UNITED STATES
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Greenpro Capital Corp.
FORM 10-K
For the Fiscal Year Ended December 31, 2021
Index
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements. These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guaranteed to future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. These risks and uncertainties include the following:
| ● | The availability and adequacy of our cash flow to meet our requirements; | |
| ● | Economic, competitive, demographic, business and other conditions in our local and regional markets; | |
| ● | Changes or developments in laws, regulations or taxes in our industry; | |
| ● | Actions taken or omitted to be taken by third parties including our suppliers and competitors, as well as legislative, regulatory, judicial and other governmental authorities; | |
| ● | Competition in our industry; | |
| ● | The loss of or failure to obtain any license or permit necessary or desirable in the operation of our business; | |
| ● | Changes in our business strategy, capital improvements or development plans; | |
| ● | The availability of additional capital to support capital improvements and development; and | |
| ● | Other risks identified in this Annual Report and in our other filings with the Securities and Exchange Commission or the SEC. |
This Annual Report should be read completely and with the understanding that actual future results may be materially different from what we expect. The forward-looking statements included in this Annual Report are made as of the date of this Annual Report and should be evaluated with consideration of any changes occurring after the date of this Annual Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Use of Defined Terms
Except as otherwise indicated by the context, references in this Annual Report to:
| ● | The “Company,” “we,” “us,” or “our,” “Greenpro” are references to Greenpro Capital Corp., a Nevada corporation. | |
| ● | “Common Stock” refers to the common stock, par value $.0001, of the Company; | |
| ● | “HK” refers to Hong Kong; | |
| ● | “U.S. dollar,” “$” and “US$” refer to the legal currency of the United States; | |
| ● | “Securities Act” refers to the Securities Act of 1933, as amended; and | |
| ● | “Exchange Act” refers to the Securities Exchange Act of 1934, as amended. |
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PART I
ITEM 1. BUSINESS
Corporate History
We were incorporated on July 19, 2013 in the state of Nevada under the name “Greenpro, Inc.”. On May 6, 2015, we changed our name to “Greenpro Capital Corp.”. Our corporate structure is set forth below:
A list of our subsidiaries with a brief description of their business is set forth below:
| Name (Domicile) | Business | |
| Greenpro Capital Corp. (Nevada, USA) | Provides financial consulting services and corporate services. | |
| Greenpro Resources Limited (British Virgin Islands) | A holding company. | |
| Greenpro Holding Limited (Hong Kong) | A holding company. |
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| Greenpro Resources (HK) Limited (Hong Kong) | Holds Greenpro’s intellectual property and currently holds six trademarks and applications thereof. | |
| Greenpro Resources Sdn. Bhd. (Malaysia) | Holds investment in commercial real estate in Malaysia. | |
| Greenpro Management Consultancy Limited (China) | Provides corporate advisory services such as tax planning, cross-border listing solution and advisory, transaction services in China. | |
| Shenzhen Falcon Financial Consulting Limited (China) | Provides Hong Kong company formation advisory services and company secretarial services and financial services. It focuses on China clients. | |
| Greenpro Global Capital Sdn. Bhd. (formerly known as Greenpro Wealthon Sdn. Bhd.) (Malaysia) | Provides corporate advisory services such as company review, bank loan advisory and bank products analysis services. | |
| Greenpro Financial Consulting Limited (Belize) | Provides corporate advisory services such as tax planning, cross-border listing solution and advisory, transaction services. | |
| Asia UBS Global Limited (Belize) | Provides business advisory services with a main focus on offshore company formation advisory and company secretarial services, such as tax planning, bookkeeping and financial review. It focuses on South-East Asia and China clients. | |
| Asia UBS Global Limited (Hong Kong) | Provides business advisory services with a main focus on Hong Kong company formation advisory and company secretarial services, such as tax planning, bookkeeping and financial review. It focuses on Hong Kong clients. | |
| Falcon Corporate Services Limited (Hong Kong) | Provides offshore company formation advisory services and company secretarial services. Clients based in Hong Kong and China. | |
| Falcon Accounting & Secretaries Limited (formerly known as Falcon Secretaries Limited) (Hong Kong) | Provides company formation advisory services and company secretarial services in Hong Kong. | |
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| Greenpro Family Office Limited (Hong Kong) | Provides professional multi-family office offers services such as wealth planning, administration, asset protection and management, asset consolidation, asset performance monitoring, charity services, tax and legal services, trusteeship and risk management, investment planning and management, and business support services. | |
| Greenpro Venture Capital Limited (Anguilla) | A holding company. | |
| Forward Win International Limited (Hong Kong) | Holds investment in commercial real estate in Hong Kong. | |
| Greenpro New Finance Academy Limited (formerly known as Greenpro Synergy Network Limited) (Hong Kong) | Provides a borderless platform through networking events and programs in Hong Kong. | |
| Greenpro Synergy Network (Shenzhen) Limited (China) | Provides a borderless platform through networking events and programs in China for our members to seek professional services, business opportunities, and to exchange sources of information and research.
| |
| Greenpro Sparkle Insurance Brokers Limited (Hong Kong) | Provides insurance brokerage services with an insurance broker license in Hong Kong.
| |
| Greenpro Capital Village Sdn. Bhd. (Malaysia) | Provides business consulting and advisory services in Malaysia. |
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Incorporation of Subsidiaries and VIE
Incorporation of Greenpro Resources Limited, a British Virgin Islands company
On July 3, 2012, Greenpro Resources Limited (“GRBVI”) was founded and incorporated by our directors, Mr. Lee Chong Kuang and Mr. Loke Che Chan Gilbert (“Messrs. Lee and Loke”) in the British Virgin Islands.
Incorporation of Greenpro Resources Limited’s wholly owned subsidiaries
Greenpro Resources (HK) Limited, a Hong Kong company
On April 5, 2012, Greenpro Resources (HK) Limited (“GRHK”) was founded and incorporated by our directors, Messrs. Lee and Loke in Hong Kong.
Greenpro Financial Consulting Limited, a Belize company
On July 26, 2012, Greenpro Financial Consulting Limited (“GFCL”, formerly known as Weld Asia Financial Consulting Limited) was founded and incorporated by our director, Mr. Lee Chong Kuang (“Mr. Lee”) in Belize.
Greenpro Resources Sdn. Bhd., a Malaysian company
On April 25, 2013, Greenpro Resources Sdn. Bhd. (“GRSB”) was founded and incorporated by our director, Mr. Lee and his spouse, Ms. Yap Pei Ling (“Ms. Yap”) in Malaysia.
Greenpro Holding Limited, a Hong Kong company
On July 22, 2013, Greenpro Holding Limited (“GHL”) was founded and incorporated by GRBVI in Hong Kong.
Greenpro Management Consultancy Limited, a Shenzhen, China company
On August 30, 2013, Greenpro Management Consultancy Limited (“GMCSZ”) was founded and incorporated by GRHK in Shenzhen, China.
Development of Greenpro Resources Limited and its wholly owned subsidiaries through acquisitions
On January 1, 2014, Greenpro Resources Limited (“GRBVI”) acquired 100% of the outstanding shares of GFCL, from our director, Mr. Lee at a consideration of $1.
On January 22, 2014, GHL acquired 2 shares, representing 100% of the outstanding shares of GRHK from its shareholders, Messrs. Lee and Loke for a total consideration of HK$2 (approximately $0.26). At the same day after this acquisition, GRHK allotted additional 1,075,000 shares to GHL for HK$1,075,000 (approximately $138,709).
On June 30, 2014, GRHK acquired 100% of the issued and outstanding shares of Greenpro Resources Sdn. Bhd., a Malaysian company (“GRSB”) from our director, Mr. Lee and his spouse, Ms. Yap for HK$2,943,298 (approximately $379,780). GRSB is principally engaged in commercial real estate investments in Malaysia.
Incorporation of Greenpro Venture Capital Limited, an Anguilla company
On September 5, 2014, Greenpro Venture Capital Limited (“GVCL”) was founded and incorporated by our directors, Messrs. Lee and Loke in Anguilla.
Incorporation and restructure of VIE, Greenpro New Finance Academy Limited, a Hong Kong company and its wholly owned subsidiary, Greenpro Synergy Network (Shenzhen) Limited, a Shenzhen, China company
On March 2, 2016, Greenpro New Finance Academy Limited (formerly known as Greenpro Synergy Network Limited) (“GNFA”) was incorporated in Hong Kong, as a variable interest entity (the “VIE”), which is required to consolidate with the Company. The principal activity of GNFA is providing a borderless platform through networking events and programs in Hong Kong. The Company controlled GNFA through a series of contractual arrangements (the “VIE Agreements”) between Greenpro Holding Limited, a subsidiary of the Company (“GHL”) and GNFA. Our directors, Messrs. Lee and Loke, are also the shareholders of GNFA.
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The VIE agreements included (i) an Exclusive Business Cooperation Agreement, (ii) a Loan Agreement, (iii) a Share Pledge Agreement, (iv) a Power of Attorney and (v) an Exclusive Option Agreement with the shareholders of GNFA.
GHL acquired a life insurance policy (the “Policy”) on May 15, 2015. On June 13, 2016, GHL transferred the ownership of the Policy to GNFA. On December 19, 2019, GNFA redeemed the Policy valued at $156,058. After deducting the loan balance of $115,889 and the insurance expense of $531 from the value of the Policy, GNFA received a net cash surrender value of $39,638.
On July 28, 2017, Greenpro Synergy Network (Shenzhen) Limited (“GSNSZ”), a wholly owned subsidiary of GNFA, was incorporated in Shenzhen, China. GSNSZ provides a borderless platform through networking events and programs in China for our members to seek professional services, business opportunities, and to exchange sources of information and research.
On April 20, 2020, after our directors, Messrs. Lee and Loke transferred all shareholdings of GNFA to GHL, the VIE was dissolved and restructured as a subsidiary of the Company.
Acquisition and Reorganization of Subsidiaries
Acquisitions of entities under common control:
Acquisition of Greenpro Resources Limited, a British Virgin Islands company
On July 31, 2015, we acquired 100% of the issued and outstanding securities of Greenpro Resources Limited, a British Virgin Islands corporation (“GRBVI”), which had been our affiliate at the time of the acquisition. As consideration thereof, we issued 9,070,000 shares of our restricted Common Stock and paid $25,500 in cash.
At the time of the acquisition of GRBVI, Mr. Lee was the Company’s Chief Executive Officer, President and director, and Mr. Loke was the Company’s Chief Financial Officer, Secretary, Treasurer and director. Messrs. Lee and Loke each held a 44.6% interest in the Company. Before the transaction, Mr. Lee was GRBVI’s Chief Executive Officer and director, and Mr. Loke was GRBVI’s Chief Financial Officer and director, and Messrs. Lee and Loke each held a 50% interest in GRBVI. Upon the consummation of the acquisition, Messrs. Lee and Loke received, in the aggregate, $25,500 in cash and 9,070,000 shares of restricted Common Stock of the Company, and the acquisition was accounted for as a transfer among entities under common control.
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Acquisition of Greenpro Venture Capital Limited, an Anguilla corporation
On September 30, 2015, the Company acquired all the issued and outstanding securities of Greenpro Venture Capital Limited, an Anguilla corporation (“GVCL”), from its shareholders, Messrs. Lee and Loke, respectively. At the time of the acquisition of GVCL, Mr. Lee was the Company’s Chief Executive Officer, President and director, and Mr. Loke was the Company’s Chief Financial Officer, Secretary, Treasurer and director. Messrs. Lee and Loke each held a 43.02% interest in the Company. At the time of the acquisition of GVCL, Mr. Lee was GVCL’s Chief Executive Officer and director, Mr. Loke was GVCL’s Chief Financial Officer and director, and Messrs. Lee and Loke each held a 50% interest in GVCL. Upon the consummation of the acquisition, Messrs. Lee and Loke received, in the aggregate, $6,000 in cash and 13,260,000 shares of restricted Common Stock of the Company, and the acquisition was accounted for as a transfer among entities under common control.
Acquisition of A&G International Limited, a Belize company
On September 30, 2015, we acquired 100% of the issued and outstanding securities of A&G International Limited, a Belize corporation (“A&G”), from Ms. Yap Pei Ling (“Ms. Yap”). Ms. Yap, a director and sole shareholder of A&G, is the spouse of our director, Mr. Lee.
In connection therewith, we issued to Ms. Yap, 1,842,000 shares of our restricted Common Stock and the acquisition was accounted for as a transfer among entities under common control.
A&G provided corporate and business advisory services through its wholly owned subsidiaries, Asia UBS Global Limited, a Hong Kong limited company (“AUH”) and Asia UBS Global Limited, a Belize corporation (“AUB”).
On December 30, 2015, A&G transferred all the issued and outstanding securities of AUH and AUB to GRBVI to simplify our corporate structure. Then A&G, a corporation with no assets, was subsequently transferred back to Ms. Yap.
Acquisition of Falcon Accounting & Secretaries Limited (formerly known as Falcon Secretaries Limited) and Falcon Corporate Services Limited (formerly known as Ace Corporate Services Limited), Hong Kong companies, and Shenzhen Falcon Financial Consulting Limited, a Shenzhen, China company
On September 30, 2015, we acquired all the issued and outstanding securities of Falcon Secretaries Limited (renamed to Falcon Accounting & Secretaries Limited on February 25, 2020), Ace Corporate Services Limited (renamed to Falcon Corporate Services Limited on August 26, 2016) and Shenzhen Falcon Financial Consulting Limited (these companies collectively known as “F&A”). As consideration thereto, we issued to Ms. Chen Yanhong, a sole shareholder of F&A (“Ms. Chen”), 2,080,200 shares of our restricted Common Stock, representing an aggregate purchase price of $1,081,704 based on the average closing price of the ten trading days preceding the date of the acquisition agreement on July 31, 2015, of $0.52 per share. The purchase price was determined based on the business value generated from F&A at the time of acquisition. The acquisition was accounted for as a transfer among entities under common control.
Ms. Chen, a director and sole shareholder of F&A, is also a director and legal representative of Greenpro Management Consultancy Limited, one of our subsidiaries in Shenzhen, China.
Acquisition of Greenpro Global Capital Sdn. Bhd., a Malaysian company
On May 23, 2016, our wholly owned subsidiary, Greenpro Holding Limited (“GHL”) acquired 400 shares, representing 40% of the outstanding shares of Greenpro Wealthon Sdn. Bhd. (“GGCSB”, renamed to Greenpro Global Capital Sdn. Bhd. on June 13, 2018), from our director, Mr. Lee for MYR1 (approximately $0.25) and the acquisition was accounted for as a transfer among entities under common control. On June 7, 2016, GGCSB issued another 200 shares to GHL at the price of MYR120,000 (approximately $30,000), resulting in GHL owing 60% of GGCSB.
On August 30, 2018, the remaining 40% of the outstanding shares of GGCSB were transferred to GHL, and currently GHL holds 100% of GGCSB.
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Acquisition of Greenpro Credit Limited (formerly known as Gushen Credit Limited), a Hong Kong company
On April 27, 2017, our wholly owned subsidiary, GRBVI and Gushen Credit Limited (“GCL”, renamed to Greenpro Credit Limited on May 16, 2017), a Hong Kong corporation, entered into an asset purchase agreement, pursuant to which GRBVI purchased all the assets of GCL. As consideration thereto, GRBVI agreed to pay a purchase price of $105,000 and the acquisition was accounted for as a transfer among entities under common control.
GCL operates a money lending business in Hong Kong. On April 28, 2017, GCL sold two (2) ordinary shares, representing 100% of its ownership, at a total consideration of $0.26 in cash to GRBVI. The purchase price was determined based on the mutual agreement between GCL and GRBVI.
Acquisition of Greenpro Family Office Limited, a Hong Kong company
On July 21, 2017, our wholly owned subsidiary, GRBVI acquired 51% of the outstanding shares of Greenpro Family Office Limited (“GFOL”) from our director, Mr. Loke. Mr. Loke was the sole shareholder of GFOL before the transaction and the acquisition was accounted for as a transfer among entities under common control. On September 21, 2018, the remaining 49% shareholdings of GFOL were transferred to GRBVI, and currently GRBVI holds 100% of GFOL.
Acquisition of Greenpro Sparkle Brokers Limited (formerly known as Sparkle Insurance Brokers Limited), a Hong Kong company
On January 2, 2019, the Company acquired Sparkle Insurance Brokers Limited (“Sparkle”, renamed Greenpro Sparkle Brokers Limited on April 4, 2019) from Mr. Teh Boo Yim and Ms. Teh Jocelyn Nga Man, the former 100% shareholders of Sparkle for total consideration of $170,322, made up of $129,032 in cash and the issuance of 8,602 shares of the Company’s Common Stock valued at $41,290. The shares were valued based on the closing price of the Company’s Common Stock of $4.80 per share at acquisition and the acquisition was accounted for as a transfer among entities under common control. The Company aims to expand its long term and general insurance services through the acquisition of Sparkle.
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Acquisitions of controlling interests:
Acquisition of Forward Win International Limited, a Hong Kong company
On February 25, 2015, we acquired 60% of the issued and outstanding shares of Forward Win International Limited, a Hong Kong company (“FWIL”) at a consideration of $774. FWIL is principally engaged in commercial real estate investments in Hong Kong.
Acquisition, disposal, and reacquisition of Greenpro Capital Village Sdn. Bhd. (formerly known as Weld Asia Global Advisory Sdn. Bhd.), a Malaysian company
On February 25, 2013, Greenpro Financial Consulting Limited, a subsidiary of the Company, acquired 100% of Weld Asia Global Advisory Sdn. Bhd., a Malaysian company, from its shareholders, Mr. Lee Chong Kuang, and his spouse, Ms. Yap Pei Ling, for MYR2 (approximately $0.50). At the time of the acquisition, Mr, Lee Chong Kuang was the Company’s Chief Executive Officer, President and director and the acquisition was accounted for as a transfer among entities under common control.
In 2015, Weld Asia Global Advisory Sdn. Bhd. was renamed Greenpro Capital Village Sdn. Bhd. (“GCVSB”). On October 1, 2015, the Company sold 49% of the outstanding shares of GCVSB to QSC Asia Sdn. Bhd., an unrelated party (“QSC”), for MYR49,000 (approximately $12,794). On June 26, 2019, the Company disposed of GCVSB due to continued losses incurred by GCVSB and sold its remaining 51% interest in GCVSB to Ms. Tan Tee Yong, an unrelated party (“Ms. Tan”), for MYR51 (approximately $12).
On June 22, 2020, our director, Mr. Lee acquired respective 51% and 49% shareholdings of GCVSB (51,000 shares and 49,000 shares of common stock of GCVSB) from Ms. Tan and QSC at a price of MYR51,000 and MYR49,000, respectively or MYR1 per share.
In July 2021, the Company acquired all the issued and outstanding shares of common stock of GCVSB from our director, Mr. Lee at a consideration of MYR167 (approximately $40) and redeemed 347,000 shares out of a total of 504,750 shares of preferred stock from 25 preferred stock shareholders of GCVSB by issuance of 79,530 shares of the Company’s Common Stock valued at $69,191 or $0.87 per share. Total consideration of the acquisition was $69,231. The Company acquired GCVSB to expand its business consulting services.
Disposal of subsidiaries
Disposal of Greenpro Credit Limited, a Hong Kong company
On August 2, 2021, the Company sold its entire 100% interest in Greenpro Credit Limited to an unrelated party for HK$30,000 (approximately $3,847), due to continuing losses incurred by GCL.
As of August 2, 2021, GCL had no assets or liabilities, resulting in a gain on disposal of $3,847, after consideration of foreign currency adjustments.
Acquisition of an associate company
Acquisition of Greenpro KSP Holding Group Company Limited (formerly known as KSP Holding Group Company Limited)
On July 20, 2018, our wholly owned subsidiary, GVCL entered into a sale and purchase agreement with Mr. Prapakorn Saokliew and Ms. Surapa Jamjang, each holding 45.13% and 45.12% shareholdings in KSP Holding Group Company Limited, respectively. Pursuant to the agreement, GVCL agreed to acquire approximately 49% of the shareholdings of KSP Holding Group Company Limited (“KSP”, renamed to Greenpro KSP Holding Group Company Limited on August 7, 2018) in exchange for $363,930, made up of $75,000 in cash and 38,524 shares of the Company’s Common Stock valued at $288,930. The Company also issued 578 shares of the Company’s Common Stock valued at $7.50 per share, or a total of $4,335, as a commission that was also capitalized as cost of investment in KSP. KSP provides accounting, auditing and consulting services in Thailand. The Company accounted for its investment in KSP under the equity method of accounting.
On December 31, 2018, the Company determined that its investment in KSP was impaired and recorded an impairment of unconsolidated investment of $363,930. We currently hold approximately 48% of the issued and outstanding shares of KSP.
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Acquisitions of other investments
| Name (Domicile) | Acquisition Date | Shareholdings | Business | |||||||
| 1. | Greenpro Trust Limited | March 30, 2015 | 8.33 | % | Provides trusteeship,
custodial | |||||
| (Hong Kong) | April 13, 2016 | 2.78 | % | and fiduciary services | ||||||
| 2. | Agape ATP Corporation (Nevada, US) | April 14, 2017 | 4.65 | % | Supplies health and wellness products | |||||
| 3. | Millennium Fine Art Inc. (Wyoming, US) | June 29, 2020 | 4.65 | % | Invests in art (Millennium Sapphire) | |||||
| 4. | Ata Plus Sdn. Bhd. (Malaysia) | July 8, 2020 | 15 | % | Provides an online equity crowdfunding platform to assist small to medium-sized enterprises (SMEs) to access funding through its platform | |||||
| 5. | Global Leaders Corporation (Nevada, US) | August 30, 2020 | 5.85 | % | Provides training and consulting services | |||||
| 6. | First Bullion Holdings Inc. | October 19, 2020 | 10 | % | Provides cryptocurrency
trading | |||||
| (British Virgin Islands) | February 17, 2021 | 8 | % | and digital asset exchange services | ||||||
| 7. | New Business Media Sdn. Bhd. (Malaysia) | November 1, 2020 | 18 | % | Provides a capital
market focused portal to browse business markets or corporate news | |||||
| 8. | Adventure Air Race Company Limited (Nevada, US) | December 22, 2020 | 3.60 | % | Organizes international air race series | |||||
| 9. | Pentaip Technology Inc. (Nevada, US) | December 29, 2020 | 10 | % | Provides big data and
focuses on artificial intelligence (AI) to provide financial services | |||||
| 10. | Angkasa-X Holdings Corp. (British Virgin Islands) | February 3, 2021 | 5 | % | Provides internet connectivity to rural areas in Southeast Asia | |||||
| 11. | Simson Wellness Tech. Corp. (Nevada, US) | February 19, 2021 | 5 | % | Provides a digital platform that acts as middleware for distribution of optical products | |||||
| 12. | Innovest Energy Fund (Cayman Islands) | April 7, 2021 | N/A | Develops a multi-faceted suite of products and services for the cryptocurrency industry and economy | ||||||
| 13. | Jocom Holdings Corp. (Nevada, US) | June 2, 2021 | 3 | % | Operates a Malaysia-based m-commerce platform specializing in online grocery shopping via smartphones | |||||
| 14. | 72 Technology Group Limited (Cayman Islands) | July 13, 2021 | 0.83 | % | Provides digital marketing services using 5G and artificial intelligence (AI) technology | |||||
| 15. | Ata Global Inc. (Nevada, US) | July 30, 2021 | 5 | % | Provides financial technology (FinTech) services | |||||
| 16. | catTHIS Holdings Corp. (Nevada, US) | August 27, 2021 | 5 | % | Provides a digital catalog management platform for users to upload, share and retrieve digital catalogs from any devices | |||||
| 17. | Fruita Bio Limited (British Virgin Islands) | September 27, 2021 | 5 | % | Produces bio-degradable packaging materials | |||||
| 1. | Acquisition of Greenpro Trust Limited |
On March 30, 2015, our wholly owned subsidiary, GRBVI acquired 300,000 shares, representing approximately 8% of the issued and outstanding shares of Greenpro Trust Limited, a Hong Kong company (“GTL”), from its shareholders at a price of HK$300,000 (approximately $38,710) or HK$1 per share. GTL is principally engaged in provision of trusteeship, custodial and fiduciary services to clients in Hong Kong.
On April 13, 2016, another wholly owned subsidiary of the Company, Asia UBS Global Limited, a Belize company (“AUB”) acquired 100,000 shares, representing approximately 3% of the issued and outstanding shares of GTL for HK$100,000 (approximately $12,903) or HK$1 per share.
The Company indirectly has an aggregate of approximately 11% interest in GTL with an investment value of $51,613 which was recorded at cost and approximates its fair value. Messrs. Lee and Loke are common directors of GTL and the Company.
| 2. | Acquisition of Agape ATP Corporation |
On April 14, 2017, GVCL acquired 17,500,000 shares of common stock of Agape ATP Corporation, a Nevada corporation (“Agape”), par value of $0.0001 per share, for $1,750. Agape is principally engaged in providing health and wellness products and advisory services to clients in Malaysia. As of December 31, 2021, GVCL holds approximately 5% of the total outstanding shares of Agape and recognized the investment at historical cost of $1,750 under other investments.
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| 3. | Acquisition of Millennium Fine Art Inc. |
On June 29, 2020, the Company entered into a purchase and sale agreement with its Wyoming incorporated subsidiary, Millennium Fine Art Inc. (“MFAI”). Pursuant to the agreement, the Company agreed to sell its 4% ownership interest in a 12.3 kilogram carved natural blue sapphire (the “Millennium Sapphire”) to MFAI and MFAI agreed to acquire the 4% ownership of the Millennium Sapphire from the Company. As consideration thereto, on July 1, 2020, MFAI issued 2,000,000 restricted shares of its Class B common stock to the Company valued at $5,000,000 ($5 per share), in which 1,000,000 shares were retained by the Company and the other 1,000,000 shares were reserved as a dividend to the shareholders of the Company. The Company expects to distribute these 1,000,000 shares to its shareholders later. A gain on disposal of $1,000,000 was recorded at the Company level but was eliminated upon consolidation.
On July 1, 2020, MFAI issued 19,200,000 restricted shares of its Class A common stock to a majority owner of the Millennium Sapphire, Mr. Daniel McKinney valued at $96,000,000 ($5 per share) to acquire the remaining 96% interest in the Millennium Sapphire. MFAI is an investment company and has a 100% interest in the Millennium Sapphire.
As of December 31, 2021, the Company owns 2,000,000 shares of Class B common stock of MFAI, in which 1,000,000 shares were retained by the Company and recognized at historical cost of $4,000,000 (by issuance of 4,444,444 shares of the Company’s restricted Common Stock at $0.9 per share) under other investments, representing approximately 5% of the issued and outstanding shares of MFAI and approximately 1% of MFAI’s total voting rights. The other 1,000,000 shares were reserved as a dividend to the shareholders of the Company, and as of the date of this report, the dividend has not been distributed.
| 4. | Acquisition of Ata Plus Sdn. Bhd. |
On July 8, 2020, GVCL entered into an acquisition agreement with all the eight shareholders of Ata Plus Sdn. Bhd., a company incorporated in Malaysia and a Recognized Market Operator (RMO) by the Securities Commission of Malaysia (“APSB”). Pursuant to the agreement, GVCL agreed to acquire 15% of the issued and outstanding share of APSB for a purchase price of $749,992. The purchase price was paid by the Company issuing to the shareholders approximately 457,312 shares of the Company’s restricted Common Stock, which was based on the average closing price of the Company’s Common Stock for the five trading days preceding the date of the agreement, $1.64 per share, on November 18, 2020.
As of December 31, 2021, GVCL holds 15% shareholdings of APSB and recognized the investment at historical cost of $749,992 under other investments.
| 5. | Acquisition of Global Leaders Corporation |
On August 30, 2020, GVCL entered into a subscription agreement with Global Leaders Corporation, a Nevada corporation (“GLC”) to acquire 9,000,000 shares of common stock of GLC at a price of $900 or $0.0001 per share, representing approximately 6% of the total issued and outstanding shares of GLC. GLC’s principal activities are providing training and consulting services to corporate clients in Hong Kong and China. As of December 31, 2021, GVCL recognized the investment at historical cost of $900 under other investments.
| 6. | Acquisition of First Bullion Holdings, Inc. |
On October 19, 2020, GVCL entered into a stock purchase and option agreement with Mr. Tang Ka Siu Johnny and First Bullion Holdings Inc. (“FBHI”). FBHI, a British Virgin Islands company, operates the businesses of banking, payment gateway, credit cards, debit cards, money lending, crypto trading and securities token offerings, with corporate offices in the Philippines and Hong Kong. Pursuant to the agreement, GVCL agreed to acquire 10% of the issued and outstanding shares of FBHI for a purchase price of $1,000,000 by issuing approximately 685,871 shares of the Company’s restricted Common Stock to Mr. Tang, which was based on the average closing price of the Company’s Common Stock for the five trading days preceding the date of the agreement.
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Pursuant to the agreement, Mr. Tang and FBHI also granted to GVCL an option for 180 days following the date of the agreement to purchase an additional 8% of the issued and outstanding shares of FBHI, at an agreed valuation of FBHI equal to $20,000,000. In consideration of acquisition of the option, GVCL agreed to issue 250,000 shares of the Company’s restricted Common Stock to Mr. Tang, which shall constitute partial payment for the option should GVCL elect to exercise the option.
On December 11, 2020, the Company issued 685,871 shares of its restricted Common Stock to two designees of Mr. Tang at $1.458 per share to acquire 10% of the issued and outstanding shares of FBHI for a purchase price of $1,000,000 and issued 250,000 shares of its restricted Common Stock at $364,500 or $1.458 per share in partial consideration of the additional 8% shareholdings of FBHI.
On February 17, 2021, GVCL exercised its option and FBHI issued to GVCL 160,000 ordinary shares of FBHI, comprising the additional 8% of the shares sold under the agreement valued at $20,000,000.
On February 26, 2021, the Company issued an additional 342,592 shares of its restricted Common Stock to two designees of Mr. Tang at $2.70 per share (valued at approximately $925,000).
As of December 31, 2021, GVCL, in aggregate, holds 360,000 ordinary shares of FBHI, representing 18% of the total issued and outstanding shares of FBHI. The investment was recognized at historical cost of $2,289,500 under other investments.
| 7. | Acquisition of New Business Media Sdn. Bhd |
On November 1, 2020, GVCL entered into an acquisition agreement with Ms. Lee Yuet Lye and Mr. Chia Min Kiat, shareholders of New Business Media Sdn. Bhd. New Business Media Sdn. Bhd. is a Malaysian company involved in operating a Chinese media portal, which provides digital news services focusing on Asian capital markets (“NBMSB”). NBMSB is one of the biggest Chinese language digital business news networks in Malaysia and has readers from across Southeast Asia.
Pursuant to the agreement, both Ms. Lee and Mr. Chia have agreed to sell to GVCL an 18% equity stake in NBMSB in consideration of a new issuance of 257,591 shares of the Company’s restricted Common Stock, valued at $411,120 or $1.596 per share. The consideration was derived from an agreed valuation of NBMSB of $2,284,000, based on its assets including customers, fixed assets, cash and cash equivalents, liabilities as of November 1, 2020.
As of December 31, 2021, GVCL recognized the investment at historical cost of $411,120 under other investments.
| 8. | Acquisition of Adventure Air Race Company Limited |
On December 21, 2020, GVCL entered into a subscription agreement with Adventure Air Race Company Limited, a company incorporated in Nevada and is principally engaged in promoting and managing an air race series (“AARC”). Pursuant to the agreement, GVCL acquired 2,000,000 shares of common stock of AARC at a price of $200 or $0.0001 per share.
On December 22, 2020, GVCL entered another subscription agreement with AARC to acquire an additional 996,740 shares of common stock of AARC at a price of $249,185 or $0.25 per share.
As of December 31, 2021, GVCL, in aggregate, holds approximately 4% of the issued and outstanding shares of AARC and recognized the investment at historical cost of $249,385 under other investments.
| 9. | Acquisition of Pentaip Technology Inc. |
On December 29, 2020, GVCL entered into a subscription agreement with Pentaip Technology Inc., a Nevada corporation (“PTI”) to acquired 4,000,000 shares of common stock of PTI at a price of $400 or $0.0001 per share, representing 10% of the issued and outstanding shares of PTI. PTI uses artificial intelligence (“AI”) to provide investors and traders with financial data. The investment was recognized at historical cost of $400 under other investments.
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| 10. | Acquisition of Angkasa-X Holdings Corp. |
On February 3, 2021, 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 28,000,000 ordinary shares of Angkasa at a price of $2,800 or $0.0001 per share. The investment was recognized at historical cost of $2,800 under other investments.
| 11. | Acquisition of 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 5,000,000 shares of common stock of Simson at a price of $500 or $0.0001 per share. The investment was recognized at historical cost of $500 under other investments.
| 12. | Acquisition of Innovest Energy Fund |
On February 11, 2021, Greenpro Resources Limited, a subsidiary of the Company (“GRL”) entered into a subscription agreement with Innovest Energy Fund, a global multi-asset fund incorporated in the Cayman Islands and principally engaged in developing a multi-faceted suite of products and services for the cryptocurrency industry and economy (the “Fund”). Pursuant to the agreement, GRL agreed to subscribe for $7,206,000 worth of Class B shares of the Fund by issuing 3,000,000 shares of the Company’s restricted Common Stock, valued at $7,206,000 to the Fund.
On April 7, 2021, the Company issued 3,000,000 shares of its restricted Common Stock to the Fund and issued 60,000 shares of its restricted Common Stock to a designee of the Fund as a subscription fee of $144,120 ($2.402 per share) associated with the Fund.
On December 31, 2021, GRL determined that its investment in the Fund was impaired and revalued at $1,856,400, and an impairment loss of $5,349,600 was recorded.
| 13. | Acquisition of 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 1,500,000 shares of common stock of Jocom at a price of $150 or $0.0001 per share. The investment was recognized at historical cost of $150 under other investments.
| 14. | Acquisition of 72 Technology Group Limited |
On July 13, 2021, GVCL entered into a subscription agreement with 72 Technology Group Limited, a Cayman Islands media corporation based in China which provides digital marketing services using 5G and AI technology (“72 Technology”). Pursuant to the agreement, GVCL acquired 600,000 shares of common stock of 72 Technology at a price of $6,000 or $0.01 per share. The investment was recognized at historical cost of $6,000 under other investments.
| 15. | Acquisition of Ata Global Inc. |
On July 30, 2021, GVCL entered into a subscription agreement with Ata Global Inc., a Nevada corporation, provides financial technology (“FinTech”) services (“Ata Global”). Pursuant to the agreement, GVCL acquired 2,250,000 shares of common stock of Ata Global at a price of $225 or $0.0001 per share. The investment was recognized at historical cost of $225 under other investments.
| 16. | Acquisition of catTHIS Holdings Corp. |
On August 27, 2021, GVCL entered into a subscription agreement with catTHIS Holdings Corp., a Nevada corporation, which provides a digital catalog management platform for users to upload, share and retrieve digital catalogs from any devices (“catTHIS”). Pursuant to the agreement, GVCL acquired 2,000,000 shares of common stock of catTHIS at a price of $200 or $0.0001 per share. The investment was recognized at historical cost of $200 under other investments.
| 17. | Acquisition of Fruita Bio Limited |
On September 27, 2021, GVCL entered into a subscription agreement with Fruita Bio Limited., a British Virgin Islands corporation with major business operations in Thailand and principally engaged in production of bio-degradable packaging materials (“Fruita”). Pursuant to the agreement, GVCL acquired 10,000,000 ordinary shares of Fruita at a price of $1,000 or $0.0001 per share. The investment was recognized at historical cost of $1,000 under other investments.
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Business Overview
We currently operate and provide a wide range of business solution services to small and medium-size businesses located in South-East Asia and East Asia, with an initial focus on Hong Kong, China and Malaysia, and subsequently in Thailand and Taiwan. Our comprehensive range of services includes cross-border business solutions, record management services, and accounting outsourcing services. Our cross-border business services include, among other services, tax planning, trust and wealth management, cross border listing advisory services and transaction services. As part of the cross-border business solutions, we have developed a package solution of services (“Package Solution”) that can reduce business costs and enhance revenues.
We also operate a venture capital business through Greenpro Venture Capital Limited, an Anguilla corporation. Our venture capital business is focused on (1) establishing a business incubator for start-up and high growth companies to support such companies during critical growth periods, which includes education and support services, and (2) searching for investment opportunities in selected start-up and high growth companies, which we expect can generate significant returns to the Company. We expect to target companies located in Asia including Hong Kong, Malaysia, China, Thailand and Singapore. We anticipate our venture capital business will also engage in the purchase or lease of commercial properties in the same Asian region.
Our Services
We provide a range of services to our clients as part of the Package Solution that we have developed. We believe that our clients can reduce their business costs and enhance their revenues by utilizing our Package Solution.
Cross-Border Business Solutions/Cross-Border Listing Solutions
We provide a full range of cross-border services to small to medium-sized enterprises (SMEs) to assist them in conducting their business effectively. Our “Cross-Border Business Solution” includes the following services:
| ● | Advising clients on company formation in Hong Kong, the United States, the British Virgin Islands and other overseas jurisdictions; | |
| ● | Assisting companies to set up bank accounts with banks in Hong Kong to facilitate clients’ banking operations; | |
| ● | Providing bank loan referral services; | |
| ● | Providing company secretarial services; | |
| ● | Assisting companies in applying for business registration certificates with the Inland Revenue Department of Hong Kong; | |
| ● | Providing corporate finance consulting services; | |
| ● | Providing due diligence investigations and valuations of companies; | |
| ● | Advising clients regarding debt and company restructurings; | |
| ● | Providing liquidation, insolvency, bankruptcy and individual voluntary arrangement advice and assistance; | |
| ● | Designing a marketing strategy and promoting the company’s business, products and services; | |
| ● | Providing financial and liquidity analysis; | |
| ● | Assisting in setting up cloud invoicing systems for clients; |
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| ● | Assisting in liaising with investors for the purposes of raising capital; | |
| ● | Assisting in setting up cloud inventory systems to assist clients to record, maintain and control their inventories and track their inventory levels; | |
| ● | Assisting in setting up cloud accounting systems to enable clients to keep track of their financial performance; | |
| ● | Assisting clients in payroll matters operated in our cloud payroll system; | |
| ● | Assisting clients in tax planning, preparing the tax computation and making tax filings with the Inland Revenue Department of Hong Kong; | |
| ● | Cross-border listing advisory services, including but not limited to, United States, United Kingdom, Hong Kong, and Australia; | |
| ● | International tax planning in China; | |
| ● | Advising on Trust and wealth management; | |
| ● | Providing an online equity crowdfunding platform to assist small to medium sized enterprises (SMEs) to access funding through its platform; | |
| ● | Providing cryptocurrency trading and digital asset exchange services; | |
| ● | Providing a capital market focused portal to browse business markets or corporate news; | |
| ● | Providing big data and focusing on artificial intelligence (AI) to provide financial services; | |
| ● | Providing financial technology (FinTech) services; and | |
| ● | Transaction services. |
There is a growing market in Asia of companies who are seeking to go public and become listed on a recognized exchange in a foreign jurisdiction. We see tremendous opportunity to the extent that this trend continues worldwide. With respect to cross border listing advisory services, we are assisting private companies in their desire to list and trade on public exchanges, including the U.S. NASDAQ and OTC Markets. The Jumpstart Our Business Startups Act, or JOBS Act, signed in 2012, eases the initial public offering (“IPO”) process for “emerging growth companies” and reduces their regulatory burden, (2) improves the ability of these companies to access capital through private offerings and small public offerings without SEC registration, and (3) allows private companies with a substantial shareholder base to delay becoming a public reporting company.
Through our cross-border listing advisory services, we seek to form the bridge between these companies seeking to conduct their IPO (or in some cases, self-directed public offerings), and their goal of becoming a listed company on a recognized U.S. national exchange, such as NASDAQ and the NYSE.
While there are several alternatives for companies seeking to go public and trade on the U.S. OTC markets, we primarily focus on three methods:
| ● | Registration Statement on Form S-1 | |
| ● | Regulation A+ offering | |
| ● | The Form 10 shell company |
The manner in which the OTC markets are structured provides companies the ability to “uplist” in the marketplace as they provide better transparency. These OTC markets include:
| ● | OTCQX Best Marketplace: offers transparent and efficient trading of established, investor-focused U.S. and global companies. | |
| ● | OTCQB Venture Marketplace: for early-stage and developing U.S. and international companies that are not yet able to qualify for OTCQX. | |
| ● | OTC Pink Open Marketplace: offers trading in a wide spectrum of securities through any broker. With no minimum financial standards, this market includes foreign companies that limit their disclosure, penny stocks and shells, as well as distressed, delinquent, and dark companies not willing or able to provide adequate information to investors. |
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We act as a case reference for our clients, as we originally had our shares quoted in the OTC markets and subsequently “uplisted” to The Nasdaq Stock Market LLC., a U.S. national securities exchange.
With growing competition and increasing economic sophistication, we believe more companies need strategies for cross-border restructuring and other corporate matters. Our plan is to bundle our Cross-Border Business Solution services with our cloud accounting solutions and Accounting Outsourcing Services described below.
Accounting Outsourcing Services
We intend to develop relationships with professional firms from Hong Kong, Malaysia, China and Thailand that can provide company secretarial, business centers and virtual offices, book-keeping, tax compliance and planning, payroll management, business valuation, and wealth management services to our clients. We intend to include local accounting firms within this network to provide general accounting, financial evaluation and advisory services to our clients. Our expectation is that firms within our professional network will refer their international clients to us that may need our book-keeping, payroll, company secretarial and tax compliance services. We believe that this accounting outsourcing service arrangement will be beneficial to our clients by providing a convenient, one-stop firm for their local and international business and financial compliance and governance needs.
Our Service Rates
We intend to have a two-tiered rate system based upon the type of services being offered. We may impose project-based fees, where we charge 10% - 25% of the revenues generated by the client on projects that are completed using our services, such as transaction projects, contract compliance projects, and business planning projects. We may also charge a flat rate fee or fixed fee based on the estimated complexity and timing of a project when our professionals provide specified expertise to our clients on a project. For example, for our Cross-Border Business Solutions services, we plan to charge our client a monthly fixed fee.
Our Venture Capital Business Segment
Venture Capital Investment
As a result of our acquisition of Greenpro Venture Capital Limited (“GVCL”) in 2015, we entered the venture capital business in Hong Kong with a focus on companies located in South-East Asia and East Asia, including Hong Kong, Malaysia, China, Thailand and Singapore. Our venture capital business is focused on (1) establishing a business incubator for start-up and high growth companies to support such companies during critical growth periods and (2) investment opportunities in select start-ups and high growth companies.
We believe that a company’s life cycle can be divided into five stages, including the seed stage, start-up stage, expansion stage, mature stage and decline stage. We anticipate that most of a company’s funding needs will occur during these first three stages.
| ● | Seed stage: Financing is needed for assets, and research and development of an initial business concept. The company usually has relatively low costs in developing the business idea. The ownership model is considered and implemented. | |
| ● | Start-up stage: Financing is needed for product development and initial marketing. Firms in this phase may be in the process of setting up a business or they might have been in operating the business for a short period of time but may not have sold their products commercially. In this phase, costs are increasing due to product development, market research and the need to recruit personnel. Low levels of revenues are starting to generate. | |
| ● | Expansion stage: Financing is needed for growth and expansion. Capital may be used to finance increased production capacity, product or marketing development or to hire additional personnel. In the early expansion phase, sales and production increases but there is not yet any profit. In the later expansion stage, the business typically needs extra capital in addition to organically generated profit, for further development, marketing or product development. |
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We intend for our business incubators to provide valuable support to young, emerging growth and potential high growth companies at critical junctures of their development. For example, our incubators will offer office space at a below market rental rate. We will also provide our expertise, business contacts, introductions and other resources to assist their development and growth. Depending on each individual circumstance, we may also take an active advisory role in our venture capital companies including board representation, strategic marketing, corporate governance, and capital structuring. We believe that there will be potential investment opportunities for us in these start-up companies.
Our business processes for our investment strategy in select start-up and high growth companies are as follows:
| ● | Step 1. Generating Deal Flow: We expect to actively search for entrepreneurial firms and to generate deal flow through our business incubator and the personal contacts of our executive team. We also anticipate that entrepreneurs will approach us for financing. | |
| ● | Step 2. Investment Decision: We will evaluate, examine and engage in due diligence of a prospective portfolio company, including but not limited to product/services viability, market potential and integrity as well as capability of the management. After that, both parties arrive at an agreed value for the deal. Following that is a process of negotiation, which if successful, ends with capital transformation and restructuring. | |
| ● | Step 3. Business Development and Value Adding: In addition to capital contribution, we expect to provide expertise, knowledge and relevant business contacts to the company. | |
| ● | Step 4. Exit: There are several ways to exit an investment in a company. Common exits are: |
| ○ | IPO (Initial Public Offering): The company’s shares are offered in a public sale on an established securities market. | |
| ○ | Trade sale (Acquisition): The entire company is sold to another company. | |
| ○ | Secondary sale: The company’s firm sells only part of its shares. | |
| ○ | Buyback or MBO: Either the entrepreneur or the management of the company buys back the company’s shares of the firm. | |
| ○ | Reconstruction, liquidation or bankruptcy: If the project fails, the company will restructure or close down its operations. |
Our objective is to achieve a superior rate of return through the eventual and timely disposal of investments. We expect to look for businesses that meet the following criteria:
| ● | high growth prospects | |
| ● | ambitious teams | |
| ● | viability of product or service | |
| ● | experienced management | |
| ● | ability to convert plans into reality | |
| ● | justification of venture capital investment and investment criteria |
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Our Venture Capital Related Education and Support Services.
In addition to providing venture capital services through GVCL, we also provide educational and support services that we believe will be synergistic with our venture capital business. We have arranged seminars called the CEO & Business Owners Strategic Session (“CBOSS”) in Malaysia and Singapore for business owners who are interested in the following:
| ● | Developing their business globally; | |
| ● | Expanding business with increased capital funding; | |
| ● | Creating a sustainable SME business model; | |
| ● | Accelerating the growth of the business; or | |
| ● | Significantly increasing company cash flows. |
The objective of the CBOSS seminar is to educate the chief executive officers or business owners on how to acquire “smart capital” and the considerations involved. The seminar includes an introduction to the basic concepts of “smart capital,” “wealth and value creation,” recommendation and planning and similar topics. We believe that this seminar will synergistically support our venture capital business segment.
Sales and Marketing
We plan to deploy three strategies to market the Greenpro brand: leadership, market segmentation and sales management process development.
| ● | Building Brand Image: Greenpro’s marketing efforts will focus on building the image of our extensive expertise and knowledge of our professionals. We intend to conduct a marketing campaign through media visibility, seminars, webinars, and the creation of a wide variety of white papers, newsletters, books, and other information. | |
| ● | Market segmentation: We plan to devote marketing resources to highly measurable and high return on investment tactics that specifically target those industries and areas where Greenpro has particularly deep experience and capabilities. These efforts typically involve local, regional or national trade show and event sponsorships, targeted direct mail, email, and telemarketing campaigns, and practice and industry specific micro-sites and newsletters in the Asian region. | |
| ● | Social Media: We plan to begin a social media campaign utilizing blogs, Twitter, Facebook and LinkedIn after we secure sufficient financing. A targeted campaign will be made to the following groups of clients: law firms, auditing firms, consulting firms and small to medium-sized enterprises (“SMEs”) in different industries, including biotechnology, intellectual property, information technologies and real estate. |
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Worldwide Wealth Wisdom Development
Worldwide Wealth Wisdom Development (“WWW”) is our marketing and promotional campaign, which is focused on building long-term awareness of our brand. WWW targets the following markets (i) business owners and senior management; (ii) high and medium net worth individuals in China and (iii) financial services providers, such as Certified Financial Planners in China. The campaign involves sharing content, knowledge and information about wealth management, including wealth creation, wealth protection and wealth succession.
The objectives of WWW are:
| 1. | To increase public awareness and recognition of Greenpro as a well-known advocate of the wealth principles described above; |
| 2. | For our philosophy to gain recognition so that our clients are confident and comfortable with our services and trust us; |
| 3. | To educate existing clients and potential prospects; and |
| 4. | To act as a channel of communication to gather market data and feedback. |
Set forth below are the marketing strategies we expect to develop.
Awareness and Optimization
| 1. | Email Blasts and E-Newsletter |
Email blasts are one of the commonly used tactics to disseminate information. Our email database will be collected through leads generated by online marketing (social media) and promotional events. Future event invitations and monthly/quarterly newsletters will be sent to the email database to boost event participation and provide updates on Company development.
| 2. | Media PR and News Releases |
Our post event information will be sent to news and media platforms as part of our publicity effort to increase public awareness about our events and developments, and to encourage more participants to join our upcoming events. We will also share our analysis on various industries and industry trends to the media network providers for free. We believe that this strategy will strengthen the relationship between Greenpro and the media network providers.
| 3. | Social Media |
To generate more leads and subscribers, two to four articles related to wealth management will be shared in our official WeChat account. These articles are tools we use to share content online, through social media platforms such as WeChat, Jinri Toutiao and Facebook, which increases our online presence.
| 4. | Online Search Engine Optimization |
Online Search Engine Optimization (“SEO”) will be used as a supporting strategy to enhance our online presence campaign. We will seek a SEO expert team in China and Malaysia to assist in the promotion of the campaign by using an advertising and keyword tagging strategy to drive traffic to our social media accounts and our company website. The major search engines are Baidu and Google as these are the common search engine worldwide.
Interaction and Conversion
| 1. | Seminars and Conferences |
Seminars and conferences will be held once a month to deliver and educate the attendees on wealth management. We target between 80 and 100 attendees each time. We intend to invite professionals and strategic partners to share their ideas, resources and knowhow in the seminars and conferences. The seminars and conferences will focus on our three core wealth management principles, namely “Wealth Creation, Wealth Protection and Wealth Succession”.
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| 2. | Private Events by Invitation |
Private and exclusive events are planned to be held quarterly with a target between 30 and 40 attendees. These events are exclusive and by-invitation only, at which we will share insights into our services and explain to attendees how they can proceed with wealth management planning.
| 3. | Small Group Meet Ups and Networking |
Small Group Meet Ups will be held twice a month targeting the public with an estimated five to ten attendees per session. The objective of these sessions is to encourage idea exchanges, to provide a platform for networking and potentially future collaboration opportunities, and foster better understanding between the participants and us, as well as among themselves.
Market Opportunities
We believe the main drivers for the growth of our business are the products and services together with the resources such as an office network, professional staff members and operational tools to make the advisory and consulting business more competitive.
We intend to assist our clients in the preparation of their financial statements cost-effectively and provide security to such financial information since the data will be stored in a cloud system. We anticipate a market with growing needs in Asia. We believe that there is currently an increasing need for enterprises in different industries to maximize their performance with cost-effective methods. We believe our services will create numerous competitive advantages for our clients. We believe that with us handling the administrative and logistic support, our clients can focus on developing their businesses and expanding their own client portfolio.
Customers
Our revenues are generated from clients located globally, including those from Hong Kong, China, Malaysia, Singapore, Indonesia, Thailand, Australia, Japan, Taiwan, Russia and the United States. Our venture capital business will initially focus on Hong Kong and other Asian start-ups and high growth companies. We hope to generate deal flow through personal contacts of our management team as well as through our business incubator.
We generated revenues of $2,949,780 during the fiscal year ended December 31, 2021 and $2,254,811 during the fiscal year ended December 31, 2020. We are not a party to any long-term agreements with our customers.
Competition
We operate in a mature, competitive industry. We consider our focus to be on a niche market of small and medium-sized businesses. Competition in the general field of business advisory services is quite intense, particularly in Hong Kong. We face competition principally from established law firms and consulting service providers in the corporate finance industry, such as Marbury, King & Wood Mallesons, QMIS Financial Group, First Asia Finance Group Limited and their respective affiliates, as well as from certain accounting firms, including those that specialize in a tax planning and corporate restructuring. The competition in China and Malaysia is not as fierce as in Hong Kong. Our major competitors in China are JP Investment Group and QMIS Financial Group while our major competitors in Malaysia are Global Bridge Management Sdn. Bhd. and QMIS Financial Group. These competitors generate significant traffic and have established brand recognition and financial resources. New or existing competition that uses a business model that is different from our business model may pressure us to change so that we can remain competitive.
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We believe that the principal competitive factors in our market include quality of analysis; applicability and efficacy of recommendations; strength and depth of relationships with clients; ability to meet the changing needs of current and prospective clients; and service scope. By utilizing our competitive strengths, we believe that we have a competitive edge over other competitors due to the breadth of our service offerings, one stop convenience, pricing, marketing expertise, coverage network, service levels, track record, brand and reputation. We are confident we can retain and enlarge our market share.
Intellectual Property
We intend to protect our investment in the research and development of our products and technologies. We intend to seek the widest possible protection for significant product and process developments in our major markets through a combination of trade secrets, trademarks, copyrights and patents, if applicable. We anticipate that the form of protection will vary depending upon the level of protection afforded by a particular jurisdiction. Currently, our revenue is derived principally from our operations in Hong Kong, China and Malaysia, where intellectual property protection may be limited and difficult to enforce. In such instances, we may seek protection of our intellectual property through measures taken to increase the confidentiality of intellectual property.
We have registered trademarks as a means of protecting the brand names of our companies and products. We intend to protect our trademarks against infringement, and also seek to register design protection where appropriate. Currently, there are six trademarks registered under the name of Greenpro Resources (HK) Limited.
| Trademark | Trademark Owner | Country / Territory | Registration Date | Brief Description | ||||
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Greenpro Resources (HK) Limited |
Hong Kong | August 11, 2010, June 25, 2013 and December 3, 2014 | Classes 35, 41, 42: Advertising, business management, business administration, office functions, research services, education, training | ||||
 |
U.S.A. | February 2, 2016 | Class 35: Business administration services, Business assistance, management and information services, Business knowledge management and consulting services | |||||
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China | December 28, 2014 | Classes 35 and 42: Advertising, business management, business administration, office functions and research services | |||||
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Singapore | July 22, 2013 | Classes 35 and 42: Advisory services related to business management and administration, computer software and security |
We rely on trade secrets and un-patentable know-how that we seek to protect, in part, by confidentiality agreements. Our policy is to require all employees to execute confidentiality agreements upon the commencement of employment with us. These agreements provide that all confidential information developed or made known to the individual through individual’s relationship with us, to be kept confidential and do not disclose to third parties except in specific circumstances. The agreements also provide that all inventions conceived by the individual while rendering services to us shall be assigned to us as the exclusive property of our company. There can be no assurance, however, that all persons who we desire to sign such agreements will sign, or if they do, that these agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets or unpatentable know-how will not otherwise become known or be independently developed by competitors.
Government Regulation
We provide our Package Solution initially in Hong Kong, China and Malaysia, which we believe are locations that would need outsourcing support services. Further, we believe these markets are the central and regional markets for many customers doing cross border business in Asia. We target those customers from Asia doing international business and plan to provide our Package Solution to meet their needs. Our planned Package Solution will be structured in Hong Kong, but services may be outsourced to lower cost jurisdictions such as Malaysia and China, which encourage and welcome outsourcing services.
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The following regulations are the laws and regulations that may be applicable to us:
Hong Kong
Our businesses located in Hong Kong are subject to the general laws in Hong Kong governing businesses, including labor, occupational safety and health, general corporations, intellectual property and other similar laws. Because our website is maintained through the server in Hong Kong, we expect that we will be required to comply with the rules and regulations and Hong Kong governing the data usage and regular terms of service applicable to our potential customers. As the information of our potential customers is preserved in Hong Kong, we will need to comply with the Hong Kong Personal Data (Privacy) Ordinance (Cap 486).
The Employment Ordinance is the main piece of legislation governing conditions of employment in Hong Kong. It covers a comprehensive range of employment protection and benefits for employees, including Wage Protection, Rest Days, Holidays with Pay, Paid Annual Leave, Sickness Allowance, Maternity Protection, Statutory Paternity Leave, Severance Payment, Long Service Payment, Employment Protection, Termination of Employment Contract and Protection against Anti-Union Discrimination.
An employer must also comply with all legal obligations under the Mandatory Provident Fund Schemes Ordinance, (Cap 485). These include enrolling all qualifying employees in Mandatory Provident Fund (“MPF”) schemes and making MPF contributions for them. Except for exempt persons, employers should enroll both full-time and part-time employees who are at least 18 but under 65 years of age in an MPF scheme within the first 60 days of employment. The 60-day employment rule does not apply to casual employees in the construction and catering industries.
We are required to make MPF contributions for our Hong Kong employees once every contribution period (generally the wage period). Employers and employees are each required to make regular mandatory contributions of 5% of the employee’s relevant income to an MPF scheme, subject to the minimum and maximum relevant income levels. For a monthly-paid employee, the minimum and maximum relevant income levels are $7,100 and $30,000 respectively.
We comply with the above applicable ordinances and regulations in Hong Kong and have not been involved any lawsuit or prosecuted by the local authority resulting from any breach of the ordinances and regulations.
Malaysia
Our businesses located in Malaysia are subject to the general laws in Malaysia governing businesses including labor, occupational safety and health, general corporations, intellectual property and other similar laws including the Computer Crime Act 1997 and The Copyright (Amendment) Act 1997. We believe that the focus of these laws is censorship in Malaysia, however we believe this does not impact our businesses because the censorship focus is on media controls and does not relate to cloud base technology which we plan to use.
Our real estate investments are subject to extensive local, city, county and state rules and regulations regarding permitting, zoning, subdivision, utilities and water quality as well as federal rules and regulations regarding air and water quality and protection of endangered species and their habitats. Such regulation may result in higher than anticipated administrative and operational costs.
We comply with the above applicable ordinances and regulations in Malaysia and have not involved any lawsuit or prosecuted by the local authority resulting from any breach of the ordinances and regulations.
China
A portion of our acquired businesses located in China and subject to the general laws in China governing businesses including labor, occupational safety and health, general corporations, intellectual property and other similar laws.
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Employment Contracts
The Employment Contract Law was promulgated by the National People’s Congress’ Standing Committee on June 29, 2007 and took effect on January 1, 2008. The Employment Contract Law governs labor relations and employment contracts (including the entry into, performance, amendment, termination and determination of employment contracts) between domestic enterprises (including foreign-invested companies), individual economic organizations and private non-enterprise units (collectively referred to as the “employers”) and their employees.
a. Execution of employment contracts
Under the Employment Contract Law, an employer is required to execute written employment contracts with its employees within one month from the commencement of employment. In the event of contravention, an employee is entitled to receive double salary for the period during which the employer fails to execute an employment contract. If an employer fails to execute an employment contract for more than 12 months from the commencement of the employee’s employment, an employment contract would be deemed to have been entered into between the employer and employee for a non-fixed term.
b. Right to non-fixed term contracts
Under the Employment Contract Law, an employee may request a non-fixed term contract without an employer’s consent to renew. In addition, an employee is also entitled to a non-fixed term contract with an employer if he has completed two fixed term employment contracts with such employer; however, such employee must not have committed any breach or have been subject to any disciplinary actions during his employment. Unless the employee requests to enter into a fixed term contract, an employer who fails to enter into a non-fixed term contract pursuant to the Employment Contract Law is liable to pay the employee double salary from the date the employment contract is renewed.
c. Compensation for termination or expiry of employment contracts
Under the Employment Contract Law, employees are entitled to compensation upon the termination or expiry of an employment contract. Employees are entitled to compensation even in the event the employer (i) has been declared bankrupt; (ii) has its business license revoked; (iii) has been ordered to cease or withdraw its business; or (iv) has been voluntarily liquidated. Where an employee has been employed for more than one year, the employee will be entitled to such compensation equivalent to one month’s salary for every completed year of service. Where an employee has been employed for less than one year, such employee will be deemed to have completed one full year of service.
d. Trade union and collective employment contracts
Under the Employment Contract Law, a trade union may seek arbitration and litigation to resolve any dispute arising from a collective employment contract provided that such dispute failed to be settled through negotiations. The Employment Contract Law also permits a trade union to enter into a collective employee contract with an employer on behalf of all the employees.
Where a trade union has not been formed, a representative appointed under the recommendation of a high-level trade union may execute the collective employment contract. Within districts below county level, collective employment contracts for industries such as those engaged in construction, mining, food and beverage and those from the service sector, etc., may be executed on behalf of employees by the representatives from the trade union of each respective industry. Alternatively, a district-based collective employment contract may be made.
As a result of the Employment Contract Law, all our employees have executed standard written employment agreements with us. We have not experienced any significant labor disputes or any difficulties in recruiting staff for our operations.
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On October 28, 2010, the National People’s Congress of China promulgated the PRC Social Insurance Law, which became effective on July 1, 2011. In accordance with the PRC Social Insurance Law, the Interim Regulations on the Collection and Payment of Social Security Fund and other relevant laws and regulations, China establishes a social insurance system including basic pension insurance, basic medical insurance, work-related injury insurance, unemployment insurance and maternity insurance. An employer shall pay the social insurance for its employees in accordance with the rates provided under relevant regulations and shall withhold the social insurance that should be assumed by the employees. The authorities in charge of social insurance may request an employer’s compliance and impose sanctions if such employer fails to pay and withhold social insurance in a timely manner. Under the Regulations on the Administration of Housing Fund effective in 1999, as amended in 2002, PRC companies must register with applicable housing fund management centers and establish a special housing fund account in an entrusted bank. Both PRC companies and their employees are required to contribute to the housing funds.
The Ministry of Human Resources and Social Security promulgated the Interim Provisions on Labor Dispatch on January 24, 2014. The Interim Provisions on Labor Dispatch, which became effective on March 1, 2014, sets forth that labor dispatch should only be applicable to temporary, auxiliary or substitute positions. Temporary positions shall mean positions subsisting for no more than six months, auxiliary positions shall mean positions of non-major business that serve positions of major businesses, and substitute positions shall mean positions that can be held by substitute employees for a certain period of time during which the employees who originally hold such positions are unable to work as a result of full-time study, being on leave or other reasons. The Interim Provisions further provides that, the number of the dispatched workers of an employer shall not exceed 10% of its total workforce, and the total workforce of an employer shall refer to the sum of the number of the workers who have executed labor contracts with the employer and the number of workers who are dispatched to the employer.
Foreign Exchange Control and Administration
Foreign exchange in China is primarily regulated by:
| ● | The Foreign Currency Administration Rules (1996), as amended; and | |
| ● | The Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules. |
Under the Foreign Currency Administration Rules, if documents certifying the purposes of the conversion of RMB into foreign currency are submitted to the relevant foreign exchange conversion bank, the RMB will be convertible for current account items, including the distribution of dividends, interest and royalty payments, and trade and service-related foreign exchange transactions. Conversion of RMB for capital account items, such as direct investment, loans, securities investment and repatriation of investment, however, is subject to the approval of SAFE or its local counterpart.
Under the Administration Rules for the Settlement, Sale and Payment of Foreign Exchange, foreign-invested enterprises may only buy, sell and/or remit foreign currencies at banks authorized to conduct foreign exchange business after providing valid commercial documents and, in the case of capital account item transactions, obtaining approval from SAFE or its local counterpart.
As an offshore holding company with a PRC subsidiary, we may (i) make additional capital contributions to our PRC subsidiaries, (ii) establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, (iii) make loans to our PRC subsidiaries or consolidated affiliated entities, or (iv) acquire offshore entities with business operations in China in offshore transactions. However, most of these uses are subject to PRC regulations and approvals. For example:
| ● | Capital contributions to our PRC subsidiaries, whether existing or newly established ones, must be approved by the Ministry of Commerce or its local counterparts; | |
| ● | Loans by us to our PRC subsidiaries, each of which is a foreign-invested enterprise, to finance their activities cannot exceed statutory limits and must be registered with SAFE or its local branches; and | |
| ● | Loans by us to our consolidated affiliated entities, which are domestic PRC entities, must be approved by the National Development and Reform Commission and must also be registered with SAFE or its local branches. |
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On August 29, 2008, SAFE promulgated the Circular on the Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-invested Enterprises, or “Circular 142”. On March 30, 2015, SAFE issued the Circular of the State Administration of Foreign Exchange Concerning Reform of the Administrative Approaches to Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or “Circular 19”, which became effective on June 1, 2015, to regulate the conversion by foreign invested enterprises, or FIEs, of foreign currency into RMB by restricting how the converted RMB may be used. Circular 19 requires that RMB converted from the foreign currency-dominated capital of a FIE shall be managed under the Accounts for FX settlement and pending payment. The expenditure scope of such Accounts includes expenditure within the business scope, payment of funds for domestic equity investment and RMB deposits, repayment of the RMB loans after completed utilization and so forth. A FIE shall truthfully use its capital by itself within the business scope and shall not, directly or indirectly, use its capital or RMB converted from the foreign currency-dominated capital for (i) expenditure beyond its business scope or expenditure prohibited by laws or regulations, (ii) disbursing RMB entrusted loans (unless permitted under its business scope), repaying inter-corporate borrowings (including third-party advance) and repaying RMB bank loans already refinanced to any third party. Where a FIE, other than a foreign-invested investment company, foreign-invested venture capital enterprise or foreign-invested equity investment enterprise, makes domestic equity investment by transferring its capital in the original currency, it shall obey the current provisions on domestic re-investment. Where such a FIE makes domestic equity investment by its RMB conversion, the invested enterprise shall first go through domestic re-investment registration and open a corresponding Accounts for FX settlement and pending payment, and the FIE shall thereafter transfer the conversion to the aforesaid Account according to the actual amount of investment. In addition, according to the Regulations of the People’s Republic of China on Foreign Exchange Administration, which became effective on August 5, 2008, the use of foreign exchange or RMB conversion may not be changed without authorization.
Violations of the applicable circulars and rules may result in severe penalties, including substantial fines as set forth in the Foreign Exchange Administration Regulations.
In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will always be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans to our PRC subsidiaries or future capital contributions by us to our PRC subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
Currently, we are in compliance with the above applicable ordinances and regulations in China and have not involved any lawsuit or prosecuted by the local authority resulting from any breach of the ordinances and regulations.
Insurance
We do not current maintain property, business interruption and casualty insurance. As our business matures, we expect to obtain such insurance in accordance with customary industry practices in Malaysia, Hong Kong and China, as applicable.
Seasonality
Our businesses are not subject to seasonality.
Employees
As of March 29, 2022, we have 55 employees, located in the following territories:
| Country/Territory | Number of Employees | |
| Malaysia | 18 | |
| China | 25 | |
| Hong Kong | 12 |
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As a result of the Employment Contract Law, all our employees in China have executed standard written employment agreements with us.
We are required to contribute to the Employees Provident Fund under a defined contribution pension plan for all eligible employees in Malaysia between the ages of eighteen and fifty-five. We are required to contribute a specified percentage of the participant’s income based on their ages and wage level. The participants are entitled to all of our contributions together with accrued returns regardless of their length of service with the Company. For the years ended December 31, 2021 and 2020, the contributions are $35,977 and $60,536, respectively.
We are required to contribute to the MPF for all eligible employees in Hong Kong between the ages of eighteen and sixty-five. We are required to contribute a specified percentage of the participant’s income based on their ages and wage level. For the years ended December 31, 2021 and 2020, the MPF contributions by the Company were $25,663 and $33,455, respectively. We have not experienced any significant labor disputes or any difficulties in recruiting staff for our operations.
We are required to contribute to the Social Insurance Schemes and Housing Fund Schemes for all eligible employees in PRC. For the years ended December 31, 2021 and 2020, the contributions were $44,603 and $17,854, respectively.
Executive Office
Our principal executive office is located at B-7-5, Northpoint, Mid Valley City, No. 1 Medan Syed Putra Utara, 59200 Kuala Lumpur, Malaysia. Our principal telephone number is +60 3 2201 - 3192. Our website is at: http://www.greenprocapital.com. The information contained on our website is not, and should not be interpreted to be, a part of this Form 10-K.
We have regional offices in Hong Kong and Shenzhen, China which principally serve their respective clients and provide support to the Company.
Future Development Plan
We are in the process of carrying out the following development plans.
| 1. | Expansion of Corporate Finance Services: |
We plan to further expand our corporate finance services business. Our corporate finance services include financial advisory services relating to listings in the US capital markets (e.g., NASDAQ and OTC Markets) and listings in Hong Kong, mergers and acquisitions, investment valuation, project management and other financial advisory services. We intend to enhance our corporate finance business in China, Hong Kong, Malaysia and Thailand, by engaging in more marketing activities and expanding our business network to these regions.
| 2. | ADAQ Development: |
ADAQ is a next generation online financial information platform which facilitates connecting private high growth emerging companies with access to potential investors and synergetic companies. ADAQ is dedicated to equip emerging growth companies in the Asia Pacific region with the guidance and information to identify, build and stream their sustainable core values. In addition, it offers an acceleration program to incubate and assist companies to accelerate the process by which they seek to list on international exchanges such as New York Stock Exchange (“NYSE”), NASDAQ and Hong Kong Stock Exchange (“HKEX”).
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| ● | ADAQ has three major functions: |
1. Corporate Value Building Program
2. Online platform and acceleration process to International Capital Market Listing
3. Online Financial Information Market
We intend to strengthen the development of ADAQ as an acceleration platform to assist high growth emerging companies in the ASEAN regions covering Malaysia, Thailand, Singapore, Indonesia, Myanmar, Laos and Vietnam, and China to obtain funding and prepare for an IPO. An increasing number of companies across South-East Asia and the Greater Bay Area are interested in listing on the ADAQ market platform. We believe the successful development of the platform will heighten the prospects of Greenpro’s venture capital projects, aiming to achieve success and to widen market coverage to source for new potential projects.
| ● | Wealth Management Portfolio Development. The increase in the number of high-net-worth individuals in the Asia Pacific Region has created opportunities and needs for cross-border wealth management services. Leveraging our competitive advantages with integrated financial services and strategic offices, we look forward to enhancing our strategic development in wealth management, fund management and asset management businesses. We continue to look for partnerships to explore the potential of wealth management, fund management and asset management services, and provide with the assistance from our affiliates customized wealth creation, wealth protection and wealth succession solutions for medium, high and ultra-high net worth individuals/families in the Asian region. We also expect to place more efforts into the development of our Wealth Network Database focusing on wealth related information sharing. |
For our long-term plan and development, we look forward to initiating the “Greenpro Capital Tower” plan in ASEAN as an effort to further develop our brand, strengthen our operational and client base with stronger customers and market confidence. In addition, we plan to continue to grow through mergers and acquisitions of related services to enhance our services horizontally and vertically. We are continuously sourcing synergetic and licensed financial institutions to strengthen our capabilities and scope of our services with the aim to widen our market coverage.
ITEM 1A. RISK FACTORS
You should carefully consider the risks described below and elsewhere in this Annual Report, which could materially and adversely affect our business, results of operations or financial condition. Our business faces significant risks and the risks described below may not be the only risks we face. Additional risks not presently known to us or that we currently believe are immaterial may materially affect our business, results of operations, or financial condition. If any of these risks occur, the trading price of our Common Stock could be decline and you may lose all or part of your investment.
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COVID-19 Pandemic
Our business, financial condition and results of operations may be materially adversely affected by global health epidemics, including the recent COVID-19 outbreak.
Outbreaks of epidemic, pandemic, or contagious diseases such as COVID-19, could have an adverse effect on our business, financial condition, and results of operations. The spread of COVID-19 from China to other countries has resulted in the World Health Organization declaring the outbreak of COVID-19 as a global pandemic. The international stock markets reflect the uncertainty associated with the slow-down in the global economy and the reduced levels of international travel experienced since the beginning of January 2020, large declines in oil prices and the significant decline in the Dow Industrial Average at the end of February and beginning of March 2020 was largely attributed to the effects of COVID-19.
More specifically our business was affected to a large extent by a shut-down of operations both for ourselves and our clients for much of the first half of 2020. Total revenue for fiscal year 2020 was $2,254,811 compared to $2,949,780 for fiscal year 2021. The increase year o ver year is largely attributable to the growth in the provision of business services, which mainly comprise business consulting and advisory services as well as company secretarial, accounting and financial analysis services. When nation-wide shutdowns were mandated the first half of 2020, there was a corresponding decline in demand for our business services. When business gradually resumed beginning the latter half 2020, we saw a corresponding increase in orders of our business services.
The full extent of the financial impact of the COVID-19 pandemic cannot be reasonably estimated at this time and the pandemic is still ongoing. The extent to which the COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and its variants and the actions taken globally to contain the coronavirus or treat its impact, the efficacy of vaccines on COVID-19 and its variants, among others. Existing insurance coverage may not provide protection for all costs that may arise from all such possible events.
Additionally, the COVID-19 pandemic may also affect our overall ability to react timely to mitigate the impact of this event and may hamper our efforts to contact our service providers and advisors and to provide our investors with timely information and comply with our filing obligations with the SEC, especially in the event of office closures, stay-in-place orders and a ban on travel or quarantines. We are still assessing our business operations and the impact COVID-19 may have on our results and financial condition, but there can be no assurance that this analysis will enable us to avoid part or all of any impact from the spread of COVID-019 or its consequences, including downturns in business sentiment generally or in our sector in particular.
Risks Related to our Business
We have a limited operating history that you can use to evaluate us, and the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company.
We were incorporated in Nevada in July 2013. For the year ended December 31, 2021 and 2020, we have generated $2,949,780 and $2,254,811, respectively, in revenues and incurred net losses of $14,363,232 and $3,752,953, respectively. The likelihood of our success must be considered in the light of the problems, expenses, difficulties, complications and delays frequently encountered by a small company starting a new business enterprise and the highly competitive environment in which we are operating. We have a limited operating history upon which an evaluation of our future success or failure can be made. Our ability to achieve and maintain profitability and positive cash flow is dependent upon:
| ● | our ability to market our product and services; | |
| ● | our ability to generate revenues; and | |
| ● | our ability to raise the capital necessary to continue marketing and developing our product. |
We are not currently profitable and may not become profitable.
As of December 31, 2021, we had $5,338,571 cash on hand and our common stockholders’ equity was $18,811,934. We have generated $2,949,780 in revenue in 2021 and have incurred operating loss of $2,754,684 and net loss of $14,363,232. We expect to incur losses and negative operating cash flows for the foreseeable future, and we may not achieve profitability. We also expect to experience negative cash flow for the foreseeable future due to operating losses and capital expenditures. As a result, we will need to generate significant revenues to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our business.
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We may not be able to continue to operate as a going concern.
For the year ended December 31, 2021, the Company incurred a net loss of $14,363,232 and used cash in operating activities of $2,023,150. In addition, the Company’s independent registered public accounting firm, in their report on the Company’s December 31, 2021 audited financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. 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. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company’s ability to continue as a going concern is dependent upon improving its profitability and the continuing financial support from its major shareholders. Management believes the existing shareholders or external financing will provide the additional cash to meet the Company’s obligations as they become due. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company can obtain additional financing, if necessary, 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.
Our operating results may prove unpredictable which could negatively affect our profit.
Our operating results are likely to fluctuate significantly in the future due to a variety of factors, many of which we have no control. Factors that may cause our operating results to fluctuate significantly include: our inability to generate enough working capital from future equity sales; the level of commercial acceptance by clients of our services; fluctuations in the demand for our service the amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure and general economic conditions. If realized, any of these risks could have a material adverse effect on our business, financial condition and operating results.
If we are unable to gain any significant market acceptance for our service or establish a significant market presence, we may be unable to generate sufficient revenue to continue our business.
Our growth strategy is substantially dependent upon our ability to successfully market our service to prospective clients. However, our planned services may not achieve significant acceptance. Such acceptance, if achieved, may not be sustained for any significant period of time. Failure of our services to achieve or sustain market acceptance could have a material adverse effect on our business, financial conditions and the results of our operations.
Management’s ability to implement the business strategy may be slower than expected and we may be unable to generate a profit.
Our business plans, including offering a cloud accounting system and consulting services, may not occur. Our growth strategy is subject to significant risks which you should carefully consider before purchasing our shares.
Our services may be slow to achieve profitability, or may not become profitable at all, which will result in losses. There can be no assurance that we will succeed.
We may be unable to enter into our intended markets successfully. The factors that could affect our growth strategy include our success in (a) developing our business plan, (b) obtaining our clients, (c) obtaining adequate financing on acceptable terms, and (d) adapting our internal controls and operating procedures to accommodate our future growth.
Our systems, procedures and controls may not be adequate to support the expansion of our business operations. Significant growth will place managerial demands on all aspects of our operations. Our future operating results will depend substantially upon our ability to manage changing business conditions and to implement and improve our technical, administrative and financial controls and reporting systems.
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Competitors may enter this sector with superior service which would affect our business adversely.
We believe that barriers to entry are low to medium because of economies of scale, cost advantage and brand identity. Potential competitors may enter this sector with superior services. This would have an adverse effect upon our business and our results of operations. In addition, a high level of support is critical for the successful marketing and recurring sales of our services. Despite having accumulated customers from the past four years, we may still need to continue to improve our platform and software to assist potential customers in using our platform, and we also need to provide effective support to future clients. If we are unable to increase customer support and improve our platform in the face of increasing competition, with the increase in competition, our ability to sell our services to potential customers could adversely affect our brand, which would harm our reputation.
Our use of open source and third-party software could impose limitations on our ability to commercialize our services.
We intend to incorporate open-source software into our platform. Although we monitor our use of open source closely, the terms of many open-source licenses have not been interpreted by U.S. courts or jurisdictions elsewhere, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our services. We could also be subject to similar conditions or restrictions should there be any changes in the licensing terms of the open-source software incorporated into our products. In either event, we could be required to seek licenses from third parties to continue our services in the event re-engineering cannot be accomplished on a timely or successful basis, any of which could adversely affect our business, operating results and financial condition.
We also intend to incorporate certain third-party technologies, including software programs, into our website and may need to utilize additional third-party technologies in the future. However, licenses to relevant third-party technology may not continue to be available to us on commercially reasonable terms, or at all. Therefore, we could face delays in releases of our platform until equivalent technology can be identified, licensed or developed, and integrated into our current products. These delays, if they occur, could materially adversely affect our business, operating results and financial condition. Any disruption in our access to software programs or third-party technologies could result in significant delays in releases of our platform and could require substantial effort to locate or develop a replacement program. If we decide in the future to incorporate into our products any other software program licensed from a third party, and the use of such software program is necessary for the proper operation of our appliances, then our loss of any such license would similarly adversely affect our ability to release our products in a timely fashion.
The security of our computer systems may be compromised and harm our business.
A significant portion of our business operations is conducted through use of our computer network. Although we intend to implement security systems and procedures to protect the confidential information stored on these computer systems, experienced computer programmers and hackers may be able to penetrate our network security and misappropriate our confidential information or that of third parties. As well, they may be able to create system disruptions, shutdowns or effect denial of service attacks. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious software programs that attack our networks or client computers, or otherwise exploit any security vulnerabilities, or that misappropriate and distribute confidential information stored on these computer systems. Any of the foregoing could result in damage to our reputation and customer confidence in the security of our products and services and could require us to incur significant costs to eliminate or alleviate the problem. Additionally, our ability to transact business may be affected. Such damage, expenditures and business interruption could seriously impact our business, financial condition and results of operations.
Adverse developments in our existing areas of operation could adversely impact our results of operations, cash flows and financial condition.
Our operations focus on utilizing the sales efforts which are principally located in South-East Asia and East Asia. As a result, the results of our operations, cash flows and financial condition depend upon the demand for our services in these regions. Lack of broad diversification in the industry type and geographic location, adverse developments in our current segment of the midstream industry, or in our existing areas of operation, could have a greater impact on the results of operations, cash flows and financial condition than if our operations were more diversified.
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Risks Related to Doing Business in South-East Asia and East Asia
Our business is subject to the risks of international operations.
Our business operations are conducted in South-East Asia and East Asia. Accordingly, the results of our operations, financial condition and prospects are subject to a significant degree to the economic, political and legal conditions of the South-East Asia and East Asia countries where we intend to develop business. Following the closing of our initial public offering in 2017, we derive a significant portion of our revenues and earnings from Hong Kong, our principal business place, PRC, Malaysia and other South-East Asia countries, respectively. Operation in multiple foreign countries involves substantial risk. For example, our operations and business activities are subject to a variety of laws and regulations, such as anti-corruption laws, tax laws, foreign exchange controls and cash repatriation restrictions, data privacy and security requirements, labor laws, intellectual property laws, privacy laws, and anti-competition regulations. As we expand into additional countries, the complexity inherent in complying with these laws and regulations increases, making compliance more difficult and costly and driving up the costs of doing business in foreign jurisdictions. Any failure to comply with foreign laws and regulations could subject us to fines and penalties, make it more difficult or impossible to do business in that country and harm our reputation.
We face the risk that changes in the world economy and political developments in Malaysia may adversely affect our business.
In recent years, there have been political instabilities in the Malaysian government which may reduce investors’ confidence, result in reduction in foreign direct investment and weigh on consumer and business sentiment, depressing growth. In addition, the Malaysian economy is reliant on external demand. Any possible worsening global demand is likely to hinder the export development and any economic weakness may possibly lead to market intervention and the government may impose capital controls. Under these circumstances, our business operation may be adversely affected.
You may have difficulty enforcing judgments against us.
We are a Nevada corporation but most of our assets are and will be located outside of the United States. Almost all our operations are conducted in Hong Kong, Malaysia and the PRC. In addition, most of our officers and directors are the nationals and residents of a country other than the United States. Most of their assets are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon them. It may also be difficult for you to enforce in U.S. courts judgments on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, since he or she is not a resident in the United States. In addition, there is uncertainty as to whether the courts of Hong Kong or other Asian countries would recognize or enforce judgments of U.S. courts.
Payment of dividends is subject to restrictions under Nevada, Hong Kong, Malaysia and the PRC laws.
Under Nevada law, we may only pay dividends subject to our ability to service our debts as they become due and provided that our assets will exceed our liabilities after the payment of such dividends. Our ability to pay dividends will therefore depend on our ability to generate adequate profits. Under the Hong Kong Companies Ordinance, we are permitted to make payments of dividends from distributable profits (that is, accumulated realized profits less its accumulated realized losses). Under the Laws of Malaysia, we may only make a distribution to the shareholders out of our profits available if we are solvent. The Company is regarded as solvent if the Company can pay its debts as and when the debts become due within twelve months immediately after the distribution is made. In addition, because of a variety of rules applicable to our operations in China and the regulations on foreign investments as well as the applicable tax law, we may be subject to further limitations on our ability to declare and pay dividends to our shareholders.
We can give no assurance that we will declare dividends of any amounts, at any rate or at all in the future. The declaration of future dividends, if any, will be at the discretion of our board of directors and will depend upon our future operations and earnings, capital requirements, general financial conditions, legal and contractual restrictions and other factors that our board of directors may deem relevant.
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Risks Related to Doing Business in Hong Kong and China
Introduction of new laws or changes to existing laws by the PRC government may adversely affect our business.
The PRC legal system is a codified legal system made up of written laws, regulations, circulars, administrative directives and internal guidelines. Unlike common law jurisdictions like the U.S., decided cases (which may be taken as reference) do not form part of the legal structure of the PRC and thus have no binding effect on subsequent cases with similar issues and fact patterns. Furthermore, in line with its transformation from a centrally planned economy to a relatively free market economy, the PRC government is still in the process of developing a comprehensive set of laws and regulations. As the legal system in the PRC is still evolving, laws and regulations or the interpretation of the same may be subject to further changes. For example, the PRC government may impose restrictions on the amount of service fees that may be payable by municipal governments to wastewater and sludge treatment service providers. Also, the PRC central and municipal governments may impose more stringent environmental regulations which would affect our ability to comply with, or our costs to comply with, such regulations. Such changes, if implemented, may adversely affect our business operations and may reduce our profitability
We face the risk that changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and the profitability of such business.
The PRC’s economy is in a transition from a planned economy to a market-oriented economy subject to five-year and annual plans adopted by the central government that set national economic development goals. Policies of the PRC government can have significant effects on the economic conditions of the PRC. The PRC government has confirmed that economic development will follow the model of a market economy. Under this direction, we believe that the PRC will continue to strengthen its economic and trading relationships with foreign countries and business development in the PRC will follow market forces. While we believe that this trend will continue, we cannot assure you that this will be the case. A change in policies by the PRC government could adversely affect our interests by, among other factors: changes in laws, regulations or the interpretation thereof, confiscatory taxation, restrictions on currency conversion, imports or sources of supplies, or the expropriation or nationalization of private enterprises. Although the PRC government has been pursuing economic reform policies for more than two decades, we cannot assure you that the government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting the PRC’s political, economic and social environment.
The recent state government interference into business activities on U.S. listed Chinese companies may negatively impact our existing and future operations in Hong Kong and China.
Recently, the Chinese government announced that it would step up supervision of Chinese firms listed offshore. Under the new measures, China will improve regulation of cross-border data flows and security, crack down on illegal activity in the securities market and punish fraudulent securities issuance, market manipulation and insider trading, China will also check sources of funding for securities investment and control leverage ratios. The Cyberspace Administration of China (“CAC”) has also opened a cybersecurity probe into several U.S.-listed tech giants focusing on anti-monopoly, financial technology regulation and more recently, with the passage of the Data Security Law, how companies collect, store, process and transfer data. If our Hong Kong and PRC subsidiaries are subject to such a probe or if they are required to comply with stepped-up supervisory requirements, valuable time from management and money may be expended in complying and/or responding to the probe and requirements, thus diverting valuable resources and attention away from our operations. This may, in turn, negatively impact their operations.
The Company is headquartered in Malaysia with operations in Hong Kong and China. The Company is NOT a Chinese operating company but a Malaysian holding company with operations conducted by its subsidiaries based in China and that this structure involves unique risks to investors. It does not use variable interest entities in its corporate structure. It provides cross-border business solutions such as tax planning, trust and wealth management, cross border listing advisory services, transaction services, record management services, and accounting outsourcing services. One of its venture capital business segments focuses on rental activities of commercial properties and the sale of investment properties. None of the aforesaid business activities appears to be within the current targeted areas of concern by the Chinese government. The Company plans to continue to explore future potential business opportunities in the Asia region, in particular South East Asia. Nonetheless, it intends to keep Hong Kong and China as part of its operating structure going forward and this would potentially subject it to political and economic influence from China to the extent of such operations.
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Because of the Company’s subsidiaries in Hong Kong and mainland China and its operations there and given the Chinese government’s significant oversight and discretion over the conduct of our Hong Kong and PRC subsdiaries’ business operations there, there is always a risk that the Chinese government may, in the future, seek to affect operations of any company with any level of operations in China including its ability to offer securities to investors, list its securities on a U.S. or other foreign exchange, conduct its business or accept foreign investment. In light of China’s recent extension of authority not only in China but into Hong Kong, there are risks and uncertainties which it cannot foresee for the time being, and rules and regulations in China can change quickly with little or no advance notice. The Chinese government may intervene or influence the Company’s current and future operations in Hong Kong and China at any time, or may exert more control over offerings conducted overseas and/or foreign investment in issuers likes ourselves.
If any or all of the foregoing were to occur, this could lead to a material change in our Hong Kong and China subsidiaries’ operations and/or the value of the Company common stock and/or significantly limit or completely hinder its ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
Our shares may be delisted under the Holding Foreign Companies Accountable Act (“HFCCA”) if the PCAOB is unable to inspect our auditors for three consecutive years beginning in 2021. If the bill passed by the U.S. Senate on June 22, 2021 is passed by the U.S. House of Representatives and signed into law, this would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two. The delisting of our shares, or the threat of their being delisted, may materially and adversely affect the value of your investment.
The Holding Foreign Companies Accountable Act, or the HFCAA, was enacted on December 18, 2020. The HFCAA states if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit such shares from being traded on a national securities exchange or in the over the counter trading market in the U.S.
On June 22, 2021, the U.S. Senate passed a bill which, if passed by the U.S. House of Representatives and signed into law, would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two.
The lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China. As a result, the investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these accounting firms’ audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause existing and potential investors in our stock to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.
On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA. A company will be required to comply with these rules if the SEC identifies it as having a “non-inspection” year under a process to be subsequently established by the SEC. The SEC began to assess how to implement other requirements of the HFCAA, including the listing and trading prohibition requirements described above.
On December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. On December 16, 2021, the PCAOB issued a report on its determinations that the Board is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong because of positions taken by PRC authorities in those jurisdictions. The Board made these determinations pursuant to PCAOB Rule 6100, which provides a framework for how the PCAOB fulfils its responsibilities under the HFCAA.
The rules apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate (“Commission-Identified Issuers”). The final amendments require Commission-Identified Issuers to submit documentation to the SEC establishing that, if true, it is not owned or controlled by a governmental entity in the public accounting firm’s foreign jurisdiction. The amendments also require that a Commission-Identified Issuer that is a “foreign issuer,” as defined in Exchange Act Rule 3b-4, provide certain additional disclosures in its annual report for itself and any of its consolidated foreign operating entities. Further, the release provides notice regarding the procedures the SEC has established to identify issuers and to impose trading prohibitions on the securities of certain Commission-Identified Issuers, as required by the HFCAA.
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The SEC will identify Commission-Identified Issuers for fiscal years beginning after December 18, 2020. A Commission-Identified Issuer will be required to comply with the submission and disclosure requirements in the annual report for each year in which it was identified. If a registrant is identified as a Commission-Identified Issuer based on its annual report for the fiscal year ended December 31, 2021, the registrant will be required to comply with the submission or disclosure requirements in its annual report filing covering the fiscal year ended December 31, 2022.
Our current auditor, JP Centurion & Partners PLT (“Centurion”) is headquartered in Kuala Lumpur, Malaysia. Our previous auditors, JLKZ CPA LLP (“JLKZ”) and Weinberg & Company, P.A. (“Weinberg”) are both headquartered in the United States of America and are the independent registered public accounting firms that issued the audit reports included in this proxy statement, and as auditors of companies that are traded publicly in the United States and firms registered with the PCAOB, are subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess their compliance with the applicable professional standards. We are not aware of any reasons to believe or conclude that Centurion, JLKZ or Weinberg would not permit an inspection by PCAOB or that either one may not be subject to such inspection. Centurion, JLKZ and Weinberg are outside the jurisdiction of Hong Kong and China and have assured us that if requested, they shall cooperate and deliver work papers of our Chinese subsidiaries to the PCAOB for inspection. We cannot assure you that the jurisdiction in which our current auditor is located would not implement rules forbidding our auditor to be subject to PCAOB inspection. If such rules were to be implemented, we may have to incur substantial costs and time to appoint a new auditor to re-audit our financials. This could cause the market price of our shares to be materially and adversely affected, and our securities could be delisted or prohibited from being traded on the national securities exchange if we fail to do so timely or on commercially reasonable times.
However, given the recent developments, we cannot assure you whether NASDAQ or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements.
The SEC may propose additional rules or guidance that could impact us if our auditor is not subject to PCAOB inspection. For example, on August 6, 2020, the President’s Working Group on Financial Markets, or the PWG, issued the Report on Protecting United States Investors from Significant Risks from Chinese Companies to the then President of the United States. This report recommended the SEC implement five recommendations to address companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfil its statutory mandate. Some of the concepts of these recommendations were implemented with the enactment of the HFCA Act. However, some of the recommendations were more stringent than the HFCA Act. For example, if a company’s auditor was not subject to PCAOB inspection, the report recommended that the transition period before a company would be delisted would end on January 1, 2022.
The SEC had announced that the SEC staff was preparing a consolidated proposal for the rules regarding the implementation of the HFCA Act and to address the recommendations in the PWG report. The implications of possible additional regulation in addition to the requirements of the HFCA Act and what was recently adopted on December 2, 2021 are uncertain. Such uncertainty could cause the market price of our shares to be materially and adversely affected, and our securities could be delisted or prohibited from being traded on the national securities exchange earlier than would be required by the HFCAA. If our shares are unable to be listed on another securities exchange by then, such a delisting would substantially impair your ability to sell or purchase our shares when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact on the price of our shares.
Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our future business and operations.
Our business direction going forward is focused in the Asia region which, accordingly, could place our future business, financial condition, results of operations and prospects be influenced to a certain degree by political, economic and social conditions in China generally. The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies.
The Chinese government also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.
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While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. Any adverse changes in economic conditions in China, in the policies of the Chinese government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect our future business and operating results, lead to reduction in demand for our services and adversely affect our competitive position. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain measures, including interest rate adjustment, to control the pace of economic growth. These measures may cause decreased economic activity in China, which may adversely affect our future business and operating results.
Interpretation of PRC laws and the implementation of National Security Law in Hong Kong involve uncertainty.
The PRC’s legal system is based on written statutes, and prior court decisions can only be used as a reference. Since 1979, the PRC’s government has promulgated laws and regulations in relation to economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade, with a view to developing a comprehensive system of commercial law, including laws relating to property ownership and development. However, due to the fact that these laws and regulations have not been fully developed, and because of the limited volume of published cases and the non-binding nature of prior court decisions, interpretation of PRC’s laws and regulations involves a degree of uncertainty. Some of these laws may be changed with little advance notice, without immediate publication or may be amended with retroactive effect.
On June 30, 2020, China’s top legislature unanimously passed a new National Security Law for Hong Kong that was enacted on the same day. Similar to PRC’s laws and regulations, the interpretation of National Security Law involves a degree of uncertainty.
Depending on the government agency or how an application or case is presented to such agency, we may receive less favorable interpretations of laws and regulations than our competitors, particularly if a competitor has long been established in the locality of, and has developed a relationship with such agency. In addition, any litigation may be protracted and result in substantial costs and a diversion of resources and management attention. All of these uncertainties may cause difficulties in the enforcement of our land use rights, entitlements under our permits and other statutory and contractual rights and interests.
We may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption law.
In connection with any future offering, we may be subjected to the U.S. Foreign Corrupt Practices Act (“FCPA”), and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business. We may also be subjected to Chinese anti-corruption laws, which strictly prohibit the payment of bribes to government officials. Going forward Hong Kong and China subsidiaries may have operations, agreements with third parties, and make sales in China, which may experience corruption. Our Hong Kong and China subsidiaries’ future activities in China may create the risk of unauthorized payments or offers of payments by one of their employees, because sometimes these employees are out of our control. Violations of the FCPA or Chinese anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect their business, operating results and financial condition. In addition, the government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.
The PRC government may issue further restrictive measures in the future.
We cannot assure you that the PRC’s government will not issue further restrictive measures in the future. The PRC government’s restrictive regulations and measures could increase our existing and future operating costs in adapting to these regulations and measures, limit our access to capital resources or even restrict our existing and future business operations, which could further adversely affect our business and prospects.
Our Hong Kong and China subsidiaries may be subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on their business, financial condition and results of operations.
Our Hong Kong and China subsidiaries may be subject relating various risks and costs associated with to the collection, use, sharing, retention, security, and transfer of confidential and private information, such as personal information and other data. This data is wide ranging and relates to our investors, employees, contractors and other counterparties and third parties. The relevant PRC laws apply not only to third-party transactions, but also to transfers of information between us, our subsidiaries and other parties with which we/they have commercial relations.
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The PRC regulatory and enforcement regime with regard to privacy and data security is evolving. The PRC Cybersecurity Law which was promulgated on November 7, 2016 and became effective on June 1, 2017 provides that personal information and important data collected and generated by operators of critical information infrastructure in the course of their operations in the PRC should be stored in the PRC, and the law imposes heightened regulation and additional security obligations on operators of critical information infrastructure. According to the Cybersecurity Review Measures promulgated by the Cyberspace Administration of China and certain other PRC regulatory authorities in April 2020, which became effective in June 2020, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security. If they provide or are deemed to provide such network products and services to critical information infrastructure operators, or they are deemed to be a critical information infrastructure operator, they would be required to follow cybersecurity review procedures. There can be no assurance that they would be able to complete the applicable cybersecurity review procedures in a timely manner, or at all, if they are required to follow such procedures. Any failure or delay in the completion of the cybersecurity review procedures may prevent them from using or providing certain network products and services, and may result in fines of up to ten times the purchase price of such network products and services being imposed upon us, if they are to be deemed a critical information infrastructure operator using network products or services without having completed the required cybersecurity review procedures. The PRC government is increasingly focused on data security, recently launching cybersecurity review against a number of mobile apps operated by several US-listed Chinese companies and prohibiting these apps from registering new users during the review period.
On June 10, 2021, the Standing Committee of the National People’s Congress of China promulgated the Data Security Law which shall take effect in September 1, 2021. The Data Security Law provides for data security and privacy obligations of entities and individuals carrying out data activities, prohibits entities and individuals in China from providing any foreign judicial or law enforcement authority with any data stored in China without approval from the competent PRC authority, and sets forth the legal liabilities of entities and individuals found to be in violation of their data protection obligations, including rectification order, warning, fines of up to RMB10 million, suspension of relevant business, and revocation of business permits or licenses.
On August 20, 2021, the Standing Committee of the National People’s Congress adopted the Personal Information Security Law, which shall come into force as of November 1, 2021. The Personal Information Protection Law includes the basic rules for personal information processing, the rules for cross-border provision of personal information, the rights of individuals in personal information processing activities, the obligations of personal information processors, and the legal responsibilities for illegal collection, processing, and use of personal information.
In addition, on July 10, 2021, the Cyberspace Administration of China issued the Measures for Cybersecurity Review (Revision Draft for Comments) for public comments, which proposes to authorize the relevant government authorities to conduct cybersecurity review on a range of activities that affect or may affect national security, including listings in foreign countries by companies that possess personal data of more than one million users. The PRC National Security Law covers various types of national security, including technology security and information security.
Our Hong Kong and China subsidiaries do not collect, process or use personal information of entities or individuals other than what is necessary for our business and do not disseminate such information. They do not operate mobile apps and they do not possess information on more than a million entities/individuals. Although we believe they currently are not required to obtain clearance from the Cyberspace Administration of China under the Measures for Cybersecurity Review (Revision Draft for Comments) or the Opinions on Strictly Cracking Down on Illegal Securities Activities, they face uncertainties as to the interpretation or implementation of such regulations or rules, and if required, whether such clearance can be timely obtained, or at all.
Compliance with the PRC Cybersecurity Law, the PRC National Security Law, the Data Security Law, the Personal Information Protection Law, the Cybersecurity Review Measures, as well as additional laws and regulations that PRC regulatory bodies may enact in the future, including data security and personal information protection laws, may result in additional expenses to us and subject us to negative publicity, which could harm our reputation among users and negatively affect the trading price of our shares in the future. There are also uncertainties with respect to how the PRC Cybersecurity Law, the PRC National Security Law and the Data Security Law will be implemented and interpreted in practice. PRC regulators, including the Ministry of Public Security, the MIIT, the SAMR and the Cyberspace Administration of China, have been increasingly focused on regulation in the areas of data security and data protection, including for mobile apps, and are enhancing the protection of privacy and data security by rule-making and enforcement actions at central and local levels. We expect that these areas will receive greater and continued attention and scrutiny from regulators and the public going forward, which could increase our Hong Kong and China subsidiaries’ compliance costs and subject them to heightened risks and challenges associated with data security and protection. If our Hong Kong and China subsidiaries are unable to manage these risks, they could become subject to penalties, including fines, suspension of business, prohibition against new user registration (even for a short period of time) and revocation of required licenses, and their reputation and results of operations could be materially and adversely affected.
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It may be difficult for overseas shareholders and/or regulators to conduct investigation or collect evidence within China.
Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator, such as the Department of Justice, the SEC, the PCAOB and other authorities, to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests.
Some of our business operations are conducted in Hong Kong and the PRC through our Hong Kong and China subsidiaries. In the event that the U.S. regulators carry out investigation on us and there is a need to conduct investigation or collect evidence within the territory of the PRC, the U.S. regulators may not be able to carry out such investigation or evidence collection directly in the PRC under the PRC laws. The U.S. regulators may consider cross-border cooperation with securities regulatory authority of the PRC by way of judicial assistance, diplomatic channels or regulatory cooperation mechanism established with the securities regulatory authority of the PRC.
Failure to comply with laws and regulations applicable to our business in China could subject us to fines and penalties and could also cause us to lose customers or otherwise harm our business.
Our Hong Kong and China subsidiaries’ business is subject to regulation by various governmental agencies in China, including agencies responsible for monitoring and enforcing compliance with various legal obligations, such as value-added telecommunication laws and regulations, privacy and data protection-related laws and regulations, intellectual property laws, employment and labor laws, workplace safety, environmental laws, consumer protection laws, governmental trade laws, import and export controls, anti-corruption and anti-bribery laws, and tax laws and regulations. In certain jurisdictions, these regulatory requirements may be more stringent than in China. These laws and regulations impose added costs on their business. Noncompliance with applicable regulations or requirements could subject them to:
| ● | investigations, enforcement actions, and sanctions; | |
| ● | mandatory changes to our network and products; | |
| ● | disgorgement of profits, fines, and damages; | |
| ● | civil and criminal penalties or injunctions; | |
| ● | claims for damages by our customers or channel partners; | |
| ● | termination of contracts; | |
| ● | loss of intellectual property rights; | |
| ● | failure to obtain, maintain or renew certain licenses, approvals, permits, registrations or filings | |
| ● | necessary to conduct our operations; and | |
| ● | temporary or permanent debarment from sales to public service organizations. |
If any governmental sanctions are imposed, or if they do not prevail in any possible civil or criminal litigation, their business, results of operations, and financial condition could be adversely affected. In addition, responding to any action will likely result in a significant diversion of our management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could materially harm our business, results of operations, and financial condition.
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Additionally, companies in the technology industry have recently experienced increased regulatory scrutiny. Any similar reviews by regulatory agencies or legislatures may result in substantial regulatory fines, changes to their business practices, and other penalties, which could negatively affect their business and results of operations.
Changes in social, political, and regulatory conditions or in laws and policies governing a wide range of topics may cause them to change their business practices. Further, their expansion into a variety of new fields also could raise a number of new regulatory issues. These factors could negatively affect their business and results of operations in material ways.
Moreover, they are exposed to the risk of misconduct, errors and failure to functions by their management, employees and parties that they collaborate with, who may from time to time be subject to litigation and regulatory investigations and proceedings or otherwise face potential liability and penalties in relation to noncompliance with applicable laws and regulations, which could harm their reputation and business.
The recent joint statement by the SEC, proposed rule changes submitted by NASDAQ, and an act passed by the U.S. Senate and the U.S. House of Representatives, all call for additional and more stringent criteria to be applied to U.S.-listed companies with significant operations in China. These developments could add uncertainties to our future offerings, business operations share price and reputation.
U.S. public companies that have substantially all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud.
On December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China, reiterating past SEC and PCAOB statements on matters including the difficulty associated with inspecting accounting firms and audit work papers in China and higher risks of fraud in emerging markets and the difficulty of bringing and enforcing SEC, Department of Justice and other U.S. regulatory actions, including in instances of fraud, in emerging markets generally.
On May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act (“HFCAA”) requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the HFCAA. On December 18, 2020, the HFCAA Act was signed into law. On June 22, 2021, the U.S. Senate passed a bill which, if passed by the U.S. House of Representatives and signed into law, would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two.
On March 24, 2021, the SEC announced that it had adopted interim final amendments to implement congressionally mandated submission and disclosure requirements of the Act. The interim final amendments will apply to registrants that the SEC identifies as having filed an annual report on Forms 10-K, 20-F, 40-F or N-CSR with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction. The SEC will implement a process for identifying such a registrant and any such identified registrant will be required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction and will also require disclosure in the registrant’s annual report regarding the audit arrangements of, and governmental influence on, such a registrant.
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On May 21, 2021, NASDAQ filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in a “Restrictive Market”, (ii) prohibit Restrictive Market companies from directly listing on NASDAQ Capital Market, and only permit them to list on NASDAQ Global Select or NASDAQ Global Market in connection with a direct listing and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.
On December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The rules apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the Public Company Accounting Oversight Board (“PCAOB”) is unable to inspect or investigate (“Commission-Identified Issuers”). The final amendments require Commission-Identified Issuers to submit documentation to the SEC establishing that, if true, it is not owned or controlled by a governmental entity in the public accounting firm’s foreign jurisdiction. The amendments also require that a Commission-Identified Issuer that is a “foreign issuer,” as defined in Exchange Act Rule 3b-4, provide certain additional disclosures in its annual report for itself and any of its consolidated foreign operating entities. Further, the release provides notice regarding the procedures the SEC has established to identify issuers and to impose trading prohibitions on the securities of certain Commission-Identified Issuers, as required by the HFCAA.
The SEC will identify Commission-Identified Issuers for fiscal years beginning after December 18, 2020. A Commission-Identified Issuer will be required to comply with the submission and disclosure requirements in the annual report for each year in which it was identified. If a registrant is identified as a Commission-Identified Issuer based on its annual report for the fiscal year ended December 31, 2021, the registrant will be required to comply with the submission or disclosure requirements in its annual report filing covering the fiscal year ended December 31, 2022.
These recent developments could add uncertainties to our offering and we cannot assure you whether NASDAQ or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements.
It remains unclear what further actions the SEC, the PCAOB or NASDAQ will take to address these issues and what impact those actions will have on U.S. companies that have significant operations in the PRC and have securities listed on a U.S. stock exchange (including a national securities exchange or over-the-counter stock market). In addition, the March 2021 interim final amendments and any additional actions, proceedings, or new rules resulting from these efforts to increase U.S. regulatory access to audit information could create some uncertainty for investors, the market price of our ordinary shares could be adversely affected, and we could be delisted if we and our auditor are unable to meet the PCAOB inspection requirement or being required to engage a new audit firm, which would require significant expense and management time.
As a result of these scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on us, our future offerings, business and our share price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our Company. This situation will be costly and time consuming and distract our management from developing our growth. If such allegations are not proven to be groundless, we and our business operations will be severely affected and you could sustain a significant decline in the value of our shares.
NASDAQ may apply additional and more stringent criteria for our continued listing.
NASDAQ Listing Rule 5101 provides NASDAQ with broad discretionary authority over the continued listing of securities in NASDAQ and NASDAQ may use such discretion to deny apply additional or more stringent criteria for the continued listing of particular securities, or suspend or delist particular securities based on any event, condition, or circumstance that exists or occurs that makes continued listing of the securities on NASDAQ inadvisable or unwarranted in the opinion of NASDAQ, even though the securities meet all enumerated criteria for continued listing on NASDAQ. In addition, NASDAQ has used its discretion to deny continued listing or to apply additional and more stringent criteria in the instances, including but not limited to where the company engaged an auditor that has not been subject to an inspection by PCAOB, an auditor that PCAOB cannot inspect, or an auditor that has not demonstrated sufficient resources, geographic reach, or experience to adequately perform the company’s audit. For the aforementioned concerns, we may be subject to the additional and more stringent criteria of NASDAQ for our continued listing.
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The current tension in international trade, particularly with regard to U.S. and China trade policies, may adversely impact our business, financial condition, and results of operations.
Although cross-border business may not be an area of our focus, if we plan to expand our business internationally in the future, any unfavorable government policies on international trade, such as capital controls or tariffs, may affect the demand for our services, impact our competitive position, or prevent us from being able to conduct business in certain countries. If any new tariffs, legislation, or regulations are implemented, or if existing trade agreements are renegotiated, such changes could adversely affect our business, financial condition, and results of operations. Recently, there have been heightened tensions in international economic relations, such as the one between the United States and China. The U.S. government has recently imposed, and has recently proposed to impose additional, new, or higher tariffs on certain products imported from China to penalize China for what it characterizes as unfair trade practices. China has responded by imposing, and proposing to impose additional, new, or higher tariffs on certain products imported from the United States. Following mutual retaliatory actions for months, on January 15, 2020, the United States and China entered into the Economic and Trade Agreement Between the United States of America and the People’s Republic of China as a phase one trade deal, effective on February 14, 2020.
Although the direct impact of the current international trade tension, and any escalation of such tension, on the industries in which we operate is uncertain, the negative impact on general, economic, political and social conditions may adversely impact our business, financial condition and results of operations.
The Hong Kong legal system embodies uncertainties which could limit the legal protections available to the Company.
Hong Kong is a Special Administrative Region of the PRC and enjoys a high degree of autonomy under the “one country, two systems” principle. The Hong Kong Special Administrative Region’s constitutional document, the Basic Law, ensures that the current political situation will remain in effect for 50 years. Hong Kong has enjoyed the freedom to function in a high degree of autonomy for its affairs, including currencies, immigration and custom, independent judiciary system and parliamentary system. However, we are not in any position to guarantee the implementation of the “one country, two systems” principle and the level of autonomy as currently in place at the moment. Any changes in the state of political environment in Hong Kong may materially and adversely affect our business and operation. Additionally, intellectual property rights and confidentiality protections in Hong Kong may not be as effective as in the United States or other countries. These uncertainties could limit the legal protections available to us, including our ability to enforce our agreements with our clients
Risks Related to our Common Stock
Our failure to meet the continued listing requirements of Nasdaq could result in the de-listing of our Common Stock.
On January 3, 2022, we received notice from The NASDAQ Stock Market (“Nasdaq”) that, because the closing bid price for our common stock has fallen below $1.00 per share for 30 consecutive business days, we no longer comply with the minimum bid price requirement for continued listing on the Nasdaq Capital Market pursuant to the Nasdaq Listing Rule 5550(a)(2). However the Nasdaq Listing Rules also provide us a compliance period of 180 calendar days (i.e. by July 5, 2022) in which to regain compliance. If we fail to satisfy the continued listing requirements of Nasdaq, including the minimum closing bid price requirement, Nasdaq may take steps to delist our Common Stock. Such a delisting would likely have a negative effect on the price of our Common Stock and would impair your ability to sell or purchase our Common Stock when you wish to do so.
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The Company is considering actions that it may take in response to this notification to regain compliance with the continued listing requirements, but no decisions about a response have been made as of the date of this report.
Future sales of substantial amounts of the shares of Common Stock by existing shareholders could adversely affect the price of our Common Stock.
If our existing shareholders sell substantial amounts of the shares, then the market price of our Common Stock could fall. Such sales by our existing shareholders might make it more difficult for us to issue new equity or equity-related securities in the future at a time and place we deem appropriate. If any existing shareholders sell substantial amounts of shares, the prevailing market price for our shares could be adversely affected.
The market price of our shares is likely to be highly volatile and subject to wide fluctuations in response to factors such as:
| ● | variations in our actual and perceived operating results; | |
| ● | news regarding gains or losses of customers or partners by us or our competitors; | |
| ● | news regarding gains or losses of key personnel by us or our competitors; | |
| ● | announcements of competitive developments, acquisitions or strategic alliances in our industry by us or our competitors; | |
| ● | changes in earnings estimates or buy/sell recommendations by financial analysts; | |
| ● | potential litigation; | |
| ● | general market conditions or other developments affecting us or our industry; and | |
| ● | the operating and stock price performance of other companies, other industries and other events or factors beyond our control. |
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of certain companies. These market fluctuations may also materially and adversely affect the market price of the shares.
In case that our shares trade under $5.00 per share they will be considered penny stock. Trading in penny stocks has many restrictions and these restrictions could severely affect the price and liquidity of our shares.
If our stock trades below $5.00 per share, our stock would be known as a “penny stock”, which is subject to various regulations involving disclosures to be given to you prior to the purchase of any penny stock. The U.S. Securities and Exchange Commission (the “SEC”) has adopted regulations which generally define a “penny stock” to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Depending on market fluctuations, our Common Stock would be considered as a “penny stock”. A penny stock is subject to rules that impose additional sales practice requirements on broker/dealers who sell these securities to persons other than established Members and accredited investors. For transactions covered by these rules, the broker/dealer must make a special suitability determination for the purchase of these securities. In addition, he must receive the purchaser’s written consent to the transaction prior to the purchase. He must also provide certain written disclosures to the purchaser. Consequently, the “penny stock” rules may restrict the ability of broker/dealers to sell our securities and may negatively affect the ability of holders of shares of our Common Stock to resell them. These disclosures require you to acknowledge that you understand the risks associated with buying penny stocks and that you can absorb the loss of your entire investment. Penny stocks are low priced securities that do not have a very high trading volume. Consequently, the price of the stocks is often volatile, and you may not be able to buy or sell the stock when you want to.
We do not anticipate paying cash dividends on our Common Stock in the foreseeable future.
We do not anticipate paying cash dividends in the foreseeable future. Presently, we intend to retain all our earnings, if any, to finance development and expansion of our business. Consequently, your only opportunity to achieve a positive return on your investment in us will be if the market price of our Common Stock appreciates.
Together, our Chief Executive Officer, Mr. Lee Chong Kuang, and our Chief Financial Officer, Mr. Loke Che Chan Gilbert own a large percentage of our outstanding stock and could significantly influence the outcome of our corporate matters.
Mr. Lee Chong Kuang, our CEO, beneficially owns 22.10% of our outstanding shares of Common Stock, and Mr. Loke Che Chan Gilbert, our CFO, beneficially owns 13.54% of our outstanding shares of Common Stock. As a result, Messrs. Lee and Loke are collectively able to exercise significant influence over all matters that require us to obtain shareholder approval, including the election of directors to our board and approval of significant corporate transactions that we may consider, such as a merger or other sale of our company or its assets. This concentration of ownership in our shares by executive officers will limit the other shareholders’ ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our principal executive office is located at B-7-5, Northpoint, Mid Valley City, No. 1 Medan Syed Putra Utara, 59200 Kuala Lumpur, Malaysia.
| Location | Owner | Use | ||
| B-7-5, Northpoint, Mid Valley City, No. 1 Medan Syed Putra Utara, 59200 Kuala Lumpur, Malaysia | Greenpro Resources Sdn Bhd | Self-use business premises | ||
| D-07-06 and D-07-07~Sky Park @ One City, Jalan USJ 25/1, 47650 Subang Jaya, Selangor Darul Ehsan, Malaysia | Greenpro Resources Sdn Bhd | Investment for rental and capital gains | ||
| Units 6, 7 and 8, 22/F., Di Wang Building, No. 5002 Shennan Dong Road, Luohu District, Shenzhen, China | Greenpro Management Consultancy Limited | Self-use business premises | ||
| Factory Units A8, B1, B6, B7, B8, B9, C3, C6, C7, C8, C9, D8, D9 on 14/F., Wang Cheung Industrial Building, 6 Tsing Yeung Circuit, Tuen Mun, New Territories, Hong Kong | Forward Win International Limited | Investment for rental and capital gains |
In December 2013, the Company obtained a loan in the principal amount of MYR1,629,744 (approximately $391,201) from Standard Chartered Saadiq Berhad, a financial institution in Malaysia to finance the acquisition of leasehold office units at Sky Park @ One City, Selangor Darul Ehsan, Malaysia which bore interest at the base lending rate less 2.1% per annum with 300 monthly installments of MYR8,984 (approximately $2,157) each and would mature in November 2038. The mortgage loan was secured by (i) the first legal charge over the property, (ii) personally guaranteed by Messrs. Lee Chong Kuang and Loke Che Chan Gilbert, officers and directors of the Company, and (iii) corporate guaranteed by a related company which was controlled by the directors of the Company. On September 21, 2021, the Company repaid the loan in full.
In December 2013, the Company, through Mr. Lee Chong Kuang, President, Chief Executive Officer and director of the Company, obtained a loan in the principal amount of MYR1,074,896 (approximately $258,016) from United Overseas Bank (Malaysia) Berhad, a financial institution in Malaysia to finance the acquisition of a leasehold office unit at Northpoint, Mid Valley City in Kuala Lumpur, Malaysia which bore interest at the base lending rate less 2.2% per annum with 360 monthly installments of MYR4,998 (approximately $1,200) each and would mature in November 2043. The mortgage loan was secured by the first legal charge over the property. On August 9, 2021, the Company repaid the loan in full.
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In December 2017, the Company obtained a loan in the principal amount of RMB9,000,000 (approximately $1,416,185) from Bank of China Limited, a financial institution in China to finance the acquisition of leasehold office units of approximately 5,000 square feet at the Di Wang Building (Shun Hing Square), Shenzhen, China. The loan bore interest at a 25% premium above the 5-year-or-above RMB base lending rate per annum with 120 monthly installments and would mature in December 2027. The interest rate of the loan was 6.125% per annum. The monthly installment would be determined by the sum of (i) a 25% premium above the 5-year-or-above RMB base lending rate per annum on the 20th day of each month for the interest payment and (ii) RMB75,000 (approximately $11,802) for the fixed repayment of principal. The mortgage loan was secured by (i) the first legal charge over the property, (ii) a Restricted-Cash Fixed Deposit of RMB1,000,000 (approximately $157,354) of Greenpro Management Consultancy Limited, (iii) the accounts receivable of Greenpro Management Consultancy Limited, (iv) corporate guaranteed by Greenpro Financial Consulting Limited, (v) corporate guaranteed by a related company which was controlled by Mr. Loke Che Chan Gilbert and (vi) personally guaranteed by Ms. Chen Yanhong, the legal representative of Greenpro Management Consultancy Limited and a shareholder of the Company. On July 9, 2021, the Company repaid the loan in full.
We believe that the current facilities are adequate for our current needs. We intend to secure new facilities or expand existing facilities as necessary to support future growth. We believe that suitable additional space will be available on commercially reasonable terms as needed to accommodate our operations.
ITEM 3. LEGAL PROCEEDINGS
On August 24, 2021, Plaintiff Millennium Fine Art Inc. (“MFAI”) filed a Complaint against the Company, alleging that on or about April 21, 2021, MFAI and the Company entered into a contract (the “Contract”), by which MFAI agreed to create 7,700 non-fungible tokens (“NFT”) in exchange for sixteen million dollars ($16,000,000) worth of shares of the Company. MFAI claims that the Company breached the Contract by refusing delivery of the NFTs and not delivering $16 million worth of shares to MFAI. The Complaint asserts causes of action for breach of contract, special damages and promissory estoppel, and seeks sixty-six million dollars ($66,000,000) in damages, specific performance by Company according to the terms of the Contract, and MFAI’s attorney’s fees and costs.
On October 18, 2021, the Company filed a motion, denying all the material allegations of the Complaint, and seeking to stay the case and compel arbitration pursuant to the purported Contract. In its motion, the Company only sought to enforce the terms of the Contract as it relates to arbitration, but otherwise denied the existence of a valid and binding contract. Over MFAI’s opposition, the Court granted the Company’s motion, and stayed the case, pending the resolution of the Parties’ arbitration of the dispute.
To date, MFAI has not filed an arbitration, and the matter remains stayed. The Company intends to continue to defend the matter vigorously, to the extent MFAI ultimately decides to file an arbitration.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our Common Stock is currently listed on the NASDAQ Capital Market under the trading symbol “GRNQ.” Our Common Stock did not trade prior to July 9, 2015.
On March 28, 2022, the closing price for our Common Stock as reported on the NASDAQ Capital Market was $2.52.
As of March 29, 2022, we had 78,671,688 shares of our Common Stock issued and outstanding. There were approximately 212 record holders of our Common Stock. Such number does not include any shareholders holding shares in nominee or “street name”.
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Dividend Policy
Distribution of DQWS shares as a dividend:
On September 24, 2020, the board of directors of the Company agreed to distribute 11,840,684 restricted shares of common stock of an investment of the Company, DSwiss, Inc. (OTC: DQWS) (the “Dividend”)., to the Company’s shareholders (the “Shareholders”) of record on September 30, 2020.
At September 30, 2020 (the “Record Date”), the Company owned 27,000,000 restricted shares of the total issued and outstanding 206,904,600 restricted shares of common stock of DQWS. The Dividend is comprised of approximately one (1) share of DQWS common stock for every five (5) shares of the Company’s Common Stock issued and outstanding of the Record Date.
On November 12, 2020, the Dividend was distributed to the Shareholders.
Distribution of SEAV shares as a dividend:
On August 17, 2021, the Company announced that its Board of Directors had declared a dividend of 7,441,721 shares of common stock of SEATECH Ventures Corp. (“SEAV”) to the Company’s shareholders (the “Shareholders”) of record as of August 31, 2021. However, in order to comply with Nasdaq Listing Rule 5250(e)(6), which requires the Company to provide the Nasdaq with 10 days calendar days’ notice prior to the record date, the Company has amended the record date to September 13, 2021 (the “Record Date”).
At September 13, 2021 (the “Record Date”), the Company owned 10,000,000 restricted shares of the total issued and outstanding 92,519,867 restricted shares of common stock of SEAV. The dividend comprised one share of SEAV common stock for every 10 shares of the Company’s Common Stock issued and outstanding on the Record Date.
On September 27, 2021, the dividend of 7,720,187 shares of common stock of SEAV was distributed to the Shareholders.
We have not declared or paid dividends on our Common Stock since our formation, and we do not anticipate paying dividends in the foreseeable future.
Declaration or payment of dividends, if any, in the future, will be at the discretion of our board of directors and will depend on our then current financial condition, results of operations, capital requirements and other factors deemed relevant by the board of directors. There are no contractual restrictions on our ability to declare or pay dividends.
Recent Sales of Unregistered Securities
All sales of unregistered Common Stock of the Company were made in reliance upon Section 4(a)(2) of the Securities Act, Regulation D and/or Rule 903 of Regulation S promulgated thereunder.
| Date | Shares
of Common Stock Issued | Cash Proceeds
/ Value in Kind from Share Issuance | Recipient(s)
of Shares | |||
| June 15, 2020 (1) | 4,444,444 | 4,000,000 | Three shareholders | |||
| September 14, 2020 (2) | 35,000 | 35,000 | One shareholder | |||
| November 18, 2020 (3) | 457,312 | 750,000 | Eight shareholders | |||
| November 24, 2020 (4) | 50,000 | 55,000 | One shareholder | |||
| November 24, 2020 (5) | 145,455 | 160,000 | One shareholder | |||
| November 30, 2020 (6) | 257,591 | 411,120 | Two shareholders | |||
| December 1, 2020 (7) | 200,000 | 313,400 | One shareholder | |||
| December 1, 2020 (8) | 300,000 | 372,150 | One shareholder | |||
| December 11, 2020 (9) | 935,871 | 1,364,500 | Three shareholders | |||
| December 31, 2020 (10) | 215,000 | 262,300 | One shareholder | |||
| February 26, 2021 (11) | 342,592 | 925,000 | Two shareholders | |||
| April 7, 2021 (12) | 3,000,000 | 7,206,000 | One shareholder | |||
| April 7, 2021 (13) | 60,000 | 144,120 | One shareholder | |||
| April 16, 2021 (14) | 704,738 | 1,642,040 | One shareholder | |||
| July 14, 2021 (15) | 232,659 | 234,986 | One shareholder | |||
| July 19, 2021 (16) | 79,530 | 69,191 | Twenty five shareholders | |||
| July 26, 2021 (17) | 281,498 | 261,793 | One shareholder | |||
| August 5, 2021 (18) | 562,995 | 489,637 | One shareholder | |||
| August 12, 2021 (19) | 643,423 | 521,237 | One shareholder | |||
| August 20, 2021 (20) | 3,375,000 | 2,564,662 | One shareholder | |||
| August 24, 2021 (21) | 3,370,000 | 3,088,268 | One shareholder | |||
| August 31, 2021 (22) | 1,709,667 | 1,636,664 | One shareholder | |||
| August 31, 2021 (23) | 1,075,000 | 1,029,097 | One shareholder | |||
| October 6, 2021 (24) | 227,299 | 153,676 | One shareholder | |||
| October 8, 2021 (25) | 1,042,725 | 710,200 | One shareholder | |||
| November 17, 2021 (26) | 200,000 | 208,080 | One shareholder |
| 1. | The Company issued 4,444,444 shares of restricted Common Stock at a price of $0.90 per share, or a total of $4,000,000, to acquire a 4% interest in a 12.3-kilogram carved natural blue sapphire (the “Millennium Sapphire”). |
| 2. | The Company issued 35,000 shares of restricted Common Stock at a price of $1.00 per share, or a total of $35,000, to settle marketing expense to CorporateAds, LLC (“CorporateAds”). |
| 3. | The Company issued 457,312 shares of restricted Common Stock at a price of $1.64 per share, or a total of $749,992, to acquire 15% equity interests in Ata Plus Sdn. Bhd (“APSB”). |
| 4. | The Company issued and sold 50,000 shares of restricted Common Stock in a private placement to Mr. Seah Kok Wah at a price of $1.10 per share for cash proceeds of $55,000. |
| 5. | The Company issued and sold 145,455 shares of restricted Common Stock in a private placement to AG Opportunities Fund SPC-AG Pre-IPO Fund SP1 at a price of $1.10 per share for cash proceeds of $160,000. |
| 6. | The Company issued 257,591 shares of restricted Common Stock at a price of $1.596 per share, or a total of $411,120, to acquire 18% equity interests in New Business Media Sdn. Bhd (“NBMSB”). |
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| 7. | The Company issued 200,000 shares of restricted Common Stock at a price of $1.567 per share, or a total of $313,400, to settle marketing expense to Mr. Dennis Burns. |
| 8. | The Company issued 300,000 shares of restricted Common Stock at a price of $1.2405 per share, or a total of $372,150, to settle consultancy fee to Mr. Daniel McKinney. |
| 9. | The Company issued 685,871 shares of restricted Common Stock at a price of $1.458 per share, or a total of $1,000,000, to acquire 10% equity interests in First Bullion Holdings Inc. (“FBHI”).
|
| The Company also issued 250,000 shares of restricted Common Stock at a price of $1.458 per share, or a total of $364,500 for purchase of an option to acquire an additional 8% of the issued and outstanding shares of FBHI, at an agreed valuation of FBHI equal to $20,000,000, which shall constitute partial payment for the option should the Company elect to exercise the option. | |
| 10. | The Company issued and sold 215,000 shares of restricted Common Stock in a private placement to Ms. Wong Wai Hing Lena at a price of $1.22 per share for cash proceeds of $262,300. |
| 11. | The Company issued 342,592 shares of its restricted Common Stock at $2.7 per share, or a total of $925,000, to exercise the stock option pursuant to Section 2.2 of a stock purchase and option agreement dated October 19, 2020, between the Company, First Bullion Holdings Inc. (“FBHI”) and the shareholder of FBHI. |
| 12. | The Company subscribed for $7,206,000 worth of Class B shares of Innovest Energy Fund (the “Fund”) by issuing 3,000,000 shares of the Company’s restricted Common Stock at a price of $2.402 per share, or a total of $7,206,000 to the Fund. |
| 13. | The Company issued 60,000 shares of restricted Common Stock to a designee of the Fund at a price of $2.402 per share, or a total of $144,120 to settle a subscription fee to the Fund. |
| 14. | The Company fully repaid the convertible note issued to Streeterville Capital, LLC (“Streeterville”) on October 13, 2020 by issuance of 704,738 shares of its restricted Common Stock at a conversion price of $1 per share for settlement of the principal balance of $670,000 and accrued interest of $34,738, respectively on April 16, 2021. The market price of the Company’s Common Stock was $2.33 per share, or at a total value of $1,642,040, on April 16, 2021. |
| 15. | The Company partially repaid the convertible note issued to Streeterville on January 8, 2021 by issuance of 232,659 shares of its restricted Common Stock at a conversion price of $0.752175 per share for settlement of the principal balance of $175,000 on July 14, 2021. The market price of the Company’s Common Stock was $1.01 per share, or at a total value of $234,986, on July 14, 2021. |
| 16. | The Company issued 79,530 shares of its restricted Common Stock at a price of $0.87 per share, or a total of $69,191, to redeem 347,000 shares out of total 504,750 shares of preferred stock from 25 preferred stock shareholders of Greenpro Capital Village Sdn. Bhd. |
| 17. | The Company partially repaid the convertible note issued to Streeterville on January 8, 2021 by issuance of 281,498 shares of its restricted Common Stock at a conversion price of $0.621675 per share for settlement of the principal balance of $175,000 on July 26, 2021. The market price of the Company’s Common Stock was $0.93 per share, or at a total value of $261,793, on July 26, 2021. |
| 18. | The Company partially repaid the convertible note issued to Streeterville on January 8, 2021 by issuance of 562,995 shares of its restricted Common Stock at a conversion price of $0.621675 per share for settlement of the principal balance of $350,000 on August 5, 2021. The market price of the Company’s Common Stock was $0.8697 per share, or at a total value of $489,637, on August 5, 2021. |
| 19. | The Company partially repaid the convertible note issued to Streeterville on February 11, 2021 by issuance of 643,423 shares of its restricted Common Stock at a conversion price of $0.621675 per share for settlement of principal balance of $400,000 on August 12, 2021. The market price of the Company’s Common Stock was $0.8101 per share, or at a total value of $521,237, on August 12, 2021. |
| 20. | The Company partially repaid the convertible note issued to Streeterville on February 11, 2021 by issuance of 3,375,000 shares of its restricted Common Stock at a conversion price of $0.621675 per share for settlement of principal balance of $2,098,153 on August 20, 2021. The market price of the Company’s Common Stock was $0.7599 per share, or at a total value of $2,564,662, on August 20, 2021. |
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| 21. | The Company partially repaid the convertible note issued to Streeterville on February 11, 2021 by issuance of 3,370,000 shares of its restricted Common Stock at a conversion price of $0.621675 per share for settlement of principal balance of $2,095,045 on August 24, 2021. The market price of the Company’s Common Stock was $0.9164 per share, or at a total value of $3,088,268, on August 24, 2021. |
| 22. | The Company fully repaid the convertible note issued to Streeterville on January 8, 2021 by issuance of 1,709,667 shares of its restricted Common Stock at a conversion price of $0.621675 per share for settlement of the balance of principal of $960,000 and accrued interest of $102,857 on August 31, 2021. The market price of the Company’s Common Stock was $0.9573 per share, or at a total value of $1,636,664, on August 31, 2021. |
| 23. | The Company partially repaid the convertible note issued to Streeterville on February 11, 2021 by issuance of 1,075,000 shares of its restricted Common Stock at a conversion price of $0.621675 per share for settlement of principal balance of $668,301 on August 31, 2021. The market price of the Company’s Common Stock was $0.9573 per share, or at a total value of $1,029,097, on August 31, 2021. |
| 24. | The Company partially repaid the convertible note issued to Streeterville on February 11, 2021 by issuance of 227,299 shares of its restricted Common Stock at a conversion price of $0.43995 per share for settlement of principal balance of $100,000 on October 6, 2021. The market price of the Company’s Common Stock was $0.6761 per share, or at a total value of $153,676, on October 6, 2021. |
| 25. | The Company fully repaid the convertible note issued to Streeterville on February 11, 2021 by issuance of 1,042,725 shares of its restricted Common Stock at a conversion price of $0.43995 per share for settlement of the balance of principal of $154,989 and accrued interest of $303,758, respectively on October 8, 2021. The market price of the Company’s Common Stock was $0.6811 per share, or at a total value of $710,200, on October 8, 2021. |
| 26. | The Company issued 200,000 shares of its restricted Common Stock at a price of $1.0404 per share, or a total of $208,080, to settle marketing expense to Mr. Dennis Burns. |
Equity Compensation Plan Information
We have not adopted or approved an equity compensation plan. None of options, warrants or other convertible securities have been granted outside of an approved equity compensation plan.
Transfer Agent and Registrar
The transfer agent for our capital stock is VStock Transfer, LLC, with an address at 18 Lafayette Place, Woodmere, NY 11598, telephone number is 212-828-8436.
ITEM 6. [Reserved]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our results of operations and financial condition for fiscal years ended December 31, 2021 and 2020, should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Annual Report. Some of the information contained in this management’s discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and related financing, includes forward looking statements that involve risks, uncertainties and assumptions. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in this Annual Report.
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Company Overview
Greenpro Capital Corp. (the “Company” or “Greenpro”), was incorporated in the State of Nevada on July 19, 2013. We provide cross-border business solutions and accounting outsourcing services to small and medium-size businesses located in Asia, with an initial focus on Hong Kong, Malaysia and China. Greenpro provides a range of services as a package solution (the “Package Solution”) to our clients and we believe that our clients can reduce their business costs and improve their revenues.
In addition to our business solution services, we also operate a venture capital business through Greenpro Venture Capital Limited, an Anguilla corporation. One of our venture capital business segments focuses on (1) establishing a business incubator for start-up and high growth companies to support such companies during critical growth periods, which will include education and support services, and (2) searching the investment opportunities in selected start-up and high growth companies, which may generate significant returns to the Company. Our venture capital business focuses on companies located in South-East Asia and East Asia, including Hong Kong, Malaysia, China, Thailand and Singapore. Another venture capital business segment focuses on rental activities of commercial properties and the sale of investment properties.
Results of Operations
For information regarding our controls and procedures, see Part II, Item 9A - Controls and Procedures, of this Annual Report.
During the years ended December 31, 2021 and 2020, we operated in three regions: Hong Kong, Malaysia and China. We derived revenues from rental activities of our commercial properties, sale of properties, and the provision of services. A table further describing our revenue and cost of revenues is set forth below:
| Year ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| REVENUES: | ||||||||
| Service revenue (including $861,449 and $250,246 of service revenue from related parties for the years ended December 31, 2021 and 2020, respectively) | $ | 2,820,950 | $ | 1,876,954 | ||||
| Rental revenue | 128,830 | 124,128 | ||||||
| Sale of real estate properties | - | 253,729 | ||||||
| Total revenues | 2,949,780 | 2,254,811 | ||||||
| COST OF REVENUES: | ||||||||
| Cost of service revenue (including $0 and $2,514 of cost of service to related parties for the years ended December 31, 2021 and 2020, respectively) | (422,908 | ) | (338,683 | ) | ||||
| Cost of rental revenue | (49,778 | ) | (50,114 | ) | ||||
| Cost of real estate properties sold | - | (210,616 | ) | |||||
| Total cost of revenues | (472,686 | ) | (599,413 | ) | ||||
| GROSS PROFIT | 2,477,094 | 1,655,398 | ||||||
| OPERATING EXPENSES: | ||||||||
| General and administrative (including $12,922 and $12,483 of general and administrative expense to related parties for the years ended December 31, 2021 and 2020, respectively) | (5,231,778 | ) | (4,560,973 | ) | ||||
| Total operating expenses | (5,231,778 | ) | (4,560,973 | ) | ||||
| LOSS FROM OPERATIONS | $ | (2,754,684 | ) | $ | (2,905,575 | ) | ||
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Comparison of the years ended December 31, 2021 and 2020
Total Revenues
Total revenue was $2,949,780 and $2,254,811 for the years ended December 31, 2021 and 2020, respectively. The increase of $694,969 was primarily due to an increase in the revenue of business services. We expect revenue from our business services segment to steadily improve as we are expanding our businesses into new territories.
Service Business Revenue
Revenue from the provision of business services was $2,820,950 and $1,876,954 for the years ended December 31, 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 are expanding our businesses into new territories.
Real Estate Business
Rental Revenue
Revenue from rentals was $128,830 and $124,128 for the years ended December 31, 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.
Sale of Properties
For the year ended December 31, 2021, revenue from the sale of properties was $0, as no property was sold. For the year ended December 31, 2020, there was revenue of $253,729 generated from the sale of one property located in Hong Kong.
As opportunities permit, management expects to continue to purchase and sell commercial real estate in the near future. Accordingly, we expect revenue and costs attributable to the sale of properties to fluctuate on a going forward basis.
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Total Operating Costs and Expenses
Total operating costs and expenses were $5,704,464 and $5,160,386 for the years ended December 31, 2021 and 2020, respectively. They consist of cost of service revenue, cost of rental revenue and cost of real estate properties sold, and general and administrative expenses.
Loss from operations for the Company for the years ended December 31, 2021 and 2020 was $2,754,684 and $2,905,575, respectively. The decrease in loss from operations was mainly due to an increase in service revenue by $943,996.
Cost of Service Revenue
Cost of revenue for provision of services was $422,908 and $338,683 for the years ended December 31, 2021 and 2020, respectively. It primarily consists of employee compensation and related payroll benefits, company formation cost and other professional fees directly attributable to cost related to the services rendered.
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Cost of Rental Revenue
Cost of rental revenue was $49,778 and $50,114 for the years ended December 31, 2021 and 2020, respectively. It includes the costs associated with taxes, repairs and maintenance, property insurance, depreciation and other related administrative costs. Property management fee and utility expenses are paid directly by tenants.
Cost of Real Estate Properties Sold
Cost of revenue on properties sold was $0 and $210,616 for the years ended December 31, 2021 and 2020, respectively. It primarily consists of the purchase price of property, legal fees, improvement costs to the building structure, and other acquisition costs. Selling and advertising costs are expensed as incurred.
General and Administrative
General and administrative (“G&A”) expenses were $5,231,778 and $4,560,973 for the years ended December 31, 2021 and 2020, respectively. In 2021, G&A expenses primarily consisted of salaries and wages of $1,636,129, directors’ salary and compensation of $707,343, advertising and marketing of $603,164, commission of $260,494, rent and rates of $179,101, subscription fee of $154,042, and audit, legal, and other professional fees of $707,166. We expect our G&A expenses will continue to increase as we integrate our business acquisitions, expand our businesses and offices into new jurisdictions, and strengthen our existing businesses.
Fair value of shares issued for consultancy fee, subscription fee and marketing expenses
For the year ended December 31, 2021, the Company issued 60,000 shares and 200,000 shares of restricted Common Stock for subscription fee of $144,120 and marketing expense of $280,080, respectively.
On April 7, 2021, the Company issued 60,000 shares of restricted Common Stock to a designee of the Innovest Energy Fund (the “Fund”) as subscription fee of $144,120 ($2.402 per share) associated with the Fund.
On November 17, 2021, the Company issued 200,000 shares of restricted Common Stock valued at $1.0404 per share, or a total of $208,080 for marketing expense to an investor relations agent, Mr. Dennis Burns.
For the year ended December 31, 2020, the Company issued 235,000 shares and 300,000 shares of restricted Common Stock for marketing expenses of $348,400 and consultancy fee of $372,150, respectively.
On September 14, 2020, the Company issued 35,000 shares of restricted Common Stock valued at $1.00 per share, or a total of $35,000 for marketing expense to a marketing service provider, CorporateAds, LLC.
On December 1, 2020, the Company issued 200,000 shares of restricted Common Stock valued at $1.567 per share, or a total of $313,400 for marketing expense to an investor relations agent, Mr. Dennis Burns.
On December 1, 2020, the Company issued 300,000 shares of restricted Common Stock valued at $1.2405 per share, or a total of $372,150 for consultancy fee to a business consultant, Mr. Daniel McKinney.
Other income or expenses
Net other expenses were $11,603,608 and $847,378 for the years ended December 31, 2021 and 2020, respectively. In 2021, other expenses included interest expenses of $12,950,750 which mainly consisted of interest expense associated with convertible notes of $12,900,855, loss on extinguishment of convertible notes of $3,521,263 and impairment of other investment of $5,349,600, while other income mainly consisted of fair value gains associated with convertible notes of $5,093,720 and reversal of write-off notes receivable of $5,000,000.
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 12). Interest expenses related to the convertible promissory notes totaled $12,900,855 for the year ended December 31, 2021, which included coupon interest expense of $460,189, amortization of discount on convertible notes of $206,342, amortization of debt issuance costs of $76,380, interest expense associated with conversion of notes of $2,254,480, interest expense associated with accretion of convertible notes payable of $8,561,440, interest expense due to non-fulfillment of use of proceeds requirements of $1,106,488 and additional charge for early redemption of $235,536. Interest expenses related to the convertible promissory notes totaled $1,013,415 for the year ended December 31, 2020, which included coupon interest expense of $38,742, amortization of discount on convertible notes of $15,122, amortization of debt issuance costs of $6,780, interest expense associated with conversion of notes of $120,571 and interest expense associated with accretion of convertible notes payable of $832,200.
Total interest expenses were $12,950,750 and $1,144,530 for the years ended December 31, 2021 and 2020, respectively.
Attributable to noncontrolling interest
The Company recorded net income (loss) attributable to noncontrolling interest in the consolidated statements of operations for noncontrolling interests of a consolidated subsidiary.
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For the years ended December 31, 2021 and 2020, the consolidated financial statements included noncontrolling interests related to the Company’s 60% ownership of Forward Win International Limited (“FWIL”), which is principally involved in trading and leasing properties in Hong Kong.
The Company recorded net loss attributable to noncontrolling interest of $13,876 for the year ended December 31, 2021 and net income attributable to noncontrolling interest of $8,870 for the year ended December 31, 2020. In 2021, net loss attributable to noncontrolling interest was primarily due to a net loss incurred by FWIL and its share of loss allocated to the noncontrolling interests. In 2020, net income attributable to noncontrolling interest was primarily due to a net income derived from FWIL and its share of income allocated to the noncontrolling interests.
Net Loss
Net loss was $14,363,232 and $3,752,953 for the years ended December 31, 2021 and 2020, respectively. The increase in net loss in 2021 was mainly due to an increase of G&A expenses, interest expenses associated with the convertible promissory notes, loss on extinguishment of convertible notes and impairment loss of other investments.
There were no seasonal aspects that had a material effect on the financial condition or results of operations of the Company.
Other than as disclosed elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 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.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders as of December 31, 2021.
Contractual Obligations
As of December 31, 2021, one of the subsidiaries of the Company leases an office in Hong Kong under a separate non-cancellable operating lease with a term of two years commencing from March 15, 2021 to April 14, 2023. Another subsidiary of the Company leases an office in Malaysia under a separate non-cancellable operating lease with a term of one year commencing from April 1, 2021 to March 31, 2022. At December 31, 2021, the future minimum rental payments under these leases in the aggregate are approximately $115,538 and are due as follows: 2022: $96,301 and 2023: $19,237, respectively.
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Related Party Transactions
For the years ended December 31, 2021 and 2020, related party service income totaled $861,449 and $250,246, respectively.
For the years ended December 31, 2021 and 2020, related party expenses included in cost of services and general and administrative expenses totaled $12,922 and $14,997, respectively.
Impairment of related party investment was $5,349,600 and $0 for the years ended December 31, 2021 and 2020, respectively.
For the years ended December 31, 2021 and 2020, related party other income totaled $0 and $1,934, respectively.
Net accounts receivable from related parties was $41 and $152,475 as of December 31, 2021 and 2020, respectively.
Amounts due from related parties were $1,170,855 and $62,320 as of December 31, 2021 and 2020, respectively. Amounts due to related parties were $757,283 and $1,108,641 as of December 31, 2021 and 2020, respectively.
Our related parties are mainly those companies in which Greenpro Venture Capital Limited or Greenpro Resources Limited owns a certain percentage of the shares of such companies, or those companies that the Company can exercise significant influence over those companies in making financial and operating policy decisions. Some of the related parties are either controlled by or under common control of Mr. Loke Che Chan Gilbert or Mr. Lee Chong Kuang, officers and directors of the Company. One of the related parties is controlled by Ms. Chen Yanhong, a director of some of our subsidiaries.
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 transfer
