The information contained in this Form 10-Q/A is intended to update the
information contained in our Annual Report on Form 10-K/A for the year ended
December 31, 2020 filed with the Securities and Exchange Commission on April 12,
2021 (the "Form 10-K/A") 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/A. The
following discussion and analysis also should be read together with our
financial statements and the notes to the financial statements included
elsewhere in this Form 10-Q/A.
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 several places in this
Report, including, without limitation, "Management's Discussion and Analysis of
Financial Condition and Results of Operations." These statements are not
guaranteed 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 strongly
encourage investors to carefully read the factors described in our Form 10-K/A
in the section entitled "Risk Factors" for a description of certain risks that
could, among other things, cause actual results to differ from these
forward-looking statements. We assume no responsibility to update the
forward-looking statements contained in this quarterly report on Form 10-Q/A.
The following should also be read in conjunction with the unaudited Financial
Statements and notes thereto that appear elsewhere in this report.
Company Overview
Greenpro Capital Corp. (the "Company" or "Greenpro"), was incorporated in the
State of Nevada on July 19, 2013. We provide cross-border business solutions and
accounting outsourcing services to small and medium-size businesses located in
Asia, with an initial focus on Hong Kong, Malaysia, and China. Greenpro provides
a range of services as a package solution to our clients, which we believe can
assist our clients in reducing their business costs and improve their revenues.
In addition to our business solution services, we also operate a venture capital
business through Greenpro Venture Capital Limited, an Anguilla corporation. One
of our venture capital business segments is focused on (1) establishing a
business incubator for start-up and high growth companies to support such
companies during critical growth periods, which will include education and
support services, and (2) searching for investment opportunities in selected
start-up and high growth companies, which may generate significant returns to
the Company. Our venture capital business is focused on companies located in
Asia and Southeast Asia including Hong Kong, Malaysia, China, Thailand, and
Singapore. Another one of our venture capital business segments is focused on
rental activities of commercial properties and the sale of investment
properties.
Results of Operations
For information regarding our controls and procedures, see Part I, Item 4 -
Controls and Procedures, of this Quarterly Report.
During the three and nine months ended September 30, 2021, and 2020, we operated
in three regions: Hong Kong, Malaysia, and China. We derived revenue from the
provision of services and rental activities of our commercial properties.
Comparison of the three months ended September 30, 2021, and September 30, 2020
Total revenue
Total revenue was $429,366 and $678,917 for the three months ended September 30,
2021, and September 30, 2020, respectively. The decreased amount of $249,551 was
primarily due to a decrease in revenue from the sale of real estate properties
in 2021. We expect revenue from our business services segment to steadily
improve as we expand our businesses into new territories.
Service business revenue
Revenue from the provision of business services was $398,856 and $389,610 for
the three months ended September 30, 2021, and September 30, 2020, respectively.
It was derived principally from the provision of business consulting and
advisory services as well as company secretarial, accounting, and financial
analysis services. We expect revenue from our business services segment to
steadily improve as we expand our businesses into new territories.
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Real estate business
Sale of real estate properties
There was no revenue generated from the sale of real estate property for the
three months ended September 30, 2021. Revenue from the sale of real estate
property was $253,677 for the three months ended September 30, 2020, which was
derived from the sale of one unit of commercial property located in Hong Kong.
Rental revenue
Revenue from rentals was $30,510 and $35,630 for the three months ended
September 30, 2021, and September 2020, respectively. It was derived principally
from leasing properties in Malaysia and Hong Kong. We believe our rental income
will be stable in the future.
Total operating costs and expenses
Total operating costs and expenses were $1,060,087 and $1,147,339 for the three
months ended September 30, 2021, and 2020, respectively. They consist of
cost-of-service revenue, cost of real estate properties sold, cost of rental
revenue, and general and administrative expenses.
Loss from operations for the three months ended September 30, 2021, and
September 30, 2020 was $630,721 and $468,422, respectively. An increase in loss
from operations was mainly due to a decrease in revenue from the sale of real
estate property and an increase in general and administrative expenses in 2021.
Cost of service revenue
Cost of revenue on provision of services was $85,335 and $52,243 for the three
months ended September 30, 2021, and 2020, respectively. It primarily consists
of employee compensation and related payroll benefits, company formation costs,
and other professional fees directly attributable to the services rendered.
An increase of cost-of-service revenue was in tandem with the increase in
service business revenue.
Cost of real estate properties sold
There was no cost incurred for the sale of real estate property for the three
months ended September 30, 2021. Cost of revenue on real estate property sold
was $210,573 for the three months ended September 30, 2020. It primarily
consisted of the purchase price of property, legal fees, improvement costs to
the building structure, and other acquisition costs. Selling and advertising
costs are expensed as incurred.
Cost of rental revenue
Cost of rental revenue was $10,506 and $13,986 for the three months ended
September 30, 2021, and September 30, 2020, respectively. It includes the costs
associated with governmental charges, repairs and maintenance, property
insurance, depreciation, and other related administrative costs. Property
management fees and utility expenses are paid directly by tenants. A decrease of
cost of rental revenue was mainly due to a decrease of insurance premiums of
$1,078 and agency commission of $1,030, in 2021.
General and administrative expenses
General and administrative ("G&A") expenses were $964,246 and $870,537 for the
three months ended September 30, 2021, and September 30, 2020, respectively. For
the three months ended September 30, 2021, G&A expenses consisted primarily of
directors' compensation of $164,244, salary and wages of $338,167, other
professional fees of $103,737, legal services fee of $86,007, advertising and
promotion expenses of $59,347 and rental expenses of $25,580. We expect our G&A
expenses to continue to increase as we integrate our business acquisitions,
expand our existing businesses, and develop new markets in other regions.
Other income or expenses
Net other expense was $5,414,154 and net other income was $38,673 for the three
months ended September 30, 2021, and September 30, 2020, respectively. For the
three months ended September 30, 2021, and September 30, 2020, a fair value gain
associated with warrants was $27,678 and $11,804, respectively. Interest expense
was $762,253, which mainly consisted of interest expense associated with
convertible notes of $750,982 for the three months ended September 30, 2021,
while interest expense was $36,118 for the three months ended September 30,
2020. Loss on extinguishment of convertible notes of $4,593,366 and impairment
of other investments of $2,094,300 offset by reversal of write-off notes
receivable of $2,000,000 were recorded for the three months ended September 30,
2021.
Interest expenses
On October 13, 2020, the Company issued three unsecured promissory notes to
Streeterville Capital, LLC, FirstFire Global Opportunities Fund, LLC, and
Granite Global Value Investments Ltd. (collectively, the "Investors"),
respectively. The Company issued another unsecured promissory note to
Streeterville Capital, LLC ("Streeterville") on January 8, 2021, and February
11, 2021, respectively (see Note 6). Interest expenses related to the
convertible promissory notes totaled $750,982 for the three months ended
September 30, 2021, which included coupon interest expense of $130,493,
amortization of discount on convertible notes of $46,265, amortization of debt
issuance costs of $19,421, interest expense associated with conversion of notes
of $553,571 and interest expense due to non-fulfillment of use of proceeds
requirements of $1,232.
Total interest expenses were $762,253 and $36,118 for the three months ended
September 30, 2021, and 2020, respectively.
Net loss
Net loss was $6,044,875 and $429,749 for the three months ended September 30,
2021, and September 30, 2020, respectively. An increase in net loss was mainly
due to a decrease in revenue from the sale of real estate properties, an
increase of G&A expenses and interest expenses associated with the convertible
promissory notes, loss on extinguishment of convertible notes and impairment
loss of other investments.
Net income or loss attributable to noncontrolling interest
The Company records net income or loss attributable to noncontrolling interest
in the consolidated statements of operations for any noncontrolling interest of
consolidated subsidiaries.
For the three months ended September 30, 2021, and September 30, 2020, the
Company recorded net loss attributable to a noncontrolling interest of $18,512
and net income attributable to the noncontrolling interests of $24,162,
respectively.
29
Comparison of the nine months ended September 30, 2021, and September 30, 2020
Total revenue
Total revenue was $1,810,964 and $1,896,598 for the nine months ended September
30, 2021, and September 30, 2020, respectively. The slightly decreased amount of
$85,634 was mainly due to a decrease in revenue from the sale of real estate
properties in 2021. We expect revenue from our business services segment to
steadily improve as we are expanding our businesses into new territories.
Service business revenue
Revenue from the provision of business services was $1,715,555 and $1,551,783
for the nine months ended September 30, 2021, and September 30, 2020,
respectively. It was derived principally from business consulting and advisory
services as well as company secretarial, accounting, and financial analysis
services. We expect revenue from our business services segment to steadily
improve as we expand our businesses into new territories.
Real estate business
Sale of real estate properties
There was no revenue generated from the sale of real estate property for the
nine months ended September 30, 2021. Revenue from the sale of real estate
property was $253,677 for the nine months ended September 30, 2020, which was
derived from the sale of one unit of commercial property located in Hong Kong.
Rental revenue
Revenue from rentals was $95,409 and $91,138 for the nine months ended September
30, 2021, and September 30, 2020, respectively. It was derived principally from
leasing properties in Malaysia and Hong Kong. An increase in rental revenue was
mainly due to more units being leased in Hong Kong for the nine months ended
September 30, 2021, compared to the same period in 2020. We believe our rental
income will be stable in the future.
Total operating costs and expenses
Total operating costs and expenses were $3,818,049 and $3,137,216 for the nine
months ended September 30, 2021, and September 30, 2020, respectively. They
consist of cost-of-service revenue, cost of real estate properties sold, cost of
rental revenue and G&A expenses. The Company incurred $3,525,332 of G&A expenses
for the nine months ended September 30, 2021, compared to $2,633,729 of G&A
expenses for the same period in 2020.
Cost of service revenue
Costs of revenue on provision of services was $256,905 and $252,687 for the nine
months ended September 30, 2021, and September 30, 2020, respectively. It
primarily consists of employee compensation and related payroll benefits,
company formation costs, and other professional fees directly attributable to
the services rendered. The slight increase of cost-of-service revenue was mainly
due to an increase of other professional fees directly attributable to the
services for the nine months ended September 30, 2021.
Cost of real estate properties sold
There was no cost incurred for the sale of real estate property for the nine
months ended September 30, 2021. Cost of revenue on real estate property sold
was $210,573 for the nine months ended September 30, 2020. It primarily
consisted of the purchase price of property, legal fees, improvement costs to
the building structure, and other acquisition costs. Selling and advertising
costs are expensed as incurred.
Cost of rental revenue
Cost of rental revenue was $35,812 and $40,227 for the nine months ended
September 30, 2021, and September 30, 2020, respectively. It includes the costs
associated with government rent and rates, repairs and maintenance, property
insurance, depreciation, and other related administrative costs. Property
management fees and utility expenses are paid directly by the tenants. A slight
decrease of cost of rental revenue was mainly due to a decrease of insurance
premiums of $1,078 and agency commission of $2,420 in 2021.
General and administrative expenses
G&A expenses were $3,525,332 and $2,633,729 for the nine months ended September
30, 2021, and September 30, 2020, respectively. For the nine months ended
September 30, 2021, G&A expenses consisted primarily of directors' compensation
of $493,461, salary and wages of $1,060,209, advertising and promotion expenses
of $307,552, other professional fees of $285,839, commission expenses of
$260,494, legal services fees of $177,868, rental expenses of $153,148 and
subscription fees of $151,363. We expect our G&A expenses to continue to
increase as we expect to integrate our business acquisitions, develop our
existing businesses, and explore new markets in other regions.
30
Other income or expenses
Net other expense was $11,096,555 and net other income was $5,139 for the nine
months ended September 30, 2021, and September 30, 2020, respectively. A fair
value gain on derivative liabilities associated with warrants was $67,422 and a
fair value gain on derivative liabilities of options associated with convertible
notes was $5,093,720 for the nine months ended September 30, 2021, compared to a
loss on change in fair value of derivative liabilities associated with warrants
of $28,149 for the nine months ended September 30, 2020. Interest expense was
$12,949,517, which mainly consisted of interest expense associated with
convertible notes of $12,899,670 for the nine months ended September 30, 2021,
while interest expense was $98,669, and no such interest expenses associated
with convertible notes for the nine months ended September 30, 2020. Loss on
extinguishment of convertible notes of $2,981,987 and impairment of other
investments of $5,340,300, were offset by a reversal of write-off notes
receivable of $5,000,000 for the nine months ended September 30, 2021.
Interest expenses
On October 13, 2020, the Company issued three unsecured promissory notes to
Streeterville Capital, LLC, FirstFire Global Opportunities Fund, LLC, and
Granite Global Value Investments Ltd. (collectively, the "Investors"),
respectively. The Company issued another unsecured promissory note to
Streeterville Capital, LLC ("Streeterville") on January 8, 2021, and February
11, 2021, respectively (see Note 6). Interest expenses related to the
convertible promissory notes totaled $12,899,670 for the nine months ended
September 30, 2021, which included coupon interest expense of $459,004,
amortization of discount on convertible notes of $206,342, amortization of debt
issuance costs of $76,380, interest expense associated with conversion of notes
of $2,254,480, interest expense associated with accretion of convertible notes
payable of $8,561,440, interest expense due to non-fulfillment of use of
proceeds requirements of $1,106,488 and additional charge for early redemption
of $235,536.
Total interest expenses were $12,949,517 and $98,669 for the nine months ended
September 30, 2021, and September 30, 2020, respectively.
Net Loss
Net loss was $13,106,274 and $1,235,479 for the nine months ended September 30,
2021, and September 30, 2020, respectively. An increase in net loss was mainly
due to an increase of G&A expenses, interest expenses associated with the
convertible promissory notes, loss on extinguishment of convertible notes and
impairment loss of other investments.
Income or loss attributable to noncontrolling interests
We record net income or loss attributable to noncontrolling interest in the
consolidated statements of operations for any noncontrolling interest of
consolidated subsidiaries.
On February 29, 2020, we sold our 60% interest in Yabez (Hong Kong) Limited and
its wholly owned subsidiary, Yabez Business Service (SZ) Company Limited
(collectively, "Yabez") due to continuing losses incurred by Yabez, to an
unrelated party for $1.
In July 2021, the Company acquired all the issued and outstanding shares of
common stock of Greenpro Capital Village Sdn. Bhd. ("GCVSB") from our director,
Mr. Lee Chong Kuang at a consideration of MYR167 (approximately $40) and
redeemed 347,000 shares out of total 504,750 shares of preferred stock from 25
preferred stock shareholders of GCVSB by issuance of 79,530 shares of the
Company's Common Stock valued at $69,191 or $0.87 per share. Total consideration
of the acquisition was $69,231. The Company acquired GCVSB to expand its
business consulting services.
On August 2, 2021, the Company sold its entire 100% interest in Greenpro Credit
Limited ("GCL") to an unrelated party for HK$30,000 (approximately $3,854), due
to continuing losses incurred by GCL.
As of September 30, 2021, the noncontrolling interest is related to a 40%
interest of our subsidiary, Forward Win International Limited and a 31% interest
in the preferred stock, representing 157,750 shares of a total 504,750 shares of
preferred stock of our newly acquired subsidiary, Greenpro Capital Village Sdn.
Bhd. ("GCVSB").
For the nine months ended September 30, 2021, and September 30, 2020, the
Company recorded net loss attributable to a noncontrolling interest of $10,537
and net income attributable to the noncontrolling interests of $28,424,
respectively.
There were no seasonal aspects that had a material effect on the financial
condition or results of operations of the Company.
Other than as disclosed elsewhere in this Quarterly Report, we are not aware of
any trends, uncertainties, demands, commitments or events for the nine months
ended September 30, 2021 that are reasonably likely to have a material adverse
effect on our financial condition, changes in our financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital
resources, or that would cause the disclosed financial information to be not
necessarily indicative of future operating results or financial conditions.
31
Off Balance Sheet Arrangements
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 as of September 30, 2021.
Contractual Obligations
As of September 30, 2021, one of our subsidiaries leased one office in Hong Kong
under a non-cancellable operating lease, with a term of two years commencing
from March 15, 2021, to March 14, 2023. Another subsidiary of the Company leased
an office in Malaysia under a non-cancellable operating lease with a term of one
year commencing from April 1, 2021, to March 31, 2022. As of September 30, 2021,
the future minimum rental payments under these leases in the aggregate are
approximately $142,759 and are due as follows: 2021: $27,064, 2022: $96,427 and
2023: $19,268.
Related Party Transactions
For the nine months ended September 30, 2021, and September 30, 2020, related
party service revenue totaled $739,949 and $181,417, respectively.
Net accounts receivable due from related parties was $41 and $152,475 as of
September 30, 2021, and December 31, 2020, respectively. Other receivable due
from related parties was $471,777 and $62,320 as of September 30, 2021, and
December 31, 2020, respectively. Amounts due to related parties were $760,503
and $1,108,641 as of September 30, 2021, and December 31, 2020, respectively.
Our related parties are primarily those companies where we own a certain
percentage of shares of such companies, and companies that we have determined
that we can significantly influence based on our common business relationships.
Refer to Note 9 to the Condensed Consolidated Financial Statements for
additional details regarding the related party transactions.
Critical Accounting Policies and Estimates
Use of estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting period.
Significant accounting estimates include certain assumptions related to, among
others, the allowance for doubtful accounts receivable, impairment analysis of
real estate assets and other long-term assets including goodwill, valuation
allowance on deferred income taxes, and the accrual of potential liabilities.
Actual results may differ from these estimates.
Revenue recognition
The Company follows the guidance of Accounting Standards Codification (ASC) 606,
Revenue from Contracts. ASC 606 creates a five-step model that requires entities
to exercise judgment when considering the terms of contracts, which includes (1)
identifying the contracts or agreements with a customer, (2) identifying our
performance obligations in the contract or agreement, (3) determining the
transaction price, (4) allocating the transaction price to the separate
performance obligations, and (5) recognizing revenue as each performance
obligation is satisfied. The Company only applies the five-step model to
contracts when it is probable that the Company will collect the consideration it
is entitled to in exchange for the services it transfers to its clients.
The Company's revenue consists of revenue from providing business consulting and
corporate advisory services ("service revenue"), revenue from the sale of real
estate properties, and revenue from the rental of real estate properties.
Impairment of long-lived assets
Long-lived assets primarily include real estate held for investment, property
and equipment, and intangible assets. In accordance with the provision of ASC
360, the Company generally conducts its annual impairment evaluation of its
long-lived assets in the fourth quarter of each year, or more frequently if
indicators of impairment exist, such as a significant sustained change in the
business climate. The recoverability of long-lived assets is measured at the
reporting unit level. If the total of the expected undiscounted future net cash
flows is less than the carrying amount of the asset, a loss is recognized for
the difference between the fair value and carrying amount of the asset. In
addition, for real estate held for sale, an impairment loss is the adjustment to
fair value less estimated cost to dispose of the asset.
Goodwill
Goodwill is the excess of cost of an acquired entity over the fair value of
amounts assigned to assets acquired and liabilities assumed in a business
combination. Under the guidance of ASC 350, goodwill is not amortized, rather it
is tested for impairment annually, and will be tested for impairment between
annual tests if an event occurs or circumstances change that would indicate the
carrying amount may be impaired. An impairment loss generally would be
recognized when the carrying amount of the reporting unit's net assets exceeds
the estimated fair value of the reporting unit and would be measured as the
excess carrying value of goodwill over the derived fair value of goodwill. The
Company's policy is to perform its annual impairment testing for its reporting
units on December 31, of each fiscal year.
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Derivative financial instruments
Derivative financial instruments consist of financial instruments that contain a
notional amount and one or more underlying variables such as interest rate,
security price, variable conversion rate or other variables, require no initial
net investment and permit net settlement. The derivative financial instruments
may be free-standing or embedded in other financial instruments. The Company
evaluates its financial instruments to determine if such instruments are
derivatives or contain features that qualify as embedded derivatives. The
Company follows the provision of ASC 815, Derivatives and Hedging for derivative
financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value and is then re-valued at each
reporting date, with changes in the fair value reported in the statements of
operations. The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is evaluated at the
end of each reporting period. Derivative instrument liabilities are classified
in the balance sheet as current or non-current based on whether net-cash
settlement of the derivative instrument could be required within 12 months of
the balance sheet date. At each reporting date, the Company reviews its
convertible securities to determine that their classification is appropriate.
Recent accounting pronouncements
Refer to Note 1 in the accompanying financial statements.
Liquidity and Capital Resources
Our cash balance on September 30, 2021, was $6,010,499, as compared to
$1,086,753 on December 31, 2020, it was increased by $4,923,746. We estimate the
Company currently has sufficient cash available to meet its anticipated working
capital for the next twelve months.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. During the nine
months ended September 30, 2021, the Company incurred a net loss of $13,106,274
and used cash in operations of $2,210,002. These factors raise substantial doubt
about the Company's ability to continue as a going concern within one year of
the date that the financial statements are issued. In addition, the Company's
independent registered public accounting firm, in its report on the Company's
financial statements on December 31, 2020, has expressed substantial doubt about
the Company's ability to continue as a going concern. The financial statements
do not include any adjustments that might be necessary if the Company is unable
to continue as a going concern.
The Company's ability to continue as a going concern is dependent upon improving
its profitability and the continuing financial support from its shareholders.
Management believes the existing shareholders or external financing will provide
the additional cash to meet the Company's obligations as they become due.
Despite the amount of funds that the Company has raised, no assurance can be
given that any future financing, if needed, will be available or, if available,
that it will be on terms that are satisfactory to the Company. Even if the
Company can obtain additional financing, if needed, it may contain undue
restrictions on its operations, in the case of debt financing, or cause
substantial dilution for its shareholders, in the case of equity financing.
Operating activities
Net cash used in operating activities was $2,210,002 and $845,125 for the nine
months ended September 30, 2021, and September 30, 2020, respectively. The cash
used in operating activities in 2021 was mainly due to net loss for the period
of $13,106,274, reversal of write-off notes receivable of $5,000,000, a fair
value gain of options associated with convertible notes of $5,093,720 and offset
by amortization and interest expenses associated with convertible notes of
$12,205,130, loss of extinguishment of convertible notes of $2,981,987 and
impairment of other investments of $5,340,300. For the nine months ended
September 30, 2021, non-cash adjustments totaled $10,782,488, were mainly
composed of non-cash expenses of interest expense associated with accretion of
convertible notes of $8,561,440, interest expense associated with conversion of
notes of $2,254,480, interest expense due to non-fulfillment of use of proceeds
requirements of $1,106,488, amortization of discount on convertible notes of
$206,342, amortization of debt issuance costs of $76,380, loss of extinguishment
of convertible notes of $2,981,987 and impairment of other investments of
$5,340,000, and offset by non-cash income of reversal of write-off notes
receivable of $5,000,000 and fair value gain of options associated with
convertible notes of $5,093,720.
Investing activities
Net cash provided by investing activities was $38,950 and $88,550 for the nine
months ended September 30, 2021, and September 30, 2020, respectively.
Financing activities
Net cash provided by financing activities was $7,016,119 and $83,918 for the
nine months ended September 30, 2021, and September 30, 2020, respectively.
The cash provided by financing activities in the nine months ended September 30,
2021 was mainly from the net proceeds of convertible notes of $5,210,000 and
collection of notes receivable of $5,000,000.
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GREENPRO CAPITAL CORP. 