Greenpro Capital Corp. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Unaudited consolidated results; balance-sheet comparisons are with December 31, 2021. Greenpro provides business consulting and corporate advisory services, venture-capital activities, and real-estate rental and sales, primarily in Asia. Amounts are U.S. dollars.
Key financial results
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $1.306m | $0.429m | $2.690m | $1.811m |
| Gross profit | $0.747m | $0.334m | $1.845m | $1.518m |
| Gross margin | 57.2% | 77.7% | 68.6% | 83.8% |
| Operating loss | $0.230m | $0.631m | $1.066m | $2.007m |
| Net loss | $0.453m | $6.045m | $2.415m | $13.106m |
| Net loss attributable to common shareholders | $0.531m | $6.026m | $2.511m | $13.096m |
| Operating cash flow | Not separately provided | Not separately provided | $(2.157)m | $(2.210)m |
- Revenue mix: Q3 revenue included $628,295 in services, $652,788 from selling two Hong Kong property units, and $25,356 in rent. Nine-month revenue included $1.761m in services, $839,661 from selling three properties, and $89,686 in rent.
- Expenses and margins: Nine-month general and administrative expense was $2.910m, down from $3.525m. Gross margin declined year over year in both periods, reflecting the revenue mix and costs associated with property sales.
- Cash and liquidity: Cash and restricted cash were $3.646m at September 30, down from $5.339m at year-end. Current assets were $6.084m versus current liabilities of $3.074m; total liabilities were $3.074m. The filing reports no convertible-note interest expense in 2022. Lease liabilities were $41,227.
- Investments and equity: Other investments, all identified as investments in related parties, were $8.162m, down from $9.622m. Nine-month investment impairment was $1.460m. Total stockholders’ equity was $16.328m; accumulated deficit was $33.783m.
Changes versus prior comparable periods
- Revenue rose 204% in Q3 and 49% for the nine months. Management attributed the increase mainly to 2022 property sales; service revenue rose only modestly for the nine-month period.
- Operating losses narrowed in both comparisons, helped by higher gross profit and lower nine-month G&A expense. Net losses also narrowed substantially, chiefly because 2021 included large impairment charges and convertible-note interest and extinguishment expenses. The 2021 results also included reversals of previously written-off notes receivable and gains on convertible-note options, so the year-over-year net-loss comparison includes significant unusual items.
- Nine-month cash used in operations remained substantial at $2.157m. Investing activities provided $0.836m, primarily from property-sale proceeds; financing activities used $0.416m, consisting of advances to related parties.
- A 10-for-1 reverse stock split took effect July 28, 2022. Share counts and per-share figures presented in the filing are retroactively adjusted. The company reported 7,875,813 shares outstanding at September 30, 2022.
Outlook, risks, and unusual matters
- Going concern: Management and the financial statements disclose substantial doubt about the company’s ability to continue as a going concern within one year of issuance, citing the nine-month net loss and operating cash outflow. Management says it expects sufficient cash for anticipated working capital and expects shareholder support or external financing, but acknowledges financing is not assured and could be restrictive or dilutive.
- Management outlook: Management expects service revenue to improve as it expands into new territories and pandemic effects wane, rental income to remain stable, and G&A expense to increase slightly as it expands and develops markets. These are expectations, not firm financial guidance.
- Investment and related-party exposure: The company held $1.370m due from related parties, unsecured, interest-free and without fixed repayment terms; it also reported an $80,000 related-party deposit. Related-party service revenue was $548,602 for the nine months, and $1.460m of investment impairment related to related parties was recorded.
- Customer and vendor concentration: Three customers generated 67% of Q3 revenue. Three vendors accounted for 84% of accounts payable at quarter-end. Operations are concentrated in Hong Kong, Malaysia and China, exposing the company to regional political, regulatory, economic and foreign-exchange risks. The filing also discusses continuing COVID-19 uncertainty.
- Litigation: Millennium Fine Art Inc. seeks $66m in an arbitration dispute over an alleged NFT-related contract and share issuance. Greenpro denies the allegations and says it intends to defend the matter; arbitration was in discovery. The filing does not provide a clear value for any related loss accrual.
- Other: No significant off-balance-sheet arrangements were reported. Management stated disclosure controls were effective as of September 30, 2022 and that no material change in internal control over financial reporting occurred during the quarter.
Important facts for investors to verify
- Whether operating cash burn, losses and the disclosed going-concern uncertainty improve, and whether anticipated shareholder support or external financing is actually secured.
- The timing and sustainability of service revenue growth, given that reported revenue growth depended materially on property sales.
- The recoverability, valuation and related-party nature of the $8.162m investment portfolio and $1.370m due from related parties.
- The status, potential exposure and any subsequent developments in the $66m NFT-related arbitration claim.
- The effect of customer concentration, foreign-exchange movements and regional conditions on revenue, receivables and liquidity.