The information contained in this quarter report on Form 10-Q is intended to
update the information contained in our Form 10-K, dated March 28, 2022, for the
year ended December 31, 2021 and presumes that readers have access to, and will
have read, the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and other information contained in such Form 10-K. The
following discussion and analysis also should be read together with our
unaudited condensed consolidated financial statements and the notes to the
unaudited condensed consolidated financial statements included elsewhere in this
Form 10-Q.
The following discussion contains certain statements that may be deemed
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements appear in a number of places in
this Report, including, without limitation, "Management's Discussion and
Analysis of Financial Condition and Results of Operations." These statements are
not guarantees of future performance and involve risks, uncertainties and
requirements that are difficult to predict or are beyond our control.
Forward-looking statements speak only as of the date of this quarterly report.
You should not put undue reliance on any forward-looking statements. We assume
no responsibility to update the forward-looking statements contained in this
transition report on Form 10-Q. The following should also be read in conjunction
with the unaudited condensed Consolidated Financial Statements and notes thereto
that appear elsewhere in this report.
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 subsidiaries, namely, Agape ATP
Corporation, a company incorporated in Labuan, Malaysia, and Agape Superior
Living Sdn. Bhd. ("ASL"), a company incorporated in 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.
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., a network marketing entity incorporated in
Malaysia.
Agape Superior Living Sdn. Bhd. is a limited company incorporated on August 8,
2003, under the laws of Malaysia.
On September 11, 2020, the Company incorporated Wellness ATP International
Holdings Sdn, Bhd. ("WATP"), a wholly owned subsidiary under the laws of
Malaysia, to pursue the business of promoting wellness and wellbeing lifestyle
of the community by providing services that includes online editorials,
programs, events and campaigns on how to achieve positive wellness and
lifestyle.
On November 11, 2021, Agape ATP Corporation (Labuan) formed a joint-venture
entity, DSY Wellness International Sdn. Bhd. ("DSY Wellness") with an
independent third party which Agape ATP Corporation (Labuan) owns 60% of the
equity interest, to pursue the business of providing complementary health
therapies.
The Company and its subsidiaries are principally engaged in the Health and
Wellness Industry. The principal activity of the Company is to supply
high-quality health and wellness products, including supplements to assist in
cell metabolism, detoxification, blood circulation, anti-aging and products
designed to improve the overall health system of the human body and various
wellness programs.
Agape ATP Corporation is a company that provides health and wellness products
and health solution advisory services to our clients. The Company primarily
focus its efforts on attracting customers in Malaysia. Its 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.
3
In order to strengthen the Company's supply chain, on May 8, 2020, the Company
has successfully acquired approximately 99.99% of ASL, with the goal of securing
an established network marketing sales channel that has been established in
Malaysia for the past 15 years. ASL 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.
Through ASL, the Company offers three series of programs which consist of
different services and products: ATP Zeta Health Program, ÉNERGÉTIQUE and
BEAUNIQUE.
The 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.
The 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.
The 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.
The Company deems creating public awareness on wellness and wellbeing lifestyle
as essential to enhance the provision of its health solution advisory services;
and therefore, incorporated WATP. Upon its establishment, WATP started
collaborating with ASL to carry out various wellness programs.
To further its reach in the Health and Wellness Industry, on November 11, 2021,
Agape ATP Corporation (Labuan) formed a joint-venture entity, DSY Wellness
International Sdn. Bhd. ("DSY Wellness") with an independent third party which
Agape ATP Corporation (Labuan) owns 60% of the equity interest, to pursue the
business of providing complementary health therapies.
Results of Operation
For the three months ended September 30, 2022 and 2021
Revenue
We generated revenue of $663,889 for the three months ended September 30, 2022
as compared to $201,284 for the three months ended September 30, 2021,
represented an increase of $462,605 or approximately 230%. The increase was
predominately due to: (i) the recovery from COVID-19 in Malaysia. The Company
made progress in revenue generating as Malaysia, where the Company's operations
predominantly reside, has moved to a COVID-19 endemic phase with minimal
restrictions on businesses and people movements in the country; and (ii) the
Company's operations in the provision of complementary health therapies since
February 2022. The complementary health therapies business segment contributed
approximately 30% of the Company's total revenue for the three months ended
September 30, 2022.
Cost of Revenue
Cost of revenue for the three months ended September 30, 2022 amounted to
$157,745 as compared to $36,663 for the three months ended September 30, 2021,
represented an increase of $121,082 or approximately 330%. The increase is in
line with the increase in revenue as explained in the above.
Cost of revenue typically comprise of freight-in, cost of goods purchased, and
packing materials.
4
Gross Profit
Gross profit for the three months ended September 30, 2022 amounted to $506,144,
represented a gross margin of 76.2% as compared to $164,621 for the three months
ended September 30, 2021, equivalent to a gross margin of 81.8%. The decrease in
gross margin was predominantly due to lower gross margin associated with the
provision of complementary health therapies as compared to the Company's network
marketing business.
Operating Expenses
Our operating expenses consist of selling expenses, commission expenses and G&A
expenses.
Selling expenses
Selling expenses for the three months ended September 30, 2022 amounted to
$76,030 as compared to $82,854 for the three months ended September 30, 2021, a
minor reduction of $6,824 or approximately 8.2%. The Company's selling expenses
typically comprise salaries and benefits expenses which represented
approximately 70% to 85% of total selling expenses, credit card processing fees
and promotional expenses.
Commission expenses
Commission expenses were $167,395 and $76,817 for the three months ended
September 30, 2022 and 2021, respectively. The increase in commission expenses
was in line with the increase in revenue.
General and administrative expenses ("G&A Expenses")
G&A expenses for the three months ended September 30, 2022 amounted to $456,027,
as compared to $369,946 for the three months ended September 30, 2021, an
increase of $86,081 or approximately 23.3%. The increase in G&A expenses was
mainly due to G&A expenses associated with the provision of complementary health
therapies. The Company's G&A expenses typically comprise of salaries and
benefits expenses, rental expenses, professional expenses and depreciation
expenses.
Other Expenses, Net
For the three months ended September 30, 2022, we recorded an amount of $65,906
as other expenses, net, as compared to $220,812 other expenses, net, for the
three months ended September 30, 2021, represented a decrease of $154,906 or
approximately 70.1%.
The net other expenses of $65,906 incurred during the three months ended
September 30, 2022 comprised foreign currency exchange loss of $59,504,
unrealized holding loss on marketable securities of $11,395, other income of
$1,173 and interest income of $3,820. The net other expenses of $220,812
incurred during the three months ended September 30, 2021 comprised other
expenses of $11,643 and unrealized holding loss on marketable securities of
$209,169.
Benefit of Income Taxes
The Company recorded benefit of income taxes of $18,997 for the three months
ended September 30, 2022, due to the write back of income taxes overprovided in
prior years in respect of the Company's operations in Malaysia.
We recognized benefit of income taxes $14,543 for the three months ended
September 30, 2021. During the three months ended September 30, 2021, we mainly
recognized our ASL's 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.
5
Net Loss
Net loss reduced by $331,048 from net loss of $571,265 for the three months
ended September 30, 2021 to net loss of $240,217 for the three months ended
September 30, 2022, mainly due to reasons as discussed above.
For the nine months ended September 30, 2022 and 2021
Revenue
We generated revenue of $1,469,556 for the nine months ended September 30, 2022
as compared to $806,850 for the nine months ended September 30, 2021,
represented an increase of $662,706 or approximately 82.1%. The increase was
predominately due to : (i) recovery from COVID-19 in Malaysia. The Company made
progress in revenue generating as Malaysia, where the Company's operations
predominantly reside, has moved to a COVID-19 endemic phase with minimal
restrictions on businesses and people movements in the country; and (ii) the
Company's operations in the provision of complementary health therapies since
February 2022. The complementary health therapies business segment contributed
approximately 30% of the Company's total revenue for the nine months ended
September 30, 2022.
Cost of Revenue
Cost of revenue for the nine months ended September 30, 2022 amounted to
$340,559 as compared to $149,877 for the nine months ended September 30, 2021,
representing an increase of $190,682 or approximately 127.2%. The increase is in
line with the increase in revenue as explained in the above.
Cost of revenue typically comprise of freight-in, cost of goods purchased, and
packing materials.
Gross Profit
Gross profit for the nine months ended September 30, 2022 amounted to
$1,128,997, represented a gross margin of 76.8% as compared to $656,973 for the
nine months ended September 30, 2021, equivalent to a gross margin of 81.4%. The
decrease in gross margin was predominantly due to lower gross margin associated
with the provision of complementary health therapies as compared to the
Company's network marketing business.
Operating Expenses
Our operating expenses consist of selling expenses, commission expenses, general
and administrative expenses and provision for doubtful accounts.
Selling expenses
Selling expenses for the nine months ended September 30, 2022 amounted to
$270,228 as compared to $299,806 for the nine months ended September 30, 2021, a
minor reduction of $29,578 or approximately 9.9%. The Company's selling expenses
typically comprise salaries and benefits expenses which represented
approximately 70% to 85% of total selling expenses, credit card processing fees
and promotional expenses.
6
Commission expenses
Commission expenses were $344,061 and $258,030 for the nine months ended
September 30, 2022 and 2021, respectively. The increase in commission expenses
was in line with the increase in revenue.
General and administrative expenses
G&A expenses for the nine months ended September 30, 2022 amounted to
$1,286,431, as compared to $1,094,042 for the nine months ended September 30,
2021, an increase of $192,389 or approximately 17.6%. The increase in G&A
expenses was mainly due to G&A expenses associated with the provision of
complementary health therapies. The Company's G&A expenses typically comprise of
salaries and benefits expenses, rental expenses, professional expenses and
depreciation expenses.
Provision for doubtful accounts
Provision for doubtful accounts were $0 and $121,686 for the nine months ended
September 30, 2022 and 2021, respectively, a decrease of $121,686 or 100.0%. The
provision for doubtful accounts was in respect of prepayments to a supplier. As
the prepayments remain outstanding for over a year, the likelihood of recovering
the prepayments is remote. The provision for doubtful accounts of $121,598 was
subsequently written-off as reflected in Note 7 of Notes To Condensed
Consolidated Financial Statements above.
Other Expenses, Net
For the nine months ended September 30, 2022, we recorded an amount of $181,601
as other expenses, net, as compared to $435,089 other expenses, net, for the
nine months ended September 30, 2021, represented a decrease of $253,488 or
approximately 58.3%.
The net other expenses of $181,601incurred during the nine months ended
September 30, 2022 comprised foreign currency exchange loss of $143,387,
unrealized holding loss on marketable securities of $64,284, other income of
$13,999 and interest income of $12,071. The net other expenses of $435,089
incurred during the nine months ended September 30, 2021 comprised other
expenses of $60,189 and unrealized holding loss on marketable securities of
$374,900.
Benefit of Income Taxes
The Company recorded benefit of income taxes of $10,317 for the nine months
ended September 30, 2022, due to the write back of income taxes overprovided in
prior years in respect of the Company's operations in Malaysia.
We recognized benefit of income taxes $4,452 for the nine months ended September
30, 2021. During the nine months ended September 30, 2021, we mainly recognized
our ASL's 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 Loss
Net loss reduced by $604,133 from net loss of $1,547,140 for the nine months
ended September 30, 2021 to net loss of $954,711 for the nine months ended
September 30, 2022, mainly due to reasons as discussed above.
7
Liquidity and Capital Resources
On March 11, 2020, the World Health Organization or WHO declared the corona
virus or COVID-19 a pandemic. To help counter the transmission of COVID-19, the
government of Malaysia initiated movement control orders ("MCO"), the first
effective March 18, 2020. The MCO had resulted in quarantines, travel
restrictions, and the temporary closure of stores and facilities in Malaysia.
The first MCO was extended three times, each for a two-weeks period, until May
12, 2020. On May 13, 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.
The CMCO was further relaxed, and on June 8, 2020, Malaysia moved into the
Recovery Movement Control Order ("RMCO"). Due to a resurgence of COVID-19, CMCO
was reimposed in the state of Sabah, Selangor, Kuala Lumpur and Putrajaya
effective October 14, 2020. On November 7, 2020, the CMCO was extended to a
wider geographical area to include another six states in the country.
Effectively, ten of thirteen states in Malaysia were placed under CMCO with the
exceptions of Perlis, Pahang and Kelantan. On January 1, 2021, the Government of
Malaysia extended the Recovery Movement Control Order ("RMCO") through March 31,
2021. On January 12, 2021, the Malaysian government declared a state of
emergency nationwide to combat COVID-19. Intermittent lockdowns were imposed in
various states and districts in the country.
On March 5, 2021, lockdowns in most part of the country was eased to a CMCO,
nevertheless, COVID-19 cases in the country continue to rise. On May 12, 2021,
Malaysia was again put under a full lockdown nationwide, until the earlier of
(i) daily COVID-19 cases infection of the country fall below 4,000; (ii)
intensive Unit Care, or ICU, wards start operating at a moderate level; or (iii)
10% of the Malaysian population is fully vaccinated. The country is
administering over 400,000 doses of COVID-19 vaccines daily. On July 17, 2021,
the full lockdown was slightly eased as 13.9% of the Malaysian population was
fully vaccinated, with another 30% having received at least one dose of the
vaccine. The COVID-19 situation in the country showed no sign of abating. Kuala
Lumpur and Selangor remained the epicenter of the latest wave of infections.
Total COVID-19 cases in the country surpassed the one million mark on July 25,
2021, and daily cases hit a record high of 24,599 on August 26, 2021. Despite
the deteriorating COVID-19 state, the government lifted Kuala Lumpur from
Enhanced Movement Control Order ("EMCO") ahead of schedule and ended the
nationwide state of emergency on August 1, 2021. Parliament met for the first
time this year on July 26, 2021. Malaysia pressed on with its National COVID-19
Immunization Plan, fast inoculating its residents. COVID-19 infection started to
drop below the 10,000 mark daily since beginning October 3, 2021. Effective
October 11, 2021, interstate and international travel restrictions were lifted
for residents who had been fully vaccinated against COVID-19 as the country
achieved its target of inoculating 90% of its adult population.
Malaysia officially transitioned to the endemic phase of COVID-19 effective
April 1, 2022. Restrictions on businesses and people are minimal. Meanwhile the
government continues to encourage inoculation for those between the ages of 5 to
11 years and its adolescent group which comprised those between the ages 12 to
17. Adults who have been fully vaccinated, i.e. received two doses of the
COVID-19 vaccine are encouraged to take booster shots.
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, disruption or suspension of
supplies, our customers may be negatively impacted financially resulting in
which the demand for our products may be adversely affected;
? 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.
8
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 are currently operating primarily in Malaysia and anticipate 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 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 2022 and beyond.
The Company entered into a share forfeiture agreement with Mr. How Kok Choong,
the CEO and director of the Company on January 20, 2022 in which Mr. How agreed
to forfeit 215,008,035 shares of common stock of the Company. The forfeiture of
shares has no effect on the Company's liquidity and capital resources.
As of September 30, 2022, we had working capital of $1,505,169, consisting of
cash in bank of $517,730 and time deposits of $1,027,797 as compared to working
capital of $2,599,281 consisting of cash in bank of $554,864 and time deposits
of $1,975,347 as of December 31, 2021.
Accumulated deficit of the company was $4,213,396 and $3,258,687, as of
September 30, 2022 and December 31, 2021, respectively. In assessing our
liquidity and going concern, management is projecting that the company's revenue
will revert to pre-pandemic level, generating sufficient cash therefrom to cover
our operating expenses.
If we are unable to generate sufficient cash flow within the normal operating
cycle of a twelve-month period to pay for the Company's future payment
obligations, we may have to consider supplementing our available sources of
funds through the following avenues:
? other available sources of financing from Malaysia banks and other financial
institutions; and
? financial support from our related parties and shareholders.
Based on the above initiatives, management is of the opinion that the company
should have sufficient funds to meet its working capital requirements and debt
obligations as they become due in the foreseeable future from the date of
issuance of this Form 10-Q. However, there is no assurance that management will
be successful in its plans.
The following summarizes the key components of our cash flows for the nine
months ended September 30, 2022 and 2021:
For the nine months ended
September 30,
2022 2021
Net cash used in operating activities $ (737,456 ) $ (541,440 )
Net cash used in investing activities (5,777 ) (3,970 )
Net cash used in financing activities (184,466 ) (23,280 )
Effect of exchange rate on cash and cash equivalents (85,280 ) (68,233 )
Net change in cash and cash equivalents $ (1,012,979 ) $ (636,923 )
9
Operating activities
Net cash used in operating activities for the nine months ended September 30,
2022 was $737,456 and were mainly comprised of the net loss of $943,007,
deferred tax benefit of $14,903, increase in accounts receivables of $1,828,
decrease in customer deposits of $197,518, payment of operating lease
liabilities of $106,716, decrease in other payables and accrued liabilities of
$192,108. The net cash used in operating activities was mainly offset by the
non-cash depreciation and amortization expense of $55,460, amortization of
operating right-of-use assets of $106,300, unrealized holding loss on marketable
securities of $64,284, decrease in amount due from related parties of $6,788,
decrease in inventories of $81,376, refund in prepaid taxes of $266,120,
decrease in prepayments and deposits of $103,276, increase in accounts payables
(including related parties) of $30,100, increase in other payables from related
parties of $4,056 and decrease in income tax payables of $864.
Net cash used in operating activities for the nine months ended September 30,
2021 was $541,440 and were mainly comprised of the net loss of $1,547,140,
deferred tax benefit of $131,634, decrease in prepayments and deposits of
$4,309, decrease in customer deposits of $44,044, payment of operating lease
liabilities of $111,460 and decrease in other payables and accrued liabilities
of $123,082. The net cash used in operating activities was mainly offset by the
non-cash depreciation and amortization expense of $58,401, amortization of
operating right-of-use assets of $112,678, unrealized holding loss on marketable
securities of $374,900, inventories write-down of $36,636, provision for
doubtful accounts of $121,598, decrease in accounts receivables of $168,019,
decrease in inventories of $90,580, refund in prepaid taxes of 431,224 and
decrease in income tax payables of $26,193.
Investing activities
Net cash used in investing activities for the nine months ended September 30,
2022 was $5,777, which was in respect of purchase of equipment.
Net cash used in investing activities for the nine months ended September 30,
2021 was $3,970, which was in respect of purchase of equipment.
Financing activities
Net cash used in financing activities for the nine months ended September 30,
2022 was $184,466 which was in respect of payment of deferred offering cost.
Net cash used in financing activities for the nine months ended September 30,
2021 was $23,280 which were mainly comprised of payment of deferred offering
cost of $15,210 and advances to related parties of $8,070.
Credit Facilities
We do not have any credit facilities or other access to bank credit.
Off-Balance Sheet Arrangements
As of September 30, 2022, 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 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 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 property and equipment,
useful lives of intangible assets, impairment of long-lived assets, allowance
for deferred tax assets, operating right-of-use assets, operating lease
liabilities and uncertain tax position and impairment of investment in
non-marketable securities. Following are the methods and assumptions used in
determining our estimates.
10
Estimated allowance for doubtful accounts
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 September 30, 2022 and December 31,
2021, no allowance of doubtful accounts was recorded.
Estimated allowance for inventories obsolescence
Management reviews inventory on hand for estimated obsolescence or unmarketable
items, as compared to future demand requirements and the shelf life of the
various products. Based on the review, the Company records inventory
write-downs, when necessary, when costs exceed expected net realizable value.
For the three months ended September 30, 2022 and 2021, the Company did not
recognize any inventory write-downs. For the nine months ended September 30,
2022 and 2021, the Company recognized inventory write-downs of $0 and $36,636,
respectively
Estimated allowance for doubtful accounts of prepayments and deposits
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. For the three and
nine months ended September 30, 2022, the Company wrote-off doubtful debts of
$120,372. There were no doubtful debts written-off during the three and nine
months ended September 30, 2021. As of September 30, 2022 and December 31, 2021,
there was $0 and $121,095 allowance for doubtful accounts recorded,
respectively.
Estimated useful lives of property, equipment and intangible assets
Property and equipment are depreciated on the straight-line basis over the
estimated useful lives of the assets. Intangible assets are amortized on the
straight-line basis over the estimated useful lives of the assets. Management
reviews the estimated useful lives of the assets regularly in order to determine
the amount of depreciation and amortization expenses to be recorded during any
reporting period. The useful lives are based on the Company's historical
experience with similar assets. The depreciation and amortization expenses for
future periods is adjusted if there are material changes from previous
estimates.
Impairment of operating right-of-use assets and property plant and equipment
Operating right-of-use assets and property, plant and equipment are stated at
costs less accumulated depreciation and impairment, if any. In determining
whether an asset is impaired, the Company has to exercise judgment and make
estimation, particularly in assessing: (1) whether an event has occurred or any
indicators that may affect the asset value; (2) whether the carrying value of an
asset can be supported by the recoverable amount, in the case of value in use,
the present value of future cash flows which are estimating the recoverable
amounts including cash flow projections and an appropriate discount rate.
Changing the assumptions and estimates, including the discount rates or the
growth rate in the cash flow projections, could materially affect the net
present value used in the impairment test.
As of September 30, 2022, the carrying amounts of operating right-of-use assets
and property, plant and equipment is amounted to $114,016 and $148,798 (December
31, 2021: $237,718 and $215,799), respectively. No impairment losses on
operating right-of-use assets and property, plant and equipment were recognized
as of September 30, 2022 and December 31, 2021.
Recognition of income taxes and deferred tax assets/liabilities
The Company conducts much of its business activities in Malaysia and Hong Kong
and is subject to tax in each of these jurisdictions. Significant estimates are
required in determining the provision for income taxes. There are many
transactions and calculations for which the ultimate tax determination is
uncertain during the ordinary course of business. Where the final tax outcome of
these matters is different from the amounts that were initially recorded, such
differences will impact the income tax and deferred tax provisions in the period
in which such determination is made.
Deferred tax assets relating to certain temporary differences and tax losses are
recognized as management considers it is probable that future taxable profit
will be available against which the temporary differences or tax losses can be
utilized. Where the expectation is different from the original estimate, such
differences will impact the recognition of deferred taxation assets and taxation
in the periods in which such estimate is changed.
Impairment of investment in non-marketable equity securities
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.
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Critical Accounting Policies
We prepare our unaudited condensed consolidated financial statements in
accordance with U.S GAAP. These accounting principles require us to make
judgments, estimates and assumptions on the reported amounts of assets and
liabilities at the end of each fiscal period, and the reported amounts of
revenues and expenses during each fiscal period. We continually evaluate these
judgments and estimates based on our past experience, knowledge and assessments
of current business and other conditions, our expectations regarding the future
based on available information and assumptions.
Other than disclosed below, there have been no material changes during the three
months ended September 30, 2022 in our accounting policies from those previously
disclosed in our Annual Report for the fiscal year ended December 31, 2021.
The selection of critical accounting policies, the judgments and other
uncertainties affecting the application of those policies and the sensitivity of
reported results to changes in conditions and assumptions are factors that
should be considered when reviewing our financial statements. We believe the
following accounting policies involve the most significant assumptions and
estimates used in the preparation of our unaudited condensed consolidated
financial statements.
Revenue recognition
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 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.
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 utilize the coupons after six months,
the Company would recognize the forfeiture of the originated sales value of the
coupons as net revenues.
Sales of Health and Wellness services
- Performance obligations satisfied at a point in time
The Company carries out its Wellness program, where the Company's products are
bundled with health screening test and a health camp program. The health
screening test and the health camp programs are considered as separate
performance obligations. The promises to deliver the health screening test
report and the attendance at the health camp are separately identifiable, which
are evidenced by the fact that the Company provides separate services of
delivering the health screening test report and allowing admission of the
customers to attend the health camp. The Company derives its revenues from sales
contracts with its customers with revenues being recognized when the test
reports are completed and delivered to its customers during the consultation
section in person. The Company also separately derives its revenues from sales
contracts with its customers with revenues being recognized when the health camp
program was completed in the final day of the health camp.
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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, considers
the applicability and impact of all accounting standards updates ("ASUs").
Management periodically reviews new accounting standards that are issued.
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 ASUs 2016-13 and 2019-05 may have on its unaudited condensed
consolidated financial statements.
Except for the above-mentioned pronouncements, there are no new recent issued
accounting standards that will have a material impact on the consolidated
financial position, statements of operations and cash flows.
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