Agape ATP Corp. — Form 10-Q Summary
Reporting period: Three months ended September 30, 2017, the first quarter of the company’s fiscal year ending June 30. The unaudited statements are in U.S. dollars. Agape is a development-stage company providing health and wellness products and health solution advisory services, operating through subsidiaries in Labuan and Hong Kong.
Financial results and liquidity
- Revenue: $490,126, compared with no revenue in the prior-year quarter. Revenue came from healthy food product sales.
- Gross profit and margin: $45,888; approximately 9.4% of revenue. Cost of sales was $444,238.
- Operating expenses: $93,350, including $90,000 in professional fees and $513 in trademark application fees.
- Net loss: $54,609, versus no reported loss in the prior-year quarter. Basic and diluted loss per share was reported as $0.00; weighted-average shares were 371,350,000.
- Cash flow: $155,025 used in operating activities, primarily reflecting a $490,466 increase in accounts receivable, partly offset by increases in accounts payable and other liabilities. Cash declined from $2,312,748 at June 30 to $2,157,723 at September 30. No investing or financing cash flows were reported.
- Balance sheet and liquidity: Current assets were $2,648,189, including $2,157,723 cash and $490,466 receivables. Current liabilities were $398,150 as itemized, implying working capital of $2,250,039. The company reported no credit facilities or bank-credit access and said existing capital resources were expected to cover basic operating requirements for approximately 12 months.
- Debt: No borrowings are reported. A director advanced $3,946 for working capital; the advance is unsecured, interest-free, and has no fixed repayment term.
- Equity: 371,350,000 common shares were issued and outstanding at quarter-end and November 13, 2017.
Changes, outlook, risks, and unusual items
- Management attributed the new revenue and gross profit to increased market exposure and new products. It said further marketing or product development may be needed to retain and attract customers.
- The entire $490,126 of quarterly revenue came from one customer identified as a related party whose director is the company’s CEO. That customer represented 100% of sales; its reported period-end receivable was $490,466.
- One vendor accounted for 100% of purchases ($444,238); accounts payable to that vendor was $387,052 at quarter-end.
- The company recorded a $90,000 professional fee and $513 trademark application fee paid to a related party that was a 4.7% shareholder.
- Disclosure controls and procedures were deemed ineffective due to material weaknesses: inadequate segregation of duties and risk assessment, and insufficient written accounting and financial-reporting policies for U.S. GAAP and SEC requirements. No material changes in internal control were reported during the quarter.
- The company cited dependence on prior financing for liquidity, negative operating cash flows, customer and vendor concentration, and exposure to foreign currencies. It reported no material commitments or contingencies, no material pending legal proceedings, and no subsequent events requiring disclosure.
- Management’s forward-looking statements are subject to risks and uncertainties; the filing provides no quantified revenue or earnings guidance.
Important facts for investors to verify
- Reconcile the balance sheet: current-liability line items sum to $398,150, but the statement separately reports total liabilities of $390,998—a $7,152 difference. The line-item total plus equity equals reported total assets.
- Assess collectability and terms of the $490,466 receivable, given that it is slightly greater than quarterly revenue and is entirely attributable to the single related-party customer.
- Review the related-party sales and fee arrangements, and the company’s reliance on its sole customer and sole vendor.
- Evaluate the plan and timing for remediating the disclosed material weaknesses, and the assumptions supporting the approximately 12-month liquidity estimate.