As
filed with the U.S. Securities and Exchange Commission on July 20, 2020.
Registration
No. [*]
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AGAPE
ATP CORPORATION
(Exact
name of registrant as specified in its charter)
Nevada
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8000
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36-4838886
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(State
or other jurisdiction of
incorporation
or organization)
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(Primary
Standard Industrial
Classification
Code Number)
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(IRS
Employer
Identification
No.)
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1705
– 1708, Level 17, Tower 2, Faber Towers, Jalan Desa Bahagia,
Taman
Desa, Kuala Lumpur, Malaysia (Postal Code: 58100).
(Address
of principal executive offices, including zip code)
Registrant’s
phone number, including area code
+(60)
192230099
How
Kok Choong
Chief
Executive Officer
1705
– 1708, Level 17, Tower 2, Faber Towers, Jalan Desa Bahagia,
Taman
Desa, Kuala Lumpur, Malaysia (Postal Code: 58100)
(Name,
address, including zip code, and telephone number, including area code, of agent for service)
Copies
to:
Lawrence
S. Venick, Esq.
Loeb
& Loeb LLP
21st
Floor, CCB Tower
3
Connaught Road Central
Hong
Kong SAR
Tel:
+852.3923.1111
Fax:
+852.3923.1100
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Approximate
date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration
Statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933 check the following box: [X]
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the
same offering. [ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large
Accelerated Filer [ ]
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Accelerated
Filer [ ]
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Non-accelerated
Filer [ ]
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(Do
not check if a smaller reporting company)
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Smaller
Reporting Company [X]
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Emerging
Growth Company [X]
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If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Calculation
of Registration Fee
Title
of Class of Securities to be Registered
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Amount
to
Be
Registered(1)
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Proposed
Maximum
Offering
Price per
Share(3)
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Proposed
Maximum
Aggregate
Offering
Price
|
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Amount
of
Registration
Fee(5)
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Common Stocks, par value US$0.01 per share
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|
|
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$
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$
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$
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Common
Stocks underlying Underwriter Warrants (2)(4)
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$
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|
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Total
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$
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$
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(1)
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The
registration fee for securities is based on an estimate of the proposed maximum offering price of the securities, and such
estimate is solely for the purpose of calculating the registration fee pursuant to Rule 457(o).
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(2)
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We
have agreed to issue to the underwriter warrants to purchase the number of common stock (the “Underwriter Warrants”)
in the aggregate equal to [[*] percent ([*]%)] of the number of offered shares sold to investors introduced by the underwriter
in the offering, divided by the public offering price per share in the offering. The warrants will be exercisable at any time,
and from time to time within [*] ([*]) years from effective date of the Registration Statement, in whole or in part, but may
not be transferred nor may the shares underlying the warrants be sold until [180] days from the effective date of this registration
statement. The exercise price of the Underwriter Warrants is equal to [*]% of the public offering price per share in the offering.
The Underwriter Warrants are exercisable, with a cashless provision, beginning six months following the effective date of
the offering for a period of three years from the issuance.
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(3)
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Estimated
solely for the purpose of determining the amount of registration fee in accordance with Rule 457(a) under the Securities Act
of 1933.
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(4)
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No
separate registration fee required pursuant to Rule 457(g) under the Securities Act.
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(5)
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Amount
of registration fee is calculated based on proposed maximum aggregate offering price multiplied by 0.0001298 based on the
filing fee rate issued by the Securities and Exchange Commission for the period between October 1, 2019 and September 20,
2020.
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The
registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective
on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The
information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell
nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED [*], 2020
PRELIMINARY
PROSPECTUS
$[*]
of Shares of Common Stock
AGAPE
ATP CORPORATION
Our
common stock currently is quoted on the OTC Markets – Pink Sheets, operated by OTC Markets Group, under the symbol “ATTP.”
The last reported sale price of our common stock on the OTC Markets – Pink Sheets on July 2, 2020 was $7.50 per share. We
have applied to list our common stock on the [NASDAQ Capital Market (“NASDAQ”)/New York Stock Exchange (“NYSE”)]
under the symbol “ATTP”. No assurance can be given that our application will be approved and we do not expect our
common stock to be listed on either exchange upon completion of this offering.
We
are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, and, as such, have
elected to comply with certain reduced public company reporting requirements for this prospectus and other filings with the Securities
and Exchange Commission.
Investing
in our common stock is highly speculative and involves a significant degree of risk. See “Risk Factors” beginning
on page 11 of this prospectus for a discussion of information that should be considered before making a decision to purchase our
common stock.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
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Price
to
Public
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Underwriting
Discounts and Commissions(1)
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Proceeds
to us
(before
expenses)
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Per
Common Stock
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US$
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US$
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US$
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Total
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US$
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US$
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US$
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(1)
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See
“Underwriting” for additional disclosure regarding underwriting compensation payable by us.
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We
are offering on a “firm commitment” basis $ of our shares of common
stock, $0.0001 par value per share. We estimate that the public offering price will be between $
to $ per share. The Underwriter is obligated to take and pay for all of the shares if
any such shares are taken. We have granted Underwriter [an over-allotment option], exercisable one or more times in whole or in
part, to purchase up to additional common stock from us at the public offering price, less
the underwriting discounts and commissions, within 60 days from the date of this prospectus to cover [over-allotments], if any.
If the Underwriter exercises the option in full, the total underwriting discounts and commissions payable will be $ ,
and the total proceeds to us, before expenses, will be $ .
Delivery
of the shares of common stock is expected to be made on or about ,
2020.
[Sole
Underwriter]
The
date of this prospectus is , 2020.
TABLE
OF CONTENTS
You
should rely only on the information contained in this prospectus or contained in any free writing prospectus prepared by or on
behalf of us or to which we have referred you. We have not, and the underwriter has not, authorized anyone to provide you with
information that is different from that contained in such prospectuses. We are offering to sell shares of our common stock, and
seeking offers to buy shares of our common stock, only in jurisdictions where such offers and sales are permitted. The information
in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or
any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that
date.
In
this prospectus, we rely on and refer to information and statistics regarding our industry. We obtained this statistical, market
and other industry data and forecasts from publicly available information. While we believe that the statistical data, market
data and other industry data and forecasts are reliable, we have not independently verified the data.
For
investors outside of the United States: neither we nor the underwriter have done anything that would permit this offering or possession
or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States.
You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of
this prospectus.
PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this prospectus. Because this is only a summary, it does not contain all
of the information that may be important to you. You should read this entire prospectus and should consider, among other things,
the matters set forth under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition
and Results of Operations”, and our consolidated financial statements and related notes thereto appearing elsewhere in this
prospectus before making your investment decision.
Overview
Agape
ATP Corporation is a company that provides health solution advisory services to our clients. We primarily focus our efforts on
attracting customers in Malaysia. We have an advisory services center called 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 the promotion of health. The program aims to promote improved health and longevity through a combination of modern
health supplements, proper nutrition and advice from skilled nutritionists and/or dieticians. For the six months ended December,
2019 and 2018, our revenue was approximately $0.4 million and $0.7 million, respectively, and our gross profit was approximately
$46,000 and $66,000, respectively. For the years ended June 30, 2019 and 2018, our revenue was approximately $1.5 million and
$0.5 million, respectively, and our gross profit was approximately $109,000 and $46,000, respectively.
In
order to strengthen the Company’s supply chain, on May 8, 2020, the Company has successfully acquired 99.99% of Agape Superior
Living Sdn Bhd, with the goal of securing an established network marketing sales channel that has been in existence in Malaysia
for the past 15 years. Agape Superior Living Sdn Bhd 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.
Our
Products
We
offer three series of programs which consist of different services and products: ATP Zeta Health Program, ÉNERGÉTIQUE
and BEAUNIQUE.
Our
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.
Our
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.
Our
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.
Our
Strategies
We
intend to pursue the following strategies in order to further develop and expand our business:
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Expand
our product range in each of our ATP Zeta Health Program, ÉNERGÉTIQUE and BEAUNIQUE series;
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Further
penetrate existing markets;
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Deepen
our relationship with existing distributors and members;
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Further
investment into information technology such as the establishment of an e-commerce platform; and
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●
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Expand
into other geographies outside of Malaysia.
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Our
Competitive Strengths
We
believe the following competitive strengths contribute to our success and differentiate us from our competitors:
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Well
established reputation;
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Well-established
product portfolio;
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Large,
highly-motivated distributor base, supported by a successful training methodology;
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Scalable
business model; and
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●
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Founder-led
and deeply experienced management team.
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Our
Challenges
Our
ability to realize our mission and execute our strategies is subject to risks and uncertainties, including those relating to our
ability to:
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Respond
to a highly competitive market;
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Respond
to concentration risk of heavy reliance on our largest supplier for the supply of products;
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Maintain
quality product and value;
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Create
brand influence;
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Expand
our product offerings; and
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●
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Expand
our business in Malaysia and globally.
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Please
see “Risk Factors” and other information included in this prospectus for a discussion of these and other risks and
uncertainties that we face.
Risk
Factors
An
investment in our common stock involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties
described in “Risk Factors” beginning on page 11, together with all of the other information contained in this
prospectus, including our consolidated financial statements and related notes thereto appearing elsewhere in this prospectus,
before investing in our common stock. These risks could materially affect our business, financial condition and results of operations
and cause the trading price of our common stock to decline. You could lose part or all of your investment. You should bear in
mind, in reviewing this prospectus, that past experience is no indication of future performance. You should read “Special
Note Regarding Forward-Looking Statements” for a discussion of what types of statements are forward-looking statements,
as well as the significance of such statements in the context of this prospectus.
Emerging
Growth Company Status
We
are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, and we are
eligible to take advantage of certain exemptions from various reporting and financial disclosure requirements that are applicable
to other public companies that are not emerging growth companies, including, but not limited to, (1) presenting
only two years of audited financial statements and only two years of related management’s discussion and analysis of financial
condition and results of operations in this prospectus, (2) not being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, (3) reduced disclosure obligations regarding executive
compensation in our periodic reports and proxy statements, and (4) exemptions from the requirements of holding a non-binding advisory
vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We intend to
take advantage of these exemptions. As a result, investors may find investing in our shares of common stock less attractive.
In
addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition
period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new
or revised accounting standards. As a result, an emerging growth company can delay the adoption of certain accounting standards
until those standards would otherwise apply to private companies. We elected to opt out of such extended transition period and
acknowledge such election is irrevocable pursuant to Section 107 of the JOBS Act.
Corporate
Information
Our
principal executive offices are located at 1705 – 1708, Level 17, Tower 2, Faber Towers, Jalan Desa Bahagia, Taman Desa,
Kuala Lumpur, Malaysia (Post Code: 58100). Our telephone number at this address is +(60) 327325716. Our registered office in Nevada
is located at 1645 Village Center Circle, Suite 170, Las Vegas, Nevada, United States, 89134.
Our
website is http://www. http://agapeatpgroup.com/. The information contained on our website or any third-party websites is not
a part of this prospectus.
Corporate
Structure
The
following diagram illustrates our corporate structure as of the date of this prospectus:
Note:
1.
|
It
is the company’s equity at risk is insufficient to finance its activities. 100% of its business is transacted
with Agape Superior Living Sdn Bhd. The company is considered a VIE of Agape Superior Living Sdn Bhd as the latter is the
primary beneficiary since it has the following characteristics:
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a.
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The
power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and
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b.
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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.
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Conventions
That Apply to this Prospectus
Unless
otherwise indicated or the context otherwise requires, references in this prospectus to:
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●
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“Malaysia”
is Malaysia;
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●
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“dollar,”
“USD,” “US$,” or “$” are to U.S. dollars;
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●
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“RM”
and “Ringgit” are to the legal currency of Malaysia; and
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●
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“we,”
“us,” “Company,” “Agape”, “Agape ATP” and “our” are to Agape ATP
Corporation, our Nevada holding company, and its subsidiaries, and its consolidated affiliated entities.
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●
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“ASL”
is Agape Superior Living Sdn Bhd, a Malaysia company and a 99.99% owned subsidiary of Agape ATP;
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The
Offering
Common
stock offered by us
|
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$[*]
of shares of common stock [(or [*] shares of common stock if the underwriters exercise their over-allotment option in full)
on a firm commitment basis].
|
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Common
stock to be outstanding prior to this offering
|
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_______shares
of common stock.
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Common
stock to be outstanding immediately after this offering
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shares
of common stock, assuming the sale of all the shares offered in this Prospectus.
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Gross
proceeds to us, net of underwriting discount but before expenses:
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$
, assuming no exercise of the [underwriter’s
warrants] [and full exercise of the over-allotment option.]
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[Over-allotment
option:]
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[We
have granted to the underwriter a 15% over-allotment option, exercisable within [60] days from the date of this prospectus,
to purchase up to an aggregate of [*] additional common stocks.]
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Use
of proceeds
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We
plan to use the net proceeds of this offering primarily for general corporate purposes.
For more information on the use of proceeds, see “Use of Proceeds” on page
26.
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Trading
Market
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|
Our
common stock currently is quoted on the OTC Markets – Pink Sheets under the symbol
“ATTP.” We have applied to list our common stock on the [Nasdaq Capital Market/
NYSE American LLC].
|
Concentration
of Ownership
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Prior
to this offering, our executive officers and directors beneficially own, in the aggregate,
approximately 68% of the outstanding shares of our common stock, which will become [*]%
upon completion of this offering assuming the sale of all the shares offered in this
Prospectus.
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Trading
Symbol
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“ATTP”
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Risk
factors
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You
should read the “Risk Factors” section of this prospectus for a discussion of factors to consider carefully before
deciding to invest in shares of our common stock.
|
Summary
Consolidated Financial Data
AGAPE
ATP CORPORATION
The
following tables summarize our historical consolidated financial data. We have derived the historical consolidated statements
of operations data for the three months ended March 31, 2020 and 2019, for the six months ended December 31, 2019 and 2018 and
for the years ended June 30, 2019 and 2018 from our consolidated financial statements included elsewhere in this prospectus. The
following summary consolidated financial data should be read in conjunction with the section titled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and
related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that
may be expected in the future, and our results for any interim period are not necessarily indicative of the results to be expected
for a full fiscal year.
Consolidated
Statements of Operations Data for the:
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Three
Months Ended March 31,
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2020
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2019
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(Unaudited)
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(Unaudited)
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Revenue
|
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$
|
-
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$
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464,297
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Net income (loss)
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$
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(231,750
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)
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$
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71,215
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|
Earnings (loss) per share – (basic
and diluted)
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|
$
|
0.00
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$
|
0.00
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Six
Months Ended December 31,
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2019(1)
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2018
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(unaudited)
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Revenue
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$
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429,362
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$
|
685,288
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Net
loss
|
|
$
|
(338,931
|
)
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$
|
(142,446
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)
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Earnings (loss)
per share – (basic and diluted)
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|
$
|
0.00
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$
|
0.00
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|
Note:
1.
|
Subsequent
to the Company’s financial year ended June 30, 2019, the Company changed its financial year end to December 31. The
six months period financial statements were audited and were previously disclosed in Form 10-K filed on March 27, 2020 (file
no. 333-220144).
|
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Years
Ended June 30,
|
|
|
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2019
|
|
|
2018
|
|
Revenue
|
|
$
|
1,546,057
|
|
|
$
|
487,005
|
|
Net loss
|
|
$
|
(519,642
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)
|
|
$
|
(130,274
|
)
|
Earnings (loss) per share –
(basic and diluted)
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Consolidated
Balance Sheet Data as of:
|
|
As
of
|
|
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|
March
31,
2020
|
|
|
December
31, 2019
|
|
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June
30,
2019
|
|
|
December
31, 2018
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Total
assets
|
|
$
|
4,124,765
|
|
|
$
|
4,335,274
|
|
|
$
|
4,651,755
|
|
|
$
|
5,198,181
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|
Total liabilities
|
|
$
|
97,459
|
|
|
$
|
83,988
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|
|
$
|
71,402
|
|
|
$
|
241,847
|
|
Agape
Superior Living Sdn. Bhd. (“ASL”)
The
following tables summarize ASL’s historical consolidated financial data. We have derived the ASL’s historical consolidated
statements of operations data for the three months ended March 31, 2020 and 2019 and for the years ended December 31, 2019 and
2018 from ASL’s consolidated financial statements included elsewhere in this prospectus. The following summary consolidated
financial data should be read in conjunction with the section titled “ASL Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and ASL’s consolidated financial statements and related notes included
elsewhere in this prospectus. ASL’s historical results are not necessarily indicative of the results that may be expected
in the future, and ASL’s results for any interim period are not necessarily indicative of the results to be expected for
a full fiscal year.
Consolidated
Statements of Operations Data for the:
|
|
Three
Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Revenue
|
|
$
|
1,241,252
|
|
|
$
|
1,214,600
|
|
Net income (loss)
|
|
$
|
197,576
|
|
|
$
|
(252,125
|
)
|
|
|
Years
Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Revenue
|
|
$
|
4,139,359
|
|
|
$
|
14,393,762
|
|
Net income (loss)
|
|
$
|
(1,059,494
|
)
|
|
$
|
1,981,911
|
|
Consolidated
Balance Sheet Data as of:
|
|
As
of
|
|
|
|
March
31,
2020
|
|
|
December
31,
2019
|
|
|
December
31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
4,105,376
|
|
|
$
|
4,126,180
|
|
|
$
|
3,158,206
|
|
Total liabilities
|
|
$
|
2,301,330
|
|
|
$
|
2,418,539
|
|
|
$
|
2,362,871
|
|
Summary
Unaudited Pro Forma Condensed Combined Financial Data
The
selected unaudited pro forma condensed combined financial information has been derived from, and should be read in conjunction
with, the unaudited pro forma condensed combined financial information included elsewhere in this prospectus.
The
following unaudited pro forma condensed combined financial statements give effect to the Business Combination under the acquisition
method of accounting in accordance with Financial Accounting Standards Board (FASB) Accounting Standard Codification (“ASC”)
Topic 805, Business Combinations (“ASC 805”). The Business Combination will be accounted for as acquisition
of business under common control at carrying value in accordance with accounting principles generally accepted in the United States
of America.
The
historical consolidated financial information has been adjusted in these unaudited pro forma condensed combined financial data
to give effect to pro forma events that are directly attributable to the Business Combination. The unaudited pro forma condensed
combined balance sheet is based on the historical consolidated balance sheet of AAPT and the historical consolidated balance sheet
of ASL, each of which is included elsewhere in this prospectus, and in each case as
of March 31, 2020 and has been prepared to reflect the Business Combination as if they occurred on March 31, 2020. The unaudited
pro forma condensed combined statements of operations and comprehensive loss for the three months ended March 31, 2020 and for
the year ended December 31, 2019, each of which is included elsewhere in this prospectus,
combine the historical results of operations of AATP and ASL for those periods, giving effect to the Business Combination as if
they occurred on January 1, 2019.
The
selected unaudited pro forma condensed combined financial data below should be read in conjunction with the sections entitled
“Unaudited Pro Forma Condensed Combined Financial Information,” “Agape ATP Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” “Agape Superior Living Sdn. Bhd. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and notes
thereto of AATP and ASL included elsewhere in this prospectus.
Unaudited
Pro Forma Condensed Combined Consolidated Statements of Operations Data for the:
|
|
Three
Months
Ended
March 31, 2020
|
|
|
Year
Ended
December 31, 2019
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
Revenue
|
|
$
|
1,241,252
|
|
|
$
|
4,139,359
|
|
Net loss
|
|
$
|
(22,538
|
)
|
|
$
|
(1,813,892
|
)
|
Earnings (loss) per share
– (basic and diluted)
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Unaudited
Pro Forma Condensed Combined Consolidated Balance Sheets Data as of:
|
|
As
of
|
|
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Total
assets
|
|
$
|
7,023,870
|
|
|
$
|
7,245,902
|
|
Total liabilities
|
|
$
|
1,907,161
|
|
|
$
|
1,981,741
|
|
RISK
FACTORS
Any
investment in our securities involves a high degree of risk. You should carefully consider the risks described below, which we
believe represent certain of the material risks to our business, together with the information contained elsewhere in this prospectus,
before you make a decision to invest in our shares of common stock. Please note that the risks highlighted here are not the only
ones that we may face. For example, additional risks presently unknown to us or that we currently consider immaterial or unlikely
to occur could also impair our operations. If any of the following events occur or any additional risks presently unknown to us
actually occur, our business, financial condition and operating results may be materially adversely affected. In that event, the
trading price of our securities could decline and you could lose all or part of your investment.
Risks
Relating to Our Business and Industry
We
operate in a highly competitive market. If we do not compete effectively, our prospects, operating results, and financial condition
could be materially and adversely affected.
The
health and wellness market in Malaysia is a mature and a highly competitive market, with companies offering a variety of competitive
products and services. We expect competition in our market to intensify in the future as new and existing competitors introduce
new or enhanced products and services that are potentially more competitive than our products and services. The health and wellness
market has a multitude of participants in the domestic market, including, but not limited, to retail health supplement providers,
pharmaceutical companies, and network marketing company which supply health supplement products, such as Elken Group, USANA Group,
NHF Group, Young Living, Jeunesse Global Holdings LLC, USA, Shaklee Corporation, VASAYO LLC, Amway Corporation, Sami Direct, Kyäni,
Inc., Melaleuca, Inc.
We
believe many of our competitors and potential competitors may have significant competitive advantages, including but not limited
to, longer operating histories, ability to leverage their sales efforts and marketing expenditures across a broader portfolio
of products and services, larger and broader customer bases, more established relationships with a larger number of suppliers,
greater brand recognition, ability to leverage stores which they may operate, and greater financial, research and development,
marketing, distribution, and other capabilities and resources than we do. Our competitors and potential competitors may also be
able to develop products and services that are equal or more superior to ours, achieve greater market acceptance of their products
and services, and increase sales by utilizing different distribution channels than we do. Some of our competitors may aggressively
discount their products in order to gain market share, which could result in pricing pressures, reduced profit margins, lost market
share, or a failure to grow market share for us. If we are not able to compete effectively against our current or potential competitors,
our prospects, operating results, and financial condition could be materially and adversely affected.
We
are exposed to concentration risk of heavy reliance on our two largest suppliers for the supply of our products, and any shortage
of, or delay in, the supply may significantly impact on our business and results of operation.
We
principally source the majority of our products for sale to our customers from our two largest suppliers. As such, we rely on
the ability and efficiency of our two largest suppliers to supply products. Our purchase from our largest supplier amounted to
approximately $226,000 and $555,000 for the six months ended December 31, 2019 and 2018, respectively, representing approximately
59% and 89% of our total purchases, respectively. Our purchase from our second largest supplier amounted to approximately $158,000
and Nil for the six months ended December 31, 2019 and 2018, respectively, representing approximately 41% and Nil of our total
purchases, respectively. Our purchases from our top two largest suppliers accounted for a significant portion of our total purchases
for both of the six months ended December 31, 2019 and 2018.
As
we do not engage in manufacturing, our business, financial condition and operating results depend on the continuous supply of
products from our two largest suppliers and our continuous supplier-customer relationship with them. Our heavy reliance on our
two largest suppliers for the supply of our products will have significant impact on our business and results of operation in
the event of any shortage of, or delay in the supply. Our product supply may also be disrupted by potential labor disputes, strike
action or natural disasters or other accidents affecting our largest supplier. If our two largest suppliers do not supply products
to us in a timely manner or in sufficient quantities, our business, financial condition and operating results may be materially
and adversely affected. Any shortage of, disruption, or delay in the supply, or our inability to obtain supplies from alternative
sources will have significant impact on our business and results of operation.
We
entered into a long term original design manufacturer
supply agreement (the “ODM Supply Agreement”) with one of our largest suppliers
in January 2018 for a period of 10 years. We also entered into a sales agreement with our other largest supplier in May 2018 (the
“Sales Agreement”), Agape S.E.A. Sdn Bhd (“Agape S.E.A.”). As is customary in the supply or sales arrangements,
the agreements with our two largest suppliers are terminable by either party by giving notice. We cannot guarantee that our two
largest suppliers will not terminate the agreements before the expiry of the agreement. In the event that our two largest supplier
terminate the agreements, we will have to source products from other suppliers and we may not be able to secure a similar supply
of products with quantity and quality required to support our business or at all. Such termination may therefore have a material
adverse impact on our business, financial condition and operating results if we fail to engage any other suppliers with similar
standards before the termination.
Furthermore,
our two largest suppliers may change their existing sales or marketing strategy in respect of the products supplied to us by changing
its export strategy, reducing its sales or production volume or changing its selling prices. As a result, there is no assurance
that our largest supplier will not appoint other agents, dealers or distributors which may compete with us in the market where
we operate. Furthermore, any significant increase in the selling prices of the products which we source from our two largest suppliers
will increase our costs and may materially and adversely affect our profit margin if we are not able to pass the increased costs
on to our customers.
There
is no assurance that there will be no deterioration in our relationship with our two largest suppliers which could affect our
ability to secure sufficient supply of products for our business. In the event that our two largest supplier change their sales
or marketing strategy or otherwise appoint other dealers or distributors who may compete with us, our business, financial condition
and operating results may be materially and adversely affected.
If
we fail to maintain quality products and value, our sales are likely to be negatively affected.
Our
success depends on the safety and quality of products that we obtain from our suppliers for our customers. Our future customers
will identify our brand name with a certain level of quality and value. If we cannot meet this perceived value or level of quality,
we may be negatively affected and our operating results may suffer. In addition, any failure on the part of our suppliers to maintain
the quality of their products, will in turn substantially harm the results of our business operations, potentially forcing us
to identify other suppliers or alter our business strategy significantly.
If
we are unable to create brand influence, we may not be able to maintain current or attract new users and customers for our products.
Our
operational and financial performance is highly dependent on the strength of our brand. We believe brand familiarity and preference
will continue to have a significant role in winning customers as the decision to buy our products and services. In order to further
expand our customer base, we may need to substantially increase our marketing expenditures to enhance brand awareness through
various online and offline means. Moreover, negative coverage in the media of our company could threaten the perception of our
brand, and we cannot assure you that we will be able to defuse negative press coverage about our company to the satisfaction of
our investors, customers and suppliers. If we are unable to defuse negative press coverage about our company, our brand may suffer
in the marketplace, our operational and financial performance may be negatively impacted and the price of our shares may decline.
Currently,
we sell our products, with or without customization, under our brand name “ATP”, to domestic customers in Malaysia
and to overseas customers. However, if our competitors initiate a lawsuit against us for infringing their trademark, we may be
forced to adopt a new brand name for our products. As a result, we may incur additional marketing cost to raise awareness of such
new brand name. We may also be ordered to pay a significant amount of damages, and our business, results of operations and financial
condition could be materially and adversely affected.
We
may be unable to protect our intellectual property rights.
We
rely on intellectual property laws in Malaysia and other jurisdictions to protect our trademarks. We are the registered owner
of two trademarks. We have recently applied to register an additional three trademarks in Malaysia. We cannot assure you that
counterfeiting or imitation of our products will not occur in the future or, if it does occur, that we will be able to address
the problem in a timely and effective manner. Any occurrence of counterfeiting or imitation of our products or other infringement
of our intellectual property rights could negatively affect our brand and our reputation, which in turn adversely affects the
results of our operations.
Litigation
to prosecute infringement of our intellectual property rights could be costly and lengthy and will divert our managerial and financial
resources. We will have to bear costs of the intellectual property litigation and may be unable to recover such costs from our
opposite parties. Protracted litigation could also result in our customers deferring or limiting their purchase or use of or products
until such litigation is resolved. The occurrence of any of the foregoing will have a material adverse effect on our business,
financial condition and results of operations.
If
we are unable to successfully develop and timely introduce new products or services or enhance existing products or services,
our business, financial condition and results of operations may be materially and adversely affected.
We
must continually source, develop and introduce new products and services as well as improve and enhance our existing products
and services to maintain or increase our sales. The success of new or enhanced products or services may depend on a number of
factors including, anticipating and effectively addressing user preferences and demand, the success of our sales and marketing
efforts, effective forecasting and management of products and services demands, purchase commitments, and the quality of or defects
in our products. The risk of not meeting our customers’ preferences and demands through our products and services may result
in a shift in market shares, as customers instead choose products and services offered by our competitors. This may result in
lower sales revenue, materially and adversely affecting our business, financial condition and results of operations.
We
may not be able to manage the growth of our business and our expansion plans and operations or implement our business strategies
on schedule or within our budget, or at all.
We
are continually executing a number of growth initiatives, strategies and operating plans designed to enhance our business. In
2020, we plan to increase our revenue stream from health solution advisory services from our “ATP Zeta Health Program”,
“ENERGETIQUE” and “BEAUNIQUE” series to align with our growth strategies. Any expansion may increase the
complexity of our operations and place a significant strain on our managerial, operational, financial and human resources. Our
current and planned personnel, systems, procedures and controls may not be adequate to support our future operations. We cannot
assure you that we will be able to effectively manage our growth or to implement all these systems, procedures and control measures
successfully. Furthermore, the anticipated benefits from these growth initiatives, strategies and operating plans are based on
assumptions that may prove to be inaccurate. Moreover, we may not be able to successfully complete these growth initiatives, strategies
and operating plans and realize all of the benefits that we expect to achieve or it may be more costly to do so than we anticipate.
If, for any reason, we are not able to manage our growth effectively, the benefits we realize are less than our estimates or the
implementation of these growth initiatives, strategies and operating plans adversely affects our operations or costs more or takes
longer to effectuate than we expect, and/or if our assumptions prove to be inaccurate, our business and prospects may be materially
and adversely affected.
In
addition, we may seek and pursue opportunities through joint ventures or strategic partnerships for expansion from time to time,
and we may face similar risks and uncertainties as listed above. Failure to properly address these risks and uncertainties may
materially and adversely affect our ability to carry out acquisitions and other expansion plans, integrate and consolidate newly
acquired or newly formed businesses, and realize all or any of the anticipated benefits of such expansion, which may have a material
adverse effect on our business, financial condition, results of operations and prospects.
We
have a limited operating history in the Malaysia health and wellness industry, which makes
it difficult to evaluate our future prospects.
We
launched our ATP Zeta Super Health Program business in June 2016, the same month in which our Company was incorporated, followed
by our ENERGETIQUE” and “BEAUNIQUE” series in July 2018 and March 2019, respectively, and thus, we have a limited
operating history. We have limited experience in most aspects of our business operation, such as sourcing products for and offering
advisory services on all the three programs. As our business develops and as we respond to competition, we may continue to introduce
new product and services offerings and make adjustments to our existing product line and services and to our business operation
in general. Any significant change to our business model that does not achieve expected results may have a material and adverse
impact on our financial condition and results of operations. It is therefore difficult to effectively assess our future prospects.
The
Malaysia health and wellness industry may not develop as expected. Prospective retail and corporate customers may not be familiar
with the development of the market and may have difficulties distinguishing our products from those of our competitors. Convincing
prospective customers or distributors of the value of our products or services is important to the success of our business. The
risk of failing to convince potential customers or distributors to purchase products or services from us may result in the failure
of our business plan. Many customers or distributors may not be interested in purchasing products and services we sell because
there is no certainty that our business will succeed.
You
should consider our business and prospects in light of the risks and challenges we encounter or may encounter given the rapidly
evolving market in which we operate and our limited operating history. These risks and challenges include our ability to, among
other things:
|
●
|
manage
our future growth;
|
|
|
|
|
●
|
increase
the utilization of our products by existing and new customers;
|
|
|
|
|
●
|
maintain
and enhance our relationships with customers and distributors;
|
|
|
|
|
●
|
improve
our operational efficiency;
|
|
|
|
|
●
|
attract,
retain and motivate talented employees;
|
|
|
|
|
●
|
cope
with economic fluctuations;
|
|
|
|
|
●
|
navigate
the evolving regulatory environment; and
|
|
|
|
|
●
|
defend
ourselves against legal and regulatory actions.
|
Our
historical growth rates may not be indicative of our future growth. If we are unable to manage the growth and increased complexity
of our business, fail to control our costs and expenses, or fail to execute our strategies effectively, our business and business
prospects may be materially and adversely affected.
Our
historical growth rates may not be indicative of our future growth, and we may not be able to generate similar growth rates in
future periods. Our revenue growth may slow, or our total revenues may decline for a number of possible reasons, including change
in consumers’ preferences, changes in regulations and government policies, increasing competition, emergence of alternative
business models, and general economic conditions.
Our
total revenues increased by approximately 217% from approximately $0.5 million for the year ended June 30, 2018 to approximately
$1.5 million for the year ended June 30, 2019. Our total revenues decreased by approximately 37% from approximately $0.7 million
for the six months ended December 31, 2018 to approximately $0.4 million for the six months ended December 31, 2019. Our gross
profit increased by approximately 140% from approximately $46,000 for the year ended June 30, 2018 to approximately $109,000 for
the year ended June 30, 2019. However, our gross profit decreased by approximately 30% from approximately $66,000 for the six
months ended December 31, 2018 to approximately $46,000 for the six months ended December 31, 2019.
If
our growth rate declines, investors’ perceptions of our business and business prospects may be materially and adversely
affected and the market price of our shares could decline.
Our
lack of insurance could expose us to significant costs and business disruption.
The
health and wellness industry
in Malaysia is a mature market. We currently do not have any product liability or disruption insurance to cover our operations
in Malaysia or overseas, which, based on public information available to us relating to Malaysia-based health and wellness
companies, is consistent with customary industry practice in Malaysia. We have determined
that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable
terms make it impractical for us to have such insurance. If we suffer any losses, damages or liabilities in the course of our
business operations, we may not have adequate insurance coverage to provide sufficient funds to cover any such losses, damages
or product claim liabilities. Therefore, there may be instances when we will sustain losses, damages and liabilities because of
our lack of insurance coverage, which may in turn materially and adversely affect our financial condition and results of operations.
A
decline in general economic condition could lead to reduced consumer demand and could negatively impact our business operation
and financial condition, which in turn could have a material adverse effect on our business, financial condition and results of
operations.
Our
operating and financial performance may be adversely affected by a variety of factors that influence the general economy. Consumer
spending habits, including spending for health related products and services we sell, are affected by, among other things, prevailing
economic conditions, levels of unemployment, salaries and wage rates, prevailing interest rates, income tax rates and policies,
consumer confidence and consumer perception of economic conditions. In addition, consumer purchasing patterns may be influenced
by consumers’ disposable income. In the event of an economic slowdown, consumer spending habits could be adversely affected
and we could experience lower net sales than expected on a quarterly or annual basis which could have a material adverse effect
on our business, financial condition and results of operations.
We
operate in a heavily regulated industry.
Our
business is principally regulated by various laws and regulations in the market we operate, such as in Malaysia the Food Act 1983
(ACT 281) and Regulations, Control of Drugs and Cosmetics Regulations 1984 mandate authorization from the Food Safety and Quality
Division and National Pharmaceutical Regulatory Agency of the Ministry of Health for our Company’s products to be sold in
the country. Various registrations, certificates and/or licenses for the conduct of our business are required under the above
laws, which also contain provisions for requirements on the storage, labelling, advertising and importation of some of our products.
Furthermore,
in the health and wellness industry, we are subject to numerous laws and regulations, including labor, employment and taxation
laws to which the industry participants are typically subject to. The formulation, manufacturing, packaging, labeling, distribution,
sale and storage of our inventory are subject to extensive regulation by various regulatory agencies and bodies. If we fail to
comply with those regulations, we would subject to significant penalties or claims, which would harm our business operations.
In addition, the adoption of new regulations or changes in the interpretations of existing regulations may result in significant
compliance costs or discontinuation of product sales and may impair the marketability of products we may offer, resulting in significant
loss of net sales. Our failure to comply with regulations may result in enforcement actions and imposition of penalties or otherwise
harm the distribution and sale of products we may offer for sale. The occurrence of any of the foregoing will have a material
adverse effect on our business, financial condition and results of operations.
Based
on our experience, some of the laws and regulations of Malaysia are subject to amendments, uncertainty in interpretation and administrative
actions from time to time. Therefore, we cannot assure you that, for the implementation of our business plans and the introduction
of any new product, we will be able to obtain all the necessary registrations, certificates and/or licenses. Any failure to comply
with the above laws and regulations may give rise to fines, administrative penalties and/or prosecution against us, which may
adversely affect our reputation, financial condition or results of operation.
We
may be adversely affected by the performance of third-party contractors.
We
engaged third-party contractors to carry out logistics services. We endeavor to engage third-party companies with a strong reputation
and track record, high performance reliability and adequate financial resources. However, any such third-party contractor may
still fail to provide satisfactory logistics services at the level of quality or within the timeframe required by us or our customers.
While we generally require our logistics contractors to fully reimburse us for any losses arising from delay in delivery or non-delivery,
our results of operation and financial condition may be adversely affected if any of the losses are not borne by them. If the
performance of any third-party contractor is not satisfactory, we may need to replace such contractor or take other remedial actions,
which could adversely affect the cost structure and delivery schedule of our products and services and thus have a negative impact
on our reputation, financial position and business operations. In addition, as we expand our business into overseas markets, there
may be a shortage of third-party contractors that meet our quality standards and other selection criteria in such locations and,
as a result, we may not be able to engage a sufficient number of high-quality third-party contractors in a timely manner, which
may adversely affect our delivery schedules and delivery costs and hence our business, results of operations and financial conditions.
We
may need additional capital, and financing may not be available on terms acceptable to us, or at all.
There
is no guarantee that in the future we will generate enough profits to support our business. Although we believe that our anticipated
cash flows from operating activities together with cash on hand will be sufficient to meet our anticipated working capital requirements
and capital expenditures in the ordinary course of business for the next twelve months, we cannot assure you this will be the
case. We may need additional cash resources in the future if we experience changes in business conditions or other developments.
We may also need additional cash resources in the future if we find and wish to pursue opportunities for investment, acquisition,
capital expenditure or similar actions. If we determine that our cash requirements exceed the amount of cash and cash equivalents
we have on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities. The issuance and sale
of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased
fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing
will be available in amounts or on terms acceptable to us, if at all.
Adverse
developments in our existing areas of operation could adversely impact our results of business, results of operations and financial
condition.
Our
operations are focused on utilizing our sales efforts which are principally located in Malaysia. As a result, our results of operations,
cash flows and financial condition depend upon the demand for our products in Malaysia. Due to the lack of broad diversification
in industry type and geographic location, adverse developments in our current segment of the industry, or our existing areas of
operation, could have a significantly greater impact on our business, results of operations and financial condition than if our
operations were more diversified.
Our
internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being
disseminated to the public.
Our
management is responsible for establishing and maintaining adequate internal control over our financial reporting. As defined
in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of,
the principal executive and principal financial officer and effected by the board of directors, management and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
pertain to the maintenance of records in reasonable detail accurately and fairly reflect the transactions and dispositions of
the assets of the Company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and/or directors of the Company; and provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could
have a material effect on the financial statements.
In
connection with the audits of our consolidated financial statements as of December 31, 2019, June 30, 2019 and 2018, we and our
independent registered public accounting firms identified three “material weaknesses,” and other control deficiencies
including significant deficiencies in our internal control over financial reporting. A “material weakness” is a deficiency,
or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that
a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely
basis. The material weaknesses identified related to the Company were: (i) insufficient full-time personnel with appropriate levels
of accounting knowledge and experience to monitor the daily recording of transactions, address complex U.S. GAAP accounting issues
and to prepare and review financial statements and related disclosures under U.S. GAAP; (ii) lack of a functional internal audit
department or personnel that monitors the consistencies of the preventive internal control procedures and lack of adequate policies
and procedures in internal audit function to ensure that the Company’s policies and procedures have been carried out as
planned; (iii) lack of adequate segregation of duties and effective risk assessment, which in turn may cause the Company to face
the likelihood of fraud or theft, due to poor oversight, governance and review to detect errors. We have taken measures and plan
to continue to take measures to remedy these material weaknesses. The measures that we have taken and are planning to take
which includes, but not limited to, seeking a chief financial officer who possesses U.S. GAAP and SEC reporting knowledge
and hiring more qualified accounting personnel with U.S. GAAP experiences. We also intend to form an internal audit function and
have plans to hire internal auditors to strengthen our overall governance. All internal auditors will be independent of our operations
and will report directly to the audit committee. The implementation of these measures may not fully address the material weaknesses
in our internal control over financial reporting, and we cannot conclude that they have been fully remedied. Our failure to correct
theses material weaknesses or our failure to discover and address any other material weaknesses could result in inaccuracies in
our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related
regulatory filings on a timely basis .
Upon
completion of this offering, we will become subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act,
or SOX 404, will require that we include a report from management on the effectiveness of our internal control over financial
reporting in our annual report on Form 10-K and in our quarterly report on Form 10-Q if we are qualified as an accelerated
filer. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our
management concludes that our internal control over financial reporting is effective, our independent registered public accounting
firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal
controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements
differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on
our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete
our evaluation testing and any required remediation.
During
the course of documenting and testing our internal control procedures, in order to satisfy the requirements of SOX 404,
we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to
maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended
from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting
in accordance with SOX 404. If we fail to achieve and maintain an effective internal control environment, we could
suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause
investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm
our results of operations, and lead to a decline in the trading price of our shares. Additionally, ineffective internal control
over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential
delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be
required to restate our financial statements from prior periods.
Legal
disputes or proceedings could expose us to liability, divert our management’s attention and negatively impact our reputation.
We
may at times be involved in potential legal disputes or proceedings during the ordinary course of business operations relating
to product or other types of liability, employees’ claims, labor disputes or contract disputes that could have a material
and adverse effect on our reputation, operation and financial condition. If we become involved in material or protracted legal
proceedings or other legal disputes in the future, the outcome of such proceedings could be uncertain and could result in settlements
or outcomes which materially and adversely affect our financial condition. In addition, any litigation or legal proceedings could
incur substantial legal expenses as well as significant time and attention of our management, diverting their attention from our
business and operations.
Our
failure to comply with anti-corruption laws and regulations, or effectively manage our employees, customers and business partners,
could severely damage our reputation, and materially and adversely affect our business, financial condition, results of operations
and prospects.
We
are subject to risks in relation to actions taken by us, our employees, third-party customers or third-party suppliers that constitute
violations of the anti-corruption laws and regulations. While we adopt strict internal procedures and work closely with relevant
government agencies to ensure compliance of our business operations with relevant laws and regulations, our efforts may not be
sufficient to ensure that we comply with relevant laws and regulations at all times. If we, our employees, third-party customers
or third-party suppliers violate these laws, rules or regulations, we could be subject to fines and/or other penalties. Actions
by Malaysia regulatory authorities or the courts to provide an alternative interpretation of the laws and regulations or to adopt
additional anti-bribery or anti-corruption related regulations could also require us to make changes to our operations. Our reputation,
corporate image, and business operations may be materially and adversely affected if we fail to comply with these measures or
become the target of any negative publicity as a result of actions taken by us, our employees, third-party customers or third-party
suppliers.
An
overall decline in the health of the economy and other factors impacting consumer spending, such as natural disasters, outbreak
of viruses, illnesses, infectious diseases, contagions and the occurrence of unforeseen epidemics may affect consumer purchases,
reduce demand for our products and materially harm our business, results of operations and financial condition.
Our
business depends on consumer demand for our products and, consequently, is sensitive to a number of factors that influence consumer
confidence and spending, including but not limited to, general current and future economic and political conditions, consumer
disposable income, recession and fears of recession, unemployment, minimum wages, availability of consumer credit, consumer debt
levels, interest rates, tax rates and policies, inflation, war and fears of war, inclement weather, natural disasters, terrorism,
active shooter situations, outbreak of viruses, illnesses, infectious diseases, contagions and the occurrence of unforeseen epidemics
(including the outbreak of the coronavirus and its potential impact on our financial results) and consumer perceptions of personal
well-being and security. For example, in recent years, there have been outbreaks of epidemics in various countries, including
Malaysia. Recently, there was an outbreak of a novel strain of coronavirus (“COVID-19”), which has spread rapidly
to many parts of the world, including Malaysia. On March 11, 2020, the World Health Organization declared the COVID-19 a pandemic.
In accordance with the recommendations of the WHO, Malaysia had imposed a nationwide lockdown via the government’s Movement
Control Order (“MCO”) effective March 18, 2020. The MCO has resulted in quarantines, travel restrictions, and the
temporary closure of stores and facilities in Malaysia. On May 4, 2020, the MCO was 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.
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 our customers or suspension supplies may negatively affected,
and could continue to negatively affect, the demand for our products;
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our
customers may require additional time to pay us or fail to pay us at all, which could significantly increase the amount of
accounts receivable and require us to record additional allowances for doubtful accounts. We may have to provide significant
sales incentives to our customers during the outbreak, which may in turn materially adversely affect our financial condition
and operating results;
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any
disruption of our supply chain, logistics providers or customers could adversely impact our business and results of operations,
including causing us or our suppliers to cease manufacturing for a period of time or materially delay delivery to our sole
customer, which may also lead to loss of our sole customer; and
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the
global stock markets have experienced, and may continue to experience, significant decline from the COVID-19 outbreak and
the marketable securities that we have invested in could be materially adversely affected, which may lead to significant impairment
in the fair values of our investments and in turn materially adversely affect our financial condition and operating results.
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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 our total revenues will grow or remain at the similar
level year over year in the next three quarters of 2020.
We
may have to record downward adjustments or impairment in the fair value of investments in the following quarters of 2020, if conditions
have not been significantly improved and global stock markets have not recovered from recent declines.
In
general, our business could be adversely affected by the effects of epidemics, pandemic
or, including, but not limited to, the COVID-19, avian influenza, severe acute respiratory
syndrome (SARS), the influenza A virus, Ebola virus, severe weather conditions such as flood or hazardous air pollution, or other
outbreaks. In response to an epidemic, severe weather conditions, or other outbreaks, government and other organizations may adopt
regulations and policies that could lead to severe disruption to our daily operations, including temporary closure of our offices
and other facilities. These severe conditions may cause us and/or our partners to make internal adjustments, including but not
limited to, temporarily closing down business, limiting business hours, and setting restrictions on travel and/or visits with
clients and partners for a prolonged period of time. Various impact arising from a severe condition may cause business disruption,
resulting in material, adverse impact to our financial condition and results of operations.
Fluctuations
in foreign currency exchange rates could have a material adverse effect on our financial results.
We
earn revenues, pay expenses, own assets and incur liabilities in countries using currencies other than the U.S. dollar, including
Australian Dollars, Malaysian Ringgit and Hong Kong Dollars. Since our consolidated financial statements are presented in U.S.
dollars, we must translate revenues, income and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates
in effect during or at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar against
other currencies affect our net operating revenues, operating income and the value of balance sheet items denominated in foreign
currencies. We cannot assure you that fluctuations in foreign currency exchange rates, particularly the strengthening or weakening
of the U.S. dollar against major currencies would not materially affect our financial results.
Our
business depends on the continued contributions made by Mr. How Kok Choong, as our founder, chief executive officer, chairman
of the board of Directors, Director and secretary, the loss of who may result in a severe impediment to our business, results
of operation and financial condition.
Our
success is dependent upon the continued contributions made by our founder, chief executive officer, chairman of the board of Directors,
Director and secretary, Mr. How Kok Choong. We rely on his expertise in business operations when we are developing our business.
We have no “Key Man” insurance to cover the resulting losses in the event that any of our officer or directors should
die or resign.
If
Mr. How cannot serve the Company or is no longer willing to do so, the Company may not be able to find alternatives in a timely
manner or at all. This would likely result in a severe damage to our business operations and would have an adverse material impact
on our financial position and operating results. To sustain our operations, the Company may have to recruit and train replacement
personnel at a higher cost. In addition, if Mr. How joins our competitors or develops similar businesses that are in competition
with our Company, our business, results of operation and financial conditions may also be negatively impacted.
We
may incur losses resulting from product liability claims or product recalls or adverse publicity
relating to our products.
We
may incur losses resulting from product liability claims with respect to our products supplied by our suppliers. We may face claims
or liabilities which may arise if there exist any defects in quality of these products or any of these products are deemed or
proven to be unsafe, defective or contaminated. In the event that the use or misuse of any product distributed by us results in
personal injury or death, product liability and/or indemnity claims may be brought against us, in addition to our product recalls,
and the relevant regulatory authorities in the market we operate may close down some of our related operations and take administrative
actions against us. If we experience any business disruption and litigation, we may incur additional costs and have to divert
our management’s attention and resources on such matters, which may materially and adversely affect our business, financial
condition and results of operations.
In
addition, adverse publicity about health and safety concerns, whether unfounded or not, may discourage consumers from buying our
products. Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion
that our products caused personal injury or illness could adversely affect our reputation and our corporate and brand image. If
consumers were to lose confidence in our brand and reputation, we could suffer long-term or even permanent declines in our sales
and results of operation. The amount of negative news, customers complaints and claims against us may also be very costly and
may divert our management’s attention from our business operation.
Risks
Related to Doing Business in Malaysia
Our
supply and sales agreements with our two largest
suppliers
may be legally unenforceable if they are found to infringe applicable competition laws.
Our
supply and sales agreements with our two largest
suppliers, or certain
provisions of the supply and sales agreements, may be found to be unenforceable if they are found to infringe the competition
laws of jurisdictions in which we operate. For example, our supplier covenants not to sell any product listed or named in the
ODM Supply Agreement may be held to be unenforceable under Malaysian law.
Under
the Malaysian Competition Act of 2010 (“MCA”), such provisions may be considered to be anti-competitive if they are
found to significantly prevent, restrict or distort competition in any market for goods or services. For purposes of the MCA,
an anti-competitive agreement will not be deemed significant if (i) the parties to the agreement are competitors and their combined
market share is less than 20% of the relevant market; or (ii) the parties to the agreement are not competitors and their individual
market share in any relevant market is not more than 25%. The MCA also prohibits enterprises from engaging in any conduct which
amounts to an abuse of a dominant position in any market for goods or services. Generally, for purposes of the MCA, market share
above 60% would be indicative (but not conclusive evidence) that an enterprise is dominant. If we are seen to be in a dominant
position in the market, the provisions on exclusivity, territorial restrictions and/or resale price maintenance could potentially
be seen to be an abuse of such dominant position.
However,
because limited guidance, decisions and guidelines are available with respect to determination of the relevant market or the market
shares for the industries in which we operate, it is unclear whether our agreements with third parties will be found to infringe
applicable competition laws. If any such agreement is found to infringe such laws, the authorities may (i) require that the infringement
be ceased immediately; (ii) specify steps which are required to be taken by the infringing enterprise(s) to bring the infringement
to an end; (iii) impose financial penalties which could, for example, be 10% of the worldwide turnover of the relevant enterprise
over the period during which an infringement occurred; or (iv) take any number of other actions, including imposing sanctions
and penalties, as they deem appropriate.
There
can be no assurance that our agreements will not be found to be unenforceable or to infringe relevant laws and regulations. Any
such finding may have a material adverse effect on our business, prospects, financial condition and results of operations.
Developments
in the social, political, regulatory and economic environment in Malaysia may have a material adverse impact on us.
Our
business, prospects, financial condition and results of operations may be adversely affected by social, political, regulatory
and economic developments in Malaysia. Such political and economic uncertainties include, but are not limited to, the risks of
war, terrorism, nationalism, nullification of contract, changes in interest rates, imposition of capital controls and methods
of taxation.
Negative
developments in Malaysia’s socio-political environment may adversely affect our business, financial condition, results of
operations and prospects. The Malaysian economy registered growth of approximately 4.7% in 2018 and 4.3% in 2019, according to
the Department of Statistics Malaysia. Although the overall Malaysian economic environment (in which we predominantly operate)
appears to be positive, there can be no assurance that this will continue to prevail in the future. Economic growth is determined
by countless factors, and it is extremely difficult to predict with any level of absolute certainty. Furthermore, the outbreak
of coronavirus disease 2019 was first reported in December 2019 in Wuhan, China. On March 16, 2020, the Malaysian government first
announced that there was a Movement Control Order (“MCO”) on the country effective on March 18, 2020 and lasted until
March 30, 2020. The MCO was subsequently extended three times, each covering a two-week period. On May 4, 2020, the MCO was 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. Further, at the time of the preparation of this
Form S-1 Registration Statement, a vaccine against COVID-19 has yet to be found and there is the concern of a second wave of the
coronavirus which might render the Malaysian government to further impose another MCO or CMCO. As such, the extent to which the
coronavirus may impact the Malaysian economy is uncertain. In the event that the Malaysia economy suffers, demand for our products
may diminish, which would in turn result in our profitability. This could in turn result in a substantial need for restructuring
of our business objectives and could result in a partial or entire loss of an investment in our Company.
We
are subject to foreign exchange control policies in Malaysia.
The
ability of our subsidiaries to pay dividends or make other payments to us may be restricted by the foreign exchange control policies
in the countries where we operate. For example, there are foreign exchange policies in Malaysia which support the monitoring of
capital flows into and out of the country in order to preserve its financial and economic stability. The foreign exchange policies
are administered by the Foreign Exchange Administration, an arm of Bank Negara Malaysia (“BNM”), the central bank
of Malaysia. The foreign exchange policies monitor and regulate both residents and non-residents. Under the current Foreign Exchange
Administration rules issued by BNM, non-residents are free to repatriate any amount of funds from Malaysia in foreign currency
other than the currency of Israel at any time (subject to limited exceptions), including capital, divestment proceeds, profits,
dividends, rental, fees and interest arising from investment in Malaysia, subject to any withholding tax. In the event BNM or
any other country where we operate introduces any restrictions in the future, we may be affected in our ability to repatriate
dividends or other payments from our subsidiaries in Malaysia or in such other countries. Since we are a holding company and rely
principally on dividends and other payments from our subsidiaries for our cash requirements, any restrictions on such dividends
or other payments could materially and adversely affect our liquidity, financial condition and results of operations.
Economic,
market and political developments in the countries where we operate could have a material and adverse effect on our business.
As
with all organizations that seek to reduce business risks via geographical expansion, the economic, market and political conditions
in other countries, particularly emerging market conditions in Southeast Asia, could have an influence on our business. Any widespread
global financial instability or a significant loss of investor confidence in emerging market economies may materially and adversely
affect our business, financial condition, results of operations, prospects or reputation.
Examples
of such external factors or conditions that are outside our control include, but are not limited to the following:
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general
economic, political and social conditions in Southeast Asian markets;
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consumer
spending patterns in our key markets;
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currency
and interest rate fluctuations;
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international
events and circumstances such as wars, terrorist attacks, natural disasters and political instability; and
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changes
in legal regimes and governmental regulations, such as licensing and approvals, taxation, duties and tariffs, in key markets
and abroad.
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For
example, the global financial markets experienced significant disruptions in 2008 and the United States, Europe and other economies
went into recession. The recovery from the lows of 2008 and 2009 was uneven and the global economy has continued to face new challenges.
There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies that have been adopted
by the central banks and financial authorities of some of the world’s leading economies, including the United States. For
example, in 2013, the Federal Reserve Bank in the United States announced the tapering of its bond-buying program which led to
a high degree of volatility in equity markets and substantial devaluations in the currencies of many emerging economies, including
markets where we operate. Economic conditions in the countries where we operate might be sensitive to global economic conditions,
as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in emerging
markets. Furthermore, the outbreak of coronavirus disease 2019 was first reported in December 2019 in Wuhan, China. As at June
30, 2020, the extent to which the coronavirus may impact the global economy is uncertain.
Management
and Governance Risks
As
a “controlled company” under the [NASDAQ Market Rules /NYSE Listed Company Manual], we may be exempt from certain
corporate governance requirements that could adversely affect our public shareholders.
Immediately
prior to the completion of this offering, Mr. How Kok Choong, our founder, chief executive officer, chairman of the board of Directors,
Director and secretary, will beneficially own approximately 68% of our common stocks. Upon the completion of this offering, Mr.
How will own more than [*]% of our total voting power of our total issued and outstanding share capital. As a result, Mr. How
will have considerable decisive influence over matters requiring shareholders’ approval, including the election of directors
and significant corporate transactions, such as a merger or sale of our company or our assets. This concentrated control may limit
your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other
change of control transactions that holders of our common stocks may view as beneficial.
Risks
Related to our Common Stock and this Offering
Volatility
in our shares price may subject us to securities litigation.
The
market for our shares may have, when compared to seasoned issuers, significant price volatility and we expect that our share price
may continue to be more volatile than that of a seasoned issuer for the indefinite future. In the past, plaintiffs have often
initiated securities class action litigation against a company following periods of volatility in the market price of its securities.
We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities
and could divert management’s attention and resources.
We
may never be able to pay dividends and are unlikely to do so.
To
date, we have not paid, nor do we intend to pay in the foreseeable future, dividends on our common stock, even if we become profitable.
Earnings, if any, are expected to be used to advance our activities and for working capital and general corporate purposes, rather
than to make distributions to stockholders. Since we are not in a financial position to pay dividends on our common stock and
future dividends are not presently being contemplated, investors are advised that return on investment in our common stock is
restricted to an appreciation in the share price. The potential or likelihood of an increase in share price is uncertain.
In
addition, under Nevada law, we may only pay dividends subject to our ability to service our debts as they become due and provided
that our assets will exceed our liabilities after the dividend. Our ability to pay dividends will therefore depend on our ability
to generate sufficient profits. Furthermore, because of the various rules applicable to our operations in Malaysia and the regulations
on foreign investments as well as the applicable tax law, we may be subject to further limitations on our ability to declare and
pay dividends to our shareholders.
Shareholders
may be diluted significantly through our efforts to obtain financing and satisfy obligations through the issuance of securities.
Wherever
possible, our board of directors will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe
that the non-cash consideration will consist of shares of our common stock, warrants to purchase shares of our common stock or
other securities. In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution
of the ownership interests of our stockholders. We are authorized to issue an aggregate of 1,000,000,000 shares of common stock
and 200,000,000 shares of preferred stock. We may issue additional shares of our common stock or other securities that are convertible
into or exercisable for our common stock in connection with hiring or retaining employees, future acquisitions, future sales of
our securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares
of our common stock may create downward pressure on the trading price of the common stock. We expect we will need to raise additional
capital in the near future to meet our working capital needs, and there can be no assurance that we will not be required to issue
additional shares, warrants or other convertible securities in the future in conjunction with these capital raising efforts, including
at a price (or exercise prices) below the price you paid for your stock.
We
are an “emerging growth company” under the JOBS Act of 2012, and we cannot be certain if the reduced disclosure requirements
applicable to emerging growth companies will make our common stock less attractive to investors.
We
are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies that are not “emerging growth companies”
including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not
previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common
stock and our stock price may be more volatile.
In
addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
An “emerging growth company” can therefore delay the adoption of certain accounting standards until those standards
would otherwise apply to private companies. We are choosing to follow the extended transition period, and as a result, we will
delay adoption of certain new or revised accounting standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies.
We
are a “smaller reporting company,” and we cannot be certain if the reduced disclosure requirements applicable to smaller
reporting companies will make our common stock less attractive to investors.
We
are currently a “smaller reporting company”, meaning that we are not an investment company, an asset- backed issuer,
or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a non-affiliated public float
of less than $75.0 million and annual revenues of less than $50.0 million during the most recently completed fiscal year. In the
event that we are still considered a “smaller reporting company,” at such time as we cease being an “emerging
growth company,” we will be required to provide additional disclosure in our SEC filings. However, similar to an “emerging
growth companies”, “smaller reporting companies” are able to provide simplified executive compensation disclosures
in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered
public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have
certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide
two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as a “smaller
reporting company” may make it harder for investors to analyze our results of operations and financial prospects.
We
will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging
growth company.”
Upon
consummation of this offering, we will incur significant legal, accounting and other expenses as a public company that we did
not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and [NASDAQ/NYSE],
impose various requirements on the corporate governance practices of public companies. We are an “emerging growth company,”
as defined in the JOBS Act and will remain an emerging growth company until the earlier of (1) the last day of the fiscal year
(a) following the fifth anniversary of the completion of this Offering, (b) in which we have total annual gross revenue of at
least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common
stocks that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued
more than $1.0 billion in non-convertible debt during the prior three-year period. An emerging growth company may take advantage
of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions
include exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growth company’s
internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time
as those standards apply to private companies.
Compliance
with these rules and regulations increases our legal and financial compliance costs and makes some corporate activities more time-consuming
and costly. After we are no longer an “emerging growth company,” we expect to incur significant expenses and devote
substantial management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations
of the SEC. For example, as a public company, we have been required to increase the number of independent directors and adopt
policies regarding internal controls and disclosure controls and procedures. We have incurred additional costs in obtaining director
and officer liability insurance. In addition, we incur additional costs associated with our public company reporting requirements.
It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We
are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate
with any degree of certainty the amount of additional costs we may incur or the timing of such costs.
We
may not maintain our listing on [NASDAQ/NYSE] which could limit investors’ ability to make transactions in our securities
and subject us to additional trading restrictions.
We
plan to apply to list our common stocks on [NASDAQ/NYSE]. Even if our common stock is approved to be listed on [NASDAQ/NYSE],
we cannot assure you that our common stocks will continue to be listed on [NASDAQ/NYSE] in the future. In order to continue listing
our securities on [NASDAQ/NYSE], we must maintain certain financial, distribution and share price levels. Moreover, we must comply
with certain listing standards regarding the independence of our board of directors and members of our audit committee. We intend
to fully comply with these requirements, but we may not continue to be able to meet these requirements in the future.
If
[NASDAQ/NYSE] delists our securities from trading on its exchange and we are not able to list our securities on another national
securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face
significant material adverse consequences, including:
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limited availability of market quotations for our securities;
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reduced
liquidity for our securities;
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a
determination that our common stock is a “penny stock” which will require brokers trading in our common stock
to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market
for our securities;
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a
limited amount of news and analyst coverage; and
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a
decreased ability to issue additional securities or obtain additional financing in the future.
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The
National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating
the sale of certain securities, which are referred to as “covered securities.” Because we expect that our common stock
will be listed on [NASDAQ/NYSE], such securities will be covered securities. Although the states are preempted from regulating
the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud,
and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular
case. Furthermore, if we were no longer listed on [NASDAQ/NYSE], our securities would not be covered securities and we would be
subject to regulations in each state in which we offer our securities.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements, including, without limitation, in the sections captioned “Risk Factors”,
“Management’s Discussion and Analysis of Financial Condition and Plan of Operations”, and “Business”.
Known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” may cause our
actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking
statements.
You
can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,”
“anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,”
“is/are likely to,” “potential,” “continue” or other similar expressions. We have based these
forward-looking statements largely on our current expectations and projections about future events that we believe may affect
our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include
statements relating to:
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Our
goals and strategies;
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Our
future business development, financial conditions and results of operations;
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Our
expectations regarding demand for and market acceptance of our products and services;
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Our
ability to attract and retain management;
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Our
ability to raise capital when needed and on acceptable terms and conditions;
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The
intensity of competition;
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General
economic conditions;
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Changes
in regulations;
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Relevant
government policies and regulations relating to our industry;
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Whether
the market for healthcare services continues to grow, and, if it does, the pace at which it may grow;
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Our
ability to compete against large competitors in a rapidly changing market; and
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Our
ability to comply with the continued listing standards on the exchange or trading market on which our common stock is listed
for trading.
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These
forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these
forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially
different from our expectations. Important risks and factors that could cause our actual results to be materially different from
our expectations are generally set forth in “Risk Factors,” “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” “Business” and other sections in this prospectus. You should thoroughly
read this prospectus and the documents that we refer to with the understanding that our actual future results may be materially
different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.
This
prospectus contains certain data and information that we obtained from private publications. Statistical data in these publications
also include projections based on a number of assumptions. Our industry may not grow at the rate projected by market data, or
at all. Failure of this market to grow at the projected rate may have a material and adverse effect on our business and the market
price of our common stocks. In addition, the rapidly changing nature of the health and wellness industry results in significant
uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore,
if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from
the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.
The
forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements
are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made
or to reflect the occurrence of unanticipated events. You should read this prospectus and the documents that we refer to in this
prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the
understanding that our actual future results may be materially different from what we expect.
USE
OF PROCEEDS
We
estimate that we will receive net proceeds from this offering of approximately $ million, [or approximately
$ million if the underwriter exercises its over-allotment option in full], after deducting underwriting
discounts and the estimated offering expenses payable by us.
The
primary purposes of this offering are to create a public market of our shares for the benefit of all shareholders, retain talented
employees, and obtain additional capital. We plan to use the net proceeds of this offering as follows:
|
●
|
approximately
[*]% for strengthening sales and marketing of our products and services, including further development and promotion of our
e-trading platform;
|
|
|
|
|
●
|
approximately
[*]% for research and development, including further research on enhancements of components in our current product offerings
which we can then submit to suppliers as feedback for future products;
|
|
|
|
|
●
|
approximately
[*]% for expanding operations into US markets, including collaborations with US companies in terms of product R&D and
expansion of e-commerce operations to target US consumers;
|
|
|
|
|
●
|
approximately
[*]% for future vertical integration, including investments into production resources allowing us to produce our own products,
ensuring supply and quality while reducing costs; and
|
|
|
|
|
●
|
the
remainder for working capital and general corporate purposes, including future capital expenditures and increasing our liquidity.
|
The
amounts and timing of our actual expenditures will depend on numerous factors, including the factors described under “Risk
Factors.” The foregoing represents our current intentions based upon our present plans and business conditions to use and
allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply
the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this
offering differently than as described in this prospectus.
DIVIDEND
POLICY
We
have never declared or paid any cash dividends on our common stock. We currently intend to retain all of our future earnings,
if any, to finance the growth and development of our business. We do not intend to pay cash dividends to holders of our common
stock in the foreseeable future.
CAPITALIZATION
The
following table describes our cash and our capitalization as of March 31, 2020:
|
●
|
on
an actual basis; and
|
|
|
|
|
●
|
on
an as adjusted basis to reflect our receipt of the net proceeds from this offering after deducting the underwriting commissions
and estimated offering expenses payable by us.
|
The
as adjusted information below is illustrative only and our capitalization following the completion of this offering is subject
to adjustment based on the public offering price of our common stock and other terms of this offering determined at pricing. In
addition, except for the last column in the first table below, the tables below assume that the underwriter’s over-allotment
option has not been exercised. You should read this capitalization table together with our consolidated financial statements and
the related notes appearing elsewhere in this prospectus and the “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” section and other financial information included elsewhere in this prospectus.
|
|
Actual
|
|
|
Pro
Forma
Adjusted for
IPO(1) (2)
|
|
|
Pro
Forma
Adjusted
for IPO
including
Over-
allotment(3)
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.0001 par value; 200,000,000 shares authorized; no shares issued and outstanding, actual and as adjusted
|
|
$
|
-
|
|
|
$
|
[*
|
]
|
|
$
|
[*
|
]
|
Common stock, $0.0001
par value; 1,000,000,000 shares authorized; 376,275,500 issued and outstanding, as adjusted
|
|
|
37,628
|
|
|
|
[*
|
]
|
|
|
[*
|
]
|
Additional paid in capital
|
|
|
5,293,082
|
|
|
|
[*
|
]
|
|
|
[*
|
]
|
Accumulated deficit
|
|
|
(1,320,959
|
)
|
|
|
[*
|
]
|
|
|
[*
|
]
|
Accumulated other
comprehensive income
|
|
|
17,555
|
|
|
|
[*
|
]
|
|
|
[*
|
]
|
Total shareholders’
equity
|
|
$
|
4,027,306
|
|
|
$
|
[*
|
]
|
|
$
|
[*
|
]
|
(1)
Gives effect to the sale of common stocks at a public offering price of $[*] per share and to reflect the application of the proceeds
after deducting our estimated offering expenses.
(2)
Pro forma adjusted for IPO additional paid in capital reflects the net proceeds we expect to receive, after deducting the underwriter
commission ([*]%), non-accountable underwriter expense allowance ([*]%) and other expenses (all the accountable expenses). We
expect to receive net proceeds of $[*] (approximately $[*] million offering, less underwriting fee of $[*] and offering expenses
of $[*]). For an itemization of an estimation of the total offering expenses, see “Item 13. Other Expenses of issuance and
Distribution” beginning on page II-1 of this prospectus.
[(3)
Pro forma adjusted for IPO additional paid in capital including the Underwriter’s over-allotment option reflects the net
proceeds we expect to receive after the Under exercise the over-allotment option in full and after deducting the underwriter commission
([*]%), non-accountable underwriter expense allowance ([*]%) and other expenses (all the accountable expenses). We expect to receive
net proceeds of $[*] (approximately $[*] million offering, less underwriting fee of $[*] and offering expenses of $[*]). For an
itemization of an estimation of the total offering expenses, see “Item 13. Other Expenses of issuance and Distribution”
beginning on page II-1 of this prospectus.]
DILUTION
If
you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference
between the public offering price per share of our common stock and the as adjusted net tangible book value per share of our common
stock immediately after this offering.
Dilution
results from the fact that the per share offering price is substantially in excess of the book value per share of common stock
attributable to the existing shareholders for our presently outstanding shares of common stock. Net tangible book value per share
is determined by dividing our total tangible assets less our total liabilities by the number of shares of our common stock outstanding.
Our historical net tangible book value as of March 31, 2020, was $4,251,286, or $0.01 per share.
Our
post offering as adjusted net tangible book value, which gives effect to receipt of the net proceeds from the offering and issuance
of additional shares in the offering, but does not take into consideration any other changes in our net tangible book value after
December 31, 2019, will be approximately $[*] or approximately $[*] per share. This would result in dilution to investors in this
offering of approximately $[*] per share or approximately [*]% from the assumed offering price of $[*] per share. Net tangible
book value per share would increase to the benefit of present shareholders by $[*] per share attributable to the purchase of the
shares by investors in this offering.
The
following table sets forth the estimated net tangible book value per share after the offering and the dilution to persons purchasing
shares.
|
|
Offering(1)
|
|
|
Full
Over-
allotment
Post-offering(2)
|
|
Assumed offering price per
common stock
|
|
$
|
|
|
|
$
|
|
|
Net tangible book value per common stock as of December 31, 2019
|
|
$
|
|
|
|
$
|
|
|
Increase in net tangible book value
per share after this offering
|
|
$
|
|
|
|
$
|
|
|
Net tangible book value per common stock
after the offering
|
|
$
|
|
|
|
$
|
|
|
Dilution per common stock to new investors
|
|
$
|
|
|
|
$
|
|
|
(1)
|
Assumes
gross proceeds from offering of [*] common stock.
|
(2)
|
[Assumes
gross proceeds from offering of [*] common stock, if over-allotment option is exercised in full.]
|
The
following chart illustrates our pro forma proportionate ownership, upon completion of the offering, by present shareholders and
investors in this offering, compared to the relative amounts paid by each. The charts reflect payment by present shareholders
as of the date the consideration was received and by investors in this offering at the offering price without deduction of the
estimated underwriting commissions and our estimated offering expenses. The charts further assume no changes in net tangible book
value other than those resulting from the offering.
|
|
Shares
Purchased
|
|
|
Total
Consideration
|
|
|
Average
Price
|
|
|
|
Number
|
|
|
Percentage
|
|
|
Amount
|
|
|
Percentage
|
|
|
Per
Share
|
|
New investors(1)
|
|
|
|
|
|
|
|
%
|
|
$
|
|
|
|
|
|
%
|
|
$
|
|
|
Existing shareholders
|
|
|
|
|
|
|
|
%
|
|
$
|
|
|
|
|
|
%
|
|
$
|
|
|
Total
|
|
|
|
|
|
|
100
|
%
|
|
$
|
|
|
|
|
100
|
%
|
|
$
|
|
|
(1)
|
Assuming
the offering is fully subscribed.
|
SELECTED
CONSOLIDATED FINANCIAL DATA
AGAPE
ATP CORPORATION
The
following table presents selected consolidated financial data for the periods and at the dates indicated. The unaudited condensed
consolidated financial statements for the three months ended March 31, 2020 and 2019 have been prepared on the same basis as our
audited consolidated financial statements for the years ended June 30, 2019 and 2018. The unaudited condensed financial statements
include all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair representation
of our financial position and operating results for the periods presented. The selected consolidated statements of operations
data for the six months ended December 31, 2019 and 2018 and for the years ended June 30, 2019 and 2018, and the selected consolidated
balance sheet data as of December 31, 2019, June 30, 2019 and December 31, 2018 have been derived from our audited consolidated
financial statements, included elsewhere in this prospectus. Our historical results for any prior period are not necessarily indicative
of results to be expected in any future period, and our results for any interim period are not necessarily indicative of the results
expected for a full fiscal year.
You
should read the following financial information together with the information under “Agape ATP Corporation Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and
the related notes included elsewhere in this prospectus.
Consolidated
Statements of Operations Data:
|
|
For the
Three Months Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Revenue – related party
|
|
$
|
-
|
|
|
$
|
464,297
|
|
Cost of revenue
|
|
|
|
|
|
|
(420,178
|
)
|
Gross profit
|
|
|
-
|
|
|
|
44,119
|
|
Selling, general and administrative expenses
|
|
|
(159,516
|
)
|
|
|
(28,226
|
)
|
Income (loss) from operations
|
|
|
(159,516
|
)
|
|
|
15,893
|
|
Other income (expenses), net
|
|
|
(72,234
|
)
|
|
|
48,357
|
|
Benefit for income taxes
|
|
|
-
|
|
|
|
6,965
|
|
Net income (loss)
|
|
|
(231,750
|
)
|
|
|
71,215
|
|
Other comprehensive income (loss)
|
|
|
7,770
|
|
|
|
(3,197
|
)
|
Comprehensive income (loss)
|
|
$
|
(223,980
|
)
|
|
$
|
68,018
|
|
Earnings (loss) per share – (basic and diluted)
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Weighted average number of common shares outstanding
(basic and diluted)
|
|
|
376,275,500
|
|
|
|
376,275,500
|
|
|
|
For
the Six Months Ended
|
|
|
For
the Years Ended
|
|
|
|
December
31,
|
|
|
June
30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Revenue
– related party
|
|
$
|
429,362
|
|
|
$
|
685,288
|
|
|
$
|
1,546,057
|
|
|
$
|
487,005
|
|
Cost
of revenue
|
|
|
(383,479
|
)
|
|
|
(619,355
|
)
|
|
|
(1,436,705
|
)
|
|
|
(441,409
|
)
|
Gross
profit
|
|
|
45,883
|
|
|
|
65,933
|
|
|
|
109,352
|
|
|
|
45,596
|
|
Selling,
general and administrative expenses
|
|
|
(312,270
|
)
|
|
|
(63,068
|
)
|
|
|
(240,522
|
)
|
|
|
(279,682
|
)
|
Income
(loss) from operations
|
|
|
(266,387
|
)
|
|
|
2,865
|
|
|
|
(131,170
|
)
|
|
|
(234,086
|
)
|
Other
income (expenses), net
|
|
|
(72,544
|
)
|
|
|
(138,346
|
)
|
|
|
(388,472
|
)
|
|
|
109,146
|
|
Provision
for income taxes
|
|
|
-
|
|
|
|
(6,965
|
)
|
|
|
-
|
|
|
|
(5,334
|
)
|
Net
loss
|
|
|
(338,931
|
)
|
|
|
(142,446
|
)
|
|
|
(519,642
|
)
|
|
|
(130,274
|
)
|
Other
comprehensive income (loss)
|
|
|
9,864
|
|
|
|
(1
|
)
|
|
|
1,214
|
|
|
|
(1,293
|
)
|
Comprehensive
loss
|
|
$
|
(329,067
|
)
|
|
$
|
(142,447
|
)
|
|
$
|
(518,428
|
)
|
|
$
|
(131,567
|
)
|
Earnings
(loss) per share - (basic and diluted)
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Weighted
average number of common shares outstanding (basic and diluted)
|
|
|
376,275,500
|
|
|
|
376,275,500
|
|
|
|
376,275,500
|
|
|
|
373,017,955
|
|
Consolidated
Balance Sheets Data:
|
|
As
of
|
|
|
|
March
31,
2020
|
|
|
December
31,
2019
|
|
|
June
30,
2019
|
|
|
December
31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Current
assets
|
|
$
|
4,075,063
|
|
|
$
|
3,536,653
|
|
|
$
|
3,791,470
|
|
|
$
|
3,962,986
|
|
Total assets
|
|
$
|
4,124,765
|
|
|
$
|
4,335,274
|
|
|
$
|
4,651,755
|
|
|
$
|
5,198,181
|
|
Current liabilities
|
|
$
|
97,459
|
|
|
$
|
83,988
|
|
|
$
|
71,402
|
|
|
$
|
241,847
|
|
Total liabilities
|
|
$
|
97,459
|
|
|
$
|
83,988
|
|
|
$
|
71,402
|
|
|
$
|
241,847
|
|
Total equity
|
|
$
|
4,027,306
|
|
|
$
|
4,251,286
|
|
|
$
|
4,580,353
|
|
|
$
|
4,956,334
|
|
AGAPE
SUPERIOR LIVING SDN. BHD.
The
following table presents selected ASL’s consolidated financial data for the periods and at the dates indicated. The unaudited
condensed consolidated financial statements for the three months ended March 31, 2020 and 2019 have been prepared on the same
basis as ASL’s audited consolidated financial statements for the years ended December 31, 2019 and 2018. The unaudited condensed
financial statements include all adjustments, consisting only of normal and recurring adjustments, that we consider necessary
for a fair representation of our financial position and operating results for the periods presented. The selected ASL’s
consolidated statements of operations data for the years ended December 31, 2019 and 2018, and the selected consolidated balance
sheet data as of December 31, 2019, and December 31, 2018 have been derived from ASL’s audited consolidated financial statements,
included elsewhere in this prospectus. ASL’s historical results for any prior period are not necessarily indicative of results
to be expected in any future period, and ASL’s results for any interim period are not necessarily indicative of the results
expected for a full fiscal year.
You
should read the following financial information together with the information under “Agape Superior Living Sdn. Bhd. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and ASL’s consolidated financial statements
and the related notes included elsewhere in this prospectus.
Consolidated
Statements of Operations Data:
|
|
For
the Three Months Ended
|
|
|
For
the Years Ended
|
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2019
|
|
|
2018
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,241,252
|
|
|
$
|
1,214,600
|
|
|
$
|
4,139,359
|
|
|
$
|
14,393,762
|
|
Cost of revenue
|
|
|
111,489
|
|
|
|
203,838
|
|
|
|
857,250
|
|
|
|
2,391,597
|
|
Gross profit
|
|
|
1,129,763
|
|
|
|
1,010,762
|
|
|
|
3,282,109
|
|
|
|
12,002,165
|
|
Operating
expenses
|
|
|
884,767
|
|
|
|
1,315,346
|
|
|
|
4,678,023
|
|
|
|
9,468,890
|
|
Income (loss) from operations
|
|
|
244,996
|
|
|
|
(304,584
|
)
|
|
|
(1,395,914
|
)
|
|
|
2,533,275
|
|
Other income (expenses), net
|
|
|
3,413
|
|
|
|
(4,773
|
)
|
|
|
24,196
|
|
|
|
46,184
|
|
Provision
for (benefits of) income taxes
|
|
|
50,833
|
|
|
|
(57,232
|
)
|
|
|
(312,224
|
)
|
|
|
597,548
|
|
Net income (loss)
|
|
|
197,576
|
|
|
|
(252,125
|
)
|
|
|
(1,059,494
|
)
|
|
|
1,981,911
|
|
Other comprehensive
income (loss)
|
|
|
(101,171
|
)
|
|
|
2,460
|
|
|
|
(5,471
|
)
|
|
|
2,460
|
|
Comprehensive
income (loss)
|
|
$
|
96,405
|
|
|
$
|
(249,665
|
)
|
|
$
|
(1,064,965
|
)
|
|
$
|
1,984,371
|
|
Earnings (loss)
per share - (basic and diluted)
|
|
$
|
0.02
|
|
|
$
|
(0.17
|
)
|
|
$
|
(0.57
|
)
|
|
$
|
1.32
|
|
Weighted average
number of common shares outstanding (basic and diluted)
|
|
|
9,590,598
|
|
|
|
1,500,000
|
|
|
|
1,854,656
|
|
|
|
1,500,000
|
|
Consolidated
Balance Sheets Data:
|
|
As
of
|
|
|
|
March
31,
2020
|
|
|
December
31,
2019
|
|
|
December
31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Current
assets
|
|
$
|
3,600,792
|
|
|
$
|
3,519,187
|
|
|
$
|
2,717,559
|
|
Total assets
|
|
$
|
4,105,376
|
|
|
$
|
4,126,180
|
|
|
$
|
3,158,206
|
|
Current liabilities
|
|
$
|
2,301,330
|
|
|
$
|
2,418,539
|
|
|
$
|
2,343,970
|
|
Total liabilities
|
|
$
|
2,301,330
|
|
|
$
|
2,418,539
|
|
|
$
|
2,362,871
|
|
Total equity
|
|
$
|
1,804,046
|
|
|
$
|
1,707,641
|
|
|
$
|
795,335
|
|
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The
following unaudited pro forma condensed combined financial statements give effect to the Business Combination under the acquisition
method of accounting in accordance with Financial Accounting Standards Board (FASB) Accounting Standard Codification (“ASC”)
Topic 805, Business Combinations (“ASC 805”). The Business Combination will be accounted for as acquisition
of business under common control at carrying value in accordance with accounting principles generally accepted in the United States
of America.
The
historical consolidated financial information has been adjusted in these unaudited pro forma condensed combined financial statements
to give effect to pro forma events that are directly attributable to the Business Combination. The unaudited pro forma condensed
combined balance sheet is based on the historical consolidated balance sheet of AAPT and the historical consolidated balance sheet
of ASL, each of which is included elsewhere in this prospectus, and in each case as of March 31, 2020 and has been prepared to
reflect the Business Combination as if they occurred on March 31, 2020. The unaudited pro forma condensed combined statements
of operations and comprehensive loss for the three months ended March 31, 2020 and for the year ended December 31, 2019, each
of which is included elsewhere in this prospectus, combine the historical results of operations of AATP and ASL for those periods,
giving effect to the Business Combination as if they occurred on January 1, 2019.
These
unaudited pro forma condensed combined financial statements are for informational purposes only. They do not purport to indicate
the results that would actually have been obtained had the Business Combination and the proposed related financing transactions
been completed on the assumed date or for the periods presented, or which may be realized in the future. The pro forma adjustments
are based on the information currently available and the assumptions and estimates underlying the pro forma adjustments are described
in the accompanying notes. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma
condensed combined financial information.
The
unaudited pro forma condensed combined financial statements below should be read in conjunction with the sections entitled “Agape
ATP Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Agape Superior
Living Sdn. Bhd. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
the historical financial statements and notes thereto of AATP and ASL included elsewhere in this prospectus.
AGAPE
ATP CORPORATION
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
As
of March 31, 2020
|
|
|
|
|
Agape Superior
|
|
|
|
|
|
|
|
|
|
|
|
Agape
ATP
Corporation
|
|
|
Living
Sdn. Bhd.
|
|
|
Pro
Forma
Adjustments
|
|
|
Note
|
|
Pro
Forma
Combined
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
2,588,207
|
|
|
$
|
1,206,493
|
|
|
$
|
-
|
|
|
|
|
$
|
3,794,700
|
|
Accounts receivable
- related party
|
|
|
523,141
|
|
|
|
-
|
|
|
|
(523,141
|
)
|
|
(b)
|
|
|
-
|
|
Other receivables
|
|
|
-
|
|
|
|
33,210
|
|
|
|
-
|
|
|
|
|
|
33,210
|
|
Other receivables
- related parties
|
|
|
-
|
|
|
|
219,121
|
|
|
|
-
|
|
|
|
|
|
219,121
|
|
Inventories
|
|
|
-
|
|
|
|
616,880
|
|
|
|
(26,635
|
)
|
|
(c)
|
|
|
590,245
|
|
Amount due from
a related party
|
|
|
2,227
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
2,227
|
|
Prepaid taxes
|
|
|
-
|
|
|
|
1,206,821
|
|
|
|
-
|
|
|
|
|
|
1,206,821
|
|
Prepayments and
deposits
|
|
|
304,993
|
|
|
|
318,267
|
|
|
|
-
|
|
|
|
|
|
623,260
|
|
Amount
due from a director
|
|
|
656,495
|
|
|
|
-
|
|
|
|
(656,495
|
)
|
|
(a)
|
|
|
-
|
|
Total
current assets
|
|
|
4,075,063
|
|
|
|
3,600,792
|
|
|
|
(1,206,271
|
)
|
|
|
|
|
6,469,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment,
net
|
|
|
-
|
|
|
|
325,648
|
|
|
|
-
|
|
|
|
|
|
325,648
|
|
Intangible assets,
net
|
|
|
-
|
|
|
|
6,686
|
|
|
|
-
|
|
|
|
|
|
6,686
|
|
Investment in marketable
securities
|
|
|
48,202
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
48,202
|
|
Investment in non-marketable
securities
|
|
|
1,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
1,500
|
|
Deferred
taxes asset, net
|
|
|
-
|
|
|
|
172,250
|
|
|
|
-
|
|
|
|
|
|
172,250
|
|
Total
other assets
|
|
|
49,702
|
|
|
|
504,584
|
|
|
|
-
|
|
|
|
|
|
554,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
4,124,765
|
|
|
$
|
4,105,376
|
|
|
$
|
(1,206,271
|
)
|
|
|
|
$
|
7,023,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
- related party
|
|
$
|
-
|
|
|
$
|
491,628
|
|
|
$
|
(491,628
|
)
|
|
(b)
|
|
$
|
-
|
|
Customer deposits
|
|
|
-
|
|
|
|
1,600,606
|
|
|
|
-
|
|
|
|
|
|
1,600,606
|
|
Other
payables and accrued liabilities
|
|
|
97,459
|
|
|
|
209,096
|
|
|
|
-
|
|
|
|
|
|
306,555
|
|
Total
current liabilities
|
|
|
97,459
|
|
|
|
2,301,330
|
|
|
|
(491,628
|
)
|
|
|
|
|
1,907,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
97,459
|
|
|
|
2,301,330
|
|
|
|
(491,628
|
)
|
|
|
|
|
1,907,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock,
$0.0001 par value; 200,000,000 shares authorized; None issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
Common stock, par
value $0.0001; 1,000,000,000 shares authorized, 376,452,047 shares issued and outstanding
|
|
|
37,628
|
|
|
|
-
|
|
|
|
17
|
|
|
(a)
|
|
|
37,645
|
|
Ordinary shares, no par value, 9,590,598
shares issued and outstanding
|
|
|
-
|
|
|
|
2,372,008
|
|
|
|
(2,372,008
|
)
|
|
(a)
|
|
|
-
|
|
Additional paid-in
capital
|
|
|
5,293,082
|
|
|
|
-
|
|
|
|
1,147,534
|
|
|
(a)
|
|
|
6,440,616
|
|
Accumulated deficit
|
|
|
(1,320,959
|
)
|
|
|
(542,428
|
)
|
|
|
542,428
|
|
|
(a)
|
|
|
(1,347,594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(26,635
|
)
|
|
(c)
|
|
|
|
|
Accumulated other
comprehensive income (loss)
|
|
|
17,555
|
|
|
|
(25,534
|
)
|
|
|
25,534
|
|
|
(a)
|
|
|
(13,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(31,513
|
)
|
|
(b)
|
|
|
|
|
TOTAL
STOCKHOLDERS’ EQUITY
|
|
|
4,027,306
|
|
|
|
1,804,046
|
|
|
|
(714,643
|
)
|
|
|
|
|
5,116,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
STOCKHOLDERS’ EQUITY AND LIABILITIES
|
|
$
|
4,124,765
|
|
|
$
|
4,105,376
|
|
|
$
|
(1,206,271
|
)
|
|
|
|
$
|
7,023,870
|
|
AGAPE
ATP CORPORATION
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
For
the Three Months Ended March 31, 2020
|
|
|
|
|
Agape Superior
|
|
|
|
|
|
|
|
|
|
|
|
Agape
ATP
Corporation
|
|
|
Living
Sdn. Bhd.
|
|
|
Pro
Forma
Adjustments
|
|
|
Note
|
|
Pro
Forma
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE
|
|
$
|
-
|
|
|
$
|
1,241,252
|
|
|
$
|
-
|
|
|
|
|
$
|
1,241,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE
|
|
|
-
|
|
|
|
(111,489
|
)
|
|
|
11,636
|
|
|
(a)
|
|
|
(99,853
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
-
|
|
|
|
1,129,763
|
|
|
|
11,636
|
|
|
(a)
|
|
|
1,141,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES
|
|
|
(159,516
|
)
|
|
|
(884,767
|
)
|
|
|
-
|
|
|
|
|
|
(1,044,283
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS) INCOME FROM
OPERATIONS
|
|
|
(159,516
|
)
|
|
|
244,996
|
|
|
|
11,636
|
|
|
|
|
|
97,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER INCOME
(EXPENSES), NET
|
|
|
(72,234
|
)
|
|
|
3,413
|
|
|
|
-
|
|
|
|
|
|
(68,821
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS (INCOME) BEFORE INCOME TAXES
|
|
|
(231,750
|
)
|
|
|
248,409
|
|
|
|
11,636
|
|
|
|
|
|
28,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION FOR
INCOME TAXES
|
|
|
-
|
|
|
|
(50,833
|
)
|
|
|
-
|
|
|
|
|
|
(50,833
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS) INCOME
|
|
|
(231,750
|
)
|
|
|
197,576
|
|
|
|
11,636
|
|
|
|
|
|
(22,538
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
7,770
|
|
|
|
(101,171
|
)
|
|
|
-
|
|
|
|
|
|
(93,401
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
(LOSS) INCOME
|
|
$
|
(223,980
|
)
|
|
$
|
96,405
|
|
|
$
|
11,636
|
|
|
|
|
$
|
(115,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS) EARNINGS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
0.00
|
|
|
$
|
1.12
|
|
|
|
|
|
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
376,275,500
|
|
|
|
176,547
|
|
|
|
|
|
|
|
|
|
376,452,047
|
|
AGAPE
ATP CORPORATION
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
For
the Year Ended December 31, 2019
|
|
|
|
|
Agape Superior
|
|
|
|
|
|
|
|
|
|
|
|
Agape
ATP
Corporation
|
|
|
Living
Sdn. Bhd.
|
|
|
Pro
Forma
Adjustments
|
|
|
Note
|
|
Pro
Forma
Combined
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE
|
|
$
|
-
|
|
|
$
|
4,139,359
|
|
|
$
|
-
|
|
|
|
|
$
|
4,139,359
|
|
REVENUE - INTERCOMPANY
|
|
|
1,290,131
|
|
|
|
-
|
|
|
|
(1,290,131
|
)
|
|
(a)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE
|
|
|
(1,200,829
|
)
|
|
|
(857,250
|
)
|
|
|
1,251,860
|
|
|
(a)
|
|
|
(806,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
89,302
|
|
|
|
3,282,109
|
|
|
|
(38,271
|
)
|
|
(a)
|
|
|
3,333,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES
|
|
|
(489,724
|
)
|
|
|
(4,678,023
|
)
|
|
|
-
|
|
|
|
|
|
(5,167,747
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(400,422
|
)
|
|
|
(1,395,914
|
)
|
|
|
(38,271
|
)
|
|
|
|
|
(1,834,607
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER INCOME
(EXPENSES), NET
|
|
|
(322,670
|
)
|
|
|
24,196
|
|
|
|
-
|
|
|
|
|
|
(298,474
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(723,092
|
)
|
|
|
(1,371,718
|
)
|
|
|
(38,271
|
)
|
|
|
|
|
(2,133,081
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BENEFIT FOR INCOME
TAXES
|
|
|
6,965
|
|
|
|
312,224
|
|
|
|
-
|
|
|
|
|
|
319,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
|
(716,127
|
)
|
|
|
(1,059,494
|
)
|
|
|
(38,271
|
)
|
|
|
|
|
(1,813,892
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
11,079
|
|
|
|
(5,471
|
)
|
|
|
-
|
|
|
|
|
|
5,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
LOSS
|
|
$
|
(705,048
|
)
|
|
$
|
(1,064,965
|
)
|
|
$
|
(38,271
|
)
|
|
|
|
$
|
(1,808,284
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
0.00
|
|
|
$
|
(6.00
|
)
|
|
|
|
|
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
376,275,500
|
|
|
|
176,547
|
|
|
|
|
|
|
|
|
|
376,452,047
|
|
Note
1 — Description of Transactions
On
May 8, 2020, Agape ATP Corporation (“AATP” or 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 (“ASL”), an entity incorporated in Malaysia for $1,714,003
(the “Business Combination”). The purchase consideration represented the net asset carrying value of the ASL as of
March 31, 2020 from its internal financial statements. The payment, net of the amount due from Mr. How Kok Choong of $656,495
as of March 31, 2020 arising from the purchase of the Company’s non-marketable security, will be satisfied together with
the issuance of 162,694 shares of the Company’s common stock. Upon completion, the number of shares of common stock of the
Company will be increased from 376,275,500 to 376,438,194, equivalent to approximately 0.0432% increase of the total issued and
outstanding common stock of the Company after the issuance of the additional shares, which was valued at $1,057,508 based on the
closing price of $6.50 of the Company at March 31, 2020.
In June 2020, ASL made
certain adjustments to its March 31, 2020 financial statements. As a result, the net assets carrying value increased by $90,043.
On July 1, 2020, the Company entered into a supplemental agreement share exchange agreement to the May 8, 2020 Share Exchange
Agreement with Mr. How Kok Choong, CEO of the Company, to issue additional 13,853 shares of the Company, which was valued at $90,043
based on the closing price of $6.50 of the Company at March 31, 2020. Upon completion of the additional allotment and issuance
of common stock, the number of shares of common stock of the Company will be increased from 376,275,500 to 376,452,047, equivalent
to approximately 0.0469% of the total issued and outstanding shares in the Company after the issuance of the Shares, which is
valued at $1,147,551 based on the closing price of $6.50 of the Company as quoted on the OTC Market on March 31, 2020.
Note
2 — Basis of Presentation
The
unaudited pro forma condensed combined financial statements give effect to the Business Combination under the acquisition method
of accounting in accordance with Financial Accounting Standards Board (FASB) Accounting Standard Codification (“ASC”)
Topic 805, Business Combinations (“ASC 805”). The Business Combination will be accounted for as acquisition
of business under common control at carrying value in accordance with accounting principles generally accepted in the United States
of America.
The
unaudited pro forma condensed combined balance sheet as of March 31, 2020 was derived from the Company’s unaudited consolidated
balance sheet, and ASL’s unaudited balance sheet, as of March 31, 2020. The unaudited pro forma condensed combined balance
sheet as of March 31, 2020 assumes that the Business Combination were completed on March 31, 2020.
The
unaudited pro forma condensed combined statement of operations and comprehensive loss information for the three months ended March
31, 2020 was derived from the Company’s unaudited consolidated statement of operations and comprehensive loss and ASL’s
unaudited statements of operations and comprehensive loss for the three months ended March 31, 2020. The unaudited pro forma condensed
combined statement of operations and comprehensive loss information for the year ended December 31, 2019 was derived from the
Company’s unaudited consolidated statement of operations and comprehensive loss and ASL’s audited consolidated statement
of operations and comprehensive loss for the year ended December 31, 2019 and gives pro forma effect to the Business Combination
as if they had occurred on January 1, 2019.
Note
3 — Notes and Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet
The
pro forma adjustments to the unaudited pro forma condensed combined balance sheet consist of the following:
|
(a)
|
Reflects
the transaction effect the acquisition of 9,590,596 ordinary shares of Agape Superior
Living Sdn. Bhd. (“ASL”) with total consideration of $1,804,046 (approximately
MYR 7.8 million), of which, $656,495 (approximately MYR 2.8 million) to be offset with
receivable from Mr. How Kok Choong, the CEO and director of AATP and 176,547 shares of
common stock of AATP to be issued determined using the closing price of AATP on March
31, 2020 at $6.5 per share, valued at $1,147,551.
|
|
|
|
|
(b)
|
Reflects
the elimination of intercompany receivable and payable balances.
|
|
|
|
|
(c)
|
Reflects
the elimination of intercompany gross profit generated from sales of AATP to ASL remained
at ASL inventories.
|
Note
4 — Notes and Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations and Comprehensive Loss
The
pro forma adjustments to the unaudited pro forma condensed combined statements of operations and comprehensive loss consist of
the following:
|
(a)
|
Reflects
the elimination of intercompany gross profit generated from sales of AATP to ASL
|
AGAPE
ATP CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS
OF OPERATIONS
You
should read the following discussion and analysis of our financial condition and results of operations in conjunction with the
section headed “Selected Consolidated Financial and Operating Data” and our consolidated financial statements and
the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks
and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere
in this prospectus.
Company
Overview
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 wholly owned subsidiary, Agape ATP Corporation, a Company organized in Labuan, 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.
We
are a provider of health and wellness products and advisory services in the Malaysian market. We pursue our 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. We believe the quality of our products coupled with the effectiveness
of our distribution network have been the primary reasons for our success and will allow us to pursue future business expansion.
In order to further our supply chain, on May 8, 2020, we acquired 99.99% of Agape Superior Living Sdn Bhd, with the aim of securing
an established network marketing sales channel that has been in existence in Malaysia for the past 15 years.
We
offer three series of products: ATP Zeta Health Program, ÉNERGÉTIQUE and BEAUNIQUE. Our ATP Zeta Health Program
is a health program designed to assist in the elimination of various diseases caused by environmental pollutants, unhealthy dietary
intake and unhealthy lifestyles. The program aims to promote improved health and longevity in our customers through a combination
of modern health supplements, proper nutrition and advice from skilled dieticians. Our ÉNERGÉTIQUE series aims to
provide a total dermal solution for healthy skin beginning from the cellular level. The series is comprised of the Energy Mask
series, Hyaluronic Acid and Mousse Facial Cleanser. Our 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 personalized nutrigenomic solution for every
individual.
Results
of Operations
For
the three months ended March 31, 2020 and 2019
Revenue
The
COVID-19 outbreak in the first quarter of 2020 has caused disruptions in the economic landscape all around the world with different
countries imposing sporadic lockdowns, some of which became nationwide at different points in time. Our products originate from
the United States, Germany, Australia and Taiwan. As a result, the Company was unable to obtain deliveries of its purchases as
a result of the lockdowns. The Company, therefore did not generate any revenue for the three months ended March 31, 2020.
For
the three months ended March 31, 2019, the Company generated revenue of $464,297. Our revenues were mainly derived from the sale
of health and wellness products.
Cost
of Revenue
As
explained in revenue above, cost of revenue for the three months ended March 31, 2020 was nil. Cost of revenue for the three months
ended March 31, 2019 was $420,178. The costs were predominantly cost of goods purchased and packing materials.
Gross
Profit
The
Company did not generate any gross profit for the three months ended March 31, 2020. Gross profit for the three months ended March
31, 2019 amounted to $44,119, equivalent to gross margin of approximately 9.5%.
Operating
Expenses
Selling,
general and administrative (“SG&A”) expenses for the three months ended March 31, 2020 amounted to $159,516 as
compared to $28,226 for the three months ended March 31, 2019. The amount mainly comprised of rental of office premises, travelling,
licensing and professional fees which includes legal, audit, accounting and consulting services. The increase of SG&A expenses
of $131,290 or approximately 465.1% are mainly due to the increase of professional fees of $102,043, since we have recently hired
new professional firms located in the U.S. and Hong Kong, including legal counsel, auditor, and financial reporting consultant,
to strengthen our current Securities and Exchange Commission (“SEC”) listing, as compared to the three months ended
March 31, 2019, when we were using local professional firms in Malaysia. Professional fee incurred by the U.S. and Hong Kong firms
are generally higher than the professional fees incurred by the Malaysia firms. The increase of SG&A was also due to the increase
of $27,396 of travelling expenses for our CEO for potential business development.
Other
Income (Expenses)
For
the three months ended March 31, 2020, we recorded an amount of $72,234 as other expenses, net as compared to $48,357 other income,
net for the three months ended March 31, 2019. The net other expenses of $72,234 incurred during the three months ended March
31, 2020 comprised interest income of $18,129 and net foreign currency translation loss of $74,618, unrealized holding loss on
marketable securities of $18,538 and rebate from sundry purchases of $2,793.
The
net other income of $48,357 incurred during the three months ended March 31, 2019 comprised interest income of $23,921 and net
foreign currency translation gain of $34,012, $26,085 on share of loss in investee company from our equity investment and $16,509
on gain on deemed disposal of shares in the investee company.
Net
Profit (Loss)
The
Company sustained net loss of $231,750 for the three months ended March 31, 2020. The loss sustained was predominantly due to
reasons discussed above.
The
Company generated net profit of $71,215 for the three months ended March 31, 2019.
The
net profit reported for the three months ended March 31, 2019 was due to revenue generated while in the same period of fiscal
year 2020 there was zero revenue. SG&A expenses of the Company in the three months ended March 31, 2019 were also relatively
lower as explained in operating expenses above. In addition, there were contributions from other income, net as compared to other
expenses, net in the same period in fiscal year 2020. For the three months ended March 31, 2019, there was also a write-back of
tax provision of $6,965. The tax provision for the Company’s subsidiary in Hong Kong was not required as the tax regime
in Hong Kong exempts taxation on business profits derived outside the Special Administrative Region.
For
the six months ended December 31, 2019 and 2018
Revenue
The
Company generated revenue of $429,362 for the six months ended December 31, 2019 as compared to $685,288 for the six months ended
December 31, 2018. The revenues were mainly derived from the sale of health and wellness products. The decrease in revenue mainly
due to lower demand from our related party customer, whom spent less on marketing efforts to promote its products during the six
months ended December 31, 2019 as compared to the same period in 2018.
Cost
of Revenue
Cost
of revenue for the six months ended December 31, 2019 amounted to $383,479 as compared to $619,355 for the six months ended December
31, 2018. The costs were predominantly cost of goods and packing materials. The decrease in cost of revenue was in line with the
decease of revenues for the six months ended December 31, 2019 as compared to the same period in 2018.
Gross
Profit
Gross
profit for the six months ended December 31, 2019 amounted to $45,883 as compared to $65,933 for the six months ended December
31, 2018. Gross margin for the six months ended December 31, 2019 was approximately 10.7% as compared to approximately 9.6% for
the six months ended December 31, 2018. The slightly increase of gross margin was mainly due to the slight increase of our selling
price of our health and wellness products.
Operating
Expenses
SG&A
expenses for the six months ended December 31, 2019 amounted to $312,270 as compared to $63,068 for the six months ended December
31, 2018. The amount mainly comprised of rental of office premises, travelling, licensing and professional fees which includes
legal, audit, accounting and consulting services. The increase of SG&A expenses of approximately $249,000, or 395.1%, are
mainly due to the increase of professional fees of approximately $200,000, since we have recently hired new professional firms
located in the U.S. and Hong Kong, including legal counsel, auditor, and financial reporting consultant, to strengthen our current
SEC listing, as compared to the six months ended December 31, 2018, when we were using local professional firms in Malaysia. Professional
fee incurred by the U.S. and Hong Kong firms are generally higher than the professional fee incurred by the Malaysia firms. The
increase of SG&A was also due to the increase of approximately $32,000 of travelling expenses for our CEO for potential business
development.
Other
Income (Expenses)
For
the six months ended December 31, 2019, we recorded an amount of $72,544 as other expenses, net as compared to $138,346 for the
six months ended December 31, 2018. During the six months ended December 31, 2019, we recorded approximately $68,000 on unrealized
holding loss on marketable securities upon the adoption of ASU 2016-01 on July 1, 2019. The net other expenses of $138,346 incurred
during the six months ended December 31, 2018 comprised interest income of $43,000 and net foreign currency translation losses
of $83,000 and approximately $98,000 on share of results of the investee company from our equity investment.
Net
Loss
The
Company sustained net loss of $338,931 and $142,446 for the six months ended December 31, 2019 and 2018 respectively. The losses
sustained from both of the financial periods were predominantly due to reasons as discussed above.
For
the years ended June 30, 2019 and 2018
Revenues
The
Company generated revenue of $1,546,057 for the year ended June 30, 2019 as compared to $487,005 for the year ended June 30, 2018.
The revenue is mainly derived from the sale of health and wellness products. The increase in revenue was mainly due to higher
demand from our related party customer as the overall national economy in Malaysia has improved. The end users of our products,
who purchase the products from our related party, have more to spend and increased their demand of using our health and wellness
products during the year ended June 30, 2019, as compared to the same period in 2018. As a result, our related party has purchased
more products from us.
Cost
of Revenue
Cost
of revenue for the year ended June 30, 2019 amounted to $1,436,705 as compared to $441,409 for the year ended June 30, 2018. The
cost mainly consists of cost of goods and packing materials. The increase in cost of revenue was in line with the increase of
revenues for the year ended June 30, 2019, as compared to the same period in 2018.
Gross
Profit
Gross
profit for the year ended June 30, 2019 amounted to $109,352 as compared to $45,596 for the year ended June 30, 2018. Gross margin
for the year ended June 30, 2019 was approximately 7.1% as compared to approximately 9.4% for the year ended Jun 30, 2018. The
decrease of gross margin was mainly due to the increased of freight in cost of the product labels that we specifically ordered
from Taiwan and sent to our manufacturing vendors in the U.S., Germany and Australia during the year ended June 30, 2019.
Operating
Expenses
SG&A
expenses for the year ended June 30, 2019 amounted to $240,522 as compared to $279,682 for the year ended June 30, 2018. The amount
mainly comprised of rental of office premises, travelling, licensing and professional fees which includes legal, audit, accounting
and consulting services. The decrease of SG&A expenses of approximately $39,000 or 14.0% are mainly due to the decrease of
professional fees as we incurred more professional fees during the year ended June 30, 2018 throughout the initial public offerings
(“IPO”) stage from July 1, 2017 until the completion of IPO in March 2018 as compared to the year ended June 30, 2019,
when our professional fee were mainly incurred as a result of regular SEC compliance.
Other
Income (Expenses)
For
the year ended June 30, 2019, we recorded an amount of $388,472 as other expense, net as compared to $109,146 of other income,
net generated. During the year ended June 30, 2019, we recorded an impairment loss in investments of approximately $367,000 and
approximately $124,000 of equity investment loss from the investee company offset by approximately $86,000 of foreign currency
translation gains. During the year ended June 30, 2018, we mainly derived our other income from the interest income earned through
the time deposits placed with banks.
Net
Loss
The
Company incurred net loss of $519,642 and $130,274 for the years ended June 30, 2019 and 2018, respectively. The losses sustained
from both of the financial periods were predominantly due to reasons as discussed above.
Liquidity
and Capital Resources
On
March 11, 2020, the World Health Organization or WHO declared the corona virus or COVID-19 a pandemic. In accordance with the
recommendations of the WHO, Malaysia had imposed a nationwide lockdown via the government’s Movement Control Order (“MCO”)
effective March 18, 2020. The MCO has resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities
in Malaysia. On May 4, 2020, the MCO was lessen 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.
As
the intermediary between our suppliers and our sole customer in Malaysia, the COVID-19 pandemic poses challenges to us at both
sourcing and supplying our products. Our sole customer has confirmed that onward delivery of our products is via network marketing
to end users who are also members of the Company that make up consistent demand of our products. In an effort to embrace globalization,
the Company has also embarked on e-commerce. The Company has synched up with a Malaysian e-commerce trading platform, which will
make its debut in the next three months to commence e-marketing and e-trading of its products to members, as well as online e-recruitment
of new members. The Company is positive that its online e-recruitment service which capitalizes on a large number of followers
of well-known key products influencers will dramatically increase the number of members most expediently with minimal cost, thereby
increasing demand of our products. Considering our products are health supplements, we also expect impressive demand growth at
a time when everyone’s health is at risk. This should translate into sustainable growth once awareness of the importance
of health is created. In term of collectability of our accounts receivable from our sole customer, an entity in which our President
and CEO has significant influence and is financially healthy, we believe the financial effect of our collection from our sole
customer will not be impacted.
Although
some of the countries from which our products are sourced are experiencing lockdowns, industries involve in the provision of food
especially health products and pharmaceuticals are normally exempted. We may experience slight delay in products delivery lead
time but barring unforeseen circumstances, the setback should be temporary.
We
anticipate operating primarily in Malaysia and expanding into the Asian markets in the future, with a particular focus, at least
initially, on expanding into Thailand, Indonesia and Taiwan. We will explore expansion via e-commerce. When the pandemic has subsided
or is over and restrictions on travelling between nations are uplifted, we will set up offices in the countries in which we operate
to better service our customers.
Because
of the uncertainty surrounding the COVID-19 outbreak, the financial impact related to the outbreak of and response to the coronavirus
cannot be reasonably estimated at this time. There is no guarantee that our total revenues will grow or remain at the similar
level year over year in the last two quarters of 2020.
As
of March 31, 2020, we had working capital of $3,977,604 consisting of cash in bank of $135,436 and time deposit of $2,452,771
as compared to working capital of $3,452,665 consisting of cash in bank of $238,937 and time deposit of $2,505,520 as of December
31, 2019. In assessing our liquidity, we monitor and analyze our cash on-hand and our operating expenditure commitments. Our liquidity
needs are to meet our working capital requirements and operating expenses obligations. We believe we will have sufficient liquidity
to fund our working capital needs for the next 12 months.
The
following summarizes the key components of our cash flows for the three months ended March 31, 2020, and 2019:
|
|
For
the three months ended
|
|
|
|
March
31, 2020
|
|
|
March
31, 2019
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Net cash used in operating
activities
|
|
$
|
(230,431
|
)
|
|
$
|
(358,320
|
)
|
Net cash provided by investing activities
|
|
|
70,173
|
|
|
|
-
|
|
Effect of exchange
rate on cash and cash equivalents
|
|
|
4,008
|
|
|
|
(3,197
|
)
|
Net change in
cash and cash equivalents
|
|
$
|
(156,250
|
)
|
|
$
|
(361,517
|
)
|
The
following summarizes the key components of our cash flows for the six months ended December 31, 2019 and 2018 and for the years
ended June 30, 2019 and 2018:
|
|
For
the six months ended
|
|
|
For
the years ended
|
|
|
|
December
31,
2019
|
|
|
December
31,
2018
|
|
|
June
30,
2019
|
|
|
June
30,
2018
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Net cash used in operating
activities
|
|
$
|
(113,945
|
)
|
|
$
|
(76,591
|
)
|
|
$
|
(667,064
|
)
|
|
$
|
(347,977
|
)
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
(1,000
|
)
|
|
|
(2,500
|
)
|
|
|
(1,362,490
|
)
|
Net cash provided by (used in) financing
activities
|
|
|
-
|
|
|
|
(745
|
)
|
|
|
(5,318
|
)
|
|
|
2,930,267
|
|
Effect of exchange
rate on cash and cash equivalents
|
|
|
815
|
|
|
|
(2
|
)
|
|
|
1,214
|
|
|
|
(1,293
|
)
|
Net change in
cash and cash equivalents
|
|
$
|
(113,130
|
)
|
|
$
|
(78,338
|
)
|
|
$
|
(673,668
|
)
|
|
$
|
1,218,507
|
|
Operating
activities
Net
cash used in operating activities for the three months ended March 31, 2020 was $230,431and mainly comprised of net loss of $231,750,
the increase in prepayments and deposits of $34,593, the decrease of accounts payable of $2,803, offset by the increase in other
payables and accrued liabilities of $19,892, the non-cash expense on unrealized holding loss on marketable securities of $18,538.
Net
cash used in operating activities for the three months ended March 31, 2019 was $358,320 and mainly comprised of net profit of
$71,215, the increase in accounts receivable (including related party) of $188,736, the increase in prepayments and deposits of
$100,029 and the decrease in customer deposits of $138,999, decrease in income taxes payable of $12,299, offset by the non-cash
expense of loss from equity investment of $26,085 net with gain on deemed disposal of shares in Investee Company of $16,509.
Net
cash used in operating activities for the six months ended December 31, 2019 was $113,945 and mainly comprised of net loss of
$338,931, the increase of accounts receivable – related party of $85,602 and the decrease of accounts payable (including
related party) of $32,308 offset by the non-cash expense on unrealized holding loss on marketable securities of $68,391, the decrease
in prepayments and deposits of $229,638, and the increase in other payables and accrued liabilities of $44,867.
Net
cash used in operating activities for the six months ended December 31, 2018 was $78,338 and mainly comprised of net loss of $142,466,
the increase in prepayments and deposits of $245,128 and the decrease in other payables and accrued liabilities of $11,865 offset
by the non-cash expense of share of result of investee company of $98,140 and the increase in customer deposit of $217,743.
Net
cash used in operating activities for the year ended June 30, 2019 was $667,064 and mainly comprised of net loss of $519,642,
the increase in account receivables – related party of $433,338, and the increase of prepayments and deposits of $233,394
offset by the non-cash expense of share of result of investee company of $124,225 and impairment in cost of investments of $366,834,
the increase in accounts payable – related party of $35,145 and the increase in other payables and accrued liabilities of
$11,825.
Net
cash used in operating activities for the year ended June 30, 2018 was $347,977 and mainly comprised of net loss of $130,274 and
the increase of prepayments and deposits of $264,941 offset by the non-cash expense of share of result of investee company of
$30,155 and the increase in other payables and accrued liabilities of $11,749.
Investing
activities
Net
cash provided by investing activities for the three months ended March 31, 2020, was in respect of partial proceeds collected
from the sale of our non-marketable securities.
There
were no investing activities for the three months ended March 31, 2019.
There
were no investing activities for the six months ended December 31, 2019.
Net
cash used in investing activities for the six months ended December 31, 2018 was $1,000 which is due to the investment in financial
assets.
Net
cash used in investing activities for the year ended June 30, 2019 was $2,500 which is due to the investment in marketable and
non-marketable securities.
Net
cash used in investing activities for the year ended June 30, 2018 was $1,362,490, which consists of $500,000 of investment in
marketable securities and $862,490 of investment in investee company.
Financing
activities
There
were no financing activities for the three months ended March 31, 2020 and 2019.
There
were no financing activities for the six months ended December 31, 2019.
Net
cash used in financing activities for the six months ended December 31, 2018 was $745 which is due to the repayment to a related
party.
Net
cash used in financing activities for the year ended June 30, 2019 was $5,318 which is due to the repayment to a director.
Net
cash provided by financing activities for the year ended June 30, 2018 was $2,930,267 which is mainly due to the proceed from
sale of common stock of approximately $2.9 million.
Credit
Facilities
We
do not have any credit facilities or other access to bank credit.
Off-Balance
Sheet Arrangements
As
of March 31, 2020, we have no significant off-balance sheet arrangements that have or are reasonably likely to have a current
or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to our stockholders.
Critical
accounting polices
Use
of estimates
The
preparation of 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 deferred tax assets and uncertain tax position, and impairment of investment in non-marketable securities. Actual
results could differ from these estimates.
Revenue
recognition
On
July 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers
(ASC Topic 606) using the modified retrospective method for contracts that were not completed as of June 30, 2019. This did not
result in an adjustment to the retained earnings upon adoption of this new guidance as the Company’s revenue was recognized
based on the amount of consideration expected to receive in exchange for satisfying the performance obligations.
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.
Prior
to July 1, 2019, the Company recognizes revenue from sales of goods when the following four revenue criteria are met: (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred; (3) selling price is fixed or determinable; and (4) collectability
is reasonably assured. Revenue from supplies of health and wellness products is recognized when title and risk of loss are transferred
and there are no continuing obligations to the customer. Title and the risks and rewards of ownership transfer to and accepted
by the customer when the products are collected by the customer at the Company’s office. Revenue is recorded net of sales
discounts, returns, allowances, and other adjustments that are based upon management’s best estimates and historical experience
and are provided for in the same period as the related revenues are recorded.
The
application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes
in the way the Company records its revenue. Upon adoption on July 1, 2019, the Company evaluated its revenue recognition policy
for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance
and confirmed that there were no differences in the pattern of revenue recognition.
Sales
of Health and Wellness products
-
Performance obligations satisfied at a point in time
On
July 1, 2019, 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, which
is generally similar to when its delivery has occurred prior to July 1, 2019. Such revenues are recognized at a point in time
after all performance obligations are satisfied. The revenue is recorded net of estimated discounts and return allowances. Historically,
there were no sales return as the Company’s products sold are not refundable, returnable or exchangeable.
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.
Recent
accounting pronouncements
The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption
of such any pronouncements may be expected to cause a material impact on its financial condition or the results of its operations,
as follow:
In
July 2017, the FASB Issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and
Derivatives and Hedging (Topic 815). The amendments in Part I of the Update change the reclassification analysis of certain equity-lined
financial instruments (or embedded features) with down round features. The amendments in Part II of this Update re-characterize
the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a
scope exception. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this
Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after
December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts
the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes
that interim period. The amendments in Part II of this Update do not require any transition guidance because those amendments
do not have an accounting effect. The adoption of this ASU did not have a material effect on the Company’s consolidated
financial statements.
In
February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of
Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this Update affect any entity that is required
to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive
income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this
Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal
years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public
business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities
for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update
should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change
in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The adoption of this ASU did not have
a material effect on the Company’s consolidated financial statements.
In
August 2018, the FASB has issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure
Requirements of Fair Value Measurement. This amendment modifies the disclosure requirements on fair value measurements in Topic
820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits,
with the primary purpose to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear
communication of the information required by US GAAP. The amendments in this update are effective for all entities for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the
impact of ASU 2018-13 will have on its consolidated financial statements.
In
May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for
the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology.
The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments
to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually
assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial
Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this Update address those stakeholders’
concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at
amortized cost basis. 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 consolidated financial
statements.
In
January 2020, the FASB issued ASU 2020-01 to clarify the interaction of the accounting for equity securities under ASC 321 and
investments accounted for under the equity method of accounting in ASC 323 and the accounting for certain forward contracts and
purchased options accounted for under ASC 815. With respect to the interactions between ASC 321 and ASC 323, the amendments clarify
that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting
when applying the measurement alternative in ASC 321, immediately before applying or upon discontinuing the equity method of accounting.
With respect to forward contracts or purchased options to purchase securities, the amendments clarify that when applying the guidance
in ASC 815-10-15-141(a), an entity should not consider whether upon the settlement of the forward contract or exercise of the
purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity
method in ASC 323 or the fair value option in accordance with ASC 825. The ASU is effective for interim and annual reporting periods
beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period. The Company does not
expect the adoption of this standard to have a material impact on its consolidated financial statements.
AGAPE
SUPERIOR LIVING SDN. BHD.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS
OF OPERATIONS
The
following discussion of our financial condition and results of operations should be read in conjunction with Agape Superior Living
Sdn. Bhd.’s (“ASL” or the “Company”) consolidated financial statements and the notes to those financial
statements appearing elsewhere in this Report.
Certain
statements in this Report constitute forward-looking statements. These forward-looking statements include statements, which involve
risks and uncertainties, regarding, among other things, (a) ASL’s projected sales, profitability, and cash flows, (b) ASL’s
growth strategy, (c) anticipated trends in ASL’s industry, (d) ASL’s future financing plans, and (e) ASL’s anticipated
needs for, and use of, working capital. They are generally identifiable by use of the words “may,” “will,”
“should,” “anticipate,” “estimate,” “plan,” “potential,” “project,”
“continuing,” “ongoing,” “expects,” “management believes,” “we believe,”
“we intend,” or the negative of these words or other variations on these words or comparable terminology. In light
of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will
in fact occur. You should not place undue reliance on these forward-looking statements.
The
forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities
laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on
which the statements are made or to reflect the occurrence of unanticipated events.
Overview
AGAPE
Superior Living Sdn. Bhd. is a network marketing company specializing in healthcare products and focusing on improving people’s
health and wellbeing that has been in existence in Malaysia for the past 15 years.
ASL’s
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 proper nutrition and advice from skilled
nutritionists and dieticians.
The
ATP Zeta Super Health Program consists of eight products. None of these products are owned or produced by the Company. In the
event that any of these products are no longer produced, or are otherwise unavailable, the Company may have to devote significant
effort to identifying and obtaining comparable replacement products. The eight products that comprise the ATP Zeta Super Health
Program are ATP1s Survivor Select, ATP2 Energized Mineral Concentrate, ATP3 Ionized Cal-Mag, ATP4 Omega Blend, ATP5 BetaMaxx,
AGN-Vege Fruit Fiber, AGP1-Iron and YFA-Young Formula.
ASL’s
ÉNERGÉTIQUE series aims to provide a total dermal solution for a healthy skin beginning from the cellular level.
The series is comprised of Energy Mask series, Hyaluronic Acid Serum and Mousse Facial Cleanser.
ASL’s
BEAUNIQUE product series focuses on the research of diet’s impact on modifying gene expressions to address genetic variations
and deliver a nutrigenomic solution for every individual.
Results
of Operations
For
the three months ended March 31, 2020 and 2019
Net
Revenues
The
Company generated revenue of $1,241,252 for the three months ended March 31, 2020 as compared to $1,214,600 for the three months
ended March 31, 2019. The revenues were mainly derived from the sales of health and wellness products. Revenues remained fairly
consistent for both periods with a slight increase of $26,652 during the three months ended March 31, 2020 as compared to the
same period in 2019. As the government of Malaysia imposed a Movement Control Order (“MCO”) effective March 18, 2020
onwards, the impact on our sales arising from the COVID-19 pandemic was not fully effected for the three months ended March 31,
2020.
Cost
of Revenues
Cost
of revenues for the three months ended March 31, 2020 amounted to $111,489 as compared to $203,838 for the three months ended
March 31, 2019. The costs were predominantly cost of manufactured goods, freight-in, packing materials and customs duties. The
decrease in cost of revenue was mainly due to the decease of freight-in charges, custom duties, and packing materials as we were
trying to minimize these costs and to maximize our profit margin and profits during the three months ended March 31, 2020 as compared
to the same period in 2019 by sourcing some of our products locally.
Gross
Profit
Gross
profit for the three months ended March 31, 2020 amounted to $1,129,763 as compared to $1,010,762 for the three months ended March
31, 2019. Gross margin for the three months ended March 31, 2020 was approximately 91.0 % as compared to approximately 83.2% for
the three months ended March 31, 2019. The increase of gross margin was mainly due to the slight increase of revenues and decrease
of freight-in charges, custom duties and packing materials and increased quantity sold of higher profit margin products during
the three months ended March 31, 2020 as compared to the same period in 2019.
Operating
Expenses
Our
operating expenses consist of selling expenses, commission expenses and general and administrative expenses.
Selling
expenses
Selling
expenses for three months ended March 31, 2020 amounted to $148,472 as compared to $400,971 for the three months ended March 31,
2019, a decrease of $252,499, or approximately 63.0%. The decrease was mainly due to the decrease of approximately $62,000 of
salary and staff benefit expenses as we experienced some employee turnovers in our sales department during the three months ended
March 31, 2020 and we have not replaced the positions yet. The decrease also due to approximately $0.2 million of promotion and
event expenses as we held less marketing events and regular meetings for our sales distributors to promote our products to their
sales network members.
Commission
expenses
Commission
expenses were $411,266 and $601,205 for the three months ended March 31, 2020 and 2019, respectively, a decrease of $189,939,
or approximately 31.6%. The decrease in commission expenses was due to the commission earn-out qualifications being more spread
out to different sales distributors.
General
and administrative expenses
General
and administrative expenses for the three months ended March 31, 2020 amounted to $325,029, as compared to $313,170 for the three
months ended March 31, 2019, an increase of $11,859 or approximately 3.8%. The increase was mainly due to approximately $92,000
of professional fee incurred for our audit services as our financial statements are required to be audited and presented as an
acquiree of a U.S. publicly traded company under U.S. Securities and Exchange Commission Item 9.01(a) of Form 8-K. The increase
was offset by the decrease of salary and staff benefit expenses of approximately $27,000 as we experienced some employee turnovers
in our administrative department during the three months ended March 31, 2020 and we have not replaced the positions yet, and
the decrease of sponsorship of approximately $50,000 as we did not have such sponsorship during the three months ended March 31,
2020.
Other
Income (Expenses)
For
the three months ended March 31, 2020, we recorded an amount of $3,413 as other income, net as compared to $4,773 other expense,
net for the three months ended March 31, 2019. The other income recognized was mainly attributable to the refund from a stadium
vendor on an event that we held in 2019 during the three months ended March 31, 2020.
Provision
(Benefit) for Income taxes
The
Company recorded provision for income taxes (benefit) of $50,833 and $(57,232) for the three months ended March 31, 2020 and 2019,
respectively. During the three months ended March 31, 2020, we generated taxable income that are subject to a unified 24% income
tax rate. On the other hand, during the three months ended March 31, 2019, we incurred taxable losses that can be carried forward
for 7 years, which resulted in recognition of deferred tax assets on net operating loss and income tax benefits.
Net
Income (Loss)
The
Company sustained net income (loss) of $197,576 and $(252,125) for the three months ended March 31, 2020 and 2019, respectively.
The changes of the two financial periods were predominantly due to reasons as discussed above.
For
the years ended December 31, 2019 and 2018
Net
Revenues
The
Company generated revenue of $4,139,359 for the year ended December 31, 2019 as compared to $14,393,762 for the year ended December
31, 2018. The revenues were mainly derived from the sale of health and wellness products. The decrease in revenues mainly due
to slower economic growth and lower demand from our sales distributors and sales network members during the year ended December
31, 2019 as compared to the same period in 2018.
Cost
of Revenues
Cost
of revenues for the year ended December 31, 2019 amounted to $857,250 as compared to $2,391,597 for year ended December 31, 2018.
The costs were predominantly cost of manufactured goods, freight-in, packing materials and custom duties. The decrease in cost
of revenue was in line with the decease of revenues for the year ended December 31, 2019 as compared to the same period in 2018.
Gross
Profit
Gross
profit for the year ended December 31, 2019 amounted to $3,282,109 as compared to $12,002,165 for the year ended December 31,
2018. Gross margin for the year ended December 31, 2019 was approximately 79.3% as compared to approximately 83.4% for the year
ended December 31, 2018. The slight decrease in gross margin was mainly due to the increase of freight-in and packing materials
cost during the year ended December 31, 2019 as compared to the same period in 2018.
Operating
Expenses
Our
operating expenses consist of selling expenses, commission expenses and general and administrative expenses.
Selling
expenses
Selling
expenses for year ended December 31, 2019 amounted to $1,759,136 as compared to $1,339,754 for the year ended December 31, 2018,
an increase of $419,382 or 31.3%. The increase was mainly due to the increase of approximately $0.3 million of salary and staff
benefit expenses as we hired more employees to promote our products. The increase also due to approximately $0.1 million of promotion
and event expenses as we spent more resources on holding more marketing events and regular meetings for our sales distributors
to promote our products to their sales network members.
Commission
expenses
Commission
expenses were $1,611,172 and $7,045,419 for the years ended December 31, 2019 and 2018, respectively, a decrease of $5,434,247,
or approximately 77.1%. The decrease in commission expenses was in line with the decrease of revenues as our commission expenses
are mainly earned by our sales distributors based on purchases made by their sales network members.
General
and administrative expenses
General
and administrative expenses for the year ended December 31, 2019 amounted to $1,307,715, as compared to $1,083,717 for the year
ended December 31, 2018, an increase of $223,998 or 20.7%. The increase was mainly due to approximately $0.2 million of professional
fee incurred for our audit services as our financial statements are required to be audited and presented as an acquiree of a U.S.
publicly traded company under U.S. Securities and Exchange Commission Item 9.01(a) of Form 8-K.
Other
Income
For
the year ended December 31, 2019, we recorded an amount of $24,196 as other income, net as compared to $46,184 for the year ended
December 31, 2018. The decrease in other income are mainly attributable to we earned more foreign currency translation gain and
interest income during the year ended December 31, 2018 as compared to the same period in 2019.
Provision
(Benefit) for Income taxes
The
Company recorded provision for income taxes (benefit) of $(312,224) and $597,548 for the years ended December 31, 2019 and 2018,
respectively. During the year ended December 31, 2019, we incurred taxable losses that can be carried forward for 7 years, which
resulted in recognition of deferred tax assets on net operating loss and income tax benefits. On the other hand, during the year
ended December 31, 2018, we generated taxable income that are subject to a unified 24% income tax rate.
Net
Income (Loss)
The
Company sustained net (loss) income of $(1,059,494) and $1,981,911 for the years ended December 31, 2019 and 2018 respectively.
The changes of the two fiscal years were predominantly due to reasons as discussed above.
Liquidity
and Capital Resources
On
March 11, 2020, the World Health Organization or WHO declared the corona virus or COVID-19 a pandemic. In accordance with the
recommendations of the WHO, Malaysia had imposed a nationwide lockdown via the government’s Movement Control Order (“MCO”)
effective March 18, 2020. The MCO has resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities
in Malaysia. On May 4, 2020, the MCO was lessen 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.
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:
|
●
|
temporary
closure of offices, travel restrictions, financial impact of our customers or suspension supplies may negatively affected,
and could continue to negatively affect, the demand for our products;
|
|
●
|
we
may have to provide significant sales incentives to our customers during the outbreak, which may in turn materially adversely
affect our financial condition and operating results; and
|
|
●
|
any
disruption of our supply chain, logistics providers or customers could adversely impact our business and results of operations,
including causing us or our suppliers to cease manufacturing for a period of time or materially delay delivery to our customers,
which may also lead to loss of our 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 our total revenues will grow or remain at the similar
level year over year in the last two quarters of 2020.
In
assessing our liquidity, we monitor and analyze our cash on-hand and our operating expenditure commitments. Our liquidity needs
are to meet our working capital requirements and operating expenses obligations. To date, we have financed our operations primarily
through equity financial from capital contributions from shareholders.
As
of March 31, 2020, we had working capital of $1,299,462 consisting of cash of $1,206,493 as compared to working capital of $1,100,648
consisting of cash of $1,030,829 as of December 31, 2019. The revenues, generated from our current business operations will be
sufficient to fund our operations. If we make strategic planning to further expand our business in the near future, we will likely
require additional capital to further expand our business. The potential expansion may include spending on marketing expenses
to expand our marketing channels or acquiring manufacturing companies to reduce our product cost. Sources of additional capital
through various financing transactions or arrangements with third parties may include equity or debt financing, bank loans or
revolving credit facilities. We may not be successful in locating suitable financing transactions in the time period required
or at all, and we may not obtain the capital we require by other means. Our inability to raise additional funds when required
may have a negative impact on our business development. We believe we have sufficient cash and cash equivalents to fund our operations
12 months from the report issuance date.
The
following summarizes the key components of our cash flows for the three months ended March 31, 2020 and 2019:
|
|
For
the Three Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Net cash provided by (used
in) operating activities
|
|
$
|
238,369
|
|
|
$
|
(1,070,511
|
)
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
(760
|
)
|
Net cash provided by financing activities
|
|
|
1,733
|
|
|
|
522,770
|
|
Effect of exchange
rate on cash
|
|
|
(64,478
|
)
|
|
|
18,512
|
|
Net change in
cash
|
|
$
|
175,664
|
|
|
$
|
(529,989
|
)
|
The
following summarizes the key components of our cash flows for the years ended December 31, 2019 and 2018:
|
|
For
the Years Ended
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Net cash (used in) provided
by operating activities
|
|
$
|
(2,357,544
|
)
|
|
$
|
1,648,932
|
|
Net cash used in investing activities
|
|
|
(9,084
|
)
|
|
|
(462,484
|
)
|
Net cash provided by (used in) financing
activities
|
|
|
1,844,864
|
|
|
|
(2,638,740
|
)
|
Effect of exchange
rate on cash
|
|
|
8,068
|
|
|
|
(13,003
|
)
|
Net decrease
in cash
|
|
$
|
(513,696
|
)
|
|
$
|
(1,465,295
|
)
|
Operating
activities
Net
cash provided by operating activities for the three months ended March 31, 2020 was $238,369 and mainly comprised of net income
of $197,576, the non-cash depreciation expense of $19,820 and deferred taxes provision of $50,833, the decrease of prepayments
and other assets of $143,509 and the increase of customer deposits of $60,990. The net cash provided by operating activities was
offset by the increase in inventories of $97,687 and the increase of prepaid taxes of $93,672, the decrease of other payables
and accrued liabilities of $30,505 and the decrease of other related party payable of $11,757.
Net
cash used in operating activities for the three months ended March 31, 2019 was $1,070,511 and mainly comprised of net loss of
$252,125, the non-cash deferred taxes benefit of $57,232, the increase of accounts receivable of $28,520, the increase in inventories
of $243,106, the increase of prepaid taxes of $421,370, the decrease in customer deposits of $352,708 and the decrease in other
payables and accrued liabilities of $93,034. The net cash used in operating activities was offset by the depreciation expense
of $21,257, the decrease of related party prepayments of $217,163, and the increase in related party accounts payable of $187,418.
Net
cash used in operating activities for the year ended December 31, 2019 was $2,357,544 and mainly comprised of net loss of $1,059,494,
the increase of prepaid taxes of $980,082, the decrease of other payables and accrued liabilities of $715,974, the increase in
inventories of $409,086, and the non-cash deferred taxes benefit of $250,822 offset by the decrease in related party prepayment
of $214,100, the increase in related party accounts payable of $514,524, and the increase in customer deposits of $245,909.
Net
cash provided by operating activities for the year ended December 31, 2018 was $1,648,932 and mainly comprised of net income of
$1,981,911, the decrease in inventories of $988,613, the increase in customer deposits of $1,052,787 and the increase in other
payables and accrued liabilities of $393,937 offset by the decrease in commission payables of $1,039,008, the increase in prepaid
taxes of $652,413, the decrease in account payable to related party of $525,666 and the increase in prepayment and other assets
of $552,765 (including related party).
Investing
activities
We
did not have any investing activities during the three months ended March 31, 2020.
Net
cash used in investing activities for the three months ended March 31, 2019 was $760 which was due to the purchase of equipment.
Net
cash used in investing activities for the year ended December 31, 2019 was $9,084 which were due to the purchase of equipment
of $6,502 and intangible assets of $2,582.
Net
cash used in investing activities for the year ended December 31, 2018 was $462,484 which were due to the purchase of equipment
of $455,786 and intangible assets of $6,698.
Financing
activities
Net
cash provided by financing activities for the three months ended March 31, 2020 was $1,773 which was due to repayments from a
related party.
Net
cash provided by financing activities for the three months ended March 31, 2019 was $522,770 which were due to repayments from
related parties of $37,244 and loans from related parties of $485,526.
Net
cash provided by financing activities for the year ended December 31, 2019 was $1,844,864 which were due to the loans from related
parties of $1,961,091 offset by the loans to related parties of $116,227.
Net
cash used in financing activities for the year ended December 31, 2018 was $2,638,740 which were mainly due to the dividend distributions
of $3,292,466 and repayments from related parties of $652,919.
Credit
Facilities
We
do not have any credit facilities or other access to bank credit.
Off-Balance
Sheet Arrangements
As
of March 31, 2020, we have no significant off-balance sheet arrangements that have or are reasonably likely to have a current
or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to our stockholders.
Critical
accounting polices
Use
of estimates
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 doubtful accounts, allowance for inventories obsolescence, useful lives of property
and equipment, useful lives of intangible assets impairment of long-lived assets, and allowance for deferred tax assets and uncertain
tax position. Actual results could differ from these estimates.
Revenue
recognition
The
Company adopted Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606), on all periods
presented. The Company recognizes revenue to depict the transfer of promised goods or services (that is, an asset) to customers
in an amount that reflects the consideration to which the Company expects to receive in exchange for those goods or services.
An asset is transferred when the customer obtains control of that asset. It also requires 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
Company uses 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.
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. Such revenues are
recognized at a point in time after all performance obligations are satisfied. 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 utilized the coupons after six months, the Company would
recognize the forfeiture of the originated sales value of the coupons as net revenues.
Fair
Value Measurement
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.
Recent
accounting pronouncements
The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption
of such any pronouncements may be expected to cause a material impact on its financial condition or the results of its operations,
as follow:
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to increase the transparency and comparability about leases
among entities. The new guidance requires lessees to recognize a lease liability and a corresponding lease asset for virtually
all lease contracts. It also requires additional disclosures about leasing arrangements. ASU 2016-02 is effective for interim
and annual periods beginning after December 15, 2018, and requires a modified retrospective approach to adoption. Early adoption
is permitted. In September 2017, the FASB issued ASU No. 2017-13, which to clarify effective dates that public business entities
and other entities were required to adopt ASC Topic 842 for annual reporting. ASU No. 2017-13 also amended that all components
of a leveraged lease be recalculated from inception of the lease based on the revised after tax cash flows arising from the change
in the tax law, including revised tax rates. The difference between the amounts originally recorded and the recalculated amounts
must be included in income of the year in which the tax law is enacted. In November 2019, the FASB issued ASU No. 2019-10, which
to update the effective date of ASU No. 2016-02 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 companies is for fiscal years
beginning after December 15, 2020. ASU 2016-02 is effective for the Company for annual and interim reporting periods beginning
January 1, 2021 as the Company is qualified as a smaller reporting company. The Company is expected to record the operating lease
right-of-use assets and lease liabilities upon adoption.
In
February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of
Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this Update affect any entity that is required
to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive
income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this
Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal
years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public
business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities
for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update
should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change
in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The adoption of this ASU did not have
a material effect on the Company’s unaudited condensed consolidated financial statements.
In
August 2018, the FASB has issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure
Requirements of Fair Value Measurement. This amendment modifies the disclosure requirements on fair value measurements in Topic
820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits,
with the primary purpose to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear
communication of the information required by US GAAP. The amendments in this update are effective for all entities for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this ASU on January 1,
2020 did not have a material effect on its consolidated financial statements.
In
May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for
the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology.
The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments
to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually
assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial
Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this Update address those stakeholders’
concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at
amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information
by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief
also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement
users with decision-useful information. 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 consolidated
financial statements.
In
January 2020, the FASB issued ASU 2020-01 to clarify the interaction of the accounting for equity securities under ASC 321 and
investments accounted for under the equity method of accounting in ASC 323 and the accounting for certain forward contracts and
purchased options accounted for under ASC 815. With respect to the interactions between ASC 321 and ASC 323, the amendments clarify
that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting
when applying the measurement alternative in ASC 321, immediately before applying or upon discontinuing the equity method of accounting.
With respect to forward contracts or purchased options to purchase securities, the amendments clarify that when applying the guidance
in ASC 815-10-15-141(a), an entity should not consider whether upon the settlement of the forward contract or exercise of the
purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity
method in ASC 323 or the fair value option in accordance with ASC 825. The ASU is effective for interim and annual reporting periods
beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period. The Company does not
expect the adoption of this standard to have a material impact on its consolidated financial statements.
BUSINESS
Overview
We
are a provider of health and wellness products and advisory services in the Malaysian market. We pursue our 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. We believe the quality of our products coupled with the effectiveness
of our distribution network have been the primary reasons for our success and will allow us to pursue future business expansion.
In order to further our supply chain, on May 8, 2020, we acquired 99.99% of Agape Superior Living Sdn Bhd, with the goal of securing
an established network marketing sales channel that has been in existence in Malaysia for the past 15 years.
We
offer three series of products: ATP Zeta Health Program, ÉNERGÉTIQUE and BEAUNIQUE. Our ATP Zeta Health Program
is a health program designed to assist in the elimination of various diseases caused by environmental pollutants, 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. Our ÉNERGÉTIQUE series aims to provide a total
dermal solution for healthy skin beginning from the cellular level. The series is comprised of the Energy Mask series, Hyaluronic
Acid and Mousse Facial Cleanser. Our BEAUNIQUE product series focuses on the research of our diet’s impact on modifying
gene expressions to address genetic variations and deliver a personalized nutrigenomic solution for every individual.
Industry
and Market Opportunities
Increasing
demand in Dietary Supplement products in The Association of Southeast Asian Nations (“ASEAN”) region.
ASEAN
markets have continue to see increasing demand in dietary supplement products since 2016 and will continue to do for the foreseeable
future. We believe that the ASEAN market for health supplements hold great potential for growth. According to a report published
by Zion Market Research entitled “Dietary Supplements Market by Ingredients (Botanicals, Vitamins, Minerals, Amino Acids,
Enzymes) for Additional Supplements, Medicinal Supplements, and Sports Nutrition Applications - Global Industry Perspective, Comprehensive
Analysis and Forecast, 2016 – 2022” issued in January 2017, itis estimated that while the global dietary supplements
market stood at US$132.8 billion in 2016, it is set to reach US$220.3 billion by 2022, the end of the forecast period.
Source:
Zion Market Research
According
to an article published Janio in December 2019, the nutritional and dietary supplements in the ASEAN region are being prioritized
by individuals in order to maintain a balanced diet and lifestyle. Consumers believe that they can make up for certain vitamin
deficiencies or dietary deficiencies by consuming nutritional and dietary supplements. Many consumers also use nutritional and
dietary supplements for cosmetics purposes, namely, skincare, hair strengthening, and fat burning, particularly in countries such
as Malaysia and Vietnam.
For
example, in Indonesia, the nutritional and dietary supplements market has recorded strong growth due to changes in consumers’
lifestyle habits and increasing awareness of preventive health measures. This is prevalent among the middle-class that has grown
from approximately 37.7% of the population in 2003 to approximately 50% the population in 2020. Similarly, prospects for the dietary
supplements market in Thailand has been growing since 2015 and is predicted to grow at an average of approximately 7% per year
until 2030. In the Philippines, its stable economy has also been contributing to increased financial capability and desire of
Filipino consumers to improve both their mental and physical health through supplements. Conversely, Malaysia is ranked as the
top country within ASEAN for both obesity and diabetes. Obesity and diabetes have been connected to heart disease and hypertension.
As a result, consumers in Malaysia are increasingly aware of such potential health issues associated with eating habits and have
become more proactive in searching for consumer health products to prevent such chronic diseases like diabetes and hypertension.
Continued
Growth in the Skincare products in regions such as Asia-Pacific.
We
believe that skincare products will remain highly lucrative with further potential for growth. According to Euromonitor, Asia
generates approximately 51% of the world’s skin care sales, surpassing Western Europe and North America. Fortune Business
Insights puts the Asia-Pacific skincare sector as the largest market in the world, valued at approximately $71.5 billion in 2019
and is expected to reach approximately $95.7 billion by 2024, representing a compound annual growth rate (“CAGR”)
of approximately 6%. In terms of volume, the Asia-Pacific region is expected to grow from approximately 8.4 billion units in 2019
to approximately 9.5 billion units in 2024, representing a CAGR of approximately 2.5%.
Growth
Drivers in the ASEAN Region
We
believe that the market for the health and wellness industry will continue to see rapid growth, in part due to the rising wealth
in the ASEAN region resulting in increased purchase power. According to a publication by the Association of Southeast Asian Nations
published in October 2019, it was noted that the ASEAN region ranked as the fourth largest exporting region in the world, with
its economic growth continuing to average a rate of 5.4% in the near future. ASEAN countries have established six Free Trade Agreements
with seven of the region’s main trading partners – Australia and New Zealand, China, India, South Korea, Japan and
Hong Kong. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership is one of the largest Free Trade Agreements
in the world and accounts for almost 13.5% of global GDP. The 0agreement brings together Australia, Brunei Darussalam, Canada,
Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, offering these countries investment access and free
trade. It has been estimated, for example, that Vietnam’s GDP could increase by 2% over a decade as a result of new trading
opportunities created by the Agreement. Economic wealth has allowed for social development with more than 100 million people estimated
to have joined ASEAN’s workforce over the past 20 years and another 59 million people are projected to be added by 2030.
We believe a direct advantage of such economic growth is a fast emerging middle class that will be attracted to our company and
its products.
We
believe that generally unhealthy lifestyle in the ASEAN population continues to form a basis for the growth in the health and
wellness industry in the region. According to an article published by Market Watch issued in April 2020, it was noted that the
ASEAN Dietary Supplement market size is set to reach USD 10.60 billion by 2026, representing a CAGR of 5.60% during the forecast
period. Increasing prevalence of lifestyle-induced disorders, or Non-Communicable Diseases (NCDs), such as diabetes and cancer,
will be a key factor driving food supplements market growth. Estimates computed by the World Health Organization (WHO) state that
close to 8 million people die every year in Southeast Asia due to NCDs, amounting to 55% of the total deaths in the region in
a given year. According to the WHO, four risk factors tobacco, alcohol, lack of exercise, and poor diets are primarily responsible
for the spread of NCDs in the region. For instance, the WHO found that at least 25% of boys in Malaysia and Thailand are obese
and a large number of school children across Southeast Asia are largely physically inactive. Such conditions will contribute to
a growth in demand for dietary supplement products, in order to promote a healthier lifestyle.
A
rapidly aging population in the ASEAN region also promotes the need for preventive measures to mitigate against rising healthcare
costs. An International Monetary Fund publication in April 2017found that in East Asia, the population is projected to be the
world’s fastest-aging region with its old-age dependency ratio roughly tripling by current rends by 2050. According to an
article by Fortune Business Insights published in April 2020, the aging population in Southeast Asia has led to a significant
rise in incidences of lifestyle-related diseases. As a result, healthcare costs will inevitably rise, leading to increased demand
in the use of supplements in preventing deteriorative health conditions.
Industry
Challenges
In
spite of its high growth, the health and wellness industry also faces certain challenges. We believe the following are some key
challenges to the industry:
|
●
|
Price
sensitivity - health and wellness products such as dietary supplements and skincare products
typically have premium prices which may only be affordable to certain segments of the
population. Price conscious consumers with low purchasing power may not be able to purchase
such products.
|
|
|
|
|
●
|
Consumer
awareness – consumer awareness may be low on the benefits of dietary supplements,
leading to slower update of products. According to an article published by NuFFood Spectrum
Asia in June 2017, it was noted that consumer awareness in the Asia Pacific region is
low regarding the benefits of consumption of nutraceutical products.
|
Competitive
Landscape
The
health and wellness industry in ASEAN remains highly competitive and fragmented. Key entry barriers of the industry include the
following:
|
●
|
Capital
requirements – Market participants are required to possess sufficient amount of
capital and human resources to sustain their businesses, particularly the product research
and development (R&D) process, daily operation costs and maintaining personnel knowledgeable
in the products such as dietary consultants.
|
|
|
|
|
●
|
Reputation
and relationship with suppliers and customers – In general, current market participants
have already established an extensive business network with their upstream product suppliers,
as well as established reputable products that attract customers. New market entrants
without a prior supply chain and reputable products may find it difficult to build credible
relationships with other suppliers or gain the trust of customers.
|
Our
Strategies
We
intend to pursue the following strategies to further develop and expand our business:
Expand
the product range in each of our ATP Zeta Health Program, ÉNERGÉTIQUE and BEAUNIQUE series
We
intend to continue to expand the product range in each of our product lines, namely, ATP Zeta Health Program, ÉNERGÉTIQUE
and BEAUNIQUE series.
Further
Penetrate Existing Markets.
We
believe that there are several opportunities to further penetrate our existing markets. For example, besides offering dietary
products and services through our ATP Zeta Health Program, we have also expanded our products and services to include beauty and
wellness products via the introduction of ÉNERGÉTIQUE and BEAUNIQUE series in July 2018 and March 2019, respectively,
with the goal of diversifying our product offerings and catering to broader market demands. Currently we maintain three sales
branches in different locations in Malaysia, namely, Kuala Lumpur, Johor Bahru and Ipoh, and appointed three stockists, to whom
the Company can assign its products, at two other locations in Malaysia to further cater to our distributors, members and customers.
Currently,
the Company’s distributors and members mainly consists of the Malaysian Chinese community. Due to the fact that Bumiputra,
consisting of Malays and other indigenious peoples, comprises 62% of the Malaysian population estimated at approximately 32.6
million (as compared to the Chinese community which comprises less than 21%), we believe there is opportunity for further penetration
of our products into the existing Malaysian market.
As
we further grow our business we may further expand our local sales centers to additional locations with the aim to further distribute
our products and appeal to local demands.
Deepening
our Relationships with Existing Members.
We
offer membership and distributor discounts on all our product offerings. Customers are able to become lifetime members by paying
a one-time membership fee with the purchase of specific products. Members who reach a predetermined amount of purchases per year
are automatically promoted to become a distributor who also enjoys bonuses for products that they sell to other customers, as
well as bonuses from the collective performance of their network group. As our members and distributors recognize the value of
our platform and the quality of our products, they typically purchase additional products utilizing their membership and discount
entitlements. Our sales strategy is focused on expanding our revenue per member. We believe there is significant opportunity for
existing members to become distributers, as well as for distributors to further recruit new distributors under their network.
Further
Investment into Information Technology such the Establishment of an E-Commerce platform.
In
2019, we embarked upon a strategic initiative to establish e-commerce through the setup of e-trading of our products on an existing
Malaysian e-trading platform to increase the efficiency of our supply chain, to better support and service our distributors and
members, and to establish a global reach. Our e-trading initiative will be actively promoted for online recruitment of new members
by existing distributors, as well as to provide direct sales to customers. Once the E-trading platform has provided tangible results
in the Malaysia market, we intend to expand the platform to other geographic markets in order to duplicate its success.
In
line with the current popularity of using social influencers to boost product demand, the Company is also exploring the appointment
of key social influencers with significant number of followers as ambassadors for the Company’s products.
Geographic
expansion.
A
key component of our strategy is to enter into and expand into new markets with similar cultures and a high demand for health
and nutrition products. For example, the majority of our product information sessions and training seminars for distributors are
currently conducted in Mandarin, which is the common language spoken amongst the majority of our distributors. We intend to invest
into other Asian markets such as Taiwan, where Mandarin is also widely used and understood, allowing for the seamless transition
in distributor training and membership recruitment.
With
a view to facilitate geographical expansion, our future e-trading platform will also increases efficiency of our supply chain
to better support and service our distributors and members as well as to provide online recruitment of new members by existing
distributors and to provide direct sales to customers. Once the E-trading platform has provided tangible results in the Malaysia
market, we intend to expand the platform to other geographic markets in order to duplicate its success.
Our
Competitive Strengths
We
believe the following competitive strengths contribute to our success and differentiate us from our competitors:
Well
Established Reputation.
We
have a well established reputation in the Malaysia market, where our newly acquired subsidiary, Agape Superior Living Sdn Bhd
has been operating as a reputable provider of our ATP Zeta Health Program for over 15 years.
Well-Established
Product Portfolio.
We
are committed to building our brand, and distributor and customer loyalty by providing quality health-oriented and wellness products.
We have no expenditures or expenses relating to research and development of our products. We leverage our team of in-house nutritional
consultants with rich experience gained in the area of nutritionist work, in collaborating with our customers and clients to understand
the health and wellness market via a process of consultative review. We then communicate our findings and proposals to third-party
suppliers to improve formulations, and to bring about new products for distributors and members who are ready to market to end-users.
Large,
Highly-Motivated Distributor Base, Supported By Successful Training Methodology.
We
had over 101,165 members, including 56,061 distributors, as of June 30, 2020 . Because we believe the direct sales model
is the most effective way to sell our products, we devote significant resources and management attention to assist our distributers
in recruiting and retaining our members. We provide our distributors with successful training methodology, which includes meetings,
workshops and activities to create social connections among distributors to develop proficiency of knowledge, confidence and skills
to build recruitment strength. We structured our compensation system to encourage distributors to remain active in the business
and to build a distributor network of their own, which can serve to increase their income and to increase our product sales.
In order to encourage entrepreneurship within our distributors, we also maintain six service centers, including three
operated by our stockists, to better service our distributors and members.
Scalable
Business Model.
Our
business model enables us to grow our business with minimal investment in our infrastructure and other fixed costs. We do not
require a company-employed sales force to market and sell our products. As a result, we do not incur direct incremental cost to
add a new distributor. Our distributor compensation varies directly with sales. In addition, our distributors bear the majority
of our consumer marketing expenses. Furthermore, we can readily increase inventory and distribution of our products as a result
of our partnerships with our third party suppliers.
Deeply
Experienced Founder-led Management Team.
Our
founder, Mr. How Kok Choong, has led our company through its steady growth for over 15 years. In Malaysia, Mr. How Kok Choong
was recognized by the Junior Chamber Malaysia (JCM) as an Outstanding Young Malaysian 2003, and was awarded the title of Justice
of Peace of Malaysia since 2005. Mr. How Kok Choong received the Outstanding Asian Community Contribution Award in 2011, Malaysia
Top Team 50 Enterprise Award in 2011 and 2016, The Contributor Award (Medical and Health Research) in 2012, “Man
of The Year” in Worldwide Excellence Award in 2015, “Man of The Year” in McMillan Global Award in 2016, The
Distinguished Asia Pacific Outstanding Entrepreneur Lifetime Achievement Award in 2019, World Outstanding Chinese Entrepreneur
Lifetime Award in 2019 and Certified Professional Trainer of The International Professional Managers Association in 2019.
Our senior leadership team also has extensive [*] knowledge and expertise, and an average [*] years of tenure with the Company.
Product
Overview
We
offer three series of products: (i) ATP Zeta Health Program, (ii) ÉNERGÉTIQUE and (iii) BEAUNIQUE.
Our
ATP Zeta Health Program is a health program designed to promote health and general wellbeing, as well as to prevent diseases caused
by polluted environments, unhealthy dietary intake and unhealthy lifestyles. At its core, the ATP Zeta Super Health Program is
focused upon biological energy, Adenosine Triphosphate (ATP), at the cellular level. The stimulation of ATP production at the
cellular level can increase an individual’s metabolic rate in order to promote and maintain normal and healthy functioning
of the body’s systems. Our program emphasizes nutrient absorption through the membrane ion channel in order to provide complete
and balanced nutrients to improve cellular health. Thus, ATP Zeta Super Health Program provides ionized and high zeta potential
(high bioavailability) nutrients to enhance the absorption at the cellular level.
Our
ÉNERGÉTIQUE product series is comprised of: ÉNERGÉTIQUE Mask series, Hyaluronic Acid Serum and Mousse
Facial Cleanser.
The
ÉNERGÉTIQUE Mask series is formulated with triple action natural ingredients and advanced technology. The innovative
combination of award-winning patented liposome encapsulating the customized fast acting patented essence, produces micro-particle
liposome which, when combined with collagen peptide Tencel film, creates an effective formulation that benefits the skin at the
cellular level. The ÉNERGÉTIQUE series aims to provide a total dermal solution for healthy skin beginning at the
cellular level. There are three types of face masks in the ÉNERGÉTIQUE Mask Series, each suited a different skin
requirement. They are: N°1 Med-Hydration, N°2 Med-Whitening and N°3 Med-Firming. Advanced genetic analysis and clinical
trials conducted revealed the benefits and efficacy of the patented functional essence. The ÉNERGÉTIQUE Mask Series
has clinically shown deep penetration of liposomal essence into deep skin layers within 5 minutes application, in order to deliver
immediate, deep-reaching and long-lasting benefits of skin hydration, whitening, and firming.
The
ÉNERGÉTIQUE Hyaluronic Acid Serum is formulated with four functional hyaluronic acid and a unique peptide. It is
a scientifically advanced and intensive quintuple action serum designed to promote skin hydration, reparation and regeneration
to enhance skin viscoelasticity for improved skin firmness.
The
ÉNERGÉTIQUE Mousse
Facial Cleanser is formulated with the mildest surface-active agents available on the market. It takes the form of a unique
mousse like-foam that delivers a comfortable and soft feeling to the skin during and after use without compromising the moisturizing
level and viscoelastic properties of the skin. Its PH-balanced formula is suitable for all
skin types for an effortless cleansing routine.
Our
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 personalized nutrigenomic solution for every individual.
ATP
Zeta Health Program
The
following is a list of our ATP Zeta Health Program products:
ATP1s
Survivor Select
ATP1s
Survivor Select contains various essential nutrients required by the human body to maintain normal metabolism, which includes
productions of biological energy (ATP). Effective production of ATP enhances both physical, as well as mental health, and helps
the body build resistance to diseases.
Benefits:
|
●
|
Stimulates
instant bio-energy production at the cellular level to ensure sufficient supply of bio energy for body cells.
|
|
●
|
Promotes
better metabolism at the cellular level.
|
|
●
|
Promotes
healthy and optimal growth of bones, teeth and muscle tissue of children.
|
|
●
|
Improves
the digestion and nutrient absorption powers of our bodies cells.
|
|
●
|
Promotes
cell detoxification and repair capabilities in order to enhance cell self-healing ability.
|
ATP2
Energized Mineral Concentrate
ATP2
is a nutritional supplement made from the finest plant substances and also is a proprietary formulation of a super-energized colloidal
concentrate developed from a dibase solution. Its formula supports and enhances nutritional biochemical activities.
Benefits:
|
●
|
Supports
and enhances nutritional biochemical activities (nutrient absorption and waste metabolism).
|
|
●
|
Breaks
down or oxidises toxins and waste material to promote cellular detoxification and improve blood circulation.
|
|
●
|
Increases
cellular respiration and energy production to reduce fatigue and maintain energy levels.
|
|
●
|
Increases
oxygen levels in body cells to create a higher oxygen environment in the body, which helps to prevent the growth of harmful
pathogens that contribute to diseases.
|
|
●
|
Provides
sufficient antioxidants that act as a superior scavenger of free radicals, in order to strengthen the body cells resistance
against oxidative damages.
|
ATP3
Ionized Cal-Mag
ATP3
Ionized Cal-Mag is a specialized calcium and magnesium minerals supplement that is designed to transform into an ionic form completely
before entering the body. This is compatible to the cellular ion channel theory, that all cellular metabolisms are dependent on
ionic transmission, in order to achieve the highest absorption rate. This product was tested for its nanoparticle by the National
Measurement Institute of Australian Government, with proven content of nanosized calcium and magnesium that has better absorption
and bio-availability.
Benefits:
|
●
|
Strengthens
our bone systems and promotes better bone development.
|
|
●
|
Strengthens
the teeth structure and prevents teeth damages.
|
|
●
|
Provides
abundant ionic calcium and magnesium, in order to prevent chronic diseases through better blood circulation and acid-base
regulation.
|
|
●
|
Promotes
better relaxation of the nervous system and regulations of neurotransmitters, which helps to enhance sleep quality.
|
|
●
|
Promotes
better relaxation of muscles to prevent muscle soreness and cramps.
|
ATP4
Omega Blend
ATP4
Omega Blend is a proprietary oil blend that is rich in undamaged polyunsaturated essential fatty acid, which is fully extracted
from plant-based ingredients. It provides a bio-effective balance of both essential fatty acids, Omega 3 and Omega 6 which are
the important structural components of cell membranes that cannot be synthesized by humans.
Benefits:
|
●
|
Regulates
cholesterol and triglycerides in order levels to promote better blood circulation.
|
|
●
|
Regulates
inflammation, the unifying component of many diseases, and enhances cell repairing activities.
|
|
●
|
Regulates
hormones production and functions in the body through the supply of the balanced ratio of Omega 3 and Omega 6.
|
|
●
|
Promotes
healthy functioning of the brain through the maintenance of healthy impulse transmission in brain cells that is crucial for
memory and learning ability.
|
ATP5
BetaMaxx
ATP5
BetaMaxx is derived from the cell wall of premium food-grade baker’s yeast and is a medical breakthrough result of more
than 50 years of intensive research and studies by scientists and physicians. This product combines the immunostimulatory properties
of molecularly structured beta 1-3, 1-6-D-glucan with other immunomodulating compounds that work to make ATP5 a unique and effective
natural product.
Benefits:
|
●
|
Strengthens
the function of immune cells in order to build up a better immune response of body for external and internal protection.
|
|
●
|
Promotes
better cell repairing and regulates inflammatory responses in wound healing.
|
|
●
|
Enhances
the function of immune cells against damages caused by radiation.
|
|
●
|
Helps
to normalize blood sugar levels.
|
AGN-Vege
Fruit Fiber
AGN-Vege
Fruit Fiber is a special nutrition-based formula for intestines and the stomach. It consists of four essential components for
gastrointestinal health effects - fiber, probiotic the “friendly bacteria,”, prebiotic fructooligosaccharides (FOS)
and digestive enzymes.
Benefits:
|
●
|
Promotes
better bowel movement and prevents low-fiber diet-induced constipation.
|
|
●
|
Maintains
bowel health. FOS helps increase intestinal bifidobacteria and helps maintain a good intestinal environment.
|
|
●
|
Slows
the absorption of sugar and lipid into the bloodstream which helps improve blood sugar and cholesterol levels.
|
|
●
|
Induces
better satiety, which results in reduced total food intake and helps in achieving an ideal weight management.
|
AGP1-Iron
AGP1-Iron
is the purest and most advanced Colloidal Iron that is sourced from the remains of an ancient rainforest which contains the most
active plant-based element from nature. The colloidal nanosized iron provides high zeta potential that promotes better absorption
and cellular iron uptake through the ion channel.
Benefits:
|
●
|
Promotes
better hemoglobin production to improve iron deficiency anemia.
|
|
●
|
Iron
is a component of hemoglobin in red blood cell which carries oxygen to all part of the body. As a result, it helps to improve
blood circulation and prevent some oxygen deficiency symptoms through enhancement of oxygen delivery and nutrient circulation
as well as toxins excretion.
|
|
●
|
Iron
is a factor in red blood cell formation. It promotes hemoglobin production hence is suitable especially for women and individual
who suffered accidental bleedings.
|
YFA-Young
Formula
YFA-Young
Formula is a 100% natural unique formula, a combination of amino acid, vitamins, and minerals. It is an anti-aging and youthful
maintenance supplement. It stimulates the pituitary gland to release endocrine hormones such as human growth hormone (HGH) to
stimulate synergies, thus achieving the efficacy of anti-ageing through the promotion of cells vitality and strengthening of organ
functionality.
Benefits:
|
●
|
Enhances
the production of bio-energy ATP and metabolism, which aids in reducing body fat accumulation and promote strong muscle building.
|
|
●
|
Stimulates
the production of collagen to restore skin elasticity and reduce wrinkles.
|
|
●
|
Reduces
pigmentation and dark spots on the face caused by hormonal imbalances.
|
|
●
|
HGH
builds and repairs tissues, and thus, has an effect on hair cells at the hair root to promote healthy hair growth.
|
|
●
|
Enhances
memory and cardiovascular function and prevents various chronic diseases due to HGH deficiency.
|
BEAUNIQUE
Mito+ and Mitogize
We
discontinued ATP Regal Mitogize on October 1, 2019. In its stead, an enhanced formula, the BEAUNIQUE Mito+ was introduced in November
2019. As a strong antioxidant drink with great flavor and taste, the preeminence of BEAUNIQUE Mito+ is its ability to further
protect and stimulate mitochondria (the membrane-bound organelles which produces energy for cells) in cellular energy (ATP) production
with the added advantage of fewer total sugars and calories. The new formula is comprised of 11 food groups, including potent
mangosteen skin extract. Backed by advanced scientific research and tested on 88 nutrigenomic profiles, the new formulation revealed
enhanced antioxidant properties. 96.34% DPPH Radical Scavenging activity, an approximate 22% increase compared to Mitogize.
Benefits:
Cellular
health
|
|
●
|
Effective
antioxidants to protect against cellular oxidative damages.
|
|
|
Immune
health
|
|
●
|
Enhanced
adaptive immune response.
|
●
|
Provides
anti-inflammatory functionality.
|
●
|
Strengthens
immunity against bacteria and viruses.
|
|
|
Metabolic
health
|
|
●
|
Reduces
the risk of obesity.
|
●
|
Reduces
the risk of vascular diseases.
|
●
|
Reduces
the risk of a Type II Diabetic.
|
|
|
Brain
health
|
|
●
|
Reduces
the risk of neurodegenerative diseases.
|
|
|
Skin
health
|
|
●
|
Systemic
photoprotection.
|
●
|
Reduces
dark spot formation.
|
●
|
Alleviates
skin wrinkles and inflammation induced by UV-B irradiation.
|
ORYC-Organic
Youth Care Cleansing Bar
ORYC-Organic
Youth Care Cleansing Bar is a natural, organic cleansing soap for skin. It contains pure Australian-accredited natural and organic
plant oils acting as a high quality and natural skin lubricant. It maintains the softness of the skin while promoting skin beauty
and radiance.
Benefits:
|
●
|
With
its biodynamic avocado oil and vanilla extract, it removes impurities, leaving skin clear, fresh and clean.
|
|
●
|
With
its biodynamic, coconut, almond and olive oil, it moisturizes and texturizes the skin in order to prevent skin drying.
|
|
●
|
In
acting as natural anti-bacterial and anti-inflammatory agents, it reduces the risks of skin infections and allergies.
|
*References
alluding to the efficacy and effects of our products are based on client testimonials.
ÉNERGÉTIQUE
The
following is a list of our ÉNERGÉTIQUE products:
N°1
Med-Hydration
Formulated
with a patented Sea Grape (Caulerpa lentillifera) extract, the N°1 Med-Hydration
enhances skin moisture and luminosity. This treatment effectively improves the moisture content of the inner skin layer
and rejuvenate the skin barrier function in order to to avoid moisture loss.
Benefits:
|
●
|
Locking
the skin moisture and nutrients, strengthening the skin barrier function and boosting the skin’s moisture level.
|
|
●
|
Increases
the skin’s natural moisturizing factor (PCA) and skin layer glycoprotein connectivity to maintain the skin’s moisture.
|
|
●
|
Effectively
retains water, provides moisturization, restores skin elasticity, and promotes the growth of fibroblasts for moisturization,
removes dryness, regains skin’s elasticity and smoothness.
|
|
●
|
Delivers
an instant boost of skin moisture content up to 45.7% in just 5 minutes of application and synergistically ensuring a profound
and long-lasting skin moisturization and hydration.
|
N°2
Med-Whitening
Formulated
with patented Peach Blossom Stem Cell Extract, N°2 Med-Whitening has clinically shown its efficacy in inhibiting the
melanin synthesis, down-regulating the melanin synthesis gene, boosting skin moisture level and protecting skin against UV radiation.
Benefits:
|
●
|
Suppresses
melanin production and fights against UV radiation in order to protect skin cells and result in whitening effect.
|
|
●
|
Stimulates
interstitial hyperplasia cell and helps in increasing the moisturizing ceramide by 7.4 times in order to remove skin roughness
and smoothing skin.
|
|
●
|
Enhances
the skin brightness up to 6.3% in just 5 minutes of application and synergistically rejuvenate a profound and long-lasting
skin.
|
N°3
Med-Firming
Formulated
with the patented Djulis (Chenopodium formosanum Koidz) Seed Extract, the native cereal plant in Taiwan is traditionally called
“ruby of cereals.” The formulation is clinically proven to be effective in stimulation of collagen secretion and anti-advances
glycation end-products (AGEs) reducing the glycation of skin collagen, providing protection and maintenance of the basal skin
collagen production.
Benefits:
|
●
|
Suppresses
the skin collagen glycation process, reduces collagen loss, and enhances collagen secretion.
|
|
●
|
Repairs
dead skin tissue, smooths wrinkles to restore the smoothness and health of the skin.
|
|
●
|
Prevents
wrinkles formation and provides the essential skin moisture content.
|
|
●
|
Boosts
skin elasticity by up to 14.4%. and improves sagging skin by 135 in just 5 minutes of application.
|
BEAUNIQUE
The
Company’s BEAUNIQUE product series focuses on the research of our diet’s impact on modifying gene expressions in order
to address genetic variations and deliver personalized nutrigenomic solutions for every individual.
Trim+
Trim+
is the first product launched under this series, which utilizes advanced technology to extract patented active ingredients in
foods. Trim+ has been scientifically proven to be effective in inhibiting the activities of carbohydrates digestive enzymes, which
results in a reduction of the breakdown and absorption of sugars.
Benefits:
|
●
|
Reduces
total carbohydrates calories intake with scientifically proven effect on weight management.
|
|
●
|
Regulates
blood sugar levels with scientifically proven efficacy.
|
|
●
|
Improves
cellular uptake of sugars for bioenergy ATP production.
|
|
●
|
Maintains
insulin hormone balance and helps prevent diabetes.
|
|
●
|
Improves
blood lipids compositions and helps prevent cardiovascular disease.
|
New
Products Launches
On
November 3, 2019, the Company expanded its beauty products under the ÉNERGÉTIQUE series, to include beauty essentials
of the skincare routine, i.e. the ÉNERGÉTIQUE Hyaluronic Acid Serum and ÉNERGÉTIQUE Mousse
Facial Cleanser. These new products have extended the ÉNERGÉTIQUE brand vision in offering a total dermal solutions
for a healthy skin beginning from the cellular level.
ÉNERGÉTIQUE
Hyaluronic Acid (HA) Serum
Formulated
with four functional hyaluronic acids and a unique peptide, this scientifically advanced and intensive quintuple action serum
has been proven to deliver 5Rs dermal benefits. Filled in an innovative yet convenient and hygienics syringe packaging, this HA
serum also ensures consumer benefits for every skin type.
Benefits:
|
●
|
REBALANCE
- Hydrates the skin surface by forming a protection layer and keeps the skin moisturized even after cleansing.
|
|
●
|
RECOVER
– Repairs the out-balanced lamellar layer to act as a barrier to prevent skin moisture from evaporation.
|
|
●
|
REGENERATE
- Promotes the production of Type I pro-collagen and boost the skin’s own production of Hyaluronic Acid up to 3 times.
|
|
●
|
REHYDRATE
- Nano-sized particles with high capacity of water-holding allows deep penetration and bestows moisture from inside the skin.
Long-lasting moisture retention up to 72 hours.
|
|
●
|
REMODELLING
- Proven to increase skin firmness +200% (cheek, under-eye and neck). Enhance skin viscoelasticity to improves skin roughness.
|
ÉNERGÉTIQUE
Mousse Facial Cleanser
Formulated
with mild surface-active agents available on the market, this facial cleanser is designed to deliver a distinct cleansing benefits
to consumers. The unique mousse like-foam delivers
a comfortable and soft feeling of the skin during and after use without compromising the moisturizing level and
viscoelastic properties of the skin.
Benefits:
|
●
|
Hypoallergenic
|
|
●
|
Non-comedogenic
|
|
●
|
pH-balanced
formula with buffer capacity at pH 5.5 of the skin.
|
|
●
|
Mild
to the skin and the eyes without irritating or drying your skin.
|
|
●
|
Comfortable
and soft feeling – prolonged comfortability to your skin before and after use.
|
|
●
|
Mousse-like
foam very fine porous foam and smooth skin-feel during use.
|
|
●
|
Easily
remove light makeup, dirt and impurities.
|
|
●
|
Easy
to rinse with no residual.
|
Our
Business Model
We
believe that the direct-selling channel is ideally suited to marketing our products, because sales of health solution and personal
care products are strengthened by ongoing personal contact between retail consumers and distributors. This personal contact may
enhance consumers’ nutritional and health education and motivate consumers to begin and maintain wellness and weight management
programs. In addition, by using our products themselves, distributors can provide first-hand testimonials of product effectiveness,
which can serve as a powerful sales tool.
We
are focused on building and maintaining our distributor network by offering financially rewarding and flexible career opportunities
through the sale of quality, innovative products to health conscious consumers. We believe the income opportunity provided by
our bonus program appeals to a broad cross-section of our members, particularly those seeking to supplement family income, start
a home business or pursue entrepreneurial, full and part-time, employment opportunities. Our distributors, who are all independent
third parties, profit from selling our products and also earning bonuses through performance of their network group, the establishment
of their own network group and the performance of distributors recruited under their own network group. 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 in their store premises, with the requirement that all product sales are monitored through
our centralized stock tracking system and accounted back to us. The stockists have the option of returning or exchanging any unsold
inventory consigned to them.
We
enable distributors to maximize their potential by providing a broad array of motivational, educational and support services.
We motivate our distributors through our performance-based compensation plan, product-training seminars, workshops and participation
in routine promotional activities.
We
are committed to providing professionally designed educational training materials that our distributors can use to enhance recruitment
and to maximize their sales. We conduct several training sessions per year to motivate our distributors. These training
events teach our distributors not only how to develop invaluable business-building and leadership skills, but also how to differentiate
our products with their consumers, including information sessions presented by in-house nutritional consultants.
Our
corporate-sponsored training events provide a forum for distributors, who otherwise operate independently, to share ideas with
us and each other. In addition we are also developing an e-marketing and e-trading platform allowing for marketing and trading
of products to members, as well as online recruitment of new members and to provide direct sales to customers.
We
are committed to providing our distributors with quality products to help them increase sales and recruit additional distributors.
We leverage our team of in-house nutritional consultants with rich experience gained in the area of nutrition, in collaborating
with our customers and clients to understand the health and wellness market via a process of consultative review. This review
team is headed by the Head of Product Development. We then communicate our findings and proposals to third-party suppliers to
improve formulations, to bring about new products for distributors and members who are ready to market to end-users.
We
place a strong emphasis on the science of nutrition. We have obtained the appropriate authorizations from the Food Safety and
Quality Division, and the National Pharmaceutical Regulatory Agency of the Ministry of Health, Malaysia for all our products.
Whenever products are purchased for inventory replenishment, samples are randomly selected from every batch for testing at laboratories
registered with the Ministry of Health Malaysia.
Our
Customers
General
We
provide health and wellness products and advisory services to health conscious customers in the Malaysian market. Such customers
are able to enjoy membership discounts across all our products by becoming a member.
Our
distributors enjoy further discounts on all of our products. Besides our three sales branches located in Kuala Lumpur, Johor Bahru
and Ipoh, our products are all distributed to customers and members by our distributors networks, which are comprised of three
stockists who are also independent distributors, whose store premises are located in two other locations in Malaysia.
We
believe that our products are particularly well-suited for direct distribution because the sale of health and nutrition products
are strengthened by ongoing personal contact between retail customers and distributors. We believe our continued commitment to
source quality science-based products will enhance our ability to attract new customer, as well as increase the productivity and
retention of our distributors.
Structure
of the membership program
Our
customers are able to become lifetime members by paying a one-time membership fee with the purchase of specific products. Doing
so allows the customer to enjoy membership discounts on all our products.
Members
who accumulate a predetermined amount of purchases are automatically promoted to become a distributor of the Company. Other than
helping distributors achieve physical health and wellness through the use of our products, we offer our distributors, who are
independent third parties, bonuses based on various performance factors. Distributors are required to maintain a predetermined
amount of purchases per year in order to maintain their distributor status.
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 in 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
stockists shall have the option to either return or exchange the Company’s inventory consigned to them that are unsold.
The
following table sets forth the number of members and distributors at the dates indicated:
|
|
Number
of Distributors
|
|
|
Number
of Members
|
|
|
Total
Number of Distributors and Members
|
|
As at June 30, 2020
|
|
|
56,061
|
|
|
|
45,104
|
|
|
|
101,165
|
|
Distributors’
and members’ earnings
Distributors
and members earn profits from the sales of our products to customers. Distributors enjoy additional discounts compared to members,
allowing them to earn higher direct profits through the differences in pricing when selling products they bought at distributors’
prices which are more favorable than member’s prices to customers.
Members
are encouraged to build their respective network group. Members are promoted to distributors if they manage to recruit the requisite
number of members; and the network group is able to achieve set sales targets. Other than preferential distributor pricing for
the purchase of the Company’s products, distributors enjoy bonuses from the collective performance of their network group.
There are several levels of distributors depending on the size and the collective sales performance of their respective network
group. Each level affords bonus benefits in a different form in ascending order. A higher level distributor will be compensated
with higher returns in the form of bonus entitlements.
Distributors
and members motivation and training
We
believe that motivation, inspiration and training are key elements in the success of sales via network group marketing. Together
with our distributors and members, we have established a consistent schedule of gatherings to support those needs. We conduct
several training sessions per year to educate and motivate our distributors and members. The training sessions are
typically presented by in-house staff with suitable background in nutrition, in order to provide key nutrition information about
our products, as well as providing workshops to promote presentation skills to attending participants.
Our
Suppliers
Currently,
all of our products are acquired from unrelated third parties located in Australia, the United States, Germany and Malaysia, and
rebranded by us. Due to the high costs associated with research and development of nutrition and health products, we do not maintain
any facilities to produce our products. We have no expenditures or expenses relating to research and development of our product.
We leverage our team of in-house nutritional consultants with rich experience gained in the area of nutritionist work, in collaborating
with our customers and clients to understand the health and wellness market via a process of consultative review. We then communicate
our findings and proposals to third-party suppliers to improve formulations and to bring about new products for distributors and
members who are ready to market to end-users.
Sales
Agreement with Agape S,E,A
Agape
S.E.A Sdn Bhd is a dietary supplement company founded in Malaysia. We originally entered into the Sales Agreement with Agape S.E.A.
Sdn Bhd, our largest supplier, in May 2018. Under the Sales Agreement we purchased dietary supplement products and skincare products
from Agape S.E.A.
The
following summarizes the major terms of the Sales Agreement with Agape S.E.A:
Sales
of Goods:
|
|
The
agreement stipulates the type of goods sold, transported and delivered, with a minimum quantity per order between 5,000 to
10,000 units per order.
|
|
|
|
Purchase
price:
|
|
The
agreement stipulates that the Company shall place order for goods using a purchase order. The purchase prices under the Sales
Agreement are based on and in accordance with each purchase order. Agape S.E.A shall be responsible for all taxes in connection
with the purchase of goods under the Sales Agreement.
|
|
|
|
Payment:
|
|
Payment
for goods is due within seven days of the date of the Agape S.E.A’s invoice, which date will not be before the date
of delivery of goods.
|
|
|
|
Delivery:
|
|
The
delivery date and delivery destination of each purchase shall be determined by both parties in a purchase order. Agape S.E.A.
shall deliver the goods in accordance with the terms and conditions specified separately in each purchase order, including
without limitation the quantity and delivery date. The Company is responsible for freight insurance arising from shipment
to a single delivery destination. For destinations outside of Malaysia, the Company is also responsible for freight, freight
insurance, tariffs and custom clearance fees.
|
|
|
|
Risk
of Loss:
|
|
Title
to and risk of loss of the goods shall pass to the Company upon shipment of the goods.
|
|
|
|
Right
of Inspection
|
|
The
Company shall be allowed to examine the goods once received and shall do so within fourteen days after the receipt of the
goods. In the event the Company discovers any damages, shortages or other nonconformance of the goods, the Company shall notify
Agape S.E.A within fourteen days specifying the basis of the claim. In the event of nonconformance, the Company has the following
options:
|
|
|
|
|
|
-retuning
the goods for a replacement at Agape S.E.A’s expense;-returning the goods at Agape S.E.A’s expense for a credit
of the full purchase price on future transactions; or-returning the goods at Agape S.E.A’s expense for a full refund
of the purchase price.
|
|
|
|
Warranties:
|
|
The
buyer acknowledges that it has not relied on, and that Agape S.E.A has not made any representations or warranties with respect
to the quality or condition of the goods, and is purchasing the goods on an “as is” basis.
|
|
|
|
Security
Interest:
|
|
The
Company grants Agape S.E.A a security interest in the goods, until the Company has paid the seller in full for the goods.
|
Seller
Representations and Warranties:
|
|
Agape
S.E.A warrants that the goods are free, and at the time of delivery will be free, from any security interest or other liens
or encumbrances, and there are no outstanding titles or claims of title hostile to the rights of Agape S.E.A in the goods.
|
|
|
|
Limitation
of Liability:
|
|
Agape
S.E.A will not be liable for any indirect, special, consequential or punitive damages (including lost profits) arising out
of or relating to this agreement or the transactions contemplated by it contemplates.
|
|
|
|
Assignment:
|
|
Neither
party may not assign any of its rights or delegate any performance under the agreement, except with prior consent from the
other party
|
|
|
|
Governing
Law:
|
|
The
terms of the agreement shall be governed by and construed in accordance with the laws of the State of England.
|
|
|
|
Breach/
Termination:
|
|
Each
party has an obligation to notify the other party of any breach, and where the breach is rectifiable, the breaching party
has 21 days from the date of notification of its breach to rectify.
|
Quality
Control
At
present, our products are predominately sold in Malaysia. As the contents and combination of the main ingredients in our ATP Zeta
Health Program and BEAUNIQUE series are categorized as health food rather than medicines or drugs, all of our products require
authorization from the Food Safety and Quality Division of the Ministry of Health, Malaysia according to the Food Act 1983 (ACT
281) & Regulations in order to be sold in the country. Accordingly, we have obtained the appropriate authorizations from the
Food Safety and Quality Division of the Ministry of Health, Malaysia for all products in our ATP Zeta Health Program and BEAUNIQUE
series.
Our
ÉNERGÉTIQUE series is regulated under the Control of Drugs and Cosmetics Regulations 1984, the Ministry of Health,
Malaysia. We have also obtained the appropriate authorizations for distribution and sale of the products.
Inventory
The
Company operates a central warehouse at its head office in Kuala Lumpur, Malaysia, which typically maintains an inventory reserve
of up to 6 months per product. Inventory is transferred to the Company’s sales branches via ordering through the Company’s
centralized stock tracking system. Stockists of the Company are required to have physical stores, and enjoys the benefit of being
able to store certain amount of inventory in their stores for convenience. 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 stockists
shall have the option to either return or exchange the Company’s inventory consigned to them that are unsold.
Warranty
Our
products include a customer satisfaction guarantee. Under this guarantee, within 90 days of purchase, any customer who is not
satisfied with our product for any reason may return it or any unused portion of it to the distributor from whom it was purchased
for a full refund from the Company or credit toward the purchase of another product.
Historically,
product returns have not been significant.
E-commerce
system
In
order to facilitate our continued growth and to support distributor activities, we continually invest and upgrade our platforms.
In 2019, we invested in an initiative to establish e-commerce through the setup of e-trading of our products on an existing Malaysian
e-commerce trading platform. Our e-trading initiative will be actively promoted for online recruitment of new members by existing
distributors and to provide direct sales to customers. Once the E-trading platform has provided tangible results in the Malaysia
market, we intend to expand the platform to other geographic markets in order to duplicate its success. We also intend to approach
online social influencers as part of our marketing strategy to promote our products and our e-commerce platform.
Intellectual
Property
We
consider trademarks, patents and copyrights to protect our intellectual property rights critical to our success. We are the registered
owner of two trademarks, in Malaysia. We have recently applied to register an additional three trademarks in Malaysia. We are
also the registered owner of five domain names, namely “agapeatpgroup.com”, “agapeatpcorporation.com”,
“atpsummit.com”, “agapeatpgroup.my” and “agapeatpgroup.com.my.”
Employees
As
at June 30, 2020 we had 35 employees (excluding our Directors). The following table sets forth the number of employees
by function:
Function
|
|
Number of
employees
|
|
|
|
|
|
Senior Management
|
|
|
1
|
|
Business Development Department
|
|
|
2
|
|
Finance Department
|
|
|
6
|
|
Human Resources Department
|
|
|
6
|
|
Operations Department
|
|
|
11
|
|
Product Development Department
|
|
|
3
|
|
Sales & Marketing Department
|
|
|
6
|
|
Total
|
|
|
35
|
|
Properties
We
currently lease 5 properties ranging from approximately 2,500 to 11,900 square feet in Kuala Lumpur, Johor Bahru and Ipoh which
primarily carry out the functions of a warehouse, office and sales branches in different regions of Malaysia.
Insurance
The
Employees’ Social Security Act, 1969, Malaysia mandates employers and employees to make a monthly contribution to the Social
Security Organisation, Malaysia, (“SOCSO”) for any employee who is employed for wages paid under a contract of service
or apprenticeship with an employer for the purpose of providing social security protection to employees and their dependents against
occupational injuries, including industrial accident, accident during emergency at the employers’ premises, occupational
diseases and commuting accidents. Depending on the monthly wages earned by the employee, employers shall cause to be deducted
from the respective employee’s wages, amounts that ranges between RM0.10 to RM19.75 for monthly wages between RM30 to RM4,000.
The employers’ contribution correspond to the said rates are between RM0.4 to RM69.05. Rates applicable to both the employee
and employer are fixed at the maximum rate of RM19.75 and RM69.05 respectively. Employees who have attained 60 years of age are
not required to contribute to the scheme. The employer’s responsibility towards this group shall be at a reduced rate which
ranges between MYR0.30 to RM49.40 for the said wage band.
Other
than SOCSO, effective January 1, 2018, employees and employers in the private sector are mandated to contribute to an employment
insurance system, (“EIS”) under the Employment Insurance System Act, 2017. Both the employee and employer shall contribute
at an equal rate at 0.2% of the employee’s wages under the scheme, subject to a maximum monthly wage rate of RM4,000. No
further contribution to the scheme is required from the employee or the employer for employees who have attained 60 years of age;
and employees aged 57 and above who have no prior contributions are exempted.
We
do not have any third-party liability insurance to cover claims in respect of personal injury or property or environmental damage
arising from accidents on our property or relating to our operations. Such insurance is not mandatory according to the laws and
regulations of Malaysia. We typically do not require our distributors to purchase insurance regarding their operations. We believe
this practice is consistent with customary industry standards.
Legal
Proceeding
We
are not subjected to nor engaged in any litigation, arbitration or claim of material importance, and no litigation, arbitration
or claim of material importance is known to us to be pending or threatened by or against our Company that would have a material
adverse effect on our Company’s results of operations or financial condition.
REGULATIONS
This
section sets forth a summary of the most significant rules and regulations that affect our business activities in Malaysia or
the rights of our stockholders to receive dividends and other distributions from us.
Regulations
Related to Health and Wellness
The
Food Act 1983 (Act 281) and the Food Regulations 1985
The
primary legislations governing the various aspects of food safety and quality control in Malaysia are (i) the Food Act 1983 (Act
281) (“the 1983 Act”); and (ii) the Food Regulations 1985 (“the 1985 Regulations”), both under the purview
of the Food Safety and Quality Division (FSQD) of the Ministry of Health, Malaysia. The ministry also oversees the implementation
and enforcement of the legislations. The objective
of the 1983 Act is to ensure that the public is protected from health hazards and fraud in the preparation, sale and use of foods
and for matters incidental thereto or connected therewith.
The
1983 Act and the 1985 Regulations are applicable to all foods sold in the country either locally produced or imported, covers
a broad spectrum from compositional standards to food additives, nutrient supplements, contaminants, packages and containers,
food labelling, procedure for taking samples, food irradiation, and penalty.
The
1983 Act strictly prohibits food adulteration, food containing substances injurious to health and food unfit for human consumption.
The legislation also ensures that consumer gets the right information from product labels; and that claims on food labels are
legitimate.
Food
as defined under the 1983 Act, includes every article manufactured, sold or represented for use as food or drink for human consumption
or which enters into or is used in the composition, preparation, preservation, of any food or drink and includes confectionery,
chewing substances and any ingredient of such food, drink, confectionery or chewing substances. This includes food for special
dietary use for persons with specific diseases, disorders or medical conditions, and food which contain quantities of added nutrients
allowable under the 1983 Act and the 1985 Regulations.
The
general requirements on product labelling for food on sale provided under the 1985 Regulations are as follows:
(i)
|
All
labels shall be durably marked on the material of the package or on material firmly attached to the package.
|
|
|
(ii)
|
All
text should be in Bahasa Malaysia, i.e. the official language of Malaysia, if the food is produced, prepared or packaged in
Malaysia. If the food is imported, all text should be in Bahasa Malaysia or English. In either case, translation into other
languages may be included.
|
|
|
(iii)
|
Important
particulars required on product labels are:
|
|
●
|
A
description of the food containing the common name of its principal ingredients. In the case of mixed and blended food, the
appropriate description that the contents are mixed or blended. Where the food contains beef or pork, or its derivatives,
or lard, a statement to that effect. Alcohol where presence in the food should be clearly marked in capital bold-faced lettering
of a non-serif character not smaller than 6 point, in the form, “CONTAINS ALCOHOL”. Where the food consists of
two or more ingredients, other than water, food additives and added nutrient, the appropriate designation of each of those
ingredients in descending order of proportion by weight, and wherever required by the 198s Regulations, a declaration of the
proportion of such ingredient. Any ingredients known to cause hypersensitivity shall be declared on the label.
|
|
|
|
|
●
|
Quantity
of the food package.
|
|
●
|
The
name and address of the manufacturer and packer, or the owner of the rights of manufacture or packing or the agent of any
of them, for food manufactured or packed in Malaysia; and the additional information of the name and address of the importer
in Malaysia and country of origin for imported food.
|
|
|
|
|
●
|
Depending
on its composition, words such as “genetically modified (name of ingredient)”, “produced from genetically
modified (name of ingredient)”, or “gene derived from (common name of such animal”) shall appear on the
label.
|
|
|
|
|
●
|
Marked
with the expiry date or the date of minimum durability of that food.
|
|
|
|
|
●
|
If
the validity of date marking of food is dependent on its storage, then the storage direction of that food shall also be required
on its label.
|
Further,
based on the Guide to Nutrition Labelling and Claims, the nutritional information that must be declared on a product label are
energy, protein, carbohydrate and fat. In addition, total sugars must also be declared for ready-to-drink beverages. Information
on energy value is to be expressed as kcal (kilocalories) per 100 g or per 100 ml of the food or per package if the package contains
only a single portion. In addition, the energy value should also be given for each serving of the food as quantified on the label.
Besides kcal, energy value may also be expressed as kilojoule (kJ). The amount of protein, carbohydrate and fat should be expressed
as g per 100 g or per 100 ml of the food or per package if the package contains only a single portion. In addition, the amount
of these nutrients in the food should also be given for each serving of the food as quantified on the label.
Other
than the mandatory nutrients, other nutrients may also be displayed on the nutrition label. These include vitamins and minerals,
dietary fibre, sodium, cholesterol, fatty acids, amino acid, nucleotide and other food components.
Control
of Drugs and Cosmetics Regulations 1984
The
Malaysian government enacted the Control of Drugs and Cosmetics Regulations 1984 (“the 1984 Regulations”) to regulate
the manufacture, sell, supply, import, possess or administer of cosmetics. The authority that oversee the 1984 Regulations is
the National Pharmaceutical Regulatory Agency (“NPRA”) under the Ministry of Health, Malaysia. All cosmetics industry
players who intend to manufacture or import any cosmetic, must apply the notification of cosmetics (“NOC”) through
NPRA.
Pursuant
to Regulation 18A of the 1984 Regulations, cosmetics cannot be manufactured or sold if:
(i)
|
The
cosmetic has not been notified with the NPRA;
|
|
|
(ii)
|
The
person is a not person who has been designated to place the notified cosmetics in the market;
|
|
|
(iii)
|
The
cosmetic is a notified cosmetic but it has been mixed with poison (as defined by the Poisons Act 1952);
|
|
|
(iv)
|
The
notified cosmetic has been mixed with a registered product;
|
|
|
(v)
|
The
cosmetic is labelled with another name other than the name notified by the Director of Pharmaceutical Services;
|
|
|
(vi)
|
The
cosmetic has been labelled in a way that does not comply with any directives/guidelines issued by the Director of Pharmaceutical
Services;
|
|
|
(vii)
|
The
cosmetic’s notification has been cancelled by the Director of Pharmaceutical Services; or
|
|
|
(viii)
|
The
cosmetic is labelled with words, symbols or safety features that claim to be true but is otherwise.
|
Regulations
Related to Consumer Protection
Consumer
Protection Act 1999 (Act 599)
The
principal law for consumer protection in Malaysia is the Consumer Protection Act 1999 (Act 599) (“the 1999 Act”).
The 1999 Act establishes various consumer protection mechanisms in Malaysia, and bridge gaps that may occur in other major laws,
which may be inadequate in protecting consumers. The
government agency which is primarily responsible for policy-making and law enforcement on consumer protection in Malaysia is the
Ministry of Domestic Trade and Consumer Affairs (MDTCA). The MDTCA is also responsible for receiving consumer complaints and acts
as a secretariat to the National Consumer Advisory Council (NCAC) – an institution established by the Minister of Domestic
Trade and Consumer Affairs to advise him on any relevant consumer issues and the implementation of the 1999 Act.
The
1999 Act has undergone several amendments since its enactment to cover various emerging issues relating to consumers, including
the inclusion unfair contract terms, inclusion of credit sale agreements of goods and the most recent amendment on 23 July 2019
related to Tribunal for Consumer Claims Malaysia. Amendments to this Act are to increase the jurisdiction limit of claim hearing
from RM25,000.00 to RM50,000.00 and the increase of maximum penalty for non-compliance with the Tribunal’s award.
The
1999 Act covers almost every aspects of consumer protection; ranging from misleading and deceptive conducts, false representation
and unfair practices; safety of goods and services; unfair contract terms; guarantees in respect of the supply of goods and services;
and product liability; to the establishment, structure and functions of the National Consumer Advisory Council; the Committee
on Advertisement; the Tribunals for Consumer Claims; and other matters related to enforcement, offences, remedies, and compensation.
Direct
Sales and Anti-Pyramid Scheme Act 1993 (Act 500) and Regulations.
In
Malaysia, network marketing is regulated by the Direct Sales and Anti-Pyramid Scheme Act 1993 (Act 500) (“the 1993 Act)
and Regulations. The 1993 Act provides for the licensing of persons carrying on direct sales business, for the regulation of direct
selling, for prohibiting pyramid scheme or arrangement, chain distribution scheme or arrangement, or any similar scheme or arrangement,
and for other matters connected therewith. The implementation and enforcement of the 1993 Act is governed by the Ministry of Domestic
Trade and Consumer Affairs.
Under
the 1993 Act, subject to section 14 and 42 no person shall carry on any direct sales business unless it is a company incorporated
under the Companies Act 1965 and holds a valid licence granted under Section 6. The Controller may grant licence under Section
6 of the 1993 Act with conditions and licensee shall comply with the any conditions of the licence imposed by the Controller.
By virtue of Section 8 of the 1983 Act, the Controller has the power to revoke a licence granted if he is satisfied that there
are grounds on which his power to revoke a licence is exercisable under subsection 8(1). In lieu of revocation of licence, the
Controller may restrict the licence by:
(a)
|
Imposing
limits on the duration of the licence;
|
|
|
(b)
|
Imposing
conditions as he thinks desirable or expedient for the protection of the purchasers; or
|
|
|
(c)
|
Imposing
both limits and conditions on the licence.
|
We
have the responsibility to ensure that our marketing plan is in compliance with the Direct Sales (Scheme and Conduct) Regulations
2001, not promoting pyramid scheme and have the following characteristics:
(a)
|
In
the presentation of the direct sales scheme, a person who carries on any direct sales business shall not mislead participants
by overemphasizing on disproportionately high bonus or bonus payout. Each participant shall be provided with sales kit that
includes the marketing plan and code of conduct of the company.
|
|
|
(b)
|
Any
person who carries on a direct sales business shall provide an incentive based on the volume or quantity of goods or services
sold or distributed by each participant and not based on recruitment of persons into the scheme.
|
|
|
(c)
|
Participants
not to purchase goods or services in an unreasonable amount. Each participant is required to purchase goods or service in
an amount that can be expected to be resold or consumed within a reasonable period of time.
|
Regulations
Related to Intellectual Property Rights
Intellectual
property system in Malaysia is administered by the Intellectual Property Corporation of Malaysia (MyIPO), an agency under the
Ministry of Domestic Trade and Consumer Affairs.
Trademarks
Act 2019 (Act 815)
The
Trademarks Act 2019 (Act 815) (“the 2019 Act”) officially came into force in Malaysia on 27 December 2019. The Act
repealed the Trade Marks Act 1976 and is seen as opportune in enabling Malaysia to adhere not only to commercial demands and sophistication
of the current era, but also to international standards and procedures. The Trademarks Regulations 2019 is also now in force having
been gazetted in the Government Gazette on 27 December 2019.
Malaysia
is also a member of various trademark-related treating, including:
(i)
|
Protocol
relating to the Madrid Agreement concerning the International Registration of Marks since 27 December 2019;
|
|
|
(ii)
|
Nice
Agreement concerning the International Classification of Goods and Services since 28 September 2007;
|
|
|
(iii)
|
Paris
Convention for the Protection of Industrial Property since 1 January 1989; and
|
|
|
(iv)
|
Agreement
on Trade-related Aspects of Intellectual Property Rights (TRIPS) since 1 January 1995.
|
The
2019 Act provides that any person who claims to be the bona fide proprietor of a trademark may apply for the registration of the
trademark if:
(i)
|
the
person is using or intends to use the trademark in the course of trade; or
|
|
|
(ii)
|
the
person has authorised or intends to authorise another person to use the trademark in the course of trade.
|
The
2019 Act has also expanded the types of trademark recognized for registration to be more than just word, logo, numbers, name.
signature, letter and to include shape of goods or their packaging, colour, sound, scent, hologram, positioning marks and sequence
of motion of any combination thereof; provided that they must be signs capable of being represented graphically.
In
general, Malaysia provides for protection for both registered and unregistered trademarks. Unregistered trademarks are protected
under common law rights, particularly in the tort of passing off. In fact even during the examination of trademark, the Registrar
shall refuse, under relative grounds of Section 24(4) of the 2019 Act, to register it if the mark’s use in Malaysia is prevented
by virtue of any rule of law protecting an unregistered trademark or other sign used in the course of trade including the law
of passing of.
The
scope of trademark infringement and its exemptions has been substantially expanded by the 2019 Act. There could now be infringement
even in the use of a similar mark on similar goods or services (as opposed to being identical). Liability will stick to secondary
users who know or have reasons to believe that such use is without authorization of the trademark proprietor.
Patents
Act 1983 (Act 291) and Patents Regulations 1986
Patent
protection in Malaysia is governed by the Patents Act 1983 (Act 291) (“the 1983 Act) and the Patents Regulations 1986 (“the
1986 Regulations”). As a signatory to both the Paris Convention for the Protection of Industrial Property 1883 and the Patent
Cooperation Treaty, patent protection in Malaysia may be pursued via two different routes - one route being through the filing
of a direct national application under the national patent law while the other is by way of a filing of an international patent
application through the Patent Cooperation Treaty system.
The
1983 Act grants for two types of patents as follows :-
●
|
Standard
Patent: The invention must be novel, must have an inventive step and must be industrially applicable. Duration of protection
is for 20 years from date of filing of application.
|
|
|
●
|
Certificate
of Utility Innovation: Generally same as standard patent except no inventive step is required.
|
However,
not all inventions are patentable. Even if an invention satisfies all the criteria under 1983 Act, there are still exceptions.
The following inventions are not patentable under Malaysian patent law:-
(i)
|
discoveries,
scientific theories and mathematical methods;
|
|
|
(ii)
|
plant
or animal varieties or essentially biological processes for the production of plants or animals not including man-made living
microorganisms, micro-biological processes and the products of such microorganism processes;
|
|
|
(iii)
|
schemes,
rules or methods for doing business, performing purely mental acts or playing games; and
|
|
|
(iv)
|
methods
for the treatment of human or animal body by surgery or therapy, and diagnostic methods practised on the human or animal body
(this provision does not apply to products used in any such methods).
|
The
exclusive rights of the patent owner are to exploit the patented invention; assign or transmit the patent; and conclude licence
contracts. Infringement occurs when unauthorised exploitation of the patented invention takes place. However, there is no contributory
(or indirect) infringement of a Malaysian patent. Infringement proceedings must be taken by the patent owner within 5 years of
the act(s) of infringement and 2 years in the case of a utility innovation certificate.
For
a patent granted in respect of a product, infringement consists of :
(i)
|
making,
importing, offering for sale, selling or using the product; and
|
|
|
(ii)
|
stocking
such product for the purpose of offering for sale, selling or using.
|
For
a patent granted in respect of a process, infringement consists of using the process; and doing any of the acts set out under
(i) and (ii) above in respect of a product obtained directly by means of the process.
Copyright
Act 1987 (Act 332)
Copyright
protection in Malaysia is governed by the Copyright Act 1987 (Act 332) (“the 1987 Act) which provides comprehensive protection
for copyrightable works. The 1987 Act outlines the nature of works eligible for copyright (which includes computer software),
the scope of protection, and the manner in which the protection is accorded. A unique feature of the 1987 Act is the inclusion
of provisions for enforcing the Act, which include such powers to enter premises suspected of having infringing copies and to
search and seize infringing copies and contrivances. Malaysia is a signatory of the Berne Convention. Foreign works of non-Berne
member countries are also protected if they are made in Malaysia and are published in Malaysia within thirty days of their first
publication in the country of origin.
Unlike
trademarks, designs and patents (other intellectual property rights), there is no specific system of registration for copyright
in Malaysia. Although copyright is a non-registrable
right in Malaysia and enjoys automatic protection, ownership of copyright is difficult to establish. As such, proper documentation
can be prepared to prove ownership. Copyright owners can claim ownership by way of a Statutory Declaration or by filing a Voluntary
Notification at the MyIPO.
The
definition of a literary work now includes table or compilations “whether or not expressed in words, figures or symbols
and whether or not in a visible form”. The owner of copyright in a work including a derivative work, will have the exclusive
right to control “the transmission of a work through wire or wireless means to the public, including the making available
of a work to the public in such a way that members of the public may access the work from a place and at a time individually chosen
by them”.
It
is also an infringement of copyright to circumvent any effective technological measures aimed at restricting access to works,
removal or alteration of any electronic rights management information without authority, or distribution, importation for distribution
or communication to the public, without authority, works or copies of works in respect of which electronic rights management information
has been removed or altered without authority.
Regulations
Related to Employment and Social Security
Employment
Act 1955 (Act 265)
The
Employment Act 1955 (Act 265) (“the 1955 Act) is the primary legislation on labour matters in Malaysia. The 1955 Act provides
for minimum work requirements and benefits of employment, such as maximum working hours, overtime entitlement, leave entitlement,
maternity protection and termination benefits. The 1955 Act applies only to employees earning a monthly wages of not more than
RM2,000.00 or to employees, irrespective of their monthly wages, who are engaged in manual labour, including artisan or apprentice,
or who are engaged in the operation of maintenance of mechanically propelled vehicles operated for the transport of passengers
or goods or for commercial purposes, or who supervise or oversee other employees engaged in manual labour or who are engaged in
any capacity in any vessel registered in Malaysia or who are engaged as domestic servant.
Children
and Young Persons (Employment) Act 1966 (Act 350)
Children
and Young Person (Employment) Act 1996 (Act 350) (“the 1996 Act”) prohibits children from working near hazardous and
poisonous material. The 1996 Act defines a “child” is a person who is under
the age of fifteen years and a “young person” is a person who is fifteen or older, but below the age of eighteen years.
The 1996 Act goes on to provide the minimum working hours for a child and young person. Further, under 1996 Act no
child or young person shall be, or be required or permitted to be, engaged in any employment contrary to the provisions of the
Factories and Machinery Act 1967 (Act 139), the Occupational Safety and Health Act 1994 (Act 514) or the Electricity Supply Act
1990 (Act 447) or in any employment requiring him to work underground. Any person contravening the provisions under the 1996 Act
shall be guilty of an offense and shall be liable on conviction to imprisonment of not exceeding 2 years or to fine not exceeding
RM50,000 or to both; and for repeat offenders, shall be liable on conviction to imprisonment of not exceeding 5 years or to fine
not exceeding RM100,000 or to both.
Employees’
Provident Fund Act 1991 (Act 452)
The
Employees’ Provident Fund Act 1991 (Act 452) (“the 1991 Act”) imposes the statutory obligations on employers
and employees to make contribution towards the Employees Provident Fund, which is essentially a fund established as a scheme of
savings for employees’ retirement and the management of savings for the retirement purposes. Under the 1991 Act, any employer
who fails to pay the necessary contributions shall be
liable to imprisonment for a term not exceeding three years or to a fine not exceeding ten thousand ringgit or to both.
Employee’
Social Security Act 1969 (Act 4)
The
Employee’s Social Security Act 1969 (Act 4) (“the 1969 Act’) was
implemented to provide protection for employees and their families against economic and social distress in situations where the
employees sustain injury or death. The schemes of social security under the 1969 Act are administered by Social Security Organization
(“SOCSO”) and are financed by compulsory contributions made by the employers and the employees. Under the 1969 Act,
any person who fails to make contribution shall be all be punishable with imprisonment for a term which may extend to two years,
or with fine not exceeding ten thousand ringgit, or with both.
Employment
Insurance System Act 2017 (Act 800)
SOCSO
reached a milestone when the Employment Insurance System Act 2017 (Act 800) was introduced and enforced from 28 December 2017
with the aim to provide protection and assist workers who have lost employment through two (2) main components namely, the Employment
Insurance and Active Labour Market Policies. The Employment Insurance System (EIS) provides protection to workers who have lost
their employment through income replacement, reskilling and upskilling training to enhance their employability as well as employment
services so that they can secure other suitable jobs fast.
Regulation
Related to Taxation
Income
Tax Act 1967 (Act 53)
The
Income Tax Act 1967 (Act 53) (“the 1967 Act”) imposes a tax, known as income tax, for each year of assessment upon
the income accruing in or derived from Malaysia, or received in Malaysia from other countries. A company is a tax resident in
Malaysia if its management or control is exercised in Malaysia and generally, the place where directors’ meetings are held
concerning management and control of the company are considered in determining where the management and control of the company
is exercised.
Under
the 1967 Act, any person who makes an incorrect tax return by omitting or understating income or gives incorrect information affecting
chargeability to tax otherwise than in good faith shall be guilty of an offence and shall upon conviction be liable to a fine
not less than RM1,000.00 and not more than RM10,000.00 and shall pay a special penalty of double the amount of tax which had been
undercharged.
Regulation
Related to Foreign Exchange Control
Financial
Services Act 2013 (Act 758)
The
Financial Services Act 2013 (Act 758) provides regulation and supervision of financial institutions, payment systems and other
relevant entities and the oversight of the money market and foreign exchange market to promote financial stability and for related,
consequential or incidental matters.
Pursuant
to the Foreign Exchange Administration Rules, a resident entity with domestic ringgit is only allowed to invest abroad up to RM50
million per calendar year (“the Maximum Foreign Investment”). For the avoidance of doubt, the limit of such Maximum
Foreign Investment applies to the resident entities within the group of companies. As such, if our operating subsidiaries intend
to invest exceeding the Maximum Foreign Investment, we are required to seek approval from the controller of Foreign Exchange,
Central Bank of Malaysia.
Notwithstanding
the above, the Foreign Exchange Administration Rules allows non-residents to remit out divestment proceeds, profits, dividends
or any income arising from investments in Malaysia. Repatriation, however, must be made in foreign currency.
Regulation
Related to Competition Law
Competition
Act 2010 (Act 712)
In
Malaysia, under the Competition Act 2010 (Act 712) (“the 2010 Act), such provisions may be considered to be anti-competitive
if they are found to significantly prevent, restrict or distort competition in any market for goods or services. The 2010 Act
is regulated by the Malaysia Competition Commission (“MyCC”), an independent body established under the Competition
Commission Act 2010 (Act 713) to enforce the 2010 Act. The Competition Commission Act 2010 empowers MyCC to carry out functions
such as implement and enforce the provisions of the 2010 Act, issue guidelines in relation to the implementation and enforcement
of the competition laws, act as advocate for competition matters; carry out general studies in relation to issues connected with
competition in the Malaysian economy or particular sectors of the Malaysian economy; inform and educate the public regarding the
ways in which competition may benefit consumers in and the economy of Malaysia.
The
2010 Act prohibits horizontal or vertical agreements between enterprises that either the object or effect of significantly preventing,
restricting or distorting competition in Malaysia. This is referred to as “Chapter One Prohibition”. MyCC has indicated
in its “Guidelines on Chapter 1 Prohibition” that in general, anti-competitive agreements will not be considered “significant”
if:
(i)
|
the
parties to the agreement are competitors who are in the same market and their combined market share of the relevant market
does not exceed 20%’ or
|
(ii)
|
the
parties to the agreement are not competitors and their individual market share in relevant market is not more than 25%.
|
Further,
the 2010 Act also prohibits enterprises from abusing their “dominant position” in a market. This is referred to as
the “Chapter Two Prohibition”. The term “dominant position “refers to one or more enterprises possessing
such significant power in a market that they are able to adjust prices, outputs, or trading terms without effective constraint
from competitors or potential competitors. There are no specific thresholds for abuse of a dominant
position However, the following are the types of abuses prohibited under the 2010 Act; (i) predatory behaviour (for example, margin
squeeze, and predatory pricing); (ii) refusal to supply; (iii) buying up scarce supply; and (iv) limiting output.
Pursuant
to MyCC “Guidelines on Chapter 2 Prohibition”, market share above 60% would be indicative that an enterprise is dominant.
Nevertheless, market share shall not by itself be regarded as conclusive of dominance and other factors will be taken into account
is assessing whether an enterprise is dominant.
In
there is any infringement with the 2010 Act, MyCC may (i) require that the infringement be ceased immediately; (ii) specify steps
which are required to be taken by the infringing enterprise(s) to bring the infringement to an end; (iii) impose financial penalties
which could, for example, be 10% of the worldwide turnover of the relevant enterprise over the period during which an infringement
occurred; or (iv) take any number of other actions, including imposing sanctions and penalties, as they deem appropriate.
Regulation
Related to Establishment, Operation and Management of Malaysia Subsidiaries
Companies
Act 2016 (Act 777)
The
Companies Act 2016 (Act 777) (“the 2016 Act”) stipulates that a company must be registered with the Companies Commission
Malaysia in order to engage in any business activity. Under the 2016 Act, a company shall have - (a) a name; (b) one or more members,
having limited or unlimited liability for the obligations of the company; (c) in the case of a company limited by shares, one
or more shares; and (d) one or more directors. With the liberalization in Malaysia equity
policy, foreign companies/investors generally could hold 100% equity in majority industries except for strategic sectors of national
interest such as water, telecommunications, ports, and energy. For every industry, there are specific sector regulations issued
by the relevant governmental departments. These include regulations that could impose restrictions on the foreign ownership of
equity of a company, require higher paid up capital requirements and also prior regulatory approval before the commencement of
business operations. However, limits on foreign ownership do remain in place across many sectors such as telecommunications,
oil & gas, tourism, wholesale and retail distributive trade, and financial services. A corporation is a “wholly-owned
subsidiary” of another corporation if it has no members except— (a) that other corporation or its nominee; or (b)
a wholly-owned subsidiary of that other corporation or its nominee. Private companies require a minimum of one director. A
director shall ordinarily reside in Malaysia by having a principal place of residence in Malaysia.
Pursuant
to the 2016 Act, appointment of an auditor is mandatory. However, the Registrar may exempt private companies from appointing an
auditor where the Company is dormant, a zero-revenue company or a threshold-qualified company. Companies that elect to be exempted
from audit must still lodge unaudited financial statements and the required statutory certificates with the Registrar of Companies.
Since the coming into effect of the 2016 Act, private companies are no longer obligated to convene annual general meetings. However,
shareholders have the right to request for the directors of the company to convene a general meeting. This right is however subject
to the requirements in Section 311 of the 2016 Act.
MANAGEMENT
Directors
and Executive Officers
The
following table sets forth information regarding our executive officers and directors as of the date of this prospectus:
Directors
and Executive Officers
|
|
Age
|
|
Position/
Title
|
How
Kok Choong
|
|
56
|
|
Chief
Executive Officer, Chairman of the board of Directors and Secretary
|
[*]
|
|
[*]
|
|
Director
|
[*]
|
|
[*]
|
|
Chief
Operating Officer
|
[*]
|
|
[*]
|
|
Chief
Financial Officer
|
[*]*
|
|
[*]
|
|
Independent
Director Nominee
|
[*]*
|
|
[*]
|
|
Independent
Director Nominee
|
[*]*
|
|
[*]
|
|
Independent
Director Nominee
|
*
|
Each
of Mr. [*], Mr. [*] and Mr. [*] has accepted our appointment to be our independent director, effective upon the SEC’s
declaration of effectiveness of our registration statement on Form S-1, of which this prospectus is a part.
|
Mr.
How Kok Choong is our founder and serves as our Chief Executive Officer, the Chairman of the Board of Directors and Secretary.
Mr. How is primarily responsible for overall development and business strategies, financial, administrative and human resources
affairs of the Company. Mr. How has more than 20 years of experience in the senior management roles in the health and wellness
industry. From 1987 to 2016, Mr. How was with the San Hin Group of Companies and his last position held was the group chief executive
officer for the group. Since August 2003, Mr. How began to work for AGAPE Superior Living International Group as the global president,
and continues to hold this position. Further, since September 2009, Mr. How has worked for TH3 Holdings Sdn Bhd as president.
Mr. How obtained a master’s degree and a doctorate degree in Business Administrative from Newport University, USA in December
1997 and December 2000, respectively. In Malaysia, Mr. How Kok Choong was recognized by the Junior Chamber Malaysia (JCM) as
an Outstanding Young Malaysian 2003, and was awarded the title of Justice of Peace of Malaysia since 2005. Mr. How Kok Choong
received the Outstanding Asian Community Contribution Award in 2011, Malaysia Top Team 50 Enterprise Award in 2011 and 2016, The
Contributor Award (Medical and Health Research) in 2012, “Man of The Year” in Worldwide Excellence Award in 2015,
“Man of The Year” in McMillan Global Award in 2016, The Distinguished Asia Pacific Outstanding Entrepreneur Lifetime
Achievement Award in 2019, World Outstanding Chinese Entrepreneur Lifetime Award in 2019 and Certified Professional Trainer of
The International Professional Managers Association in 2019.
Mr.
[*] serves as our Director. Mr. [*] has more than [*] years of experience in [*]. Mr. [*] has worked for [Company name]
as a [role] since [date]. From [*] to [*], Mr. [*] worked for [Company name] as [role]. Mr. [*] received
a [degree’s name] from [University’s name] in [date].
Mr.
[*] serves as our Chief Operating Officer. Mr. [*] has more than [*] years of experience in [*]. Mr. [*] has worked for
[Company name] as a [role] since [date]. From [*] to [*], Mr. [*] worked for [Company name] as [role].
Mr. [*] received a [degree’s name] from [University’s name] in [date].
Mr.
[*] serves as our Chief Financial Officer. Mr. [*] has more than [*] years of experience in [*]. Mr. [*] has worked for
[Company name] as a [role] since [date]. From [*] to [*], Mr. [*] worked for [Company name] as [role].
Mr. [*] received a [degree’s name] from [University’s name] in [date].
Mr.
[*] will serve as our independent Director effective upon the SEC’s declaration of effectiveness of our registration
statement on Form S-1. Mr. [*] has more than [*] years of experience in [*]. Mr. [*] has worked for [Company name] as a
[role] since [date]. From [*] to [*], Mr. [*] worked for [Company name] as [role]. Mr. [*] received
a [degree’s name] from [University’s name] in [date].
Mr.
[*] will serve as our independent Director effective upon the SEC’s declaration of effectiveness of our registration
statement on Form S-1. Mr. [*] has more than [*] years of experience in [*]. Mr. [*] has worked for [Company name] as a
[role] since [date]. From [*] to [*], Mr. [*] worked for [Company name] as [role]. Mr. [*] received
a [degree’s name] from [University’s name] in [date].
Mr.
[*] will serve as our independent Director effective upon the SEC’s declaration of effectiveness of our registration
statement on Form S-1. Mr. [*] has more than [*] years of experience in [*]. Mr. [*] has worked for [Company name] as a
[role] since [date]. From [*] to [*], Mr. [*] worked for [Company name] as [role]. Mr. [*] received
a [degree’s name] from [University’s name] in [date].
Employment
Agreements
We
have entered into employment agreements with all of our executive officers. Under these agreements, each of our executive officers
is employed for a specified time period. We may terminate employment for cause, at any time, without advance notice or remuneration,
for certain acts of the executive officer, such as conviction or plea of guilty to a felony or any crime involving moral turpitude,
negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties. We may also terminate an executive
officer’s employment without cause upon advance written notice or payment in-lieu of notice. In such case of termination
by us, we will provide severance payments to the executive officer as expressly required by applicable law of the jurisdiction
where the executive officer is based. The executive officer may resign at any time upon advance written notice.
Each
executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict
confidence and not to use, except as required in the performance of his or her duties in connection with the employment or pursuant
to applicable law, any of our confidential information or trade secrets, any confidential information or trade secrets of our
clients or prospective clients, or the confidential or proprietary information of any third party received by us and for which
we have confidential obligations.
Terms
of Directors and Officers
Our
officers are elected by and serve at the discretion of the board of directors and the shareholders voting by ordinary resolution.
Compensation
of Directors and Executive Officers
For
the years ended December 31, 2019 and 2018, we paid an aggregate of approximately Nil and Nil, respectively, in cash and benefits
to our executive officers. We do not have a share incentive program to provide for grants of awards to our directors and executive
officers. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive
officers and directors. We have no service contracts with any of our directors providing for benefits upon termination of employment.
Board
of Directors and Committees
Our
board of directors will consist of five directors, including [three] independent directors. We will establish three committees
under the board of directors immediately upon the effectiveness of our registration statement on Form S-1, of which this prospectus
is a part: an audit committee, a compensation committee and a nominating and corporate governance committee. We intend to adopt
and approve a charter for each of the three committees prior to consummation of this offering. Each of the committees of the board
of directors shall have the composition and responsibilities described below.
Audit
Committee
Mr.
[*], Mr. [*] and Mr. [*] will be the members of our Audit Committee where Mr. [*] shall serve as the chairman. All proposed members
of our Audit Committee will satisfy the independence standards promulgated by the SEC and by [NASDAQ/NYSE] as such standards apply
specifically to members of audit committees.
We
intend to adopt and approve a charter for the Audit Committee prior to consummation of this offering. In accordance with our Audit
Committee’s Charter, our Audit Committee shall perform several functions, including:
|
●
|
evaluate
the independence and performance of, and assess the qualifications of, our independent auditor, and engage such independent
auditor;
|
|
|
|
|
●
|
approve
the plan and fees for the annual audit, quarterly reviews, tax and other audit-related services, and approve in advance any
non-audit service to be provided by the independent auditor;
|
|
|
|
|
●
|
monitor
the independence of the independent auditor and the rotation of partners of the independent auditor on our engagement team
as required by law;
|
|
|
|
|
●
|
reviewing
our financial statements and our management’s discussion and analysis of financial condition and results of operations
to be included in our annual and quarterly reports to be filed with the SEC;
|
|
|
|
|
●
|
oversee
all aspects our systems of internal accounting control and corporate governance functions on behalf of the board;
|
|
|
|
|
●
|
review
and approve in advance any proposed related-party transactions and report to the full board of directors on any approved transactions;
and
|
|
|
|
|
●
|
provide
oversight assistance in connection with legal, ethical and risk management compliance programs established by management and
the board of directors, including Sarbanes-Oxley Act implementation, and make recommendations to the board of directors regarding
corporate governance issues and policy decisions.
|
It
is determined that Mr. [*] possesses accounting or related financial management experience that qualifies him as an “audit
committee financial expert” as defined by the rules and regulations of the SEC.
Compensation
Committee
Mr.
[*], Mr. [*] and Mr. [*] will be the members of our Compensation Committee where Mr. [*]shall be the chairman. All proposed members
of our Compensation Committee will be qualified as independent under the current definition promulgated by [NASDAQ/NYSE]. We intend
to adopt and approve a charter for the Compensation Committee prior to consummation of this offering. In accordance with the Compensation
Committee’s Charter, the Compensation Committee shall be responsible for overseeing and making recommendations to the board
of directors regarding the salaries and other compensation of our executive officers and general employees and providing assistance
and recommendations with respect to our compensation policies and practices.
Nominating
and Governance Committee
Mr.
[*], Mr. [*] and Mr. [*] will be the members of our Nominating and Governance Committee where Mr. [*] shall serve as the chairman.
All proposed members of our Nominating and Governance Committee will be qualified as independent under the current definition
promulgated by [NASDAQ/NYSE]. The board of directors intends to adopt and approve a charter for the Nominating and Governance
Committee prior to consummation of this offering. In accordance with the Nominating and Governance Committee’s Charter,
the Nominating and Corporate Governance Committee shall be responsible for identifying and proposing new potential director nominees
to the board of directors for consideration and reviewing our corporate governance policies.
Director
Independence
Our
board of directors reviewed the materiality of any relationship that each of our proposed directors has with us, either directly
or indirectly. Based on this review, it is determined that Mr. [*], Mr. [*] and Mr. [*] will be “independent directors”
as defined by [NASDAQ/NYSE]. In addition, as required by [Nasdaq and NYSE] rules, our board of directors has made a subjective
determination as to each independent director that no relationships exist, which, in the opinion of our board of directors, would
interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations,
our board of directors reviewed and discussed information provided by the directors and us with regard to each director’s
business and personal activities and relationships as they may relate to us and our management.
Family
Relationships
There
is no family relationship among any of our directors or executive officers.
Board
Leadership Structure and Role in Risk Oversight
Our
Board of Directors, or the Board, is primarily responsible for overseeing our risk management processes on behalf of our company.
The Board receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate
regarding our company’s assessment of risks. In addition, the Board focuses on the most significant risks facing our company
and our company’s general risk management strategy, and also ensures that risks undertaken by our company are consistent
with the board’s appetite for risk. While the Board oversees our company’s risk management, management is responsible
for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing
the risks facing our company and that our board leadership structure supports this approach.
Compensation
Committee Interlocks and Insider Participation
None
of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation
committee of any entity that has one or more executive officers on our board of directors or compensation committee.
Code
of Ethics
We
have a code of ethics that applies to all of our employees, including our principal executive officer, principal financial officer
and principal accounting officer, and the Board. A copy of this code is available in our employee handbook and under the “About
Us – Code of Conduct” section of our website at www.agapeatpgroup.com. In addition, we intend to post on our website
all disclosures that are required by law or the listing standards of our applicable trading market concerning any amendments to,
or waivers from, any provision of the code. The reference to our website address does not constitute incorporation by reference
of the information contained at or available through our website, and you should not consider it to be a part of this prospectus.
Involvement
in Certain Legal Proceedings
To
our knowledge, our directors and executive officers have not been involved in any of the following events during the past ten
years:
|
●
|
any
bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive
officer either at the time of the bankruptcy or within two years prior to that time;
|
|
|
|
|
●
|
any
conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other
minor offenses);
|
|
|
|
|
●
|
being
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or
banking activities or to be associated with any person practicing in banking or securities activities;
|
|
|
|
|
●
|
being
found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have
violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
|
|
●
|
being
subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently
reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or
regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting
mail or wire fraud or fraud in connection with any business entity; or
|
|
|
|
|
●
|
being
subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization,
any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over
its members or persons associated with a member.
|
Involvement
in Certain Legal Proceedings
To
our knowledge, our directors and executive officers have not been involved in any of the following events during the past ten
years:
|
●
|
any
bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive
officer either at the time of the bankruptcy or within two years prior to that time;
|
|
|
|
|
●
|
any
conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other
minor offenses);
|
|
|
|
|
●
|
being
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or
banking activities or to be associated with any person practicing in banking or securities activities;
|
|
|
|
|
●
|
being
found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have
violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
|
|
|
|
|
●
|
being
subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently
reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or
regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting
mail or wire fraud or fraud in connection with any business entity; or
|
|
|
|
|
●
|
being
subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization,
any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over
its members or persons associated with a member.
|
EXECUTIVE
AND DIRECTOR COMPENSATION
Executive
Officers’ Compensation
The
following table sets forth information concerning the annual and long-term compensation earned by or paid to our Chief Executive
Officer and to other persons who served as executive officers as at and/or during the transition period from July 1, 2019 to December
31, 2019 and fiscal year ended June 30, 2019 or who earned compensation exceeding $100,000 during the transition period from July
1, 2019 to December 31, 2019 and fiscal year ended June 30, 2019, or the named executive officers, for services as executive officers
for the said transition period or fiscal year.
Summary
Compensation Table
Name
and
Principal
Position
|
|
Fiscal
Year(1)
|
|
Salary
|
|
Stock
Award
|
|
Option
Awards
|
|
Non-Equity
Incentive Plan
Compensation
|
|
Change
in
Pension Value
and Non-
Qualified
Deferred
Compensation
Earnings
|
|
All
Other
Compensation
|
|
Total
|
|
|
|
|
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
How
Kok Choong
|
|
|
2019
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Chief
Executive Officer, Chairman of the Board of Directors, Director and Secretary
|
|
|
2018
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[*]
|
|
|
2019
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
Chief
Financial Officer
|
|
|
2018
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[*]
|
|
|
2019
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
Chief
Operating Officer
|
|
|
2018
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
|
[*]
|
|
Note:
1.
Transition period from July 1, 2019 to December 31, 2019.
Employment
Agreements
How
Kok Choong
Mr.
How currently devotes approximately 90% per week of his time to manage the affairs of the Company. He has agreed to work with
no remuneration nor drawn any (i) bonus; (ii) stock compensation; (iii) option awards; (iv) non-equity incentive plan compensation;
(v) non-qualified deferred compensation earnings; and (vi) any other compensations until such time as the Company receives significant
revenues necessary to provide management salaries.] At this time, we cannot accurately estimate when significant revenues will
occur to implement this compensation, or what the amount of the compensation will be.
[*]
On
[*], we entered into an Executive Employment Agreement with Mr. [*], our Chief Financial Officer. Pursuant to the agreement, Mr.
[*] will be employed as Chief Operating Officer through [*], unless earlier terminated pursuant to the terms of the agreement.
During the term of the agreement, Mr. [*] will be entitled to a base salary at the annualized rate of $[*] and will be eligible
for a discretionary performance bonus, equity awards and to participate in employee benefits plans as [*] may institute from time
to time at the discretion of its Board of Directors. Pursuant to the agreement, Mr. [*] may be terminated for “cause”
as defined and Mr. [*] may resign for “good reason” as defined. In the event Mr. [*] is terminated without cause or
resigns for good reason, we will be required to pay Mr. [*] all accrued salary and bonuses, reimbursement for all business expenses
and Mr. [*]’s salary for one year. In the event Mr. [*] is terminated with cause, resigns without good reason, dies or is
disabled, [*] will be required to pay Mr. [*] all accrued salary and bonuses and reimbursement for all business expenses. Under
the agreement Mr. [*] is subject to confidentiality, non-compete and non-solicitation restrictions.
[*]
On
[*], we entered into an Executive Employment Agreement with [*], our Chief Operating Officer. Pursuant to the agreement, Mr. [*]
will be employed as Chief Operating Officer through [*], unless earlier terminated pursuant to the terms of the agreement. During
the term of the agreement, Mr. [*] will be entitled to a base salary at the annualized rate of $[*] and will be eligible for a
discretionary performance bonus, equity awards and to participate in employee benefits plans as [*] may institute from time to
time at the discretion of its Board of Directors. Pursuant to the agreement, Mr. [*] may be terminated for “cause”
as defined and Mr. [*] may resign for “good reason” as defined. In the event Mr. [*] is terminated without cause or
resigns for good reason, we will be required to pay Mr. [*] all accrued salary and bonuses, reimbursement for all business expenses
and Mr. [*]’s salary for one year. In the event Mr. [*] is terminated with cause, resigns without good reason, dies or is
disabled, [*] will be required to pay Mr. [*] all accrued salary and bonuses and reimbursement for all business expenses. Under
the agreement Mr. [*] is subject to confidentiality, non-compete and non-solicitation restrictions.
Incentive
Bonus
The
Board may grant incentive bonuses to our executive officer and/or future executive officers in its sole discretion, if the Board
of Directors believes such bonuses are in the Company’s best interest, after analyzing our current business objectives and
growth, if any, and the amount of revenue we are able to generate each month, which revenue is a direct result of the actions
and ability of such executives.
Option
Exercises and Stock Vested
We
have not granted any stock options to our executive officers since our incorporation .
Long-term,
Stock Based Compensation
In
order to attract, retain and motivate executive talent necessary to support the Company’s long-term business strategy we
may award our executive and any future executives with long-term, stock-based compensation in the future, at the sole discretion
of our Board of Directors, which we do not currently have any immediate plans to award. We have not granted any stock options
to our executive officers since our incorporation .
No
Pension Benefits
We
do not maintain any plan that provide for payments or other benefits to our executive officers at, following or in connection
with retirement and including, without limitation, any tax-qualified defined benefit plans or supplemental executive retirement
plans.
No
Nonqualified Deferred Compensation
We
do not maintain any defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.
Director
Compensation
Name
|
|
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Fees
Earned or Paid in Cash $
|
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Stock
Awards $
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Option
Awards $
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Non-equity
Incentive Plan Compensation $
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Change
in Pension Value and Non-Qualified Deferred Compensation Earnings
|
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All
Other Compensation $
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Total
$*
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How Kok Choong
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—
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—
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—
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—
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On
[*], Mr. [*] was appointed to the Board of Directors of our company to serve as director. Mr. [*] entered into an agreement pursuant
to which he will serve as a director. During the term of the agreement, Mr. [*] will be entitled to a base salary at the annualized
rate of $[*]. Pursuant to the agreement, Mr. [*] will be employed as a director for an initial fixed term of 3 years with immediate
effect from the closing of this offering, unless earlier terminated pursuant to the terms of the agreement. Pursuant to the agreement,
Mr. [*] may be terminated for “cause” as defined and Mr. [*] may resign upon the provision of a prior notice in writing
not less than three (3) months to the Company or payment in lieu of notice at any time.
On
[*], Mr. [*], Mr. [*] and Mr. [*] were appointed to the Board of Directors of our company to serve as independent directors. Mr.
[*], Mr. [*] and Mr. [*] entered into agreements pursuant to which they will serve as independent directors. During the term of
the agreement, Mr. [*], Mr. [*] and Mr. [*] will be entitled to a base salary at the annualized rate of $[*].
CERTAIN
RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
SEC
rules require us to disclose any transaction since the beginning of our last fiscal year or any currently proposed transaction
in which we are a participant in which the amount involved exceeded or will exceed $120,000 and in which any related person has
or will have a direct or indirect material interest. A related person is any executive officer, director, nominee for director,
or holder of 5% or more of our common stock, or an immediate family member of any of those persons.
On
May 8, 2020, the Company acquired approximately 99.99% of the issued share capital of Agape Superior Living Sdn Bhd from Mr. How
Kok Choong. Mr. How received an aggregate consideration of $1,714,003, which was determined based on the net asset carrying value
of ASL as at March 31, 2020. The aggregate consideration was satisfied by (i) the offset of the consideration whereby the Company
has a loan receivable of $656,495 as of March 31, 2020 due from Mr. How; and (ii) the allotment and issue of the common stock
of the Company. The Company allotted and issued 162,694 shares of the Company’s common stock, each with a par value $0.0001,
representing approximately 0.0432% of the total issued and outstanding shares in the Company after the issuance of the shares,
which was valued at $1,057,508 based on the closing price of $6.50 of the Company as quoted on the OTC Market on March 31, 2020.
On
July 1, 2020, the Company and Mr. How Kok Choong agreed to amend the Share Exchange agreement and enter into a supplemental agreement
share exchange agreement (the “Supplemental Share Exchange Agreement”). In accordance with Supplemental Share
Exchange Agreement, Mr. How received an aggregate consideration of $1,804,046, which was determined based on the net asset carrying
value of ASL as at March 31, 2020. The aggregate consideration shall be satisfied by (i) the offset of the consideration whereby
the Company has a loan receivable of $656,495 as of March 31, 2020 due from Mr. How; and (ii) the allotment and issuance of common
stock of the Company. The Company allotted and issued 176,547 shares of the Company’s common stock, par value $0.0001 (the
“Shares”), representing approximately 0.0469% of the total issued and outstanding shares in the Company after
the issuance of the Shares, which is valued at $1,147,551 based on the closing price of $6.50 of the Company as quoted on the
OTC Market on March 31, 2020.
*HKC
Holdings Sdn Bhd is owned and controlled by How Kok Choong who is our executive officer and director. As such, HKC Holdings Sdn
Bhd. is regarded a related party.
With
regards to all of the above transactions we claim an exemption from registration afforded by Section 4a(2) and/or Regulation S
of the Securities Act of 1933, as amended (“Regulation S”) due to the fact that the issuance of stock was made to
non-U.S. persons (as defined under Rule 902 section (k)(2)(i) of Regulation S), pursuant an offshore transactions, and no directed
selling efforts were made in the United States by the issuer, a distributor, any of their respective affiliates, or any person
acting on behalf of any of the foregoing.
The
Company’s related party list and relationship are as follows:
Related
parties
|
|
Relationships
|
|
|
|
Agape
S.E.A. Sdn Bhd(1)
|
|
Mr.
How Kok Choong, the CEO and director of the Company is also the sole shareholder and director of Agape S.E.A. Sdn Bhd
|
Notes:
1.
|
On
May 8, 2020, the Company acquired approximately 99.99% of the issued share capital of Agape Superior
Living Sdn Bhd, the primary beneficiary of Agape S.E.A. Sdn Bhd from Mr. How Kok Choong.
|
Related
party transactions for the three months ended March 31, 2020 and 2019; and as of March 31, 2020, and December 31, 2019 are as
per table below:
|
|
For
the three months ended
|
|
|
As
of
|
|
|
|
March
31, 2020
|
|
|
March
31, 2019
|
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Revenue
|
|
|
Accounts
Receivable, Trade
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
Agape S.E.A.
Sdn Bhd
|
|
$
|
-
|
|
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$
|
464,297
|
|
|
$
|
523,141
|
|
|
$
|
520,786
|
|
Related
party transactions as of and for six months ended December 31, 2019 and 2018 are as per table below:
|
|
For
the six months ended
|
|
|
As
of
|
|
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
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|
(Unaudited)
|
|
|
|
|
|
(Unaudited)
|
|
|
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Revenue
|
|
|
Accounts
Receivable, Trade
|
|
|
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|
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|
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|
|
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Agape S.E.A.
Sdn Bhd
|
|
$
|
429,362
|
|
|
$
|
685,288
|
|
|
$
|
520,786
|
|
|
$
|
-
|
|
Related
party transactions as of and for years ended June 30, 2019 and 2018 are as per table below:
|
|
Years
ended
|
|
|
As
of
|
|
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
|
June
30, 2019
|
|
|
|
Revenue
|
|
|
Accounts
Receivable, Trade
|
|
Agape
S.E.A. Sdn Bhd
|
|
$
|
1,546,057
|
|
|
$
|
487,005
|
|
|
$
|
433,338
|
|
In
addition, as of December 31, 2019, June 30, 2019 and December 31, 2018, our chief executive officer, chairman of the board of
Directors, Director and secretary, Mr. How Kok Choong, advanced $3,952, $3,938 and $3,921, respectively to the Company, which
is unsecured, interest-free with no fixed repayment term, for working capital purpose. Imputed interest is considered insignificant.
*
How Kok Choong has acted as the sole promoter of the Company since inception. He has not been provided any form of compensation
as of the date of this registration statement.
PRINCIPAL
STOCKHOLDERS
Beneficial
ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect
to securities. In accordance with SEC rules, shares of our common stock which may be acquired upon exercise of stock options or
warrants which are currently exercisable or which become exercisable within 60 days of the date of the applicable table below
are deemed beneficially owned by the holders of such options and warrants and are deemed outstanding for the purpose of computing
the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage of
ownership of any other person. Subject to community property laws, where applicable, the persons or entities named in the tables
below have sole voting and investment power with respect to all shares of our common stock indicated as beneficially owned by
them.
The
following table sets forth certain information, as of July 6, 2020 with respect to the beneficial ownership of the outstanding
common stock by (i) any holder of more than five (5%) percent; (ii) each of our executive officers and directors; and (iii) our
directors and executive officers as a group. Except as otherwise indicated, each of the stockholders listed below has sole voting
and investment power over the shares beneficially owned.
Name
of Beneficial Owner (1)
|
|
Common
Stock Beneficially Owned
|
|
|
Percentage
of Common Stock (1)
|
|
|
Voting
Shares of Preferred Stock
|
|
|
Preferred
Stock Voting Percentage Beneficially Owned
|
|
|
Total
Voting Percentage Beneficially Owned
|
|
How Kok Choong, Chief Executive
Officer, Secretary, and Director; collectively this includes HKC Holdings Sdn Bhd (2) (3)*
|
|
|
254,597,547
|
|
|
|
67.63
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
67.63
|
%
|
5% Shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HKC Talent Limited (4)
|
|
|
50,000,000
|
|
|
|
8
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
13.28
|
%
|
All officers and directors as a group
|
|
|
254,597,547
|
|
|
|
67.63
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
67.63
|
%
|
|
|
*
Officer and/or director of the company.
|
(1)
|
Applicable
percentage ownership is based on 376,452,047 shares of common stock issued and outstanding and 200,000,000 preferred
shares authorized but none were issued and outstanding as of July 6, 2020. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to
securities.
|
|
|
(2)
|
The
address of How Kok Choong is c/o Agape ATP Corporation, 1705 – 1708, Level 17, Tower 2, Faber Towers, Jalan Desa Bahagia,
Taman Desa, 58100 Kuala Lumpur, Malaysia.
|
|
|
(3)
|
HKC
Holdings Sdn Bhd is owned and controlled by How Kok Choong who is our chief executive officer, chairman and director.
|
|
|
(4)
|
HKC
Talent Limited is owned and controlled by Law Li Lee, an independent third party. The address of HKC Talent Limited is 306
Victoria House, Victoria, Mahe, Seychelles, SC361.
|
DESCRIPTION
OF CAPITAL STOCK
We
have authorized capital stock consisting of 1,000,000,000 shares of common stock, par value $0.0001 per share, and 200,000,000
shares of preferred stock, par value $0.0001 per share. As of July 6, 2020, we had 376,452,047 shares of common stock issued
and outstanding and no shares of preferred stock issued and outstanding.
Common
Stock
All
outstanding shares of common stock are of the same class and have equal rights and attributes. The holders of common stock are
entitled to one vote per share on all matters submitted to a vote of stockholders of the company. All stockholders are entitled
to share equally in dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available.
In the event of liquidation, the holders of common stock are entitled to share ratably in all assets remaining after payment of
all liabilities. The stockholders do not have cumulative or preemptive rights.
Preferred
Stock
Our
Certificate of Incorporation authorizes the issuance of up to 200,000,000 shares of preferred stock with designations, rights
and preferences determined from time to time by our Board of Directors. Accordingly, our Board of Directors is empowered, without
stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting, or other rights which could adversely
affect the voting power or other rights of the holders of the common stock. In the event of issuance, the preferred stock could
be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company,
which is sometimes referred to in corporate parlance as a “poison pill”.
Options
and Restricted Stock
As
of June 30, 2020, other than the securities described above, we do not have any outstanding options or restricted stock.
Other
Convertible Securities
As
of June 30, 2020, other than the securities described above, we do not have any outstanding convertible securities.
Securities
Authorized for Issuance under Equity Compensation Plans
We
have not adopted any compensatory or benefit plans for future issuances of our securities.
Market
for Common Equity and Related Stockholder Matters
Our
common stock is presently quoted on the OTC Markets – Pink Sheets under the symbol “AATP”. Although there is
currently a bid and offer quotation for the common stock, such bid and offer are for limited and insignificant number of shares.
The last sale price recorded was $7.50 per share on July 2, 2020. Because trading has been sporadic and irregular, there is no
established public trading market for our common stock.
We
plan to apply to list our common stock on the [NASDAQ/NYSE] as soon as practical. No assurance can be given that our application
will be approved by the [NASDAQ/NYSE]. If our Common Stock is listed on the [NASDAQ/NYSE], we will be subject to continued listing
requirements and corporate governance standards of [NASDAQ/NYSE]. We expect the compliance with these new rules and regulations
to significantly increase our legal, accounting and financial compliance costs.
As
of the date of this prospectus, there are approximately [1206] holders of record of our common stock.
Transfer
Agent
The
stock transfer agent for our securities is Vstock Transfer, LLC, 18 Lafayette Place, Woodmere, New York 11598 and telephone number
is +1 (212) 828-8436.
SHARES
ELIGIBLE FOR FUTURE SALE
Immediately
prior to this offering, there was little to no trading activity in our common stock. Future sales of substantial amounts of common
stock in the public market, or the perception that such sales may occur, could adversely affect the market price of our common
stock.
All
shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except
for any shares purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act, whose
sales would be subject to the Rule 144 resale restrictions described below, other than the holding period requirement.
We
expect that approximately of shares of our common stock will be subject to the [180-day] lock-up period under the lock-up agreements
entered into with the underwriter. Upon expiration of the lock-up period, these shares will be available for sale in the public
market, subject in some cases to applicable volume limitations under Rule 144.
Rule
144
Some
of our stockholders will be forced to hold their shares of our common stock for at least a [six-month] period before they are
eligible to sell those shares, and even after that six-month period, sales may not be made under Rule 144 promulgated under the
Securities Act unless we and such stockholders are in compliance with other requirements of Rule 144.
In
general, Rule 144 provides that (i) any of our non-affiliates that has held restricted common stock for at least six months is
thereafter entitled to sell its restricted stock freely and without restriction, provided that we remain compliant and current
with our SEC reporting obligations, and (ii) any of our affiliates, which includes our directors, executive officers and other
person in control of us, that has held restricted common stock for at least six months is thereafter entitled to sell its restricted
stock subject to the following restrictions: (a) we are compliant and current with our SEC reporting obligations, (b) certain
manner of sale provisions are satisfied, (c) a Form 144 is filed with the SEC, and (d) certain volume limitations are satisfied,
which limit the sale of shares within any three-month period to a number of shares that does not exceed the greater of 1% of the
total number of outstanding shares. A person who has ceased to be an affiliate at least three months immediately preceding the
sale and who has owned such shares of common stock for at least one year is entitled to sell the shares under Rule 144 without
regard to any of the limitations described above.
TAXATION
Malaysia
Taxation
The
following discussion is a summary of the more relevant taxes that are applicable to our Malaysian subsidiaries with regards to
transactions that they may enter into with a foreign holding company, i.e. AATP. It excludes specifically all Malaysian taxes
that our Malaysian subsidiaries are subject to arising from their respective business activities in Malaysia such as income tax,
various types of taxes imposable on transactions entered into in the course of conducting their business activities and taxes
on capital gains. Generally, there is no taxes on capital gains in Malaysia except for real property gains tax (“RPGT”)
which is a tax on gains arising from the disposal of real property or shares in real property companies (“RPC”). Neither
subject affects our Malaysian subsidiaries as none of them were engaged in activities in the said areas.
The
type of transactions that Malaysian subsidiaries typically enter into with their foreign holding company (that is not attributable
to a business carried on in Malaysia by the foreign holding company) are royalties, interest or service fees. With respect to
such income, the tax liability of the foreign holding company, it being a non-resident will be settled by way of withholding tax
(“WHT”) deducted by the paying entity, i.e. the Malaysian subsidiary. The following are WHT rates that apply as per
the double taxation agreement (“DTA”) that exists between the United States of America and Malaysia: (Royalty: 10%,
Interest: 15%, Dividends: 0%, Income other than royalty and interest: 10%)
Payments
of the above types of income to non-residents (except for dividends) are subject to WHT which is due and payable to the Inland
Revenue Board (IRB) within one month after paying or crediting such payments. There is no WHT on dividends paid by Malaysian companies.
Tax
administration
Transfer
pricing
Transfer
pricing (TP) legislation
The
basis for determining proper compensation is, almost universally, the arm’s length principle which has also been accepted
by the Inland Revenue Board (“IRB”).
The
arm’s length principle was incorporated into Section 140A of the Malaysian Income Tax Act 1967. It allows the Director General
Inland Revenue (“DGIR”) to adjust any transfer prices between related parties in Malaysia which, in the view of the
DGIR, do not meet the arm’s length standard.
What
constitutes “arm’s length” is not defined in the Income Tax Act 1967. Consequently, the IRB has issued the TP
Rules 2012 and the revised TP Guidelines 2012 to give guidance on the arm’s length standard that is acceptable to the IRB.
The TP Rules and Guidelines seek to provide guidance on the application of the law on controlled transactions, the acceptable
methodologies as provided in the rules and administrative requirements including the types of records and documentation expected
from taxpayers involved in TP arrangements.
Advance
pricing arrangements (APA)
Companies
are allowed to apply for APAS from the DGIR. The objective of establishing APAS is to provide an avenue for taxpayers to obtain
certainty upfront that their related party transactions meet the arm’s length standard. The IRB has issued the APA Rules
2012 and APA Guidelines 2012 to give guidance on the matter.
Statute
of limitation for TP adjustments
The
statute of limitation is seven (7) years from the expiration of an assessment year (“YA”) for raising an assessment
or additional assessment for that YA in respect of TP adjustments for a transaction entered into between associated persons not
at arm’s length.
Country-by-Country
Reporting
The
Malaysian Country-by-Country Rules require a Malaysian multinational corporation (“MNC”) group with total consolidated
group revenue of RM3 billion and above in the financial year (“FY”) preceding the reporting FY (i.e. FY commencing
on or after 1 January 2017) to prepare and submit the Country-by-Country Report to the IRB no later than 12 months after the close
of each FY.
Malaysian
entities of foreign MNC groups will generally not be required to prepare and file Country-by-Country Reports as the obligation
to file will be with the ultimate holding company in the jurisdiction it is tax resident in, However, a notification to the IRB
may be required.
United
States Federal Income Taxation
The
following discussion is a summary of the material U.S. federal income tax consequences to Non-U.S. Holders (as defined below)
of the purchase, ownership and disposition of our common stock issued pursuant to this prospectus, but does not purport to be
a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws,
and any applicable state, local or non-U.S. tax laws are not discussed. This discussion is based on the U.S. Internal Revenue
Code of 1986, as amended (the “Code”), Treasury Regulations promulgated thereunder, judicial decisions, and published
rulings and administrative pronouncements of the U.S. Internal Revenue Service (the “IRS”), in each case in effect
as of the date of this prospectus. These authorities may change or be subject to differing interpretations. Any such change or
differing interpretation may be applied retroactively in a manner that could adversely affect a Non-U.S. Holder. We have not sought
and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court
will not take a contrary position to that discussed below regarding the tax consequences of the purchase, ownership and disposition
of our common stock.
This
discussion is limited to Non-U.S. Holders that hold our common stock as a “capital asset” within the meaning of Section
1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences
relevant to a Non-U.S. Holder’s particular circumstances, including the impact of the Medicare contribution tax on net investment
income. In addition, it does not address consequences relevant to Non-U.S. Holders subject to special rules, including, without
limitation:
|
●
|
U.S.
expatriates and former citizens or long-term residents of the United States;
|
|
●
|
persons
subject to the alternative minimum tax;
|
|
●
|
persons
holding our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction
or other integrated investment;
|
|
●
|
banks,
insurance companies, and other financial institutions;
|
|
●
|
brokers,
dealers or traders in securities;
|
|
●
|
“controlled
foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings
to avoid U.S. federal income tax;
|
|
●
|
partnerships
or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);
|
|
●
|
tax-exempt
organizations or governmental organizations;
|
|
●
|
persons
deemed to sell our common stock under the constructive sale provisions of the Code;
|
|
●
|
persons
who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation; and
|
|
●
|
tax-qualified
retirement plans.
|
If
an entity treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner
in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made
at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult
their tax advisors regarding the U.S. federal income tax consequences to them.
INVESTORS
SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS
AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL
ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX
TREATY.
Definition
of a Non-U.S. Holder
For
purposes of this discussion, a “Non-U.S. Holder” is any beneficial owner of our common stock that is neither a “U.S.
person” nor an entity treated as a partnership for U.S. federal income tax purposes. A U.S. person is any person that, for
U.S. federal income tax purposes, is or is treated as any of the following:
|
●
|
an
individual who is a citizen or resident of the United States;
|
|
●
|
a
corporation created or organized under the laws of the United States, any state thereof or the District of Columbia;
|
|
●
|
an
estate, the income of which is subject to U.S. federal income tax regardless of its source; or
|
|
●
|
a
trust that (1) is subject to the primary supervision of a U.S. court and all substantial decisions of which are subject to
the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or
(2) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes.
|
Distributions
As
described in the section entitled “Dividend Policy,” we do not anticipate paying any cash dividends on our common
stock in the foreseeable future. However, if we do make distributions of cash or property on our common stock, such distributions
will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and
profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax
purposes will constitute a return of capital and first be applied against and reduce a Non-U.S. Holder’s adjusted tax basis
in its common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described below under
“—Sale or Other Taxable Disposition.”
Subject
to the discussion below on effectively connected income, dividends paid to a Non-U.S. Holder will be subject to U.S. federal withholding
tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty, provided
the Non-U.S. Holder furnishes a valid IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification
for the lower treaty rate). A Non-U.S. Holder that does not timely furnish the required documentation, but that qualifies for
a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with
the IRS. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable income
tax treaty.
If
dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holder’s conduct of a trade or business
within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment
in the United States to which such dividends are attributable), the Non-U.S. Holder will be exempt from the U.S. federal withholding
tax described above. To claim the exemption, the Non-U.S. Holder must furnish to the applicable withholding agent a valid IRS
Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business
within the United States.
Any
such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular graduated
rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate
specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted for certain items. Non-U.S.
Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.
Sale
or Other Taxable Disposition
A
Non-U.S. Holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition
of our common stock unless:
|
●
|
the
gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and,
if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States
to which such gain is attributable);
|
|
●
|
the
Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year
of the disposition and certain other requirements are met; or
|
|
●
|
our
common stock constitutes a U.S. real property interest (“USRPI”) by reason of our status as a U.S. real property
holding corporation (“USRPHC”) for U.S. federal income tax purposes.
|
Gain
described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at the regular
graduated rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such
lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.
Gain
described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified
by an applicable income tax treaty), which may be offset by certain U.S. source capital losses of the Non-U.S. Holder (even though
the individual is not considered a resident of the United States), provided the Non-U.S. Holder has timely filed U.S. federal
income tax returns with respect to such losses.
With
respect to the third bullet point above, we believe we currently are not, and do not anticipate becoming, a USRPHC. Because the
determination of whether we are a USRPHC depends, however, on the fair market value of our USRPIs relative to the fair market
value of our non-U.S. real property interests and our other business assets, there can be no assurance we currently are not a
USRPHC or will not become one in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable
disposition by a Non-U.S. Holder of our common stock will not be subject to U.S. federal income tax if our common stock is “regularly
traded,” as defined by applicable Treasury Regulations, on an established securities market, and such Non-U.S. Holder owned,
actually and constructively, 5% or less of our common stock throughout the shorter of the five-year period ending on the date
of the sale or other taxable disposition or the Non-U.S. Holder’s holding period.
Non-U.S.
Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.
Information
Reporting and Backup Withholding
Payments
of dividends on our common stock will not be subject to backup withholding, provided the applicable withholding agent does not
have actual knowledge or reason to know the holder is a United States person and the holder either certifies its non-U.S. status,
such as by furnishing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI, or otherwise establishes an exemption. However, information
returns are required to be filed with the IRS in connection with any dividends on our common stock paid to the Non-U.S. Holder,
regardless of whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of our common
stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding
or information reporting, if the applicable withholding agent receives the certification described above and does not have actual
knowledge or reason to know that such holder is a United States person, or the holder otherwise establishes an exemption. Proceeds
of a disposition of our common stock conducted through a non-U.S. office of a non-U.S. broker that does not have certain enumerated
relationships with the United States generally will not be subject to backup withholding or information reporting.
Copies
of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or
agreement to the tax authorities of the country in which the Non-U.S. Holder resides or is established.
Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a
credit against a Non-U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished
to the IRS.
Additional
Withholding Tax on Payments Made to Foreign Accounts
Withholding
taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance
Act, or “FATCA”) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities.
Specifically, a 30% withholding tax may be imposed on dividends on, or gross proceeds from the sale or other disposition of, our
common stock paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined
in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the non-financial
foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or
furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or
non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution
and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department
of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United
States persons” or “United States-owned foreign entities” (each as defined in the Code), annually report certain
information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain
other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the
United States governing FATCA may be subject to different rules.
Under
the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends
on our common stock, and will apply to payments of gross proceeds from the sale or other disposition of such stock on or after
January 1, 2019.
Prospective
investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment
in our common stock.
UNDERWRITING
We
have entered into an underwriting agreement with [*], as the underwriter, with respect to the shares of our common stock in this
offering. Under the terms and subject to the conditions contained in the underwriting agreement, we have agreed to issue and sell
to the public through the underwriter, and the underwriter has agreed to offer and sell, on a best efforts all-or-any-basis, shares
of our common stock.
The
underwriting agreement provides that the obligation of the underwriter to arrange for the offer and sale of the shares of our
common stock, on a best efforts basis, is subject to certain conditions precedent, including but not limited to delivery of legal
opinions. The underwriter is under no obligation to purchase any shares of our common stock for its own account. As a “best
efforts” offering, there can be no assurance that the offering contemplated hereby will ultimately be consummated. The underwriter
may, but is not obligated to, retain other selected dealers that are qualified to offer and sell the shares and that are (i) either
members of the Financial Industry Regulatory Authority, Inc., or FINRA or (ii) a non-U.S. bank, broker, dealer or other institution
not required to register for membership with FINRA. The underwriter proposes to offer the shares to investors at the public offering
price, and will receive the underwriting commissions, set forth on the cover of this prospectus.
[Option
to Purchase Additional Common Stocks
We
have granted to the Underwriter a 15% over-allotment option, exercisable for [60] days from the date of this prospectus, to purchase
up to an aggregate of additional common stocks from us at the public
offering price listed on the cover page of this prospectus, less underwriter’s discounts and commissions. To the extent
the option is exercised, the Underwriter will become obligated, subject to certain conditions, to purchase additional common stocks.]
Commissions
and Expenses
If
we complete this offering, then on the closing date, we will pay the underwriter a commission fee of [*]% of the value of the
shares of common stock sold in this offering.
The
following table summarizes the compensation and estimated expenses we will pay in the offering. Such amounts are shown assuming
both no exercise and full exercise of the Underwriter’s over-allotment option.
|
|
Per
Share
|
|
Total
|
Public
offering price
|
|
$
|
|
|
|
$
|
|
|
Underwriting
fee and commissions ([*]%)
|
|
$
|
|
|
|
$
|
|
|
Proceeds,
before expenses, to us
|
|
$
|
|
|
|
$
|
|
|
We
have also agreed to reimburse the underwriter for all of its reasonable out-of-pocket expenses, including reasonable fees and
expenses of its legal counsel in an amount not to exceed $[*] and costs of third party due diligence reports in an amount not
to exceed $[*], in connection with the offering.
We
expect our total cash expenses for this offering to be approximately $[*], exclusive of the above commissions. If we complete
this offering, then on the closing date, we will issue shares to investors.
We
have agreed to indemnify the underwriter against certain liabilities, including liabilities under the Securities Act, or to contribute
to payments the underwriter may be required to make in respect of those liabilities.
The
underwriter intends to offer our common stock to its retail customers only in states in which we are permitted to offer our common
stock.
In
connection with this offering, the underwriter or certain of the securities dealers may distribute prospectuses electronically.
No forms of prospectus other than printed prospectuses and electronically distributed prospectuses that are printable in Adobe
PDF format will be used in connection with this offering.
[Underwriter
Warrants]
[We
have also agreed to grant to the Underwriter a warrant covering a number common stocks equal to [*]% of the common stock (the
“Underwriter Warrant”) sold by the Underwriter in this public offering. The Underwriter Warrants will be exercisable,
from the date of issuance and will expire on the [*]-year anniversary of the effective date of the offering. The Underwriter Warrants
will be exercisable at a price equal to [*]% of the initial public offering price. The Underwriter Warrant shall not be redeemable
or cancellable. We will register the shares underlying the Underwriter Warrants and file all necessary undertakings in connection
therewith. The Underwriter Warrants may not be sold, transferred, assigned, pledged or hypothecated, or be the subject of any
hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities
by any person for a period of [*] days immediately following the effective date of the registration statement of which this prospectus
forms a part (in accordance with FINRA Rule 5110), except that they may be assigned, in whole or in part, to any officer or partner
of the Underwriter, and to members of the syndicate or selling group and their respective officers or partners. The Underwriter
Warrants may be exercised as to all or a lesser number of shares, will provide for cashless exercise and will contain provisions
for immediate “piggyback” registration rights at our expense for a period of three years from the date of effectiveness.
We have registered the Underwriter Warrants and the shares underlying the Underwriter Warrants in this offering.]
[Right
of First Refusal
Until
[*] ([*]) months from the commencement of sales of the Offering, the Underwriter shall have a right of first refusal on at least
equal commercial terms to act as financial advisor or to act as joint financial advisor on any public or private financing (debt
or equity), merger, business combination, recapitalization or sale of some or all of the equity or assets of the Company (collectively,
“Future Services”). In the event the Company notifies the Underwriter of its intention to pursue an activity that
would enable the Underwriter to exercise its right of first refusal to provide Future Services, the Underwriter shall notify the
Company of its election to provide such Future Services within [*] ([*]) days of written notice by the Company.]
Lock-Up
Agreements
All
of our executive officers and directors and certain shareholders have agreed not to register, offer, sell, contract to sell or
grant (except for private transfers and in such case only with the express requirement that such shares continue to be subject
to the same lock-up) any of our shares of common stock or any securities convertible into or exercisable or exchangeable for our
shares of common stock or any warrants to purchase our shares of common stock (including, without limitation, securities of our
company which may be deemed to be beneficially owned by such individuals in accordance with the rules and regulations of the Securities
and Exchange Commission and securities which may be issued upon the exercise of a stock option or warrant) for a period of [180]
days after the closing date of this offering. Upon the expiration of these lock-up agreements, additional shares of common stock
will be available for sale in the public market.
Market
and Pricing Considerations
Prior
to this offering, our common stock was quoted on the OTC Markets – Pink Sheets, and there was a limited public market for
our common stock. The public offering price was determined based upon the price at which our common stock was quoted on the OTC
Markets – Pink Sheets, as well as by negotiations between us and the underwriter. Among the factors considered in determining
the initial public offering price are the future prospects of our company and our industry in general, our sales, earnings and
certain other financial and operating information in recent periods, and the price-earnings ratios, market prices of securities
and certain financial and operating information of companies engaged in activities similar to those of our company.
An
active trading market for our common stock may not develop. It is possible that after this offering the shares of common stock
will not trade in the public market at or above the initial offering price.
Discretionary
Shares
The
underwriter will not sell any shares in this offering to accounts over which it exercises discretionary authority, without first
receiving written consent from those accounts.
Application
for Listing on the [NASDAQ Capital Market / the NYSE American LLC]
We
have applied to list our common stock on [the Nasdaq Capital Market the NYSE American LLC]. However, our common stock will not
be listed on either exchange upon completion of this offering. If our common stock is eventually listed on the [Nasdaq Capital
Market or the NYSE American LLC], we will be subject to continued listing requirements and corporate governance standards. We
expect these rules and regulations to significantly increase our legal, accounting and financial compliance costs.
Price
Stabilization, Short Positions and Penalty Bids
In
order to facilitate the offering of our common stock, the underwriter may engage in transactions that stabilize, maintain or otherwise
affect the price of our common stock. These activities may raise or maintain the market price of our common stock above independent
market levels or prevent or retard a decline in the market price of our common stock. The underwriter is not required to engage
in these activities, and may end any of these activities at any time. We and the underwriter have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
Foreign
Regulatory Restrictions on Purchase of our Shares
We
have not taken any action to permit a public offering of our shares outside the United States or to permit the possession or distribution
of this prospectus outside the United States. People outside the United States who come into possession of this prospectus must
inform themselves about and observe any restrictions relating to this offering of our shares and the distribution of this prospectus
outside the United States.
Notice
to Prospective Investors in the European Economic Area
In
relation to each member state of the European Economic Area, no offer of shares which are the subject of the offering has been,
or will be made to the public in that Member State, other than under the following exemptions under the Prospectus Directive:
|
(a)
|
to
any legal entity which is a qualified investor as defined in the Prospectus Directive;
|
|
|
|
|
(b)
|
to
fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to
obtaining the prior consent of the underwriter for any such offer; or
|
|
|
|
|
(c)
|
in
any other circumstances falling within Article 3(2) of the Prospectus Directive,
|
provided
that no such offer of shares referred to in (a) to (c) above shall result in a requirement for the Company or any underwriter
to publish a prospectus pursuant to Article 3 of the Prospectus Directive, or supplement a prospectus pursuant to Article 16 of
the Prospectus Directive.
Each
person located in a Member State to whom any offer of shares is made or who receives any communication in respect of an offer
of shares, or who initially acquires any shares will be deemed to have represented, warranted, acknowledged and agreed to and
with the underwriter and the Company that (1) it is a “qualified investor” within the meaning of the law in that Member
State implementing Article 2(1)(e) of the Prospectus Directive; and (2) in the case of any shares acquired by it as a financial
intermediary as that term is used in Article 3(2) of the Prospectus Directive, the shares acquired by it in the offer have not
been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Member State other
than qualified investors, as that term is defined in the Prospectus Directive, or in circumstances in which the prior consent
of the underwriter has been given to the offer or resale; or where shares have been acquired by it on behalf of persons in any
Member State other than qualified investors, the offer of those shares to it is not treated under the Prospectus Directive as
having been made to such persons.
The
Company, the underwriter and their respective affiliates will rely upon the truth and accuracy of the foregoing representations,
acknowledgments and agreements.
This
prospectus has been prepared on the basis that any offer of shares in any Member State will be made pursuant to an exemption under
the Prospectus Directive from the requirement to publish a prospectus for offers of shares. Accordingly any person making or intending
to make an offer in that Member State of shares which are the subject of the offering contemplated in this prospectus may only
do so in circumstances in which no obligation arises for the Company or the underwriter to publish a prospectus pursuant to Article
3 of the Prospectus Directive in relation to such offer. Neither the Company nor the underwriter have authorized, nor do they
authorize, the making of any offer of shares in circumstances in which an obligation arises for the Company or the underwriter
to publish a prospectus for such offer.
For
the purposes of this provision, the expression an “offer of shares to the public” in relation to any common stocks
in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and
the common stocks to be offered so as to enable an investor to decide to purchase or subscribe the common stocks, as the same
may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression “Prospectus
Directive” means Directive 2003/71/EC (as amended) and includes any relevant implementing measure in each Member State.
The
above selling restriction is in addition to any other selling restrictions set out below.
Notice
to Prospective Investors in Hong Kong
The
securities have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a)
to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules
made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus”
as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning
of that Ordinance. No advertisement, invitation or document relating to the securities has been or may be issued or has been or
may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or
the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities
laws of Hong Kong) other than with respect to securities which are or are intended to be disposed of only to persons outside Hong
Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under
that Ordinance.
Notice
to Prospective Investors in Singapore
This
prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and
any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of Non-CIS Securities
may not be circulated or distributed, nor may the Non-CIS Securities be offered or sold, or be made the subject of an invitation
for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor
under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person
pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section
275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the
SFA.
Where
the Non-CIS Securities are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
|
(a)
|
a
corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold
investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor;
or
|
|
|
|
|
(b)
|
a
trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of
the trust is an individual who is an accredited investor,
|
securities
(as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described)
in that trust shall not be transferred within six months after that corporation or that trust has acquired the Non-CIS Securities
pursuant to an offer made under Section 275 of the SFA except:
|
(a)
|
to
an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer
referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
|
|
|
|
|
(b)
|
where
no consideration is or will be given for the transfer;
|
|
|
|
|
(c)
|
where
the transfer is by operation of law;
|
|
|
|
|
(d)
|
as
specified in Section 276(7) of the SFA; or
|
|
|
|
|
(e)
|
as
specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005
of Singapore.
|
LEGAL
MATTERS
Certain
legal matters with respect to the validity of the shares of common stock offered hereby and U.S. federal securities law will
be passed upon for us by Loeb & Loeb LLP, New York, New York. Legal matters as to Malaysia law will be passed upon for us
by Andrew Jye & Co. Loeb & Loeb, LLP may rely upon Andrew Jye & Co. with respect to matters governed by Malaysian
law. [*] is acting as U.S. counsel for the underwriter.
EXPERTS
The
financial statements for Agape ATP Corporation, as of December 31, 2019 and the related statements of operations, changes
in stockholders’ deficit and cash flows for the six months ended December 31, 2019, included in this prospectus and
elsewhere in the registration statement of which this prospectus forms a part, have been audited by Friedman LLP, an independent
registered public accounting firm, to the extent and for the period indicated in their report appearing elsewhere herein, and
are included in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.
The
financial statements for Agape ATP Corporation, as of June 30, 2019 and the related statements of operations, changes in stockholders’
deficit and cash flows for each of the year ended 2019 and 2018, included in this prospectus and elsewhere in the registration
statement of which this prospectus forms a part, have been audited by Total Asia Associates PLT, an independent registered public
accounting firm, to the extent and for the period indicated in their report appearing elsewhere herein, and are included in reliance
upon such report and upon the authority of such firm as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the common stock offered
by this prospectus. This prospectus, which is part of the registration statement, omits certain information, exhibits, schedules
and undertakings set forth in the registration statement. For further information pertaining to us and our common stock, reference
is made to the registration statement and the exhibits and schedules to the registration statement. Statements contained in this
prospectus as to the contents or provisions of any documents referred to in this prospectus are not necessarily complete, and
in each instance where a copy of the document has been filed as an exhibit to the registration statement, reference is made to
the exhibit for a more complete description of the matters involved.
You
may read and copy all or any portion of the registration statement without charge at the public reference room of the SEC at 100
F Street, N. E., Washington, D.C. 20549. Copies of the registration statement may be obtained from the SEC at prescribed rates
from the public reference room of the SEC at such address. You may obtain information regarding the operation of the public reference
room by calling 1-800-SEC-0330. In addition, registration statements and certain other filings made with the SEC electronically
are publicly available through the SEC’s web site at http://www.sec.gov. The registration statement, including all exhibits
and amendments thereto, has been filed electronically with the SEC.
We
are subject to the information and periodic reporting requirements of the Exchange Act and, accordingly, we file annual reports
containing financial statements audited by an independent registered public accounting firm, quarterly reports containing unaudited
financial data, current reports and other reports and information with the SEC. You may inspect and copy each of our periodic
reports, proxy statements and other information at the SEC’s public reference room, and at the web site of the SEC referred
to above.
AGAPE
ATP CORPORATION
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
Page
|
Consolidated
Financial Statements
|
|
|
|
|
|
Reports
of Independent Registered Public Accounting Firms
|
|
F-21
- F-22
|
Consolidated
Balance Sheets as of December 31, 2019, June 30, 2019 and December 31, 2018
|
|
F-23
|
Consolidated
Statements of Operations and Comprehensive Loss for the Six Months Ended December 31, 2019 and 2018 and for the Years Ended
June 30, 2019 and June 30,2018
|
|
F-24
|
Consolidated
Statements of Changes in Stockholders’ Equity for the Six Months Ended December 31, 2019 and 2018 and for the Years
Ended June 30, 2019 and June 30,2018
|
|
F-25
|
Consolidated
Statements of Cash Flows for the Six Months Ended December 31, 2019 and 2018 and for the Years Ended June 30, 2019 and June
30,2018
|
|
F-26
|
Notes
to Consolidated Financial Statements for the Six Months Ended December 31, 2019 and 2018 and for the Years Ended June 30,
2019 and June 30,2018
|
|
F-27
- F-42
|
AGAPE
SUPERIOR LIVING SDN. BHD.
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
AGAPE
ATP CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
AS
OF MARCH 31, 2020 AND DECEMBER 31, 2019
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
2,588,207
|
|
|
$
|
2,744,457
|
|
Accounts receivable
– related party
|
|
|
523,141
|
|
|
|
520,786
|
|
Amount due from
a related party
|
|
|
2,227
|
|
|
|
2,217
|
|
Prepayments and
deposits
|
|
|
304,993
|
|
|
|
269,193
|
|
Amount
due from a director
|
|
|
656,495
|
|
|
|
-
|
|
Total Current
Assets
|
|
|
4,075,063
|
|
|
|
3,536,653
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
Investment in marketable
securities
|
|
|
48,202
|
|
|
|
66,484
|
|
Investment
in non-marketable securities
|
|
|
1,500
|
|
|
|
732,137
|
|
Total other assets
|
|
|
49,702
|
|
|
|
798,621
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
4,124,765
|
|
|
$
|
4,335,274
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
-
|
|
|
$
|
2,790
|
|
Other payables and
accrued liabilities
|
|
|
97,459
|
|
|
|
77,246
|
|
Amount
due to a director
|
|
|
-
|
|
|
|
3,952
|
|
Total Current
Liabilities
|
|
|
97,459
|
|
|
|
83,988
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
97,459
|
|
|
|
83,988
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Preferred stock,
$0.0001 par value; 200,000,000 shares authorized;
None issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock, par value $0.0001; 1,000,000,000
shares authorized, 376,275,500 issued and outstanding as of March 31, 2020 and December 31, 2019
|
|
|
37,628
|
|
|
|
37,628
|
|
Additional paid
in capital
|
|
|
5,293,082
|
|
|
|
5,293,082
|
|
Accumulated deficit
|
|
|
(1,320,959
|
)
|
|
|
(1,089,209
|
)
|
Accumulated
other comprehensive income
|
|
|
17,555
|
|
|
|
9,785
|
|
TOTAL STOCKHOLDERS’
EQUITY
|
|
|
4,027,306
|
|
|
|
4,251,286
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
4,124,765
|
|
|
$
|
4,335,274
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AGAPE
ATP CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
FOR
THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
|
|
For
the three months ended
|
|
|
|
March
31, 2020
|
|
|
March
31, 2019
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
REVENUE
– RELATED PARTY
|
|
$
|
-
|
|
|
$
|
464,297
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE
|
|
|
-
|
|
|
|
(420,178
|
)
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
-
|
|
|
|
44,119
|
|
|
|
|
|
|
|
|
|
|
SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES
|
|
|
(159,516
|
)
|
|
|
(28,226
|
)
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM
OPERATIONS
|
|
|
(159,516
|
)
|
|
|
15,893
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
Other Income (Expenses),
Net
|
|
|
(53,696
|
)
|
|
|
57,933
|
|
Loss from equity
investment
|
|
|
-
|
|
|
|
(26,085
|
)
|
Unrealized holding
loss on marketable securities
|
|
|
(18,538
|
)
|
|
|
-
|
|
Gain
on deemed disposal of shares in Investee Company
|
|
|
-
|
|
|
|
16,509
|
|
TOTAL OTHER INCOME
(EXPENSES), NET
|
|
|
(72,234
|
)
|
|
|
48,357
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
|
|
(231,750
|
)
|
|
|
64,250
|
|
|
|
|
|
|
|
|
|
|
BENEFIT FOR INCOME
TAXES
|
|
|
-
|
|
|
|
6,965
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
|
(231,750
|
)
|
|
|
71,215
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
7,770
|
|
|
|
(3,197
|
)
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
INCOME (LOSS)
|
|
$
|
(223,980
|
)
|
|
$
|
68,018
|
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS) PER SHARE
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic and diluted
|
|
|
376,275,500
|
|
|
|
376,275,500
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AGAPE
ATP CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF
CHANGES
IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
FOR
THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
|
|
COMMON
STOCK
|
|
|
ADDITIONAL
|
|
|
|
|
|
ACCUMULATED
OTHER
|
|
|
TOTAL
|
|
|
|
Number
of shares
|
|
|
Par
value
|
|
|
PAID
IN
CAPITAL
|
|
|
ACCUMULATED
DEFICIT
|
|
|
COMPREHENSIVE
INCOME
(LOSS)
|
|
|
STOCKHOLDERS’
EQUITY
|
|
Balance
as of December 31, 2018
|
|
|
376,275,500
|
|
|
$
|
37,628
|
|
|
$
|
5,293,082
|
|
|
$
|
(373,082
|
)
|
|
$
|
(1,294
|
)
|
|
$
|
4,956,334
|
|
Net
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
71,215
|
|
|
|
-
|
|
|
|
71,215
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,197
|
)
|
|
|
(3,197
|
)
|
Balance
as of March 31, 2019
|
|
|
376,275,500
|
|
|
$
|
37,628
|
|
|
$
|
5,293,082
|
|
|
$
|
(301,867
|
)
|
|
$
|
(4,491
|
)
|
|
$
|
5,024,352
|
|
|
|
COMMON
STOCK
|
|
|
ADDITIONAL
|
|
|
|
|
|
ACCUMULATED
OTHER
|
|
|
TOTAL
|
|
|
|
Number
of shares
|
|
|
Par
value
|
|
|
PAID
IN
CAPITAL
|
|
|
ACCUMULATED
DEFICIT
|
|
|
COMPREHENSIVE
INCOME
|
|
|
STOCKHOLDERS’
EQUITY
|
|
Balance
as of December 31, 2019
|
|
|
376,275,500
|
|
|
$
|
37,628
|
|
|
$
|
5,293,082
|
|
|
$
|
(1,089,209
|
)
|
|
$
|
9,785
|
|
|
$
|
4,251,286
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(231,750
|
)
|
|
|
-
|
|
|
|
(231,750
|
)
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,770
|
|
|
|
7,770
|
|
Balance
as of March 31, 2020
|
|
|
376,275,500
|
|
|
$
|
37,628
|
|
|
$
|
5,293,082
|
|
|
$
|
(1,320,959
|
)
|
|
$
|
17,555
|
|
|
$
|
4,027,306
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AGAPE
ATP CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR
THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
|
|
For
the three months ended
March
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(231,750
|
)
|
|
$
|
71,215
|
|
Adjustments to reconcile net income
(loss) to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Unrealized holding
loss on marketable securities
|
|
|
18,538
|
|
|
|
-
|
|
Loss from equity
investment
|
|
|
-
|
|
|
|
26,085
|
|
Gain on deemed disposal
of shares in Investee Company
|
|
|
-
|
|
|
|
(16,509
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
– related party
|
|
|
285
|
|
|
|
(186,536
|
)
|
Amount due from
a related party
|
|
|
-
|
|
|
|
(2,200
|
)
|
Prepayments and
deposits
|
|
|
(34,593
|
)
|
|
|
(100,029
|
)
|
Accounts payable
|
|
|
(2,803
|
)
|
|
|
1,323
|
|
Customer deposits
|
|
|
-
|
|
|
|
(140,322
|
)
|
Income taxes payable
|
|
|
-
|
|
|
|
(12,299
|
)
|
Other
payables and accrued liabilities
|
|
|
19,892
|
|
|
|
952
|
|
Net
cash used in operating activities
|
|
|
(230,431
|
)
|
|
|
(358,320
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from
sale of non-marketable securities to a related party
|
|
|
70,173
|
|
|
|
-
|
|
Net
cash provided by investing activities
|
|
|
70,173
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
EFFECT
OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS
|
|
|
4,008
|
|
|
|
(3,197
|
)
|
|
|
|
|
|
|
|
|
|
DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(156,250
|
)
|
|
|
(361,517
|
)
|
|
|
|
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS, beginning of period
|
|
|
2,744,457
|
|
|
|
3,452,917
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, end of period
|
|
$
|
2,588,207
|
|
|
$
|
3,091,400
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH
FLOWS INFORMATION
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest
paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH
FLOWS INFORMATION
|
|
|
|
|
|
|
|
|
Amount
transferred from investment in investee company to investment in non-marketable securities
|
|
$
|
-
|
|
|
$
|
724,619
|
|
Sale
of the non-marketable securities to a director in exchange for a loan receivable
|
|
$
|
730,637
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AGAPE
ATP CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 wholly owned subsidiary, Agape ATP Corporation, a Company organized in Labuan, 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.
The
Company and its subsidiaries provide health and wellness products and advisory services to the public. The principal activity
of the Company and its subsidiaries is to supply high-quality health and wellness products, including supplement to assist in
cell metabolism, detoxification, blood circulation, anti-aging and products designed to improve the overall health system in our
body.
Details
of the Company’s subsidiaries:
|
|
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
|
|
Health
and wellness products and health solution advisory services
|
|
|
100
|
%
|
Business
Overview
Agape
ATP Corporation is a company that provides health solution advisory services to our clients. We primarily focus our efforts on
attracting customers in Malaysia. Our 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.
At
its core, the ATP Zeta Super Health Program is focused upon biological energy, Adenosine Triphosphate (ATP), at the cellular level.
The stimulation of ATP production at the cellular level can increase the metabolism and service to promote and maintain normal
and healthy functioning of the body’s systems. As a strong advocator of “beauty from within”, our program shall
emphasize nutrient absorption through the membrane ion channel to provide complete and balanced nutrients to improve cell health.
Thus, ATP Zeta Super Health Program provides ionized and high zeta potential (high bioavailability) nutrients to enhance the absorption
at the cellular level.
The
ATP Zeta Super Health Program consists of eight products. None of these products are owned or produced by Agape ATP Corporation.
In the event that any of these products are no longer produced, or are otherwise unavailable, we may have to devote significant
effort to identifying and obtaining comparable replacement products. The eight products that comprise the ATP Zeta Super Health
Program are ATP1s Survivor Select, ATP2 Energized Mineral Concentrate, ATP3 Ionized Cal-Mag, ATP4 Omega Blend, ATP5 BetaMaxx,
AGN-Vege Fruit Fiber, AGP1-Iron and YFA-Young Formula.
At
present, our products are mainly sold in Malaysia, and due to the contents and combination of the main ingredients in the products
they are categorized as health food rather than medicines or drugs. As such, all products require authorization from the Food
and Quality Division of Ministry of Health according to the Food Act of 1983 and Food Regulation 1985 in order to be sold in the
country. All of the products in the ATP Zeta Super Health Program have obtained the appropriate authorizations.
As
part of a continuous effort to increase market share of the health and wellness industry that is growing at an exponential rate,
we will also evaluate adding additional products to the ATP Zeta Super Health Program; and considering the potential of the synergies
between the health and beauty sectors, we will further involve ourselves in the topical approach of skin and hair regime. Other
than organic growth, the Company will also consider mergers and acquisitions where synergistic. As detailed in Note 15, Subsequent
Events, to improve its sales channel, the Company is in the process of acquiring a Malaysia incorporated entity whose principal
activity is in the trading of health and wellness products.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
accompanying consolidated financial statements reflect the application of certain significant accounting policies as described
in this note and elsewhere in the accompanying consolidated financial statements and notes.
Basis
of presentation
The
accompanying 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”).
Basis
of consolidation
The
consolidated financial statements include the financial statements of the Company and its subsidiaries. All transactions and balances
among the Company and its subsidiaries have been eliminated upon 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.
Use
of estimates
The
preparation of 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 deferred tax assets 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.
Accounts
receivable – related party
Accounts
receivable – related party are recorded at the invoiced amount less an allowance for any uncollectible accounts and do not
bear interest, which are due on demand. 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 March 31, 2020, and December 31, 2019, no valuation allowance was recorded.
Prepayments
and deposits
Prepayments
and deposits are 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.
Investment
in marketable equity securities
Prior
to July 1, 2019, marketable securities included in investment in marketable equity securities (non-current) are stated at the
lower of cost or market in the aggregate. Other marketable securities (non-current) are stated at the lower of cost or market
in the aggregate and investments other than marketable equity securities in other investments (non-current) are stated at cost
less any significant decline in fair value assessed to be other than temporary. Realized gains and losses on the sale of securities
are based on the average cost of all the units of a particular security held at the time of sale.
On
July 1, 2019, the Company adopted 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 consolidated statements of operations and comprehensive loss
in the caption of “unrealized holding losses on marketable securities” in each reporting period.
Investment
in non-marketable equity securities
Prior
to July 1, 2019, investments in non-marketable equity securities (non-current) are stated at cost less any significant decline
in fair value assessed to be other than temporary. Realized gains and losses on the sale of securities are based on the average
cost of all the units of a particular security held at the time of sale.
On
July 1, 2019, the Company adopted 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.
Revenue
recognition
On
July 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers
(ASC Topic 606) using the modified retrospective method for contracts that were not completed as of June 30, 2019. This did not
result in an adjustment to retained earnings upon adoption of this new guidance as the Company’s revenue was recognized
based on the amount of consideration expected to receive in exchange for satisfying the performance obligations.
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.
Prior
to July 1, 2019, the Company recognizes revenue from sales of goods when the following four revenue criteria are met: (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred; (3) selling price is fixed or determinable; and (4) collectability
is reasonably assured. Revenue from supplies of health and wellness products is recognized when title and risk of loss are transferred
and there are no continuing obligations to the customer. Title and the risks and rewards of ownership transfer to and accepted
by the customer when the products are collected by the customer at the Company’s office. Revenue is recorded net of sales
discounts, returns, allowances, and other adjustments that are based upon management’s best estimates and historical experience
and are provided for in the same period as the related revenues are recorded.
The
application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes
in the way the Company records its revenue. Upon adoption on July 1, 2019, the Company evaluated its revenue recognition policy
for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance
and confirmed that there were no differences in the pattern of revenue recognition.
Sales
of Health and Wellness products
-
Performance obligations satisfied at a point in time
On
July 1, 2019, 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, which
is generally similar to when its delivery has occurred prior to July 1, 2019. Such revenues are recognized at a point in time
after all performance obligations are satisfied. The revenue is recorded net of estimated discounts and return allowances. Historically,
there were no sales return as the Company’s products sold are not refundable, returnable or exchangeable.
Disaggregated
information of revenues by products are as follows:
|
|
For
the three months ended
|
|
|
|
March
31, 2020
|
|
|
March
31, 2019
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Ionized Cal-Mag
|
|
$
|
-
|
|
|
$
|
55,493
|
|
Omega Blend
|
|
|
-
|
|
|
|
68,689
|
|
Young Formula
|
|
|
-
|
|
|
|
116,979
|
|
Organic Youth Care Cleansing Bar
|
|
|
-
|
|
|
|
17,675
|
|
Trim+
|
|
|
-
|
|
|
|
65,295
|
|
Lipomask
|
|
|
-
|
|
|
|
140,166
|
|
Total revenues
|
|
$
|
-
|
|
|
$
|
464,297
|
|
Cost
of revenue
Cost
of revenue includes freight-in and the purchase cost of manufactured goods for sale to customers
Selling,
general and administrative expenses
Selling,
general and administrative expenses are primarily comprised of rental of office premises, travelling, licensing and professional
fees.
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. 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 incurred related to underpayment of income
tax.
The
Company conducts much of its businesses activities in Hong Kong and is subject to tax in this jurisdiction. 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.
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 divided by the weighted average common
share outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of the potential common shares
(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 shares 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.
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 Condensed Consolidated Statements of Operations and Comprehensive Income.
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$”)
albeit its functional currency being the primary currency of the economic environment in which the entity operates is the Malaysian
Ringgit (“MYR”). The Company’s subsidiary in Hong Kong maintains its books and record in Hong Kong Dollars (“HK$”),
similar to 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:
|
|
As
of and for the three months ended
|
|
|
As
of
|
|
|
|
March
31, 2020
|
|
|
March
31, 2019
|
|
|
December
31, 2019
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end MYR : US$1 exchange
rate
|
|
|
4.34
|
|
|
|
4.10
|
|
|
|
4.09
|
|
Period-average MYR : US$1 exchange rate
|
|
|
4.21
|
|
|
|
4.08
|
|
|
|
4.16
|
|
Period-end HKD : US$1 exchange rate
|
|
|
7.75
|
|
|
|
7.85
|
|
|
|
7.79
|
|
Period-average HKD : US$1 exchange rate
|
|
|
7.77
|
|
|
|
7.85
|
|
|
|
7.83
|
|
Period-end AUD : US$1 exchange rate
|
|
|
1.63
|
|
|
|
1.41
|
|
|
|
1.43
|
|
Period-average AUD : US$1 exchange rate
|
|
|
1.55
|
|
|
|
1.40
|
|
|
|
1.46
|
|
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.
Operating
leases
A
lease for which substantially all the benefits and risks incidental to ownership remain with the lessor is classified by the lessee
as an operating lease. All leases of the Company are currently classified as operating leases. The Company records the total expenses
on a straight-line basis over the lease term.
The
Company had on July 1, 2019, adopted ASU 2016-02, “Leases” (Topic 842), and elected the practical expedients that
do not require us 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. The Company adopted the practical
expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. There is no
impact from the adoption of ASC 842 as of January 1, 2020, as the Company did not have any existing leases with a lease term in
excess of twelve months on January 1, 2020.
Recent
accounting pronouncements
The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption
of such any pronouncements may be expected to cause a material impact on its financial condition or the results of its operations,
as follow:
In
July 2017, the FASB Issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and
Derivatives and Hedging (Topic 815). The amendments in Part I of the Update change the reclassification analysis of certain equity-lined
financial instruments (or embedded features) with down round features. The amendments in Part II of this Update re-characterize
the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a
scope exception. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this
Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after
December 15, 2020.
Early
adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an
interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.
The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting
effect. The adoption of this ASU did not have a material effect on the Company’s consolidated financial statements.
In
February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of
Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this Update affect any entity that is required
to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive
income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this
Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal
years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public
business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities
for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update
should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change
in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The adoption of this ASU did not have
a material effect on the Company’s consolidated financial statements.
In
August 2018, the FASB has issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure
Requirements of Fair Value Measurement. This amendment modifies the disclosure requirements on fair value measurements in Topic
820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits,
with the primary purpose to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear
communication of the information required by US GAAP. The amendments in this update are effective for all entities for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the
impact of ASU 2018-13 will have on its consolidated financial statements.
In
May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for
the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology.
The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments
to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually
assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial
Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this Update address those stakeholders’
concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at
amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information
by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief
also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement
users with decision-useful information. ASU 2019-05 is effective for the Company for annual and interim reporting periods beginning
January 1, 2023 due the Company is qualified as an emerging growth company. The Company is currently evaluating the impact of
ASU 2019-05 will have on its consolidated financial statements.
In
January 2020, the FASB issued ASU 2020-01 to clarify the interaction of the accounting for equity securities under ASC 321 and
investments accounted for under the equity method of accounting in ASC 323 and the accounting for certain forward contracts and
purchased options accounted for under ASC 815. With respect to the interactions between ASC 321 and ASC 323, the amendments clarify
that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting
when applying the measurement alternative in ASC 321, immediately before applying or upon discontinuing the equity method of accounting.
With respect to forward contracts or purchased options to purchase securities, the amendments clarify that when applying the guidance
in ASC 815-10-15-141(a), an entity should not consider whether upon the settlement of the forward contract or exercise of the
purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity
method in ASC 323 or the fair value option in accordance with ASC 825. The ASU is effective for interim and annual reporting periods
beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period. The Company does not
expect the adoption of this standard to have a material impact on its consolidated financial statements.
Reclassification
Certain
prior period amounts have been reclassified to conform to the current period presentation for the three months ended March 31,
2019. These reclassifications have no effect on the condensed consolidated statements of operations and comprehensive income.
3.
CASH AND CASH EQUIVALENTS
As
of March 31, 2020 and December 31, 2019 the Company recorded $2,588,207 and $2,744,457, respectively, of cash and cash equivalents,
which consists $135,436 and $238,937, respectively, of cash in bank and $2,452,771 and $2,505,520, respectively, of time deposits
placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months
or less. The effective interest rate for the time deposits ranges between 2.95% to 3.25% per annum.
4.
ACCOUNTS RECEIVABLE – RELATED PARTY
|
|
As
of
March 31, 2020
|
|
|
As
of
December 31, 2019
|
|
Accounts receivable –
related party
|
|
$
|
523,141
|
|
|
$
|
520,786
|
|
Allowance for
doubtful accounts
|
|
|
-
|
|
|
|
-
|
|
Total accounts
receivable – related party
|
|
$
|
523,141
|
|
|
$
|
520,786
|
|
5.
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
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.
|
|
|
As
of
March 31, 2020
|
|
|
As
of
December 31, 2019
|
|
Cost of investment
|
|
$
|
66,484
|
|
|
$
|
134,166
|
|
Less: Unrealized holding loss
|
|
|
(18,538
|
)
|
|
|
(68,391
|
)
|
Exchange rate
effect
|
|
|
256
|
|
|
|
709
|
|
Investment in
marketable securities
|
|
$
|
48,202
|
|
|
$
|
66,484
|
|
6.
INVESTMENT IN NON-MARKETABLE SECURITIES
The
Company invested in Unreserved Sdn Bhd with the investment amount of $863,592 (MYR3,500,000), which approximated 20% of the equity
interest of Unreserved Sdn Bhd and is accounted for under the equity method of accounting. On March 10, 2019 Unreserved Sdn Bhd
issued additional common stock for working capital. As the Company did not subscribe for the additional common stock, the Company’s
equity interest in investee company was diluted from approximately 20.0% to approximately 17.86%. Effective from March 10, 2019,
the Company discontinued equity accounting on the investee company. The Company also ceased control over the operations of the
investee company on the same date. Accordingly, the investment in investee company was reclassified to investment in non-marketable
securities.
Unreserved
Sdn Bhd was incorporated in Malaysia with 2,500,000 ordinary shares authorized, issued and outstanding. Mr. Lim Hun Soon @ David
Lim and Ms. Aniza Helina Akmi Karim are the directors of Unreserved Sdn Bhd. Mr. How Kok Choong was a director of the company
from April 30, 2018 to March 27, 2019.
On
March 2, 2020, the Company agreed to sell the 17.86% ownership interest in Unreserved Sdn Bhd at the December 31, 2019 carrying
value of $730,637 to Mr. How Kok Choong, the CEO and director of the Company. The Company received proceeds of $70,173, and had
an amount due from director balance of $660,464 as at March 31, 2020.
In
May 2020, the entire outstanding balance was settled as part of the consideration in a transaction which the Company had acquired
the CEO’s ownership interest of Agape Superior Living Sdn. Bhd.
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.
6.
INVESTMENT IN NON-MARKETABLE SECURITIES (Continued)
Unreserved Sdn Bhd
|
|
As
of
March 31, 2020
|
|
|
As
of
December 31, 2019
|
|
Investment in non-marketable
securities
|
|
$
|
730,637
|
|
|
$
|
730,637
|
|
Less:
Sale of investment in non-marketable securities
|
|
|
(730,637
|
)
|
|
|
-
|
|
Investment in
non-marketable securities
|
|
$
|
-
|
|
|
$
|
730,637
|
|
|
|
|
|
|
|
|
|
|
Phoenix
Plus Corporation
|
|
|
|
|
|
|
|
|
Cost of investment
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
|
|
|
|
|
|
|
|
|
Total investment
in non-marketable securities
|
|
$
|
1,500
|
|
|
$
|
732,137
|
|
7.
PREPAYMENTS AND DEPOSITS
|
|
As
of
March 31, 2020
|
|
|
As
of
December 31, 2019
|
|
Prepaid expenses
|
|
$
|
5,458
|
|
|
$
|
2,641
|
|
Deposits to supplier
|
|
|
299,310
|
|
|
|
266,552
|
|
Total prepaid
expenses and deposits
|
|
$
|
304,768
|
|
|
$
|
269,193
|
|
8.
AMOUNT DUE FROM A DIRECTOR
On
March 2, 2020, the Company agreed to sell the 17.86% ownership interest in Unreserved Sdn Bhd at December 31, 2019 carrying value
of $730,637 to Mr. How Kok Choong, the CEO and director of the Company. On March 19, 2020, Mr. How made a payment of 10% of the
amount due from him arising from the sale of the non-marketable securities. As of March 31, 2020, balance due from Mr. How was
$656,495.
In
May 2020, the entire outstanding balance was settled as part of the consideration in a merger transaction in which the Company
had acquired the CEO’s ownership interest of Agape Superior Living Sdn. Bhd.
9.
RELATED PARTY TRANSACTIONS
The
Company’s related party list and relationship are as follows:
Related
parties
|
|
Relationships
|
|
|
|
Agape
S.E.A. Sdn Bhd
|
|
Mr.
How Kok Choong, the CEO and director of the Company is also the sole shareholder and director of Agape S.E.A. Sdn Bhd
|
|
|
|
Agape
Superior Living Pty Ltd
|
|
Mr.
How Kok Choong, the CEO and director of the Company is a 51% shareholder and a director of Agape Superior Living Pty Ltd
|
|
|
|
Agape
Superior Living Sdn Bhd
|
|
Mr.
How Kok Choong, the CEO and director of the Company is also the sole shareholder and director of Agape Superior Living Sdn
Bhd
|
|
|
|
Agape
ATP (Asia) Limited
|
|
Mr.
How Kok Choong, the CEO and director of the Company is also the sole shareholder and director of Agape ATP (Asia) Limited.
|
Related
party transactions for the three months ended March 31, 2020 and 2019; and as of March 31, 2020, and December 31, 2019 are as
per table below:
|
|
For
the three months ended
|
|
|
As
of
|
|
|
|
March
31, 2020
|
|
|
March
31, 2019
|
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Revenue
|
|
|
Accounts
Receivable, Trade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agape
S.E.A. Sdn Bhd
|
|
$
|
-
|
|
|
$
|
464,297
|
|
|
$
|
523,141
|
|
|
$
|
520,786
|
|
|
|
Expenses
paid on behalf
|
|
|
Amount
due from a related party
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agape
ATP (Asia) Limited
|
|
$
|
-
|
|
|
$
|
2,200
|
|
|
$
|
2,227
|
|
|
$
|
2,217
|
|
|
|
Sundry
Purchases
|
|
|
Prepayments
and Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agape
Superior Living Pty Ltd
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,783
|
|
|
$
|
-
|
|
10.
STOCKHOLDERS’ EQUITY
Preferred
stock
As
of March 31, 2020, and December 31, 2019, there were 200,000,000 preferred stocks authorized but none were issued and outstanding.
Common
stock
As
of March 31, 2020, and December 31, 2019, there were 1,000,000,000 common stocks authorized, 376,275,500 were issued and outstanding.
There
were no stock options, warrants or other potentially dilutive securities outstanding as of March 31, 2020 and December 31, 2019.
11.
OTHER PAYABLES AND ACCRUED LIABILITIES
|
|
As
of
March 31, 2020
|
|
|
As
of
December 31, 2019
|
|
Accrued professional fees
|
|
$
|
68,474
|
|
|
$
|
58,594
|
|
Others
|
|
|
28,985
|
|
|
|
18,652
|
|
Total payables
and accrued liabilities
|
|
$
|
97,459
|
|
|
$
|
77,246
|
|
12.
INCOME TAXES
The
United States and foreign components of income (loss) before income taxes were comprised of the following:
|
|
For
the three months ended
|
|
|
|
March
31, 2020
|
|
|
March
31, 2019
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Tax jurisdictions from:
|
|
|
|
|
|
|
|
|
- Local
|
|
$
|
(142,419
|
)
|
|
$
|
(14,724
|
)
|
- Foreign - Labuan
|
|
|
(55,587
|
)
|
|
|
59,674
|
|
-
Foreign - Hong Kong
|
|
|
(33,744
|
)
|
|
|
19,300
|
|
Income (Loss)
before income tax
|
|
$
|
(231,750
|
)
|
|
$
|
64,250
|
|
The
benefit for income taxes consisted of the following:
|
|
For
the three months ended
|
|
|
|
March
31, 2020
|
|
|
March
31, 2019
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Current:
|
|
|
|
|
|
|
|
|
- Local
|
|
$
|
-
|
|
|
$
|
-
|
|
- Foreign
|
|
|
-
|
|
|
|
(6,965
|
)
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
- Local
|
|
|
-
|
|
|
|
-
|
|
- Foreign
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Benefit for income
taxes
|
|
$
|
-
|
|
|
$
|
(6,965
|
)
|
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, Labuan and
Hong Kong that are subject to taxes in the jurisdictions in which they operate, as follows:
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. As of
March 31, 2020, the operations in the United States of America incurred approximately $349,000 of cumulative net operating losses
which can be carried forward to offset future taxable income. Approximately $10,000 and $24,000 of the net operating loss carry
forwards will expire in 2027and 2028, respectively, if unutilized. The remaining balance can be carried forward indefinitely.
The deferred tax valuation allowance as of March 31, 2020 and December 31, 2019 were approximately $73,000 and $43,000, respectively.
Labuan
Under
the current laws of the Labuan, Agape ATP Corporation is governed under the Labuan Business Activity Act, 1990. The tax charge
for such company is based on 3% of net audited profit. Due to Agape ATP Corporation is a holding company, it did not generate
any income nor incurred any income tax. In addition, its related expenses incurred cannot be carried forward to offset any future
operation income.
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.
The
following table reconciles the local (United States) statutory rates to the Company’s effective tax rate for the periods
indicated below:
|
|
For
the three months ended
|
|
|
|
March
31, 2020
|
|
|
March
31, 2019
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
U.S. statutory rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
Valuation allowance
|
|
|
(21.0
|
)%
|
|
|
(21.0
|
)%
|
Permanent
difference (1)
|
|
|
0.0
|
%
|
|
|
(10.8
|
)%
|
Effective tax
rate
|
|
|
0.0
|
%
|
|
|
(10.8
|
)%
|
(1)
This was related to disallowed expenditure incurred in the ordinary course of business.
The
following table sets forth the significant components of the aggregate deferred tax assets of the Company as of:
|
|
As
of
March 31, 2020
|
|
|
As
of
December
31, 2019
|
|
|
|
(Unaudited)
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carry
forwards in U.S.
|
|
$
|
73,318
|
|
|
$
|
43,410
|
|
Less: valuation
allowance
|
|
|
(73,318
|
)
|
|
|
(43,410
|
)
|
Deferred tax
assets
|
|
$
|
-
|
|
|
$
|
-
|
|
13.
CONCENTRATIONS OF RISKS
(a)
Major customers
There
were no sales for the three months ended March 31, 2020. For the three months ended March 31, 2019, one related party customer
accounted for 100% of the Company’s total revenues.
As
of March 31, 2020, and December 31, 2019, one related party customer accounted for 100% of the total balance of accounts receivable.
(b)
Major vendors
There
were no purchases for the three months ended March 31, 2020. For the three months ended March 31, 2019, two vendors accounted
for approximately 54% and 46% of the Company’s total purchases, respectively.
Accounts
payable as of March 31, 2020 was nil. As of December 31, 2019, one vendor accounted for 100% of the total balance of accounts
payable.
(c)
Credit risk
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.
(d)
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.
14.
COMMITMENTS AND CONTINGENCIES
Lease
commitments
In
view of the recent economic development in Hong Kong, the Company has decided not to extend the tenancy for the office in Hong
Kong when the tenancy expires on April 30, 2020. Accordingly, the Company had on April 23, 2020 served a termination notice to
the landlord, The Company’s commitment for minimum lease payments under the operating lease as of March 31, 2020 for the
remaining lease period ending May 31, 2020 is $7,862.
Rent
expense for the three months ended March 31, 2020 and 2019 was $13,508 and $13,375, respectively.
Purchase
commitments
The
total future minimum purchase commitment under a non-cancellable purchase contract as of March 31, 2020 for the next five years
and thereafter is as follows:
Twelve
months ending March 31,
|
|
Minimum
purchase
|
|
2021
|
|
$
|
693,900
|
|
2022
|
|
|
693,900
|
|
2023
|
|
|
693,900
|
|
2024
|
|
|
693,900
|
|
2025
|
|
|
693,900
|
|
Thereafter
|
|
|
1,908,225
|
|
Total
minimum purchase commitments required
|
|
$
|
5,377,725
|
|
As
of the date of this report, the Company’s vendor is not able to meet the Company’s minimum purchase commitment of
the health and wellness products due to the manufacturing process was being delayed by its vendor.
Contingencies
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.
15.
SUBSEQUENT EVENT
In
December 2019, a novel strain of coronavirus (COVID-19) surfaced. The spread of COVID-19 around the world in the first quarter
of 2020 has caused significant volatility in Malaysia. There is significant uncertainty around the duration of business disruptions
related to COVID-19, as well as its impact on the Malaysia economies and, as such, the Company is unable to determine if it will
have a material impact to its operations.
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, an entity incorporated in Malaysia for $1,714,003. The purchase consideration represented the net asset carrying value of
the acquiree as of March 31, 2020. The payment, net of the amount due from Mr. How Kok Choong of $656,495 as of March 31, 2020
arising from the purchase of the Company’s non-marketable security, will be satisfied together with the issuance of 162,694
shares of the Company’s common stock. Upon completion, the number of shares of common stock of the Company will be increased
from 376,275,500 to 376,438,194, equivalent to approximately 0.0432% increase of the total issued and outstanding common stock
of the Company after the issuance of the additional shares, which was valued at $1,057,508 based on the closing price of $6.50
of the Company at March 31, 2020.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and
Stockholders
of Agape ATP Corporation
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheet of Agape ATP Corporation (the “Company”) as of December 31,
2019, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity and
cash flows for the six-month period ended December 31, 2019, and the related notes (collectively referred to as the consolidated
financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the six-month period
ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audit provide a reasonable basis for our opinion.
/s/
Friedman LLP
We
have served as the Company’s auditor since 2019
New
York, New York
March
27, 2020
|
TOTAL
ASIA ASSOCIATES PLT
(AF002128
& LLP0016837-LCA)
A
Firm registered with US PCAOB and Malaysian MIA
Block
C-3-1, Megan Avenue 1, 189, Off Jalan Tun Razak,
50400,
Kuala Lumpur.
Tel:
(603) 2733 9989
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and Board of Directors of Agape ATP Corporation
1705
- 1708, Level 17,
Tower
2, Faber Towers,
Jalan
Desa Bahagia, Taman Desa,
58100 Kuala Lumpur, Malaysia
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Agape ATP Corporation (the ‘Company’) as of June 30,
2019 and 2018, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash
flows each of the year ended 2019 and 2018, and the related notes (collectively referred to as the “financial statements”).
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of
June 30, 2019 and 2018, and the results of its operations and its cash flows each of the years ended 2019 and 2018, in conformity
with accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
/s/
TOTAL ASIA ASSOCIATES PLT
|
|
TOTAL
ASIA ASSOCIATES PLT
|
|
We
have served as the Company’s auditor since 2018.
Kuala
Lumpur, Malaysia
September
10, 2019
AGAPE
ATP CORPORATION
CONSOLIDATED
BALANCE SHEETS
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
|
|
December
31,
|
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2019
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
2,744,457
|
|
|
$
|
2,857,587
|
|
|
$
|
3,452,917
|
|
Accounts
receivable – related party
|
|
|
520,786
|
|
|
|
433,338
|
|
|
|
-
|
|
Amount
due from a related party
|
|
|
2,217
|
|
|
|
2,210
|
|
|
|
-
|
|
Prepayments
and deposits
|
|
|
269,193
|
|
|
|
498,335
|
|
|
|
510,069
|
|
Total
Current Assets
|
|
|
3,536,653
|
|
|
|
3,791,470
|
|
|
|
3,962,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in investee company
|
|
|
-
|
|
|
|
-
|
|
|
|
734,195
|
|
Investment
in marketable securities
|
|
|
66,484
|
|
|
|
134,166
|
|
|
|
501,000
|
|
Investment
in non-marketable securities
|
|
|
732,137
|
|
|
|
726,119
|
|
|
|
-
|
|
Total
other assets
|
|
|
798,621
|
|
|
|
860,285
|
|
|
|
1,235,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
4,335,274
|
|
|
$
|
4,651,755
|
|
|
$
|
5,198,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
2,790
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Accounts
payable – related party
|
|
|
-
|
|
|
|
35,145
|
|
|
|
-
|
|
Customer
deposits
|
|
|
-
|
|
|
|
-
|
|
|
|
217,743
|
|
Income
tax payable
|
|
|
-
|
|
|
|
-
|
|
|
|
12,299
|
|
Other
payables and accrued liabilities
|
|
|
77,246
|
|
|
|
32,319
|
|
|
|
7,884
|
|
Amount
due to a director
|
|
|
3,952
|
|
|
|
3,938
|
|
|
|
3,921
|
|
Total
Current Liabilities
|
|
|
83,988
|
|
|
|
71,402
|
|
|
|
241,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
83,988
|
|
|
|
71,402
|
|
|
|
241,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.0001 par value; 200,000,000 shares authorized; None issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Common
Stock, par value $0.0001; 1,000,000,000 shares authorized, 376,275,500 issued and outstanding as of December 31, 2019, June
30, 2019 and December 31, 2018
|
|
|
37,628
|
|
|
|
37,628
|
|
|
|
37,628
|
|
Additional
paid in capital
|
|
|
5,293,082
|
|
|
|
5,293,082
|
|
|
|
5,293,082
|
|
Accumulated
deficit
|
|
|
(1,089,209
|
)
|
|
|
(750,278
|
)
|
|
|
(373,082
|
)
|
Accumulated
other comprehensive loss
|
|
|
9,785
|
|
|
|
(79
|
)
|
|
|
(1,294
|
)
|
TOTAL
STOCKHOLDERS’ EQUITY
|
|
|
4,251,286
|
|
|
|
4,580,353
|
|
|
|
4,956,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
4,335,274
|
|
|
$
|
4,651,755
|
|
|
$
|
5,198,181
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
AGAPE
ATP CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
|
|
For
the six months ended
|
|
|
For
the years ended
|
|
|
|
December
31,
|
|
|
June
30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE
– RELATED PARTY
|
|
$
|
429,362
|
|
|
$
|
685,288
|
|
|
$
|
1,546,057
|
|
|
$
|
487,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF REVENUE
|
|
|
(383,479
|
)
|
|
|
(619,355
|
)
|
|
|
(1,436,705
|
)
|
|
|
(441,409
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
45,883
|
|
|
|
65,933
|
|
|
|
109,352
|
|
|
|
45,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELLING,
GENERAL AND ADMINISTRATIVE
EXPENSES
|
|
|
(312,270
|
)
|
|
|
(63,068
|
)
|
|
|
(240,522
|
)
|
|
|
(279,682
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) FROM OPERATIONS
|
|
|
(266,387
|
)
|
|
|
2,865
|
|
|
|
(131,170
|
)
|
|
|
(234,086
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME/(EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income/(Expenses), Net
|
|
|
(4,153
|
)
|
|
|
(40,206
|
)
|
|
|
86,078
|
|
|
|
139,301
|
|
Loss
from equity investment
|
|
|
-
|
|
|
|
(98,140
|
)
|
|
|
(124,225
|
)
|
|
|
(30,155
|
)
|
Unrealized
holding loss on marketable securities
|
|
|
(68,391
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Gain
on deemed disposal of shares in Investee Company
|
|
|
-
|
|
|
|
-
|
|
|
|
16,509
|
|
|
|
-
|
|
Impairment
loss in equity investment
|
|
|
-
|
|
|
|
-
|
|
|
|
(366,834
|
)
|
|
|
-
|
|
TOTAL
OTHER INCOME/(EXPENSES), NET
|
|
|
(72,544
|
)
|
|
|
(138,346
|
)
|
|
|
(388,472
|
)
|
|
|
109,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS BEFORE INCOME TAXES
|
|
|
(338,931
|
)
|
|
|
(135,481
|
)
|
|
|
(519,642
|
)
|
|
|
(124,940
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
|
|
-
|
|
|
|
(6,965
|
)
|
|
|
-
|
|
|
|
(5,334
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
|
(338,931
|
)
|
|
|
(142,446
|
)
|
|
|
(519,642
|
)
|
|
|
(130,274
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
9,864
|
|
|
|
(1
|
)
|
|
|
1,214
|
|
|
|
(1,293
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
LOSS
|
|
$
|
(329,067
|
)
|
|
$
|
(142,447
|
)
|
|
$
|
(518,428
|
)
|
|
$
|
(131,567
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
376,275,500
|
|
|
|
376,275,500
|
|
|
|
376,275,500
|
|
|
|
373,017,955
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
AGAPE
ATP CORPORATION
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
|
|
COMMON
STOCK
|
|
|
ADDITIONAL
|
|
|
|
|
|
ACCUMULATED
OTHER
|
|
|
TOTAL
|
|
|
|
Number
of shares
|
|
|
Par
value
|
|
|
PAID
IN
CAPITAL
|
|
|
ACCUMULATED
DEFICIT
|
|
|
COMPREHENSIVE
INCOME
(LOSS)
|
|
|
STOCKHOLDERS’
EQUITY
|
|
Balance
as of June 30, 2017
|
|
|
371,350,000
|
|
|
$
|
37,135
|
|
|
$
|
2,367,875
|
|
|
$
|
(100,362
|
)
|
|
$
|
-
|
|
|
$
|
2,304,648
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(130,274
|
)
|
|
|
-
|
|
|
|
(130,274
|
)
|
IPO
completed on March 9, 2018 at $1.00 per share
|
|
|
2,925,500
|
|
|
|
293
|
|
|
|
2,925,207
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,925,500
|
|
Shares
issued to Adam, Network 1 and Damon completed on April 16, 2018 at $0.0001 per share
|
|
|
2,000,000
|
|
|
|
200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
200
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,293
|
)
|
|
|
(1,293
|
)
|
Balance
as of June 30, 2018
|
|
|
376,275,500
|
|
|
$
|
37,628
|
|
|
$
|
5,293,082
|
|
|
$
|
(230,636
|
)
|
|
$
|
(1,293
|
)
|
|
$
|
5,098,781
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(142,446
|
)
|
|
|
-
|
|
|
|
(142,446
|
)
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Balance
as of December 31, 2018 (unaudited)
|
|
|
376,275,500
|
|
|
$
|
37,628
|
|
|
$
|
5,293,082
|
|
|
$
|
(373,082
|
)
|
|
$
|
(1,294
|
)
|
|
$
|
4,956,334
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(377,196
|
)
|
|
|
-
|
|
|
|
(377,196
|
)
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,215
|
|
|
|
1,215
|
|
Balance
as of June 30, 2019
|
|
|
376,275,500
|
|
|
$
|
37,628
|
|
|
$
|
5,293,082
|
|
|
$
|
(750,278
|
)
|
|
$
|
(79
|
)
|
|
$
|
4,580,353
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(338,931
|
)
|
|
|
-
|
|
|
|
(338,931
|
)
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,864
|
|
|
|
9,864
|
|
Balance
as of December 31, 2019
|
|
|
376,275,500
|
|
|
$
|
37,628
|
|
|
$
|
5,293,082
|
|
|
$
|
(1,089,209
|
)
|
|
$
|
9,785
|
|
|
$
|
4,251,286
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
AGAPE
ATP CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Currency
expressed in United States Dollars (“US$”)
|
|
For
the six months ended
December 31,
|
|
|
For
the years ended
June
30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(338,931
|
)
|
|
$
|
(142,446
|
)
|
|
$
|
(519,642
|
)
|
|
$
|
(130,274
|
)
|
Adjustments
to reconcile net loss to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from equity investment
|
|
|
-
|
|
|
|
98,140
|
|
|
|
124,225
|
|
|
|
30,155
|
|
Unrealized
holding loss on marketable securities
|
|
|
68,391
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Gain
on deemed disposal of shares in Investee Company
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,509
|
)
|
|
|
-
|
|
Impairment
in cost of investment
|
|
|
-
|
|
|
|
-
|
|
|
|
366,834
|
|
|
|
-
|
|
Deferred
tax expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,334
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable – related party
|
|
|
(85,602
|
)
|
|
|
-
|
|
|
|
(433,338
|
)
|
|
|
-
|
|
Amount
due from a related party
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,210
|
)
|
|
|
-
|
|
Prepayments
and deposits
|
|
|
229,638
|
|
|
|
(245,128
|
)
|
|
|
(233,394
|
)
|
|
|
(264,941
|
)
|
Accounts
payable
|
|
|
2,778
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accounts
payable – related party
|
|
|
(35,086
|
)
|
|
|
-
|
|
|
|
35,145
|
|
|
|
-
|
|
Customer
deposits
|
|
|
-
|
|
|
|
217,743
|
|
|
|
-
|
|
|
|
-
|
|
Income
taxes payable
|
|
|
-
|
|
|
|
6,965
|
|
|
|
-
|
|
|
|
-
|
|
Other
payables and accrued liabilities
|
|
|
44,867
|
|
|
|
(11,865
|
)
|
|
|
11,825
|
|
|
|
11,749
|
|
Net
cash used in operating activities
|
|
|
(113,945
|
)
|
|
|
(76,591
|
)
|
|
|
(667,064
|
)
|
|
|
(347,977
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in Investee Company
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(862,490
|
)
|
Investment
in marketable securities
|
|
|
-
|
|
|
|
(1,000
|
)
|
|
|
(1,000
|
)
|
|
|
(500,000
|
)
|
Investment
in non-marketable securities
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,500
|
)
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
-
|
|
|
|
(1,000
|
)
|
|
|
(2,500
|
)
|
|
|
(1,362,490
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in share capital
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
493
|
|
Proceeds
from sale of common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,925,207
|
|
Amount
due to a related party
|
|
|
-
|
|
|
|
(745
|
)
|
|
|
-
|
|
|
|
745
|
|
Amount
due to a director
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,318
|
)
|
|
|
3,822
|
|
Net
cash (used in) provided by financing activities
|
|
|
-
|
|
|
|
(745
|
)
|
|
|
(5,318
|
)
|
|
|
2,930,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EFFECT
OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS
|
|
|
815
|
|
|
|
(2
|
)
|
|
|
1,214
|
|
|
|
(1,293
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(DECREASE)
INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(113,130
|
)
|
|
|
(78,338
|
)
|
|
|
(673,668
|
)
|
|
|
1,218,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, beginning of period
|
|
|
2,857,587
|
|
|
|
3,531,255
|
|
|
|
3,531,255
|
|
|
|
2,312,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, end of period
|
|
$
|
2,744,457
|
|
|
$
|
3,452,917
|
|
|
$
|
2,857,587
|
|
|
$
|
3,531,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOWS INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest
paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
NON-CASH INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
transferred from investment in investee company to investment in non-marketable securities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
724,619
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
AGAPE
ATP CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(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 wholly owned subsidiary, Agape ATP Corporation, a Company organized in Labuan, 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.
The
Company and its subsidiaries provide health and wellness products and advisory services to the public. The principal activity
of the Company and its subsidiaries is to supply high-quality health and wellness products, including supplement to assist in
cell metabolism, detoxification, blood circulation, anti-aging and products designed to improve the overall health system in our
body.
Details
of the Company’s subsidiaries:
|
|
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
|
|
Health and wellness
products and health solution advisory services
|
|
|
100
|
%
|
Business
Overview
Agape
ATP Corporation is a company that provides health solution advisory services to our clients. We primarily focus our efforts on
attracting customers in Malaysia. Our 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.
At
its core, the ATP Zeta Super Health Program is focused upon biological energy, Adenosine Triphosphate (ATP), at the cellular level.
The stimulation of ATP production at the cellular level can increase the metabolism and service to promote and maintain normal
and healthy functioning of the body’s systems. As a strong advocator of “beauty from within”, our program shall
emphasize nutrient absorption through the membrane ion channel to provide complete and balanced nutrients to improve cell health.
Thus, ATP Zeta Super Health Program provides ionized and high zeta potential (high bioavailability) nutrients to enhance the absorption
at the cellular level.
The
ATP Zeta Super Health Program consists of eight products. None of these products are owned or produced by Agape ATP Corporation.
In the event that any of these products are no longer produced, or are otherwise unavailable, we may have to devote significant
effort to identifying and obtaining comparable replacement products. The ten products that comprise the ATP Zeta Super Health
Program are ATP1s Survivor Select, ATP2 Energized Mineral Concentrate, ATP3 Ionized Cal-Mag, ATP4 Omega Blend, ATP5 BetaMaxx,
AGN-Vege Fruit Fiber, AGP1-Iron and YFA-Young Formula.
At
present, our products are mainly sold in Malaysia, and due to the contents and combination of the main ingredients in the products
they are categorized as health food rather than medicines or drugs. As such, all products require authorization from the Food
and Quality Division of Ministry of Health according to the Food Act of 1983 and Food Regulation 1985 in order to be sold in the
country. All of the products in the ATP Zeta Super Health Program have obtained the appropriate authorizations.
As
part of a continuous effort to increase market share of the health and wellness industry that is growing at an exponential rate,
we will also evaluate adding additional products to the ATP Zeta Super Health Program; and considering the potential of the synergies
between the health and beauty sectors, we will further involve ourselves in the topical approach of skin and hair regime.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
accompanying consolidated financial statements reflect the application of certain significant accounting policies as described
in this note and elsewhere in the accompanying consolidated financial statements and notes.
Basis
of presentation
The
accompanying 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”).
Change
of year end
As
of December 31, 2019, the Company changed its fiscal year end from June 30 to December 31. The consolidated financial statements
consist of a six-month transition period ended December 31, 2019 and 2018 (unaudited), and the fiscal years ended June 30, 2019
and 2018.
Basis
of consolidation
The
consolidated financial statements include the financial statements of the Company and its subsidiaries. All transactions and balances
among the Company and its subsidiaries have been eliminated upon 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.
Use
of estimates
The
preparation of 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 deferred tax assets 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.
Accounts
receivable – related party
Accounts
receivable – related party are recorded at the invoiced amount less an allowance for any uncollectible accounts and do not
bear interest, which are due on demand. 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 December 31, 2019, June 30, 2019 and December 31, 2018, all of the Company’s accounts
receivable balance are due from a related party, as a result, no valuation allowance was made.
Prepayments
and deposits
Prepayments
and deposits are 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.
Investment
in investee company
The
Company evaluates investment in investee company as it holds an equity interest based on the amount of control it exercises over
the operations of the investee, exposure to losses in excess of its investment, the ability to significantly influence the investee
and whether the Company is the primary beneficiary of the investee. Entities in which the Company has the ability to exercise
significant influence, but does not have a controlling interest, are accounted for using the equity method. Significant influence
is generally considered to exist when the Company has voting shares representing 20% to 50%, and other factors, such as representation
on the Board of Directors, voting rights and the impact of commercial arrangements, are considered in determining whether the
equity method of accounting is appropriate. Under this method of accounting, the Company records its proportionate share of the
net earnings or losses of equity method investees and a corresponding increase or decrease to the investment balances. Dividends
received from the equity method investments are recorded as reductions in the cost of such investments. The Company generally
considers an ownership interest of 20% or higher to represent significant influence.
Investment
in marketable equity securities
Prior
to July 1, 2019, marketable securities included in investment in marketable equity securities (non-current) are stated at the
lower of cost or market in the aggregate. Other marketable securities (non-current) are stated at the lower of cost or market
in the aggregate and investments other than marketable equity securities in other investments (non-current) are stated at cost
less any significant decline in fair value assessed to be other than temporary. Realized gains and losses on the sale of securities
are based on the average cost of all the units of a particular security held at the time of sale.
On
July 1, 2019, the Company adopted 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 consolidated statements of operations and comprehensive loss
in the caption of “unrealized holding losses on marketable securities” in each reporting period.
Investment
in non-marketable equity securities
Prior
to July 1, 2019, investments in non-marketable equity securities (non-current) are stated at cost less any significant decline
in fair value assessed to be other than temporary. Realized gains and losses on the sale of securities are based on the average
cost of all the units of a particular security held at the time of sale.
On
July 1, 2019, the Company adopted 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.
Revenue
recognition
On
July 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers
(ASC Topic 606) using the modified retrospective method for contracts that were not completed as of June 30, 2019. This did not
result in an adjustment to retained earnings upon adoption of this new guidance as the Company’s revenue was recognized
based on the amount of consideration expected to receive in exchange for satisfying the performance obligations.
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.
Prior
to July 1, 2019, the Company recognizes revenue from sales of goods when the following four revenue criteria are met: (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred; (3) selling price is fixed or determinable; and (4) collectability
is reasonably assured. Revenue from supplies of health and wellness products is recognized when title and risk of loss are transferred
and there are no continuing obligations to the customer. Title and the risks and rewards of ownership transfer to and accepted
by the customer when the products are collected by the customer at the Company’s office. Revenue is recorded net of sales
discounts, returns, allowances, and other adjustments that are based upon management’s best estimates and historical experience
and are provided for in the same period as the related revenues are recorded.
The
application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes
in the way the Company records its revenue. Upon adoption on July 1, 2019, the Company evaluated its revenue recognition policy
for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance
and confirmed that there were no differences in the pattern of revenue recognition.
Sales
of Health and Wellness products
-
Performance obligations satisfied at a point in time
On
July 1, 2019, 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, which
is generally similar to when its delivery has occurred prior to July 1, 2019. Such revenues are recognized at a point in time
after all performance obligations are satisfied. The revenue is recorded net of estimated discounts and return allowances. Historically,
there were no sales return as the Company’s products sold are not refundable, returnable or exchangeable.
Disaggregated
information of revenues by products are as follows:
|
|
For
the six months ended
|
|
|
For
the years ended
|
|
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Survivor
Select
|
|
$
|
-
|
|
|
$
|
204,138
|
|
|
$
|
203,815
|
|
|
$
|
104,656
|
|
Energized
Mineral Concentrate
|
|
|
100,270
|
|
|
|
222,789
|
|
|
|
361,092
|
|
|
|
66,573
|
|
Ionized
Cal-Mag
|
|
|
-
|
|
|
|
-
|
|
|
|
55,731
|
|
|
|
43,124
|
|
Omega
Blend
|
|
|
68,927
|
|
|
|
97,170
|
|
|
|
165,999
|
|
|
|
68,561
|
|
BetaMaxx
|
|
|
67,789
|
|
|
|
87,793
|
|
|
|
211,280
|
|
|
|
126,191
|
|
Iron
|
|
|
-
|
|
|
|
2,813
|
|
|
|
2,809
|
|
|
|
20,270
|
|
Young
Formula
|
|
|
-
|
|
|
|
-
|
|
|
|
117,480
|
|
|
|
57,630
|
|
Organic
Youth Care Cleansing Bar
|
|
|
17,206
|
|
|
|
-
|
|
|
|
17,751
|
|
|
|
-
|
|
Energetique
Hyaluronic Acid Serum
|
|
|
175,170
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Trim+
|
|
|
-
|
|
|
|
-
|
|
|
|
198,862
|
|
|
|
-
|
|
Lipomask
|
|
|
-
|
|
|
|
70,585
|
|
|
|
211,238
|
|
|
|
-
|
|
Total
revenues
|
|
$
|
429,362
|
|
|
$
|
685,288
|
|
|
$
|
1,546,057
|
|
|
$
|
487,005
|
|
Cost
of revenue
Cost
of revenue includes freight-in and the purchase cost of manufactured goods for sale to customers
Selling,
general and administrative expenses
Selling,
general and administrative expenses are primarily comprised of rental of office premises, travelling, licensing and professional
fees.
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. 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 incurred related to underpayment of income
tax.
The
Company conducts much of its businesses activities in Hong Kong and is subject to tax in this jurisdiction. 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.
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 divided by the weighted average common
share outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of the potential common shares
(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 shares 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.
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 Condensed Consolidated Statements of Operations and Comprehensive Income.
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$”)
albeit its functional currency being the primary currency of the economic environment in which the entity operates is the Malaysian
Ringgit (“MYR”). The Company’s subsidiary in Hong Kong maintains its books and record in Hong Kong Dollars (“HK$”),
similar to 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:
|
|
As
of and for the six months ended
December
31,
|
|
|
As
of and for the year ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end
MYR : US$1 exchange rate
|
|
|
4.09
|
|
|
|
4.14
|
|
|
|
4.13
|
|
|
|
4.03
|
|
Period-average
MYR : US$1 exchange rate
|
|
|
4.16
|
|
|
|
4.13
|
|
|
|
4.13
|
|
|
|
4.21
|
|
Period-end
HKD : US$1 exchange rate
|
|
|
7.79
|
|
|
|
7.83
|
|
|
|
7.81
|
|
|
|
-
|
|
Period-average
HKD : US$1 exchange rate
|
|
|
7.83
|
|
|
|
7.84
|
|
|
|
7.84
|
|
|
|
-
|
|
Period-end
AUD : US$1 exchange rate
|
|
|
1.43
|
|
|
|
-
|
|
|
|
1.42
|
|
|
|
-
|
|
Period-average
AUD : US$1 exchange rate
|
|
|
1.46
|
|
|
|
-
|
|
|
|
1.42
|
|
|
|
-
|
|
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.
Operating
leases
A
lease for which substantially all the benefits and risks incidental to ownership remain with the lessor is classified by the lessee
as an operating lease. All leases of the Company are currently classified as operating leases. The Company records the total expenses
on a straight-line basis over the lease term.
Effective
July 1, 2019, the Company adopted ASU 2016-02, “Leases” (Topic 842), and elected the practical expedients that do
not require us 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. The Company adopted the practical
expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. There is no
impact from the adoption of ASC 842 as of July 1, 2019, as the Company did not have any existing leases with a lease term in excess
of twelve months on July 1, 2019
Recent
accounting pronouncements
The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption
of such any pronouncements may be expected to cause a material impact on its financial condition or the results of its operations,
as follow:
In
July 2017, the FASB Issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and
Derivatives and Hedging (Topic 815). The amendments in Part I of the Update change the reclassification analysis of certain equity-lined
financial instruments (or embedded features) with down round features. The amendments in Part II of this Update re-characterize
the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a
scope exception. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this
Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after
December 15, 2020.
Early
adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an
interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.
The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting
effect. The adoption of this ASU did not have a material effect on the Company’s consolidated financial statements.
In
February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of
Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this Update affect any entity that is required
to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive
income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this
Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal
years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public
business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities
for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update
should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change
in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The adoption of this ASU did not have
a material effect on the Company’s consolidated financial statements.
In
August 2018, the FASB has issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure
Requirements of Fair Value Measurement. This amendment modifies the disclosure requirements on fair value measurements in Topic
820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits,
with the primary purpose to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear
communication of the information required by US GAAP. The amendments in this update are effective for all entities for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2019. The
Company is currently evaluating the impact of ASU 2018-13 will have on its consolidated financial statements.
In
May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for
the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology.
The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments
to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually
assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial
Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this Update address those stakeholders’
concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at
amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information
by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief
also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement
users with decision-useful information. ASU 2019-05 is effective for the Company for annual and interim reporting periods beginning
January 1, 2023 due the Company is qualified as an emerging growth company. The Company is currently evaluating the impact of
ASU 2019-05 will have on its consolidated financial statements.
In
January 2020, the FASB issued ASU 2020-01 to clarify the interaction of the accounting for equity securities under ASC 321 and
investments accounted for under the equity method of accounting in ASC 323 and the accounting for certain forward contracts and
purchased options accounted for under ASC 815. With respect to the interactions between ASC 321 and ASC 323, the amendments clarify
that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting
when applying the measurement alternative in ASC 321, immediately before applying or upon discontinuing the equity method of accounting.
With respect to forward contracts or purchased options to purchase securities, the amendments clarify that when applying the guidance
in ASC 815-10-15-141(a), an entity should not consider whether upon the settlement of the forward contract or exercise of the
purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity
method in ASC 323 or the fair value option in accordance with ASC 825. The ASU is effective for interim and annual reporting periods
beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period. The Company does not
expect the adoption of this standard to have a material impact on its consolidated financial statements.
Reclassification
Certain
prior year amounts have been reclassified to conform to the current year presentation, such as reclassifying $366,834 impairment
in cost of investments from selling, general and administrative expenses to other income (expenses) for the year ended June 30,
2019, reclassifying accounts receivable – related party of $78,272 as of June 30, 2019 to be net against other payables
and accrued liabilities, and reclassifying cash inflows of $78,272 from changes in other payables and accrued liabilities to accounts
receivable – related party for the year ended June 30, 2019. These reclassifications have no effect on the reported revenues,
net loss or total assets.
3.
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
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.
|
|
|
As
of
December
31, 2019
|
|
|
As
of
June
30, 2019
|
|
|
As
of
December
31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Cost
of investment
|
|
$
|
134,166
|
|
|
$
|
501,000
|
|
|
$
|
501,000
|
|
Less:
Impairment in cost of investment
|
|
|
-
|
|
|
|
(366,834
|
)
|
|
|
-
|
|
Less:
Unrealized holding loss
|
|
|
(68,391
|
)
|
|
|
-
|
|
|
|
-
|
|
Exchange
rate effect
|
|
|
709
|
|
|
|
-
|
|
|
|
-
|
|
Investment
in marketable securities
|
|
$
|
66,484
|
|
|
$
|
134,166
|
|
|
$
|
501,000
|
|
4.
INVESTMENT IN NON-MARKETABLE SECURITIES
The
Company invested in Unreserved Sdn Bhd with the investment amount of $863,592 (MYR3,500,000), which approximated 20% of the equity
interest of Unreserved Sdn Bhd and is accounted for under the equity method of accounting. On March 10, 2019 Unreserved Sdn Bhd
issued additional common stock for working capital. As the Company did not subscribe for the additional common stock, the Company’s
equity interest in investee company was diluted from approximately 20.0% to approximately 17.86%. Effective from March 10, 2019,
the Company discontinued equity accounting on the investee company. The Company also ceased control over the operations of the
investee company on the same date. Accordingly, the investment in investee company was reclassified to investment in non-marketable
securities.
Unreserved
Sdn Bhd is incorporated in Malaysia with 2,500,000 ordinary shares authorized, issued and outstanding. Mr. Lim Hun Soon @ David
Lim and Ms. Aniza Helina Akmi Karim are the directors of Unreserved Sdn Bhd. Mr. How Kok Choong was a director of the company
from April 30, 2018 to March 27, 2019.
On
March 2, 2020, the Company agreed to sell the 17.86% ownership interest in Unreserved Sdn Bhd at December 31, 2019 carrying value
of $730,637 to Mr. How Kok Choong, the CEO and director of the Company.
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.
Unreserved
Sdn Bhd
|
|
As
of
December
31, 2019
|
|
|
As
of
June
30, 2019
|
|
|
As
of
December
31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Cost
of investment
|
|
$
|
-
|
|
|
$
|
832,335
|
|
|
$
|
832,335
|
|
Less:
loss of equity of investee company
|
|
|
-
|
|
|
|
(124,225
|
)
|
|
|
(98,140
|
)
|
Add:
gain on deemed disposal of shares in investee company
|
|
|
-
|
|
|
|
16,509
|
|
|
|
-
|
|
Investment
in investee company
|
|
$
|
-
|
|
|
$
|
724,619
|
|
|
$
|
734,195
|
|
Reclassify
to investment in non-marketable securities
|
|
|
-
|
|
|
|
(724,619
|
)
|
|
|
-
|
|
Investment
in investee company
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in non-marketable securities
|
|
$
|
730,637
|
|
|
$
|
724,619
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phoenix
Plus Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of investment
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
investment in non-marketable securities
|
|
$
|
732,137
|
|
|
$
|
726,119
|
|
|
$
|
-
|
|
5.
CASH AND CASH EQUIVALENTS
As
of December 31, 2019, June 30, 2019 and December 31, 2018, the Company recorded $2,744,457, $2,857,587, and $3,452,917 (unaudited),
respectively, of cash and cash equivalents, which consists $238,937, $353,214, and $990,323 (unaudited), respectively, of cash
in bank and $2,505,520, $2,504,373 and $2,462,594 (unaudited), respectively, of time deposits placed with banks or other financial
institutions and all highly liquid investments with an original maturity of three months or less. The effective interest rate
for the time deposits ranges between 2.95% to 3.25% per annum.
6.
ACCOUNTS RECEIVABLE – RELATED PARTY
|
|
As
of
December
31, 2019
|
|
|
As
of
June
30, 2019
|
|
|
As
of
December
31, 2018
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Accounts
receivable – related party
|
|
$
|
520,786
|
|
|
$
|
433,338
|
|
|
$
|
-
|
|
Allowance
for doubtful accounts
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
accounts receivables – related party
|
|
$
|
520,786
|
|
|
$
|
433,338
|
|
|
$
|
-
|
|
7.
PREPAYMENTS AND DEPOSITS
|
|
As
of
December
31, 2019
|
|
|
As
of
June
30, 2019
|
|
|
As
of
December
31, 2018
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Prepaid
expenses
|
|
$
|
2,641
|
|
|
$
|
21,081
|
|
|
$
|
2,702
|
|
Deposits
to supplier
|
|
|
266,552
|
|
|
|
477,254
|
|
|
|
507,367
|
|
Total
prepaid expenses and deposits
|
|
$
|
269,193
|
|
|
$
|
498,335
|
|
|
$
|
510,069
|
|
8.
RELATED PARTY TRANSACTIONS
The
Company’s related party list and relationship are as follows:
Related
parties
|
|
Relationships
|
|
|
|
Agape
S.E.A. Sdn Bhd
|
|
Mr.
How Kok Choong, the CEO and director of the Company is also the sole shareholder and director of Agape S.E.A. Sdn Bhd
|
|
|
|
Agape
Superior Living Pty Ltd
|
|
Mr.
How Kok Choong, the CEO and director of the Company is a 51% shareholder and a director of Agape Superior Living Pty Ltd
|
|
|
|
Agape
Superior Living Sdn Bhd
|
|
Mr.
How Kok Choong, the CEO and director of the Company is also the sole shareholder and director of Agape Superior Living Sdn
Bhd
|
|
|
|
Agape
ATP (Asia) Limited
|
|
Mr.
How Kok Choong, the CEO and director of the Company is also the sole shareholder and director of Agape ATP (Asia) Limited.
|
|
|
|
Greenpro
Capital Corp.
|
|
Greenpro
Capital Corp., through its wholly owned subsidiaries (collectively “Greenpro”),
is an approximately 4.7% shareholder in the Company. Greenpro Venture Capital Limited
is owned by Greenpro Capital Corp. The controlling shareholders of Greenpro Capital Corp.
are Mr. Lee Chong Kuang and Mr. Loke Che Chan.
Mr.
How Kok Choong, the CEO and director of the Company is also the director of Greenpro Capital Corp. Mr. How Kok Choong
ceased to be the director of Greenpro Capital Corp. in November 2018.
|
Related
party transactions as of and for six months ended December 31, 2019 and 2018 are as per table below:
|
|
For
the six months ended
|
|
|
As
of
|
|
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Revenue
|
|
|
Accounts
Receivable, Trade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agape
S.E.A. Sdn Bhd
|
|
$
|
429,362
|
|
|
$
|
685,288
|
|
|
$
|
520,786
|
|
|
$
|
-
|
|
|
|
Professional
fee
|
|
|
Accounts
Payable, Non-trade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greenpro
Capital Corp.
|
|
$
|
-
|
|
|
$
|
4,500
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
Expenses
paid on behalf
|
|
|
Amount
due from a related party
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agape
ATP (Asia) Limited
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,217
|
|
|
$
|
-
|
|
Related
party transactions as of and for years ended June 30, 2019 and 2018 are as per table below:
|
|
Years
ended
|
|
|
As
of
|
|
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
|
June
30, 2019
|
|
|
|
Revenue
|
|
|
Accounts
Receivable,
Trade
|
|
Agape
S.E.A. Sdn Bhd
|
|
$
|
1,524,596
|
|
|
$
|
487,005
|
|
|
$
|
433,338
|
|
Agape
Superior Living Pty Ltd
|
|
|
21,461
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
1,546,057
|
|
|
$
|
487,005
|
|
|
$
|
433,338
|
|
|
|
Professional
fee
|
|
|
Accounts
Payable,
Non-trade
|
|
Greenpro
Capital Corp.
|
|
$
|
12,000
|
|
|
$
|
214,883
|
|
|
$
|
-
|
|
|
|
Company
Secretarial fee
|
|
|
Accounts
Payable,
Non-trade
|
|
Greenpro
Capital Corp.
|
|
$
|
3,282
|
|
|
$
|
292
|
|
|
$
|
-
|
|
|
|
License
fee
|
|
|
Accounts
Payable,
Non-trade
|
|
Greenpro
Capital Corp.
|
|
$
|
1,509
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
Incorporation
fee
|
|
|
Accounts
Payable,
Non-trade
|
|
Greenpro
Capital Corp.
|
|
$
|
-
|
|
|
$
|
1,419
|
|
|
$
|
-
|
|
|
|
Expenses
paid on behalf
|
|
|
Amount
due from
A
related party
|
|
Agape
Superior Living Sdn Bhd
|
|
$
|
-
|
|
|
$
|
745
|
|
|
$
|
-
|
|
|
|
Expenses
paid on behalf
|
|
|
Amount
due from
A
related party
|
|
Agape
ATP (Asia) limited
|
|
$
|
2,210
|
|
|
$
|
-
|
|
|
$
|
2,210
|
|
|
|
Sundry
purchases
|
|
|
Accounts
Payable,
Non-trade
|
|
Agape
Superior Living Pty Ltd
|
|
$
|
35,145
|
|
|
$
|
-
|
|
|
$
|
35,145
|
|
9.
STOCKHOLDERS’ EQUITY
Preferred
stock
As
of December 31, 2019, June 30, 2019 and December 31, 2018, there were 200,000,000 preferred shares authorized but none were issued
and outstanding.
Common
stock
As
of December 31, 2019, June 30, 2019 and December 31, 2018, there were 376,275,500 of common stocks issued and outstanding.
There
were no stock options, warrants or other potentially dilutive securities outstanding as of December 31, 2019, June 30, 2019 and
December 31, 2018.
10.
OTHER PAYABLES AND ACCRUED LIABILITIES
|
|
As
of
December
31, 2019
|
|
|
As
of
June
30, 2019
|
|
|
As
of
December
31, 2018
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Accrued
professional fees
|
|
$
|
58,594
|
|
|
$
|
20,000
|
|
|
$
|
7,884
|
|
Others
|
|
|
18,652
|
|
|
|
12,319
|
|
|
|
-
|
|
Total
payables and accrued liabilities
|
|
$
|
77,246
|
|
|
$
|
32,319
|
|
|
$
|
7,884
|
|
11.
INCOME TAXES
The
United States and foreign components of income (loss) before income taxes were comprised of the following:
|
|
For
the six months ended
|
|
|
For
the years ended
|
|
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Tax
jurisdictions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Local
|
|
$
|
(279,476
|
)
|
|
$
|
(33,977
|
)
|
|
$
|
(76,309
|
)
|
|
$
|
(261,918
|
)
|
-
Foreign - Labuan
|
|
|
(4,174
|
)
|
|
|
(45,576
|
)
|
|
|
(2,777
|
)
|
|
|
134,806
|
|
-
Foreign – Hong Kong
|
|
|
(55,281
|
)
|
|
|
(55,928
|
)
|
|
|
(440,556
|
)
|
|
|
2,172
|
|
Loss
before income tax
|
|
$
|
(338,931
|
)
|
|
$
|
(135,481
|
)
|
|
$
|
(519,642
|
)
|
|
$
|
(124,940
|
)
|
The
provision for income taxes consisted of the following:
|
|
For
the six months ended
|
|
|
For
the years ended
|
|
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Local
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
-
Foreign
|
|
|
-
|
|
|
|
6,965
|
|
|
|
-
|
|
|
|
5,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Local
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
-
Foreign
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
$
|
-
|
|
|
$
|
6.965
|
|
|
$
|
-
|
|
|
$
|
5,334
|
|
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, Labuan and
Hong Kong that are subject to taxes in the jurisdictions in which they operate, as follows:
United
States of America
Agape
ATP Corporation is registered in the State of Nevada and is subject to the tax laws of the United States of America. As of December
31, 2019, June 30, 2019 and December 31, 2018, the operations in the United States of America incurred $717,901, $438,426, and
$395,095 (unaudited), respectively, of cumulative net operating losses which can be carried forward to offset future taxable income.
The net operating loss carry forwards begin to expire in 2037 and ending in 2039, if unutilized. The tax valuation allowance as
of December 31, 2019, June 30, 2019 and December 31, 2018 are $150,759, $92,069 and $82,970 (unaudited), respectively.
Labuan
Under
the current laws of the Labuan, Agape ATP Corporation is governed under the Labuan Business Activity Act, 1990. The tax charge
for such company is based on 3% of net audited profit. Due to Agape ATP Corporation is a holding company, it did not generate
any income nor incurred any income tax. In addition, its related expenses incurred cannot be carried forward to offset any future
operation income.
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.
The
following table reconciles the local (United States) statutory rates to the Company’s effective tax rate for the periods
indicated below:
|
|
For
the six months ended
|
|
|
For
the years ended
|
|
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
June
30, 2019
|
|
|
June
30, 2018
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
U.S.
statutory rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
Valuation
allowance
|
|
|
(21.0
|
)%
|
|
|
(21.0
|
)%
|
|
|
(21.0
|
)%
|
|
|
(21.0
|
)%
|
Permanent
difference (1)
|
|
|
0.0
|
%
|
|
|
(5.1
|
)%
|
|
|
0.0
|
%
|
|
|
(4.3
|
)%
|
Effective
tax rate
|
|
|
0.0
|
%
|
|
|
(5.1
|
)%
|
|
|
0.0
|
%
|
|
|
(4.3
|
)%
|
(1)
This was related to disallowed expenditure incurred in the ordinary course of business.
The
following table sets forth the significant components of the aggregate deferred tax assets of the Company as of:
|
|
As
of
December
31, 2019
|
|
|
As
of
June
30, 2019
|
|
|
As
of
December
31, 2018
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
operating loss carry forwards in U.S.
|
|
$
|
150,759
|
|
|
$
|
92,069
|
|
|
$
|
82,970
|
|
Less:
valuation allowance
|
|
|
(150,759
|
)
|
|
|
(92,069
|
)
|
|
|
(82,970
|
)
|
Deferred
tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
12.
AMOUNT DUE TO A DIRECTOR
As
of December 31, 2019, June 30, 2019 and December 31, 2018, a director of the Company advanced $3,952, $3,938 and $3,921 (unaudited),
respectively, to the Company, which is unsecured, interest-free with no fixed repayment term, for working capital purpose. Imputed
interest is considered insignificant.
13.
CONCENTRATIONS OF RISKS
(a)
Major customers
For
the six months ended December 31, 2019 and 2018, one customer accounted for 100% of the Company’s total revenues. For the
years ended June 30, 2019 and 2018, one customer accounted for approximately 99% and 100% of the Company’s total revenues,
respectively.
As
of December 31, 2019, and June 30, 2019, one customer accounted for 100% of the total balance of accounts receivable.
(b)
Major vendors
For
the six months ended December 31, 2019, two vendors accounted for approximately 59% and 41% of the Company’s total purchases,
respectively. For the six months ended December 31, 2018, one vendor accounted for approximately 89% of the Company’s total
purchases. For the year ended June 30, 2019, two vendors accounted for approximately 71% and 26% of the Company’s total
purchases. For the year ended June 30, 2018, one vendor accounted for 100% of the Company’s total purchases.
As
of December 31, 2019 and June 30, 2019, one vendor accounted for 100% of the total balance of accounts payable.
(c)
Credit risk
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.
(d)
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.
14.
COMMITMENTS AND CONTINGENCIES
Lease
commitments
The
Company has entered into an operating lease agreement for an office in Hong Kong. The Company’s commitment for minimum lease
payments under these operating leases as of December 31, 2019 for the next two years is as follow:
Twelve
months ending December 31,
|
|
Minimum
lease payment
|
|
2020
|
|
$
|
17,973
|
|
Thereafter
|
|
|
-
|
|
Total
minimum payments required
|
|
$
|
17,973
|
|
Rent
expense for the six months ended December 31, 2019 and 2018 was $26,828 and $8,932 (Unaudited), respectively. Rent expense for
the years ended June 30, 2019 and 2018 was $35,706 and $0, respectively
Purchase
commitments
The
total future minimum purchase commitment under a non-cancellable purchase contract as of December 31, 2019 for the next five years
and thereafter is as follows:
Twelve
months ending December 31,
|
|
Minimum
purchase
|
|
2020
|
|
$
|
693,900
|
|
2021
|
|
|
693,900
|
|
2022
|
|
|
693,900
|
|
2023
|
|
|
693,900
|
|
2024
|
|
|
693,900
|
|
Thereafter
|
|
|
2,081,700
|
|
Total
minimum purchase commitments required
|
|
$
|
5,551,200
|
|
As
of the date of this report, the Company’s vendor is not able to meet the Company’s minimum purchase commitment of
the health and wellness products due to the manufacturing process was being delayed by its vendor.
Contingencies
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.
15.
SUBSEQUENT EVENT
In
December 2019, a novel strain of coronavirus (COVID-19) surfaced. The spread of COVID-19 around the world in the first quarter
of 2020 has caused significant volatility in Malaysia. There is significant uncertainty around the breadth and duration of business
disruptions related to COVID-19, as well as its impact on the Malaysia economies and, as such, the Company is unable to determine
if it will have a material impact to its operations.
AGAPE
SUPERIOR LIVING SDN. BHD.
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,206,493
|
|
|
$
|
1,030,829
|
|
Other receivables
|
|
|
33,210
|
|
|
|
34,672
|
|
Other receivables
- related parties
|
|
|
219,121
|
|
|
|
233,942
|
|
Inventories
|
|
|
616,880
|
|
|
|
552,901
|
|
Prepaid taxes
|
|
|
1,206,821
|
|
|
|
1,181,963
|
|
Prepayments
and other assets
|
|
|
318,267
|
|
|
|
484,880
|
|
Total
current assets
|
|
|
3,600,792
|
|
|
|
3,519,187
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
|
|
|
|
|
|
Property and equipment,
net
|
|
|
325,648
|
|
|
|
364,604
|
|
Intangible assets,
net
|
|
|
6,686
|
|
|
|
7,592
|
|
Deferred
taxes asset, net
|
|
|
172,250
|
|
|
|
234,797
|
|
Total
other assets
|
|
|
504,584
|
|
|
|
606,993
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
4,105,376
|
|
|
$
|
4,126,180
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
- related party
|
|
$
|
491,628
|
|
|
$
|
520,786
|
|
Customer deposits
|
|
|
1,600,606
|
|
|
|
1,632,747
|
|
Other payables and
accrued liabilities
|
|
|
209,096
|
|
|
|
252,902
|
|
Other
payables - related parties
|
|
|
-
|
|
|
|
12,104
|
|
Total
current liabilities
|
|
|
2,301,330
|
|
|
|
2,418,539
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
2,301,330
|
|
|
|
2,418,539
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity
|
|
|
|
|
|
|
|
|
*Ordinary shares, no par value, 9,590,598
shares issued and outstanding as of March 31, 2020 and December 31, 2019
|
|
|
2,372,008
|
|
|
|
2,372,008
|
|
Accumulated deficit
|
|
|
(542,428
|
)
|
|
|
(740,004
|
)
|
Accumulated
other comprehensive (loss) income
|
|
|
(25,534
|
)
|
|
|
75,637
|
|
Total
shareholders’ equity
|
|
|
1,804,046
|
|
|
|
1,707,641
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
4,105,376
|
|
|
$
|
4,126,180
|
|
*Pursuant
to the New Companies Act 2016 effective from January 31, 2017, the concept of authorized share capital and par value has been
abolished, the Company is no longer required to state authorized share capital and par value.
The
accompanying notes are an integral part of these unaudited condensed financial statements.
AGAPE
SUPERIOR LIVING SDN. BHD.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
|
|
For the Three Months Ended
|
|
|
|
March
31,
|
|
|
|
2020
|
|
|
2019
|
|
Net revenues
|
|
$
|
1,241,252
|
|
|
$
|
1,214,600
|
|
Cost of revenues
|
|
|
111,489
|
|
|
|
203,838
|
|
Gross
profit
|
|
|
1,129,763
|
|
|
|
1,010,762
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
148,472
|
|
|
|
400,971
|
|
Commission expenses
|
|
|
411,266
|
|
|
|
601,205
|
|
General
and administrative expenses
|
|
|
325,029
|
|
|
|
313,170
|
|
Total
operating expenses
|
|
|
884,767
|
|
|
|
1,315,346
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
from operations
|
|
|
244,996
|
|
|
|
(304,584
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
725
|
|
|
|
1,160
|
|
Other
income (expenses), net
|
|
|
2,688
|
|
|
|
(5,933
|
)
|
Total
other income (expenses), net
|
|
|
3,413
|
|
|
|
(4,773
|
)
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
248,409
|
|
|
|
(309,357
|
)
|
|
|
|
|
|
|
|
|
|
Provision for
(benefits of) income taxes
|
|
|
50,833
|
|
|
|
(57,232
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
197,576
|
|
|
|
(252,125
|
)
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
|
(101,171
|
)
|
|
|
2,460
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss)
|
|
$
|
96,405
|
|
|
$
|
(249,665
|
)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
0.02
|
|
|
$
|
(0.17
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
9,590,598
|
|
|
|
1,500,000
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AGAPE
SUPERIOR LIVING SDN. BHD.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
|
|
For
the Three Months ended March 31,2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Ordinary
Shares
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Shares
|
|
|
Share
Capital
|
|
|
Retained
Earnings
|
|
|
Comprehensive
Income
|
|
|
Total
|
|
BALANCE, December 31, 2018
|
|
|
1,500,000
|
|
|
$
|
394,737
|
|
|
$
|
319,490
|
|
|
$
|
81,108
|
|
|
$
|
795,335
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(252,125
|
)
|
|
|
-
|
|
|
|
(252,125
|
)
|
Foreign currency
translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,555
|
|
|
|
9,555
|
|
BALANCE, March
31, 2019
|
|
|
1,500,000
|
|
|
$
|
394,737
|
|
|
$
|
67,365
|
|
|
$
|
90,663
|
|
|
$
|
552,765
|
|
|
|
For
the Three Months ended March 31,2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Ordinary
Shares
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Shares
|
|
|
Share
Capital
|
|
|
Accumulated
Deficit
|
|
|
Comprehensive
Income
|
|
|
Total
|
|
BALANCE, December 31, 2019
|
|
|
9,590,598
|
|
|
$
|
2,372,008
|
|
|
$
|
(740,004
|
)
|
|
$
|
75,637
|
|
|
$
|
1,707,641
|
|
Net Income
|
|
|
-
|
|
|
|
-
|
|
|
|
197,576
|
|
|
|
-
|
|
|
|
197,576
|
|
Foreign currency
translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(101,171
|
)
|
|
|
(101,171
|
)
|
BALANCE, March
31, 2020
|
|
|
9,590,598
|
|
|
$
|
2,372,008
|
|
|
$
|
(542,428
|
)
|
|
$
|
(25,534
|
)
|
|
$
|
1,804,046
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AGAPE
SUPERIOR LIVING SDN. BHD.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For the Three Months Ended
|
|
|
|
March
31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
197,576
|
|
|
$
|
(252,125
|
)
|
Adjustments to reconcile
net (loss) income to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
19,820
|
|
|
|
21,257
|
|
Amortization
|
|
|
494
|
|
|
|
1,621
|
|
Deferred taxes (benefit)
provision
|
|
|
50,833
|
|
|
|
(57,232
|
)
|
Loss on disposal
of equipment
|
|
|
(739
|
)
|
|
|
-
|
|
Change in operating
assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
356
|
|
|
|
(28,520
|
)
|
Other receivables
|
|
|
(849
|
)
|
|
|
-
|
|
Inventories
|
|
|
(97,687
|
)
|
|
|
(243,106
|
)
|
Prepaid taxes
|
|
|
(93,672
|
)
|
|
|
(421,370
|
)
|
Prepayments and
other assets
|
|
|
143,509
|
|
|
|
(49,875
|
)
|
Prepayment - related
party
|
|
|
-
|
|
|
|
217,163
|
|
Accounts payable
- related party
|
|
|
-
|
|
|
|
187,418
|
|
Customer deposits
|
|
|
60,990
|
|
|
|
(352,708
|
)
|
Other payables and
accrued liabilities
|
|
|
(30,505
|
)
|
|
|
(93,034
|
)
|
Other
payables - related parties
|
|
|
(11,757
|
)
|
|
|
-
|
|
Net
cash provided by (used in) operating activities
|
|
|
238,369
|
|
|
|
(1,070,511
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
Purchases of
equipment
|
|
|
-
|
|
|
|
(760
|
)
|
Net
cash used in investing activities
|
|
|
-
|
|
|
|
(760
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
Repayments from
related parties
|
|
|
1,773
|
|
|
|
37,244
|
|
Loans
from related parties
|
|
|
-
|
|
|
|
485,526
|
|
Net
cash provided by financing activities
|
|
|
1,773
|
|
|
|
522,770
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate on cash
|
|
|
(64,478
|
)
|
|
|
18,512
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
175,664
|
|
|
|
(529,989
|
)
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
|
1,030,829
|
|
|
|
1,544,525
|
|
|
|
|
|
|
|
|
|
|
Cash, end of
period
|
|
$
|
1,206,493
|
|
|
$
|
1,014,536
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flows information:
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$
|
93,672
|
|
|
$
|
123,892
|
|
Interest
paid
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AGAPE
SUPERIOR LIVING SDN. BHD.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1
– NATURE OF BUSINESS AND ORGANIZATION
Agape
Superior Living Sdn. Bhd. (“ASL” or the “Company”) is a limited company incorporated on August 8, 2003,
under the laws of Malaysia.
The
Company engages in the direct selling marketing business 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 in the body.
The
accompanying unaudited condensed consolidated financial statements reflect the activities of ASL and Agape S.E.A. Sdn. Bhd. (“SEA”),
a variable interest entity (“VIE”) (See Note 3).
Business
Overview
AGAPE
Superior Living Sdn. Bhd. is a network marketing company specializing in healthcare products and focusing on improving people’s
health and wellbeing that has been in existence in Malaysia for the past 15 years.
The
Company’s 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 proper nutrition and advice
from skilled nutritionists and/or dieticians.
The
Company’s ATP Zeta Health Program is a health program designed to promote health and general wellbeing also to prevent health
diseases caused by polluted environments, unhealthy dietary intake and unhealthy lifestyles. The program aims to promote improved
health and longevity in its customers through a combination of proper nutrition and advice from skilled dieticians as well as
trained members and distributors. The ATP Zeta Super Health Program consists of eight products. None of these products are owned
or produced by the Company. In the event that any of these products are no longer produced, or are otherwise unavailable, the
Company may have to devote significant effort to identifying and obtaining comparable replacement products. The eight products
that comprise the ATP Zeta Super Health Program are ATP1s Survivor Select, ATP2 Energized Mineral Concentrate, ATP3 Ionized Cal-Mag,
ATP4 Omega Blend, ATP5 BetaMaxx, AGN-Vege Fruit Fiber, AGP1-Iron and YFA-Young Formula.
The
Company’s ÉNERGÉTIQUE series aims to provide a total dermal solution for a healthy skin beginning from the
cellular level. The series is comprised of Energy Mask series, Hyaluronic Acid Serum and Mousse Facial Cleanser.
The
Company’s BEAUNIQUE product series focuses on the research of diet’s impact on modifying gene expressions to address
genetic variations and deliver a nutrigenomic solution for every individual.
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 (“US GAAP”) pursuant to the rules and regulations of the Securities
and 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. Therefore, these statements should be read in conjunction
with the Company’s audited financial statements as of and for the years ended December 31, 2019 and 2018.
Principles
of Consolidation
The
unaudited condensed consolidated financial statements include the financial statements of the Company and its VIE. All transactions
and balances between the Company and its subsidiaries have been eliminated upon consolidation.
Use
of Estimates and Assumptions
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 doubtful accounts, allowance for inventories obsolescence, useful lives of property
and equipment, useful lives of intangible assets, impairment of long-lived assets, and allowance for deferred tax assets and uncertain
tax position. Actual results could differ from these estimates.
Fair
Value Measurement
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.
Foreign
Currency Translation and Transaction
The
reporting currency of the Company is the U.S. dollar. The Company in Malaysia conducts its businesses in the local currency, Ringgit
Malaysia (RM), as its functional currency. Assets and liabilities are translated at the unified exchange rate as quoted by the
Federal Reserve at the end of the period. The statement of income accounts are translated at the average translation rates and
the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated
other comprehensive income (loss). Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated
in a currency other than the functional currency are included in the results of operations as incurred.
Translation
adjustments included in accumulated other comprehensive (loss) income amounted to $(25,534) and $75,637 as of March 31, 2020 and
December 31, 2019, respectively. The balance sheet amounts, with the exception of shareholders’ equity at March 31, 2020
and December 31, 2019 were translated at 4.33 RM and 4.09 RM to $1.00, respectively. The shareholders’ equity accounts were
stated at their historical rate. The average translation rates applied to statement of operations and comprehensive income (loss)
accounts for the three months ended March 31, 2020 and 2019 were 4.21 RM and 4.08 RM to $1.00, respectively. 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 sheet.
Cash
Cash
are carried at cost and represent cash on hand and deposits placed with banks or other financial institutions.
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. When
appropriate, impairment to inventories are recorded to write down the cost of inventories to their net realizable value.
Prepaid
Taxes
Prepaid
taxes include (i) prepaid income taxes that will either be refundable or utilized to offset future income tax; and (ii) goods
and service tax (“GST”) to be refundable.
Prepayments
and Other Assets
Prepayments
and other assets are cash deposited or advanced to outside vendors and service providers for future inventory purchases and future
services to be provided. This amount is refundable and bears no interest. For any prepayments determined by management that such
advances will not be utilized, collected or refunded, the Company will recognize an allowance account to reserve such balances.
Management reviews its advances to suppliers 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 March 31, 2020 and December 31, 2019, there is no allowance for
the doubtful accounts.
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:
|
|
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:
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 March 31, 2020 and December 31, 2019, no impairment of long-lived assets was recognized.
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 Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606), on all periods
presented. The Company recognizes revenue to depict the transfer of promised goods or services (that is, an asset) to customers
in an amount that reflects the consideration to which the Company expects to receive in exchange for those goods or services.
An asset is transferred when the customer obtains control of that asset. It also requires 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
Company uses 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 substantial collection.
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. Such revenues are
recognized at a point in time after all performance obligations are satisfied. 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 utilized 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 March 31, 2020
and 2019, the Company recognized $25,836 and $0, respectively, as forfeited coupon income.
As
of March 31, 2020, the Company had contracts for the sales of health and wellness products amounting to $1,420,392 which is expected
to fulfill within 12 months from March 31, 2020.
Disaggregated
information of revenues by products are as follows:
|
|
For
the Three Months Ended
|
|
|
|
March
31, 2020
|
|
|
March
31, 2019
|
|
|
|
|
|
|
|
|
Survivor Select
|
|
$
|
150,120
|
|
|
$
|
23,382
|
|
Energized Mineral Concentrate
|
|
|
133,529
|
|
|
|
111,899
|
|
Ionized Cal-Mag
|
|
|
39,353
|
|
|
|
13,912
|
|
Omega Blend
|
|
|
299,007
|
|
|
|
385,001
|
|
BetaMaxx
|
|
|
165,187
|
|
|
|
42,549
|
|
Vege Fruit Fiber
|
|
|
66,286
|
|
|
|
23,520
|
|
Iron
|
|
|
6,810
|
|
|
|
-
|
|
Young Formula
|
|
|
30,093
|
|
|
|
213,300
|
|
Organic Youth Care Cleansing Bar
|
|
|
19,304
|
|
|
|
53,747
|
|
Mitogize
|
|
|
111,632
|
|
|
|
58,060
|
|
No. 1 MED
|
|
|
66,156
|
|
|
|
102,348
|
|
Energetique
|
|
|
139,604
|
|
|
|
-
|
|
Trim+
|
|
|
14,171
|
|
|
|
186,882
|
|
Total revenues
|
|
$
|
1,241,252
|
|
|
$
|
1,214,600
|
|
Cost
of Revenues
Cost
of revenue includes freight-in and the purchase cost of manufactured goods for sale to customers.
Shipping
and Handling
Shipping
and handling charges amounted to $931 and $6,276 for the three months ended March 31, 2020 and 2019, respectively. Shipping and
handling charges are expensed as incurred and included in selling expenses.
Advertising
Costs
Advertising
costs amounted to $23,740 and $49,232 for the three months ended March 31, 2020 and 2019, respectively. Advertising costs are
expensed as incurred and included in selling expenses.
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
$411,266 and $601,205 for the three months ended March 31, 2020 and 2019, 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 plans were $26,033 and $35,894 for the three months ended March 31, 2020 and 2019, 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
|
Operating
Leases
A
lease for which substantially all the benefits and risks incidental to ownership remain with the lessor is classified by the lessee
as an operating lease. All leases of the Company are currently classified as operating leases. The Company records the total expenses
on a straight-line basis over the lease term.
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 unaudited condensed 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. 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 incurred related to underpayment of income
tax for the three months ended March 31, 2020 and 2019. The tax returns filed in 2017 to 2019 are subject to examination by any
applicable 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 shareholders’ equity
but are excluded from net income (loss). 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.
Related
Parties
Parties,
which can be a company 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.
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 divided by the weighted average ordinary
share outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of the potential ordinary shares
(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 ordinary shares 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.
Recently
Issued Accounting Pronouncements
The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption
of such any pronouncements may be expected to cause a material impact on its financial condition or the results of its operations,
as follow:
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to increase the transparency and comparability about leases
among entities. The new guidance requires lessees to recognize a lease liability and a corresponding lease asset for virtually
all lease contracts. It also requires additional disclosures about leasing arrangements. ASU 2016-02 is effective for interim
and annual periods beginning after December 15, 2018, and requires a modified retrospective approach to adoption. Early adoption
is permitted. In September 2017, the FASB issued ASU No. 2017-13, which to clarify effective dates that public business entities
and other entities were required to adopt ASC Topic 842 for annual reporting. ASU No. 2017-13 also amended that all components
of a leveraged lease be recalculated from inception of the lease based on the revised after tax cash flows arising from the change
in the tax law, including revised tax rates. The difference between the amounts originally recorded and the recalculated amounts
must be included in income of the year in which the tax law is enacted. In November 2019, the FASB issued ASU No. 2019-10, which
to update the effective date of ASU No. 2016-02 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 companies is for fiscal years
beginning after December 15, 2020. ASU 2016-02 is effective for the Company for annual and interim reporting periods beginning
January 1, 2021 as the Company is qualified as a smaller reporting company. The Company is expected to record the operating lease
right-of-use assets and lease liabilities upon adoption.
In
February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of
Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this Update affect any entity that is required
to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive
income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this
Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal
years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public
business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities
for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update
should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change
in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The adoption of this ASU did not have
a material effect on the Company’s unaudited condensed consolidated financial statements.
In
August 2018, the FASB has issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure
Requirements of Fair Value Measurement. This amendment modifies the disclosure requirements on fair value measurements in Topic
820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits,
with the primary purpose to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear
communication of the information required by US GAAP. The amendments in this update are effective for all entities for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this ASU on January 1,
2020 did not have a material effect on the Company’s unaudited condensed consolidated financial statements.
In
May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for
the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology.
The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments
to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually
assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial
Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this Update address those stakeholders’
concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at
amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information
by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief
also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement
users with decision-useful information. 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.
In
January 2020, the FASB issued ASU 2020-01 to clarify the interaction of the accounting for equity securities under ASC 321 and
investments accounted for under the equity method of accounting in ASC 323 and the accounting for certain forward contracts and
purchased options accounted for under ASC 815. With respect to the interactions between ASC 321 and ASC 323, the amendments clarify
that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting
when applying the measurement alternative in ASC 321, immediately before applying or upon discontinuing the equity method of accounting.
With respect to forward contracts or purchased options to purchase securities, the amendments clarify that when applying the guidance
in ASC 815-10-15-141(a), an entity should not consider whether upon the settlement of the forward contract or exercise of the
purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity
method in ASC 323 or the fair value option in accordance with ASC 825. The ASU is effective for interim and annual reporting periods
beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period. The Company does not
expect the adoption of this standard to have a material impact on its unaudited condensed consolidated financial statements.
3
– VARIABLE INTEREST ENTITY (“VIE”)
SEA
is a trading company incorporated on March 4, 2004, under the laws of Malaysia. SEA provided all of the Company’s purchases.
Its equity at risk was insufficient to finance its activities and 100% of its business is transacted with the Company. Therefore
it was considered to be a VIE and the Company 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 unaudited condensed financial statements.
The
carrying amount of the VIE’s assets and liabilities were as follows:
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
514,203
|
|
|
$
|
572,469
|
|
Current liabilities
|
|
|
(495,419
|
)
|
|
|
(547,627
|
)
|
Net assets
|
|
$
|
18,784
|
|
|
$
|
24,842
|
|
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
491,628
|
|
|
$
|
520,786
|
|
Other payables
and accrued liabilities
|
|
|
3,408
|
|
|
|
4,896
|
|
Other payables
- related party
|
|
|
346
|
|
|
|
993
|
|
Customer deposits
|
|
|
-
|
|
|
|
20,912
|
|
Taxes
payable
|
|
|
37
|
|
|
|
40
|
|
Total
current liabilities
|
|
$
|
495,419
|
|
|
$
|
547,627
|
|
The
summarized operating results of the VIE’s are as follows:
|
|
For
the Three Months Ended
March 31, 2020
|
|
|
For
the Three Months Ended
March 31, 2019
|
|
|
|
|
|
|
|
|
Operating
revenues
|
|
$
|
9,581
|
|
|
$
|
448,401
|
|
Gross
profit (loss)
|
|
$
|
190
|
|
|
$
|
(1,755
|
)
|
Loss
from operations
|
|
$
|
(4,770
|
)
|
|
$
|
(7,133
|
)
|
Net
loss
|
|
$
|
(4,803
|
)
|
|
$
|
(14,168
|
)
|
4
– INVENTORIES
Inventories
consist of the following:
|
|
March
31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Finished
goods
|
|
$
|
616,880
|
|
|
$
|
552,901
|
|
5
– PREPAYMENTS AND OTHER ASSETS
Prepayments
and other assets consist of the following:
|
|
March
31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Deposits
to suppliers
|
|
$
|
274,558
|
|
|
$
|
396,731
|
|
Deposits
to service providers
|
|
|
43,709
|
|
|
|
88,149
|
|
Total
|
|
$
|
318,267
|
|
|
$
|
484,880
|
|
6
– PROPERTY AND EQUIPMENT, NET
Property
and equipment, net consist of the following:
|
|
March
31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Computer
equipment
|
|
$
|
70,895
|
|
|
$
|
91,696
|
|
Office
equipment, furniture & fixtures
|
|
|
117,691
|
|
|
|
143,938
|
|
Leasehold
improvements
|
|
|
195,117
|
|
|
|
210,472
|
|
Vehicle
|
|
|
95,071
|
|
|
|
100,709
|
|
Subtotal
|
|
|
478,774
|
|
|
|
546,815
|
|
Less:
accumulated depreciation
|
|
|
(153,126
|
)
|
|
|
(182,211
|
)
|
Total
|
|
$
|
325,648
|
|
|
$
|
364,604
|
|
Depreciation
expense for the three months ended March 31, 2020 and 2019 amounted to $19,820 and $21,257, respectively.
7
– INTANGIBLE ASSETS, NET
Intangible
assets, net, consist of the following:
|
|
March
31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Computer
software
|
|
$
|
33,012
|
|
|
$
|
139,798
|
|
Less:
accumulated amortization
|
|
|
(26,326
|
)
|
|
|
(132,206
|
)
|
Total
|
|
$
|
6,686
|
|
|
$
|
7,592
|
|
Amortization
expense for the three months ended March 31, 2020 and 2019 amounted to $494 and $1,621, respectively.
8
– OTHER PAYABLES AND ACCRUED LIABILITIES
Other
payables and accrued liabilities consist of the following:
|
|
March
31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Payables
to non-trade vendors and service providers
|
|
$
|
209,096
|
|
|
$
|
252,902
|
|
9
– RELATED PARTY BALANCES AND TRANSACTIONS
Other
Receivable – Related Parties
Name
of Related Party
|
|
Relationship
|
|
Nature
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Agape
Singapore
|
|
Mr. How Kok Choong, the
CEO and director of the Company
|
|
Fees paid for Agape Singapore
|
|
$
|
9,994
|
|
|
$
|
10,586
|
|
How Academy
Sdn Bhd
|
|
Mr. How Kok Choong, the director of
the Company
|
|
Paid advance to How Academy for business
operational expenses
|
|
|
21,716
|
|
|
|
23,004
|
|
Redboy Picture
Sdn Bhd
|
|
Mr. How Kok Choong, the director of
the Company
|
|
Paid advance to Redboy for business
operational expenses
|
|
|
123,019
|
|
|
|
132,141
|
|
TH3
Technology Sdn Bhd
|
|
Mr. How Kok
Choong, the director of the Company
|
|
Paid advance
to TH3 for business operational expenses
|
|
|
64,392
|
|
|
|
68,211
|
|
Total
|
|
|
|
|
|
$
|
219,121
|
|
|
$
|
233,942
|
|
Accounts
Payable - Related Party
Name
of Related Party
|
|
Relationship
|
|
Nature
|
|
March
31, 2019
|
|
|
December
31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Agape
ATP International Holding Limited
|
|
Mr.
How Kok Choong, the CEO and director of the Company
|
|
Purchase
|
|
$
|
491,628
|
|
|
$
|
520,786
|
|
Total
|
|
|
|
|
|
$
|
491,628
|
|
|
$
|
520,786
|
|
Other
Payables - Related Party
Name
of Related Party
|
|
Relationship
|
|
Nature
|
|
March
31, 2019
|
|
|
December
31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Agape
Superior Living Pty Ltd, Taiwan
|
|
Mr.
How Kok Choong, the CEO and director of the Company
|
|
Printing
of product label expenses
|
|
$
|
-
|
|
|
$
|
12,104
|
|
Total
|
|
|
|
|
|
$
|
-
|
|
|
$
|
12,104
|
|
Purchases
Name
of Related Party
|
|
Relationship
|
|
Nature
|
|
For
the Three Months Ended March 31, 2020
|
|
|
For
the Three Months Ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Agape
ATP International Holding Limited
|
|
Mr.
How Kok Choong, the CEO and director of the Company
|
|
Purchases
|
|
$
|
-
|
|
|
$
|
464,297
|
|
Total
|
|
|
|
|
|
$
|
-
|
|
|
$
|
464,297
|
|
10
– TAXES
Income
Tax
Agape
Superior Living Sdn Bhd and Agape S.E.A. are governed by the income tax laws of Malaysia and the income tax 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 tax 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) and RM 500,000 (or approximately
$125,000) income for the three months ended March 31, 2020 and 2019, respectively, with the remaining balance being taxed at the
24% rate.
Tax
savings amounted to $9,971 and $0 for the three months ended March 31, 2020 and 2019, respectively.
Significant
components of the provision (benefit) for income taxes are as follows:
|
|
For
the Three Months Ended
March 31, 2020
|
|
|
For
the Three Months Ended
March 31, 2019
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
|
|
|
50,833
|
|
|
|
(57,232
|
)
|
Provision (benefit)
for income taxes
|
|
$
|
50,833
|
|
|
$
|
(57,232
|
)
|
The
following table sets forth the significant components of the aggregate deferred tax assets and liabilities of the Company within
Malaysia tax jurisdiction as of:
|
|
As
of
March
31,
|
|
|
As
of
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net
operating loss carry forwards
|
|
$
|
196,494
|
|
|
$
|
260,479
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Deprecation
|
|
|
(24,244
|
)
|
|
|
(25,682
|
)
|
Deferred tax
assets, net
|
|
$
|
172,250
|
|
|
$
|
234,797
|
|
As
of March 31, 2020, the Company has a net operating loss (“NOL”) of approximately $0.9 million which may reduce future
taxable income. The NOL will expire in 2026.
The
following table contains the detail of prepaid taxes:
|
|
March
31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Prepaid
income taxes
|
|
$
|
1,198,475
|
|
|
$
|
1,173,122
|
|
Prepaid
GST taxes
|
|
|
8,346
|
|
|
|
8,841
|
|
Total
|
|
$
|
1,206,821
|
|
|
$
|
1,181,963
|
|
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 March 31, 2020 and December 31, 2019, the
Company did not have any significant unrecognized uncertain tax positions. The Company did not incurred interest and penalties
tax for the three months ended March 31, 2020 and 2019.
11
– CONCENTRATION OF RISK
(a)
Major customers
For
the three months ended March 31, 2020 and 2019, no major customer accounted for 10% or more of the company’s total sales.
(b)
Major vendors
For
the three ended March 31, 2020, one vendor accounted for 97.9% of the company’s total purchases. For the three months ended
March 31, 2019, one related party vendor accounted for approximately 97.0% of the Company’s total purchases.
As
of March 31, 2020 and December 31, 2019, one related party vendor accounted for 100% of the total balance of accounts payable.
(c)
Commission Expenses to Sales Distributors and Stockists
For
the three months ended March 31, 2020, one sales distributor accounted for approximately 13.5% of the Company’s total commission
expense. For the three months ended March 31, 2019, no sales distributor accounted for 10% or more of the Company’s total
commission expense.
(d)
Credit risk
Financial
instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. As of
March 31, 2020 and December 31, 2019, $1,156,543 and $858,592 were deposited with financial institutions located in Malaysia,
respectively, $983,512 and $651,418 of these balances are over the Perbadanan Insurans Deposit Malaysia (PIDM) limit and not covered
by insurance as PIDM insures each depositor per each member bank up to RM 250,000 (approximately $62,000) if the bank with which
an individual/a company hold its eligible deposit fails. While management believes that these financial institutions are of high
credit quality, it also continually monitors their credit worthiness.
(e)
Exchange rate risk
The
Company cannot guarantee that the current exchange rate will remain steady; therefore, there is a possibility that the Company
could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher
or lower profit depending on exchange rate of RM converted to US$ on that date. The exchange rate could fluctuate depending on
changes in political and economic environments without notice.
12
– COMMITMENTS AND CONTINGENCIES
Lease
Commitments
The
Company has entered into five non-cancellable operating lease agreements for one office space, one sales and training center,
two distribution centers and one employee apartment. The Company’s commitment for minimum lease payments under these operating
leases as of March 31, 2020 for the next five years is as follow:
Twelve
Months Ending
March 31,
|
|
Minimum
Lease Payment
|
|
|
|
|
|
2021
|
|
$
|
164,745
|
|
2022
|
|
|
158,981
|
|
2023
|
|
|
156,551
|
|
2024
|
|
|
38,038
|
|
Thereafter
|
|
|
-
|
|
Total minimum
payments required
|
|
$
|
518,315
|
|
Rent
expense for the three months ended March 31, 2020 and 2019 was $44,338 and $43,982, respectively.
Contingencies
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 unaudited condensed consolidated financial statements.
13
– SUBSEQUENT EVENTS
In
December 2019, a novel strain of coronavirus (COVID-19) surfaced. The spread of COVID-19 around the world in the first quarter
of 2020 has caused significant volatility in Malaysia subsequent to March 31, 2020. There is significant uncertainty around the
breadth and duration of business disruptions related to COVID-19, as well as its impact on the Malaysia economies and, as such,
the Company is unable to determine if it will have a material impact to its operations.
On
May 8, 2020, Mr. How Kok Choong, an approximately 99.99% equity interest owner of the Company, entered into a Share Exchange Agreement
with Agape ATP Corporation (“AATP”), a Nevada corporation, which Mr. How Kok Choong is the CEO and director, to sell
9,590,596 ordinary shares, no par value, equivalent to approximately 99.99% of the equity interest of the Company. The selling
consideration represented the approximate net asset carrying value of the Company as of March 31, 2020 of $1,714,003 based on
the Company’s internal unadjusted financial statements. The payment of $656,495 were net against Mr. How Kok Choong’s
payable to Agape ATP Corporation as of March 31, 2020 and the remaining payment of $1,057,508 were paid in Agape ATP Corporation’s
common stock. As a result of the transaction, the Company became approximately 99.99% owned subsidiary of Agape ATP Corporation.
In
June 2020, the Company made certain adjustments to its March 31, 2020 financial statements, As a result, the net assets carrying
value increased by $90,043. On July 1, 2020, AATP entered into an amendment to the May 8, 2020 Share Exchange Agreement with Mr.
How Kok Choong, CEO and director of the Company, to issue additional 13,853 shares of AATP, valued at $90,043 based on the closing
price of $6.50 of AATP at March 31, 2020.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and
Shareholders
of Agape Superior Living Sdn. Bhd.
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheets of Agape Superior Living Sdn. Bhd. (the “Company”) as of
December 31, 2019 and 2018, and the related consolidated statements of operations and comprehensive income (loss), changes in
shareholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2019, and the related
notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results
of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with
accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
Friedman LLP
We
have served as the Company’s auditor since 2019
New
York, New York
April
30, 2020
AGAPE
SUPERIOR LIVING SDN. BHD.
CONSOLIDATED
BALANCE SHEETS
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,030,829
|
|
|
$
|
1,544,525
|
|
Other receivables
|
|
|
34,672
|
|
|
|
48,507
|
|
Other receivables
- related parties
|
|
|
233,942
|
|
|
|
115,225
|
|
Inventories
|
|
|
552,901
|
|
|
|
137,553
|
|
Prepaid taxes
|
|
|
1,181,963
|
|
|
|
188,198
|
|
Prepayments and
other assets
|
|
|
484,880
|
|
|
|
468,850
|
|
Prepayment
- related party
|
|
|
-
|
|
|
|
214,701
|
|
Total
current assets
|
|
|
3,519,187
|
|
|
|
2,717,559
|
|
Other assets
|
|
|
|
|
|
|
|
|
Property and equipment,
net
|
|
|
364,604
|
|
|
|
429,620
|
|
Intangible assets,
net
|
|
|
7,592
|
|
|
|
11,027
|
|
Deferred tax assets,
net
|
|
|
234,797
|
|
|
|
-
|
|
Total
other assets
|
|
|
606,993
|
|
|
|
440,647
|
|
Total
assets
|
|
$
|
4,126,180
|
|
|
$
|
3,158,206
|
|
LIABILITIES AND SHAREHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
- related party
|
|
$
|
520,786
|
|
|
$
|
-
|
|
Customer deposits
|
|
|
1,632,747
|
|
|
|
1,371,047
|
|
Other payables and
accrued liabilities
|
|
|
252,902
|
|
|
|
968,547
|
|
Other
payables - related parties
|
|
|
12,104
|
|
|
|
4,376
|
|
Total
current liabilities
|
|
|
2,418,539
|
|
|
|
2,343,970
|
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
|
-
|
|
|
|
18,901
|
|
Total
liabilities
|
|
|
2,418,539
|
|
|
|
2,362,871
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity
|
|
|
|
|
|
|
|
|
*Ordinary shares, no par value, 9,590,598 and 1,500,000 shares
issued and outstanding as of December 31, 2019 and 2018, respectively
|
|
|
2,372,008
|
|
|
|
394,737
|
|
Retained earnings
(accumulated deficit)
|
|
|
(740,004
|
)
|
|
|
319,490
|
|
Accumulated
other comprehensive income
|
|
|
75,637
|
|
|
|
81,108
|
|
Total
shareholders’ equity
|
|
|
1,707,641
|
|
|
|
795,335
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
4,126,180
|
|
|
$
|
3,158,206
|
|
*Pursuant
to the New Companies Act 2016 effective from January 31, 2017, the concept of authorized share capital and par value has been
abolished, the Company is no longer required to state authorized share capital and par value.
The
accompanying notes are an integral part of these consolidated financial statements.
AGAPE
SUPERIOR LIVING SDN. BHD.
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
|
|
For the Years Ended
|
|
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
Net
revenues
|
|
$
|
4,139,359
|
|
|
$
|
14,393,762
|
|
Cost of revenues
|
|
|
857,250
|
|
|
|
2,391,597
|
|
Gross
profit
|
|
|
3,282,109
|
|
|
|
12,002,165
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
1,759,136
|
|
|
|
1,339,754
|
|
Commission expenses
|
|
|
1,611,172
|
|
|
|
7,045,419
|
|
General
and administrative expenses
|
|
|
1,307,715
|
|
|
|
1,083,717
|
|
Total
operating expenses
|
|
|
4,678,023
|
|
|
|
9,468,890
|
|
Income
(loss) from operations
|
|
|
(1,395,914
|
)
|
|
|
2,533,275
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
4,021
|
|
|
|
8,904
|
|
Other
income, net
|
|
|
20,175
|
|
|
|
37,280
|
|
Total
other income, net
|
|
|
24,196
|
|
|
|
46,184
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
|
|
(1,371,718
|
)
|
|
|
2,579,459
|
|
|
|
|
|
|
|
|
|
|
Provision for
(benefits of) income taxes
|
|
|
(312,224
|
)
|
|
|
597,548
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(1,059,494
|
)
|
|
|
1,981,911
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
|
(5,471
|
)
|
|
|
2,460
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss)
|
|
$
|
(1,064,965
|
)
|
|
$
|
1,984,371
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per share
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.57
|
)
|
|
$
|
1.32
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
1,854,656
|
|
|
|
1,500,000
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
AGAPE
SUPERIOR LIVING SDN. BHD.
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Retained
|
|
|
Accumulated
|
|
|
|
|
|
|
Ordinary
Shares
|
|
|
Earnings
|
|
|
Other
|
|
|
|
|
|
|
Shares
|
|
|
Share
Capital
|
|
|
(Accumulated
Deficit)
|
|
|
Comprehensive
Income
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017
|
|
|
1,500,000
|
|
|
$
|
394,737
|
|
|
$
|
1,630,045
|
|
|
$
|
78,648
|
|
|
$
|
2,103,430
|
|
Dividend distributions
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,292,466
|
)
|
|
|
-
|
|
|
|
(3,292,466
|
)
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
1,981,911
|
|
|
|
-
|
|
|
|
1,981,911
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,460
|
|
|
|
2,460
|
|
Balance, December 31, 2018
|
|
|
1,500,000
|
|
|
|
394,737
|
|
|
|
319,490
|
|
|
|
81,108
|
|
|
|
795,335
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,059,494
|
)
|
|
|
-
|
|
|
|
(1,059,494
|
)
|
Capital contributions
by a shareholder
|
|
|
8,090,598
|
|
|
|
1,977,271
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,977,271
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,471
|
)
|
|
|
(5,471
|
)
|
Balance, December
31, 2019
|
|
|
9,590,598
|
|
|
$
|
2,372,008
|
|
|
$
|
(740,004
|
)
|
|
$
|
75,637
|
|
|
$
|
1,707,641
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
AGAPE
SUPERIOR LIVING SDN. BHD.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
For the Years Ended
|
|
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
|
Net
(loss) income
|
|
$
|
(1,059,494
|
)
|
|
$
|
1,981,911
|
|
Adjustments to reconcile
net (loss) income to net cash (used in) provided by operating activities
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
74,702
|
|
|
|
28,715
|
|
Amortization
|
|
|
6,077
|
|
|
|
5,709
|
|
Deferred taxes (benefit)
provision
|
|
|
(250,822
|
)
|
|
|
16,814
|
|
Change in operating
assets and liabilities
|
|
|
|
|
|
|
|
|
Other receivables
|
|
|
14,116
|
|
|
|
(49,702
|
)
|
Inventories
|
|
|
(409,086
|
)
|
|
|
988,613
|
|
Prepaid taxes
|
|
|
(980,082
|
)
|
|
|
(652,413
|
)
|
Prepayments and
other assets
|
|
|
(11,514
|
)
|
|
|
(332,774
|
)
|
Prepayment - related
party
|
|
|
214,100
|
|
|
|
(219,991
|
)
|
Accounts payable
- related party
|
|
|
514,524
|
|
|
|
(525,666
|
)
|
Customer deposits
|
|
|
245,909
|
|
|
|
1,052,787
|
|
Commission payables
|
|
|
-
|
|
|
|
(1,039,008
|
)
|
Other
payables and accrued liabilities
|
|
|
(715,974
|
)
|
|
|
393,937
|
|
Net
cash (used in) provided by operating activities
|
|
|
(2,357,544
|
)
|
|
|
1,648,932
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
Purchases of equipment
|
|
|
(6,502
|
)
|
|
|
(455,786
|
)
|
Purchase
of intangible assets
|
|
|
(2,582
|
)
|
|
|
(6,698
|
)
|
Net
cash used in investing activities
|
|
|
(9,084
|
)
|
|
|
(462,484
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
Dividend distributions
|
|
|
-
|
|
|
|
(3,292,466
|
)
|
(Loans to) repayments
from related parties
|
|
|
(116,227
|
)
|
|
|
652,919
|
|
Loans
from related parties
|
|
|
1,961,091
|
|
|
|
807
|
|
Net
cash provided by (used in) financing activities
|
|
|
1,844,864
|
|
|
|
(2,638,740
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate on cash
|
|
|
8,068
|
|
|
|
(13,003
|
)
|
|
|
|
|
|
|
|
|
|
Net
change in cash
|
|
|
(513,696
|
)
|
|
|
(1,465,295
|
)
|
|
|
|
|
|
|
|
|
|
Cash, beginning
of year
|
|
|
1,544,525
|
|
|
|
3,009,820
|
|
Cash,
end of year
|
|
$
|
1,030,829
|
|
|
$
|
1,544,525
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flows information
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
995,494
|
|
|
$
|
1,047,473
|
|
|
|
|
|
|
|
|
|
|
Non-cash transactions of investing and
financing activities
|
|
|
|
|
|
|
|
|
Capital contributions
from a shareholder loan for additional shares issued
|
|
$
|
1,977,271
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
AGAPE
SUPERIOR LIVING SDN. BHD.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1
-
|
NATURE
OF BUSINESS AND ORGANIZATION
|
Agape
Superior Living Sdn. Bhd. (“ASL” or the “Company”) is a limited company incorporated on August 8, 2003,
under the laws of Malaysia.
The
Company engages in the direct selling marketing business 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 in the body.
The
accompanying consolidated financial statements reflect the activities of ASL and Agape S.E.A. Sdn. Bhd. (“SEA”), a
variable interest entity (“VIE”) (See Note 3).
AGAPE
Superior Living Sdn. Bhd. is a network marketing company specializing in healthcare products and focusing on improving people’s
health and wellbeing. The Company primarily focuses its efforts on customers in Malaysia.
The
Company’s scientific team and medical advisors strongly believe that this is best done through creating easy access to a
nutrient rich food supply that can have a direct effect in improving the wellbeing of the individual, through providing nutrients
and vitamins no longer readily available.
The
herbal and vitamin supplements are packed with naturally occurring nutrients and minerals. When they are combined with a healthy
balanced diet, the body is really nourished, and improvements in strength, skin color, healing ability and cell rejuvenation often
begin to occur.
The
Company is also helping people enjoy greater health and ‘superior living’ right now through the ATP Zeta Super Health
Program. Other award winning products have been selected to compliment the products that form the ATP Zeta Program. The ATP Zeta
Super Health Program consists of twelve products. None of these products are owned or produced by the Company. In the event that
any of these products are no longer produced, or are otherwise unavailable, the Company may have to devote significant effort
to identifying and obtaining comparable replacement products. The twelve products that comprise the ATP Zeta Super Health Program
are ATP1s Survivor Select, ATP2 Energized Mineral Concentrate, ATP3 Ionized Cal-Mag, ATP4 Omega Blend, ATP5 BetaMaxx, AGN-Vege
Fruit Fiber, AGP1-Iron, YFA-Young Formula, Mitogize, ORYC-Organic Youth Care Cleansing Bar, No.1 MED and Trim+.
2
-
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) pursuant to the rules and regulations of the SEC.
Principles
of Consolidation
The
consolidated financial statements include the financial statements of the Company and its VIE. All transactions and balances among
the Company and its subsidiaries have been eliminated upon consolidation.
Use
of Estimates and Assumptions
The
preparation of 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 plant and equipment, impairment of long-lived assets, and allowance for
deferred tax assets and uncertain tax position. Actual results could differ from these estimates.
Fair
Value Measurement
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.
Foreign
Currency Translation and Transaction
The
reporting currency of the Company is the U.S. dollar. The Company in Malaysia conducts its businesses in the local currency, Ringgit
Malaysia (RM), as its functional currency. Assets and liabilities are translated at the unified exchange rate as quoted by the
Federal Reserve at the end of the period. The statement of income accounts are translated at the average translation rates and
the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated
other comprehensive income (loss). Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated
in a currency other than the functional currency are included in the results of operations as incurred.
Translation
adjustments included in accumulated other comprehensive income amounted to $75,637 and 81,108 as of December 31, 2019 and 2018,
respectively. The balance sheet amounts, with the exception of shareholders’ equity at December 31, 2019 and 2018 were translated
at 4.09 RM and 4.13 RM to $1.00, respectively. The shareholders’ equity accounts were stated at their historical rate. The
average translation rates applied to statement of income accounts for the years ended December 31, 2019 and 2018 were 4.14 RM
and 4.03 RM to $1.00, respectively. 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 sheet.
Cash
Cash
are carried at cost and represent cash on hand and deposits placed with banks or other financial institutions.
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. When
appropriate, impairment to inventories are recorded to write down the cost of inventories to their net realizable value.
Prepaid
Taxes
Prepaid
taxes includes prepaid income taxes and goods and service tax (“GST”) to be refundable or utilized to offset future
income tax or sales and service tax (“SST”) to be incurred.
Prepayments
and Other Assets
Prepayments
and other assets are cash deposited or advanced to outside vendors and service providers for future inventory purchases and future
services to be provided. This amount is refundable and bears no interest. For any prepayments determined by management that such
advances will not be utilized, collected or refunded, the Company will recognize an allowance account to reserve such balances.
Management reviews its advances to suppliers 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 December 31, 2019 and 2018, there is no allowance for the doubtful
accounts.
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:
|
|
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:
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 December 31, 2019 and 2018, no impairment of long-lived assets was recognized.
Customer
Deposits
Customer
deposits represent amounts advanced by customers on product orders and discounted value of the 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 Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606), on all periods
presented. The Company recognizes revenue to depict the transfer of promised goods or services (that is, an asset) to customers
in an amount that reflects the consideration to which the Company expects to receive in exchange for those goods or services.
An asset is transferred when the customer obtains control of that asset. It also requires 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
Company uses 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.
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. Such revenues are
recognized at a point in time after all performance obligations are satisfied. 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 utilized the coupons after six months, the Company would
recognize the forfeiture of the originated sales value of the coupons as net revenues. For the years ended December 31, 2019 and
2018, the Company recognized $46,304 and $0, respectively, as forfeited coupon income.
As
of December 31, 2019, the Company had contracts for the sales of health and wellness products amounting to $1,484,614 which is
expected to fulfill within 12 months from December 31, 2019.
Disaggregated
information of revenues by products are as follows:
|
|
For
the years ended
|
|
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
|
|
|
Survivor
Select
|
|
$
|
243,075
|
|
|
$
|
2,520,204
|
|
Energized Mineral
Concentrate
|
|
|
599,642
|
|
|
|
3,004,479
|
|
Ionized Cal-Mag
|
|
|
94,535
|
|
|
|
1,116,437
|
|
Omega Blend
|
|
|
723,443
|
|
|
|
1,666,296
|
|
BetaMaxx
|
|
|
217,025
|
|
|
|
2,490,573
|
|
Vege Fruit Fiber
|
|
|
167,566
|
|
|
|
751,073
|
|
Iron
|
|
|
-
|
|
|
|
71,790
|
|
Young Formula
|
|
|
394,767
|
|
|
|
1,766,914
|
|
Organic Youth Care
Cleansing Bar
|
|
|
237,530
|
|
|
|
87,025
|
|
Mitogize
|
|
|
254,622
|
|
|
|
375,724
|
|
No. 1 MED
|
|
|
440,145
|
|
|
|
543,247
|
|
Trim+
|
|
|
767,009
|
|
|
|
-
|
|
Total
revenues
|
|
$
|
4,139,359
|
|
|
$
|
14,393,762
|
|
Cost
of Revenues
Cost
of revenue includes freight-in and the purchase cost of manufactured goods for sale to customers.
Shipping
and Handling
Shipping
and handling charges amounted to $13,801 and $8,304 for the years ended December 31, 2019 and 2018. Shipping and handling charges
are expensed as incurred and included in selling expenses.
Advertising
Costs
Advertising
costs amounted to $267,543 and $26,110 for the years ended December 31, 2019 and 2018, respectively. Advertising costs are expensed
as incurred and included in selling expenses.
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. The Company also pays
commissions to “stockists” who act as sales agents. Stockists only entitle to a straight commission and no sales network
members working under them. Commission expenses amounted to $1,611,172 and $7,045,419 for the years ended December 31, 2019 and
2018, 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 plans were $129,669 and $92,022 for the years ended December 31, 2019 and 2018, 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% or 13% based on employee’s monthly salary above or below RM 5,000;
|
|
-
|
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
|
Operating
Leases
A
lease for which substantially all the benefits and risks incidental to ownership remain with the lessor is classified by the lessee
as an operating lease. All leases of the Company are currently classified as operating leases. The Company records the total expenses
on a straight-line basis over the lease term.
Sales
and Service Tax (“SST”) and Goods and Services Tax (“GST”)
There
was a change in tax regulations affecting sales tax of the Company during the reporting periods. The Goods and Services Tax (“GST”)
was enforced from April 1, 2015 to June 1, 2018, where goods and services were subjected to a standard GST rate of 6%. The Malaysian
tax authorities reverted to the Sales and Service Tax (“SST”) on September 1, 2018. The standard SST rates on products
and services are 10% and 6%, respectively. Revenue represents the invoiced value of service or products, net of SST or GST where
applicable.
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. 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 incurred related to underpayment of income
tax for the years ended December 31, 2019 and 2018. The tax returns filed in 2017 to 2019 are subject to examination by any applicable
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 shareholders’ 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.
Related
Parties
Parties,
which can be a company 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.
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 divided by the weighted average ordinary
share outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of the potential ordinary shares
(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 ordinary shares 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.
Recently
Issued Accounting Pronouncements
The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption
of such any pronouncements may be expected to cause a material impact on its financial condition or the results of its operations,
as follow:
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), to increase the transparency and comparability about leases
among entities. The new guidance requires lessees to recognize a lease liability and a corresponding lease asset for virtually
all lease contracts. It also requires additional disclosures about leasing arrangements. ASU 2016-02 is effective for interim
and annual periods beginning after December 15, 2018, and requires a modified retrospective approach to adoption. Early adoption
is permitted. In September 2017, the FASB issued ASU No. 2017-13, which to clarify effective dates that public business entities
and other entities were required to adopt ASC Topic 842 for annual reporting. ASU No. 2017-13 also amended that all components
of a leveraged lease be recalculated from inception of the lease based on the revised after tax cash flows arising from the change
in the tax law, including revised tax rates. The difference between the amounts originally recorded and the recalculated amounts
must be included in income of the year in which the tax law is enacted. In November 2019, the FASB issued ASU No. 2019-10, which
to update the effective date of ASU No. 2016-02 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 companies is for fiscal years
beginning after December 15, 2020. ASU 2016-02 is effective for the Company for annual and interim reporting periods beginning
January 1, 2021 as the Company is qualified as a smaller reporting company. The Company is expected to record the operating lease
right-of-use assets and lease liabilities upon adoption.
In
February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of
Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this Update affect any entity that is required
to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive
income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this
Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal
years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public
business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities
for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update
should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change
in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The adoption of this ASU did not have
a material effect on the Company’s consolidated financial statements.
In
August 2018, the FASB has issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure
Requirements of Fair Value Measurement. This amendment modifies the disclosure requirements on fair value measurements in Topic
820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits,
with the primary purpose to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear
communication of the information required by US GAAP. The amendments in this update are effective for all entities for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this ASU on January 1,
2020 did not have a material effect on the Company’s consolidated financial statements.
In
May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for
the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology.
The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments
to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually
assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial
Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this Update address those stakeholders’
concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at
amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information
by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief
also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement
users with decision-useful information. 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 consolidated
financial statements.
In
January 2020, the FASB issued ASU 2020-01 to clarify the interaction of the accounting for equity securities under ASC 321 and
investments accounted for under the equity method of accounting in ASC 323 and the accounting for certain forward contracts and
purchased options accounted for under ASC 815. With respect to the interactions between ASC 321 and ASC 323, the amendments clarify
that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting
when applying the measurement alternative in ASC 321, immediately before applying or upon discontinuing the equity method of accounting.
With respect to forward contracts or purchased options to purchase securities, the amendments clarify that when applying the guidance
in ASC 815-10-15-141(a), an entity should not consider whether upon the settlement of the forward contract or exercise of the
purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity
method in ASC 323 or the fair value option in accordance with ASC 825. The ASU is effective for interim and annual reporting periods
beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period. The Company does not
expect the adoption of this standard to have a material impact on its consolidated financial statements.
3
-
|
VARIABLE
INTEREST ENTITY (“VIE”)
|
SEA
is a trading company incorporated on March 4, 2004, under the laws of in Malaysia. SEA provided all of the Company’s purchases.
Its equity at risk was insufficient to finance its activities and 100% of its business is transacted with the Company. Therefore
it was considered to be a VIE and the Company 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 are consolidated in the accompanying consolidated financial statements.
The
carrying amount of the VIE’s assets and liabilities were as follows:
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
572,469
|
|
|
$
|
243,766
|
|
Current liabilities
|
|
|
(547,627
|
)
|
|
|
(216,187
|
)
|
Net assets
|
|
$
|
24,842
|
|
|
$
|
27,579
|
|
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
520,786
|
|
|
$
|
-
|
|
Other payables
and accrued liabilities
|
|
|
4,896
|
|
|
|
978
|
|
Other payables
- related party
|
|
|
993
|
|
|
|
984
|
|
Customer deposits
|
|
|
20,912
|
|
|
|
214,199
|
|
Taxes
payable
|
|
|
40
|
|
|
|
26
|
|
Total
current liabilities
|
|
$
|
547,627
|
|
|
$
|
216,187
|
|
The
summarized operating results of the VIE’s are as follows:
|
|
For
the Year Ended
December 31, 2019
|
|
|
For
the Year Ended
December 31, 2018
|
|
|
|
|
|
|
|
|
Operating
revenues
|
|
$
|
1,382,516
|
|
|
$
|
883,216
|
|
Gross
profit
|
|
$
|
47,800
|
|
|
$
|
138,508
|
|
Income
from operations
|
|
$
|
26,613
|
|
|
$
|
119,849
|
|
Net
income (loss)
|
|
$
|
(2,956
|
)
|
|
$
|
144,042
|
|
Inventories
consist of the following:
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
|
|
|
Finished
goods
|
|
$
|
552,901
|
|
|
$
|
137,553
|
|
5
-
|
PREPAYMENTS
AND OTHER ASSETS
|
Prepayments
and other assets consist of the following:
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
|
|
|
Deposits to suppliers
|
|
$
|
396,731
|
|
|
$
|
429,456
|
|
Deposits to service
providers
|
|
|
88,149
|
|
|
|
39,394
|
|
Total
|
|
$
|
484,880
|
|
|
$
|
468,850
|
|
6
-
|
PROPERTY
AND EQUIPMENT, NET
|
Property
and equipment, net consist of the following:
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
|
|
|
Computer equipment
|
|
$
|
91,696
|
|
|
$
|
83,890
|
|
Office equipment, furniture & fixtures
|
|
|
143,938
|
|
|
|
142,152
|
|
Leasehold improvements
|
|
|
210,472
|
|
|
|
209,414
|
|
Vehicle
|
|
|
100,709
|
|
|
|
99,778
|
|
Subtotal
|
|
|
546,815
|
|
|
|
532,234
|
|
Less: accumulated
depreciation and amortization
|
|
|
(182,211
|
)
|
|
|
(105,614
|
)
|
Total
|
|
$
|
364,604
|
|
|
$
|
429,620
|
|
Depreciation
expense for the years ended December 31, 2019 and 2018 amounted to $74,702 and $28,715, respectively.
7
-
|
INTANGIBLE
ASSETS, NET
|
Intangible
assets, net, consist of the following:
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
|
|
|
Computer software
|
|
$
|
139,798
|
|
|
$
|
135,916
|
|
Less: accumulated
depreciation and amortization
|
|
|
(132,206
|
)
|
|
|
(124,889
|
)
|
Total
|
|
$
|
7,592
|
|
|
$
|
11,027
|
|
Amortization
expense for the years ended December 31, 2019 and 2018 amounted to $6,077 and $5,709, respectively.
8
-
|
OTHER
PAYABLES AND ACCRUED LIABILITIES
|
Other
payables and accrued liabilities consist of the following:
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
Payables
to non-trade vendors and service providers
|
|
$
|
252,902
|
|
|
$
|
968,547
|
|
9-
|
RELATED
PARTY BALANCES AND TRANSACTIONS
|
Other
receivable – related parties
Name
of Related Party
|
|
Relationship
|
|
Nature
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Agape
Singapore
|
|
Mr. How Kok Choong, the
CEO and director of the Company
|
|
Fees paid for Agape Singapore
|
|
$
|
10,586
|
|
|
$
|
10,490
|
|
How Academy Sdn.
Bhd.
|
|
Mr. How Kok Choong, the director of
the Company
|
|
Fees paid for How Academy
|
|
|
23,004
|
|
|
|
-
|
|
Other
Receivable – Related Parties (Continued)
Name
of Related Party
|
|
Relationship
|
|
Nature
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Redboy
Picture Sdn Bhd
|
|
Mr.
How Kok Choong, the director of the Company
|
|
Paid
advance to Redboy for business operational fees
|
|
$
|
132,141
|
|
|
$
|
-
|
|
TH3
Technology Sdn Bhd
|
|
Mr. How Kok Choong,
the director of the Company
|
|
Paid advance
to TH3 for business expenses
|
|
|
68,211
|
|
|
|
-
|
|
Dato
Sri How
|
|
Principal
Owner, Board and CEO of the Company
|
|
Expenses
paid for Mr. How
|
|
|
-
|
|
|
|
104,735
|
|
Total
|
|
|
|
|
|
$
|
233,942
|
|
|
$
|
115,225
|
|
Prepayment
- Related Party
Name
of Related Party
|
|
Relationship
|
|
Nature
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Agape
ATP International Holding Limited
|
|
Mr.
How Kok Choong, the CEO and director of the Company
|
|
Prepayment
for Purchase
|
|
$
|
-
|
|
|
$
|
214,701
|
|
Total
|
|
|
|
|
|
$
|
-
|
|
|
$
|
214,701
|
|
Accounts
Payable - Related Party
Name
of Related Party
|
|
Relationship
|
|
Nature
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Agape
ATP International Holding Limited
|
|
Mr.
How Kok Choong, the CEO and director of the Company
|
|
Purchase
|
|
$
|
520,786
|
|
|
$
|
-
|
|
Total
|
|
|
|
|
|
$
|
520,786
|
|
|
$
|
-
|
|
Other
Payables - Related Parties
Name
of Related Party
|
|
Relationship
|
|
Nature
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Agape
Superior Living Pty Ltd, Taiwan
|
|
Mr.
How Kok Choong, the CEO and director of the Company
|
|
ATP
Printing Label fees
|
|
$
|
12,104
|
|
|
$
|
4,376
|
|
Total
|
|
|
|
|
|
$
|
12,104
|
|
|
$
|
4,376
|
|
Purchases
Name
of Related Party
|
|
Relationship
|
|
Nature
|
|
For
the
Year
ended
December
31, 2019
|
|
|
For
the
Year
ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Agape
ATP International Holding Limited
|
|
Mr.
How Kok Choong, the CEO and director of the Company
|
|
Purchases
|
|
$
|
1,268,670
|
|
|
$
|
685,288
|
|
Total
|
|
|
|
|
|
$
|
1,268,670
|
|
|
$
|
685,288
|
|
Income
Tax
Agape
Superior Living Sdn Bhd and Agape S.E.A. are governed by the income tax laws of the Malaysia and the income tax provision in respect
to operations in the 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 the Malaysia, enterprises that incorporated
in Malaysia are usually subject to a unified 24% enterprise income tax 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 and that are not part of a group containing a company exceeding this
capitalization threshold) is 17% and 18% for the first RM 500,000 (or approximately $125,000) income for the years ended December
31, 2019 and 2018, respectively, with the remaining balance being taxed at the 24% rate.
Tax
savings amounted to $0 and $7,443 for the years ended December 31, 2019 and 2018, respectively.
Significant
components of the provision (benefit) for income taxes are as follows:
|
|
For
the year ended
December 31, 2019
|
|
|
For
the year ended
December 31, 2018
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
(61,402
|
)
|
|
$
|
580,734
|
|
Deferred
|
|
|
(250,822
|
)
|
|
|
16,814
|
|
Provision
(benefit) for income taxes
|
|
$
|
(312,224
|
)
|
|
$
|
597,548
|
|
The
following table reconciles the statutory rates to the Company’s effective tax rate:
|
|
For
the year ended
December
31, 2019
|
|
|
For
the year ended
December
31, 2018
|
|
|
|
|
|
|
|
|
Statutory
rate
|
|
|
24.0
|
%
|
|
|
24.0
|
%
|
Preferential tax
rate reduction
|
|
|
(0.8
|
)%
|
|
|
(0.3
|
)%
|
Permanent
difference
|
|
|
(0.4
|
)%
|
|
|
(0.5
|
)%
|
Effective
tax rate
|
|
|
22.8
|
%
|
|
|
23.2
|
%
|
The
following table sets forth the significant components of the aggregate deferred tax assets and liabilities of the Company within
Malaysia tax jurisdiction as of:
|
|
As
of
|
|
|
As
of
|
|
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net
operating loss carry forwards
|
|
$
|
260,479
|
|
|
$
|
-
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Deprecation
|
|
|
(25,682
|
)
|
|
|
(18,901
|
)
|
Deferred
tax assets (liabilities), net
|
|
$
|
234,797
|
|
|
$
|
(18,901
|
)
|
As
of December 31, 2019, the company has a net operating loss (“NOL”) of approximately $1.1 million which may reduce
future taxable income. The NOL will expire in 2026.
The
following table contains the detail of prepaid taxes:
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
|
|
|
|
|
|
Prepaid
income taxes
|
|
$
|
1,173,122
|
|
|
$
|
158,002
|
|
Prepaid
GST taxes
|
|
|
8,841
|
|
|
|
30,196
|
|
Total
|
|
$
|
1,181,963
|
|
|
$
|
188,198
|
|
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 December 31, 2019 and 2018, the Company
did not have any significant unrecognized uncertain tax positions. The Company did not incurred interest and penalties tax for
the years ended December 31, 2019 and 2018.
11
-
|
CONCENTRATION
OF RISK
|
(a)
Major Customers
For
the year ended December 31, 2019 and 2018, no major customer accounted for 10% or more of the company’s total sales.
(b)
Major Vendors
For
the years ended December 31, 2019 and 2018, one related party vendor accounted for approximately 99.7% and 83.5% of the Company’s
total purchases, respectively.
As
of December 31, 2019, one related party vendor accounted for 100% of the total balance of accounts payable.
(c)
Commission Expenses to Sales Distributors and Stockists
For
the year ended December 31, 2019, one sales distributor accounted for approximately 16.2% of the Company’s total commission
expense. For the year ended December 31, 2018, one sales distributor accounted for approximately 14.9% of the Company’s
total commission expense.
(d)
Credit risk
Financial
instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. As of
December 31, 2019 and 2018, $858,592 and $1,249,141 were deposited with financial institutions located in Malaysia, respectively,
$651,418 and $1,111,897 of these balances are over the Perbadanan Insurans Deposit Malaysia (PIDM) limit and not covered by insurance
as PIDM insures each depositor per each member bank up to RM 250,000 (approximately $62,000) if the bank with which an individual/a
company hold its eligible deposit fails. While management believes that these financial institutions are of high credit quality,
it also continually monitors their credit worthiness.
(e)
Exchange rate risk
The
Company cannot guarantee that the current exchange rate will remain steady; therefore, there is a possibility that the Company
could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher
or lower profit depending on exchange rate of RM and HK$ converted to US$ on that date. The exchange rate could fluctuate depending
on changes in political and economic environments without notice.
12
-
|
SHAREHOLDERS’
EQUITY
|
Dividends
During
the year ended December 31, 2018, the directors of the Company declared and paid $3,292,466 (RM 13,210,000) to the Company’s
shareholders.
Capital
Contributions
On
December 16, 2019, Dato Sri How, the CEO and director of the Company, agreed to treat the $1,977,271 (RM 8,090,598) loans payable
to him as share capital contributions to the Company. As a result, the Company reclassified the $1,977,271 loans payable to him
to share capital by the issuance of 8,090,598 additional ordinary shares at RM 1.00 each in the Company to him.
13
-
|
COMMITMENTS
AND CONTINGENCIES
|
Lease
Commitments
The
Company has entered into five non-cancellable operating lease agreements for one office space, one sales and training center,
two distribution centers and one employee apartment. The Company’s commitment for minimum lease payments under these operating
leases as of December 31, 2019 for the next five years is as follow:
Twelve
Months Ending
December 31,
|
|
Minimum
Lease Payment
|
|
|
|
|
|
2020
|
|
$
|
178,035
|
|
2021
|
|
|
169,077
|
|
2022
|
|
|
165,836
|
|
2023
|
|
|
81,753
|
|
Thereafter
|
|
|
-
|
|
Total minimum
payments required
|
|
$
|
594,701
|
|
Rent
expense for the years ended December 31, 2019 and 2018 was $175,755 and $125,309, respectively.
Contingencies
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.
In
December 2019, a novel strain of coronavirus (COVID-19) surfaced. The spread of COVID-19 around the world in the first quarter
of 2020 has caused significant volatility in Malaysia. There is significant uncertainty around the breadth and duration of business
disruptions related to COVID-19, as well as its impact on the Malaysia economies and, as such, the Company is unable to determine
if it will have a material impact to its operations.
The
Company is in negotiations with Agape ATP Corporation (“Agape”), a company incorporated in Nevada, the United States,
and listed and traded on the OTC Market to be acquired for stock of Agape. The Company is anticipating to close this transaction
during May 2020. The shareholders of the Company, How Kok Choong, Lim Ah Yew @ Lim Soo Yew, and Lor Keat Yoon, (collectively,
the “Sellers”) and Agape (the “Purchaser”) will enter into an agreement, pursuant to which the Sellers
will sell their 100% interest in the Company to Agape in exchange for the common stock of Agape and other considerations as stated
in the agreement.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set
forth below is an estimate (except for SEC registration and FINRA filing fees, which are actual) of the approximate amount of
the types of fees and expenses listed below that were paid or are payable by us in connection with the issuance and distribution
of the shares of common stock to be registered by this registration statement.
Item
|
|
Amount
to
be paid
|
|
SEC registration fee
|
|
$
|
[*
|
]
|
FINRA filing fee
|
|
|
[*
|
]
|
Printing and engraving expenses
|
|
|
[*
|
]
|
Legal fees and expenses
|
|
|
[*
|
]
|
Accounting fees and expenses
|
|
|
[*
|
]
|
Transfer agent fees and expenses
|
|
|
[*
|
]
|
Miscellaneous
expenses
|
|
|
[*
|
]
|
Total
|
|
$
|
[*
|
]
|
ITEM
14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The
Company’s directors and executive officers are indemnified as provided by the Nevada Revised Statutes and its Bylaws. These
provisions state that the Company’s directors may cause the Company to indemnify a director or former director against all
costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred
by him as a result of him acting as a director. The indemnification of costs can include an amount paid to settle an action or
satisfy a judgment. Such indemnification is at the discretion of the Company’s board of directors and is subject to the
Securities and Exchange Commission’s policy regarding indemnification.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons
controlling us pursuant to the foregoing provisions, or otherwise, The Company has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
ITEM
15. RECENT SALE OF UNREGISTERED SECURITIES
No
underwriters were involved in the issuance of the securities noted below. All of the securities issued below were deemed to be
exempt from registration under the Securities Act in reliance upon Regulation S for offerings made outside of the United States.
|
●
|
On
April 5, 2017, the Company acquired Agape ATP Corporation, a company incorporated in Labuan, Malaysia.
|
|
|
|
|
●
|
On
April 10, 2017, the Company issued 245,000,000 and 70,000,000 shares of common stock to Mr. How Kok Choong and HKC Holdings
Sdn Bhd respectively, each with a par value of $0.0001 per share, for total additional working capital of $31,500. HKC Holdings
Sdn Bhd is owned and controlled by Mr. How Kok Choong who is our chief executive officer and director.
|
|
|
|
|
●
|
On
May 8, 2020, the Company acquired approximately 99.99% of the issued share capital of Agape Superior Living Sdn Bhd, a company
incorporated in Malaysia from Mr. How Kok Choong.
|
ITEM
16. EXHIBITS AND FINANCIAL STATEMENTS
Exhibits
See
the Exhibit Index attached to this registration statement, which is incorporated by reference herein.
ITEM
17. UNDERTAKINGS
The
undersigned registrant hereby undertakes to:
(1)
File, during any period in which offers or sells are being made, a post-effective amendment to this registration statement:
(i)
To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii)
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
(iii)
To include material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement; provided, however, that paragraphs (1)(i), (1)(ii)
and (1)(iii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is
contained in reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 and Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
(4)
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant
to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule
430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document immediately prior to such date of first use.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement on Form
S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in Kuala Lumpur, Malaysia, on July 20, 2020.
|
AGAPE
ATP CORPORATION
|
|
|
|
|
By:
|
/s/
How Kok Choong
|
|
Name:
|
How
Kok Choong
|
|
Title:
|
Director,
Chairman of the Board of Directors, Chief Executive Officer and Secretary
(Principal
Executive Officer)
|
POWER
OF ATTORNEY
Each
person whose signature appears below constitutes and appoints each of How Kok Choong and [*] as attorneys-in-fact with full power
of substitution for him or her in any and all capacities to do any and all acts and all things and to execute any and all instruments
which said attorney and agent may deem necessary or desirable to enable the registrant to comply with the Securities Act of 1933,
as amended (the “Securities Act”), and any rules, regulations and requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under the Securities Act of common stocks of the registrant (the “Shares”),
including, without limitation, the power and authority to sign the name of each of the undersigned in the capacities indicated
below to the Registration Statement on Form S-1 (the “Registration Statement”) to be filed with the Securities and
Exchange Commission with respect to such Shares, to any and all amendments or supplements to such Registration Statement, whether
such amendments or supplements are filed before or after the effective date of such Registration Statement, to any related Registration
Statement filed pursuant to Rule 462(b) under the Securities Act, and to any and all instruments or documents filed as part of
or in connection with such Registration Statement or any and all amendments thereto, whether such amendments are filed before
or after the effective date of such Registration Statement; and each of the undersigned hereby ratifies and confirms all that
such attorney and agent shall do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities
and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
How Kok Choong
|
|
Chief
Executive Officer, Chairman of the Board of Directors and Secretary
|
|
July 20,
2020
|
How
Kok Choong
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
/s/
|
|
Chief
Financial Officer
|
|
,
2020
|
[*]
|
|
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/
|
|
Chief
Operating Officer
|
|
,
2020
|
[*]
|
|
|
|
|
|
|
|
|
|
/s/
|
|
Director
|
|
,
2020
|
[*]
|
|
|
|
|
|
|
|
|
|
/s/
|
|
Director
|
|
,
2020
|
[*]
|
|
|
|
|
|
|
|
|
|
/s/
|
|
Director
|
|
,
2020
|
[*]
|
|
|
|
|
|
|
|
|
|
/s/
|
|
Director
|
|
,
2020
|
[*]
|
|
|
|
|
|
|
|
|
|
EXHIBIT
INDEX
*
|
To
be filed by amendment.
|
Agape ATP (PK) (USOTC:AATP)
Gráfica de Acción Histórica
De May 2024 a Jun 2024
Agape ATP (PK) (USOTC:AATP)
Gráfica de Acción Histórica
De Jun 2023 a Jun 2024