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 nine months ended September 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 September 30, 2020 and 2019
Total revenue
Total revenue was $678,917 and $1,152,326 for the three months ended September
30, 2020 and 2019, respectively. The decreased amount of $473,409 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 $389,610 and $1,132,784 for
the three months ended September 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
Sale of real estate properties
Revenue from the sale of real estate property was $253,677 for the three months
ended September 30, 2020, which was derived from the sale of one unit of
commercial property located in Hong Kong. There was no revenue generated from
the sale of real estate property for the three months ended September 30, 2019.
Rental revenue
Revenue from rentals was $35,630 and $19,542 for the three months ended
September 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 $1,147,339 and $1,365,385 for the three
months ended September 30, 2020 and 2019, respectively. They consist of cost of
service revenue, cost of real estate properties sold, cost of rental revenue,
and general and administrative expenses.
A loss from operations for the Company for the three months ended September 30,
2020 and 2019 was $468,422 and $213,059, 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 $52,243 and $352,813 for the three
months ended September 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 real estate properties sold
Cost of revenue on real estate property sold was $210,573 for the three months
ended September 30, 2020. 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, 2019, hence no cost was recorded accordingly.
Cost of rental revenue
Cost of rental revenue was $13,986 and $11,237 for the three months ended
September 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 $870,537 and $1,001,335 for the
three months ended September 30, 2020 and 2019, respectively. For the three
months ended September 30, 2020, G&A expenses consisted primarily of salary and
wages of $381,558, rental expenses of $73,652, other professional fees of
$45,834, and directors' compensation of $98,849. 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
Net other income was $38,673 and $2,489 for the three months ended September 30,
2020 and 2019, respectively. Gain on disposal of other investment was $875 for
the three months ended September 30, 2020. Gain on changes in fair value of
derivative liabilities was $11,804 and $8,221 for the three months ended
September 30, 2020 and 2019, respectively.
Fair value of shares issued for marketing expense
On September 14, 2020, the Company issued 35,000 shares of the Company's common
stock to a marketing consulting company, CorporateAds, LLC ("CorporateAds"). The
Company determined the fair value of the 35,000 shares issued to CorporateAds
was $1 per share based on the average closing price of the Company' common stock
for the five trading days preceding the date of issuance of shares or $35,000.
This $35,000 was recorded as a marketing expense for the three months ended
September 30, 2020.
For the three months ended September 30, 2019, there were no shares of common
stock issued for marketing expense.
Net loss
For the three months ended September 30, 2020 and 2019, net loss was $429,749
and $211,147, respectively. The increase in net loss was mainly due to a
decrease in service revenue in 2020.
Net income or loss attributable to noncontrolling interests
The Company records net income or loss attributable to noncontrolling interests
in the consolidated statements of operations for any noncontrolling interests of
consolidated subsidiaries.
For the three months ended September 30, 2020 and 2019, the Company recorded net
income attributable to a noncontrolling interest of $24,162 and net loss
attributable to the noncontrolling interests of $23,295, respectively.
Comparison of the nine months ended September 30, 2020 and 2019
Total revenue
Total revenue was $1,896,598 and $3,316,088 for the nine months ended September
30, 2020 and 2019, respectively. The decrease of $1,419,490 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 $1,551,783 and $3,244,626
for the nine months ended September 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
Sale of real estate properties
Revenue from the sale of real estate property was $253,677 for the nine months
ended September 30, 2020, which was derived from the sale of one unit of
commercial property located in Hong Kong. There was no revenue generated from
the sale of real estate property for the nine months ended September 30, 2019.
Rental revenue
Revenue from rentals was $91,138 and $71,462 for the nine months ended September
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 cost and expenses were $3,137,216 and $4,353,669 for the nine
months ended September 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.
A loss from operations for the Company for the nine months ended September 30,
2020 and 2019 was $1,240,618 and $1,037,581, 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 $252,687 and $1,131,003 for the
nine months ended September 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 real estate properties sold
Cost of revenue on real estate property sold was $210,573 for the nine months
ended September 30, 2020. 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, 2019, hence no cost was recorded accordingly.
Cost of rental revenue
Cost of rental revenue was $40,227 and $34,989 for the nine months ended
September 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 $2,633,729 and $3,187,677 for
the nine months ended September 30, 2020 and 2019, respectively. For the nine
months ended September 30, 2020, G&A expenses consisted primarily of salary and
wages of $1,181,538, rental expenses of $245,682, other professional fees of
$153,510, and directors' remuneration of $296,275. 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
Net other income was $5,139 and $207,625 for the nine months ended September 30,
2020 and 2019, respectively. Gain on disposal of other investment was $875 for
the nine months ended September 30, 2020. For the nine months ended September
30, 2020, loss on changes in fair value of derivative liabilities was $28,149,
as compared to gain on changes in fair value of derivative liabilities of
$192,785 for the nine months ended September 30, 2019.
Fair value of shares issued for marketing expense
On September 14, 2020, the Company issued 35,000 shares of the Company's common
stock to a marketing consulting company, CorporateAds, LLC ("CorporateAds"). The
Company determined the fair value of the 35,000 shares issued to CorporateAds
was $1 per share based on the average closing price of the Company's common
stock for the five trading days preceding the date of issuance of shares or
$35,000. This $35,000 was recorded as a marketing expense for the nine months
ended September 30, 2020.
For the nine months ended September 30, 2019, there were no shares of common
stock issued for marketing expense.
Net Loss
The net loss was $1,235,479 and $838,264 for the nine months ended September 30,
2020 and 2019, respectively. The increase in net loss was mainly due to a
decrease in 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 September 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 entire 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 May 20, 2020, Global Leaders Corporation (formerly known as Greenpro Venture
Cap (Qianhai) Limited), a wholly owned subsidiary of the Company ("GVCQH"),
allotted an additional 196 shares to an unrelated party 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.
Later on August 17, 2020, the Company sold the rest of the 2% interest in GVCQH
to the unrelated party for $4.
At September 30, 2020, the noncontrolling interest is related to the Company's
60% ownership of Forward Win International Limited.
For the nine months ended September 30, 2020 and 2019, the Company recorded net
income attributable to a noncontrolling interest of $28,424 and net loss
attributable to the noncontrolling interests of $63,122, 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 nine months
ended September 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 September 30, 2020.
Contractual Obligations
As of September 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
September 30, 2020, the future minimum rental payments under these leases in the
aggregate are approximately $161,692 and are due as follows: 2020: $69,878, and
2021: $91,814.
Related Party Transactions
For the nine months ended September 30, 2020 and 2019, related party service
revenue totaled $181,417 and $1,743,533, respectively.
Accounts receivable due from related parties were $7,223 and $0 as of September
30, 2020 and December 31, 2019, respectively. Amounts due from related parties
were $62,391 and $61,623 as of September 30, 2020 and December 31, 2019,
respectively. The amounts due to related parties were $1,255,291 and $1,009,760
as of September 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 September 30, 2020 decreased to $559,743 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 nine
months ended September 30, 2020, the Company incurred a net loss of $1,235,479
and used cash in operations of $845,125 and at September 30, 2020, the Company
had a working capital deficiency of $2,864,238. 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 $845,125 and $1,241,216 for the nine
months ended September 30, 2020 and 2019, respectively. The cash used in
operating activities in 2020 was mainly from the net loss for the period of
$1,235,479, a decrease in accounts payable and accrued liabilities of $66,909
and offset by a decrease in net accounts receivable of $161,675, a decrease in
prepaids and other current assets of $8,013, a decrease in deferred cost of
revenue of $20,714 and an increase in deferred revenue of $36,087. For the nine
months ended September 30, 2020, non-cash adjustments totaled $452,840, which
was mostly composed of non-cash expenses of depreciation and amortization of
$193,510 and amortization of right-of-use assets of $199,878, provision for bad
debts of $40,710, fair value of shares issued for marketing expense of $35,000
and change in fair value of derivative liabilities of $28,149, and offset by
non-cash income of a gain of sale of real estate held for sale of $43,104 and a
gain on disposal of other investments of $875.
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Investing activities
Net cash provided by investing activities was $88,550 for the nine months ended
September 30, 2020. Net cash used in investing activities was $63,112 for the
nine months ended September 30, 2019.
Financing activities
Net cash provided by financing activities was $83,918 and $1,744 for the nine
months ended September 30, 2020 and 2019, respectively.
The cash provided by financing activities in 2020 was mainly advances from
related parties of $240,509 and offset by repayment of loans secured by real
estate of $156,591.
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