Greenpro Capital Corp. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Greenpro provides business consulting and corporate advisory services, invests in start-ups, and owns, rents, and sells real estate, primarily in Asia. Comparisons are with Q1 2022 unless noted.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | $637,735 | $575,846; up 10.7% |
| Gross profit | $559,551 | $373,436 |
| Gross margin | 87.7% | 64.9% |
| Operating loss | $(332,013) | $(530,703) |
| Net income (loss) | $21,936 | $(1,009,870) |
| Net income (loss) attributable to Greenpro common stockholders | $31,089 | $(1,033,682) |
| Operating cash flow | $(751,522) | $(774,931) |
Service revenue increased to $615,604 from $355,033, including $379,976 of listing services versus none in the prior period. No real estate was sold in Q1 2023, compared with $186,873 of sales in Q1 2022; rental revenue fell to $22,131 from $33,940. General and administrative expense was $891,564, versus $904,139.
Q1 2023 net income included a $200,000 reversal of a write-off of notes receivable and a $123,000 reversal of investment impairment. These items, rather than operating profitability, materially supported the reported result. The company still reported an operating loss.
Cash and cash equivalents, including restricted cash, were $3,030,128 at March 31, 2023, down $881,407 from year-end. Current assets were $4,790,319 and current liabilities were $2,695,284. Total liabilities were $2,786,028, including $182,191 of operating lease liabilities. The filing does not report conventional borrowings at quarter-end. Operating cash use was $751,522; investing cash use was $500; financing cash use was $128,702, including $328,702 of advances to related parties partly offset by a $200,000 notes-receivable collection.
Total assets were $15,397,019 and stockholders’ equity was $12,610,991. Other investments were $5,529,606, all identified as related-party investments; the company reported $10,008,858 of accumulated impairment against these investments. The company had 7,875,813 common shares outstanding at March 31 and May 11, 2023.
Material changes and management commentary
- Total revenue rose by $61,889, mainly from business-services growth; management attributed completed listing-service obligations to the increase.
- Gross profit improved, while the operating loss narrowed by $198,690, reflecting higher service revenue and the absence of the prior-year real-estate sale costs.
- Net results improved substantially year over year, but included the $323,000 combined benefit from the notes-receivable and impairment reversals.
- Management said it expects revenue from services and real estate to improve as COVID-19 impacts abate and expects rental income to remain stable. It provided no quantitative guidance.
- Management estimated cash would cover anticipated working capital for the next twelve months, but also disclosed substantial doubt about the company’s ability to continue as a going concern within one year. It cited operating cash use and a $37,591,591 accumulated deficit; continued profitability improvement and major-shareholder support or external financing are important to its plan. Financing is not assured and could restrict operations or dilute shareholders.
Risks, contingencies, and other notable items
- Litigation: Millennium Fine Art Inc. alleges breach of an NFT-related contract and seeks $66 million in damages, specific performance, and fees. Greenpro denies the allegations. The dispute is in arbitration; discovery resumed, and a status conference was scheduled for September 18, 2023. The filing does not provide a clear estimate of potential loss or outcome.
- Customer concentration: Two customers accounted for 59% of Q1 revenue. Three customers accounted for 83% of net accounts receivable at quarter-end.
- Related-party exposure: $341,172 of service revenue was from related parties. Amounts due from related parties were $571,280, related-party accounts receivable were $238,742, and related-party prepayments were $120,000. Amounts due to related parties were $425,058 and are payable on demand.
- Investment valuation: The portfolio consists of private equity investments without readily determinable fair values and has substantial accumulated impairment; valuation and recoverability remain areas to monitor.
- Regional and currency risks: Operations are concentrated in Hong Kong, Malaysia, and China and are exposed to political, regulatory, economic, and foreign-exchange risks.
- Management reported effective disclosure controls as of March 31, 2023 and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether service growth converts into recurring operating profit and positive operating cash flow, excluding reversals and other nonrecurring items.
- Whether Greenpro can sustain liquidity and obtain shareholder support or external financing given the going-concern warning and cash burn.
- The status, potential exposure, and accounting treatment of the MFAI arbitration claim.
- Recoverability and valuation support for the $5.53 million related-party investment portfolio and the $571,280 due from related parties.
- Whether customer concentration and related-party revenue, receivables, advances, and transactions change materially in subsequent periods.