Agape ATP Corp. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparisons are with FY2020. This is an annual report, not a standalone fourth-quarter filing. Amounts are U.S. dollars unless noted.
Business context
Agape sells health and wellness products and related services, primarily in Malaysia, largely through ASL’s network-marketing channel. In November 2021, the company formed DSY Wellness, a complementary-health-therapy joint venture in which it owns 60%. It reported 128,235 network-marketing members at year-end.
Financial results and liquidity
| Metric | FY2021 / Dec. 31, 2021 | FY2020 / Dec. 31, 2020 |
|---|---|---|
| Revenue | $1.017 million | $3.453 million |
| Gross profit / margin | $720,000 / 70.8% | $2.677 million / 77.5% |
| Operating loss | $1.859 million | $158,000 |
| Net income (loss) | $(2.525) million | $355,000 |
| Net cash used in operating activities | $(846,000) | $(558,000) |
| Cash and cash equivalents | $2.598 million | $3.518 million |
| Total assets | $4.725 million | $7.211 million |
| Total liabilities | $1.412 million | $1.286 million |
Working capital was $2.599 million, down from $4.646 million. Cash and cash equivalents included $1.975 million in time deposits. The company reported no credit facilities or bank-credit access. Lease liabilities totaled approximately $241,000; the filing does not identify conventional bank debt. Basic and diluted loss per share was $0.01.
Changes and notable items
- Revenue declined 70.5% despite ASL contributing for a full year in 2021; it contributed only from April 2020 after acquisition. Management also attributed the decline to Malaysian pandemic restrictions and weaker consumer purchasing power.
- Gross margin fell to 70.8%, which management attributed partly to promotional discounts. Operating expenses were $2.578 million, including a $122,000 provision for doubtful accounts; general and administrative expense increased 7.3%.
- Other items shifted from $674,000 net income in 2020 to $529,000 net expense in 2021, including a $505,000 unrealized loss on marketable securities.
- Year-end shares outstanding fell from 376.452 million to 290.460 million following 85.992 million shares forfeited in December 2021. A January 2022 agreement provided for the CEO to forfeit a further 215.008 million shares. The filing reports 75.452 million shares outstanding as of March 23, 2022.
Outlook, risks and controls
Management aims to restore ASL’s operations toward pre-pandemic levels, expand e-commerce and member recruitment, activate wellness programs through WATP, and develop DSY Wellness in Malaysia, with possible later expansion into Indonesia and Thailand. Management’s liquidity assessment assumes revenue recovers to pre-pandemic levels; it says financing or related-party support may be needed if cash generation is insufficient. The company gives no quantified revenue or earnings guidance and cautions that 2022 revenue is not assured to grow or remain at prior levels.
Key risks include continued Malaysia market and pandemic exposure; reliance on two suppliers for approximately 92.5% of FY2021 purchases; product-quality, liability and regulatory risks; currency movements; and dependence on the CEO. The company reported ineffective internal control over financial reporting and multiple material weaknesses involving accounting staffing, segregation of duties, internal audit, IT change and access controls, vendor oversight, audit logs and tax expertise. Remediation was planned, but the filing does not establish that the weaknesses have been remedied. The auditor gave an unqualified opinion on the financial statements but did not attest to internal-control effectiveness.
The stock trades on the OTC Pink Sheets, where the company reports no active trading market. The company has no formal audit committee, independent director or audit-committee financial expert. Related-party transactions and the CEO’s control position warrant attention. No material pending legal proceedings were reported.
Investor facts to verify
- Confirm the share-forfeiture status and current share count, including the January 2022 CEO forfeiture and the reported March 2022 outstanding shares.
- Review the audited financial statements and notes for the distinction between $1.313 million of current liabilities and $1.412 million of total liabilities, and reconcile other reported figures where needed.
- Assess whether operating cash burn, lower working capital and the assumption of revenue recovery support the company’s liquidity outlook.
- Check progress on remediation of internal-control material weaknesses and the creation of independent board and audit oversight.
- Evaluate supplier concentration, the marketable-securities exposure and the terms and governance of related-party arrangements.