The information contained in this Form 10-Q is intended to update the
information contained in our Annual Report on Form 10-K for the year ended
December 31, 2021 filed with the Securities and Exchange Commission on March 29,
2022 (the "Form 10-K") 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
financial statements and the notes to the 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 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 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. 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 improving 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-ups 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-ups 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.
21
During the three months ended March 31, 2022 and 2021, we operated in three
regions: Hong Kong, Malaysia and China. We derived revenues from the provision
of services and sales or rental activities of our real estate properties.
Comparison of the three months ended March 31, 2022 and 2021
Total Revenue
Total revenue was $575,846 and $589,573 for the three months ended March 31,
2022 and 2021, respectively. The decrease revenue by $13,727 was primarily due
to a decrease in the revenue of business services. We expect revenue from our
business services segment will be improved in the next few months, as the
effects of the COVID-19 pandemic wanes and stabilizes.
Service Business
Business service revenue
Revenue from the provision of business services was $355,033 and $559,335 for
the three months ended March 31, 2022 and 2021, 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
experienced a decrease in service income as the performance obligations for some
listing services have not been completed during the period ended March 31, 2022.
Real Estate Business
Sale of real estate properties
Revenue from the sale of real estate property was $186,873 for the three months
ended March 31, 2022, which was derived from the sale of one unit of real estate
property located in Hong Kong. There was no revenue generated from the sale of
real estate property for the three months ended March 31, 2021.
Rental revenue
Revenue from rentals was $33,940 and $30,238 for the three months ended March
31, 2022 and 2021, respectively. It was derived principally from leasing
properties in Malaysia and Hong Kong. We believe our rental income will be
stable in the near future.
Total Operating Costs and Expenses
Total operating costs and expenses were $1,106,549 and $1,476,871 for the three
months ended March 31, 2022 and 2021, 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 Company for the three months ended March 31, 2022
and 2021 was $530,703 and $887,298, respectively. The decrease in a loss from
operations was mainly due to a decrease in general and administrative expenses
of $477,115.
Cost of service revenue
Cost of revenue on provision of services was $64,276 and $83,802 for the three
months ended March 31, 2022 and 2021, respectively. It primarily consists of
employee compensation and related payroll benefits, company formation costs, and
other professional fees directly attributable to the services rendered.
Cost of real estate properties sold
Cost of revenue on real estate property sold was $127,341 for the three months
ended March 31, 2022. 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. No sales of real
estate property occurred for the three months ended March 31, 2021, hence no
cost of real estate sold was recorded.
Cost of rental revenue
Cost of rental revenue was $10,793 and $11,815 for the three months ended March
31, 2022 and 2021, respectively. It includes the costs associated with
governmental charges, building management fees, repairs and maintenance,
property insurance, depreciation and other related administrative costs.
22
General and administrative expenses
General and administrative ("G&A") expenses were $904,139 and $1,381,254 for the
three months ended March 31, 2022 and 2021, respectively. For the three months
ended March 31, 2022, G&A expenses consisted primarily of employees' salaries
and allowances of $346,736, directors' salaries and compensation of $163,644,
legal and other professional fees of $108,063, and consulting fees of $61,787.
We expect our G&A expenses will continue to increase as we integrate our
business acquisitions, expand our existing business and develop new markets in
other regions.
Other Income or Expense
Net other expenses were $479,167 and $5,407,844 for the three months ended March
31, 2022 and 2021, respectively. Impairment of other investment was $536,400 for
the three months ended March 31, 2022, but no such impairment was recorded
during the same period in 2021. Gain on change in fair value of derivative
liabilities associated with warrants was $5,902 for the three months ended March
31, 2022, while gain on change in fair value of derivative liabilities was
$5,217,399, which was composed of a fair value gain associated with convertible
notes of $5,236,920 and a fair value loss associated with warrants of $19,521
for the three months ended March 31, 2021. Interest expense was $0 for the three
months ended March 31, 2022, while interest expense was $10,627,038, which
mainly consisted of interest expense associated convertible notes of $10,607,711
for the three months ended March 31, 2021.
Interest expenses
Total interest expenses were $0 and $10,627,038 for the three months ended March
31, 2022 and 2021, respectively.
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.
Interest expenses related to the convertible promissory notes totaled
$10,607,711 for the three months ended March 31, 2021, which included coupon
interest expense of $139,692, amortization of discount on convertible notes of
$70,796, amortization of debt issuance costs of $24,930, interest expense
associated with conversion of notes of $705,597, interest expense associated
with accretion of convertible notes payable of $8,561,440 and interest expense
due to non-fulfillment of use of proceeds requirements of $1,105,256.
Net Loss
Net loss was $1,009,870 and $6,295,142 for the three months ended March 31, 2022
and 2021, respectively. The decrease in net loss was mainly due to a decrease of
G&A expenses and no interest expenses were incurred in 2022.
Net Income or Loss Attributable to Noncontrolling Interest
We record net income or loss attributable to noncontrolling interest in the
consolidated statements of operations for any noncontrolling interest of
consolidated subsidiaries.
At March 31, 2022, the noncontrolling interest is related to the Company's 60%
ownership of Forward Win International Limited.
For the three months ended March 31, 2022 and 2021, we recorded net income
attributable to a noncontrolling interest of $23,812 and $3,378, respectively.
23
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 three months
ended March 31, 2022 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.
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 March 31, 2022.
Contractual Obligations
As of March 31, 2022, 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, 2022 to March 31, 2023. As of March 31, 2022, the
future minimum rental payments under these leases in the aggregate are
approximately $103,791 and are due as follows: 2022: $80,716 and 2023: $23,075.
Related Party Transactions
Accounts receivable due from related parties was $548 and $41 as of March 31,
2022 and December 31, 2021, respectively. Other receivable due from related
parties was $1,291,171 and $1,170,855 as of March 31, 2022 and December 31,
2021, respectively. The amounts due to related parties was $701,949 and $757,283
as of March 31, 2022 and December 31, 2021, respectively.
For the three months ended March 31, 2022 and 2021, related party service
revenue totaled $59,085 and $288,471, respectively.
General and administrative ("G&A") expenses to related parties were $18,511 and
$5,524 for the three months ended March 31, 2022 and 2021, respectively.
Impairment of investment in a related party was $536,400 for the three months
ended March 31, 2022.
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 7 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.
24
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 at March 31, 2022 was $4,560,884 as compared to $5,338,571 at
December 31, 2021. 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 three
months ended March 31, 2022, the Company incurred a net loss of $1,009,870 and
net cash used in operations of $774,931. 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
December 31, 2021 financial statements, 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 major
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 is able to 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 $774,931 for the three months ended
March 31, 2022 as compared to net cash used in operating activities of $788,464
for the three months ended March 31, 2021. The cash used in operating activities
in 2022 was mainly from the net loss for the period of $1,009,870 and a decrease
in accounts payable and accrued liabilities of $382,457 and offset by impairment
of other investment of $536,400 and an increase in deferred revenue of $216,211.
For the three months ended March 31, 2022, non-cash adjustments totaled
$535,790, which was mostly composed of the non-cash expenses of impairment of
other investment of $536,400.
25
Investing activities
Net cash provided by investing activities for the three months ended March 31,
2022 was $181,466 while net cash used in investing activities for the three
months ended March 31, 2021 was $3,988.
Financing activities
Net cash used in financing activities for the three months ended March 31, 2022
was $172,568 while net cash provided by financing activities for the three
months ended March 31, 2021 was $5,169,291.
The cash used in financing activities in 2022 was advances to related parties of
$172,568.
© Edgar Online, source Glimpses
GREENPRO CAPITAL CORP. 
