Greenpro, Inc. — FY2014 Form 10-K
Reporting period: Fiscal year ended October 31, 2014; filed January 27, 2015. The filing identifies the registrant as Greenpro, Inc. (Nevada), although the request metadata names Greenpro Capital Corp. Greenpro described itself as a development-stage company based in Hong Kong, planning cloud accounting, cross-border business, record-management, and accounting-outsourcing services, initially targeting Hong Kong and Malaysia. It reported minimal operations and began serving three Hong Kong clients in September 2014.
Financial results and liquidity
- Revenue: $3,613, versus none in the prior comparable period; revenue came from company-formation and secretarial services. Cost of services was $1,123, producing gross profit of $2,490 and a gross margin of approximately 69%.
- Expenses and profit: General and administrative expenses were $108,833, up from $22,295. Net loss was $106,343, versus $22,295; reported basic and diluted loss per share was $0.00 when rounded. The filing attributes the higher expenses to launching operations, including directors’ remuneration, professional and legal fees, rent, and interest expense.
- Cash flow: The cash-flow statement reports operating cash used of $227,640, investing cash used of $14,011, and financing cash provided of $688,200. Cash ended the year at $507,934, compared with $61,205 a year earlier. The MD&A instead states operating cash use of $227,460.
- Liquidity and balance sheet: Current assets were $556,672, including $507,934 cash and $48,738 prepaid expenses; current liabilities were $9,887. Working capital was therefore $546,785. Total assets were $570,449; total liabilities were $9,887; stockholders’ equity was $560,562, versus a $21,295 deficiency in 2013.
- Debt and financing: The $82,500 of related-party convertible notes was converted into 10 million shares in August 2014; no related-party loan remained at year-end. Financing also included a $500,000 public offering and a $105,700 private placement. The two notes carried 8% interest; the MD&A reports $6,960 of loan interest expense.
Material changes and unusual items
- Revenue began in 2014, but remained very small relative to operating costs; the annual net loss increased by $84,048.
- Common shares outstanding increased from 10 million to 22,422,800, through conversion of related-party notes and equity offerings. The two officers each held 10 million shares, or 44.6% apiece, and together held 89.2%.
- The company reported material weaknesses in internal control over financial reporting: no internal-audit function, inadequate segregation of duties, no audit committee, and no written accounting and reporting procedures. It cited delayed recording and SEC disclosure of the September private placement. Management planned remediation during fiscal 2015, contingent in part on available funds.
- The independent auditor gave an unqualified opinion on the financial statements. The auditor did not attest to internal-control effectiveness.
Outlook, risks, and contingencies
The filing provides no quantified revenue, earnings, or cash-flow guidance. Management planned to expand its service offering and client base, but stated that operating revenue might not fund operations or growth and that additional capital would likely be needed. The filing warns that suitable financing may not be available. Other cited risks include competition, changing laws and taxes, licensing or permit issues, and economic conditions. No material legal proceedings or off-balance-sheet arrangements were reported. The office lease runs through August 31, 2016, at approximately $9,257 per month. The filing marks the company as a shell company and reports no trading or quoted bid/ask prices for its stock; it states that the non-affiliate market value was approximately zero.
Most important facts to verify
- Reconcile operating cash used: $227,640 in the cash-flow statement versus $227,460 in MD&A; also reconcile the reported $446,729 net cash increase with the cash-flow components.
- Confirm the accounting and disclosure treatment of the $6,960 loan-interest expense, given that supplemental cash-flow information reports no interest paid.
- Verify the private-placement timing and related SEC disclosures, and whether the stated internal-control remediation was implemented.
- Assess cash runway, ongoing operating burn, and access to additional financing against the company’s limited revenue and stated funding needs.
- Confirm the registrant name and corporate identity, given the mismatch between the request metadata and the filing’s identification as Greenpro, Inc.