Greenpro Capital Corp. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; figures are unaudited and in U.S. dollars. Greenpro provides corporate advisory and business services, invests in early-stage businesses, and operates real estate leasing and sales activities, primarily in Asia.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $575,846 | $589,573; down 2.3% |
| Gross profit / margin | $373,436 / 64.8% | $493,956 / 83.8% |
| Operating loss | $530,703 | $887,298 |
| Net loss | $1,009,870 | $6,295,142 |
| Net loss attributable to Greenpro common stockholders | $1,033,682; $0.01 per share | $6,298,520; $0.10 per share |
| Operating cash flow | $(774,931) | $(788,464) |
| Cash, cash equivalents and restricted cash | $4,560,884 at March 31 | $5,338,571 at December 31, 2021 |
| Total assets / liabilities | $21,434,965 / $3,419,960 | $22,710,681 / $3,672,247 at December 31, 2021 |
Service revenue fell to $355,033 from $559,335, partly because some listing-service performance obligations were incomplete. Real estate sales contributed $186,873 from one Hong Kong unit; rental revenue was $33,940 versus $30,238. Gross margin declined as revenue mix and costs changed. General and administrative expense fell to $904,139 from $1,381,254.
Net loss improved substantially year over year, chiefly because Q1 2021 included $10.6 million of interest expense related to convertible notes; Q1 2022 reported no interest expense. Q1 2022 also included a $536,400 impairment of a related-party investment and a $5,902 warrant fair-value gain.
Investing activities provided $181,466, mainly from real estate sale proceeds; financing activities used $172,568, consisting of advances to related parties. The balance sheet reports $85,933 of current operating lease liabilities and $4,033 of derivative liabilities; it does not show outstanding convertible-note debt at March 31, 2022. Management said cash should meet anticipated working-capital needs for the next 12 months, but also disclosed substantial doubt about the company’s ability to continue as a going concern within one year. The company depends on improved profitability and anticipated shareholder support or external financing, which is not assured and could be dilutive or restrictive.
Material changes and management outlook
- Total revenue decreased by $13,727 year over year. Hong Kong revenue increased, while Malaysia and China revenue decreased.
- Management expects business-services revenue to improve as COVID-19 effects wane and stabilize, and believes rental income will remain stable. It expects G&A costs to rise as it integrates acquisitions, expands existing operations and develops new markets. These are expectations, not guarantees.
- Related-party investments totaled $9,084,485, down from $9,621,935 at year-end, including the Q1 impairment. Amounts due from related parties were $1,291,171; amounts due to related parties were $701,949. The receivables and payables are generally unsecured, interest-free and without fixed repayment terms.
- One customer accounted for 32% of Q1 revenue and 60% of period-end accounts receivable. Three vendors represented 65% of accounts payable.
- The company cited ongoing COVID-19 uncertainty and political, regulatory, currency and fund-transfer risks in its Asian markets. It reported no material off-balance-sheet arrangements and no material change in internal controls; management deemed disclosure controls effective.
Legal matter and contingencies
Millennium Fine Art Inc. alleges breach of an NFT-related contract and seeks $66 million in damages, specific performance and legal fees. Greenpro denies the material allegations and is defending the matter in arbitration; the filing describes the dispute as pending. The filing does not provide a clear estimate of any probable loss or financial-statement accrual for this claim.
Important facts for investors to verify
- Whether Greenpro can fund operations and meet obligations without additional financing, and whether anticipated shareholder support will materialize.
- The status and recoverability of the substantial related-party investment balance and related-party receivables, including the basis for the $536,400 impairment.
- Progress and potential financial exposure in the $66 million NFT-related arbitration.
- Whether service revenue and gross margins recover, given the decline in service revenue and the company’s dependence on a concentrated customer base.
- Future cash use, related-party advances and the company’s ability to convert deferred revenue into completed services and revenue.