Greenpro Capital Corp. — FY2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018; comparative figures are for FY2017. This annual filing is not a separate fourth-quarter report. Greenpro provides corporate advisory and business services and invests in, rents and sells commercial real estate, primarily in Hong Kong, Malaysia and China. All amounts below are U.S. dollars.
Financial performance
| Metric | FY2018 | FY2017 |
|---|---|---|
| Revenue | $4.213 million | $3.916 million |
| Operating loss | $4.219 million | $2.821 million |
| Net loss | $8.325 million | $3.117 million |
| Net loss attributable to common stockholders | $8.550 million | $2.285 million |
| Basic and diluted loss per share | $0.15 | $0.04 |
| Cash used in operating activities | $1.001 million | $0.443 million |
| Cash and cash equivalents, including restricted cash | $2.172 million | $1.162 million |
| Total assets | $10.064 million | $11.014 million |
| Total liabilities | $5.335 million | $5.767 million |
| Real-estate-secured loans | $1.765 million | $2.771 million |
Revenue increased 7.6%. Service revenue fell to $2.681 million from $3.314 million, while property-sale revenue rose to $1.368 million from $0.424 million; rental revenue declined to $0.164 million from $0.179 million. The company sold eight real-estate units in 2018 versus three in 2017. Revenue less reported service, property-sale and rental costs was approximately $2.132 million, or 50.6% of revenue, compared with approximately $2.428 million, or 62.0%, in 2017; this is a simple gross-profit calculation, not a company-reported margin.
Operating costs and expenses increased to $8.432 million from $6.737 million. General and administrative expense rose $0.936 million to $4.287 million. Goodwill and intangible-asset impairments were $0.997 million, compared with $1.899 million in 2017; 2018 also included $0.077 million of notes-receivable impairment and $0.990 million of other-investment and deposit impairments.
Liquidity, debt and cash flow
Working capital deficiency was $0.541 million at year-end, improved from a $2.070 million deficiency in 2017. Current assets were $3.176 million and current liabilities were $3.717 million. Current liabilities included $1.816 million of deferred revenue and $0.863 million due to related parties. The company reported $1.765 million of secured loans, with $0.147 million due in 2019; maturities extend beyond 2023. Operating cash outflow increased year over year. Investing activities provided $0.461 million, while financing activities provided $1.568 million, including net share-issuance proceeds.
Material changes, outlook and risks
- Unusual financing expense: Greenpro recorded a $4.640 million expense tied to its July 2018 V1 Group share transaction, a principal driver of the higher net loss. The company described a $6.800 million transaction as $0.800 million cash plus a $6.000 million note receivable from a private company, with the note due in two years. It said collectability could not be determined and the amount would be recognized as a capital contribution when collected. The filing also reports $0.698 million net proceeds after placement fees; investors should reconcile the transaction’s accounting and cash flows in the notes.
- Going concern: The auditor highlighted substantial doubt about the company’s ability to continue as a going concern, citing the 2018 net loss, operating cash outflow and working-capital deficiency. Management expects shareholder support or external financing but provides no assurance that funds will be available on acceptable terms. The financial statements contain no adjustments for a possible failure to continue as a going concern.
- Controls and reporting: Management concluded disclosure controls and internal control over financial reporting were ineffective, citing material weaknesses in staffing and U.S. GAAP expertise, risk assessment of unusual transactions, the close and disclosure process, related-party disclosures, board and audit committee review, and complex transactions. The weaknesses resulted in a restatement of the September 2018 quarterly financial statements. Management planned remediation during 2019.
- Management plans: The company described plans to develop ADAQ, an online platform for emerging companies, expand wealth-management services and pursue partnerships, acquisitions and regional expansion. These are plans, not quantified guidance; the filing gives no clear numerical earnings or revenue forecast.
- Other exposures: Risks include dependence on Asian markets, foreign-exchange and regulatory changes, possible limits on moving funds from China, cybersecurity and competition, reliance on contractual VIE arrangements, and related-party dealings. The company reported $0.421 million of related-party service revenue in 2018. It also disclosed no property, business-interruption or casualty insurance.
- Portfolio actions: Greenpro disposed of its 60% interest in loss-making Billion Sino for $60 in November 2018. A subsequent event was the January 2019 acquisition of Sparkle Insurance Brokers for $0.194 million, including cash and shares.
Most important facts for investors to verify
- The status and terms of financing needed to address the going-concern uncertainty, including any shareholder support, new borrowing or equity issuance.
- The collectability, contractual terms and accounting treatment of the $6.000 million V1-related note receivable, and the reconciliation of the transaction’s stated proceeds, cash received and $4.640 million expense.
- Whether the company implemented its 2019 control-remediation plans and whether later filings report further restatements or material weaknesses.
- The composition, completion status and expected profitability of the $1.816 million deferred-revenue obligations, alongside the related $0.419 million deferred costs.
- Future service revenue trends, property-sale margins and the recoverability of investments, goodwill and other assets following the reported impairments.