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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Greenpro Capital Corp.    GRNQ

GREENPRO CAPITAL CORP.

(GRNQ)
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GREENPRO CAPITAL : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

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08/14/2020 | 06:18am EDT

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, 2019 filed with the Securities and Exchange Commission on March 30, 2020 (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-up and high growth companies to support such companies during critical growth periods, which will include education and support services, and (2) searching the 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.



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During the three and six months ended June 30, 2020 and 2019, 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 June 30, 2020 and 2019



Total revenue


Total revenue was $401,140 and $1,701,714 for the three months ended June 30, 2020 and 2019, respectively. The decreased amount of $1,300,574 was primarily due to a decrease in the revenue of business services. We expect revenue from our business services segment to decrease in the next few months due to the impact of the COVID-19 pandemic.



Service business revenue


Revenue from the provision of business services was $368,460 and $1,678,783 for the three months ended June 30, 2020 and 2019, 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 less service orders placed from clients during the period due to the impact of the COVID-19 pandemic.




Real estate business



Rental revenue


Revenue from rentals was $32,680 and $22,931 for the three months ended June 30, 2020 and 2019, 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 was $939,829 and $1,835,740 for the three months ended June 30, 2020 and 2019, 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 June 30, 2020 and 2019 was $538,689 and $134,026, respectively. The increase in loss from operations was mainly due to a decrease in service revenue.



Cost of service revenue


Cost of revenue on provision of services was $71,937 and $609,098 for the three months ended June 30, 2020 and 2019, 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 rental revenue


Cost of rental revenue was $14,607 and $10,201 for the three months ended June 30, 2020 and 2019, 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 $853,285 and $1,216,441 for the three months ended June 30, 2020 and 2019, respectively. For the three months ended June 30, 2020, general and administrative expenses consisted primarily of salary and wages of $370,589, rental expenses of $71,303, other professional fees of $82,381, and directors' compensation of $98,831. 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)


For the three months ended June 30, 2020, net other expense was ($24,526) as compared to net other income of $73,103 for the three months ended June 30, 2019. Loss on changes in fair value of derivative liabilities was $55,409 for the three months ended June 30, 2020. Gain on changes in fair value of derivative liabilities was $43,916 for the three months ended June 30, 2019.



Net loss


The net loss was $563,215 and $65,228 for the three months ended June 30, 2020 and 2019, respectively. The increase in net loss was mainly due to a decrease of service revenue in 2020.

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, 2020 and 2019, the Company recorded net income attributable to a noncontrolling interest of $3,562 and net loss attributable to the noncontrolling interests of $29,092, respectively.

Comparison of the six months ended June 30, 2020 and 2019



Total revenue


Total revenue was $1,217,681 and $2,163,762 for the six months ended June 30, 2020 and 2019, respectively. The decrease of $946,081 was due to a decrease of revenue in business services and a decrease in our client base. We expect revenue from our business services segment to decrease in the next few months due to the impact of the COVID-19 pandemic.



Service business revenue


Revenue from the provision of business services was $1,162,173 and $2,111,842 for the six months ended June 30, 2020 and 2019, respectively. It was derived principally from 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 less service orders placed from clients during the period due to the impact of the COVID-19 pandemic.



Real estate business



Rental revenue


Revenue from rentals was $55,508 and $51,920 for the six months ended June 30, 2020 and 2019, 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 was $1,989,877 and $2,988,284 for the six months ended June 30, 2020 and 2019, respectively. They consist of cost of service revenue, cost of real estate properties sold, cost of rental revenue and G&A expenses.




Cost of service revenue



Costs of revenue on provision of services were $200,444 and $778,190 for the six months ended June 30, 2020 and 2019, 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 rental revenue


Cost of rental revenue was $26,241 and $23,752 for the six months ended June 30, 2020 and 2019, respectively. It includes the costs associated with government rent and rates, repairs and maintenance, property insurance, depreciation and other related administrative costs. Property management fees and utility expenses are paid directly by the tenants.



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General and administrative expenses

General and administrative ("G&A") expenses were $1,763,192 and $2,186,342 for the six months ended June 30, 2020 and 2019, respectively. For the six months ended June 30, 2020, G&A expenses consist primarily of salary and wages of $799,980, rental expenses of $172,030, other professional fees of $107,676, and directors' remuneration of $197,426. We expect our G&A expenses to continue to increase as we expect to integrate our business acquisitions, deepen our existing businesses and develop new markets in other regions.



Other income (expense)


For the six months ended June 30, 2020, net other expense was ($33,534) as compared to net other income of $205,136 for the six months ended June 30, 2019. Loss on changes in fair value of derivative liabilities was $39,953 for the six months ended June 30, 2020. Gain on changes in fair value of derivative liabilities was $184,565 for the six months ended June 30, 2019.



Net Loss


The net loss was $805,730 and $627,117 for the six months ended June 30, 2020 and 2019, respectively. The increase in net loss was mainly due to a decrease of service revenue in 2020.

Income or loss attributable to noncontrolling interests

The Company records income or loss attributable to noncontrolling interests in the consolidated statements of operations for any noncontrolling interests of consolidated subsidiaries.

At June 30, 2019, noncontrolling interests are related to the Company's respective 60% ownership of Forward Win International Limited, Yabez (Hong Kong) Company Limited and Yabez Business Service (SZ) Company Limited.

On February 29, 2020, the Company sold its 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.

On April 23, 2020, the Company sold 40% of the outstanding shares of Greenpro New Finance Academy Limited (formerly known as Greenpro Synergy Network Limited) and its wholly owned subsidiary, Greenpro Synergy Network (Shenzhen) Limited (collectively, "GSN") to Mr. Yip Hoi Hing Peter, a director of certain controlled subsidiaries of the Company ("Mr. Yip") for HK$1 (approximately $0.13).

On May 4, 2020, the Company disposed 40% shareholdings of Greenpro Family Office Limited ("GFO") to Mr. Yip for HK$1 (approximately $0.13).

On May 20, 2020, Greenpro Venture Cap (Qianhai) Limited, a wholly owned subsidiary of the Company ("GVCQH"), allotted an additional 196 shares to Mr. Yip at the aggregate price of $196. As a result, the Company holds a 2% interest in GVCQH, and GVCQH's sole asset, cash of $129, was disposed and a loss on disposal of $125 was recorded.

At June 30, 2020, the noncontrolling interest is related to the Company's respective 60% ownership of Forward Win International Limited, GFO and GSN.

For the six months ended June 30, 2020 and 2019, the Company recorded net income attributable to noncontrolling interests of $4,262 and net loss attributable to noncontrolling interests of $39,827, 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, 2020 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, 2020.



Contractual Obligations


As of June 30, 2020, one of the subsidiaries of the Company leases an office in Hong Kong under a non-cancellable operating lease with a term of three years commencing from May 1, 2018 to April 30, 2021. Another subsidiary of the Company leases an office in Malaysia under a non-cancellable operating lease with a term of one year commencing from April 1, 2020 to March 31, 2021. At June 30, 2020, the future minimum rental payments under these leases in the aggregate are approximately $231,187 and are due as follows: 2020: $139,502, and 2021: $91,685.




Related Party Transactions



For the six months ended June 30, 2020 and 2019, related party service revenue totaled $107,971 and $1,313,464, respectively.

Accounts receivable due from related parties was $126 and $0 as of June 30, 2020 and December 31, 2019, respectively. Other receivable due from related parties was $61,032 and $61,623 as of June 30, 2020 and December 31, 2019, respectively. The amounts due to related parties was $1,222,948 and $1,009,760 as of June 30, 2020 and December 31, 2019, respectively.

Our related parties are primarily those companies where Greenpro owns 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.



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Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. 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 or not. 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 June 30, 2020 decreased to $559,465 as compared to $1,256,739 at December 31, 2019. We estimate the Company currently does not have sufficient cash available to meet its anticipated working capital for the next twelve months, without raising additional capital. The Company is continuing to look for different financing opportunities in order to increase working capital and improve liquidity.

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, 2020, the Company incurred a net loss of $805,730 and used cash in operations of $871,698 and at June 30, 2020, the Company had a working capital deficiency of $2,720,009. 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, 2019 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 $871,698 and $999,305 for the six months ended June 30, 2020 and 2019, respectively. The cash used in operating activities in 2020 was mainly from the net loss for the period of $805,730, a decrease in accounts payable and accrued liabilities of $84,486, a decrease in deferred revenue of $270,000, an increase in prepaids and other current assets of $11,703, and offset by a decrease in net accounts receivable of $152,716. For the six months ended June 30, 2020, non-cash adjustments totaled $277,167, which was mostly composed of non-cash expenses of depreciation and amortization of $128,758 and amortization of right-of-use assets of $137,324, change in fair value of derivative liabilities of $39,953 and offset by non-cash income of provision for bad debts of $28,911.



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Investing activities


Net cash used in investing activities was $26,964 and $63,179 for the six months ended June 30, 2020 and 2019, respectively.



Financing activities


Net cash provided by financing activities was $146,904 and $31,639 for the six months ended June 30, 2020 and 2019, respectively.

The cash provided by financing activities in 2020 was mainly advances from related parties of $218,825 and offset by repayment of loans secured by real estate of $71,921.

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2019 4,48 M - -
Net income 2019 -1,34 M - -
Net Debt 2019 1,41 M - -
P/E ratio 2019 -23,2x
Yield 2019 -
Capitalization 57,8 M 57,8 M -
EV / Sales 2018 61,0x
EV / Sales 2019 7,27x
Nbr of Employees 60
Free-Float 27,9%
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NameTitle
Lee Chong Kuang President, CEO & Executive Director
Loke Che Chan Chairman, CFO, Secretary & Treasurer
Yeong Ning Chief Technology Officer
Srirat Chuchottaworn Independent Non-Executive Director
Ramesh Ruben Louis Independent Non-Executive Director
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