Greenpro Capital Corp. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019; unaudited. Greenpro provides business consulting and corporate advisory services, alongside real-estate leasing and property sales, principally in Hong Kong, Malaysia, and China. Amounts below are U.S. dollars.
Financial results and position
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $1.152 million | $1.557 million | $3.316 million | $3.106 million |
| Operating loss | $213,059 | $428,544 | $1.038 million | $1.041 million |
| Net loss | $211,147 | $4.773 million | $838,264 | $5.146 million |
| Net loss attributable to Greenpro common shareholders | $187,852 | $4.853 million | $775,142 | $5.261 million |
| Operating cash flow | Not presented for the quarter | Not presented for the quarter | $(1.241) million | $(744,000) |
- Revenue mix: Nine-month service revenue was $3.245 million, up from $1.975 million; real-estate sales were zero versus $999,494 in 2018; rental revenue was $71,462 versus $131,270. Q3 service revenue rose to $1.133 million from $660,353, but no property-sale revenue was recorded, compared with $853,420 a year earlier.
- Expenses and margins: Nine-month operating costs and expenses rose to $4.354 million from $4.146 million, including G&A of $3.188 million versus $2.721 million. Service costs increased to $1.131 million from $621,823. The filing does not provide a single consolidated gross-margin percentage.
- Other items: Nine-month other income was $207,625, including a $192,785 favorable change in derivative fair value. The 2018 comparison included a $4.640 million expense tied to a financing transaction, substantially contributing to the prior-year net loss.
- Liquidity and balance sheet at September 30, 2019: Cash and cash equivalents, including $153,860 restricted cash, were $857,892, down from $2.172 million at year-end 2018. Current assets were $1.410 million versus current liabilities of $3.135 million, a $1.725 million working-capital deficit. Total assets were $8.648 million; total liabilities, $4.810 million; and stockholders’ equity, $3.837 million.
- Debt and obligations: Loans secured by real estate totaled approximately $1.608 million ($142,551 current and $1.465 million long-term). Operating-lease liabilities totaled $494,311. Amounts due to related parties were $972,074, including $822,194 payable on demand to a noncontrolling interest.
Material changes versus the prior comparable period
- Nine-month revenue increased 6.8%, driven by service growth, while Q3 revenue decreased 26.0% because there were no property sales in 2019.
- Nine-month operating loss was nearly unchanged. Net loss improved substantially from 2018, primarily because the prior period included the $4.640 million financing-related expense, and because service revenue grew.
- Cash declined by $1.314 million during the first nine months. Operating cash use increased to $1.241 million from $744,000; financing cash flow was only $1,744 versus $2.008 million provided in 2018.
- Greenpro acquired Sparkle Insurance Brokers Limited in January 2019 for $170,322, comprising $129,032 cash and 8,602 shares valued at $41,290.
Outlook, risks, contingencies, and unusual items
- Going concern: Management and the filing identify substantial doubt about the company’s ability to continue as a going concern within one year, citing nine-month operating and net losses, $1.241 million operating cash use, and the working-capital deficit. Management says continued shareholder support or external financing is expected and estimates cash will cover anticipated working capital for the next 12 months, but acknowledges financing is not assured and could impose restrictions or dilute shareholders.
- Management outlook: Management expects service revenue to grow through business expansion, new territories, client growth, and acquired clients; it expects rental income to remain stable and G&A to rise as it integrates acquisitions and expands. These are expectations, not guarantees.
- Concentration and related parties: Three customers represented 59% of nine-month revenue (26%, 18%, and 15%). Related-party service revenue was $1.744 million, approximately 53% of total revenue, compared with $339,422 in 2018. The filing also reports $972,074 due to related parties.
- Controls: Management concluded disclosure controls and procedures were not effective at September 30, 2019. Reported weaknesses include insufficient U.S. GAAP and control personnel, inadequate risk assessment, weaknesses in financial close and disclosure review—including related-party disclosures—and inadequate controls over complex or unusual transactions.
- Other exposures: Operations are concentrated in Asia and subject to political, regulatory, economic, and foreign-exchange risks. Derivative liabilities were $49,138 at quarter-end and are based on Level 3 valuation inputs. The filing reports no material pending legal proceedings and no significant off-balance-sheet arrangements.
Important facts for investors to verify
- Whether Greenpro can fund operations and meet obligations without new shareholder support or external financing, given cash levels, negative operating cash flow, and the stated going-concern doubt.
- Whether service growth is recurring and collectible, especially given the customer concentration and substantial related-party revenue.
- The timing and cash consequences of related-party amounts payable on demand, secured loan repayments, and lease commitments.
- Whether management addresses the disclosed control weaknesses, particularly the financial close, related-party disclosures, and unusual transactions.
- Whether expansion and acquisition costs increase as management expects, and whether service growth offsets the absence of episodic real-estate sales.