The following discussion and analysis of our results of operations and financial
condition for fiscal years ended December 31, 2022, and 2021, should be read in
conjunction with our financial statements and the notes to those financial
statements that are included elsewhere in this Annual Report. Some of the
information contained in this management's discussion and analysis or set forth
elsewhere in this Annual Report, including information with respect to our plans
and strategy for our business and related financing, includes forward looking
statements that involve risks, uncertainties, and assumptions. As a result of
many factors, including those factors set forth in the "Risk Factors" section of
this Annual Report, our actual results could differ materially from the results
described in or implied by the forward-looking statements contained in this
Annual 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 (the "Package Solution") to our
clients and we believe that our clients can reduce their business costs and
improve their revenues.
In addition to our business solution services, we also operate a venture capital
business through Greenpro Venture Capital Limited, an Anguilla corporation. One
of our venture capital business segments 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 the investment opportunities in selected start-up
and high growth companies, which may generate significant returns to the
Company. Our venture capital business focuses on companies located in South-East
Asia and East Asia, including Hong Kong, Malaysia, China, Thailand, and
Singapore. Another venture capital business segment focuses on rental activities
of commercial properties and the sale of investment properties.
Results of Operations
For information regarding our controls and procedures, see Part-II, Item 9A -
Controls and Procedures, of this Annual Report.
During the years ended December 31, 2022, and 2021, we principally operated in
three regions: Hong Kong, China and Malaysia. We derived revenues from provision
of services, leasing and trading of our commercial properties, respectively.
A table further describing our revenues and cost of revenues is set forth below:
Year ended December 31,
2022 2021
REVENUES:
Service revenue (including $665,203 and $861,449
of service revenue from related parties for the
years ended December 31, 2022, and 2021,
respectively) $ 2,725,466 $ 2,820,950
Rental revenue 108,495 128,830
Sale of real estate properties 840,036 -
Total revenues 3,673,997 2,949,780
COST OF REVENUES:
Cost of service revenue (404,077 ) (422,908 )
Cost of rental revenue (46,083 ) (49,778 )
Cost of real estate properties sold (573,343 ) -
Total cost of revenues (1,023,503 ) (472,686 )
GROSS PROFIT 2,650,494 2,477,094
OPERATING EXPENSES:
General and administrative (including $193,802
and $12,922 of general and administrative
expense to related parties for the years ended
December 31, 2022, and 2021, respectively) (4,168,997 ) (5,231,778 )
Total operating expenses (4,168,997 ) (5,231,778 )
LOSS FROM OPERATIONS $ (1,518,503 ) $ (2,754,684 )
51
Comparison of the years ended December 31, 2022, and 2021
Total Revenues
Total revenue was $3,673,997 and $2,949,780 for the years ended December 31,
2022, and 2021, respectively. The increase of $724,217 was primarily due to the
sale of three real estate property units. We expect revenue from both business
service and real estate segments to steadily improve when the impact of the
COVID-19 pandemic becomes contained.
Service Business Revenue
Revenue from the provision of business services was $2,725,466 and $2,820,950
for the years ended December 31, 2022, and 2021, respectively. It was derived
principally from the provision of business consulting and advisory services as
well as company secretarial, accounting, and financial analysis services. We
expect revenue from our business services segment to steadily improve as we are
expanding our businesses into new territories.
Real Estate Business
Rental Revenue
Revenue from rentals was $108,495 and $128,830 for the years ended December 31,
2022, and 2021, respectively. It was derived principally from leasing properties
in Hong Kong and Malaysia. We expect our rental income will be stable.
Sale of Properties
For the year ended December 31, 2022, we generated revenue of $840,036 from the
sale of three property units in Hong Kong. No revenue was generated as no
property was sold for the year ended December 31, 2021.
As opportunities permit, management expects the Company will continuously
purchase and sell commercial properties. Accordingly, we expect revenue and
costs attributable to the sale of properties to fluctuate on a going forward
basis.
Total Operating Costs and Expenses
Total operating costs and expenses were $5,192,500 and $5,704,464 for the years
ended December 31, 2022, and 2021, respectively. They consist of cost-of-service
revenue, cost of rental revenue and cost of real estate properties sold, and
general and administrative expenses.
Loss from operations was $1,518,503 and $2,754,684 for the years ended December
31, 2022, and 2021, respectively. The decrease in loss from operations was
mainly due to a decrease in general and administrative expense by $1,062,781.
Cost of Service Revenue
Cost of revenue for provision of services was $404,077 and $422,908 for the
years ended December 31, 2022, and 2021, respectively. It primarily consists of
employee compensation and related payroll benefits, company formation cost and
other professional fees directly attributable to cost related to the services
rendered.
Cost of Rental Revenue
Cost of rental revenue was $46,083 and $49,778 for the years ended December 31,
2022, and 2021, respectively. It includes the costs associated with taxes,
repairs and maintenance, property management fee, insurance, depreciation and
other related administrative costs. Utility expenses are paid directly by
tenants.
Cost of Real Estate Properties Sold
Cost of real estate properties sold was $573,343 and $0 for the years ended
December 31, 2022, and 2021, respectively. It 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.
General and Administrative Expenses
General and administrative ("G&A") expenses were $4,168,997 and $5,231,778 for
the years ended December 31, 2022, and 2021, respectively. In 2022, our G&A
expenses primarily consisted of employees' salaries and allowances of
$1,505,316, directors' salaries and compensation of $702,512, advertising and
marketing of $333,872, consulting fee of $175,167, rent and rates of $112,904,
and audit, legal, and other professional fees of $641,142. 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 expenses were $4,741,329 and $11,603,608 for the years ended December
31, 2022, and 2021, respectively. In 2022, other expenses included impairment of
goodwill of $263,247, impairment of other receivable of $606,250 and impairment
of other investments of $4,208,029, while other income mainly consisted of
reversal of write-off notes receivable of $200,000.
Interest Expenses
Total interest expenses were $0 and $12,950,750 for the years ended December 31,
2022, and 2021, respectively.
On October 13, 2020, the Company issued three unsecured promissory notes to
Streeterville Capital, LLC, FirstFire Global Opportunities Fund, LLC, and
Granite Global Value Investments Ltd. (collectively, the "Investors"),
respectively. The Company issued another unsecured promissory note to
Streeterville Capital, LLC ("Streeterville") on January 8, 2021, and February
11, 2021, respectively. Interest expenses related to the convertible promissory
notes totaled $12,900,855 for the year ended December 31, 2021, which included
coupon interest expense of $460,189, amortization of discount on convertible
notes of $206,342, amortization of debt issuance costs of $76,380, interest
expense associated with conversion of notes of $2,254,480, interest expense
associated with accretion of convertible notes payable of $8,561,440, interest
expense due to non-fulfillment of use of proceeds requirements of $1,106,488 and
additional charge for early redemption of $235,536.
Attributable to Noncontrolling Interests
The Company recorded net income (loss) attributable to noncontrolling interests
in the consolidated statements of operations, for the noncontrolling interests
of a consolidated subsidiary.
For the years ended December 31, 2022, and 2021, the consolidated financial
statements included noncontrolling interests to the Company's 60% ownership
subsidiary, Forward Win International Limited ("FWIL"), which is principally
engaged in trading and leasing properties in Hong Kong.
The Company recorded net income attributable to noncontrolling interests of
$88,684 for the year ended December 31, 2022, and net loss attributable to
noncontrolling interests of $13,876 for the year ended December 31, 2021. In
2022, net income attributable to noncontrolling interests was primarily due to a
net income derived from FWIL and its share of income allocated to the
noncontrolling interests. In 2021, net loss attributable to noncontrolling
interests was primarily due to a net loss incurred by FWIL and its share of loss
allocated to the noncontrolling interests.
Net Loss
Net loss was $6,262,188 and $14,363,232 for the years ended December 31, 2022,
and 2021, respectively. The decrease in net loss in 2022 was mainly due to
extinguishment of convertible notes during 2021. Hence, no interest expense and
loss on extinguishment associated with the convertible notes was incurred in
2022.
There were no seasonal aspects that had a material effect on the financial
condition or results of operations of the Company.
Other than as disclosed elsewhere in this Annual Report, we are not aware of any
trends, uncertainties, demands, commitments or events for the year ended
December 31, 2022 that are reasonably likely to have a material adverse effect
on our financial condition, changes in our financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources, or that would cause the disclosed financial information to be not
necessarily indicative of future operating results or financial conditions.
52
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 December 31, 2022.
Contractual Obligations
As of December 31, 2022, one of our subsidiaries leases one office in Hong Kong
under a non-cancellable operating lease, with a term of two years commencing
from March 15, 2021, to March 14, 2023. In February 2023, this tenancy agreement
has been renewed with a term of two years commencing from March 15, 2023 to
March 14, 2025. One of our Malaysia subsidiaries leases an office in Kuala
Lumpur and the other Malaysia subsidiary leases one office in Labuan, which are
under a separate non-cancellable operating lease with terms of one year, from
April 1, 2022, to March 31, 2023, and from June 15, 2022 to June 14, 2023,
respectively.
On December 31, 2022, the future minimum rental payments under these leases in
the aggregate are approximately $220,528 and are due as follows: 2023: $102,667;
2024: $97,540 and 2025: $20,321, respectively.
Related Party Transactions
For the years ended December 31, 2022, and 2021, related party service income
totaled $665,203 and $861,449, respectively.
For the years ended December 31, 2022, and 2021, related party expenses included
cost of services and general and administrative expenses totaled $193,802 and
$12,922, respectively.
Impairment of other receivable from related party was $606,250 and $0 for the
years ended December 31, 2022, and 2021 respectively.
Impairment of related party investments totaled $4,208,029 and $5,349,600 for
the years ended December 31, 2022, and 2021, respectively.
For the years ended December 31, 2022, and 2021, related party other income was
$5,850 and $0, respectively.
Net accounts receivable from related parties was $129,292 and $41 as of December
31, 2022, and 2021, respectively.
Prepayment to related party was $80,000 and $0 as of December 31, 2022, and
2021, respectively.
Amounts due from related parties were $265,772 and $1,170,855 as of December 31,
2022, and 2021, respectively. Amounts due to related parties were $448,251 and
$757,283 as of December 31, 2022, and 2021, respectively.
Deferred costs of revenue to related party was $11,640 as of December 31, 2022,
and 2021, while deferred revenue from related parties was $849,400 and $912,980
as of December 31, 2022, and 2021, respectively.
As of December 31, 2022, and 2021, other investments in related parties were
$5,406,106 and $9,621,935, respectively.
Our related parties are mainly those companies in which Greenpro Venture Capital
Limited or Greenpro Resources Limited owns a certain number of shares or certain
percentage of interest in those companies, or the Company can exercise
significant influence over those companies' financial and operating policy
decisions. Some of the related parties are either controlled by or under common
control of Mr. Loke Che Chan Gilbert or Mr. Lee Chong Kuang, executive officers
and directors of the Company.
53
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, real estate
held for use, and equipment and intangible assets. In accordance with the
provision of ASC 360, the Company generally conducts its annual impairment
evaluation to its long-lived assets, usually 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.
Recent accounting pronouncements
Refer to Note 1 in the accompanying consolidated financial statements.
54
Liquidity and Capital Resources
Our cash balance on December 31, 2022, was $3,911,535, as compared to $5,338,571
on December 31, 2021, it was decreased by $1,427,036. We estimate the Company
has sufficient cash available to meet its anticipated working capital for the
next twelve months.
The accompanying consolidated 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 year
ended December 31, 2022, the Company incurred a net loss of $6,262,188 and net
cash used in operations of $2,402,769. 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
financial statements on December 31, 2022, 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, 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 can 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 $2,402,769 and $2,023,150 for the
years ended December 31, 2022, and 2021, respectively. The cash used in
operating activities in 2022 was mainly from net loss for the year of
$6,262,188, gain on sale of real estate held for sale of $266,693, reversal of
write-off notes receivable of $200,000 and offset by impairment of goodwill of
$263,247, impairment of other receivable of $606,250 and impairment of other
investments of $4,208,029, while the cash used in operating activities in 2021
was mainly from net loss for the year of $14,363,232, reversal of write-off
notes receivable of $5,000,000, fair value gains of options associated with
convertible notes of $5,093,720 and offset by amortization and interest expenses
associated with convertible notes of $12,440,666, loss of extinguishment of
convertible notes of $3,521,263 and impairment of other investment of
$5,349,600.
Non-cash net expenses totaled $4,936,324 and $11,836,184 for the years ended
December 31, 2022 and 2021, respectively, which were mostly composed of non-cash
expenses of impairment of goodwill of $263,247, impairment of other receivable
of $606,250 and impairment of other investments of $4,208,029 and offset by
non-cash income of gain on sale of real estate held for sale of $266,693 and
reversal of write-off notes receivable of $200,000 for the year ended December
31, 2022.
The Company incurred operating losses and had net cash used in operating
activities for the past two years.
Investing activities
Net cash provided by investing activities was $836,170 and $35,515 for the years
ended December 31, 2022, and 2021, respectively.
Financing activities
Net cash provided by financing activities was $135,421 and $6,308,213 for the
years ended December 31, 2022 and 2021, respectively.
Cash provided by financing activities was mainly from collection of notes
receivable of $200,000 in 2022. In 2021, cash provided by financing activities
was mainly from the net proceeds of convertible notes of $5,210,000 and
collection of notes receivable of $5,000,000.
55
During 2022, the Company did not issue any shares of its Common Stock. There was
no cash proceeds from shares issued in 2021.
Below is the share issuance summary of the financing activities of the Company
during 2022 and 2021:
Cash Proceeds
from Share Recipient(s)
Date Shares of Common Stock Issued Issuance of Shares
February 26, 2021 (1) 34,259 - Two shareholders
April 7, 2021 (2) 300,000 - One shareholder
April 7, 2021 (3) 6,000 - One shareholder
April 16, 2021 (4) 70,474 - One shareholder
July 14, 2021 (5) 23,266 - One shareholder
Twenty-five
July 19, 2021 (6) 7,953 - shareholders
July 26, 2021 (7) 28,150 - One shareholder
August 5, 2021 (8) 56,299 - One shareholder
August 12, 2021 (9) 64,342 - One shareholder
August 20, 2021 (10) 337,500 - One shareholder
August 24, 2021 (11) 337,000 - One shareholder
August 31, 2021 (12) 170,967 - One shareholder
August 31, 2021 (13) 107,500 - One shareholder
October 6, 2021 (14) 22,730 - One shareholder
October 8, 2021 (15) 104,273 - One shareholder
November 17, 2021 (16) 20,000 - One shareholder
1. The Company issued 34,259 shares of its restricted Common Stock at $27 per
share, or a total of $925,000, to exercise the stock option pursuant to
Section 2.2 of a stock purchase and option agreement dated October 19, 2020,
between the Company, First Bullion Holdings Inc. ("FBHI") and the shareholder
of FBHI, on February 26, 2021.
2. The Company subscribed for $7,206,000 worth of Class B shares of Innovest
Energy Fund (the "Fund") by issuing 300,000 shares of the Company's
restricted Common Stock at a price of $24.02 per share, or a total of
$7,206,000 to the Fund, on April 7, 2021.
3. The Company issued 6,000 shares of restricted Common Stock to a designee of
the Fund at a price of $24.02 per share, or a total of $144,120 to settle a
subscription fee to the Fund, on April 7, 2021.
4. The Company fully repaid the convertible note issued to Streeterville
Capital, LLC ("Streeterville") on October 13, 2020, by issuance of 70,474
shares of its restricted Common Stock at a conversion price of $10 per share
for settlement of the principal balance of $670,000 and accrued interest of
$34,738, respectively on April 16, 2021. The market price of the Company's
Common Stock was $23.3 per share, or at a total value of $1,642,040, on April
16, 2021.
5. The Company partially repaid the convertible note issued to Streeterville on
January 8, 2021, by issuance of 23,266 shares of its restricted Common Stock
at a conversion price of $7.52175 per share for settlement of the principal
balance of $175,000 on July 14, 2021. The market price of the Company's
Common Stock was $10.1 per share, or at a total value of $234,986, on July
14, 2021.
6. The Company issued 7,953 shares of its restricted Common Stock at a price of
$8.7 per share, or a total of $69,191, to redeem 347,000 shares out of total
504,750 shares of preferred stock from 25 preferred stock shareholders of
Greenpro Capital Village Sdn. Bhd, on July 19, 2021.
7. The Company partially repaid the convertible note issued to Streeterville on
January 8, 2021, by issuance of 28,150 shares of its restricted Common Stock
at a conversion price of $6.21675 per share for settlement of the principal
balance of $175,000 on July 26, 2021. The market price of the Company's
Common Stock was $9.3 per share, or at a total value of $261,793, on July 26,
2021.
8. The Company partially repaid the convertible note issued to Streeterville on
January 8, 2021, by issuance of 56,299 shares of its restricted Common Stock
at a conversion price of $6.21675 per share for settlement of the principal
balance of $350,000 on August 5, 2021. The market price of the Company's
Common Stock was $8.697 per share, or at a total value of $489,637, on August
5, 2021.
9. The Company partially repaid the convertible note issued to Streeterville on
February 11, 2021, by issuance of 64,342 shares of its restricted Common
Stock at a conversion price of $6.21675 per share for settlement of principal
balance of $400,000 on August 12, 2021. The market price of the Company's
Common Stock was $8.101 per share, or at a total value of $521,237, on August
12, 2021.
10. The Company partially repaid the convertible note issued to Streeterville on
February 11, 2021, by issuance of 337,500 shares of its restricted Common
Stock at a conversion price of $6.21675 per share for settlement of principal
balance of $2,098,153 on August 20, 2021. The market price of the Company's
Common Stock was $7.599 per share, or at a total value of $2,564,662, on
August 20, 2021.
11. The Company partially repaid the convertible note issued to Streeterville on
February 11, 2021, by issuance of 337,000 shares of its restricted Common
Stock at a conversion price of $6.21675 per share for settlement of principal
balance of $2,095,045 on August 24, 2021. The market price of the Company's
Common Stock was $9.164 per share, or at a total value of $3,088,268, on
August 24, 2021.
12. The Company fully repaid the convertible note issued to Streeterville on
January 8, 2021, by issuance of 170,967 shares of its restricted Common Stock
at a conversion price of $6.21675 per share for settlement of the balance of
principal of $960,000 and accrued interest of $102,857 on August 31, 2021.
The market price of the Company's Common Stock was $9.573 per share, or at a
total value of $1,636,664, on August 31, 2021.
13. The Company partially repaid the convertible note issued to Streeterville on
February 11, 2021, by issuance of 107,500 shares of its restricted Common
Stock at a conversion price of $6.21675 per share for settlement of principal
balance of $668,301 on August 31, 2021. The market price of the Company's
Common Stock was $9.573 per share, or at a total value of $1,029,097, on
August 31, 2021.
14. The Company partially repaid the convertible note issued to Streeterville on
February 11, 2021, by issuance of 22,730 shares of its restricted Common
Stock at a conversion price of $4.3995 per share for settlement of principal
balance of $100,000 on October 6, 2021. The market price of the Company's
Common Stock was $6.761 per share, or at a total value of $153,676, on
October 6, 2021.
15. The Company fully repaid the convertible note issued to Streeterville on
February 11, 2021, by issuance of 104,273 shares of its restricted Common
Stock at a conversion price of $4.3995 per share for settlement of the
balance of principal of $154,989 and accrued interest of $303,758,
respectively on October 8, 2021. The market price of the Company's Common
Stock was $6.811 per share, or at a total value of $710,200, on October 8,
2021.
16. The Company issued 20,000 shares of its restricted Common Stock at a price of
$10.404 per share, or a total of $208,080, to settle marketing expense to Mr.
Dennis Burns, on November 17, 2021.
As of December 31, 2022, there were 7,875,813 shares of Common Stock issued and
outstanding.
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