Agape ATP Corporation — Form 10-Q Summary
Reporting period: Quarter and six months ended December 31, 2017. The company is a development-stage provider of health and wellness products and health-solution advisory services, operating through subsidiaries in Malaysia and Hong Kong. Financial statements are unaudited and presented in U.S. dollars.
Financial results and position
| Metric | Three months ended Dec. 31, 2017 | Six months ended Dec. 31, 2017 | Comparable 2016 period |
|---|---|---|---|
| Revenue | $0 | $489,499 | $0 |
| Gross profit (margin) | $0 | $45,829 (9.4%) | $0 |
| Net loss | $123,978 | $178,678 | $0 |
| Operating cash flow | Not presented for the quarter | $(892,834) | $0 |
Six-month operating expenses included $210,512 of other operating expenses and $7,254 of administrative expenses. The related-party note identifies $210,000 in professional fees to a 4.7% shareholder. The company reported basic and diluted loss per share of $0.00, rounded, for both periods.
At December 31, cash was $1,858,159, receivables $489,838, deposits $360,506, total current assets $2,708,503, and current liabilities $144,289. Total equity was $2,564,214; no conventional debt or credit facilities were reported. A director had advanced $3,941, unsecured, interest-free and without a fixed repayment term. The MD&A reports working capital of $2,566,214, which does not reconcile to the balance sheet; the balance-sheet figures imply $2,564,214.
Cash declined $454,588 from June 30, 2017. Operating activities used $892,834, primarily reflecting receivables and a deposit payment; financing provided $434,500 from common-stock issuance. The company had 371,784,500 common shares outstanding at December 31, 2017, with no options or warrants reported.
Changes versus the prior comparable period
The company recorded its first reported six-month sales, $489,499, and gross profit of $45,829; it reported no revenue in the three months ended December 31, 2017 or in either comparable 2016 period. Six-month net loss increased to $178,678 from zero, primarily due to professional fees and other operating expenses. Cash fell from $2,312,748 at June 30, 2017, while receivables, deposits and payables were newly reported.
Outlook, risks and notable items
- Management said existing capital resources were expected to cover basic operating requirements for approximately 12 months, while noting negative operating cash flow and reliance on prior financing. No formal earnings or revenue guidance was provided.
- The company paid a $360,506 deposit toward a proposed 20% interest in Newsmakers Production Sdn. Bhd.; completion remains subject to conditions in the share purchase agreement.
- Revenue was entirely from one customer, identified as a related party whose director is the company’s CEO and a director. The company also reported all purchases from one vendor. These concentrations increase counterparty and collection risk.
- Management concluded disclosure controls were ineffective because of material weaknesses in segregation of duties/risk assessment and written accounting and SEC-reporting procedures. No material control changes were reported during the quarter.
- The filing reported no commitments or contingencies, material legal proceedings, or material off-balance-sheet arrangements. Management cited foreign-currency translation exposure and cautioned that forward-looking statements are uncertain.
Important facts for investors to verify
- Collection status and credit quality of the $489,838 receivable, including the reported $489,499 balance attributable to the sole customer and the difference between those amounts.
- Nature, business rationale, completion conditions and recoverability of the $360,506 acquisition deposit.
- Related-party revenue and fees, the company’s dependence on one customer and one vendor, and the terms of those arrangements.
- The working-capital discrepancy in MD&A and the tax note’s stated pre-tax loss, which differs from the statements of operations.
- Progress in remediating material weaknesses, adequacy of available liquidity, and the company’s ability to fund operations beyond management’s stated 12-month estimate.