in income tax payable of $10,674, the non-cash items on unrealized holding gain on marketable securities of $4,838, deferred tax benefit of $6,537, offset by the non-cash depreciation and amortization expense of $59,424, amortization of operating right-of-use assets of $113,804, refund in prepaid taxes of $307,967, decrease in prepayments and deposits of $84,978, increase in accounts payables (including related parties) of $15,156.

Current wording

Net cash used in operating activities for the three months ended March 31, 2025 was $1,453,874, and were mainly comprised of the net loss of $712,919, the decrease in accounts receivables of $4,366, the decrease in inventories of $2,898, the decrease in other receivable of $1,697, increase in other receivables from related parties of $2,194, increase in prepaid taxes of $3,990, increase in prepayments and deposits of $581,028, decrease in accounts payables (including related parties) of $33,333, the decrease in customer deposits of $6,246, the payment of operating lease liabilities of $37,518, the decrease in other payables (including related parties) and accrued liabilities of $163,419. The net cash used in operating activities was mainly offset by non-cash depreciation and amortization expense of $13,709, amortization of finance assets of $10,634, amortization of operating right-of-use assets of $37,316, allowance for credit lossof $8,280, inventory write off of $6,777, unrealized holding loss on marketable securities of $1,096.

Previous wording

Net cash used in operating activities for the nine months ended September 30, 2024 was $2,080,879, comprised of net loss of $1,659,449, gain on disposal of office equipment of $111, the increase in inventories of $6,473, the increase in prepaid taxes of $8,592, the increase in prepayments and deposits of $329,898, the increase in other receivables $949, the decrease in customer deposits of $16,349, the payment of operating lease liabilities of $102,605, the decrease in other payables (including related parties) and accrued liabilities of $186,986. The net cash used in operating activities was mainly offset by non-cash depreciation and amortization expense of $36,022, amortization of finance assets of $18,956, amortization of operating right-of-use assets of $103,187, unrealized holding loss on marketable securities of $6,642, deferred tax benefit of $218, allowance for expected credit loss $28,359, the decrease in accounts receivables of $6,353, the decrease in other receivables (including related parties) of $8,858, the increase in account payable (including related parties) $8,724, and the increase of income tax payable of $13,213.

Current 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, 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, 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.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2023 was $7,200, which was in respect of purchase of equipment.

Current wording

Net cash used in investing activities for the three months ended March 31, 2025 was $23,000,649, which was mainly from advances for investment.

Previous wording

Net cash used in financing activities for the nine months ended September 30, 2024 was $6,691, which was the reduction of finance lease liability.

Current 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.

Previous wording

The preparation of unaudited 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 unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s unaudited condensed consolidated financial statements include allowance for inventories obsolescence, allowance for expected credit loss, impairment of long-lived assets and allowance for deferred tax assets. Following are the methods and assumptions used in determining our estimates.

Current wording

The preparation of unaudited 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 unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s unaudited condensed consolidated financial statements include allowance for inventories obsolescence, impairment of long-lived assets, allowance for deferred tax assets, allowance for credit loss, allowance for estimation of coupon redemption and the assumptions used in the valuation of the derivative financial instruments. Following are the methods and assumptions used in determining our estimates.

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 nine months ended September 30, 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. For the three months ended March 31, 2025 and 2024, there were no inventory write-down; and $6,777 and $0 inventory write-off respectively.

Previous wording

As of September 30, 2024, the carrying amounts of operating right-of-use assets and property and equipment amounted to $282,734 and $47,508 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 September 30, 2024 and 2023.

Current wording

As of March 31, 2025 and December 31, 2024, the carrying amounts of operating right-of-use assets amounted to $189,059 and $224,595, and property, plant and equipment amounted to $19,810 and $31,463. No impairment losses on operating right-of-use assets and property, plant and equipment were recognized as of March 31, 2025 and December 31, 2024.

Previous wording

The Company conducts much of its business activities in Malaysia and Hong Kong and is subject to tax in each of these jurisdictions. Significant estimates are required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Current wording

The Company conducts much of its business activities in Malaysia, Hong Kong and China and is subject to tax in each of these jurisdictions. Significant estimates are required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Previous wording

The Company estimates and records an allowance for its expected credit loss related to its accounts receivable. Credit losses are determined by Current Estimate of Expected Credit Losses model in accordance with Topic 326 – Financial Instruments – Credit Losses. For accounts receivable, the Company considers historical collectivity based on past due status, the age of the accounts receivable balances, credit quality of the Company’s customers based on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers.

Current wording

The Company estimates and records an allowance for credit loss related to its accounts receivable. Credit losses are determined by Current Estimate of Expected Credit Losses model in accordance with Topic 326 – Financial Instruments – Credit Losses. For accounts receivable, the Company considers the age of the accounts receivable balances, credit quality of the Company’s customers based on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. As of March 31, 2025 and December 31, 2024, the Company recognize an allowance for credit loss of $41,360 and $32,857, respectively.

Previous wording

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.

Current wording

The Company derives its revenues from sales contracts with its customers with revenues being recognized when control of the skin care, 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.

Previous wording

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The ASU 2023-07 is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The ASU 2023-07 is effective for annual reporting periods beginning after December 15, 2023 and interim periods in fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this ASU may have on its consolidated financial statements.

Current wording

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The ASU 2023-07 is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The ASU 2023-07 is effective for annual reporting periods beginning after December 15, 2023 and interim periods in fiscal years beginning after December 15, 2024. The adoption of this accounting standard has no material impact on the consolidated financial statements.

Previous wording

In March 2024, the FASB issued ASU 2024-01 “Compensation – Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards”. The ASU clarify how an entity determines whether a profits interest or similar award is within the scope of Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation, by adding illustrative guidance. The guidance in ASU 2024-01 is effective for annual reporting periods beginning after December 15, 2024, and can be applied either retrospectively to all prior periods presented in the consolidated financial statements or prospectively to profits interest and similar awards granted or modified on or after the date at which the entity first applies the amendments. Early adoption is permitted. The adoption of ASU 2024-01 is not expected to have any impact on the Company’s consolidated financial statements.

Current wording

In March 2024, the FASB issued ASU 2024-01 “Compensation – Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards”. The ASU clarify how an entity determines whether a profits interest or similar award is within the scope of Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation, by adding illustrative guidance. The guidance in ASU 2024-01 is effective for annual reporting periods beginning after December 15, 2024, and can be applied either retrospectively to all prior periods presented in the consolidated financial statements or prospectively to profits interest and similar awards granted or modified on or after the date at which the entity first applies the amendments. Early adoption is permitted. The adoption of ASU 2024-01 has no material impact on the Company’s consolidated financial statements.

Previous wording

In March 2024, the FASB issued ASU 2024-02 “Codification Improvements – Amendments to Remove References to the Concepts Statements”. The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance. Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities. The amendments in this update are effective for annual reporting periods beginning after December 15, 2024 and are not expected to have a significant impact on our financial statements.

Current wording

In March 2024, the FASB issued ASU 2024-02 “Codification Improvements – Amendments to Remove References to the Concepts Statements”. The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance. Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities. The amendments in this update are effective for annual reporting periods beginning after December 15, 2024 and has no significant impact on our financial statements.

Previous wording

Except for the above-mentioned pronouncements, there are no other new recent issued accounting standards that will have a material impact on the consolidated financial position, statements of operations and cash flows.

Current wording

Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have a material impact on the unaudited consolidated financial position, statements of operations and cash flows.