Greenpro Capital Corp. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2021. Financial statements are unaudited. Greenpro provides business consulting and corporate advisory services, invests in early-stage businesses, and operates a real estate leasing and sales business, primarily in Asia.
Financial performance and position
| Metric | Q3 2021 | Nine months 2021 |
|---|---|---|
| Revenue | $429,366 | $2,194,409 |
| Gross profit (gross margin) | $333,525 (77.7%) | $1,648,416 (75.1%) |
| Operating loss | $630,825 | $1,877,043 |
| Net loss | $6,044,982 | $12,973,389 |
| Net loss attributable to Greenpro common shareholders | $6,026,427 | $13,016,006 |
| Net loss per share, basic and diluted | $0.09 | $0.20 |
For the nine months, service revenue was $1.716 million, real estate sales were $383,445, and rental revenue was $95,409. Cash used in operating activities was $2.247 million, compared with $845,125 in the prior-year period. Investing activities provided $87,279 and financing activities provided $7.016 million. Cash, cash equivalents, and restricted cash ended at $6.010 million.
At September 30, current assets were $6.951 million and current liabilities were $3.481 million, implying working capital of approximately $3.470 million. Total assets were $22.879 million and total liabilities were $3.523 million. Real-estate-secured loans were fully repaid by period-end. Convertible notes had a carrying value of $290,111, including accrued interest; the remaining notes were repaid through share issuance in October 2021, according to the filing.
Changes versus the prior comparable periods
- Nine-month revenue rose 15.7% from $1.897 million, mainly from higher service revenue and real estate sales. Q3 revenue fell 36.8% from $678,917 because there was no real estate sale in Q3 2021, versus a sale in Q3 2020.
- Nine-month operating expenses rose to $3.525 million from $2.634 million; management attributed the increase primarily to higher general and administrative expenses. Nine-month operating loss widened to $1.877 million from $1.241 million.
- Nine-month net loss increased substantially from $1.235 million. Major 2021 items included $12.950 million of interest expense, a $2.982 million loss on extinguishment of convertible notes, and $5.340 million of investment impairment. These were partly offset by a $5.000 million reversal of a prior notes-receivable write-off and a $5.094 million fair-value gain on options associated with convertible notes.
- Cash increased from $1.087 million at December 31, 2020, largely reflecting financing inflows and collection of $5.000 million of notes receivable. Shares outstanding rose from 61.765 million at year-end to 77.202 million at September 30, 2021; the filing reports 78.472 million outstanding as of November 10, 2021.
Outlook, risks, contingencies, and unusual items
- Going concern: The filing states that the $12.973 million nine-month net loss and $2.247 million operating cash outflow raise substantial doubt about the company’s ability to continue as a going concern within one year of issuance. Management expects shareholder support or external financing to help meet obligations, but provides no assurance financing will be available or acceptable. Management also estimates cash is sufficient for anticipated working capital for the next 12 months.
- Convertible financing and dilution: Convertible notes generated significant interest and extinguishment expense and were repaid substantially through equity conversion. The filing describes variable conversion prices and default provisions, including a 22% default interest rate and potential additional charges. It reports all notes issued since October 2020 were repaid after further share issuance in October 2021.
- Investment impairment: Greenpro impaired its Innovest Energy Fund investment by $5.340 million during the nine months, leaving it valued at $1.866 million. The company reported $9.631 million of other investments at September 30, 2021, including related-party investments.
- Litigation: Millennium Fine Art Inc. filed suit alleging breach of contract and seeking $66 million in damages and specific performance. Greenpro says the claims are without merit and intends to defend itself. The filing does not provide a clear estimate of potential loss or outcome.
- Nasdaq listing: Nasdaq notified the company that its share price had been below $1 for 30 consecutive business days. The company had until February 28, 2022, to regain compliance, potentially through a reverse stock split; management had not decided on a response as of the filing.
- Other risks and commentary: Management expects service revenue to improve as it expands into new territories, rental income to remain stable, and G&A expenses to increase with acquisitions and expansion. The filing cites COVID-19 disruption and risks from operating in Malaysia, China, and other Asian markets. Management reported disclosure controls were effective and no material change in internal control during the quarter.
Key facts for investors to verify
- Progress on the $66 million lawsuit, including any subsequent developments, potential exposure, and whether a loss estimate becomes available.
- Nasdaq minimum-bid-price compliance status and any reverse-stock-split or other remedial action.
- Post-quarter repayment of convertible notes, the associated share issuance, and resulting dilution and share count.
- Cash runway, operating cash burn, and the availability and terms of any shareholder or external financing given the going-concern warning.
- Valuation support for the remaining investment portfolio, especially related-party holdings and the impaired Innovest investment.