Greenpro Capital Corp. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2015; financial statements report five- and nine-month periods. The company changed its fiscal year-end from October 31 to December 31 in July 2015. Results are unaudited and should be read with the company’s prior filings.
Business context and significant developments
Greenpro provides consulting, accounting, company-secretarial and related services to small and midsize businesses in Asia, and also leases and trades real estate. During 2015 it acquired several service businesses and real-estate-related entities. The acquisitions substantially expanded the reported business and asset base; some were transactions with directors or other related parties. The GRBV, A&G and GPVC share exchanges gave their former owners approximately 47% of Greenpro’s voting interest and were accounted for as a reverse acquisition. F&A and Yabez were accounted for as business combinations; recorded goodwill was $1.414 million.
Financial results and position
| Metric | Five months ended September 30, 2015 | Nine months ended September 30, 2015 |
|---|---|---|
| Revenue | $1.166 million | $1.753 million |
| Gross profit | $480,369; 41.2% margin | $887,709; 50.6% margin |
| Operating income (loss) | ($26,299) | $85,353 |
| Net income (loss) attributable to Greenpro common stockholders | ($181,609) | ($81,363) |
| Operating cash flow | Not presented for this period | ($3.514 million) |
- Nine-month revenue rose from $349,059 in 2014, driven by service growth and newly reported property sales. Service income was $1.093 million; property-sale revenue was $628,757. The company reported $470,769 of cost of properties sold.
- Nine-month gross margin fell from 70.3% in 2014 to 50.6% in 2015; management attributed the decline to lower-margin property sales. General and administrative expense increased to approximately $802,000 from $192,497, which management linked mainly to director remuneration, office rent, and professional and legal fees.
- At September 30, assets were $8.056 million, including $4.516 million of properties held for sale and $658,759 of cash. Current liabilities were $3.202 million and working capital was $2.319 million. The reported current ratio was approximately 1.72, but current assets were heavily concentrated in properties held for sale.
- Total liabilities were $3.774 million. Bank loans totaled $584,587, mostly long term; related-party amounts due were $2.230 million, including $1.496 million due to a non-controlling-interest party. A $500,000 shareholder advance carried 12% interest and was due in December 2015. Another $116,473 policy loan was secured by life-insurance cash value.
- Operating cash use was primarily associated with the $4.516 million increase in properties held for sale. Financing provided $3.697 million, including $2.060 million from share issuance and $1.708 million of related-party advances. Cash increased by $35,389 to $658,759.
Changes, outlook, risks and unusual items
- Greenpro reported a $467,712 accumulated deficit and an $81,363 attributable net loss for the nine months. Management stated that continued operations through December 31 depended on improved profitability and ongoing shareholder support or external financing; the filing says these conditions raise substantial doubt about the company’s ability to continue as a going concern. Management nevertheless expected cash on hand to cover basic operating requirements for approximately 12 months.
- Share count rose to 51,457,171 at September 30 from 44,752,800 at December 31, 2014, largely reflecting acquisition consideration and debt conversions, alongside private placements. A subsequent October 19 placement raised $144,405; it was not included in September 30 balances.
- Management reported no formal financial guidance. It described plans to grow its packaged cloud and traditional accounting services, but cautioned that forward-looking statements are not guarantees.
- Management identified foreign-exchange exposure to the U.S. dollar, Malaysian ringgit and renminbi; regional political, economic, regulatory and tax risks; and customer concentration. Four customers accounted for 46% of nine-month revenue, including a related company contributing $174,547.
- Disclosure controls and internal control over financial reporting were judged ineffective. Reported material weaknesses included no functioning audit committee, inadequate segregation of duties, and ineffective period-end reporting controls. Remediation was planned, subject to available funding.
- The filing reported no material pending legal proceedings, defaults on senior securities, or significant off-balance-sheet arrangements. It disclosed office lease commitments, including $91,690 of minimum rent due in the next 12 months.
Important facts for investors to verify
- How quickly properties held for sale can be sold, at what margins, and whether proceeds will meet near-term obligations.
- The availability and terms of shareholder or external financing, including repayment of the $500,000 advance due in December 2015, and progress toward sustained profitability.
- The valuation, integration and impairment risk of acquired businesses and the $1.414 million goodwill balance, particularly for related-party transactions.
- The extent of dilution from acquisition shares, debt conversions and subsequent share issuances, and the effect of the reverse-acquisition accounting on comparisons with prior periods.
- Reconciliation of apparent statement inconsistencies: the nine-month segment table reports revenue of $1,757,086 and gross income of $891,915, while the primary operations statement reports $1,752,880 and $887,709, respectively. The filing text does not provide a clear reconciliation.
- Whether control weaknesses are remediated and whether future reporting remains reliable; also monitor currency movements, customer concentration and related-party balances.