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 six months ended June 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.
The Company effected a 10:1 reverse split of its common stock on July 28, 2022.
Comparison of the three months ended June 30, 2022 and 2021
Total revenue
Total revenue was $807,942 and $792,025 for the three months ended June 30, 2022
and 2021, respectively. The increased amount of $15,917 was primarily due to an
increase in the revenue from our business services. 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 $777,552 and $757,364 for
the three months ended June 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 June 30, 2022.
Real estate business
Sale of real estate properties
There was no revenue generated from the sale of real estate properties for the
three months ended June 30, 2022 and 2021, respectively.
Rental revenue
Revenue from rentals was $30,390 and $34,661 for the three months ended June 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 $1,112,610 and $1,281,091 for the three
months ended June 30, 2022 and 2021, respectively. They consist of
cost-of-service revenue, cost of rental revenue, and general and administrative
expenses.
Loss from operations for the three months ended June 30, 2022 and 2021 was
$304,668 and $489,066, respectively. A decrease in loss from operations was
mainly due to a decrease in general and administrative expenses of $151,197.
Cost of service revenue
Cost of revenue on provision of services was $72,068 and $87,768 for the three
months ended June 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 three months
ended June 30, 2022.
Cost of real estate properties sold
There was no cost incurred for the sale of real estate properties for the three
months ended June 30, 2022 and 2021, respectively.
Cost of rental revenue
Cost of rental revenue was $11,907 and $13,491 for the three months ended June
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 three months ended June 30, 2022 as compared to the same fee incurred
for the three months ended June 30, 2021.
General and administrative expenses
General and administrative ("G&A") expenses were $1,028,635 and $1,179,832 for
the three months ended June 30, 2022 and 2021, respectively. For the three
months ended June 30, 2022, G&A expenses consisted primarily of employees'
salaries and allowances of $381,974, directors' salaries and compensation of
$162,995, advertising and promotion expenses of $118,747, legal service fee of
$83,057, consulting fees of $69,782, and other professional fees of $51,129,
respectively. 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 $645,956 and $274,557 for the three months ended June
30, 2022 and 2021, respectively. Impairment of other investment was $677,400 for
the three months ended June 30, 2022, while impairment of other investment was
$3,246,000 for the three months ended June 30, 2021. Fair value gains associated
with warrants was $3,503 for the three months ended June 30, 2022, while a loss
on change in fair value of derivative liabilities was $83,935 which was composed
of fair value loss of options associated with convertible notes of $143,200 and
offset by a fair value gain associated with warrants of $59,265 for the three
months ended June 30, 2021. Interest expense was $0 for the three months ended
June 30, 2022, while interest expense was $1,560,226 which mainly consisted of
interest expense associated with convertible notes of $1,540,977 for the three
months ended June 30, 2021. Gain on extinguishment of convertible notes of
$1,611,379 and reversal of write-off notes receivable of $3,000,000 were
recorded for the three months ended June 30, 2021, but no such gain or reversal
was recorded during the same period in 2022.
Interest expenses
Total interest expenses were $0 and $1,560,226 for the three months ended June
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 $1,540,977
for the three months ended June 30, 2021, which included coupon interest expense
of $188,717, amortization of discount on convertible notes of $89,281,
amortization of debt issuance costs of $32,029, interest expense associated with
conversion of notes of $995,312 and additional charge for early redemption of
$235,638.
Net loss
Net loss was $952,160 and $766,257 for the three months ended June 30, 2022 and
2021, respectively. An increase in net loss was mainly due to a decrease in
other income in three months ended June 30, 2022.
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 June 30, 2022, the Company recorded net loss
attributable to a noncontrolling interest of $6,380, as compared to net income
attributable to a noncontrolling interest of $4,597 for the three months ended
June 30, 2021.
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Comparison of the six months ended June 30, 2022 and 2021
Total revenue
Total revenue was $1,383,788 and $1,381,598 for the six months ended June 30,
2022 and 2021, respectively. A slight increase of revenue was mainly due to the
sale of one-unit real estate property of $186,873 and offset by a decreased
service revenue of $184,114. 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 $1,132,585 and $1,316,699
for the six months ended June 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
decreased revenue of $184,114, mainly due to a decrease of revenue from listing
services for the six months ended June 30, 2022 in comparison with the same
period in 2021.
Real estate business
Sale of real estate properties
Revenue from the sale of real estate property was $186,873 for the six months
ended June 30, 2022, which was derived from the sale of one commercial property
located in Hong Kong. There was no revenue generated from the sale of real
estate property for the six months ended June 30, 2021.
Rental revenue
Revenue from rentals was $64,330 and $64,899 for the six months ended June 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 $2,219,159 and $2,757,962 for the six
months ended June 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. The Company incurred $1,932,774 and $2,561,086 of G&A
expenses for the six months ended June 30, 2022 and 2021, respectively.
Cost of service revenue
Cost of revenue on provision of services were $136,344 and $171,570 for the six
months ended June 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 six months ended
June 30, 2022.
Cost of real estate properties sold
Cost of revenue on real estate property sold was $127,341 for the six months
ended June 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 six months ended
June 30, 2021, hence no cost was recorded.
Cost of rental revenue
Cost of rental revenue was $22,700 and $25,306 for the six months ended June 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 six
months ended June 30, 2022 as compared to the same fees incurred for the six
months ended June 30, 2021.
General and administrative expenses
G&A expenses were $1,932,774 and $2,561,086 for the six months ended June 30,
2022 and 2021, respectively. For the six months ended June 30, 2022, G&A
expenses consisted primarily of employees' salaries and allowances of $728,710,
directors' salaries and compensation of $326,639, advertising and promotion
expenses of $156,456, consulting fee of $131,569, legal service fee of $127,732,
and other professional fee of $114,517, respectively. 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.
21
Other income or expenses
Net other expenses were $1,125,123 and $5,682,401 for the six months ended June
30, 2022 and 2021, respectively. Impairment of other investment was $1,213,800
for the six months ended June 30, 2022, while impairment of the same investment
was $3,246,000 for the six months ended June 30, 2021. Gain on change in fair
value associated with warrants was $9,405 for the six months ended June 30,
2022, while a gain on change in fair value of derivative liabilities was
$5,133,464 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 $39,744 for the six months ended June 30, 2021. No interest expense was
incurred for the six months ended June 30, 2022, as compared to interest expense
of $12,187,264 which mainly consisted of interest expense associated convertible
notes of $12,148,688 for the six months ended June 30, 2021. Gain on
extinguishment of convertible notes of $1,611,379 and reversal of write-off
notes receivable of $3,000,000 were recorded for the six months ended June 30,
2021, but no such gain or reversal was recorded during the same period in 2022.
Interest expenses
Total interest expenses were $0 and $12,187,264 for the six months ended June
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
$12,148,688 for the six months ended June 30, 2021, which included coupon
interest expense of $328,409, amortization of discount on convertible notes of
$160,077, amortization of debt issuance costs of $56,959, interest expense
associated with conversion of notes of $1,700,909, 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 $1,105,256 and additional
charge for early redemption of $235,638.
Net Loss
Net loss was $1,962,030 and $7,061,399 for the six months ended June 30, 2022
and 2021, respectively. A decrease in net loss was mainly due to a decrease of
G&A expenses, interest expenses associated with the aforementioned convertible
promissory notes and an impairment loss of other investments.
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 June 30, 2022, the noncontrolling interest is related to Forward Win
International Limited ("FWIL"), which the Company owns a 60% interest in FWIL
and the noncontrolling shareholders own the remaining 40% interest of FWIL.
For the six months ended June 30, 2022 and 2021, we recorded net income
attributable to a noncontrolling interest of $17,432 and $7,975, 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 six months
ended June 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 June 30, 2022.
Contractual Obligations
As of June 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 June 30, 2022, the future minimum rental
payments under these leases in the aggregate are approximately $81,438 and are
due as follows: 2022: $56,085 and 2023: $25,353.
Related Party Transactions
Net accounts receivable due from related parties was $0 and $41 as of June 30,
2022 and December 31, 2021, respectively. Other receivable due from related
parties was $1,230,661 and $1,170,855 as of June 30, 2022 and December 31, 2021,
respectively. Amounts due to related parties were $716,996 and $757,283 as of
June 30, 2022 and December 31, 2021, respectively.
For the six months ended June 30, 2022 and 2021, related party service revenue
totaled $507,171 and $664,989, respectively.
General and administrative ("G&A") expenses to related parties were $36,228 and
$6,973 for the six months ended June 30, 2022 and 2021, respectively. Impairment
of investment in a related party was $1,213,800 and $3,246,000 for the six
months ended June 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.
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 June 30, 2022 were $4,094,007, while at
December 31, 2021, the cash and cash equivalents were $5,338,571. It was
decreased by $1,244,564. 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 six
months ended June 30, 2022, the Company incurred a net loss of $1,962,030 and
net cash used in operations of $1,364,723. 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 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 $1,364,723 and $1,294,682 for the six
months ended June 30, 2022 and 2021, respectively. The cash used in operating
activities in 2022 primarily consisted of a net loss for the period of
$1,962,030, an increase in prepayments and other current assets of $434,859 and
a decrease in accounts payable and accrued liabilities of $447,066 and offset by
impairment of other investment of $1,213,800 and an increase in deferred revenue
of $319,412. For the six months ended June 30, 2022, non-cash adjustments
totaled $1,269,975, which was mostly composed of non-cash expenses of impairment
of other investment of $1,213,800.
Investing activities
Net cash provided by investing activities for the six months ended June 30, 2022
was $180,590, as compared to net cash used in investing activities of $38,583
for the six months ended June 30, 2021.
Financing activities
Net cash used in financing activities for the six months ended June 30, 2022 was
$93,768, as compared to net cash provided by financing activities of $6,982,991
for the six months ended June 30, 2021.
The cash used in financing activities in 2022 was advances to related parties of
$93,768.
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