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 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/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 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.
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During the three months ended March 31, 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 March 31, 2021 and 2020
Total Revenues
Total revenue was $589,573 and $816,541 for the three months ended March 31,
2021 and 2020, respectively. The decreased amount of $226,968 was primarily due
to a decrease in the revenue of business services. We expect revenue from our
business services segment to steadily increase as we continue to grow our
business and expand into new territories.
Service Business Revenue
Revenue from the provision of business services was $559,335 and $793,713 for
the three months ended March 31, 2021 and 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
experienced a decrease in service income as a result of fewer service orders
placed from clients during the period due to the impact of the COVID-19
pandemic.
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 March 31, 2021 and 2020, respectively.
Rental Revenue
Revenue from rentals was $30,238 and $22,828 for the three months ended March
31, 2021 and 2020, 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 $1,476,871 and $1,050,048 for the three
months ended March 31, 2021 and 2020, respectively. They consist of cost of
service revenue, cost of rental revenue, and general and administrative
expenses.
The losses from operations for the Company for the three months ended March 31,
2021 and 2020 was $887,298 and $233,507, respectively. The increase in a loss
from operations was mainly due to an increase in general and administrative
expenses of $471,347.
Cost of service revenue
Cost of revenue on provision of services was $83,802 and $128,507 for the three
months ended March 31, 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.
Cost of real estate properties sold
There was no revenue generated from the sale of real estate property for the
three months ended March 31, 2021 and 2020, respectively, hence no cost of real
estate properties sold was recorded accordingly.
Cost of rental revenue
Cost of rental revenue was $11,815 and $11,634 for the three months ended March
31, 2021 and 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.
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General and administrative expenses
General and administrative ("G&A") expenses were $1,381,254 and $909,907 for the
three months ended March 31, 2021 and 2020, respectively. For the three months
ended March 31, 2021, G&A expenses consisted primarily of salary and wages of
$361,213, rental expenses of $77,644, advertising and promotion expenses of
$142,434, commission expenses of $260,494 and directors' compensation of
$164,634. We expect our G&A expenses to continue to increase as we integrate our
business acquisitions, expand our existing business and develop new markets in
other regions.
Other income (expense)
Net other expenses were ($5,407,844) and ($9,008) for the three months ended
March 31, 2021 and 2020, respectively. 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, while gain
on change in fair value of derivative liabilities associated with warrants was
$15,456 for the three months ended March 31, 2020. 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, while interest
expense was $33,604 for the three months ended March 31, 2020.
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 5). 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.
Total interest expenses were $10,627,038 and $33,604 for the three months ended
March 31, 2021 and 2020, respectively.
Net loss
Net loss was $6,295,142 and $242,515 for the three months ended March 31, 2021
and 2020, respectively. The increase in net loss was mainly due to an increase
of G&A expenses and interest expenses associated with the aforementioned
convertible promissory notes in 2021.
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.
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 $1.00.
At March 31, 2021, the noncontrolling interest is related to the Company's 60%
ownership of Forward Win International Limited.
For the three months ended March 31, 2021 and 2020, we recorded net income
attributable to a noncontrolling interest of $3,378 and $700, respectively.
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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, 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.
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, 2021.
Contractual Obligations
As of March 31, 2021, two of our subsidiaries leased two offices in Hong Kong
under two non-cancellable operating leases, one of which has a term of three
years commencing from May 1, 2018 to April 30, 2021 and the other 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 March 31, 2021, the future minimum rental payments under these leases in
the aggregate are approximately $211,462 and are due as follows: 2021: $95,565,
2022: $96,602 and 2023: $19,295.
Related Party Transactions
For the three months ended March 31, 2021 and 2020, related party service
revenue totaled $288,471 and $50,843, respectively.
Accounts receivable due from related parties was $68,781 and $152,475 as of
March 31, 2021 and December 31, 2020, respectively. Other receivable due from
related parties was $61,165 and $62,320 as of March 31, 2021 and December 31,
2020, respectively. The amounts due to related parties was $1,102,567 and
$1,108,641 as of March 31, 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 8 to the Condensed Consolidated Financial Statements for
additional details regarding the related party transactions.
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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 at March 31, 2021 increased to $5,456,654 as compared to
$1,086,753 at December 31, 2020. 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, 2021, the Company incurred a net loss of $6,295,142 and
used cash in operations of $788,464. 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,
2020 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 $788,464 for the three months ended
March 31, 2021 as compared to net cash used in operating activities of $572,935
for the three months ended March 31, 2020. The cash used in operating activities
in 2021 was mainly from the net loss for the period of $6,259,142, a change in
fair value of options associated with convertible notes of $5,236,920 and offset
by amortization and interest expenses associated with convertible notes of
$10,468,018. For the three months ended March 31, 2021, non-cash adjustments
totaled $5,373,849, which was mostly 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 $705,596, interest expense due to
non-fulfillment of use of proceeds requirements of $1,105,256 and amortization
of discount on convertible notes and debt issuance costs of $95,726 and offset
by non-cash income of change in fair value of options associated with
convertible notes of $5,236,920.
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Investing activities
Net cash used in investing activities was $3,988 and $24,887 for the three
months ended March 31, 2021 and 2020, respectively.
Financing activities
Net cash provided by financing activities was $5,169,291 and $22,661 for the
three months ended March 31, 2021 and 2020, respectively.
The cash provided by financing activities in 2021 was mainly from the net
proceeds of convertible notes of $5,210,000.
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