Greenpro Capital Corp. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021; interim financial statements are unaudited. Greenpro provides corporate advisory and business services, venture investments, and real-estate leasing and sales, primarily in Asia.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $792,025 | $401,140 | $1,765,043 | $1,217,681 |
| Gross profit | $690,766 | $314,596 | $1,314,891 | $990,996 |
| Operating loss | $489,089 | $538,689 | $1,246,218 | $772,196 |
| Net loss | $764,867 | $563,215 | $6,928,407 | $805,730 |
| Net loss per share, basic and diluted | $0.01 | $0.01 | $0.11 | $0.01 |
- Gross margin was approximately 87% for Q2 2021 versus 78% a year earlier; for the six-month periods it was approximately 75% versus 81%.
- At June 30, cash and cash equivalents, including restricted cash, were $6.74 million, compared with $1.09 million at year-end 2020. Current assets were $7.25 million and current liabilities $5.76 million (approximately 1.26x current ratio).
- Six-month operating cash use was $1.33 million; investing activities provided $9,865 and financing activities provided $6.98 million. Financing inflows included $5.21 million net proceeds from convertible notes and $3.00 million collected on notes receivable.
- Total liabilities were $7.11 million and stockholders’ equity $18.23 million. Real-estate-secured loans totaled approximately $1.45 million. Convertible notes had a $2.03 million carrying value including accrued interest, but $7.86 million face value plus a $1.11 million contractual balance increase; contractual amounts due by June 2022 were reported as $8.25 million before $6.22 million of interest.
- Common shares outstanding were 65.87 million at June 30 and 67.03 million as of August 9, 2021.
Changes versus comparable periods
- Q2 revenue increased 97% year over year, primarily from business-services revenue. Six-month revenue increased 45%, reflecting higher service revenue and a $383,445 sale of one Hong Kong property; there were no property-sale revenues in the comparable 2020 period.
- Six-month G&A rose to $2.56 million from $1.76 million. The company reported higher directors’ compensation, wages, advertising, commissions, professional fees, rent and subscription costs.
- Six-month net loss widened to $6.93 million, principally due to $12.19 million of interest expense associated mainly with convertible notes, increased G&A, and a $3.25 million investment impairment. The period also included offsetting gains and reversals, including a $5.09 million fair-value gain on note options, a $1.61 million gain on extinguishment of convertible notes, and a $3.00 million reversal of a prior notes-receivable write-off.
- Other investments increased to $11.72 million from $6.83 million at year-end. The company issued 3.0 million shares valued at $7.21 million for a fund investment and recorded a $3.25 million impairment on that investment.
Outlook, risks and other disclosures
- Management expects business-services revenue to improve as the company expands into new territories and believes rental income will remain stable. It also expects G&A expenses to increase as it integrates acquisitions, expands existing business and develops markets. No quantified earnings or revenue guidance was provided.
- The filing states that the six-month net loss and operating cash use raise substantial doubt about the company’s ability to continue as a going concern within one year of issuance; the auditor had also expressed substantial doubt in its 2020 report. Management believes shareholder support or external financing can meet obligations, but acknowledges financing may be unavailable or dilutive/restrictive.
- Convertible notes include early-redemption and conversion terms, anti-dilution protections and default provisions. A missed use-of-proceeds requirement triggered a $1.11 million balance increase. The company disclosed subsequent July–August 2021 redemptions of a January note for $700,000 through issuance of 1,077,152 shares.
- Revenue and receivables are concentrated: three customers represented 51% of six-month revenue and three customers 48% of June 30 receivables. Related-party service revenue was $664,989, about 38% of six-month revenue; related-party balances and investments are material.
- The company cited COVID-19 disruption and risks from operating in Malaysia, Hong Kong and China, including regulatory, political, currency and fund-transfer risks. Management reported disclosure controls effective at June 30, no material changes in internal control, and no known material active or pending legal proceedings.
Investor facts to verify
- Assess the going-concern warning against cash burn, upcoming note obligations, financing access and potential dilution.
- Review the convertible-note agreements, including the use-of-proceeds penalty, conversion/redemption prices, default terms and subsequent share issuances.
- Validate the valuation and impairment assumptions for the $11.72 million portfolio of largely private-company investments, including related-party holdings.
- Examine customer concentration and the nature, terms and collectability of related-party revenues, receivables and payables.
- Distinguish operating performance from the large, non-cash and unusual note-related charges, fair-value changes, extinguishment gain and receivable reversal.