UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the Quarterly Period Ended
or
For the transition period from _________ to _________
Commission
File Number
(Exact name of registrant issuer as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices, including zip code)
Registrant’s
phone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding twelve months (or shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” or an “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
Accelerated Filer ☐ Accelerated Filer ☐
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 August 9, 2021, 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 JUNE 30, 2021 AND DECEMBER 31, 2020
(In U.S. dollars, except share and per share data)
| June 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash
and cash equivalents (including $ | $ | $ | ||||||
| Accounts
receivable, net of allowance of $ | ||||||||
| Prepaids and other current assets | ||||||||
| Due from related parties | ||||||||
| Deferred
costs of revenue (including $ | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Real Estate investments: | ||||||||
| Real estate held for sale | ||||||||
| Real estate held for investment, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other
investments (including $ | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Other non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Current portion of loans secured by real estate | ||||||||
| Convertible notes payable, net | ||||||||
| Due to related parties | ||||||||
| Operating lease liabilities, current portion | ||||||||
| Deferred
revenue (including $ | ||||||||
| Derivative liabilities | ||||||||
| Total current liabilities | ||||||||
| Long term portion of loans secured by real estate | ||||||||
| Operating lease liabilities, net of current portion | - | |||||||
| Total liabilities | ||||||||
| Commitments and contingencies | - | - | ||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ par value; shares authorized; shares issued and outstanding | - | - | ||||||
| Common Stock, $ par value; shares authorized; and shares issued and outstanding at June 30, 2021 and December 31, 2020 | ||||||||
| Additional paid in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Greenpro Capital Corp. stockholders’ equity | ||||||||
| Noncontrolling interests in consolidated subsidiaries | ||||||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements.
| 3 |
GREENPRO CAPITAL CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020
(In U.S. dollars, except share and per share data)
(Unaudited)
| Three months ended June 30 | Six months ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| REVENUES: | ||||||||||||||||
| Service
revenue (including $ | $ | $ | $ | $ | ||||||||||||
| Sale of real estate properties | ||||||||||||||||
| Rental revenue | ||||||||||||||||
| Total revenue | ||||||||||||||||
| COST OF REVENUES: | ||||||||||||||||
| Cost
of service revenue (including $ | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Cost of real estate properties sold | ( | ) | ||||||||||||||
| Cost of rental revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total cost of revenues | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| General
and administrative (including $ | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSES) | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of derivative liabilities associated with warrants | ( | ) | ( | ) | ||||||||||||
| Change in fair value of options associated with convertible notes | ( | ) | ||||||||||||||
| Gain on extinguishment of convertible notes | ||||||||||||||||
| Reversal of write-off notes receivable | ||||||||||||||||
| Impairment
of other investments (including $ | ( | ) | ( | ) | ||||||||||||
| Total other expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| LOSS BEFORE INCOME TAX | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ( | ) | ( | ) | ||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income attributable to noncontrolling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET LOSS ATTRIBUTED TO COMMON SHAREHOLDERS OF GREENPRO CAPITAL CORP. | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive (loss) income: | ||||||||||||||||
| - Foreign currency translation (loss) income | ( | ) | ( | ) | ( | ) | ||||||||||
| COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| NET LOSS PER SHARE, BASIC AND DILUTED | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| WEIGHTED AVERAGE NUMBER OF COMMON STOCK OUTSTANDING, BASIC AND DILUTED | ||||||||||||||||
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 SIX MONTHS ENDED JUNE 30, 2021 AND 2020
(In U.S. dollars, except share data)
(Unaudited)
| Three months ended June 30, 2021 (Unaudited) | ||||||||||||||||||||||||||||
| Common Stock | Additional | Accumulated Other | Non- | Total | ||||||||||||||||||||||||
Number of shares | Amount | Paid-in Capital | Comprehensive Loss | Accumulated Deficit | Controlling Interest | Stockholders’ Equity | ||||||||||||||||||||||
| Balance as of March 31, 2021 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Fair
value of shares issued for other investment | - | - | - | |||||||||||||||||||||||||
| Fair value of shares issued for subscription fee | - | - | - | |||||||||||||||||||||||||
| Fair value of shares issued from conversion of promissory note | - | - | - | |||||||||||||||||||||||||
| Value of beneficial conversion feature resulting from debt extinguishment | - | - | ( | ) | - | - | - | ( | ) | |||||||||||||||||||
| Foreign currency translation | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||
| Net (loss) income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||
| Balance as of June 30, 2021 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Six months ended June 30, 2021 (Unaudited) | ||||||||||||||||||||||||||||
| Common Stock | 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 | - | - | - | |||||||||||||||||||||||||
| Fair value of shares issued from conversion of promissory note | - | - | - | |||||||||||||||||||||||||
| Beneficial conversion feature related to convertible notes | - | - | - | - | - | |||||||||||||||||||||||
| Reclassification of conversion option related to a convertible note | - | - | - | - | - | |||||||||||||||||||||||
| Value of beneficial conversion feature resulting from debt extinguishment | - | - | ( | ) | - | - | - | ( | ) | |||||||||||||||||||
| Foreign currency translation | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||
| Net (loss) income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||
| Balance as of June 30, 2021 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Three months ended June 30, 2020 (Unaudited) | ||||||||||||||||||||||||||||
| Common Stock | Additional | Accumulated Other | Non- | Total | ||||||||||||||||||||||||
Number of shares | Amount | Paid-in Capital | Comprehensive Loss | Accumulated Deficit | Controlling Interest | Stockholders’ Equity | ||||||||||||||||||||||
| Balance as of March 31, 2020 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Fair value of shares issued for other investment | - | - | - | |||||||||||||||||||||||||
| Changes in ownership interests in subsidiaries | - | - | - | - | ( | ) | - | |||||||||||||||||||||
| Foreign currency translation | - | - | - | - | - | |||||||||||||||||||||||
| Net (loss) income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||
| Balance as of June 30, 2020 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Six months ended June 30, 2020 (Unaudited) | ||||||||||||||||||||||||||||
| Common Stock | 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, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Fair value of shares issued for other investment | - | - | - | |||||||||||||||||||||||||
| Derecognition of non-controlling interest due to deconsolidation | - | - | - | - | - | |||||||||||||||||||||||
| Changes in ownership interests in subsidiaries | - | - | - | - | ( | ) | - | |||||||||||||||||||||
| Foreign currency translation | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||
| Net (loss) income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||
| Balance as of June 30, 2020 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| 5 |
GREENPRO CAPITAL CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020
(In U.S. dollars)
(Unaudited)
Six months ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of right-of-use assets | ||||||||
| Amortization of discount on convertible notes | - | |||||||
| Amortization of debt issuance costs | - | |||||||
| Interest expense associated with accretion of convertible notes | - | |||||||
| Interest expense associated with conversion of notes | - | |||||||
| Interest expense due to non-fulfillment of use of proceeds requirements | - | |||||||
| Provision for bad debts | ( | ) | ||||||
| Fair value of shares issued for subscription fee | - | |||||||
| Reversal of write-off notes receivable | ( | ) | - | |||||
| Impairment of other investment-related party | - | |||||||
| Gain on sale of real estate held of sale | ( | ) | - | |||||
| Loss on disposal of property and equipment | - | |||||||
| Loss on disposal of a subsidiary | - | |||||||
| Increase in cash surrender value on life insurance | - | ( | ) | |||||
| Loss on deconsolidation of controlled subsidiaries | - | |||||||
| Change in fair value of derivative liabilities associated with warrants | ( | ) | ||||||
| Change in fair value of options associated with convertible notes | ( | ) | - | |||||
| Gain on extinguishment of convertible notes | ( | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ||||||||
| Prepaids and other current assets | ( | ) | ||||||
| Deferred costs 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 sale of property and equipment | - | |||||||
| Net decrease in cash due to deconsolidation of subsidiaries | - | ( | ) | |||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Principal payments of loans secured by real estate | ( | ) | ( | ) | ||||
| Advances (to) from related parties | ( | ) | ||||||
| Proceeds from convertible promissory notes, net | - | |||||||
| Collection of notes receivable | - | |||||||
| Convertible note redemptions paid in cash | ( | ) | - | |||||
| Net cash 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: | ||||||||
| Noncash assets derecognized on deconsolidation of controlled subsidiaries | $ | $ | ||||||
| Noncash liabilities derecognized on deconsolidation of controlled subsidiaries | $ | $ | ||||||
| Fair value of shares issued for other investments | $ | $ | ||||||
| Fair value of shares issued from conversion of promissory note | $ | $ | ||||||
| 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 | $ | $ | ||||||
| Right-of-use assets and operating lease liabilities removed for terminated operating leases | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements.
| 6 |
GREENPRO CAPITAL CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020
(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 six months ended June 30, 2021 and 2020, 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 June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The Condensed Consolidated Balance Sheet information as of December 31, 2020 was derived from the Company’s audited Consolidated Financial Statements as of and for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K/A filed with the SEC on April 12, 2021. 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 six months ended June 30, 2021, the Company incurred a net
loss of $
| 7 |
The Company’s ability to continue as a going concern is dependent upon improving its profitability and the continuing financial support from its shareholders. Management believes the existing shareholders or external financing will provide the additional cash to meet the Company’s obligations as they become due. Despite the amount of funds that 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.
COVID-19 outbreak
In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, workforces, customers, and created significant volatility and disruption of financial markets. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our services and harm our business and results of operations. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business or results of operations at this time.
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 liability, 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 also the minimum paid-up share capital requirement for insurance brokers specified under the Insurance Ordinance of Hong Kong.
At
June 30, 2021 and December 31, 2020, cash included funds held by employees of $
As of June 30, 2021 | As of December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Cash, cash equivalents, and restricted cash | ||||||||
| Denominated in United States Dollars | $ | $ | ||||||
| Denominated in Hong Kong Dollars | ||||||||
| Denominated in Chinese Renminbi | ||||||||
| Denominated in Malaysian Ringgit | ||||||||
| 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
June 30, 2021, the Company had twenty three investments in equity securities without readily determinable fair values of related parties
valued at $
At
December 31, 2020, the Company had nineteen investments in equity securities without readily determinable fair values of related parties
valued at $
Debt discount
During
the six months ended June 30, 2021, the Company incurred $
Debt issuance costs
During
the six months ended June 30, 2021, the Company incurred direct costs associated with the issuance of convertible promissory notes, as
described in Note 5, and recorded $
Derivative financial instruments
Derivative financial instruments consist of financial instruments that contain a notional amount and one or more underlying variables such as interest rate, security price, variable conversion rate or other variables, require no initial net investment and permit net settlement. The derivative financial instruments may be free-standing or embedded in other financial instruments. The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company follows the provision of ASC 815, Derivatives and Hedging for derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. At each reporting date, the Company reviews its convertible securities to determine that their classification is appropriate.
Basic income (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net 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 six months ended June 30, 2021 and 2020, 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$”), which is the functional and reporting currency of the Company. In addition, the Company’s operating subsidiaries maintain their books and records in their respective functional currency, which consists of the Malaysian Ringgit (“MYR”), Chinese Renminbi (“RMB”), Hong Kong Dollars (“HK$”) and Australian Dollars (“AU$”).
In general, for consolidation purposes, assets and liabilities of the Company’s subsidiaries whose functional currency is not the US$, 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 six months ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| 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$1 exchange rate | ||||||||
| Period-end AU$ : US$1 exchange rate | ||||||||
| Period-average AU$ : US$1 exchange rate | ||||||||
| 9 |
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 costs 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 June 30, 2021 and December 31, 2020, 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, 2020 | $ | |||
| Net change in the fair value of derivative liability associated with warrants | ( | ) | ||
| Derecognition of derivative liability resulting from convertible note redemptions | ( | ) | ||
| Fair value as of June 30, 2021 (Unaudited) | $ | |||
Concentrations of risks
For
the three months ended June 30, 2021,
For
the three and six months ended June 30, 2021 and 2020, no vendor accounted for 10% or more of the Company’s cost of revenues. For
the period ended June 30, 2021,
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.
| 10 |
Recent accounting pronouncements
The FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326) in June 2016. ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 is effective for the Company beginning January 1, 2023, and early adoption is permitted. The Company does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations and cash flows.
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.
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 of our service contracts providing assistance to clients in capital market listings (“Listing services”), our services provided are considered to be one performance obligation. 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 costs of revenue are 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 may record a liability if costs exceed revenue is determined.
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. The adoption of ASC 606 had no impact on the Company’s consolidated financial statements.
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 six months ended June 30, 2021, there was no sales of real estate and one unit of real estate property sold to a buyer, respectively. The Company recorded no sales revenue from the real estate property held for sale for the three and six months ended June 30, 2020.
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 June 30, | ||||||||
| 2021 | 2020 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue by service lines: | ||||||||
| Corporate advisory – Non-listing services | $ | $ | ||||||
| Corporate advisory – Listing services | ||||||||
| Rental of real estate properties | ||||||||
| Total revenue | $ | $ | ||||||
| Three Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue by geographic area: | ||||||||
| Hong Kong | $ | $ | ||||||
| Malaysia | ||||||||
| China | ||||||||
| Total revenue | $ | $ | ||||||
| Six Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| (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 | $ | $ | ||||||
| Six Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue by geographic area: | ||||||||
| Hong Kong | $ | $ | ||||||
| Malaysia | ||||||||
| China | ||||||||
| Total revenue | $ | $ | ||||||
Our contract balances include deferred costs of revenue and deferred revenue.
Deferred Revenue
For service contracts where the performance obligation is not completed, deferred revenue is recorded for any payments received in advance of the performance obligation. Changes in deferred revenue were as follows:
Six Months Ended June 30, 2021 | ||||
| (Unaudited) | ||||
| Deferred revenue, January 1, 2021 | $ | |||
| New contract liabilities | ||||
| Performance obligations satisfied | ( | ) | ||
| Deferred revenue, June 30, 2021 | $ | |||
Deferred Costs of Revenue
For service contracts where the performance obligation is not completed, deferred costs of revenue are recorded for any costs incurred in advance of the performance obligation.
Deferred revenue and deferred costs of revenue at June 30, 2021 and December 31, 2020 are classified as current assets or current liabilities and totaled:
As of June 30, 2021 | As of December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Deferred revenue | $ | $ | ||||||
| Deferred costs of revenue | $ | $ | ||||||
| 12 |
NOTE 3 - OTHER INVESTMENTS
| As of | As of | |||||||
| June 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| (A) Investment in equity securities without readily determinable fair values of affiliates: | ||||||||
| (1) Greenpro Trust Limited (a related party) | $ | $ | ||||||
| (2) Other related parties | ||||||||
| (B) Stock option (a related party) | ||||||||
| Total | $ | $ | ||||||
| (A) |
Equity
securities without readily determinable fair values are investments in privately held 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 six months ended June 30, 2021, 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 June 30, 2021.
At June 30, 2021 and December, 31 2020, the carrying values of equity securities without readily determinable fair values are as follows:
| As of | As of | |||||||
| June 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Original cost | $ | $ | ||||||
| Unrealized gains (losses) | ||||||||
| Provision for impairment or decline in value | ( | ) | ( | ) | ||||
| Equity securities without readily determinable fair values, net | $ | $ | ||||||
The
Company had cost method investments with a carrying value of $
(a) Angkasa-X Holdings Corp.:
On
February 3, 2021, Greenpro Venture Capital Limited, a subsidiary of the Company (“GVCL”) entered into a subscription agreement
with Angkasa-X Holdings Corp., a British Virgin Islands corporation, which principally provides internet connectivity to rural areas
in Southeast Asia (“Angkasa”). Pursuant to the agreement, GVCL acquired ordinary shares of Angkasa at a price
of $
(b) First Bullion Holdings Inc.:
On February 17, 2021, First Bullion Holdings Inc. (“FBHI”), a British Virgin Islands corporation, issued to our wholly owned subsidiary, GVCL, ordinary shares of FBHI pursuant to Section 2.2 of a stock purchase and option agreement dated October 19, 2020 between the Company, Mr. Tang Ka Siu Johnny (“Mr. Tang”) and FBHI. FBHI had, under Section 2.2 of the agreement, granted the Company an option to purchase an additional % of the shares sold under the agreement valued at $.
In
partial consideration of the FBHI shares, the Company had previously issued restricted shares of its Common Stock
on December 11, 2020 at $
On
February 26, 2021, the Company issued restricted shares of its Common Stock to two designees of Mr. Tang at $ per share (valued
at approximately $
At
June 30, 2021, together with the
| 13 |
(c) Simson Wellness Tech. Corp.:
On
February 19, 2021, GVCL entered into a subscription agreement with Simson Wellness Tech. Corp., a Nevada corporation, which is
a digital platform that acts as middleware for distribution of optical products (“Simson”). Pursuant to the agreement, GVCL
acquired shares of common stock of Simson at a price of
$
(d) Innovest Energy Fund:
On
February 11, 2021, Greenpro Resources Limited, a subsidiary of the Company (“GRL”) entered into a subscription agreement
with Innovest Energy Fund, a global multi-asset fund incorporated in the Cayman Island, and is principally engaged in developing
a multi-faceted suite of products and services for the cryptocurrency industry and economy (the “Fund”). Pursuant to the
agreement, GRL agreed to subscribe for $
On
April 7, 2021, the Company issued restricted shares of its Common Stock to the Fund and issued restricted shares of
its Common Stock to a designee of the Fund as a subscription fee of $
At
June 30, 2021, the Company determined that its investment in the Fund was impaired and revalued at $
(e) Jocom Holdings Corp.:
On
June 2, 2021, GVCL entered into a subscription agreement with Jocom Holdings Corp., a Nevada corporation, which operates a Malaysia-based
m-commerce platform specializing in online grocery shopping via smartphones (“Jocom”). Pursuant to the agreement, GVCL acquired
shares of common stock of Simson at a price of
$
Impairment of other investments
For
the three and six months ended June 30, 2021, the Company recognized an impairment loss of $
NOTE 4 - OPERATING LEASES
The
Company has two separate operating lease agreements for one office space in Hong Kong with remaining lease terms of
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.
| 14 |
The components of lease expense and supplemental cash flow information related to leases for the period are as follows:
Six
Months Ended | ||||
| (Unaudited) | ||||
| Lease Cost | ||||
| Operating lease cost (included in general and administrative expenses in the Company’s unaudited condensed statement of operations) | $ | |||
| Other Information | ||||
| Cash paid for amounts included in the measurement of lease liabilities for the six months ended June 30, 2021 | $ | |||
| 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 June 30, 2021 | ||||
| (Unaudited) | ||||
| Operating leases | ||||
| Long-term right-of-use assets | $ | |||
| Short-term operating lease liabilities | $ | |||
| Long-term operating lease liabilities | ||||
| Total operating lease liabilities | $ | |||
Maturities of the Company’s lease liabilities are as follows:
| Year Ending | Operating Leases | |||
| (Unaudited) | ||||
| 2021 (remaining 6 months) | $ | |||
| 2022 | ||||
| 2023 | ||||
| Total lease payments | ||||
| Less: Imputed interest/present value discount | ( | ) | ||
| Present value of lease liabilities | $ | |||
Lease
expenses were $
| 15 |
NOTE 5 - CONVERTIBLE NOTES PAYABLE, NET
Convertible Notes issued in October 2020:
Convertible Note Financing with Streeterville Capital, LLC, FirstFire Global Opportunities Fund, LLC and Granite Global Value Investments Ltd.
On
October 13, 2020, the Company issued three unsecured convertible promissory notes to Streeterville Capital, LLC, FirstFire Global Opportunities
Fund, LLC and Granite Global Value Investments Ltd. (collectively, the “Investors”), respectively. The notes were issued
with combined principal amount of $
Investor Conversion and Early Redemption Options
At
the Investors’ option, the notes can be converted in Company’s Common Stock at any time at the conversion price of $
The
Investors have an option to redeem the notes prior to their contractual maturity (put option) but not before 6 months since the issuance
date. If the put option is exercised, Investors’ monthly redemption amounts including principal and face interest are capped at
$
The Investors have an option to demand the repayment of debt upon default, as defined in the terms of the notes.
Issuer Early Redemption Option
The
Company has an option to prepay the notes ahead of contractual maturity at
The Company assessed the Investors’ conversion option for the scope exception for contracts involving a reporting entity’s own equity. The Company concluded that the conversion option is indexed to Company’s own stock, is considered “conventional” and can be classified in Company’s stockholders’ equity. The conversion option was not separated from but presented as part of the debt instrument.
Investors’
conversion option was determined to be in the money at the commitment date. The non-detachable option was determined to be a beneficial
conversion feature measured at the intrinsic value and recorded in Company’s additional paid-in capital. The intrinsic value was
determined by calculating the initial effective conversion price. Effective conversion price was calculated as the ratio between the
total proceeds allocated to the convertible instrument and the number of shares into which it is convertible. The proceeds allocated
to the conversion instrument were impacted by the initial issuance discount. The number of shares issuable under the terms of the conversion
option was . The overall amount of beneficial conversion feature recognized at issuance was $
The Company assessed Investors’ put option and Investors’ option to redeem the debt upon default using bifurcation guidance per ASC 815-15, Embedded Derivatives. The Company concluded that economic characteristics and risks of Investors’ put option are not considered clearly and closely related to debt host and that Investors’ put option should be separated from the host instrument. The Company noted that certain events triggering the default including fundamental transaction and non-compliance with listing requirements are not directly related to Company’s creditworthiness. Economic characteristics and risks of Investors’ put option triggered by the occurrence of such events are not considered clearly and closely related to the economic characteristics and risks of the host instrument.
Investors’ put option and the option to redeem the debt upon default triggered by events not directly linked to Company’s creditworthiness were separated from the debt instrument and presented as a “compound” derivative liability (see Note 6).
Estimated
fair value of the derivative liability, $
| 16 |
At October 13, 2020, net carrying value of three short-term convertible notes issued on October 13, 2020 is as follows:
At Issuance October 13, 2020 | ||||
| Face value of convertible notes | $ | |||
| Initial discount | ( | ) | ||
| Discount related to debt issuance costs | ( | ) | ||
| Discount related to beneficial conversion feature | ( | ) | ||
| Discount related to put options | ( | ) | ||
| Net carrying value of convertible notes payable | $ | |||
On
April 14, 2021, Streeterville Capital, LLC (“Streeterville”), exercised an option defined in the terms of the convertible
promissory note issued by the Company on October 13, 2020, to redeem the note after 6 months from issuance date, at a conversion price
of $
On
April 12 and 16, 2021, the Company exercised an option defined in the terms of the convertible promissory notes issued to FirstFire
Global Opportunities Fund, LLC (“FirstFire”) and Granite Global Value Investments Ltd. (“Granite”) on October
13, 2020, to prepay the notes ahead of contractual maturity of
At June 30, 2021, fair value of the derivative liability related to Investors’ early redemption options, resulting from redemption of notes was (see Note 6).
Convertible Note issued in January 2021:
Convertible Note Financing with Streeterville Capital, LLC
On
January 8, 2021, the Company entered into a securities purchase agreement with Streeterville Capital, LLC, an accredited investor (“Streeterville”),
pursuant to which the Company issued and sold to Streeterville in a private placement an unsecured convertible promissory note in the
original principal amount $
| 17 |
At January 8, 2021, net carrying value of a short-term convertible note issued on January 8, 2021 is as follows:
At Issuance January 8, 2021 | ||||
| (Unaudited) | ||||
| Face value of convertible note | $ | |||
| Initial discount | ( | ) | ||
| Discount related to debt issuance costs | ( | ) | ||
| Discount related to beneficial conversion feature | ( | ) | ||
| Net carrying value of convertible note payable | $ | |||
Convertible Note issued in February 2021:
Convertible Note Financing with Streeterville Capital, LLC
On
February 11, 2021, the Company entered into a securities purchase agreement with Streeterville Capital, LLC, an accredited investor (“Streeterville”),
pursuant to which the Company issued and sold to Streeterville in a private placement an unsecured convertible promissory note in the
original principal amount $
The Company has covenanted to use part of the proceeds from the note to repay the outstanding notes it issued to FirstFire Global Opportunities Fund, LLC (“FirstFire”) and Granite Global Value Investments Ltd. (“Granite”) in relation to their respective securities purchase agreement signed on October 13, 2020.
On February 21, 2021, the Company entered into an amendment to convertible promissory note with Streeterville. Pursuant to the amendment, the obligation in Section 1.3 of the note to repay the outstanding note issued to EMA Financial, LLC within fifteen (15) days of the Effective Date is deleted from the note.
| 18 |
At February 11, 2021, net carrying value of a short-term convertible note issued on February 11, 2021 is as follows:
At Issuance February 11, 2021 | ||||
| (Unaudited) | ||||
| Face value of convertible note | $ | |||
| Initial discount | ( | ) | ||
| Discount related to debt issuance costs | ( | ) | ||
| Discount related to conversion option | ( | ) | ||
| Net carrying value of convertible notes payable | $ | |||
Pursuant to the obligation in Section 1.3 of the note issued to Streeterville on February 11, 2021, the Company agreed to use the proceeds received hereunder to repay the outstanding convertible notes it issued to FirstFire Global Opportunities Fund, LLC and Granite Global Value Investments Ltd on October 13, 2020 (the “Outstanding Investor Notes”) within fifteen (15) days of the Effective Date (the “Repayment Date”). In the event the Company fails to repay the Outstanding Investor Notes by the Repayment Date, the Outstanding Balance will automatically increase by twenty-five percent (25%).
At February 26, 2021 (the Repayment Date), net carrying value of a short-term convertible note issued on February 11, 2021 is as follows:
At Repayment Date February 26, 2021 | ||||
| (Unaudited) | ||||
| Face value of convertible note | $ | |||
| Accrued interest from February 11 to February 26, 2021 | ||||
| Outstanding
Balance (before additional | ||||
| Additional
| ||||
| Outstanding Balance (after additional 25%) | ||||
| Initial discount | ( | ) | ||
| Discount related to debt issuance costs | ( | ) | ||
| Discount related to conversion option | ( | ) | ||
| Discount related to beneficial conversion feature | ( | ) | ||
| Net carrying value of convertible notes payable | $ | |||
The Company amortized debt discount associated with the derivative liability using the straight-line method.
Amount
of unamortized debt discount including initial issuance discount, transaction cost, beneficial conversion feature, and separated derivative
liability was $
Summary of convertible debt’s interest expense is as follows:
Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Coupon interest | $ | $ | ||||||
| Amortization of discount on convertible notes | ||||||||
| Amortization of debt issuance costs | ||||||||
| Interest expense associated with conversion of notes | ||||||||
| Interest expense associated with accretion of convertible notes payable | - | |||||||
| Interest expense due to non-fulfillment of use of proceeds requirements | - | |||||||
| Additional charge for early redemption | ||||||||
| Total | $ | $ | ||||||
All convertible promissory notes were classified as short-term due to lender’s earlier redemption or put option.
| 19 |
At June 30, 2021 and December 31, 2020, carrying values of the short-term convertible notes are as follows:
| June
30, 2021 | December
31, 2020 | |||||||
| (Unaudited) | ||||||||
| Face value of convertible notes | $ | $ | ||||||
| Additional
| - | |||||||
| Initial discount | ( | ) | ( | ) | ||||
| Discount related to debt issuance costs | ( | ) | ( | ) | ||||
| Discount related to beneficial conversion feature | ( | ) | ( | ) | ||||
| Discount related to put options | ( | ) | ( | ) | ||||
| Discount related to conversion option | ( | ) | - | |||||
| Redemptions | ( | ) | - | |||||
| Net convertible notes payable | ||||||||
| Accrued interest during the period / year | ||||||||
| Carrying value of convertible notes payable | $ | $ | ||||||
Contractual maturities on the convertible debt and carrying value are as follows:
| Period ending June 30, | ||||
| 2022 | $ | |||
| Less: Interest | ( | ) | ||
| Carrying value | $ |
The
Company determined the fair value of debt to be $
Components and costs of two convertible promissory notes issued during the period ended June 30, 2021 are as follows:
Six Months Ended June 30, 2021 | ||||
| (Unaudited) | ||||
| Original Principal Amount | $ | |||
| Less: Original issue discount (OID) | ( | ) | ||
| Less: Transaction Expense Amount | ( | ) | ||
| Purchase Price | ||||
| Less: Broker Fee | ( | ) | ||
| Net proceeds | $ | |||
| 20 |
NOTE 6 - DERIVATIVE LIABILITIES
| As of | As of | |||||||
| June 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Fair value of warrants | $ | $ | ||||||
| Fair value of options associated with convertible promissory notes | ||||||||
| Total | $ | $ | ||||||
At
June 30, 2021, the Company has outstanding warrants exercisable into
At
December 31, 2020, 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 | |||||||
June 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| 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 six months ended June 30, 2021, the Company recognized a gain of $
Convertible debt early redemption options
On October 13, 2020, the Company issued three unsecured convertible promissory notes with certain Investors’ early redemption options, that are considered derivative liabilities (see Note 5).
On
April 14, 2021, Streeterville Capital, LLC (“Streeterville”), exercised an option defined in the terms of the convertible
promissory note issued by the Company on October 13, 2020, to redeem the note after 6 months from issuance date, at a conversion price
of $
On
April 12 and 16, 2021, the Company exercised an option defined in the terms of the convertible promissory notes issued to FirstFire
Global Opportunities Fund, LLC (“FirstFire”) and Granite Global Value Investments Ltd. (“Granite”) on October
13, 2020, to prepay the notes ahead of contractual maturity of
At June 30, 2021, fair value of the derivative liability related to Investors’ early redemption options, resulting from redemption of notes was (see Note 5).
The
Company used Trinomial Option Pricing Model to estimate the fair value of the derivative liability related to Investors’ early
redemption options. The derivative liability was classified within Level 3 of the fair value hierarchy because certain unobservable inputs
were used in the valuation model. The Company estimated the fair value of the derivative liability to be $
The Company estimated the fair value of derivative liabilities using the following assumptions:
| As of | As of | |||||||
June 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Risk free rate | % | % | ||||||
| Fair value of underlying stock | $ | $ | ||||||
| Expected term (in years) | ||||||||
| Stock price volatility | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Fair value of options | $ | $ | ||||||
At June 30, 2021, the fair value of derivative liability was zero, resulting from redemptions of three convertible notes issued in October 2020.
| 21 |
NOTE 7 - WARRANTS
In
2018, the Company issued warrants exercisable into
| Remaining | ||||||||||||
| Number | Contractual | |||||||||||
| of | Exercise | Life | ||||||||||
| Shares | Price | (in Years) | ||||||||||
| Warrants outstanding at December 31, 2020 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Expired | ||||||||||||
| Warrants outstanding at June 30, 2021 | $ | |||||||||||
| Warrants exercisable at June 30, 2021 | $ | |||||||||||
At June 30, 2021, the intrinsic value of outstanding warrants was .
NOTE 8 - RELATED PARTY TRANSACTIONS
| Due from related parties: | June 30, 2021 | December 31, 2020 | ||||||
| (Unaudited) | ||||||||
| Accounts receivable, net | ||||||||
| Due
from related party B (net of allowance of $ | $ | $ | ||||||
| Due from related parties | ||||||||
| Due from related party D | ||||||||
| Due from related party G | ||||||||
| Due from related party H | ||||||||
| Total | $ | $ | ||||||
| Due to related parties: | June 30, 2021 | December 31, 2020 | ||||||
| (Unaudited) | ||||||||
| Due to related party A | $ | $ | ||||||
| Due to related party B | ||||||||
| Due to related party G | ||||||||
| Due to related party I | ||||||||
| Due to related party J | ||||||||
| Due to related party K | ||||||||
| Total | $ | $ | ||||||
For the six months ended June 30, | ||||||||
| Related party revenue and expense transactions: | 2021 | 2020 | ||||||
| (Unaudited) | (Unaudited) | |||||||
| Service revenue from related parties | ||||||||
| - Related party A | $ | $ | ||||||
| - Related party B | ||||||||
| - Related party C | ||||||||
| - Related party D | ||||||||
| - Related party E | ||||||||
| - Related party G | ||||||||
| - Related party I | ||||||||
| - Related party K | ( | ) | ||||||
| Total | $ | $ | ||||||
| Cost of service revenue to related parties | ||||||||
| - Related party B | $ | $ | ||||||
| Total | $ | $ | ||||||
| General and administrative expenses to related parties | ||||||||
| - Related party A | $ | $ | ||||||
| - Related party B | ||||||||
| - Related party D | ||||||||
| - Related party G | ||||||||
| Total | $ | $ | ||||||
| Impairment of other investments with related parties: | ||||||||
| - Related party B | $ | $ | ||||||
| Total | $ | $ | ||||||
| 22 |
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 percentage of the company (ranging from
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 Kung, 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.
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NOTE 9 - 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 six months ended June 30, 2021 (Unaudited) | ||||||||||||||||
Real estate business | Service business | Corporate | Total | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Total assets | ||||||||||||||||
| Capital expenditures for long-lived assets | $ | $ | $ | $ | ||||||||||||
| For the six months ended June 30, 2020 (Unaudited) | ||||||||||||||||
Real estate business | Service business | Corporate | Total | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Total assets | ||||||||||||||||
| Capital expenditures for long-lived assets | $ | $ | $ | $ | ||||||||||||
(b) By Geography*
| For the six months ended June 30, 2021 (Unaudited) | ||||||||||||||||
| Hong Kong | Malaysia | China | Total | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Total assets | ||||||||||||||||
| Capital expenditures for long-lived assets | $ | $ | $ | $ | ||||||||||||
| For the six months ended June 30, 2020 (Unaudited) | ||||||||||||||||
| Hong Kong | Malaysia | China | Total | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total assets | ||||||||||||||||
| Capital expenditures for long-lived assets | $ | $ | $ | $ | ||||||||||||
| * |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K/A for the year ended December 31, 2020 filed with the Securities and Exchange Commission on April 12, 2021 (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 a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guaranteed of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Form 10-K/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 six months ended June 30, 2021 and 2020, we operated in three regions: Hong Kong, Malaysia and China. We derived revenue from the provision of services and rental activities of our commercial properties.
Comparison of the three months ended June 30, 2021 and 2020
Total revenue
Total revenue was $792,025 and $401,140 for the three months ended June 30, 2021 and 2020, respectively. The increased amount of $390,885 was primarily due to an increase in the revenue from our business services. We expect revenue from our business services segment to steadily improve as we expand our businesses into new territories.
Service business revenue
Revenue from the provision of business services was $757,364 and $368,460 for the three months ended June 30, 2021 and 2020, respectively. It was derived principally from the provision of business consulting and advisory services as well as company secretarial, accounting and financial analysis services. We expect revenue from our business services segment to steadily improve as we expand our businesses into new territories.
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Real estate business
Sale of real estate properties
There was no revenue generated from the sale of real estate properties for the three months ended June 30, 2021 and 2020, respectively.
Rental revenue
Revenue from rentals was $34,661 and $32,680 for the three months ended June 30, 2021 and 2020, 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 $1,281,114 and $939,829 for the three months ended June 30, 2021 and 2020, respectively. They consist of cost of service revenue, cost of rental revenue, and general and administrative expenses.
Loss from operations for the three months ended June 30, 2021 and 2020 was $489,089 and $538,689, respectively. A decrease in loss from operations was mainly due to an increase in service revenue.
Cost of service revenue
Cost of revenue on provision of services was $87,768 and $71,937 for the three months ended June 30, 2021 and 2020, 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 slightly increase of cost of service revenue was mainly due to an increase of service business revenue in 2021 accordingly.
Cost of real estate properties sold
There was no cost incurred for the sale of real estate properties for the three months ended June 30, 2021 and 2020 respectively.
Cost of rental revenue
Cost of rental revenue was $13,491 and $14,607 for the three months ended June 30, 2021 and 2020, respectively. It includes the costs associated with governmental charges, repairs and maintenance, property insurance, depreciation and other related administrative costs. Property management fees and utility expenses are paid directly by tenants. A slight decrease of cost of rental revenue was mainly due to an assessment fee of $812 incurred for the three months ended June 30, 2020, but no such fee incurred for the three months ended June 30, 2021.
General and administrative expenses
General and administrative (“G&A”) expenses were $1,179,855 and $853,285 for the three months ended June 30, 2021 and 2020, respectively. For the three months ended June 30, 2021, G&A expenses consisted primarily of directors’ compensation of $164,583, salary and wages of $360,829, advertising and promotion expenses of $105,771, other professional fees of $70,075, rental expenses of $49,924 and subscription fees of $144,746. We expect our G&A expenses to continue to increase as we integrate our business acquisitions, expand our existing business and develop new markets in other regions.
Other income or expenses
Net other expenses were $273,144 and $24,526 for the three months ended June 30, 2021 and 2020, respectively. Loss on change in fair value of derivative liabilities was $83,935, which mainly composed of fair value loss of options associated with convertible notes of $143,200 and offset by a fair value gain associated with warrants of $59,265 for the three months ended June 30, 2021, while a loss on change in fair value of derivative liabilities associated with warrants was $55,409 for the three months ended June 30, 2020. Interest expense was $1,560,226, which mainly consisted of interest expense associated with convertible notes of $1,540,977 for the three months ended June 30, 2021, while interest expense was $28,947 for the three months ended June 30, 2020. Gain on extinguishment of convertible notes of $1,611,379, reversal of write-off notes receivable of $3,000,000, and offset by impairment of other investments of $3,246,000 were recorded for the three months ended June 30, 2021.
Interest expenses
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 (see Note 5). Interest expenses related to the convertible promissory notes totaled $1,540,977 for the three months ended June 30, 2021, which included coupon interest expense of $188,717, amortization of discount on convertible notes of $89,281, amortization of debt issuance costs of $32,029, interest expense associated with conversion of notes of $995,312 and additional charge for early redemption of $235,638.
Total interest expenses were $1,560,226 and $28,947 for the three months ended June 30, 2021 and 2020, respectively.
Net loss
Net loss was $764,867 and $563,215 for the three months ended June 30, 2021 and 2020, respectively. An increase in net loss was mainly due to an increase of G&A expenses, interest expenses associated with the aforementioned convertible promissory notes and an impairment loss of other investments.
Net income or loss attributable to noncontrolling interest
The Company records net income or loss attributable to noncontrolling interest in the consolidated statements of operations for any noncontrolling interest of consolidated subsidiaries.
For the three months ended June 30, 2021 and 2020, the Company recorded net income attributable to a noncontrolling interest of $5,153 and $3,562, respectively.
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Comparison of the six months ended June 30, 2021 and 2020
Total revenue
Total revenue was $1,765,043 and $1,217,681 for the six months ended June 30, 2021 and 2020, respectively. The increase of $547,362 was due to an increase of revenue in business services and sale of real estate properties. We expect revenue from our business services segment to steadily improve as we are expand our businesses into new territories.
Service business revenue
Revenue from the provision of business services was $1,316,699 and $1,162,173 for the six months ended June 30, 2021 and 2020, respectively. It was derived principally from business consulting and advisory services as well as company secretarial, accounting and financial analysis services. We expect revenue from our business services segment to steadily improve as we expand our businesses into new territories.
Real estate business
Sale of real estate properties
Revenue from the sale of real estate property was $383,445 for the six months ended June 30, 2021, which was derived from the sale of one commercial property located in Hong Kong. There was no revenue generated from the sale of real estate property for the six months ended June 30, 2020.
Rental revenue
Revenue from rentals was $64,899 and $55,508 for the six months ended June 30, 2021 and 2020, respectively. It was derived principally from leasing properties in Malaysia and Hong Kong. The increase in rental revenue is due to the Company leasing out more units for the six months ended June 30, 2021 compared to six months ended June 30, 2020. We believe our rental income will be stable in the near future.
Total operating costs and expenses
Total operating costs and expenses were $3,011,261 and $1,989,877 for the six months ended June 30, 2021 and 2020, respectively. They consist of cost of service revenue, cost of real estate properties sold, cost of rental revenue and G&A expenses. The Company incurred $2,561,109 of G&A expenses for the six months ended June 30, 2021 compared with $1,763,192 of G&A expenses for the six months ended June 30, 2020.
Cost of service revenue
Costs of revenue on provision of services were $171,570 and $200,444 for the six months ended June 30, 2021 and 2020, 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 six months ended June 30, 2021.
Cost of real estate properties sold
Cost of revenue on real estate property sold was $253,276 for the six months ended June 30, 2021. 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 six months ended June 30, 2020, hence no cost was recorded accordingly.
Cost of rental revenue
Cost of rental revenue was $25,306 and $26,241 for the six months ended June 30, 2021 and 2020, respectively. It includes the costs associated with government rent and rates, repairs and maintenance, property insurance, depreciation and other related administrative costs. Property management fees and utility expenses are paid directly by the tenants. A slightly decrease of cost of rental revenue was mainly due to an assessment fee of $812 incurred for the six months ended June 30, 2020, but without such fee incurred for the six months ended June 30, 2021.
General and administrative expenses
G&A expenses were $2,561,109 and $1,763,192 for the six months ended June 30, 2021 and 2020, respectively. For the six months ended June 30, 2021, G&A expenses consisted primarily of directors’ compensation of $329,217, salary and wages of $722,042, advertising and promotion expenses of $248,205, other professional fees of $182,102, commission expenses of $260,494, rental expenses of $127,568 and subscription fees of $149,086. We expect our G&A expenses to continue to increase as we expect to integrate our business acquisitions, deepen our existing businesses and develop new markets in other regions.
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Other income or expenses
Net other expenses were $5,679,555 and $33,534 for the six months ended June 30, 2021 and 2020, respectively. Gain on change in fair value of derivative liabilities was $5,133,464, 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 $39,744 for the six months ended June 30, 2021, as compared to a loss on change in fair value of derivative liabilities associated with warrants of $39,953 for the six months ended June 30, 2020. Interest expense was $12,187,264, which mainly consisted of interest expense associated convertible notes of $12,148,688 for the six months ended March 31, 2021, while interest expense was $62,551 for the six months ended June 30, 2020. Gain on extinguishment of convertible notes of $1,611,379, reversal of write-off notes receivable of $3,000,000, and offset by impairment of other investments of $3,246,000 were recorded for the six months ended June 30, 2021.
Interest expenses
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 (see Note 5). Interest expenses related to the convertible promissory notes totaled $12,148,688 for the six months ended June 30, 2021, which included coupon interest expense of $328,409, amortization of discount on convertible notes of $160,077, amortization of debt issuance costs of $56,959, interest expense associated with conversion of notes of $1,700,909, 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 $1,105,256 and additional charge for early redemption of $235,638.
Total interest expenses were $12,187,264 and $62,551 for the six months ended June 30, 2021 and 2020, respectively.
Net Loss
Net loss was $6,928,407 and $805,730 for the six months ended June 30, 2021 and 2020, respectively. An increase in net loss was mainly due to an increase of G&A expenses, interest expenses associated with the aforementioned convertible promissory notes and an impairment loss of other investments.
Income or loss attributable to noncontrolling interests
We record net income or loss attributable to noncontrolling interest in the consolidated statements of operations for any noncontrolling interest of consolidated subsidiaries.
On February 29, 2020, we sold our 60% interest in Yabez (Hong Kong) Limited and its wholly-owned subsidiary, Yabez Business Service (SZ) Company Limited (collectively, “Yabez”) due to continuing losses incurred by Yabez, to an unrelated party for $1.00.
At June 30, 2021, the noncontrolling interest is related to the Company’s 60% ownership of Forward Win International Limited.
For the six months ended June 30, 2021 and 2020, we recorded net income attributable to a noncontrolling interest of $61,172 and $4,262, respectively.
There were no seasonal aspects that had a material effect on the financial condition or results of operations of the Company.
Other than as disclosed elsewhere in this Quarterly Report, we are not aware of any trends, uncertainties, demands, commitments or events for the six months ended June 30, 2021 that are reasonably likely to have a material adverse effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
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Off Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders as of June 30, 2021.
Contractual Obligations
As of June 30, 2021, one of our subsidiaries leased 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. Another subsidiary of the Company leased an office in Malaysia under a non-cancellable operating lease with a term of one year commencing from April 1, 2021 to March 31, 2022. As of June 30, 2021, the future minimum rental payments under these leases in the aggregate are approximately $170,304 and are due as follows: 2021: $54,304, 2022: $96,685 and 2023: $19,315.
Related Party Transactions
For the six months ended June 30, 2021 and 2020, related party service revenue totaled $664,989 and $107,971, respectively.
Net accounts receivable due from related parties was $41 and $152,475 as of June 30, 2021 and December 31, 2020, respectively. Other receivable due from related parties was $61,261 and $62,320 as of June 30, 2021 and December 31, 2020, respectively. Amounts due to related parties were $1,083,704 and $1,108,641 as of June 30, 2021 and December 31, 2020, 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 8 to the Condensed Consolidated Financial Statements for additional details regarding the related party transactions.
Critical Accounting Policies and Estimates
Use of estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates include certain assumptions related to, among others, the allowance for doubtful accounts receivable, impairment analysis of real estate assets and other long-term assets including goodwill, valuation allowance on deferred income taxes, and the accrual of potential liabilities. Actual results may differ from these estimates.
Revenue recognition
The Company follows the guidance of Accounting Standards Codification (ASC) 606, Revenue from Contracts. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.
The Company’s revenue consists of revenue from providing business consulting and corporate advisory services (“service revenue”), revenue from the sale of real estate properties, and revenue from the rental of real estate properties.
Impairment of long-lived assets
Long-lived assets primarily include real estate held for investment, property and equipment, and intangible assets. In accordance with the provision of ASC 360, the Company generally conducts its annual impairment evaluation of its long-lived assets in the fourth quarter of each year, or more frequently if indicators of impairment exist, such as a significant sustained change in the business climate. The recoverability of long-lived assets is measured at the reporting unit level. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset. In addition, for real estate held for sale, an impairment loss is the adjustment to fair value less estimated cost to dispose of the asset.
Goodwill
Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. Under the guidance of ASC 350, goodwill is not amortized, rather it is tested for impairment annually, and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. An impairment loss generally would be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit and would be measured as the excess carrying value of goodwill over the derived fair value of goodwill. The Company’s policy is to perform its annual impairment testing for its reporting units on December 31, of each fiscal year.
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Derivative financial instruments
Derivative financial instruments consist of financial instruments that contain a notional amount and one or more underlying variables such as interest rate, security price, variable conversion rate or other variables, require no initial net investment and permit net settlement. The derivative financial instruments may be free-standing or embedded in other financial instruments. The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company follows the provision of ASC 815, Derivatives and Hedging for derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. At each reporting date, the Company reviews its convertible securities to determine that their classification is appropriate.
Recent accounting pronouncements
Refer to Note 1 in the accompanying financial statements.
Liquidity and Capital Resources
Our cash balance at June 30, 2021 was $6,739,280, as compared to $1,086,753 at December 31, 2020. It was increased by $5,652,527. 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 six months ended June 30, 2021, the Company incurred a net loss of $6,928,407 and used cash in operations of $1,331,655. 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, 2020 financial statements, has expressed substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company’s ability to continue as a going concern is dependent upon improving its profitability and the continuing financial support from its shareholders. Management believes the existing shareholders or external financing will provide the additional cash to meet the Company’s obligations as they become due.
Despite the amount of funds that the Company has raised, no assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its shareholders, in the case of equity financing.
Operating activities
Net cash used in operating activities was $1,331,655 and $871,698 for the six months ended June 30, 2021 and 2020, respectively. The cash used in operating activities in 2021 was mainly due to net loss for the period of $6,928,407, reversal of write-off notes receivable of $3,000,000, a fair value gain of options associated with convertible notes of $5,093,720, gain of extinguishment of convertible notes of $1,611,379 and offset by amortization and interest expenses associated with convertible notes of $11,584,641 and impairment of other investments of $3,246,000. For the six months ended June 30, 2021, non-cash adjustments totaled $5,306,651, which was mostly composed of non-cash expenses of interest expense associated with accretion of convertible notes of $8,561,440, interest expense associated with conversion of notes of $1,700,909, interest expense due to non-fulfillment of use of proceeds requirements of $1,105,256 and amortization of discount on convertible notes, debt issuance costs of $217,036 and impairment of other investments of $3,246,000, and offset by non-cash income of reversal of write-off notes receivable of $3,000,000, change in fair value of options associated with convertible notes of $5,093,720 and gain on extinguishment of convertible notes of $1,611,379.
Investing activities
Net cash provided by investing activities for the six months ended June 30, 2021 was $9,865, as compared to net cash used in investing activities of $26,964 for the six months ended June 30, 2020.
Financing activities
Net cash provided by financing activities was $6,982,991 and $146,904 for the six months ended June 30, 2021 and 2020, respectively.
The cash provided by financing activities in 2021 was mainly from the net proceeds of convertible notes of $5,210,000 and collection of notes receivable of $3,000,000.
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.
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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 June 30, 2021 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 six months ended June 30, 2021, 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.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any beneficial shareholder are an adverse party or has a material interest adverse to us.
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.
On April 14, 2021, Streeterville Capital, LLC (“Streeterville”), exercised an option defined in the terms of the convertible promissory note issued by the Company on October 13, 2020, to redeem its note after 6 months from issuance date, at a conversion price of $1 per share. The note was repaid upon issuance of 704,738 restricted shares of the Company’s Common Stock to Streeterville on April 16, 2021.
On July 14, July 26 and August 5, 2021, Streeterville exercised an option defined in the terms of the convertible promissory note issued by the Company on January 8, 2021, to redeem its note after 6 months from issuance date, at conversion prices of $0.752175, $0.621675 and $0.621675 respectively per share. The note was repaid in the amount of $700,000 upon issuance of an aggregate of 1,077,152 restricted shares of the Company’s Common Stock to Streeterville.
The abovementioned redemptions and issuances of shares of Common Stock were exempt from registration pursuant to the provisions of Section 4(a)(2) of the Securities Act, as amended and Rule 506 of Regulation D promulgated thereunder. Streeterville had represented to the Company that it (i) is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act, (ii) is knowledgeable, sophisticated and experienced in making investment decisions of this kind, and (iii) has had adequate access to information about the Company.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
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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: August 9, 2021 | By: | /s/ Lee Chong Kuang |
| Lee Chong Kuang | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: August 9, 2021 | By: | /s/ Loke Che Chan, Gilbert |
| Loke Che Chan, Gilbert | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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