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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)
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(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 | ||
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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 ☐ |
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Smaller
reporting company
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Emerging
Growth Company
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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 ☐
As of November 14, 2022, there were shares, par value $0.0001, of the registrant’s Common Stock 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, 2022 AND DECEMBER 31, 2021
(In U.S. dollars, except share and per share data)
| September 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
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Cash and cash equivalents (including
$
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$ |
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$ |
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||||
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Accounts receivable, net of allowance of
$
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Prepaids and other current assets (including $
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||||||
| Due from related parties |
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Deferred cost of revenue (including $
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| Total current assets |
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||||||
| Property and equipment, net |
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| Real Estate investments: | ||||||||
| Real estate held for sale |
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| Real estate held for investment, net |
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| Intangible assets, net |
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| Goodwill |
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Other investments (including $
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||||||
| Operating lease right-of-use assets, net |
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||||||
| Other non-current assets |
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||||||
| TOTAL ASSETS | $ |
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$ |
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||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ |
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$ |
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||||
| Due to related parties |
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||||||
| Income tax payable |
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|||||||
| Operating lease liabilities, current portion |
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Deferred revenue (including
$
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| Derivative liabilities |
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| Total current liabilities |
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||||||
| Operating lease liabilities, net of current portion |
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|||||||
| Total liabilities |
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||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, par value; shares authorized; shares issued and outstanding | ||||||||
| Common Stock, par value; shares authorized; shares issued and outstanding at September 30, 2022 and shares issued and outstanding at December 31, 2021, respectively (1) |
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||||||
| Additional paid in capital |
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||||||
| Accumulated other comprehensive loss |
(
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) |
(
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) | ||||
| Accumulated deficit |
(
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) |
(
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) | ||||
| Total Greenpro Capital Corp. stockholders’ equity |
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||||||
| Noncontrolling interests in consolidated subsidiaries |
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||||||
| Total stockholders’ equity |
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||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ |
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$ |
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||||
| (1) |
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See accompanying notes to the condensed consolidated financial statements.
| 3 |
GREENPRO CAPITAL CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(In U.S. dollars, except share and per share data)
(Unaudited)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| REVENUES: | ||||||||||||||||
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Service revenue (including
$
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$ |
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$ |
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$ |
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$ |
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||||||||
| Sale of real estate properties |
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| Rental revenue |
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| Total revenue |
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||||||||||||
| COST OF REVENUES: | ||||||||||||||||
| Cost of service revenue |
(
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) |
(
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) |
(
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) |
(
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) | ||||||||
| Cost of real estate properties sold |
(
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(
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| Cost of rental revenue |
(
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(
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(
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(
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| Total cost of revenues |
(
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) |
(
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) |
(
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(
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| GROSS PROFIT |
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| OPERATING EXPENSES: | ||||||||||||||||
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General and administrative (including
$
|
(
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) |
(
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) |
(
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) |
(
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) | ||||||||
| LOSS FROM OPERATIONS |
(
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) |
(
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) |
(
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) |
(
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) | ||||||||
| OTHER INCOME (EXPENSES) | ||||||||||||||||
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Other income (including $
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||||||||||||
| Interest income |
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| Fair value gains of derivative liabilities associated with warrants |
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| Fair value gains of options associated with convertible notes |
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| Reversal of write-off notes receivable |
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| Loss on extinguishment of convertible notes |
(
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(
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) | ||||||||||||
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Interest expense (including $
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(
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(
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Impairment of other investments (including
$
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(
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(
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(
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(
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| Total other expenses |
(
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(
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(
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(
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| LOSS BEFORE INCOME TAX |
(
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(
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(
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) |
(
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| Income tax expense |
(
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(
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| NET LOSS |
(
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(
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(
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(
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) | ||||||||
| Net (income) loss attributable to noncontrolling interest |
(
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(
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| NET LOSS ATTRIBUTED TO COMMON SHAREHOLDERS OF GREENPRO CAPITAL CORP. |
(
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(
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(
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(
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| Other comprehensive loss: | ||||||||||||||||
| - Foreign currency translation loss |
(
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) |
(
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) |
(
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) |
(
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) | ||||||||
| COMPREHENSIVE LOSS | $ |
(
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) | $ |
(
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) | $ |
(
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) | $ |
(
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) | ||||
| NET LOSS PER SHARE, BASIC AND DILUTED (1) | $ |
(
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) | $ |
(
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) | $ |
(
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) | $ |
(
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| WEIGHTED AVERAGE NUMBER OF COMMON STOCK OUTSTANDING, BASIC AND DILUTED (1) |
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||||||||||||
| (1) |
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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, 2022 AND 2021
(In U.S. dollars, except share data)
(Unaudited)
|
Three months ended September 30, 2022 (Unaudited) |
||||||||||||||||||||||||||||
| Common Stock (1) | Additional | Accumulated Other | Non- | Total | ||||||||||||||||||||||||
|
Number
of
shares |
Amount |
Paid-in
Capital |
Comprehensive
Loss |
Accumulated
Deficit |
Controlling
Interest |
Stockholders’
Equity |
||||||||||||||||||||||
| Balance as of June 30, 2022 (Unaudited) |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
$ |
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|||||||||||||
| Roundup of fractional shares upon reverse stock split |
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(
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) | ||||||||||||||||||||||||
| Foreign currency translation | - |
(
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) |
(
|
) | |||||||||||||||||||||||
| Net (loss) income | - |
(
|
) |
|
(
|
) | ||||||||||||||||||||||
| Balance as of September 30, 2022 (Unaudited) |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
$ |
|
|||||||||||||
| Nine months ended September 30, 2022 (Unaudited) | ||||||||||||||||||||||||||||
| Common Stock (1) | Additional | Accumulated Other | Non- | Total | ||||||||||||||||||||||||
|
Number
of
shares |
Amount |
Paid-in
Capital |
Comprehensive
Loss |
Accumulated
Deficit |
Controlling
Interest |
Stockholders’ Equity |
||||||||||||||||||||||
| Balance as of December 31, 2021 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
$ |
|
|||||||||||||
| Roundup of fractional shares upon reverse stock split |
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(
|
) | ||||||||||||||||||||||||
| Foreign currency translation | - |
(
|
) |
(
|
) | |||||||||||||||||||||||
| Net (loss) income | - |
(
|
) |
|
(
|
) | ||||||||||||||||||||||
| Balance as of September 30, 2022 (Unaudited) |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
$ |
|
|||||||||||||
|
Three months ended September 30, 2021 (Unaudited) |
||||||||||||||||||||||||||||
| Common Stock (1) | Additional |
Accumulated Other |
Non- | Total | ||||||||||||||||||||||||
|
Number of Shares |
Amount |
Paid-in Capital |
Comprehensive Loss |
Accumulated Deficit |
Controlling Interest |
Stockholders’ Equity |
||||||||||||||||||||||
| Balance as of June 30, 2021 (Unaudited) |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
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$ |
|
|||||||||||||
| Fair value of shares issued from conversion of promissory notes |
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||||||||||||||||||||||||
| Fair value of shares issued for acquisition |
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| Value of beneficial conversion feature resulting from debt extinguishment |
(
|
) |
(
|
) | ||||||||||||||||||||||||
| Foreign currency translation | - |
(
|
) |
(
|
) | |||||||||||||||||||||||
| Net loss | - |
(
|
) |
(
|
) |
(
|
) | |||||||||||||||||||||
| Balance as of September 30, 2021 (Unaudited) |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
$ |
|
|||||||||||||
| Nine months ended September 30, 2021 (Unaudited) | ||||||||||||||||||||||||||||
| Common Stock (1) | Additional |
Accumulated Other |
Non- | Total | ||||||||||||||||||||||||
|
Number of Shares |
Amount |
Paid-in Capital |
Comprehensive Loss |
Accumulated Deficit |
Controlling Interest |
Stockholders’ Equity |
||||||||||||||||||||||
| Balance as of December 31, 2020 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
$ |
|
|||||||||||||
|
Fair value of shares issued
for other
investments |
|
|
|
|
||||||||||||||||||||||||
| Fair value of shares issued for subscription fee |
|
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|
||||||||||||||||||||||||
| Fair value of shares issued from conversion of promissory notes |
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|
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|
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| Fair value of shares issued for acquisition |
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|
|
|
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|||||||||||||||||||||||
| Beneficial conversion feature related to convertible notes | - |
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|
|||||||||||||||||||||||||
| Reclassification of conversion option related to a convertible note | - |
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|
|||||||||||||||||||||||||
| Value of beneficial conversion feature resulting from debt extinguishment | - |
(
|
) |
(
|
) | |||||||||||||||||||||||
| Foreign currency translation | - |
(
|
) |
(
|
) | |||||||||||||||||||||||
| Net loss | - |
(
|
) |
(
|
) |
(
|
) | |||||||||||||||||||||
| Balance as of September 30, 2021 (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, 2022 AND 2021
(In U.S. dollars)
(Unaudited)
| Nine months ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ |
(
|
) | $ |
(
|
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization |
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|
||||||
| Amortization of right-of-use assets |
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|
||||||
| Amortization of discount on convertible notes |
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| Amortization of debt issuance costs |
|
|||||||
| Interest expense associated with accretion of convertible notes |
|
|||||||
| Interest expense associated with conversion of notes |
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|||||||
| Interest expense due to non-fulfillment of use of proceeds requirements |
|
|||||||
| Loss on extinguishment of convertible notes |
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|||||||
| Provision for bad debts |
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|
||||||
| Impairment of other investments-related parties |
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|
||||||
| Loss on forfeiture of other investment |
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|||||||
| Fair value of shares issued for subscription fee |
|
|||||||
| Reversal of write-off notes receivable |
(
|
) | ||||||
| Gain on disposal of a subsidiary |
(
|
) | ||||||
| Fair value gains of options associated with convertible notes |
(
|
) | ||||||
| Fair value gains of derivative liabilities associated with warrants |
(
|
) |
(
|
) | ||||
| Gain on sale of real estate held for sale |
(
|
) | ||||||
| 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 |
(
|
) |
(
|
) | ||||
| Purchase of other investments |
(
|
) |
(
|
) | ||||
| Proceeds from real estate held for sale |
|
|||||||
| Proceeds from disposal of subsidiary |
|
|||||||
| Acquisition of business, net of cash acquired |
|
|||||||
| Net cash provided by investing activities |
|
|
||||||
| Cash flows from financing activities: | ||||||||
| Principal payments of loans secured by real estate |
(
|
) | ||||||
| Advances to related parties |
(
|
) |
(
|
) | ||||
| Proceeds from convertible promissory notes, net |
|
|||||||
| Collection of notes receivable |
|
|||||||
| Convertible note redemptions paid in cash |
(
|
) | ||||||
| Net cash (used in) provided by 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 | $ | $ |
|
|||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Fair value of shares issued for acquisition of business | $ | $ |
|
|||||
| Fair value of shares issued for other investments | $ | $ |
|
|||||
| Fair value of shares issued from conversion of promissory notes | $ | $ |
|
|||||
| Beneficial conversion feature associated with convertible notes payable | $ | $ |
|
|||||
| Reclassification of conversion option associated with convertible notes payable to additional paid in capital | $ | $ |
|
|||||
| Derecognition of beneficial conversion feature value from additional paid in capital resulting from debt extinguishment | $ | $ |
|
|||||
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, 2022 AND 2021
(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, 2022 and 2021 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, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The Condensed Consolidated Balance Sheet information as of December 31, 2021 was derived from the Company’s audited Consolidated Financial Statements as of and for the year ended December 31, 2021 included in the Company’s Annual Report on Amendment No. 1 to Form 10-K filed with the SEC on July 18, 2022. 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, 2022, the Company incurred
a net loss of $
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 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.
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.
| 7 |
COVID-19 pandemic
Our business, financial condition and results of operations may be materially adversely affected by global health epidemics, including the recent COVID-19 outbreak.
Outbreaks of epidemic, pandemic, or contagious diseases such as COVID-19, could have an adverse effect on our business, financial condition, and results of operations. The spread of COVID-19 from China to other countries has resulted in the World Health Organization declaring the outbreak of COVID-19 as a global pandemic. The international stock markets reflect the uncertainty associated with the slow-down in the global economy and the reduced levels of international travel experienced since the beginning of January 2020, large declines in oil prices and the significant decline in the Dow Industrial Average at the end of February and beginning of March 2020 was largely attributed to the effects of COVID-19.
More
specifically our business was affected to a large extent by a shut-down of operations both for ourselves and our clients for much of
the whole year of 2020. Total revenue for the nine months ended
September
30, 2022, was $
The full extent of the financial impact of the COVID-19 pandemic cannot be reasonably estimated at this time as the pandemic is still ongoing. The extent to which the COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and its variants and the actions taken globally to contain the coronavirus or treat its impact, the efficacy of vaccines on COVID-19 and its variants, among others. Existing insurance coverage may not provide protection for all costs that may arise from all such possible events.
Additionally, the COVID-19 pandemic may also affect our overall ability to react timely to mitigate the impact of this event and may hamper our efforts to contact our service providers and advisors and to provide our investors with timely information and comply with our filing obligations with the SEC, especially in the event of office closures, stay-in-place orders and a ban on travel or quarantines. We are still assessing our business operations and the impact COVID-19 may have on our results and financial condition in the future, but there can be no assurance that this analysis will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or in our sector in particular.
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.
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.
At
September 30, 2022 and December 31, 2021, cash included funds held by employees of $
|
As of
September 30, 2022 |
As of
December 31, 2021 |
|||||||
| (Unaudited) | (Audited) | |||||||
| Cash, cash equivalents, and restricted cash | ||||||||
| Denominated in United States Dollars | $ |
|
$ |
|
||||
| Denominated in Hong Kong Dollars |
|
|
||||||
| Denominated in Chinese Renminbi |
|
|
||||||
| Denominated in Malaysian Ringgit |
|
|
||||||
| Denominated in Euro |
|
|||||||
| 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).
| 8 |
Investments
Investments in equity securities
The
Company accounts for its investments that represent less than
At
September 30, 2022, the Company had thirty investments in equity securities without readily determinable fair values of related parties
valued at $
At
December 31, 2021, the Company had twenty seven investments in equity securities without readily determinable fair values of related
parties valued at $
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 loss per share is computed by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per share is calculated by dividing the net 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 three and nine months ended September 30, 2022 and 2021, 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 loss per share were the same.
Foreign currency translation
The consolidated financial statements are presented in United States Dollars (“US$”), which is the functional and reporting currency of the Company. In addition, the Company’s operating subsidiaries maintain their books and records in their respective functional currency, which consists of the Malaysian Ringgit (“MYR”), Chinese Renminbi (“RMB”) and Hong Kong Dollars (“HK$”).
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 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, |
||||||||
| 2022 | 2021 | |||||||
| 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 to related parties, approximate their fair values because of the short-term nature of these financial instruments.
As
of September 30, 2022 and December 31, 2021, 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, 2021 (Audited) | $ |
|
||
| Fair value gains of derivative liability associated with warrants |
(
|
) | ||
| Fair value as of September 30, 2022 (Unaudited) | $ |
|
||
| 9 |
Concentrations of risks
For
the three months ended September 30, 2022, three customers accounted for
Three
customers accounted for
For the three and nine months ended September 30, 2022 and 2021, no vendor accounted for 10% or more of the Company’s cost of revenues.
Three
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, 2022. Adoption is either a modified retrospective method or a fully retrospective method of transition. The Company adopted this guidance effective January 1, 2022, and the adoption of this standard did not have a material impact on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The standard is effective for interim and annual reporting periods beginning after December 15, 2022. The Company is currently assessing the impact of adopting this standard on the Company’s financial statements and related disclosures.
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.
| 10 |
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, 2022, the Company recorded revenues from the sale of two and three real estate property units, respectively. The Company recorded no sales revenue from the real estate property held for sale for the three and nine months ended September 30, 2021, respectively.
Revenue from the rental of real estate properties
Rental revenue represents lease rental 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 insurance, depreciation, and other related administrative costs. Property management fees and utility expenses are paid directly by tenants.
| 11 |
The following table provides information about disaggregated revenue based on revenue by service lines and revenue by geographic area:
| Three Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| (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, | ||||||||
| 2022 | 2021 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue by geographic area: | ||||||||
| Hong Kong | $ |
|
$ |
|
||||
| Malaysia |
|
|
||||||
| China |
|
|
||||||
| Total revenue | $ |
|
$ |
|
||||
| Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| (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, | ||||||||
| 2022 | 2021 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue by geographic area: | ||||||||
| Hong Kong | $ |
|
$ |
|
||||
| Malaysia |
|
|
||||||
| China |
|
|
||||||
| Total revenue | $ |
|
$ |
|
||||
The Company’s balance of contract includes deferred cost of revenue and deferred revenue.
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, 2022 |
||||
| (Unaudited) | ||||
| Deferred revenue, January 1, 2022 | $ |
|
||
| New contract liabilities |
|
|||
| Performance obligations satisfied |
(
|
) | ||
| Deferred revenue, September 30, 2022 | $ |
|
||
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 and deferred cost of revenue at September 30, 2022 and December 31, 2021 are classified as current assets or current liabilities and totaled:
|
As of
September 30, 2022 |
As of
December 31, 2021 |
|||||||
| (Unaudited) | (Audited) | |||||||
| Deferred revenue | $ |
|
$ |
|
||||
| Deferred cost of revenue | $ |
|
$ |
|
||||
| 12 |
NOTE 3 - OTHER INVESTMENTS
| As of | As of | |||||||
| September 30, 2022 | December 31, 2021 | |||||||
| (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 in companies 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, 2022, the Company recognized an
impairment loss of $
In
addition, the Company held equity securities without readily determinable fair values that were recorded at cost. For these cost method
investments, we recorded as other investments in our condensed consolidated balance sheets. We reviewed all of 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 used discounted cash flow analyses to that the fair
values of our cost method investments approximated or exceeded their carrying values as of September 30, 2022. Our cost method investments
had a carrying value of $
(a) Agape ATP Corporation:
On
January 21, 2022
, Greenpro Venture Capital Limited, a subsidiary of the Company (“GVCL”)
entered into a forfeiture agreement with Agape ATP Corporation (“Agape”). Pursuant to the agreement, GVCL agreed to transfer
shares out of its total invested
shares of common stock of Agape to Agape for nil consideration. As a result, GVCL
recognized a loss on forfeiture of other investment of $
(b) ACT Wealth Academy Inc.:
On
February 21, 2022, GVCL entered into a subscription agreement with ACT Wealth Academy Inc., a Nevada corporation, which provides training,
seminars, and events in the academic fields (“ACT Wealth”). Pursuant to the agreement, GVCL acquired
shares of
common stock of ACT Wealth at a price of $
(c) REBLOOD Biotech Corp.:
On
April 1, 2022, GVCL entered into a subscription agreement with REBLOOD Biotech Corp., a Nevada corporation, which provides health management
and biotechnology services (“REBLOOD”). Pursuant to the agreement, GVCL acquired
shares of common stock of REBLOOD
at a price of $
(d) Best2bid Technology Corp.:
On
June 9, 2022, GVCL entered into a subscription agreement with Best2bid Technology Corp., a Nevada corporation, which provides an online
bidding cum e-commerce platform enabling participants to auction or sell their merchandise to bidders (“Best2bid”). Pursuant
to the agreement, GVCL acquired
shares of common stock of Best2bid at a price of $
The
Company had cost method investments without readily determinable fair values with a carrying value of $
On September 30, 2022 and December, 31 2021, the carrying values of equity securities without readily determinable fair values are as follows:
| As of | As of | |||||||
| September 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | (Audited) | |||||||
| Original cost | $ |
|
$ |
|
||||
| Unrealized gains (losses) | ||||||||
| Provision for impairment or decline in value |
(
|
) |
(
|
) | ||||
| Forfeiture of partial investment |
(
|
) | ||||||
| Equity securities without readily determinable fair values, net | $ |
|
$ |
|
||||
Impairment of other investments
For
the three and nine months ended September 30, 2022, the Company recognized an impairment loss of other investments of $
| 13 |
NOTE 4 - OPERATING LEASES
The Company has three separate operating lease agreements for one office space in Hong Kong with a term of two years, one office space in Kuala Lumpur and another office space in Labuan both with a term of one year, respectively. Other than these three separate leases, the Company does not have other leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company accounts for the lease and non-lease components of its leases as a single lease component. Lease expense is recognized on a straight-line basis over the lease term.
Operating 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 operating lease 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 period are as follows:
|
Nine Months Ended
September 30, 2022 |
Nine Months Ended
September 30, 2021 |
|||||||
| (Unaudited) | (Unaudited) | |||||||
| Lease Cost | ||||||||
| Operating lease costs included in the measurement of lease liabilities for the nine months ended September 30, 2022 and 2021, respectively | $ |
|
$ |
|
||||
| Other Information | ||||||||
| Cash paid for amounts included in the measurement of lease liabilities for the nine months ended September 30, 2022 and 2021, respectively | $ |
|
$ |
|
||||
| Weighted average remaining lease term - operating leases (in years) |
|
|
||||||
| Average discount rate - operating leases |
|
% |
|
% | ||||
The supplemental balance sheet information related to leases for the period is as follows:
|
As of
September 30, 2022 |
As of
December 31, 2021 |
|||||||
| (Unaudited) | (Audited) | |||||||
| Operating lease assets and liabilities | ||||||||
| Long-term ROU assets | $ |
|
$ |
|
||||
| Short-term lease liabilities | $ |
|
$ |
|
||||
| Long-term lease liabilities |
|
|||||||
| Total lease liabilities | $ |
|
$ |
|
||||
Maturities of the Company’s lease liabilities are as follows:
| Year Ending | Leases Liabilities | |||
| (Unaudited) | ||||
| 2022 (remaining 3 months) | $ |
|
||
| 2023 |
|
|||
| Total lease payments |
|
|||
| Less: Imputed interest/present value discount |
(
|
) | ||
| Present value of lease liabilities | $ |
|
||
Lease
expenses were $
| 14 |
NOTE 5 - DERIVATIVE LIABILITIES
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, 2022, the Company has outstanding warrants exercisable into
At
December 31, 2021, 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 | As of | |||||||
| September 30, 2022 | December 31, 2021 | |||||||
| (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. The expected dividend yield was 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.
For
the nine months ended September 30, 2022, the Company recognized a fair value gain of $
| 15 |
NOTE 6 - WARRANTS
In
2018, the Company 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, 2022 is presented below:
| Remaining | ||||||||||||
| Number | Contractual | |||||||||||
| of | Exercise | Life | ||||||||||
| Shares | Price | (in Years) | ||||||||||
| Warrants outstanding at December 31, 2021 |
|
$ |
|
|||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Expired | ||||||||||||
| Warrants outstanding at September 30, 2022 (Unaudited) |
|
$ |
|
|||||||||
| Warrants exercisable at September 30, 2022 (Unaudited) |
|
$ |
|
|||||||||
At September 30, 2022, the intrinsic value of outstanding warrants was .
| 16 |
NOTE 7 - RELATED PARTY TRANSACTIONS
| Accounts receivable from a related party: | September 30, 2022 | December 31, 2021 | ||||||
| (Unaudited) | (Audited) | |||||||
| Accounts receivable, net - related party | ||||||||
|
- Related party B (net of allowance of $
|
$ | $ |
|
|||||
| Deposit paid to a related party: | September 30, 2022 | December 31, 2021 | ||||||
| (Unaudited) | (Audited) | |||||||
| Deposit - related party | ||||||||
| - Related party B | $ |
|
$ | |||||
| Due from related parties: | September 30, 2022 | December 31, 2021 | ||||||
| (Unaudited) | (Audited) | |||||||
| Due from related parties | ||||||||
| - Related party B | $ |
|
$ |
|
||||
| - Related party D |
|
|
||||||
| - Related party G |
|
|
||||||
| - Related party H |
|
|
||||||
| Total | $ |
|
$ |
|
||||
The amounts due from related parties are interest-free, unsecured and have no fixed terms of repayment.
| Due to related parties: | September 30, 2022 | December 31, 2021 | ||||||
| (Unaudited) | (Audited) | |||||||
| Due to related parties | ||||||||
| - Related party A | $ |
|
$ |
|
||||
| - Related party B |
|
|
||||||
| - Related party G |
|
|
||||||
| - Related party I |
|
|
||||||
| - Related party J |
|
|
||||||
| - Related party K |
|
|
||||||
| Total | $ |
|
$ |
|
||||
The amounts due to related parties are interest-free, unsecured and have no fixed terms of repayment.
| For the nine months ended September 30, | ||||||||
| Related party revenue and expense transactions: | 2022 | 2021 | ||||||
| (Unaudited) | (Unaudited) | |||||||
| Service revenue from related parties | ||||||||
| - Related party A | $ |
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$ |
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| - Related party B |
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| - Related party C |
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| - Related party D |
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| - Related party E |
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| - Related party G |
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| - Related party I |
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| - Related party K |
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| Total | $ |
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$ |
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| General and administrative expenses to related parties | ||||||||
| - Related party A | $ |
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$ |
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| - Related party B |
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| - Related party D |
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| - Related party I |
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| - Related party K |
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| Total | $ |
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$ |
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| Other income from a related party: | ||||||||
| - Related party D | $ |
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$ | |||||
| Impairment of other investments in related parties: | ||||||||
| - 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 companies where the Company owns a certain percentage of their company shares.
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 noncontrolling 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 to related party K represents expenses paid by the shareholders or directors to third parties on behalf of the Company, are non-interest bearing, and are due on demand.
| 17 |
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 and 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, 2022 (Unaudited) | ||||||||||||||||
|
Real estate
business |
Service
business |
Corporate | Total | |||||||||||||
| Revenues | $ |
|
$ |
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$ | $ |
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| Cost of revenues |
(
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) |
(
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) |
(
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| Depreciation and amortization |
(
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(
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| Impairment |
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(
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| Total assets |
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| Capital expenditures for long-lived assets | $ | $ |
|
$ | $ |
|
||||||||||
| For the nine months ended September 30, 2021 (Unaudited) | ||||||||||||||||
|
Real estate
business |
Service
business |
Corporate | Total | |||||||||||||
| Revenues | $ |
|
$ |
|
$ | $ |
|
|||||||||
| Cost of revenues |
(
|
) |
(
|
) |
(
|
) | ||||||||||
| Depreciation and amortization |
(
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) |
(
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(
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(
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| Impairment |
(
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) |
(
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) | ||||||||||||
| Net loss |
(
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(
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(
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(
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| Total assets |
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| Capital expenditures for long-lived assets | $ | $ |
|
$ | $ |
|
||||||||||
(b) By Geography*
| For the nine months ended September 30, 2022 (Unaudited) | ||||||||||||||||
| Hong Kong | Malaysia | China | Total | |||||||||||||
| Revenues * | $ |
|
$ |
|
$ |
|
$ |
|
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| Cost of revenues * |
(
|
) |
(
|
) |
(
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(
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) | ||||||||
| Depreciation and amortization * |
(
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(
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(
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) |
(
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) | ||||||||
| Impairment * |
(
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) |
(
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) | ||||||||||||
| Net (loss) income * |
(
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(
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) |
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(
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| Total assets |
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|
|
|
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| Capital expenditures for long-lived assets * | $ | $ |
|
$ |
|
$ |
|
|||||||||
| For the nine months ended September 30, 2021 (Unaudited) | ||||||||||||||||
| Hong Kong | Malaysia | China | Total | |||||||||||||
| Revenues * | $ |
|
$ |
|
$ |
|
$ |
|
||||||||
| Cost of revenues * |
(
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) |
(
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) |
(
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) |
(
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) | ||||||||
| Depreciation and amortization * |
(
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(
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(
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) |
(
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) | ||||||||
| Impairment * |
(
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(
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) | ||||||||||||
| Net (loss) income * |
(
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) |
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(
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) |
(
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| Total assets |
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| Capital expenditures for long-lived assets * | $ |
|
$ |
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$ |
|
$ |
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||||||||
| * |
|
| 18 |
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 Amendment No. 1 to Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission on July 18, 2022 (the “Form 10-K/A”) and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K/A. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.
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/A in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited Financial Statements and notes thereto that appear elsewhere in this report.
Company Overview
Greenpro Capital Corp. (the “Company” or “Greenpro”), was incorporated in the State of Nevada on July 19, 2013. We provide cross-border business solutions and accounting outsourcing services to small and medium-size businesses located in Asia, with an initial focus on Hong Kong, Malaysia, and China. Greenpro provides a range of services as a package solution to our clients, which we believe can assist our clients in reducing their business costs and improving their revenues.
In addition to our business solution services, we also operate a venture capital business through Greenpro Venture Capital Limited, an Anguilla corporation. One of our venture capital business segments is focused on (1) establishing a business incubator for start-up and high growth companies to support such companies during critical growth periods, which will include education and support services, and (2) searching for investment opportunities in selected start-up and high growth companies, which may generate significant returns to the Company. Our venture capital business is focused on companies located in Asia and Southeast Asia including Hong Kong, Malaysia, China, Thailand and Singapore. Another one of our venture capital business segments is focused on rental activities of commercial properties and the sale of investment properties.
Results of Operations
For information regarding our controls and procedures, see Part I, Item 4 - Controls and Procedures, of this Quarterly Report.
During the three and nine months ended September 30, 2022 and 2021, we operated in three regions: Hong Kong, Malaysia and China. We derived revenue from the provision of services and sales or rental activities of our commercial properties.
Comparison of the three months ended September 30, 2022 and 2021
Total revenue
Total revenue was $1,306,439 and $429,366 for the three months ended September 30, 2022 and 2021, respectively. The increased amount of $877,073 was primarily due to an increase in the revenue from our business services of $229,439 and the sale of two real estate property units of $652,788 during the period in 2022. We expect revenue from our business services segment to steadily improve as we expand our businesses into new territories and as the effects of the COVID-19 pandemic wane.
Service business revenue
Revenue from the provision of business services was $628,295 and $398,856 for the three months ended September 30, 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 experienced a slight increase in service revenue as some listing service obligations were completed during the three months ended September 30, 2022.
Real estate business
Sale of real estate properties
Revenue from the sale of real estate property 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. There was no revenue generated from the sale of real estate properties for the three months ended September 30, 2021.
Rental revenue
Revenue from rentals was $25,356 and $30,510 for the three months ended September 30, 2022 and 2021, respectively. It was derived principally from leasing properties in Malaysia and Hong Kong. We believe our rental income will be stable in the near future.
| 19 |
Total operating costs and expenses
Total operating costs and expenses were $1,536,785 and $1,060,087 for the three months ended September 30, 2022 and 2021, 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, 2022 and 2021 was $230,346 and $630,721, respectively. A decrease in loss from operations was mainly due to an increase in the gross profit from our business services of $211,681 and the increased amount of $207,042 from the gross profit of the sale of two real estate property units during the period in 2022.
Cost of service revenue
Cost of revenue on provision of services was $103,093 and $85,335 for the three months ended September 30, 2022 and 2021, 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, 2022.
Cost of real estate properties sold
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 property, legal fees, improvement costs to the building structure, and other acquisition costs. Selling and advertising costs are expensed as incurred. There was no revenue generated from the sale of real estate property for the three months ended September 30, 2021, hence no cost was recorded.
Cost of rental revenue
Cost of rental revenue was $10,489 and $10,506 for the three months ended September 30, 2022 and 2021, 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 $977,457 and $964,246 for the three months ended September 30, 2022 and 2021, respectively. For the three months ended September 30, 2022, G&A expenses consisted primarily of employees’ salaries and allowances of $367,703, directors’ salaries and compensation of $162,944, advertising and promotion expenses of $120,638, other professional fee of $79,032, legal service fee of $51,575 and consulting fees of $16,402. We expect our G&A expenses will slightly increase as we integrate our business acquisitions, expand our existing business, and develop new markets in other regions.
Other income or expenses
Net other expenses were $222,459 and $5,414,154 for the three months ended September 30, 2022 and 2021, respectively. Impairment of other investments was $246,100 for the three months ended September 30, 2022, while impairment of other investments was $2,094,300 for the three months ended September 30, 2021. Fair value gains associated with warrants was $479 and 27,678 for the three months ended September 30, 2022 and 2021, respectively. Reversal of write-off notes receivable was $0 and $2,000,000 for the three months ended September 30, 2022 and 2021, respectively. Interest expense of $762,253 which mainly consisted of interest expense associated with convertible notes of $750,982, and loss on extinguishment of convertible notes of $4,593,366 were recorded for the three months ended September 30, 2021, but no such interest expense or loss was recorded during the same period in 2022.
Interest expenses
Total interest expenses were $0 and $762,253 for the three months ended September 30, 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 $750,982 for the three months ended September 30, 2021, which included coupon interest expense of $130,493, amortization of discount on convertible notes of $46,265, amortization of debt issuance costs of $19,421, interest expense associated with conversion of notes of $553,571 and interest expense due to non-fulfillment of use of proceeds requirements of $1,232.
Net loss
Net loss was $452,805 and $6,044,875 for the three months ended September 30, 2022 and 2021, respectively. A decrease in net loss was mainly due to a decrease of impairment loss of other investments, and no interest expenses and loss on extinguishment associated with the convertible promissory notes was recorded during the three months ended September 30, 2022.
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 any non-controlling interest of consolidated subsidiaries.
For the three months ended September 30, 2022, the Company recorded net income attributable to a non-controlling interest of $78,675, as compared to net loss attributable to a non-controlling interest of $18,512 for the three months ended September 30, 2021.
| 20 |
Comparison of the nine months ended September 30, 2022 and 2021
Total revenue
Total revenue was $2,690,227 and $1,810,964 for the nine months ended September 30, 2022 and 2021, respectively. An increase of revenue was mainly due to an increase in the revenue from our business services of $45,325 and the sale of three real estate property units of $839,661 during the period in 2022. We expect revenue from our business services segment to steadily improve as we expand our businesses into new territories and as the effects of the COVID-19 pandemic wane.
Service business revenue
Revenue from the provision of business services was $1,760,880 and $1,715,555 for the nine months ended September 30, 2022 and 2021, respectively. It was derived principally from business consulting and advisory services as well as company secretarial, accounting, and financial analysis services. We experienced a slight increase in service revenue as some listing service obligations were completed during the nine months ended September 30, 2022.
Real estate business
Sale of real estate properties
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. There was no revenue generated from the sale of real estate property for the nine months ended September 30, 2021.
Rental revenue
Revenue from rentals was $89,686 and $95,409 for the nine months ended September 30, 2022 and 2021, respectively. It was derived principally from leasing properties in Malaysia and Hong Kong. We believe our rental income will be stable in the near future.
Total operating costs and expenses
Total operating costs and expenses were $3,755,944 and $3,818,049 for the nine months ended September 30, 2022 and 2021, respectively. They consist of cost-of-service revenue, cost of real estate properties sold, cost of rental revenue and G&A expenses.
Loss from operations for the nine months ended September 30, 2022 and 2021 was $1,065,717 and $2,007,085, respectively. A decrease in loss from operations was mainly due to the increased amount of $266,574 from the gross profit of the sale of three real estate property units and the decreased amount of $615,101 from the G&A expenses during the nine months ended September 30, 2022.
Cost of service revenue
Cost of revenue on provision of services were $239,437 and $256,905 for the nine months ended September 30, 2022 and 2021, respectively. It primarily consists of employee compensation and related payroll benefits, company formation costs, and other professional fees directly attributable to the services rendered. A decrease of cost-of-service revenue was mainly due to a decrease of other professional fees directly attributable to the services for the nine months ended September 30, 2022.
Cost of real estate properties sold
Cost of revenue on real estate properties sold was $573,087 for the nine months ended September 30, 2022. It primarily consisted of the purchase price of property, legal fees, improvement costs to the building structure, and other acquisition costs. Selling and advertising costs are expensed as incurred. There was no revenue generated from the sale of real estate property for the nine months ended September 30, 2021, hence no cost was recorded.
Cost of rental revenue
Cost of rental revenue was $33,189 and $35,812 for the nine months ended September 30, 2022 and 2021, 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 commission fees incurred for the nine months ended September 30, 2022 as compared to the same fees incurred for the nine months ended September 30, 2021.
General and administrative expenses
G&A expenses were $2,910,231 and $3,525,332 for the nine months ended September 30, 2022 and 2021, respectively. For the nine months ended September 30, 2022, G&A expenses consisted primarily of employees’ salaries and allowances of $1,096,413, directors’ salaries and compensation of $489,583, advertising and promotion expenses of $277,094, other professional fee of $193,549, legal service fee of $179,307 and consulting fee of $147,971. We expect our G&A expenses will slightly increase as we integrate our business acquisitions, expand our existing business, and develop new markets in other regions.
| 21 |
Other income or expenses
Net other expenses were $1,347,582 and $11,096,555 for the nine months ended September 30, 2022 and 2021, respectively. Impairment of other investments was $1,459,900 for the nine months ended September 30, 2022, while impairment of other investments was $5,340,300 for the nine months ended September 30, 2021. Gain on change in fair value associated with warrants was $9,884 for the nine months ended September 30, 2022, while a gain on change in fair value of derivative liabilities was $5,161,142 which was composed of a fair value gain of options associated with convertible notes of $5,093,720 and a fair value gain associated with warrants of $67,422 for the nine months ended September 30, 2021. Reversal of write-off notes receivable was $0 and $5,000,000 for the nine months ended September 30, 2022 and 2021, respectively. No interest expense was incurred for the nine months ended September 30, 2022, as compared to interest expense of $12,949,517 which mainly consisted of interest expense associated with convertible notes of $12,899,670 for the nine months ended September 30, 2021. Loss on extinguishment of convertible notes of $2,981,987 was recorded for the nine months ended September 30, 2021, but no such loss was recorded during the same period in 2022.
Interest expenses
Total interest expenses were $0 and $12,949,517 for the nine months ended September 30, 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 $12,899,670 for the nine months ended September 30, 2021, which included coupon interest expense of $459,004, 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.
Net Loss
Net loss was $2,414,835 and $13,106,274 for the nine months ended September 30, 2022 and 2021, respectively. A decrease in net loss was mainly due to a decrease of impairment loss of other investments, and no interest expenses and loss on extinguishment associated with the convertible promissory notes were recorded during the nine months ended September 30, 2022.
Net income or loss attributable to non-controlling interest
We record net income or loss attributable to non-controlling interest in the consolidated statements of operations for any non-controlling interest of consolidated subsidiaries.
At September 30, 2022, the non-controlling interest is related to Forward Win International Limited (“FWIL”), which the Company owns a 60% interest in and the non-controlling shareholders own the remaining 40% interest.
For the nine months ended September 30, 2022, the Company recorded net income attributable to a non-controlling interest of $96,107, as compared to net loss attributable to a non-controlling interest of $10,537 for the nine months ended September 30, 2021.
There were no seasonal aspects that had a material effect on the financial condition or results of operations of the Company.
Other than as disclosed elsewhere in this Quarterly Report, we are not aware of any trends, uncertainties, demands, commitments or events for the nine months ended September 30, 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.
| 22 |
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, 2022.
Contractual Obligations
As of September 30, 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. One of the Malaysian subsidiaries leases an office in Kuala Lumpur and the other Malaysian 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. As of September 30, 2022, the future minimum rental payments under these leases in the aggregate are approximately $52,822 and are due as follows: 2022: $27,783 and 2023: $25,039.
Related Party Transactions
Net accounts receivable due from a related party was $0 and $41 as of September 30, 2022 and December 31, 2021, respectively. Deposit paid to a related party was $80,000 and $0 as of September 30, 2022 and December 31, 2021, respectively. Other receivable due from related parties was $1,370,463 and $1,170,855 as of September 30, 2022 and December 31, 2021, respectively. Amounts due to related parties were $531,969 and $757,283 as of September 30, 2022 and December 31, 2021, respectively.
For the nine months ended September 30, 2022 and 2021, related party service revenue totaled $548,602 and $739,949, respectively.
G&A expenses to related parties were $53,689 and $9,873 for the nine months ended September 30, 2022 and 2021, respectively.
For the nine months ended September 30, 2022 and 2021, other income from a related party was $1,123 and $0, respectively. Impairment of investments in related parties was $1,459,900 and $5,340,300 for the nine months ended September 30, 2022 and 2021, respectively.
Our related parties are primarily those companies where we own a certain percentage of shares of such companies, and companies that we have determined that we can significantly influence based on our common business relationships. Refer to Note 7 to the Condensed Consolidated Financial Statements for additional details regarding the related party transactions.
Critical Accounting Policies and Estimates
Use of estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates include certain assumptions related to, among others, the allowance for doubtful accounts receivable, impairment analysis of real estate assets and other long-term assets including goodwill, valuation allowance on deferred income taxes, and the accrual of potential liabilities. Actual results may differ from these estimates.
Revenue recognition
The Company follows the guidance of Accounting Standards Codification (ASC) 606, Revenue from Contracts. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.
The Company’s revenue consists of revenue from providing business consulting and corporate advisory services (“service revenue”), revenue from the sale of real estate properties, and revenue from the rental of real estate properties.
Impairment of long-lived assets
Long-lived assets primarily include real estate held for investment, property and equipment, and intangible assets. In accordance with the provision of ASC 360, the Company generally conducts its annual impairment evaluation of its long-lived assets in the fourth quarter of each year, or more frequently if indicators of impairment exist, such as a significant sustained change in the business climate. The recoverability of long-lived assets is measured at the reporting unit level. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset. In addition, for real estate held for sale, an impairment loss is the adjustment to fair value less estimated cost to dispose of the asset.
Goodwill
Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. Under the guidance of ASC 350, goodwill is not amortized, rather it is tested for impairment annually, and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. An impairment loss generally would be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit and would be measured as the excess carrying value of goodwill over the derived fair value of goodwill. The Company’s policy is to perform its annual impairment testing for its reporting units on December 31, of each fiscal year.
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.
Reverse Stock Split
A 10-for-1 reverse stock split, or the Reverse Stock Split, of our Common Stock became effective on July 28, 2022. Unless expressly stated herein, all outstanding shares and per share amounts of the Company’s Common Stock in this Quarterly Report have been adjusted to reflect the Reverse Stock Split.
Recent accounting pronouncements
Refer to Note 1 in the accompanying financial statements.
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Liquidity and Capital Resources
Our cash and cash equivalents at September 30, 2022 were $3,646,166, while at December 31, 2021, the cash and cash equivalents were $5,338,571, a decrease of $1,692,405. We estimate the Company currently has sufficient cash available to meet its anticipated working capital for the next twelve months.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. During the nine months ended September 30, 2022, the Company incurred a net loss of $2,414,835 and net cash used in operations of $2,157,380. 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, 2021 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 $2,157,380 and $2,210,002 for the nine months ended September 30, 2022 and 2021, respectively. The net cash used in operating activities in 2022 primarily consisted of a net loss for the period of $2,414,835, an increase in prepayments and other current assets of $625,718, a decrease in accounts payable and accrued liabilities of $429,321 and a gain on sale of real estate held for sale of $266,574, while it was offset by impairment of other investments of $1,459,900 and an increase in deferred revenue of $136,198. For the nine months ended September 30, 2022, non-cash adjustments totaled $1,367,070, which was mostly composed of non-cash expenses of impairment of other investments of $1,459,900.
Investing activities
Net cash provided by investing activities was $836,167 and $38,950 for the nine months ended September 30, 2022 and 2021, respectively. The net cash provided by investing activities in 2022 primarily was the proceeds from real estate held for sale of $839,661.
Financing activities
Net cash used in financing activities for the nine months ended September 30, 2022 was $416,382, as compared to net cash provided by financing activities of $7,016,119 for the nine months ended September 30, 2021.
The cash used in financing activities in 2022 was advances to related parties of $416,382.
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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, 2022 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 three months ended September 30, 2022 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.
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 14, 2022 | By: | /s/ Lee Chong Kuang |
| Lee Chong Kuang | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November 14, 2022 | By: | /s/ Loke Che Chan, Gilbert |
| Loke Che Chan, Gilbert | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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