Greenpro Capital Corp. — Q1 2020 Form 10-Q
Business context and period: Unaudited results for the three months ended March 31, 2020, compared with Q1 2019. Greenpro provides corporate advisory and business services in Asia and operates a real estate rental and investment business. Amounts are in U.S. dollars.
Financial highlights
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | $816,541 | $462,048; up 77% |
| Service revenue | $793,713 | $433,059 |
| Rental revenue | $22,828 | $28,989 |
| Gross profit and margin | $676,400; 82.8% | $279,405; 60.5% |
| Operating loss | $233,507 | $690,496 |
| Net loss | $242,515 | $561,889 |
| Net loss attributable to common shareholders | $243,215 | $551,154 |
| Operating cash flow | $(572,935) | $(623,578) |
| Cash, cash equivalents and restricted cash | $679,214 at March 31 | $1,256,739 at December 31, 2019 |
| Total assets / liabilities | $7.75 million / $4.67 million | $8.88 million / $5.53 million at December 31, 2019 |
Service revenue growth reflected client integration through acquisitions and greater emphasis on higher-end services, including $342,000 of listing services revenue; there was no listing-services revenue in Q1 2019. The filing reports no real estate sales in either period. Operating expenses totaled $1.05 million, including $909,907 of general and administrative expense. The operating loss narrowed, while net loss improved; Q1 2019 included a larger derivative fair-value gain ($140,649 versus $15,456 in Q1 2020). Basic and diluted loss per share was reported as $0.00 in Q1 2020 and $0.01 in Q1 2019.
Liquidity, debt and financial position
- Working capital deficiency was $2,217,970 at quarter-end. Current assets were $1.05 million against current liabilities of $3.27 million.
- Cash used in operations was $572,935. Cash declined by $577,525 during the quarter. Financing provided $22,661, including $58,517 of advances from related parties, partly offset by $35,856 of real-estate loan principal payments.
- Loans secured by real estate totaled $1,910,627, including $528,314 current and $1,382,313 long term. The company also reported $1,065,874 due to related parties, generally unsecured, non-interest-bearing and payable on demand.
- Operating lease liabilities totaled $277,848. The filing also reports approximately $298,784 of future minimum rental payments under leases.
Material changes, outlook and risks
- Going concern: The company reported a quarterly net loss and operating cash outflow, a substantial working capital deficit, and substantial doubt about its ability to continue as a going concern within one year. Management said it expected shareholder support or external financing to help meet obligations, but gave no assurance financing would be available or acceptable. Management also stated it believed cash was sufficient for anticipated working capital over the next 12 months.
- COVID-19: The filing said the pandemic had disrupted business operations and could reduce spending and demand for services; its duration and impact could not then be predicted.
- Management outlook: Management expected service revenue to increase as the business grows and expands, rental income to remain stable in the near term, and G&A expenses to continue rising with integration, expansion and new-market development. These are expectations, not quantified guidance.
- Customer and geographic concentration: One customer represented 42% of Q1 2020 revenue. Hong Kong generated $662,493, about 81% of revenue. Operations are concentrated in Asia and exposed to foreign-exchange, political, regulatory and economic risks.
- Unusual transaction: On February 29, 2020, Greenpro sold its 60% interest in Yabez and its subsidiary to an unrelated party for $1 and deconsolidated them. Yabez had a net deficit of $6,663; the reported disposal loss was $727 after foreign-currency adjustments. The company cited continuing Yabez losses.
- Other items: Related-party revenue was $50,843; amounts due to related parties rose to $1.07 million. The company reported no material pending legal proceedings, no defaults upon senior securities, and effective disclosure controls as of March 31, 2020.
Important facts for investors to verify
- Whether the company obtained sufficient financing or shareholder support after quarter-end, and how it addressed the disclosed going-concern uncertainty.
- Whether operating cash use, the working capital deficit and related-party balances changed materially after March 31.
- The sustainability and collection timing of service revenue, particularly listing-services revenue and revenue concentrated in one customer.
- The subsequent effects of COVID-19 on client demand, operations, rental income and cash flows.
- The status and carrying value of real estate, other investments and goodwill, including any impairment indicators.
- Whether disclosed lease payment amounts represent different measures: the filing gives $277,848 of lease liabilities, approximately $298,784 of future minimum payments, and a separate maturity schedule.