UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the Quarterly Period Ended
or
For the transition period from _________ to _________
Commission File Number
(Exact name of registrant issuer as specified in its charter)
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices, including zip code)
Registrant’s phone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding twelve months (or shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” or an “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large Accelerated Filer ☐ | Accelerated Filer ☐ |
| Smaller reporting company | |
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate
by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of November 13, 2023, there were shares of the registrant’s Common Stock, par value $0.0001, issued and outstanding.
TABLE OF CONTENTS
| 2 |
PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.
GREENPRO CAPITAL CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2023 AND DECEMBER 31, 2022
(In U.S. dollars, except share and per share data)
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents (including $ | $ | $ | ||||||
| Accounts receivable, net of allowance of $ | ||||||||
| Prepaids and other current assets (including $ | ||||||||
| Due from related parties | ||||||||
| Deferred cost of revenue (including $ | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Real estate investments: | ||||||||
| Real estate held for sale | ||||||||
| Real estate held for investment, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other investments (including $ | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Finance lease right-of-use asset, net | ||||||||
| Other non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Due to related parties | ||||||||
| Income tax payable | ||||||||
| Operating lease liabilities, current portion | ||||||||
| Finance lease liabilities, current portion | ||||||||
| Deferred revenue (including $ | ||||||||
| Derivative liabilities | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities, non-current portion | ||||||||
| Finance lease liabilities, non-current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $ par value; shares authorized; shares issued and outstanding | ||||||||
| Common Stock, $ par value; shares authorized; and shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Greenpro Capital Corp. stockholders’ equity | ||||||||
| Non-controlling interest in a consolidated subsidiary | ||||||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements.
| 3 |
GREENPRO CAPITAL CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(In U.S. dollars, except share and per share data)
(Unaudited)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| REVENUES: | ||||||||||||||||
| Service revenue (including $ | $ | $ | $ | $ | ||||||||||||
| Sale of real estate properties | ||||||||||||||||
| Rental revenue | ||||||||||||||||
| Total revenue | ||||||||||||||||
| COST OF REVENUES: | ||||||||||||||||
| Cost of service revenue (including $ | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Cost of real estate properties sold | ( | ) | ( | ) | ||||||||||||
| Cost of rental revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total cost of revenues | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| General and administrative (including $ | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSES): | ||||||||||||||||
| Other income (including $ | ||||||||||||||||
| Interest income | ||||||||||||||||
| Fair value gains of derivative liabilities associated with warrants | ||||||||||||||||
| (Impairment) reversal of impairment of other investment (including reversal of impairment of $ | ( | ) | ( | ) | ||||||||||||
| Reversal of write-off notes receivable | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||
| Total other income (expenses) | ( | ) | ( | ) | ||||||||||||
| (LOSS) INCOME BEFORE INCOME TAX | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax expense | ( | ) | ( | ) | ( | ) | ||||||||||
| NET (LOSS) INCOME | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss (income) attributable to non-controlling interest | ( | ) | ( | ) | ||||||||||||
| NET (LOSS) INCOME ATTRIBUTED TO COMMON SHAREHOLDERS OF GREENPRO CAPITAL CORP. | ( | ) | ( | ) | ( | ) | ||||||||||
| Other comprehensive loss: | ||||||||||||||||
| - Foreign currency translation loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| COMPREHENSIVE (LOSS) INCOME | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| NET (LOSS) INCOME PER SHARE, BASIC AND DILUTED (1) | $ | ) | $ | ) | $ | $ | ) | |||||||||
| WEIGHTED AVERAGE NUMBER OF COMMON STOCK OUTSTANDING, BASIC AND DILUTED (1) | ||||||||||||||||
| (1) |
See accompanying notes to the condensed consolidated financial statements.
| 4 |
GREENPRO CAPITAL CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(In U.S. dollars, except share data)
(Unaudited)
| Three months ended September 30, 2023 (Unaudited) | ||||||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||
Number of Shares | Amount | Additional Capital | Accumulated Loss | Accumulated Deficit |
Non- Interest | Total Equity | ||||||||||||||||||||||
| Balance as of June 30, 2023 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance as of September 30, 2023 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Nine months ended September 30, 2023 (Unaudited) | ||||||||||||||||||||||||||||
| Common Stock | Accumulated | |||||||||||||||||||||||||||
Number of Shares | Amount | Additional Capital | Other Loss | Accumulated Deficit | Non- Interest | Total Equity | ||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Cancellation of shares resulting from termination of investment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net income (loss) | - | ( | ) | |||||||||||||||||||||||||
| Balance as of September 30, 2023 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Three months ended September 30, 2022 (Unaudited) | ||||||||||||||||||||||||||||
| Common Stock (1) | Accumulated | |||||||||||||||||||||||||||
Number of shares |
Amount | Additional Capital | Other Loss | Accumulated Deficit | Non- Interest | Total Equity | ||||||||||||||||||||||
| Balance as of June 30, 2022 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Roundup of fractional shares upon reverse stock split | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net (loss) income | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance as of September 30, 2022 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Nine months ended September 30, 2022 (Unaudited) | ||||||||||||||||||||||||||||
| Common Stock (1) | Accumulated | |||||||||||||||||||||||||||
Number
of |
Amount | Additional Capital | Other Comprehensive Loss | Accumulated Deficit | Non- Interest | Total Equity | ||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Roundup of fractional shares upon reverse stock split | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net (loss) income | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance as of September 30, 2022 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| (1) |
See accompanying notes to the condensed consolidated financial statements.
| 5 |
GREENPRO CAPITAL CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(In U.S. dollars)
(Unaudited)
| Nine months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of right-of-use assets | ||||||||
| Amortization of finance lease right-of-use asset | ||||||||
| Reversal of write-off notes receivable | ( | ) | ||||||
| (Reversal of impairment) impairment of other investment-related party | ( | ) | ||||||
| Loss on forfeiture of other investment | ||||||||
| Provision for bad debts | ||||||||
| Gain on sale of real estate held for sale | ( | ) | ||||||
| Fair value gains of derivative liabilities associated with warrants | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ( | ) | ( | ) | ||||
| Prepaids and other current assets | ( | ) | ||||||
| Deferred cost of revenue | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ( | ) | ||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Income tax payable | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from disposal of other investment | ||||||||
| Purchase of other investments | ( | ) | ( | ) | ||||
| Initial payment of finance lease right-of-use asset | ( | ) | ||||||
| Proceeds from real estate held for sale | ||||||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Principal payment of finance lease liabilities | ( | ) | ||||||
| Advances to related parties | ( | ) | ( | ) | ||||
| Collection of notes receivable | ||||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Effect of exchange rate changes in cash and cash equivalents | ||||||||
| NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | ( | ) | ( | ) | ||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD | ||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for income tax | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Balance payment of finance lease right-of-use asset by finance lease liabilities | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements.
| 6 |
GREENPRO CAPITAL CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(In U.S. dollars, except share and per share data)
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Greenpro Capital Corp. (the “Company” or “GRNQ”) was incorporated on July 19, 2013 in the state of Nevada. The Company currently provides a wide range of business consulting and corporate advisory services, including cross-border listing advisory services, tax planning, advisory and transaction services, record management services, and accounting outsourcing services. Our focus is on companies located in Asia and Southeast Asia, including Hong Kong, Malaysia, China, Thailand, and Singapore. As part of our business consulting and corporate advisory business segment, Greenpro Venture Capital Limited provides a business incubator for start-up companies and focuses on investments in select start-up and high growth potential companies. In addition to our business consulting and corporate advisory business segment, we operate another business segment that focuses on the acquisition and rental of real estate properties held for investment and the acquisition and sale of real estate properties held for sale.
Basis of presentation and principles of consolidation
The accompanying unaudited condensed consolidated financial statements as of and for the nine months ended September 30, 2023 and 2022 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) that permit reduced disclosure for interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the period ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The Condensed Consolidated Balance Sheet information as of December 31, 2022 was derived from the Company’s audited Consolidated Financial Statements as of and for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2023. These financial statements should be read in conjunction with that report.
The accompanying unaudited condensed consolidated
financial statements include the accounts of the Company and its wholly owned subsidiaries and majority-owned subsidiaries which the Company
controls and entities for which the Company is the primary beneficiary. For those consolidated subsidiaries where the Company’s
ownership is less than
Going concern
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, 2023, the Company recorded net cash used in operations of $
The Company’s ability to continue as a going concern is dependent upon profitable future operations, positive cash flows and additional financing. Despite the amount of funds that we have raised in the past, no assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its stockholders, in the case of equity financing.
| 7 |
Certain effects of reverse stock split
On July 19, 2022, the Company filed a Certificate
of Change with the Secretary of State of the State of Nevada (the “Certificate of Change”) to effect a reverse split of the
Company’s Common Stock at a ratio of
No fractional shares are issued in connection with the Reverse Stock Split. Stockholders who otherwise would be entitled to receive fractional shares because they hold a number of pre-reverse stock split shares of the Company’s Common Stock not evenly divisible by 10, in lieu of a fractional share, are entitled the number of shares rounded up to the nearest whole share. The Company will issue one whole share of the post-Reverse Stock Split Common Stock to any stockholder who otherwise would have received a fractional share as a result of the Reverse Stock Split.
The Reverse Stock Split affected all holders of Common Stock uniformly and did not affect any stockholder’s percentage of ownership interest. The par value of the Company’s Common Stock remained unchanged at $ per share and the number of authorized shares of Common Stock remained the same after the Reverse Stock Split.
As the par value per share of the Company’s Common Stock remained unchanged at $ per share, the change in the Common Stock recorded at par value has been reclassified to additional paid-in-capital on a retroactive basis. All references to shares of Common Stock and per share data for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted to reflect the Reverse Stock Split on a retroactive basis.
| 8 |
COVID-19 pandemic and other global risks
As a result of the COVID-19 pandemic and actions taken to slow its spread, the ongoing military conflict between Russia and Ukraine, the armed conflict in Sudan, and other geopolitical and macroeconomic factors beyond our control, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability.
On March 10, 2023, the Federal Deposit Insurance Corporation took control and was appointed receiver of Silicon Valley Bank. While we did not have deposits at Silicon Valley Bank, if other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition. It is possible that further deterioration in credit and financial markets and confidence in economic conditions will occur. If equity and credit markets deteriorate, it may affect our ability to raise equity capital, borrow on our existing facilities, access our existing cash, or make any additional necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive.
Use of estimates
The preparation of financial statements in conformity with US GAAP 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, the assumptions used in the valuation of the derivative liabilities, and the accrual of potential liabilities. Actual results may differ from these estimates.
| 9 |
Cash, cash equivalents, and restricted cash
Cash consists of funds on hand and held in bank accounts. Cash equivalents includes demand deposits placed with banks or other financial institutions and all highly liquid investments with original maturities of three months or less, including money market funds. Restricted cash represents cash restricted for the loan collateral requirements as defined in a loan agreement and the minimum paid-up share capital requirement for insurance brokers specified under the Insurance Ordinance of Hong Kong.
As of September 30, 2023 and December
31, 2022, cash included funds held by employees of $
| As of September 30, 2023 | As of December 31, 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| Cash, cash equivalents, and restricted cash | ||||||||
| Denominated in United States Dollar | $ | $ | ||||||
| Denominated in Hong Kong Dollar | ||||||||
| Denominated in Chinese Renminbi | ||||||||
| Denominated in Malaysian Ringgit | ||||||||
| Denominated in Euro | ||||||||
| Denominated in Singapore Dollar | ||||||||
| Denominated in Great British Pound | ||||||||
| Cash, cash equivalents, and restricted cash | $ | $ | ||||||
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 (see Note 2).
| 10 |
Investments
Investments in equity securities
The Company accounts for its investments that represent
less than
On May 18, 2023, the Company decided to terminate
its investment in the Fund due to significant impairments suffered since subscription and to cancel the shares issued to the Fund due
to the Fund’s failure to provide consideration for the shares. As a result, shares of the Company’s restricted Common
Stock were cancelled, the value of Common Stock of $ and the value of additional paid-in capital of $, in aggregate of $,
were reversed accordingly. The Company recorded a reversal of impairment of other investment of $
On September 30, 2023, the Company had total twenty-five
(25) investments in equity securities without readily determinable fair values, all were related party investments with aggregate value
of $
On December 31, 2022, the Company had total twenty-seven
(27) investments in equity securities without readily determinable fair values, all were related party investments with aggregate value
of $
Leases
The Company determines if a contract is or contains a lease at inception of the contract or modification of the contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset.
Finance and operating lease right-of-use (“ROU”) assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. As the implicit rate is not determinable in most of the Company’s leases, management uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The expected lease term includes options to extend or terminate the lease when it is reasonably certain the Company will exercise such option. Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term.
The Company’s lease arrangements have lease and non-lease components. Leases with an expected term of 12 months or less are not accounted for on the balance sheet and the related lease expense is recognized on a straight-line basis over the expected lease term.
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
See Note 4 for more information regarding leases.
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.
Basic income (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is calculated by dividing the net income (loss) by the weighted average number of common shares outstanding during the period plus any potentially dilutive shares related to the issuance of shares from stock warrants. For the nine months ended September 30, 2023, there were dilutive shares outstanding, while for the nine months ended September 30, 2022, the only outstanding Common Stock equivalents were warrants for potentially dilutive shares outstanding. These warrants have been excluded from the calculation of weighted average shares as the effect would have been anti-dilutive and therefore, basic and diluted net income (loss) per share were the same.
| 11 |
Foreign currency translation
The consolidated financial statements are presented in United States Dollar (“US$”), which is the functional and reporting currency of the Company. In addition, the Company’s operating subsidiaries maintain their books and records in their respective functional currency, which consists of the Malaysian Ringgit (“MYR”), Chinese Renminbi (“RMB”) and Hong Kong Dollar (“HK$”).
In general, for consolidation purposes, assets and liabilities of the Company’s subsidiaries whose functional currency is not the US$, are translated into US$ using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of a foreign subsidiary are recorded as a separate component of accumulated other comprehensive income or loss within stockholders’ equity.
Translation of amounts from the local currencies of the Company into US$ has been made at the following exchange rates for the respective periods:
| As of and for the nine months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Period-end MYR : US$1 exchange rate | ||||||||
| Period-average MYR : US$1 exchange rate | ||||||||
| Period-end RMB : US$1 exchange rate | ||||||||
| Period-average RMB : US$1 exchange rate | ||||||||
| Period-end HK$ : US$1 exchange rate | ||||||||
| Period-average HK$ : US$1 exchange rate | ||||||||
Fair value of financial instruments
The Company follows the guidance of ASC 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
| ● | Level 1 : Observable inputs such as quoted prices in active markets; |
| ● | Level 2 : Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
| ● | Level 3 : Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions |
The Company believes the carrying amount reported in the balance sheet for cash and cash equivalents, accounts receivable, prepaids and other current assets, accounts payable and accrued liabilities, income tax payable, deferred cost of revenue, deferred revenue, and due from or due to related parties, approximate their fair values because of the short-term nature of these financial instruments.
As of September 30, 2023 and December 31, 2022, the
Company’s balance sheet includes Level 3 liabilities comprised of the fair value of derivative liabilities of $
Derivative liability | ||||
| Fair value as of December 31, 2022 (Audited) | $ | |||
| Fair value gain of derivative liability associated with warrants | ( | ) | ||
| Fair value as of September 30, 2023 (Unaudited) | $ | |||
| 12 |
Concentrations of risks
For the three months ended September
30, 2023, two customers accounted for
Three customers accounted for
For the three and nine months ended September 30,
2023 and 2022, no vendor accounted for
Two vendors accounted for
Economic and political risks
Substantially all the Company’s services are conducted in the Asian region, primarily in Hong Kong, Malaysia, and the People’s Republic of China (“PRC”). Among other risks, the Company’s operations in Malaysia are subject to the risks of restrictions on transfer of funds; export duties, quotas, and embargoes; domestic and international customs and tariffs; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations in Malaysia.
The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic, and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.
Recent accounting pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related earnings per share guidance. This standard became effective for the Company beginning on January 1, 2023. Adoption is either a modified retrospective method or a fully retrospective method of transition. The Company adopted this guidance effective January 1, 2023, and the adoption of this standard did not have a material impact on its consolidated financial statements.
In November 2019, the FASB issued ASU No. 2019-10, which to update the effective date of ASU No. 2016-13 for private companies, not-for-profit organizations and certain smaller reporting companies applying for credit losses, leases, and hedging standard. The new effective date for these preparers is for fiscal years beginning after December 15, 2022. ASU 2019-05 is effective for the Company for annual and interim reporting periods beginning January 1, 2023, as the Company is qualified as a smaller reporting company. The Company has accordingly adopted ASUs 2016-13 and 2019-05 in the preparation of its unaudited condensed consolidated financial statements. The adoption of the accounting standards has no material impact on the unaudited condensed consolidated financial statements for the nine months ended and as at September 30, 2023.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
| 13 |
NOTE 2 - REVENUE FROM CONTRACTS WITH CUSTOMERS
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.
Revenue from services
For certain service contracts, we assist or provide advisory to clients in capital market listings (“Listing services”), our services provided to clients are considered as our performance obligations. Revenue and expenses are deferred until the performance obligation is complete and collectability of the consideration is probable. For service contracts where the performance obligation is not completed, deferred cost of revenue is recorded as incurred and deferred revenue is recorded for any payments received on such yet to be completed performance obligations. On an ongoing basis, management monitors these contracts for profitability and when needed may record a liability if a determination is made that costs will exceed revenue.
For other services such as company secretarial, accounting, financial analysis and related services (“Non-listing services”), the Company’s performance obligations are satisfied, and the related revenue is recognized, as services are rendered. For contracts in which we act as an agent, the Company reports revenue net of expenses paid.
The Company offers no discounts, rebates, rights of return, or other allowances to clients which would result in the establishment of reserves against service revenue. Additionally, to date, the Company has not incurred incremental costs in obtaining a client contract.
Revenue from the sale of real estate properties
The Company follows the guidance of ASC 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”) in accounting for the sale of real estate properties. The Company records the sale based on completed performance obligations, which typically occurs upon the transfer of ownership of a real estate asset to the buyer. During the three and nine months ended September 30, 2023, no real estate property was sold. For the three and nine months ended September 30, 2022, the Company recorded revenues from the sale of two and three real estate property units, respectively.
Revenue from the rental of real estate properties
Rental revenue represents the lease income from the Company’s tenants. The tenants pay monthly in accordance with lease agreements and the Company recognizes the income ratably over the lease term as this is the most representative of the pattern in which the benefit is expected to be derived from the underlying asset.
Cost of revenues
Cost of service revenue 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 primarily consists 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.
Cost of rental revenue primarily includes costs associated with repairs and maintenance, property management fees and insurance, depreciation, and other related administrative costs. Utility expenses are borne and paid directly by individual tenants.
| 14 |
The following table provides information about disaggregated revenue based on revenue by service lines and revenue by geographic area:
| Three Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue by service lines: | ||||||||
| Corporate advisory - Non-listing services | $ | $ | ||||||
| Corporate advisory - Listing services | ||||||||
| Rental of real estate properties | ||||||||
| Sale of real estate properties | ||||||||
| Total revenue | $ | $ | ||||||
| Three Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue by geographic area: | ||||||||
| Hong Kong | $ | $ | ||||||
| Malaysia | ||||||||
| China | ||||||||
| Total revenue | $ | $ | ||||||
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue by service lines: | ||||||||
| Corporate advisory - Non-listing services | $ | $ | ||||||
| Corporate advisory - Listing services | ||||||||
| Rental of real estate properties | ||||||||
| Sale of real estate properties | ||||||||
| Total revenue | $ | $ | ||||||
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue by geographic area: | ||||||||
| Hong Kong | $ | $ | ||||||
| Malaysia | ||||||||
| China | ||||||||
| Total revenue | $ | $ | ||||||
Our contract balances include deferred costs of revenue and deferred revenue.
Deferred Cost of Revenue
Deferred cost of revenue mainly consists of the direct costs associated with the services provided. For the service contracts where the Company’s performance obligation is not completed, deferred cost of revenue is recorded when the costs incurred.
Deferred Revenue
Deferred revenue primarily consists of deferred service revenue. For the service contracts where the Company’s performance obligation is not completed, deferred revenue is recorded for any payments received in advance by the Company before the completion of its performance obligation. Changes in deferred revenue were as follows:
| Nine Months Ended September 30, 2023 | ||||
| (Unaudited) | ||||
| Deferred revenue, January 1, 2023 | $ | |||
| New contract liabilities | ||||
| Performance obligations satisfied | ( | ) | ||
| Deferred revenue, September 30, 2023 | $ | |||
Deferred cost of revenue and deferred revenue at September 30, 2023 and December 31, 2022 are classified as current assets or current liabilities and totaled:
| As of September 30, 2023 | As of December 31, 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| Deferred cost of revenue | $ | $ | ||||||
| Deferred revenue | $ | $ | ||||||
| 15 |
NOTE 3 - OTHER INVESTMENTS
| As of | As of | |||||||
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| Investments in equity securities without readily determinable fair values of affiliates: | ||||||||
| (1) Greenpro Trust Limited (a related party) | $ | $ | ||||||
| (2) Other related parties | ||||||||
| Total | $ | $ | ||||||
Investments in equity securities without readily determinable fair values of affiliates (related parties):
Equity securities without readily determinable fair values are investments without readily determinable market values. The Company adopted the guidance of ASC 321, Investments - Equity Securities, which allows an entity to measure investments in equity securities without a readily determinable fair value using a measurement alternative that measures these securities at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investment of same issuer (the “Measurement Alternative”). The fair value of equity securities without readily determinable fair values that have been remeasured due to impairment are classified within Level 3. Management assesses each of these investments on an individual basis. Additionally, on a quarterly basis, management is required to make a qualitative assessment of whether the investment is impaired.
For the three and nine months ended September 30,
2023, the Company recognized the reversal of impairment of $
For the three and nine months ended September 30,
2022, the Company recognized an impairment loss of $
During the year ended December 31, 2022, the Company
recognized impairment of $
In addition, the Company recorded its equity securities
without readily determinable fair values at cost. For these cost method investments, we recorded as other investments in our condensed
consolidated balance sheets. We reviewed all our cost method investments quarterly to determine if impairment indicators were present;
however, we were not required to determine fair value of these investments unless impairment indicators exist. When impairment indicators
exist, we generally adopt the valuation methods allowed under ASC820 Fair Value Measurement to evaluate the fair values of our cost method
investments approximated or exceeded their carrying values as of September 30, 2023. Our cost method investments had a carrying value
of $
| 16 |
(a) Celmonze Wellness Corporation:
On February 8, 2023, our wholly owned subsidiary,
Greenpro Venture Capital Limited (“GVCL”) entered into a subscription agreement with Celmonze Wellness Corporation, a Nevada
corporation, which provides beauty and wellness solutions to clients (“Celmonze”). Pursuant to the agreement, GVCL acquired
shares of common stock of Celmonze at a price of $
(b) Innovest Energy Fund:
On February 11, 2021, Greenpro Resources Limited,
a subsidiary of the Company (“GRL”) entered into a subscription agreement with Innovest Energy Fund, a global multi-asset
fund incorporated in the Cayman Islands and principally engaged in developing a multi-faceted suite of products and services for the cryptocurrency
industry and economy (the “Fund”). Pursuant to the agreement, GRL agreed to subscribe for $
On May 18, 2023, the Company decided to terminate
its investment in the Fund due to significant impairments suffered since subscription and to cancel the shares issued to the Fund due
to the Fund’s failure to provide consideration for the shares. As a result, shares of the Company’s restricted Common
Stock were cancelled, the value of Common Stock of $ and the value of additional paid-in capital of $, in aggregate of $,
were reversed accordingly. The Company recorded a reversal of impairment of other investment of $
(c) Simson Wellness Tech Corp.:
On February 19, 2021, GVCL entered into a subscription
agreement with Simon Wellness Tech Corp., a Nevada corporation, which is a digital platform that
acts as middleware for distribution of optical products (“Simson”). Pursuant to the agreement, GVCL acquired shares
of common stock of Simson at a price of $
In July 2023, GVCL agreed with Simson’s repurchase
request, sold back our owned Simson shares to Simson at $
The Company had cost method investments without readily
determinable fair values with a carrying value of $
On September 30, 2023 and December 31, 2022, the carrying values of equity securities without readily determinable fair values are as follows:
| As of September 30, 2023 | As of December 31, 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| Original cost | ||||||||
| Balance, beginning of period / year | $ | $ | ||||||
| Additions during the period / year | ||||||||
| Disposals or forfeitures during the period / year | ( | ) | ( | ) | ||||
| Balance, end of period / year | ||||||||
| Accumulated impairment | ||||||||
| Balance, beginning of period / year | ( | ) | ( | ) | ||||
| Reversal of impairment (Impairment) for the period / year | ( | ) | ||||||
| Balance, end of period / year | ( | ) | ( | ) | ||||
| Net carrying values of equity securities without readily determinable fair values | $ | $ | ||||||
Accumulated impairment of other investments
For the three and nine months ended September 30,
2023, the Company recognized a reversal of impairment of $
| 17 |
NOTE 4 - LEASES
Currently, the Company has an operating lease agreement
for one office space in Hong Kong with a term of
Operating lease or finance lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The ROU asset includes any lease payments made and excludes lease incentives.
The components of lease expense and supplemental cash flow information related to leases for the periods are as follows:
| Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Lease costs | ||||||||
| Operating lease costs: | ||||||||
| Operating lease cost | $ | $ | ||||||
| Short-term lease cost (1) | $ | $ | ||||||
| Finance lease costs: | ||||||||
| Interest on lease liabilities | $ | $ | ||||||
| Amortization of right-of-use asset | $ | $ | ||||||
| Other information | ||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows for operating leases | $ | $ | ||||||
| Operating cash flows for finance leases | $ | $ | ||||||
| Financing cash flows for finance leases | $ | $ | ||||||
| Non-cash activity: | ||||||||
| Balance payment of ROU asset by finance lease liabilities | $ | $ | ||||||
| Weighted average remaining lease term (in years): | ||||||||
| Operating leases | ||||||||
| Finance leases | ||||||||
| Weighted average discount rate: | ||||||||
| Operating leases | % | % | ||||||
| Finance leases | % | |||||||
| (1) |
The supplemental balance sheet information related to leases for the periods is as follows:
| As of September 30, 2023 | As of December 31, 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| Assets | ||||||||
| Long-term operating lease ROU assets, net (1) | $ | $ | ||||||
| Long-term finance lease ROU asset, net (2) | ||||||||
| Total ROU assets | $ | $ | ||||||
| Liabilities | ||||||||
| Current portion of operating lease liabilities | $ | $ | ||||||
| Current portion of finance lease liabilities | ||||||||
| Total current lease liabilities | ||||||||
| Long-term operating lease liabilities | ||||||||
| Long-term finance lease liabilities | ||||||||
| Total long-term lease liabilities | ||||||||
| Total lease liabilities | $ | $ | ||||||
| (1) | |
| (2) |
Maturities of the Company’s lease liabilities are as follows:
| Operating leases | Finance leases | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Year ending December 31, | ||||||||
| 2023 (remaining 3 months) | $ | $ | ||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| Total future minimum lease payments | ||||||||
| Less: Imputed interest/present value discount | ( | ) | ( | ) | ||||
| Present value of lease liabilities | $ | $ | ||||||
| Lease obligations | ||||||||
| Current lease obligations | $ | $ | ||||||
| Long-term lease obligations | ||||||||
| Total lease obligations | $ | $ | ||||||
Lease expenses were $
| 18 |
NOTE 5 - DERIVATIVE LIABILITIES
On June 12, 2018, warrants exercisable into
The contractual life of the warrants is based on the expiration date of the warrants, that is the five-year anniversary of the effective date of the public offering on June 13, 2018, and hence the expected expiration of the warrants is June 12, 2023 (the “Expiration”). The derivative liability is re-measured at the end of every reporting period with the change in value reported in the statement of operations.
On July 19, 2022, the Company filed a Certificate
of Change with the Secretary of State of the State of Nevada (the “Certificate of Change”) to effect a reverse split of the
Company’s Common Stock at a ratio of
Warrant activity including the number of shares and the exercise price per share has been adjusted for all periods presented in this Quarterly Report to reflect the Reverse Stock Split effected on July 28, 2022 on a retroactive basis.
At September 30, 2023, the Company did not have any
outstanding warrants exercisable into the Company’s Common Stock as all call warrants were not exercised on June 12, 2023 (the “Expiration”).
At the Expiration, the Company’s Common Stock traded at or below the exercise price (
During the nine months ended
September 30, 2023, the Company recorded a decrease in fair value of derivatives of $
The balance of the derivative
liabilities related to warrants was $
The derivative liabilities related to warrants were valued using the Black-Scholes-Merton valuation model with the following assumptions:
| As of June 12, 2023 (expiration) | As of December 31, 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| Risk-free interest rate | $ | % | $ | % | ||||
| Expected volatility | % | % | ||||||
| Contractual life (in years) | ||||||||
| Expected dividend yield | % | % | ||||||
| Fair value of warrants | $ | $ | ||||||
The risk-free interest rate is based on the yield available on U.S. Treasury securities. The Company estimates volatility based on the historical volatility of its Common Stock. The contractual life of the warrants is based on the expiration date of the warrants that is the five-year anniversary of the effective date of the public offering on June 13, 2018. The expected expiration of the warrants is June 12, 2023 (the “Expiration”). The expected dividend yield is based on the fact that the Company has not paid dividends to common shareholders in the past and does not expect to pay dividends to common shareholders in the future.
On June 12, 2023 (the “Expiration), no warrants
were exercised as the trading price of the Company’s Common Stock was at or below the exercise price of $
| 19 |
NOTE 6 - WARRANTS
On June 13, 2018, the Company granted to the placement agent
and issued warrants exercisable into
On July 19, 2022, the Company filed a Certificate
of Change with the Secretary of State of the State of Nevada (the “Certificate of Change”) to effect a reverse split of the
Company’s Common Stock at a ratio of
Warrant activity including the number of shares and the exercise price per share has been adjusted for all periods presented in this Quarterly Report to reflect the Reverse Stock Split effected on July 28, 2022 on a retroactive basis.
A summary of warrant activity during the nine months ended September 30, 2023 is presented below:
| Remaining | ||||||||||||
| Number | Contractual | |||||||||||
| of | Exercise | Life | ||||||||||
| Shares | Price | (in Years) | ||||||||||
| Warrants outstanding at December 31, 2022 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Expired | ||||||||||||
| Warrants outstanding at September 30, 2023 (Unaudited) | $ | |||||||||||
| Warrants exercisable at September 30, 2023 (Unaudited) | $ | |||||||||||
On June 12, 2023 (the “Expiration), no warrants
were exercised as the trading price of the Company’s Common Stock was at or below the exercise price of $
At September 30, 2023, the value of the warrants was $ as all warrants expired, warrants were outstanding and exercisable.
| 20 |
NOTE 7 - RELATED PARTY TRANSACTIONS
| Accounts receivable from related parties: | September 30, 2023 | December 31, 2022 | ||||||
| (Unaudited) | (Audited) | |||||||
| Accounts receivable, net - related parties | ||||||||
| - Related party B (net of allowance of $ | $ | $ | ||||||
| - Related party K (net of allowance of $ | ||||||||
| Total | $ | $ | ||||||
| Prepaid to a related party: | September 30, 2023 | December 31, 2022 | ||||||
| (Unaudited) | (Audited) | |||||||
| Prepayment | ||||||||
| - Related party B | $ | $ | ||||||
| Due from related parties: | September 30, 2023 | December 31, 2022 | ||||||
| (Unaudited) | (Audited) | |||||||
| Due from related parties | ||||||||
| - Related party B | $ | $ | ||||||
| - Related party D | ||||||||
| - Related party G | ||||||||
| - Related party H | ||||||||
| - Related party I | ||||||||
| Total | $ | $ | ||||||
The amounts due from related parties are interest-free, unsecured and repayable on demand.
| Due to related parties: | September 30, 2023 | December 31, 2022 | ||||||
| (Unaudited) | (Audited) | |||||||
| Due to related parties | ||||||||
| - Related party A | $ | $ | ||||||
| - Related party B | ||||||||
| - Related party E | ||||||||
| - Related party J | ||||||||
| - Related party K | ||||||||
| Total | $ | $ | ||||||
The amounts due to related parties are interest-free, unsecured, and repayable on demand.
| Deferred cost of revenue to a related party: | September 30, 2023 | December 31, 2022 | ||||||
| (Unaudited) | (Audited) | |||||||
| Deferred cost of revenue to a related party | ||||||||
| - Related party B | $ | $ | ||||||
| Deferred revenue from related parties: | September 30, 2023 | December 31, 2022 | ||||||
| (Unaudited) | (Audited) | |||||||
| Deferred revenue from related parties | ||||||||
| - Related party B | $ | $ | ||||||
| - Related party E | ||||||||
| Total | $ | $ | ||||||
| 21 |
| For the nine months ended September 30, | ||||||||
| Related party revenue and expense transactions: | 2023 | 2022 | ||||||
| (Unaudited) | (Unaudited) | |||||||
| Service revenue from related parties | ||||||||
| - Related party A | $ | $ | ||||||
| - Related party B | ||||||||
| - Related party D | ||||||||
| - Related party E | ||||||||
| - Related party G | ||||||||
| - Related party I | ||||||||
| - Related party K | ||||||||
| Total | $ | $ | ||||||
| Cost of revenues to a related party | ||||||||
| - Related party B | $ | $ | ||||||
| General and administrative expenses to related parties | ||||||||
| - Related party A | $ | $ | ||||||
| - Related party B | ||||||||
| - Related party D | ||||||||
| - Related party I | ||||||||
| - Related party K | ||||||||
| Total | $ | $ | ||||||
| Other income from related parties: | ||||||||
| - Related party B | $ | $ | ||||||
| - Related party D | ||||||||
| $ | $ | |||||||
| Reversal of impairment (impairment) of other investment: | ||||||||
| - Related party B | $ | $ | ( | ) | ||||
Related party A is under common control of Mr. Loke Che Chan Gilbert, the Company’s CFO, and a major shareholder.
Related party B represents those companies where
Related party C is controlled by a director of a wholly owned subsidiary of the Company.
Related party D represents a company that we have determined that we can significantly influence based on our common business relationships.
Related party E represents companies whose CEO is a consultant to the Company, and who is also a director of Aquarius Protection Fund, a shareholder in the Company.
Related party F represents a family member of Mr. Loke Che Chan Gilbert, the Company’s CFO and a major shareholder.
Related party G is under common control of Mr. Lee Chong Kuang, the Company’s CEO and a major shareholder.
Related party H represents a company in which we currently
have an approximate
Related party I is controlled by a family member of Mr. Lee Chong Kuang, the Company’s CEO and a major shareholder.
Related party J represents the non-controlling interest in the Company’s subsidiary that owns its real estate held for sale. The amounts due to related party J are unsecured, bear no interest, are payable on demand, and related to the initial acquisition of the real estate held for sale.
Related party K represents shareholders and directors of the Company. Due from related party K represents the amounts paid by the Company to third parties on behalf of our shareholders or directors. On the other hand, due to related party K represents the amounts paid by the shareholders or directors to third parties on behalf of the Company. The amounts due from or due to related party K are non-interest bearing, and are due on demand.
| 22 |
NOTE 8 - SEGMENT INFORMATION
ASC 280, “Segment Reporting” establishes
standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure
as well as information about services categories, business segments and major customers in financial statements. The Company has
| ● | Service business - provision of corporate advisory and business solution services |
| ● | Real estate business - leasing or trading of commercial real estate properties in Hong Kong and Malaysia |
The Company had no inter-segment sales for the periods presented. Summarized financial information concerning the Company’s reportable segments is shown as below:
(a) By Categories
| For the nine months ended September 30, 2023 (Unaudited) | ||||||||||||||||
| Real estate business | Service business | Corporate | Total | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ( | ) | ( | ) | ( | ) | ||||||||||
| Depreciation and amortization expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Reversal of impairment of other investment | ||||||||||||||||
| Reversal of write-off notes receivable | ||||||||||||||||
| Net (loss) income | ( | ) | ( | ) | ||||||||||||
| Total assets | ||||||||||||||||
| Capital expenditures for long-lived assets | $ | $ | $ | $ | ||||||||||||
| For the nine months ended September 30, 2022 (Unaudited) | ||||||||||||||||
| Real estate business | Service business | Corporate | Total | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ( | ) | ( | ) | ( | ) | ||||||||||
| Depreciation and amortization expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Impairment | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Total assets | ||||||||||||||||
| Capital expenditures for long-lived assets | $ | $ | $ | $ | ||||||||||||
(b) By Geography*
| For the nine months ended September 30, 2023 (Unaudited) | ||||||||||||||||
| Hong Kong | Malaysia | China | Total | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Depreciation and amortization expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Reversal of impairment of other investment | ||||||||||||||||
| Reversal of write-off notes receivable | ||||||||||||||||
| Net income (loss) | ( | ) | ||||||||||||||
| Total assets | ||||||||||||||||
| Capital expenditures for long-lived assets | $ | $ | $ | $ | ||||||||||||
| For the nine months ended September 30, 2022 (Unaudited) | ||||||||||||||||
| Hong Kong | Malaysia | China | Total | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Depreciation and amortization expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Impairment | ( | ) | ( | ) | ||||||||||||
| Net (loss) income | ( | ) | ( | ) | ( | ) | ||||||||||
| Total assets | ||||||||||||||||
| Capital expenditures for long-lived assets | $ | $ | $ | $ | ||||||||||||
| * |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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, 2022 filed with the Securities and Exchange Commission on March 31, 2023 (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 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 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 our wholly-owned subsidiary, Greenpro Venture Capital Limited (“GVCL”). GVCL, an Anguilla corporation, is primarily focuses 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 mainly focused on the 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 trading or rental activities of our commercial properties.
Results of Operations
During the three and nine months ended September 30, 2023, and 2022, we operated in three regions: Hong Kong, China and Malaysia. We derived revenue from the provision of services and the trading or rental activities of our commercial properties.
Comparison of the three months ended September 30, 2023 and 2022
Total revenue
Total revenue was $1,070,972 and $1,306,439 for the three months ended September 30, 2023, and 2022, respectively. The decreased amount of $235,467 was primarily due to the sale of two units of real estate properties for $652,788 during the three months ended September 30, 2022, but no real estate property was sold during the same period in 2023. We expect revenue from both service business and real estate business to steadily improve when the impact of the COVID-19 pandemic abates.
Service business
Revenue from the provision of business services was $1,043,360 and $628,295 for the three months ended September 30, 2023, and 2022, 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 an increase in service revenue as some listing service obligations were completed during the three months ended September 30, 2023.
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 September 30, 2023. Revenue from the sale of real estate properties was $652,788 for the three months ended September 30, 2022, which was derived from the sale of two commercial property units located in Hong Kong.
Rental revenue
Revenue from rentals was $27,612 and $25,356 for the three months ended September 30, 2023, and 2022, respectively. It was derived principally from leasing properties in Hong Kong and Malaysia. We believe our rental income will be stable.
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Total operating costs and expenses
Total operating costs and expenses were $1,207,517 and $1,536,785 for the three months ended September 30, 2023, and 2022, respectively. They consist of cost-of-service revenue, cost of real estate properties sold, cost of rental revenue, and general and administrative expenses.
Loss from operations for the three months ended September 30, 2023, and 2022 was $136,545 and $230,346, respectively. A decrease in loss from operations in 2023 was mainly due to an increase in the gross profit from our business services of $298,293, offset by a decreased amount of $207,042 from the gross profit of the sale of real estate properties.
Cost of service revenue
Cost of revenue from the provision of services was $219,865 and $103,093 for the three months ended September 30, 2023, and 2022, respectively. It primarily consists of employee compensation and related payroll benefits, company formation costs, and other professional fees directly attributable to the services rendered.
An increase of cost-of-service revenue was mainly due to an increase of other professional fees directly attributable to the services for the three months ended September 30, 2023.
Cost of real estate properties sold
There was no cost incurred for the sale of real estate properties for the three months ended September 30, 2023. Cost of revenue on real estate properties sold was $445,746 for the three months ended September 30, 2022. It primarily consisted of the purchase price of properties, legal fees, improvement costs to the building structure, and other acquisition costs. Selling and advertising costs are expensed as incurred.
Cost of rental revenue
Cost of rental revenue was $9,629 and $10,489 for the three months ended September 30, 2023, and 2022, respectively. It includes the costs associated with governmental charges, repairs and maintenance, property management fees and insurance, depreciation, and other related administrative costs. Utility expenses are borne and paid directly by individual tenants.
General and administrative expenses
General and administrative (“G&A”) expenses were $978,023 and $977,457 for the three months ended September 30, 2023, and 2022, respectively. For the three months ended September 30, 2023, G&A expenses consisted primarily of employees’ salaries and allowances of $319,523, directors’ salaries and compensation of $163,427, advertising and promotion expenses of $45,104, computer expenses of $95,866, consulting fees of $49,138, legal services fees of $48,936, other professional fees of $60,563 and rent and rates of $27,965. For the three months ended September 30, 2022, G&A expenses consisted mainly of employees’ salaries and allowances of $367,703, directors’ salaries and compensation of $162,944, advertising and promotion expenses of $120,638, consulting fees of $16,402, legal services fees of $51,575, other professional fees of $79,032 and rent and rates of $28,330. We expect our G&A expenses will continue to increase as we integrate our business acquisitions, explore, and expand businesses into new jurisdictions.
Other income or expenses
Net other income was $18,488 for the three months ended September 30, 2023, while net other expense was $222,459 for the three months ended September 30, 2022. For the three months ended September 30, 2023, other income mainly consisted of interest income of $8,853 and other gains of $9,635. For the three months ended September 30, 2022, net other expense included impairment of other investment of $246,100, offset by interest income and other gains of $23,641.
Net loss
Net loss was $120,994 and $452,805 for the three months ended September 30, 2023 and 2022, respectively. A decrease in net loss was mainly due to an impairment of other investment of $246,100 in 2022, but no such impairment in 2023.
Net income or loss attributable to non-controlling interest
The Company records net income or loss attributable to non-controlling interest in the consolidated statements of operations for the non-controlling interest of a consolidated subsidiary.
For the three months ended September 30, 2023, the Company recorded net loss attributable to a non-controlling interest of $3,865, as compared to net income attributable to a non-controlling interest of $78,675 for the three months ended September 30, 2022.
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Comparison of the nine months ended September 30, 2023, and 2022
Total revenue
Total revenue was $2,309,592 and $2,690,227 for the nine months ended September 30, 2023, and 2022, respectively. A decrease of revenue was mainly due to the sale of three units of real estate properties for $839,661 during the nine months ended September 30, 2022, but no real estate property was sold during the same period in 2023. We expect revenue from both service business and real estate business to steadily improve when the impact of the COVID-19 pandemic abates.
Service business
Revenue from the provision of business services was $2,239,354 and $1,760,880 for the nine months ended September 30, 2023, and 2022, respectively. It was derived principally from business consulting and advisory services as well as company secretarial, accounting, and financial analysis services. We experienced an increase in service revenue as some listing service obligations were completed during the nine months ended September 30, 2023.
Real estate business
Sale of real estate properties
There was no revenue generated from the sale of real estate properties for the nine months ended September 30, 2023. Revenue from the sale of real estate properties was $839,661 for the nine months ended September 30, 2022, which was derived from the sale of three commercial property units located in Hong Kong.
Rental revenue
Revenue from rentals was $70,238 and $89,686 for the nine months ended September 30, 2023, and 2022, respectively. It was derived principally from leasing properties in Hong Kong and Malaysia. We believe our rental income will be stable.
Total operating costs and expenses
Total operating costs and expenses were $3,089,209 and $3,755,944 for the nine months ended September 30, 2023, and 2022, 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 $2,686,846 and $2,910,231 of G&A expenses for the nine months ended September 30, 2023, and 2022, respectively.
Loss from operations for the nine months ended September 30, 2023, and 2022 was $779,617 and $1,065,717, respectively. A decrease in loss from operations was mainly due to a decrease of G&A expenses of $223,385.
Cost of service revenue
Cost of revenue from the provision of services was $374,048 and $239,437 for the nine months ended September 30, 2023, and 2022, respectively. It primarily consists of employee compensation and related payroll benefits, company formation costs, and other professional fees directly attributable to the services rendered.
An increase of cost-of-service revenue was mainly due to an increase of other professional fees directly attributable to the services for the nine months ended September 30, 2023.
Cost of real estate properties sold
During the nine months ended September 30, 2023, no real estate property was sold, and hence no cost incurred accordingly. Cost of real estate properties sold was $573,087 for the nine months ended September 30, 2022. It primarily consisted of the purchase price of properties, legal fees, improvement costs to the building structure, and other acquisition costs. Selling and advertising costs are expensed as incurred.
Cost of rental revenue
Cost of rental revenue was $28,315 and $33,189 for the nine months ended September 30, 2023, and 2022, 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 repairs and maintenance fees, cleaning fee and commission incurred for the nine months ended September 30, 2023, as compared to the same fees incurred for the nine months ended September 30, 2022.
General and administrative expenses
G&A expenses were $2,686,846 and $2,910,231 for the nine months ended September 30, 2023, and 2022, respectively. For the nine months ended September 30, 2023, G&A expenses consisted primarily of employees’ salaries and allowances of $1,009,398, directors’ salaries and compensation of $489,589, advertising and promotion expenses of $149,404, computer expenses of $122,603, consulting fees of $122,349, legal services fees of $161,303, other professional fees of $123,595 and rent and rates of $85,293. For the nine months ended September 30, 2022, G&A expenses consisted mainly of employees’ salaries and allowances of $1,096,413, directors’ salaries and compensation of $489,583, advertising and promotion expenses of $277,094, consulting fees of $147,971, legal services fees of $179,307, other professional fees of $193,549 and rent and rates of $83,676. We expect our G&A expenses will continue to increase as we integrate our business acquisitions, explore, and expand businesses into new jurisdictions.
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Other income or expenses
Net other income was $7,349,638 for the nine months ended September 30, 2023, while net other expense was $1,347,582 for the nine months ended September 30, 2022. For the nine months ended September 30, 2023, other income mainly consisted of reversal of impairment of other investment of $6,882,000, reversal of write-off notes receivable of $400,000 and interest income of $30,859. For the nine months ended September 30, 2022, net other expense included impairment of other investment of $1,459,900, offset by interest income and other gains of $112,318.
Net income (loss)
Net income was $6,563,458 for the nine months ended September 30, 2023, while net loss was $2,414,835 for the nine months ended September 30, 2022. For the nine months ended September 30, 2023, net income was generated mainly by a reversal of impairment of other investment, a reversal of write-off notes receivable, and a decrease of G&A expenses, respectively.
Net income or loss attributable to non-controlling interest
The Company records net income or loss attributable to non-controlling interest in the consolidated statements of operations for the non-controlling interest of a consolidated subsidiary.
As of September 30, 2023, the non-controlling interest is related to Forward Win International Limited (“FWIL”), a company with principal activity of trading and leasing properties in Hong Kong. Currently, the Company holds 60% equity interest in FWIL.
For the nine months ended September 30, 2023, and 2022, we recorded net loss attributable to non-controlling interest of $17,820 and net income attributable to non-controlling interest of $96,107, respectively.
There were no seasonal aspects that had a material effect on the financial condition or the 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, 2023 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, 2023.
Contractual Obligations
Currently, one of our subsidiaries leases one office space in Hong Kong under a non-cancellable operating lease with a term of two years commencing from March 15, 2023, to March 14, 2025. As of September 30, 2023, the future minimum rental payments under this lease in the aggregate are approximately $141,508 and are due as follows: 2023: $24,326; 2024: $97,303 and 2025: $19,879.
In June 2023, one of our subsidiaries in Malaysia purchased a motor vehicle and the majority amount of the purchase, $18,530 was funded by Maybank Islamic under a finance lease agreement with a term of five years commencing from June 3, 2023, to June 2, 2028. As of September 30, 2023, the future minimum lease payments under this lease in the aggregate are approximately $20,476 and are due as follows: 2023: $1,097; 2024: $4,388; 2025: $4,388, and 2026 and thereafter: $10,603.
Related Party Transactions
Net accounts receivable due from related parties was $308,621 and $129,292 as of September 30, 2023, and December 31, 2022, respectively. Prepayment to a related party was $120,000 and $80,000 as of September 30, 2023, and December 31, 2022, respectively.
Amounts due from related parties were $719,776 and $265,772 as of September 30, 2023, and December 31, 2022, respectively, while amounts due to related parties were $436,578 and $448,251 as of September 30, 2023, and December 31, 2022, respectively.
Deferred cost of revenue to a related party was $0 and $11,640 as of September 30, 2023, and December 31, 2022, respectively, while deferred revenue from related parties was $236,800 and $849,400 as of September 30, 2023, and December 31, 2022, respectively.
For the nine months ended September 30, 2023, and 2022, related party service revenue totaled $1,232,526 and $548,602, respectively.
Cost of service revenue to related party was $23,280 and $0 for the nine months ended September 30, 2023, and 2022, respectively.
G&A expenses to related parties were $90,407 and $53,689 for the nine months ended September 30, 2023, and 2022, respectively.
For the nine months ended September 30, 2023, and 2022, other income from related parties was $10,158 and $1,123, respectively. The Company recorded a reversal of impairment of related party investment of $6,882,000 and an impairment of related party investment of $1,459,900 for the nine months ended September 30, 2023, and 2022, respectively.
Our related parties primarily represent those companies where we own a certain percentage of their shares, and it is determined that we have significant influence on those companies based on our common business relationships. Refer to Note 7 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.
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
On September 30, 2023, our cash balance was $2,559,285, as compared to $3,911,535 on December 31, 2022, a decrease of $1,352,250. We estimate we still have sufficient cash available to meet our anticipated working capital for the next twelve months.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. During the nine months ended September 30, 2023, the Company recorded net cash used in operations of $1,293,574, and as of September 30, 2023, the Company incurred accumulated deficit of $31,041,402. 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, 2022 financial statements, has expressed substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company’s ability to continue as a going concern is dependent upon improving its profitability and the continuing financial support from its major shareholders. Management believes the existing shareholders or external financing will provide the additional cash to meet the Company’s obligations as they become due.
Despite the amount of funds that the Company has raised in the past, no assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its shareholders, in the case of equity financing.
Operating activities
Net cash used in operating activities was $1,293,574 and $2,157,380 for the nine months ended September 30, 2023, and 2022, respectively. The net cash used in operating activities in 2023 primarily consisted of an increase in net accounts receivable of $236,494, a decrease in accounts payable and accrued liabilities of $133,386 and a decrease in deferred revenue of $493,333, a reversal of impairment of other investment of $6,882,000 and a reversal of write-off notes receivable of $400,000, offset by net income of $6,563,458. For the nine months ended September 30, 2023, non-cash adjustments totaled $7,105,607, which was mostly composed of non-cash income from reversal of impairment of other investment of $6,882,000 and reversal of write-off notes receivable of $400,000, respectively.
Investing activities
For the nine months ended September 30, 2023, net cash used in investing activities was $14,710 as compared to the nine months ended September 30, 2022, net cash provided by investing activities was $836,167.
Financing activities
Net cash used in financing activities for the nine months ended September 30, 2023, and 2022 was $66,763 and $416,382, respectively.
Cash used in financing activities was mainly due to advances to related parties of $465,677, offset by $400,000 from collection of notes receivable.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
As a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, the Company is not required to provide the information under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”). Based on such evaluation, our principal executive officer and principal financial officer have concluded that the disclosure controls and procedures were effective as of September 30, 2023 to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the U.S. Securities and Exchange Commission’s (“SEC”) rules and forms, and to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting for the nine months ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including each of our Chief Executive Officer and Chief Financial Officer, intends that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
On August 24, 2021, Plaintiff Millennium Fine Art Inc. (“MFAI”) filed a Complaint against the Company, alleging that on or about April 21, 2021, MFAI and the Company entered into a contract (the “Contract”), by which MFAI agreed to create 7,700 non-fungible tokens (“NFT”) in exchange for sixteen million dollars ($16,000,000) worth of shares of the Company. MFAI claims that the Company breached the Contract by refusing delivery of the NFTs and not delivering $16 million worth of shares to MFAI. The Complaint asserts causes of action for breach of contract, special damages and promissory estoppel, and seeks sixty-six million dollars ($66,000,000) in damages, specific performance by Company according to the terms of the Contract, and MFAI’s attorney’s fees and costs.
On October 18, 2021, the Company filed a motion, denying all the material allegations of the Complaint, and seeking to stay the case and compel arbitration pursuant to the purported Contract. In its motion, the Company only sought to enforce the terms of the Contract as it relates to arbitration, but otherwise denied the existence of a valid and binding contract. Over MFAI’s opposition, the Court granted the Company’s motion, and stayed the case, pending the resolution of the Parties’ arbitration of the dispute.
On or about April 1, 2022, MFAI filed a Request for Arbitration with JAMS dispute resolution services, in response to which the Company filed a Statement of Answer, denying the material allegations of the Complaint, which the Company deems to be without merit. The matter is currently in the discovery phase, and the Company intends to continue vigorously defending this matter. No final hearing date has yet been scheduled in the Arbitration.
Item 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
| Exhibit No. | Description | |
| 31.1 | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer | |
| 31.2 | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial officer | |
| 32.1 | Section 1350 Certification of principal executive officer | |
| 32.2 | Section 1350 Certification of principal financial officer and principal accounting officer | |
| 101. INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Greenpro Capital Corp. | ||
| Date: November 13, 2023 | By: | /s/ Lee Chong Kuang |
| Lee Chong Kuang | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November 13, 2023 | By: | /s/ Loke Che Chan, Gilbert |
| Loke Che Chan, Gilbert | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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