Greenpro Capital Corp. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed March 29, 2021. This is an annual report, not a standalone fourth-quarter report. Greenpro provides cross-border business advisory and accounting services, alongside venture investments and commercial real estate activities, primarily in Hong Kong, Malaysia and China.
Key financial metrics
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $2.255 million | $4.485 million |
| Gross profit / gross margin | $1.655 million / 73.4% | $3.108 million / 69.3% |
| Operating loss | $2.906 million | $1.591 million |
| Net loss | $3.753 million | $1.349 million |
| Net loss per share, basic and diluted | $0.07 | $0.02 |
| Cash used in operating activities | $1.568 million | $1.433 million |
| Cash and cash equivalents, including restricted cash | $1.087 million | $1.257 million |
| Working capital | Deficit of $3.411 million | Deficit of $2.078 million |
| Total assets / total liabilities | $14.796 million / $6.400 million | $8.884 million / $5.531 million |
Real estate-secured loans totaled $1.536 million at year-end, including $158,612 due in 2021. The company also issued $1.790 million principal amount of unsecured convertible notes in October 2020. These notes carry 10% interest, an 18-month contractual maturity and investor conversion and early-redemption features. The filing reports a $181,215 carrying value in the notes disclosure but $142,473 as “convertible notes payable, net” on the balance sheet; investors should reconcile these figures. Derivative liabilities were $1.190 million.
Changes versus 2019
- Revenue fell $2.230 million, or about 50%, chiefly because service revenue declined $2.325 million to $1.877 million. Management attributed fewer service orders to COVID-19 impacts.
- Gross profit declined $1.453 million, while gross margin increased to 73.4% from 69.3%, reflecting lower service delivery costs relative to revenue.
- General and administrative expense was $4.561 million, down modestly from $4.675 million; lower revenue nevertheless drove a larger operating loss.
- Interest expense rose to $1.145 million from $103,396. Convertible-note accounting included $832,200 of accretion interest expense and other financing-related charges.
- Investments increased to $6.830 million from $145,140, largely reflecting equity investments issued for shares, including interests in Millennium Fine Art, Ata Plus, First Bullion and New Business Media. The filing reports no impairment of other investments in 2020.
- Cash from financing activities was $1.503 million, mainly from $1.470 million net proceeds from convertible notes; cash declined by $169,986 overall.
Outlook, risks and unusual items
- Going concern: The company incurred a $3.753 million net loss, used $1.568 million in operating cash and had a $3.411 million working-capital deficit. The auditor and management state these conditions raise substantial doubt about the company’s ability to continue as a going concern within one year. Management expects shareholder support or external financing but gives no assurance it will be available or acceptable.
- Outlook: Management expected service revenue to remain pressured in the near term due to COVID-19; it viewed rental income as likely stable and property-sale revenue as variable. Longer-term plans include expanding corporate finance and wealth-management services, developing the ADAQ platform, and pursuing investments and acquisitions. No quantified earnings or revenue guidance is provided.
- Financing and dilution: The 2020 convertible notes have conversion prices initially set at $1 per share, full-ratchet anti-dilution protection and redemption terms that may use a price below market. Default interest may rise to 22%, with additional amounts for certain major defaults. Subsequent to year-end, the company raised further funds through convertible notes, including a February 2021 note with $4.0 million net proceeds.
- COVID-19 and geographic exposure: The filing says the pandemic’s full effects were uncertain. Risks also include economic, regulatory, foreign-exchange and political conditions across the company’s Asian markets, and restrictions on moving funds into or out of China.
- Concentration and related parties: Three customers represented 30% of 2020 revenue, and three customers represented 82% of year-end receivables. Related-party service revenue declined to $250,246 from $1.977 million; amounts due to related parties were $1.109 million.
- Investments and valuation: Nearly half of total assets were investments, including private-company securities without readily determinable fair values. The auditor identified convertible-note accounting, derivative valuation and investment impairment assessment as critical audit matters.
- Other items: The company sold its 60% interest in Yabez for $1 and recorded a $727 loss on deconsolidation. The company reported effective disclosure controls and internal control over financial reporting as of year-end. It did not maintain property, business-interruption or casualty insurance.
Important facts for investors to verify
- Reconcile the convertible-note carrying value difference between the balance sheet and Note 11, and review the notes’ redemption, conversion, default and dilution terms.
- Assess near-term liquidity and the availability, cost and dilution impact of financing, including post-year-end note issuances and repayments.
- Review the composition, valuation evidence and liquidity of the $6.830 million investment balance, particularly the private-company and Millennium Fine Art holdings.
- Evaluate whether service revenue can recover from the sharp decline, including customer concentration and the proportion of revenue from related parties.
- Confirm the status and terms of post-year-end investments and transactions, including the additional First Bullion interest and the announced distribution of Millennium Fine Art shares to shareholders.