The information contained in this Form 10-Q is intended to update the
information contained in our Annual Report on Amendment No. 1 to Form 10-K for
the year ended December 31, 2021 filed with the Securities and Exchange
Commission on July 18, 2022 (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.
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. 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-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, 2022 and 2021, we operated
in three regions: Hong Kong, Malaysia and China. We derived revenue from the
provision of services and sales or rental activities of our commercial
properties.
Comparison of the three months ended September 30, 2022 and 2021
Total revenue
Total revenue was $1,306,439 and $429,366 for the three months ended September
30, 2022 and 2021, respectively. The increased amount of $877,073 was primarily
due to an increase in the revenue from our business services of $229,439 and the
sale of two real estate property units of $652,788 during the period in 2022. We
expect revenue from our business services segment to steadily improve as we
expand our businesses into new territories and as the effects of the COVID-19
pandemic wane.
Service business revenue
Revenue from the provision of business services was $628,295 and $398,856 for
the three months ended September 30, 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 slight increase in service revenue as some listing service
obligations were completed during the three months ended September 30, 2022.
Real estate business
Sale of real estate properties
Revenue from the sale of real estate property was $652,788 for the three months
ended September 30, 2022, which was derived from the sale of two commercial
property units located in Hong Kong. There was no revenue generated from the
sale of real estate properties for the three months ended September 30, 2021.
Rental revenue
Revenue from rentals was $25,356 and $30,510 for the three months ended
September 30, 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.
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Total operating costs and expenses
Total operating costs and expenses were $1,536,785 and $1,060,087 for the three
months ended September 30, 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 three months ended September 30, 2022 and 2021 was
$230,346 and $630,721, respectively. A decrease in loss from operations was
mainly due to an increase in the gross profit from our business services of
$211,681 and the increased amount of $207,042 from the gross profit of the sale
of two real estate property units during the period in 2022.
Cost of service revenue
Cost of revenue on provision of services was $103,093 and $85,335 for the three
months ended September 30, 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.
An increase of cost-of-service revenue was mainly due to an increase of other
professional fees directly attributable to the services for the three months
ended September 30, 2022.
Cost of real estate properties sold
Cost of revenue on real estate properties sold was $445,746 for the three months
ended September 30, 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. There
was no revenue generated from the sale of real estate property for the three
months ended September 30, 2021, hence no cost was recorded.
Cost of rental revenue
Cost of rental revenue was $10,489 and $10,506 for the three months ended
September 30, 2022 and 2021, respectively. It includes the costs associated with
governmental charges, repairs and maintenance, property management fees and
insurance, depreciation, and other related administrative costs. Utility
expenses are borne and paid directly by individual tenants.
General and administrative expenses
General and administrative ("G&A") expenses were $977,457 and $964,246 for the
three months ended September 30, 2022 and 2021, respectively. For the three
months ended September 30, 2022, G&A expenses consisted primarily of employees'
salaries and allowances of $367,703, directors' salaries and compensation of
$162,944, advertising and promotion expenses of $120,638, other professional fee
of $79,032, legal service fee of $51,575 and consulting fees of $16,402. We
expect our G&A expenses will slightly increase as we integrate our business
acquisitions, expand our existing business, and develop new markets in other
regions.
Other income or expenses
Net other expenses were $222,459 and $5,414,154 for the three months ended
September 30, 2022 and 2021, respectively. Impairment of other investments was
$246,100 for the three months ended September 30, 2022, while impairment of
other investments was $2,094,300 for the three months ended September 30, 2021.
Fair value gains associated with warrants was $479 and 27,678 for the three
months ended September 30, 2022 and 2021, respectively. Reversal of write-off
notes receivable was $0 and $2,000,000 for the three months ended September 30,
2022 and 2021, respectively. Interest expense of $762,253 which mainly consisted
of interest expense associated with convertible notes of $750,982, and loss on
extinguishment of convertible notes of $4,593,366 were recorded for the three
months ended September 30, 2021, but no such interest expense or loss was
recorded during the same period in 2022.
Interest expenses
Total interest expenses were $0 and $762,253 for the three months ended
September 30, 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 $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.
Net loss
Net loss was $452,805 and $6,044,875 for the three months ended September 30,
2022 and 2021, respectively. A decrease in net loss was mainly due to a decrease
of impairment loss of other investments, and no interest expenses and loss on
extinguishment associated with the convertible promissory notes was recorded
during the three months ended September 30, 2022.
Net income or loss attributable to non-controlling interest
The Company records net income or loss attributable to non-controlling interest
in the consolidated statements of operations for any non-controlling interest of
consolidated subsidiaries.
For the three months ended September 30, 2022, the Company recorded net income
attributable to a non-controlling interest of $78,675, as compared to net loss
attributable to a non-controlling interest of $18,512 for the three months ended
September 30, 2021.
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Comparison of the nine months ended September 30, 2022 and 2021
Total revenue
Total revenue was $2,690,227 and $1,810,964 for the nine months ended September
30, 2022 and 2021, respectively. An increase of revenue was mainly due to an
increase in the revenue from our business services of $45,325 and the sale of
three real estate property units of $839,661 during the period in 2022. We
expect revenue from our business services segment to steadily improve as we
expand our businesses into new territories and as the effects of the COVID-19
pandemic wane.
Service business revenue
Revenue from the provision of business services was $1,760,880 and $1,715,555
for the nine months ended September 30, 2022 and 2021, respectively. It was
derived principally from business consulting and advisory services as well as
company secretarial, accounting, and financial analysis services. We experienced
a slight increase in service revenue as some listing service obligations were
completed during the nine months ended September 30, 2022.
Real estate business
Sale of real estate properties
Revenue from the sale of real estate properties was $839,661 for the nine months
ended September 30, 2022, which was derived from the sale of three commercial
property units located in Hong Kong. There was no revenue generated from the
sale of real estate property for the nine months ended September 30, 2021.
Rental revenue
Revenue from rentals was $89,686 and $95,409 for the nine months ended September
30, 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 $3,755,944 and $3,818,049 for the nine
months ended September 30, 2022 and 2021, respectively. They consist of
cost-of-service revenue, cost of real estate properties sold, cost of rental
revenue and G&A expenses.
Loss from operations for the nine months ended September 30, 2022 and 2021 was
$1,065,717 and $2,007,085, respectively. A decrease in loss from operations was
mainly due to the increased amount of $266,574 from the gross profit of the sale
of three real estate property units and the decreased amount of $615,101 from
the G&A expenses during the nine months ended September 30, 2022.
Cost of service revenue
Cost of revenue on provision of services were $239,437 and $256,905 for the nine
months ended September 30, 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. A
decrease of cost-of-service revenue was mainly due to a decrease of other
professional fees directly attributable to the services for the nine months
ended September 30, 2022.
Cost of real estate properties sold
Cost of revenue on real estate properties sold was $573,087 for the nine months
ended September 30, 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. There
was no revenue generated from the sale of real estate property for the nine
months ended September 30, 2021, hence no cost was recorded.
Cost of rental revenue
Cost of rental revenue was $33,189 and $35,812 for the nine months ended
September 30, 2022 and 2021, respectively. It includes the costs associated with
governmental charges, repairs and maintenance, property management fees and
insurance, depreciation, and other related administrative costs. Utility
expenses are borne and paid directly by individual tenants. A slight decrease of
cost of rental revenue was mainly due to a decrease in commission fees incurred
for the nine months ended September 30, 2022 as compared to the same fees
incurred for the nine months ended September 30, 2021.
General and administrative expenses
G&A expenses were $2,910,231 and $3,525,332 for the nine months ended September
30, 2022 and 2021, respectively. For the nine months ended September 30, 2022,
G&A expenses consisted primarily of employees' salaries and allowances of
$1,096,413, directors' salaries and compensation of $489,583, advertising and
promotion expenses of $277,094, other professional fee of $193,549, legal
service fee of $179,307 and consulting fee of $147,971. We expect our G&A
expenses will slightly increase as we integrate our business acquisitions,
expand our existing business, and develop new markets in other regions.
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Other income or expenses
Net other expenses were $1,347,582 and $11,096,555 for the nine months ended
September 30, 2022 and 2021, respectively. Impairment of other investments was
$1,459,900 for the nine months ended September 30, 2022, while impairment of
other investments was $5,340,300 for the nine months ended September 30, 2021.
Gain on change in fair value associated with warrants was $9,884 for the nine
months ended September 30, 2022, while a gain on change in fair value of
derivative liabilities was $5,161,142 which was composed of a fair value gain of
options associated with convertible notes of $5,093,720 and a fair value gain
associated with warrants of $67,422 for the nine months ended September 30,
2021. Reversal of write-off notes receivable was $0 and $5,000,000 for the nine
months ended September 30, 2022 and 2021, respectively. No interest expense was
incurred for the nine months ended September 30, 2022, as compared to interest
expense of $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. Loss on extinguishment of convertible notes of $2,981,987 was recorded for
the nine months ended September 30, 2021, but no such loss was recorded during
the same period in 2022.
Interest expenses
Total interest expenses were $0 and $12,949,517 for the nine months ended
September 30, 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 $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.
Net Loss
Net loss was $2,414,835 and $13,106,274 for the nine months ended September 30,
2022 and 2021, respectively. A decrease in net loss was mainly due to a decrease
of impairment loss of other investments, and no interest expenses and loss on
extinguishment associated with the convertible promissory notes were recorded
during the nine months ended September 30, 2022.
Net income or loss attributable to non-controlling interest
We record net income or loss attributable to non-controlling interest in the
consolidated statements of operations for any non-controlling interest of
consolidated subsidiaries.
At September 30, 2022, the non-controlling interest is related to Forward Win
International Limited ("FWIL"), which the Company owns a 60% interest in and the
non-controlling shareholders own the remaining 40% interest.
For the nine months ended September 30, 2022, the Company recorded net income
attributable to a non-controlling interest of $96,107, as compared to net loss
attributable to a non-controlling interest of $10,537 for the nine months ended
September 30, 2021.
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, 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.
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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, 2022.
Contractual Obligations
As of September 30, 2022, one of our subsidiaries leases 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. One of the Malaysian subsidiaries leases
an office in Kuala Lumpur and the other Malaysian subsidiary leases one office
in Labuan, which are under a separate non-cancellable operating lease with terms
of one year, from April 1, 2022 to March 31, 2023, and from June 15, 2022 to
June 14, 2023, respectively. As of September 30, 2022, the future minimum rental
payments under these leases in the aggregate are approximately $52,822 and are
due as follows: 2022: $27,783 and 2023: $25,039.
Related Party Transactions
Net accounts receivable due from a related party was $0 and $41 as of September
30, 2022 and December 31, 2021, respectively. Deposit paid to a related party
was $80,000 and $0 as of September 30, 2022 and December 31, 2021, respectively.
Other receivable due from related parties was $1,370,463 and $1,170,855 as of
September 30, 2022 and December 31, 2021, respectively. Amounts due to related
parties were $531,969 and $757,283 as of September 30, 2022 and December 31,
2021, respectively.
For the nine months ended September 30, 2022 and 2021, related party service
revenue totaled $548,602 and $739,949, respectively.
G&A expenses to related parties were $53,689 and $9,873 for the nine months
ended September 30, 2022 and 2021, respectively.
For the nine months ended September 30, 2022 and 2021, other income from a
related party was $1,123 and $0, respectively. Impairment of investments in
related parties was $1,459,900 and $5,340,300 for the nine months ended
September 30, 2022 and 2021, 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 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.
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.
Reverse Stock Split
A 10-for-1 reverse stock split, or the Reverse Stock Split, of our Common Stock
became effective on July 28, 2022. Unless expressly stated herein, all
outstanding shares and per share amounts of the Company's Common Stock in this
Quarterly Report have been adjusted to reflect the Reverse Stock Split.
Recent accounting pronouncements
Refer to Note 1 in the accompanying financial statements.
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Liquidity and Capital Resources
Our cash and cash equivalents at September 30, 2022 were $3,646,166, while at
December 31, 2021, the cash and cash equivalents were $5,338,571, a decrease of
$1,692,405. 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, 2022, the Company incurred a net loss of $2,414,835
and net cash used in operations of $2,157,380. 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 in the past, 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 $2,157,380 and $2,210,002 for the nine
months ended September 30, 2022 and 2021, respectively. The net cash used in
operating activities in 2022 primarily consisted of a net loss for the period of
$2,414,835, an increase in prepayments and other current assets of $625,718, a
decrease in accounts payable and accrued liabilities of $429,321 and a gain on
sale of real estate held for sale of $266,574, while it was offset by impairment
of other investments of $1,459,900 and an increase in deferred revenue of
$136,198. For the nine months ended September 30, 2022, non-cash adjustments
totaled $1,367,070, which was mostly composed of non-cash expenses of impairment
of other investments of $1,459,900.
Investing activities
Net cash provided by investing activities was $836,167 and $38,950 for the nine
months ended September 30, 2022 and 2021, respectively. The net cash provided by
investing activities in 2022 primarily was the proceeds from real estate held
for sale of $839,661.
Financing activities
Net cash used in financing activities for the nine months ended September 30,
2022 was $416,382, as compared to net cash provided by financing activities of
$7,016,119 for the nine months ended September 30, 2021.
The cash used in financing activities in 2022 was advances to related parties of
$416,382.
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