SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The fiscal year ended December 31, 2018
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 001-38308
Greenpro Capital Corp.
(Exact name of registrant issuer as specified in its charter)
(State or other jurisdiction of
incorporation or organization)
Room 1701-1703, 17/F., The Metropolis
Tower, 10 Metropolis Drive, Hung Hom, Kowloon,
(Address of principal executive offices, including zip code)
Registrant’s phone number, including area code (852) 3111 -7718
Securities registered pursuant to Section 12(b) of the Securities Exchange Act:
Common Stock, $0.0001 par value per share
(Title of Class)
The Nasdaq Stock Market LLC
(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Securities Exchange Act:
(Title of Class)
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding twelve months (or shorter period that the registrant was required to submit such files). YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer [ ] Accelerated Filer [ X ] Non-accelerated Filer [ ] Smaller reporting company [X]
Emerging growth Company [ X ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The aggregate market value of voting and non-voting common equity held by non-affiliates of the Registrant as of June 29, 2018 was $139,545,690, based on the last reported sale price.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
|Class||Outstanding at April 2, 2019|
|Common Stock, $0.0001 par value||54,723,889|
Greenpro Capital Corp.
For the Fiscal Year Ended December 31, 2018
|Item 1A.||Risk Factors||23|
|Item 1B.||Unresolved Staff Comments||30|
|Item 3.||Legal Proceedings||31|
|Item 4.||Mine Safety Disclosure||31|
|Item 5.||Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities||31|
|Item 6.||Selected Financial Data||32|
|Item 7.||Management’s Discussion and Analysis of Financial Condition and Results of Operations||32|
|Item 7A.||Quantitative and Qualitative Disclosures About Market Risk||43|
|Item 8.||Financial Statements and Supplementary Data||43|
|Item 9.||Changes in and Disagreements With Accountants on Accounting and Financial Disclosure||43|
|Item 9A.||Controls and Procedures||43|
|Item 9B.||Other Information||44|
|Item 10.||Directors, Executive Officers and Corporate Governance||45|
|Item 11.||Executive Compensation||51|
|Item 12.||Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters||52|
|Item 13.||Certain Relationships and Related Transactions, and Director Independence||53|
|Item 14.||Principal Accounting Fees and Services||54|
|Item 15.||Exhibits, Financial Statement Schedules||55|
|Item 16.||Form 10-K Summary||56|
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements. These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guaranteed to future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. These risks and uncertainties include the following:
|●||The availability and adequacy of our cash flow to meet our requirements;|
|●||Economic, competitive, demographic, business and other conditions in our local and regional markets;|
|●||Changes or developments in laws, regulations or taxes in our industry;|
|●||Actions taken or omitted to be taken by third parties including our suppliers and competitors, as well as legislative, regulatory, judicial and other governmental authorities;|
|●||Competition in our industry;|
|●||The loss of or failure to obtain any license or permit necessary or desirable in the operation of our business;|
|●||Changes in our business strategy, capital improvements or development plans;|
|●||The availability of additional capital to support capital improvements and development; and|
|●||Other risks identified in this report and in our other filings with the Securities and Exchange Commission or the SEC.|
This report should be read completely and with the understanding that actual future results may be materially different from what we expect. The forward looking statements included in this report are made as of the date of this Annual Report and should be evaluated with consideration of any changes occurring after the date of this Annual Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Use of Defined Terms
Except as otherwise indicated by the context, references in this report to:
|●||The “Company,” “we,” “us,” or “our,” “Greenpro” are references to Greenpro Capital Corp., a Nevada corporation.|
|●||“Common Stock” refers to the common stock, par value $.0001, of the Company;|
|●||“HK” refers to Hong Kong;|
|●||“U.S. dollar,” “$” and “US$” refer to the legal currency of the United States;|
|●||“Securities Act” refers to the Securities Act of 1933, as amended; and|
|●||“Exchange Act” refers to the Securities Exchange Act of 1934, as amended.|
ITEM 1. BUSINESS
We were incorporated on July 19, 2013 in the state of Nevada under the name Greenpro, Inc. On May 6, 2015, we changed our name to Greenpro Capital Corp. Our corporate structure is set forth below:
A list of our subsidiaries and VIE entities together with a brief description of their business is set forth below:
|Greenpro Capital Corp. (Nevada, USA)||Provides financial consulting services and corporate services|
|Greenpro Resources Limited (British Virgin Islands)||Holding company|
|Greenpro Holding Limited (Hong Kong)||Holds life insurance products|
|Greenpro Resources (HK) Limited (Hong Kong)||Holds Greenpro intellectual property and currently holds six trademarks and applications thereof|
|Greenpro Resources Sdn. Bhd. (Malaysia)||Holds investment in commercial real estate in Malaysia|
|Greenpro Management Consultancy (Shenzhen) Limited (China)||Provides corporate advisory services such as tax planning, cross-border listing solution and advisory, transaction services in China|
|Shenzhen Falcon Financial Consulting Limited (China)||Provides Hong Kong company formation advisory services & company secretarial services and financial services. It focuses on China clients.|
|Greenpro Capital Village Sdn. Bhd. (Malaysia)||Provides educational and support services through seminars and courses to new start-up companies or SMEs.|
|Greenpro Global Capital Sdn. Bhd. (Formerly known as Greenpro Wealthon Sdn. Bhd.) (Malaysia)||Provides corporate advisory services such as company review, bank loan advisory and bank products analysis services.|
|Greenpro Management Pty Ltd (Australia)||Holding company|
|Greenpro Financial Consulting Limited (Belize)||Provides corporate advisory services such as tax planning, cross-border listing solution and advisory, transaction services|
|Asia UBS Global Limited (Belize)||Provides business advisory services with main focus on offshore company formation advisory and company secretarial service, such as tax planning, bookkeeping and financial review. It focuses on South-East Asia and China clients.|
|Asia UBS Global Limited (Hong Kong)||Provides business advisory services with main focus on Hong Kong company formation advisory and company secretarial service, such as tax planning, bookkeeping and financial review. It focuses on Hong Kong clients.|
|Falcon Corporate Services Limited (Hong Kong)||Provides offshore company formation advisory services & company secretarial services. Clients based in Hong Kong & China|
|Falcon Secretaries Limited (Hong Kong)||Provides Hong Kong company formation advisory services & company secretarial services. Clients based in Hong Kong & China|
|Yabez (Hong Kong) Company Limited (Hong Kong)||Provides Hong Kong company formation advisory services, corporate secretarial services and IT related services to Hong Kong based clients.|
|Yabez Business Service (SZ) Company Limited (China)||Provides Shenzhen company formation advisory services, corporate secretarial services and IT related services to China based clients.|
|Greenpro Credit Limited (Hong Kong)||Provides loan and credit services in Hong Kong. Holder of Money Lenders License.|
|Greenpro Family Office Limited (Hong Kong)||Provides professional multi-family office offers services such as wealth planning, administration, asset protection & management, asset consolidation, asset performance monitoring, charity services, tax and legal services, trusteeship and risk management, investment planning & management, and business support services.|
|Greenpro Venture Capital Limited (Anguilla)||Holding company|
|Forward Win International Limited (Hong Kong)||Holds investment in commercial Hong Kong real estate|
|Greenpro International Limited (Seychelles)||Holding company|
|Greenpro Property Development Limited (Formerly known as Chief Billion Limited) (Hong Kong)||Holding company|
|Greenpro Venture Cap (Qianhai) Limited (Anguilla)||Holding company|
|Greenpro Synergy Network Limited (Hong Kong)||Holds universal life insurance policies and provides a borderless platform through networking events and programs in Hong Kong.|
|Greenpro Synergy Network (Shenzhen) Limited (China)||Provides a borderless platform through networking events and programs in China for our members to seek professional services, business opportunities, and to exchange sources of information and research|
Acquisition and Reorganization History
Acquisition of entities under common control
Acquisition of Greenpro Resources Limited, a British Virgin Islands company
On July 31, 2015, we acquired 100% of the issued and outstanding securities of Greenpro Resources Limited, a British Virgin Islands corporation that was our affiliate at the time of the acquisition (“GRBV”). As consideration thereof, we issued to the shareholders of GRBV 9,070,000 restricted shares of our common stock (valued at $3,174,500 based on the average closing price of the six trading days preceding July 28, 2015, which was $0.35 per share) and paid US$25,500 in cash, representing an aggregate purchase price of US$3,200,000. The purchase price was determined based on the existing business value of GRBV, carrying value of GRBV properties, brand names of GRBV and settlement of GRBV founder initial investment.
GRBV provides corporate advisory services such as tax planning, cross-border listing solutions and advisory and transaction services to start-up and high–growth companies. It also owns real estate in Selangor Darul Ehsan, Malaysia and Kuala Lumpur, Malaysia that are investment properties, which are currently generating rental income. Through our acquisition of GRBV, we hope to expand our customer and revenue base as well as broaden the range of services we offer.
Lee Chong Kuang, our Chief Executive Officer, President and director, was also the Chief Executive Officer, President and director of GRBV at the time of the acquisition. Mr. Lee holds 44.6% of our issued and outstanding securities and held 50% of the issued and outstanding securities of GRBV at the time of the acquisition. Loke Che Chan Gilbert, our Chief Financial Officer, Secretary, Treasurer and director, is also the Chief Financial Officer and director of GRBV. Mr. Loke holds 44.6% of our issued and outstanding securities and held 50% of the issued and outstanding securities of GRBV at the time of the acquisition. Upon the consummation of the acquisition, Messrs. Lee and Loke received, in the aggregate, US$25,500 in cash and 9,070,000 shares of our restricted common stock.
Acquisition of A&G International Limited, a Belize company
On September 30, 2015, we acquired 100% of the issued and outstanding securities of A&G International Limited, a Belize corporation (“A&G”). In connection therewith, we issued to Yap Pei Ling, the shareholder of A&G, 1,842,000 restricted shares of our common stock, representing an aggregate purchase price of $957,840 based on the average closing price of the ten trading days preceding July 31, 2015, the date of the acquisition agreement, of $0.52 per share. The purchase price was determined based on the existing business value generated from A&G.
Ms. Yap Pei Ling, the director and sole shareholder of A&G, is the spouse of Lee Chong Kuang, our Chief Executive Officer, President and director.
A&G provides corporate and business advisory services through its wholly-owned subsidiaries, Asia UBS Global Limited (Hong Kong) and Asia UBS Global Limited (Belize).
On December 30, 2015, A&G International Limited transferred all of the issued and outstanding securities of Asia UBS Global Limited, a Belize Corporation, and Asia UBS Global Limited, a Hong Kong limited company, to Greenpro Resources Limited to simplify our corporate structure. A&G International Limited, now a corporation with no assets, was subsequently transferred back to Ms. Yap Pei Ling.
Acquisition of Greenpro Venture Capital Limited, an Anguilla corporation
On September 30, 2015, we acquired all of the issued and outstanding securities of Greenpro Venture Capital Limited, an Anguilla corporation, (“GPVC”) from its shareholders, Lee Chong Kuang and Loke Che Chan Gilbert. As consideration thereof, we issued to the shareholders of GPVC an aggregate of 13,260,000 restricted shares of our common stock (valued at $7,956,000 based on the signed Memorandum of Understanding on July 25, 2015 of $0.60 per share) and paid $6,000 in cash, representing an aggregate purchase price of $7,962,000. The purchase price was determined based on the existing business value of GPVC, including all customers, fixed assets, investments, cash and cash equivalents and assuming certain liabilities of GPVC. Mr. Lee Chong Kuang, our Chief Executive Officer, President and director, was also the Chief Executive Officer, President and director of GPVC at the time of the acquisition. Mr. Lee holds 43.02% of our issued and outstanding shares and held 50% of the issued and outstanding shares of GPVC at the timed of the acquisition. Mr. Loke Che Chan Gilbert, our Chief Financial Officer, Secretary, Treasurer and director, was also the Chief Financial Officer and director of GPVC. Mr. Loke holds 43.02% of our issued and outstanding shares and held 50% of the issued and outstanding shares of GPVC at the time of the acquisition.
Incorporation and deregistration of Greenpro Capital Pty Ltd, an Australian company
Greenpro Capital Pty Ltd was formed on May 11, 2016 with 50% held by Greenpro Holding Limited, one of our subsidiaries, and 50% was held by Mohammad Reza Masoumi Al Agha. On June 29, 2018, both parties agree to apply for deregistration of Greenpro Capital Pty Ltd due to discrepancies on the business development.
Acquisition of Greenpro Wealthon Sdn. Bhd., a Malaysia company
On May 23, 2016, our subsidiary. Greenpro Holding Limited (“GPHL”) acquired 400 shares of Greenpro Wealthon Sdn. Bhd. from Mr. Lee Chong Kuang with MYR 1 (approximately $0.25). On June 7, 2016, GPHL acquired an additional 200 shares of Greenpro Wealthon Sdn. Bhd. for MYR120,000 (approximately $30,000), resulting in GPHL owing 60% of Greenpro Wealthon Sdn. Bhd.
On June 13, 2018, Greenpro Wealthon Sdn. Bhd. was renamed to Greenpro Global Capital Sdn. Bhd. On August 30, 2018, the remaining 40% of Greenpro Global Capital Sdn. Bhd. were transferred to GPHL. As of today, GPHL holds 100% of Greenpro Global Capital Sdn. Bhd.
Acquisition of Greenpro Family Office Limited, a Hong Kong company
On July 21, 2017, Greenpro Resources Limited, the wholly owned subsidiary of GRNQ, acquired 51% of the shareholdings of Greenpro Family Office Limited (“GFOL”). GFOL allotted 231,895 shares of GFOL to Greenpro Resources Limited, representing 51% of the shareholdings of GFOL.
On September 21, 2018, the remaining 49% of GFOL were transferred to Greenpro Resources Limited . As of today, Greenpro Resources Limited holds 100% of GFOL.
Incorporation of Greenpro International Limited, a Seychelles company
Greenpro International Limited was formed on July 4, 2018 with 80% held by Greenpro Venture Capital Limited, one of our subsidiaries, and 20% was held by Mr. Loke Yu, a related party of one of our directors. On September 18, 2018, Greenpro Venture Capital Limited transferred all of the issued and outstanding securities of Greenpro Property Development Limited (formerly known as Chief Billion Limited), a Hong Kong Corporation, to Greenpro International Limited .
VIE Structure and Arrangements
Greenpro Synergy Network Ltd (“GSN”) was incorporated in Hong Kong on March 2, 2016, as a variable interest entity (“VIE”) that is subject to consolidation with the Company. GSN’s principal activities are to hold certain of our universal life insurance policies. Loke Che Chan, Gilbert, our Chief Financial Officer, Secretary, Treasurer and director and Lee Chong Kuang, our Chief Executive Officer, President and director are the sole shareholders of GSN. We control GSN through a series of contractual arrangements (the “VIE Agreements”) between GPHL and GSN. The VIE agreements include (i) an Exclusive Business Cooperation Agreement, (ii) a Loan Agreement, (iii) a Share Pledge Agreement, (iv) a Power of Attorney and (v) an Exclusive Option Agreement with the shareholder of GSN.
Set forth below is a more detailed description of each of the VIE agreement.
Exclusive Business Cooperation Agreement: Pursuant to the Exclusive Business Cooperation Agreement, GPHL serves as the exclusive provider of technical support, consulting services and management services to GSN. In consideration of such services, GSN has agreed to pay a service fee to GPHL, which is based on the time of services rendered multiplied by the corresponding rate, plus amount of the services fees or ratio decided by the board of directors of GPHL. The Agreement has a term of 10 years but may be extended by GPHL at its discretion.
Loan Agreement: Pursuant to the Loan Agreement, GPHL granted interest-free loans to the shareholders of the GSN for the sole purpose of increasing the registered capital of the GSN. These loans are eliminated with the capital of GSN during consolidation.
Share Pledge Agreement: Pursuant to the Share Pledge Agreement, the shareholders of GSN pledged to GPHL a first security interest in all of their equity interests in GSN to secure GSN’s timely and complete payment and performance of its obligations under the Exclusive Business Cooperation Agreement. During the term of the Share Pledge Agreement, the pledgors agreed, among other things, not to transfer, place or permit the existence of any security interest or other encumbrance on their interest in GSN without the prior written consent of GPHL. The pledge shall remain in effect until 10 years after the obligations under the principal agreement will have been fulfilled. However, upon the full payment of the consulting and service fees under the Exclusive Business Cooperation Agreement and upon the termination of GSN’s obligations under the Exclusive Business Cooperation Agreement, the Share Pledge Agreement shall be terminated and GPHL shall terminate this agreement as soon as reasonably practicable.
Power of Attorney: Pursuant to the Power of Attorney, Messrs. Lee and Loke, as the sole shareholders of GSN, granted to the GPHL the right to (i) attend shareholders meetings of GSN (ii) exercise all shareholder rights (including voting rights) with respect to such equity interests in GSN and (iii) designate and appoint on behalf of such shareholders the legal representative, directors, supervisors, and other senior management members of GSN. The Power of Attorney is irrevocable and is continuously valid from the date of execution of such Power of Attorney, so long as such persons remain shareholders of GSN.
Exclusive Option Agreement: Pursuant to the Exclusive Option Agreement, the shareholders of GSN granted to the GPHL an irrevocable and exclusive right and option to purchase all of their equity interests in GSN. The purchase price shall be equal to the capital paid in by the shareholders, adjusted pro rata for the purchase of less than all of the equity interests. The Agreement is effective for a term of 10 years, and may be renewed at GPHL’s election.
Acquisition of Yabez (Hong Kong) Company Limited, a Hong Kong company
On September 30, 2015, we acquired 60% of the issued and outstanding securities of Yabez (Hong Kong) Company Limited, a Hong Kong corporation (“Yabez”). As consideration thereto, we issued to the shareholders of Yabez 486,171 restricted shares of our common stock, representing an aggregate purchase price of $252,808 based on the average closing price of the ten trading days preceding July 31, 2015, the date of the acquisition agreement, of $0.52 per share. The purchase price was determined based on the existing business value generated from Yabez. Yabez provides Hong Kong company formation advisory services, corporate secretarial services and IT related services to Hong Kong based clients.
Acquisition of Falcon Secretaries Limited and Ace Corporate Services Limited, each Hong Kong companies, and Shenzhen Falcon Financial Consulting Limited, a Shenzhen, China company
On September 30, 2015, we acquired all of the issued and outstanding securities of Falcon Secretaries Limited, Ace Corporate Services Limited and Shenzhen Falcon Financial Consulting Limited (these companies collectively known as “F&A”). As consideration thereto, we issued to Ms. Chen Yanhong, the sole shareholder of F&A, 2,080,200 restricted shares of our common stock, representing an aggregate purchase price of $1,081,704 based on the average closing price of the ten trading days preceding July 31, 2015, the date of the acquisition agreement, of $0.52 per share. The purchase price was determined based on the existing business value generated from F&A. Ace Corporate Services Limited renamed to Falcon Corporate Services Limited on August 26, 2016.
Ms. Chen Yanhong, the director and sole shareholder of F&A, is also the director and legal representative of Greenpro Management Consultancy (Shenzhen) Limited, one of our subsidiaries.
Acquisition and disposal of Billion Sino Holdings Limited, a Seychelles company
On April 25, 2017, GRNQ and Mr. Yiu Yau Wing and Mr. Chui Sang Derek, representing the 91% & 9% shareholders of Billion Sino Holdings Limited respectively, a Seychelles corporation (“BSHL”), entered into a Sale and Purchase Agreement, pursuant to which GRNQ acquired 60% of the issued and outstanding shares of BSHL. As consideration thereto, GRNQ agreed to issue to the shareholders of BSHL in the aggregate 340,645 restricted shares of GRNQ’s common stock.
On November 20, 2018, due to the continuing loss making of BSHL, the Company decided to dispose BSHL. The Company sold 60% of the issued and outstanding shares of BSHL to Ms. Lam Ying Wai, at consideration of $60.
Acquisition of Gushen Credit Limited, a Hong Kong company
On April 27, 2017, Greenpro Resources Limited, the wholly owned subsidiary of GRNQ and Gushen Credit Limited, a Hong Kong corporation (“GCL”), entered into an Asset Purchase Agreement, pursuant to which GRNQ purchased the assets in GCL. As consideration thereto, GRNQ agreed to pay the purchase price of $105,000.
GCL operates a money lending business in Hong Kong, located at 1701-03, 17/F, Metropolis Tower, 10 Metropolis Drive, Hung Hom, Kowloon, Hong Kong. On April 28, 2017, GSHL sold two (2) ordinary shares of GCL to GRNQ, representing 100% ownership, for a total consideration of $0.26 in cash. The purchase price is determined based on the mutual agreement between GSHL and GRNQ. GCL was renamed to Greenpro Credit Limited on May 16, 2017.
We currently operate and provide a wide range of business solution services to small and medium-size businesses located in Asia and South-East Asia, with an initial focus on Hong Kong, China and Malaysia, and subsequently in Thailand and Taiwan. Our comprehensive range of services includes cross-border business solutions, record management services, and accounting outsourcing services. Our cross-border business services include, among other services, tax planning, trust and wealth management, cross border listing advisory services and transaction services. As part of the cross-border business solutions, we have developed a package solution of services (“Package Solution”) that can reduce business costs and improve revenues.
We also operate a venture capital business through Greenpro Venture Capital Limited, an Anguilla corporation. Our venture capital business is focused on (1) establishing a business incubator for start-up and high growth companies to support such companies during critical growth periods, which includes education and support services that operates through our subsidiary, Greenpro Capital Village Sdn. Bhd., and (2) searching for investment opportunities in selected start-up and high growth companies, which we expect can generate significant returns to the Company. We expect to target companies located in Asia and South-East Asia including Hong Kong, Malaysia, China, Thailand and Singapore. We anticipate our venture capital business will also engage in the purchase, acquisition and rental of commercial properties in the same Asia and South-East Asia region.
We provide a range of services to our clients as part of the Package Solution that we have developed. We believe that our clients can reduce their business costs and improve their revenues by utilizing our Package Solution.
Cross-Border Business Solutions/Cross-Border Listing Solutions
We provide a full range of cross-border services to small to medium-sized businesses to assist them in conducting their business effectively. Our “Cross-Border Business Solution” includes the following services:
|●||Advising clients on company formation in Hong Kong, the United States, the British Virgin Islands and other overseas jurisdictions;|
|●||Providing assistance to set up bank accounts with banks in Hong Kong to facilitate clients’ banking operations;|
|●||Providing bank loan referral services;|
|●||Providing company secretarial services;|
|●||Assisting companies in applying for business registration certificates with the Inland Revenue Department of Hong Kong;|
|●||Providing corporate finance consulting services;|
|●||Providing due diligence investigations and valuations of companies;|
|●||Advising clients regarding debt and company restructurings;|
|●||Providing liquidation, insolvency, bankruptcy and individual voluntary arrangement advice and assistance;|
|●||Designing a marketing strategy and promoting the company’s business, products and services;|
|●||Providing financial and liquidity analysis;|
|●||Assisting in setting up cloud invoicing systems for clients;|
|●||Assisting in liaising with investors for purposes of raising capital;|
|●||Assisting in setting up cloud inventory system to assist clients to record, maintain and control their inventories and track their inventory levels;|
|●||Assisting in setting up cloud accounting system to enable clients to keep track of their financial performance;|
|●||Assisting clients in payroll matters operated in our cloud payroll system;|
|●||Assisting clients in tax planning, preparing the tax computation and making tax filings with the Inland Revenue Department of Hong Kong;|
|●||Cross-border listing advisory services, including but not limited to, United States, United Kingdom, Hong Kong, Australia;|
|●||International tax planning in China;|
|●||Advising on Trust and wealth management; and|
There is a growing market in East Asia and South-East Asia of companies who are seeking to go public and become listed on a recognized exchange in a foreign jurisdiction. We see tremendous opportunity to the extent that this trend continues worldwide. With respect to cross border listing advisory services, we are assisting private companies in their desire to list and trade on public exchanges, including the U.S. OTC markets. The Jumpstart Our Business Startups Act, or JOBS Act, signed in 2012, eases the initial public offering (“IPO”) process for “emerging growth companies” and reduces their regulatory burden, (2) improves the ability of these companies to access capital through private offerings and small public offerings without SEC registration, and (3) allows private companies with a substantial shareholder base to delay becoming a public reporting company.
Through our cross-border listing advisory services, we seek to form the bridge between these companies seeking to conduct their IPO (or in some cases self-directed public offerings), and their goal of becoming a listed company on a recognized U.S. national exchange, such as NASDAQ and the NYSE.
While there are several alternatives for companies seeking to go public and trade on the U.S. OTC markets, we primarily focus on three methods:
|●||Registration Statement on Form S-1|
|●||Regulation A+ offering|
|●||The Form 10 shell company|
The manner in which the OTC markets are structured provides companies the ability to “uplist” in the marketplace as they provide better transparency. These markets include:
|●||OTCQX Best Marketplace: offers transparent and efficient trading of established, investor-focused U.S. and global companies.|
|●||OTCQB Venture Marketplace: for early-stage and developing U.S. and international companies that are not yet able to qualify for OTCQX.|
|●||OTC Pink Open Marketplace: offers trading in a wide spectrum of securities through any broker. With no minimum financial standards, this market includes foreign companies that limit their disclosure, penny stocks and shells, as well as distressed, delinquent, and dark companies not willing or able to provide adequate information to investors.|
We act as a case reference for our clients, as we originally had our shares quoted in the OTC markets and subsequently “uplisted” to The Nasdaq Stock Market LLC., a U.S. national securities exchange.
With growing competition and increasing economic sophistication, we believe more companies need strategies for cross-border restructuring and other corporate matters. Our plan is to bundle our Cross-Border Business Solution services with our Cloud Accounting Solution and Accounting Outsourcing Services described below.
Accounting Outsourcing Services
We intend to develop relationships with professional firms from Hong Kong, Malaysia, China and Thailand that can provide company secretarial, business centers and virtual offices, book-keeping, tax compliance and planning, payroll management, business valuation, and wealth management services to our clients. We intend to include local accounting firms within this network to provide general accounting, financial evaluation and advisory services to our clients. Our expectation is that firms within our professional network will refer their international clients to us that may need our book-keeping, payroll, company secretarial and tax compliance services. We believe that this accounting outsourcing service arrangement will be beneficial to our clients by providing a convenient, one-stop firm for their local and international business and financial compliance and governance needs.
Our Service Rates
We intend to have a two-tiered rate system based upon the type of services being offered. We may impose project-based fees, where we charge 10% -25% of the revenues generated by the client on projects that are completed using our services, such as transaction projects, contract compliance projects, and business planning projects. We may also charge a flat rate fee or fixed fee based on the estimated complexity and timing of a project when our professionals provide specified expertise to our clients on a project. For example, for the cross-border business solutions, we plan to charge our client a monthly fixed fee.
Our Venture Capital Business Segment
Venture Capital Investment
As a result of our acquisition of Greenpro Venture Capital Limited (“GPVC”) in 2015, we entered the venture capital business in Hong Kong with a focus on companies located in Asia and South-East Asia, including Hong Kong, Malaysia, China, Thailand and Singapore. Our venture capital business is focused on (1) establishing a business incubator for start-up and high growth companies to support such companies during critical growth periods and (2) investment opportunities in select start-up and high growth companies.
We believe that a company’s life cycle can be divided into five stages, including the seed stage, start-up stage, expansion stage, mature stage and decline stage.
|●||Seed stage: Financing is needed for assets, and research and development of an initial business concept. The company usually has relatively low costs in developing the business idea. The ownership model is considered and implemented.|
|●||Start-up stage: Financing is needed for product development and initial marketing. Firms in this phase may be in the process of setting up a business or they might have been in operating the business for a short period of time but may not have sold their products commercially. In this phase, costs are increasing due to product development, market research and the need to recruit personnel. Low levels of revenues are starting to generate.|
|●||Expansion stage: Financing is needed for growth and expansion. Capital may be used to finance increased production capacity, product or marketing development or to hire additional personnel. In the early expansion phase, sales and production increases but there is not yet any profit. In the later expansion stage, the business typically needs extra capital in addition to organically generated profit, for further development, marketing or product development.|
We anticipate that most of a company’s funding needs will occur during these first three stages.
We intend for our business incubators to provide valuable support to young, emerging growth and potential high growth companies at critical junctures of their development. For example, our incubators will offer office space at a below market rental rate. We will also provide our expertise, business contacts, introductions and other resources to assist their development and growth. Depending on each individual circumstance, we may also take an active advisory role in our venture capital companies including board representation, strategic marketing, corporate governance, and capital structuring. We believe that there will be potential investment opportunities for us in these start-up companies.
Our business processes for our investment strategy in select start-up and high growth companies is as follows:
|●||Step 1. Generating Deal Flow: We expect to actively search for entrepreneurial firms and to generate deal flow through our business incubator and the personal contacts of our executive team. We also anticipate that entrepreneurs will approach us for financing.|
|●||Step 2. Investment Decision: We will evaluate, examine and engage in due diligence of a prospective portfolio company, including but not limited to product/services viability, market potential and integrity as well as capability of the management. After that both parties arrive at an agreed value for the deal. Following that is a process of negotiation, which if successful, ends with capital transformation and restructuring.|
|●||Step 3. Business Development and Value Adding: In addition to capital contribution, we expect to provide expertise, knowledge and relevant business contacts to the company.|
|●||Step 4. Exit: There are several ways to exit an investment in a company. Common exits are:|
|○||IPO (Initial Public Offering): The company’s shares are offered in a public sale on an established securities market.|
|○||Trade sale (Acquisition): The entire company is sold to another company.|
|○||Secondary sale: The company’s firm sells only part of its shares.|
|○||Buyback or MBO: Either the entrepreneur or the management of the company buys back the company’s shares of the firm.|
|○||Reconstruction, liquidation or bankruptcy: If the project fails the company will restructure or close down the operations.|
Our objective is to achieve a superior rate of return through the eventual and timely disposal of investments. We expect to look for businesses that meet the following criteria:
|●||high growth prospects|
|●||viability of product or service|
|●||ability to convert plans into reality|
|●||justification of venture capital investment and investment criteria|
Our Venture Capital Related Education and Support Services.
In addition to providing venture capital services through GPVC, we also provide educational and support services that we believe will be synergistic with our venture capital business. We have arranged few seminars called the CEO & Business Owners Strategic Session (“CBOSS”) in Malaysia and Singapore for business owners who are interested in the following:
|●||Developing their business globally;|
|●||Expanding business with increased capital funding;|
|●||Creating a sustainable SME business model;|
|●||Accelerating the growth of the business; or|
|●||Significantly increasing company cash flows.|
The objective of the CBOSS seminar is to educate the chief executive officers or business owners on how to acquire “smart capital” and the considerations involved. The seminar includes an introduction to the basic concepts of “smart capital,” “wealth and value creation,” recommendation and planning and similar topics. We believe that this seminar will synergistically support our venture capital business segment.
China Service Centers Expansion
Our expansion strategy is to establish service centers in the Tier 1 cities of Guangzhou, Beijing and Shanghai, where a majority of the HNWIs reside. The centers will cater to customers’ needs by providing and delivering professional, high quality service and assistance before, during, and after the customer’s requirements are met. Our strategy is to rent office space ranging from 180 to 250 square meters (approximate 2,150 to 2,690 square feet) and recruiting a team of 10 people (estimated) in the first year we are present in the city. The plan in each city would be based on various factors, such as property availability and job market conditions. In 2018, we had a strategic alliance with ETR Law Firm, one of the most reputable and largest professional law firms in Guangzhou. We will utilize the strength of ETR Law Firm to enhance our business development. ETR Law Firm will provide comprehensive support and assistance to Greenpro relating to mergers and acquisitions, project management, investment evaluation and other financial services.
Sales and Marketing
We plan to deploy three strategies to market the Greenpro brand: leadership, market segmentation and sales management process development.
|●||Building Brand Image: Greenpro’s marketing efforts will focus on building the image of our extensive expertise and knowledge of our professionals. We intend to conduct a marketing campaign through media visibility, seminars, webinars, and the creation of a wide variety of white papers, newsletters, books, and other information.|
|●||Market segmentation: We plan to devote marketing resources to highly measurable and high return on investment tactics that specifically target those industries and areas where Greenpro has particularly deep experience and capabilities. These efforts typically involve local, regional or national trade show and event sponsorships, targeted direct mail, email, and telemarketing campaigns, and practice and industry specific micro-sites and newsletters in the Asia region.|
|●||Social Media: We plan to begin a social media campaign utilizing blogs, Twitter, Facebook and LinkedIn after we secure sufficient financing. A targeted campaign will be made to the following groups of clients: law firms, auditing firms, consulting firms and small to medium-size enterprises in different industries, including biotechnology, intellectual property, information technologies and real estate.|
Worldwide Wealth Wisdom Development
Worldwide Wealth Wisdom Development (“WWW”) is our marketing and promotional campaign, which is focused on building long-term awareness of our brand. WWW targets the following markets (i) business owners and senior management; (ii) high and medium net worth individuals in China and (iii) financial services providers, such as Certified Financial Planners in China. The campaign involves sharing content, knowledge and information about wealth management, including wealth creation, wealth protection and wealth succession.
The objectives of WWW are:
|1.||To arouse public awareness resulting in the recognition of Greenpro as a well-known advocate of the wealth principles described above;|
|2.||For our philosophy to gain recognition so that our clients are confident and comfortable with our services and trust us;|
|3.||To educate existing clients and potential prospects; and|
|4.||To act as a channel of communication to gather market data and feedback.|
Set forth below are the marketing strategies that we expect to develop.
Awareness & Optimization
|1.||Email Blasts and E-Newsletter|
Email blasts are one of the commonly used tactics to disseminate information. Our email database will be collected through leads generated by online marketing (social media) and promotional events. Future event invitations and monthly/quarterly newsletters will be sent to the email database in order to boost event participation and provide updates on Company development.
|2.||Media PR and News Releases|
Our post event information will be sent to news and media platforms as part of our publicity effort to increase public awareness about our events and developments, and to encourage more participants to join our upcoming events. We will also share our analysis on various industries and industry trends to the media network providers for free. We believe that this strategy will strengthen the relationship between Greenpro and the media network providers.
To generate more leads and subscribers, two to four articles related to wealth management will be shared in our official WeChat account. These articles are tools we use to share content online, through social media platforms such as WeChat, Jinri Toutiao and Facebook, which increases our online presence.
|4.||Online Search Engine Optimization|
Online Search Engine Optimization (SEO) will be used as a supporting strategy to enhance our online presence campaign. We will seek a SEO expert team in China and Malaysia to assist in the promotion of the campaign by using an advertising and keyword tagging strategy to drive traffic to our social media accounts and our company website. The major search engines are Baidu and Google as these are the common search engine worldwide.
Interaction & Conversion
|1.||Seminars and Conferences|
Seminars and conferences will be held once a month to deliver and educate the attendees on wealth management. We target between 80 and 100 attendees each time. We intend to invite professionals and strategic partners to share their ideas, resources and knowhow in the seminars and conferences. The seminars and conferences will focus on our three core wealth management principles, namely “Wealth Creation, Wealth Protection and Wealth Succession”.
|2.||Private Events by Invitation|
Private and exclusive events are planned to be held quarterly with a target between 30 and 40 attendees. These events are exclusive and by-invitation only, at which we will share insights into our services and explain to attendees how they can proceed with wealth management planning.
|3.||Small Group Meet Ups and Networking|
Small Group Meet Ups will be held twice a month targeting the public with an estimated five to ten attendees per session. The objective of these sessions is to encourage idea exchanges, to provide a platform for networking and potentially future collaboration opportunities, and foster better understanding between the participants and us, as well as among themselves.
We believe the main drivers for the growth of our business are the products and services together with the resources such as an office network, professional staff members and operational tools to make the advisory and consulting business more competitive.
We intend to assist our clients in the cost-effective preparation of their financial statements and provide security based on such financial information since the data will be stored in the cloud system. We anticipate a market with growing needs in East Asia and South-East Asia. We believe that there is currently an increasing need for enterprises in different industries to maximize their performance with cost-effective methods. We believe our services will create numerous competitive advantages for our clients. We believe that with us handling the administrative and logistic support, our clients can focus on developing their businesses and expanding their own client portfolio.
Our revenues are generated from clients located globally, including those from Hong Kong, China, Malaysia, Singapore, Indonesia, Thailand, Australia, Japan, Taiwan, Russia and the United States. Our venture capital business will initially focus on Hong Kong and South-East Asia start-ups and high growth companies. We hope to generate deal flow through personal contacts of our management team as well as through our business incubator.
We generated revenues of 4,213,360 during the fiscal year ended December 31, 2018 and $3,916,372 during the fiscal year ended December 31, 2017. Our venture capital business accounted for approximately 36% percent of our revenues. We are not a party to any long-term agreements with our customers.
We operate in a mature, competitive industry. We consider our focus to be on a niche market of small and medium-sized businesses. Competition in the general field of business advisory services is quite intense, particularly in Hong Kong. We face competition principally from established law firms and consulting service providers in the corporate finance industry, such as Marbury, King & Wood Mallesons, QMIS Financial Group, First Asia Finance Group Limited and their respective affiliates, as well as from certain accounting firms, including those that specialize in a tax planning and corporate restructuring. The competition in China and Malaysia is not as fierce as in Hong Kong. Our major competitors in China are JP Investment Group and QMIS Financial Group while our major competitors in Malaysia are Global Bridge Management Sdn. Bhd. and QMIS Financial Group. These competitors generate significant traffic and have established brand recognition and financial resources. New or existing competition that uses a business model that is different from our business model may pressure us to change so that we can remain competitive.
We believe that the principal competitive factors in our market include quality of analysis; applicability and efficacy of recommendations; strength and depth of relationships with clients; ability to meet the changing needs of current and prospective clients; and service scope. By utilizing our competitive strengths, we believe that we have a competitive edge over other competitors due to the breadth of our service offerings, one stop convenience, pricing, marketing expertise, coverage network, service levels, track record, brand and reputation. We are confident we can retain and enlarge our market share.
We intend to protect our investment in the research and development of our products and technologies. We intend to seek the widest possible protection for significant product and process developments in our major markets through a combination of trade secrets, trademarks, copyrights and patents, if applicable. We anticipate that the form of protection will vary depending upon the level of protection afforded by a particular jurisdiction. Currently, our revenue is derived principally from our operations in Hong Kong, China and Malaysia, where intellectual property protection may be limited and difficult to enforce. In such instances, we may seek protection of our intellectual property through measures taken to increase the confidentiality of intellectual property.
We have registered trademarks as a means of protecting the brand names of our companies and products. We intend to protect our trademarks against infringement and also seek to register design protection where appropriate. Currently, there are six trademarks registered under the name of Greenpro Resources (HK) Limited.
|Trademark Owner||Country / Territory||Registration Date||Brief Description|
Greenpro Resources (HK)
|Hong Kong||August 11, 2010, June 25, 2013 and December 3, 2014||Advertising, business management, business administration, office functions, research services, education, training|
|The U.S.||February 2, 2016||Business administration services, Business assistance, management and information services, Business knowledge management and consulting services|
|China||December 28, 2014||Advertising, business management, business administration, office functions and research services|
|Singapore||July 22, 2013||Advisory services related to business management and administration, computer software and security|
We rely on trade secrets and un-patentable know-how that we seek to protect, in part, by confidentiality agreements. Our policy is to require all employees to execute confidentiality agreements upon the commencement of employment with us. These agreements provide that all confidential information developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific limited circumstances. The agreements also provide that all inventions conceived by the individual while rendering services to us shall be assigned to us as the exclusive property of our company. There can be no assurance, however, that all persons who we desire to sign such agreements will sign, or if they do, that these agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets or unpatentable know-how will not otherwise become known or be independently developed by competitors.
We provide our Package Solution initially in Hong Kong, China and Malaysia, which we believe are locations that would need outsourcing support services. Further, we believe these markets are the central and regional markets for many customers doing cross border business in Asia. We target those customers from East Asia and South-East Asia doing international business and plan to provide our Package Solution to meet their needs. Our planned Packaged Solution will be structured in Hong Kong but services may be outsourced to lower cost jurisdictions such as Malaysia and China, which encourage and welcome outsourcing services.
The following regulations are the laws and regulations that may be applicable to us:
Our businesses located in Hong Kong are subject to the general laws in Hong Kong governing businesses, including labor, occupational safety and health, general corporations, intellectual property and other similar laws. Because our website is maintained through the server in Hong Kong, we expect that we will be required to comply with the rules and regulations and Hong Kong governing the data usage and regular terms of service applicable to our potential customers. As the information of our potential customers is preserved in Hong Kong, we will need to comply with the Hong Kong Personal Data (Privacy) Ordinance (Cap 486).
The Employment Ordinance is the main piece of legislation governing conditions of employment in Hong Kong. It covers a comprehensive range of employment protection and benefits for employees, including Wage Protection, Rest Days, Holidays with Pay, Paid Annual Leave, Sickness Allowance, Maternity Protection, Statutory Paternity Leave, Severance Payment, Long Service Payment, Employment Protection, Termination of Employment Contract, Protection Against Anti-Union Discrimination.
An employer must also comply with all legal obligations under the Mandatory Provident Fund Schemes Ordinance, (Cap 485). These include enrolling all qualifying employees in Mandatory Provident Fund (“MPF”) schemes and making MPF contributions for them. Except for exempt persons, employers should enroll both full-time and part-time employees who are at least 18 but under 65 years of age in an MPF scheme within the first 60 days of employment. The 60-day employment rule does not apply to casual employees in the construction and catering industries.
We are required to make MPF contributions for our Hong Kong employees once every contribution period (generally the wage period). Employers and employees are each required to make regular mandatory contributions of 5% of the employee’s relevant income to an MPF scheme, subject to the minimum and maximum relevant income levels. For a monthly-paid employee, the minimum and maximum relevant income levels are $7,100 and $30,000 respectively.
We are in compliance with the above applicable ordinances and regulations in Hong Kong and have not been involved any lawsuit or prosecuted by the local authority resulting from any breach of the ordinances and regulations.
Our businesses located in Malaysia are subject to the general laws in Malaysia governing businesses including labor, occupational safety and health, general corporations, intellectual property and other similar laws including the Computer Crime Act 1997 and The Copyright (Amendment) Act 1997. We believe that the focus of these laws is censorship in Malaysia, however we believe this does not impact our businesses because the censorship focus is on media controls and does not relate to cloud base technology which we plan to use.
Our real estate investments are subject to extensive local, city, county and state rules and regulations regarding permitting, zoning, subdivision, utilities and water quality as well as federal rules and regulations regarding air and water quality and protection of endangered species and their habitats. Such regulation may result in higher than anticipated administrative and operational costs.
We are in compliance with the above applicable ordinances and regulations in Malaysia and have not involved any lawsuit or prosecuted by the local authority resulting from any breach of the ordinances and regulations.
A portion of our acquired businesses are located in China and subject to the general laws in China governing businesses including labor, occupational safety and health, general corporations, intellectual property and other similar laws.
The Employment Contract Law was promulgated by the National People’s Congress’ Standing Committee on June 29, 2007 and took effect on January 1, 2008. The Employment Contract Law governs labor relations and employment contracts (including the entry into, performance, amendment, termination and determination of employment contracts) between domestic enterprises (including foreign-invested companies), individual economic organizations and private non-enterprise units (collectively referred to as the “employers”) and their employees.
a. Execution of employment contracts
Under the Employment Contract Law, an employer is required to execute written employment contracts with its employees within one month from the commencement of employment. In the event of contravention, an employee is entitled to receive double salary for the period during which the employer fails to execute an employment contract. If an employer fails to execute an employment contract for more than 12 months from the commencement of the employee’s employment, an employment contract would be deemed to have been entered into between the employer and employee for a non-fixed term.
b. Right to non-fixed term contracts
Under the Employment Contract Law, an employee may request a non-fixed term contract without an employer’s consent to renew. In addition, an employee is also entitled to a non-fixed term contract with an employer if he has completed two fixed term employment contracts with such employer; however, such employee must not have committed any breach or have been subject to any disciplinary actions during his employment. Unless the employee requests to enter into a fixed term contract, an employer who fails to enter into a non-fixed term contract pursuant to the Employment Contract Law is liable to pay the employee double salary from the date the employment contract is renewed.
c. Compensation for termination or expiry of employment contracts
Under the Employment Contract Law, employees are entitled to compensation upon the termination or expiry of an employment contract. Employees are entitled to compensation even in the event the employer (i) has been declared bankrupt; (ii) has its business license revoked; (iii) has been ordered to cease or withdraw its business; or (iv) has been voluntarily liquidated. Where an employee has been employed for more than one year, the employee will be entitled to such compensation equivalent to one month’s salary for every completed year of service. Where an employee has been employed for less than one year, such employee will be deemed to have completed one full year of service.
d. Trade union and collective employment contracts
Under the Employment Contract Law, a trade union may seek arbitration and litigation to resolve any dispute arising from a collective employment contract; provided that such dispute failed to be settled through negotiations. The Employment Contract Law also permits a trade union to enter into a collective employee contract with an employer on behalf of all the employees.
Where a trade union has not been formed, a representative appointed under the recommendation of a high-level trade union may execute the collective employment contract. Within districts below county level, collective employment contracts for industries such as those engaged in construction, mining, food and beverage and those from the service sector, etc., may be executed on behalf of employees by the representatives from the trade union of each respective industry. Alternatively, a district-based collective employment contract may be entered into.
As a result of the Employment Contract Law, all of our employees have executed standard written employment agreements with us. We have not experienced any significant labor disputes or any difficulties in recruiting staff for our operations.
On October 28, 2010, the National People’s Congress of China promulgated the PRC Social Insurance Law, which became effective on July 1, 2011. In accordance with the PRC Social Insurance Law, the Interim Regulations on the Collection and Payment of Social Security Fund and other relevant laws and regulations, China establishes a social insurance system including basic pension insurance, basic medical insurance, work-related injury insurance, unemployment insurance and maternity insurance. An employer shall pay the social insurance for its employees in accordance with the rates provided under relevant regulations and shall withhold the social insurance that should be assumed by the employees. The authorities in charge of social insurance may request an employer’s compliance and impose sanctions if such employer fails to pay and withhold social insurance in a timely manner. Under the Regulations on the Administration of Housing Fund effective in 1999, as amended in 2002, PRC companies must register with applicable housing fund management centers and establish a special housing fund account in an entrusted bank. Both PRC companies and their employees are required to contribute to the housing funds.
The Ministry of Human Resources and Social Security promulgated the Interim Provisions on Labor Dispatch on January 24, 2014. The Interim Provisions on Labor Dispatch, which became effective on March 1, 2014, sets forth that labor dispatch should only be applicable to temporary, auxiliary or substitute positions. Temporary positions shall mean positions subsisting for no more than six months, auxiliary positions shall mean positions of non-major business that serve positions of major businesses, and substitute positions shall mean positions that can be held by substitute employees for a certain period of time during which the employees who originally hold such positions are unable to work as a result of full-time study, being on leave or other reasons. The Interim Provisions further provides that, the number of the dispatched workers of an employer shall not exceed 10% of its total workforce, and the total workforce of an employer shall refer to the sum of the number of the workers who have executed labor contracts with the employer and the number of workers who are dispatched to the employer.
Foreign Exchange Control and Administration
Foreign exchange in China is primarily regulated by:
|●||The Foreign Currency Administration Rules (1996), as amended; and|
|●||The Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.|
Under the Foreign Currency Administration Rules, if documents certifying the purposes of the conversion of RMB into foreign currency are submitted to the relevant foreign exchange conversion bank, the RMB will be convertible for current account items, including the distribution of dividends, interest and royalty payments, and trade and service-related foreign exchange transactions. Conversion of RMB for capital account items, such as direct investment, loans, securities investment and repatriation of investment, however, is subject to the approval of SAFE or its local counterpart.
Under the Administration Rules for the Settlement, Sale and Payment of Foreign Exchange, foreign-invested enterprises may only buy, sell and/or remit foreign currencies at banks authorized to conduct foreign exchange business after providing valid commercial documents and, in the case of capital account item transactions, obtaining approval from SAFE or its local counterpart.
As an offshore holding company with a PRC subsidiary, we may (i) make additional capital contributions to our PRC subsidiaries, (ii) establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, (iii) make loans to our PRC subsidiaries or consolidated affiliated entities, or (iv) acquire offshore entities with business operations in China in offshore transactions. However, most of these uses are subject to PRC regulations and approvals. For example:
|●||Capital contributions to our PRC subsidiaries, whether existing or newly established ones, must be approved by the Ministry of Commerce or its local counterparts;|
|●||Loans by us to our PRC subsidiaries, each of which is a foreign-invested enterprise, to finance their activities cannot exceed statutory limits and must be registered with SAFE or its local branches; and|
|●||Loans by us to our consolidated affiliated entities, which are domestic PRC entities, must be approved by the National Development and Reform Commission and must also be registered with SAFE or its local branches.|
On August 29, 2008, SAFE promulgated the Circular on the Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-invested Enterprises, or “Circular 142”. On March 30, 2015, SAFE issued the Circular of the State Administration of Foreign Exchange Concerning Reform of the Administrative Approaches to Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or “Circular 19”, which became effective on June 1, 2015, to regulate the conversion by foreign invested enterprises, or FIEs, of foreign currency into RMB by restricting how the converted RMB may be used. Circular 19 requires that RMB converted from the foreign currency-dominated capital of a FIE shall be managed under the Accounts for FX settlement and pending payment. The expenditure scope of such Accounts includes expenditure within the business scope, payment of funds for domestic equity investment and RMB deposits, repayment of the RMB loans after completed utilization and so forth. A FIE shall truthfully use its capital by itself within the business scope and shall not, directly or indirectly, use its capital or RMB converted from the foreign currency-dominated capital for (i) expenditure beyond its business scope or expenditure prohibited by laws or regulations, (ii) disbursing RMB entrusted loans (unless permitted under its business scope), repaying inter-corporate borrowings (including third-party advance) and repaying RMB bank loans already refinanced to any third party. Where a FIE, other than a foreign-invested investment company, foreign-invested venture capital enterprise or foreign-invested equity investment enterprise, makes domestic equity investment by transferring its capital in the original currency, it shall obey the current provisions on domestic re-investment. Where such a FIE makes domestic equity investment by its RMB conversion, the invested enterprise shall first go through domestic re-investment registration and open a corresponding Accounts for FX settlement and pending payment, and the FIE shall thereafter transfer the conversion to the aforesaid Account according to the actual amount of investment. In addition, according to the Regulations of the People’s Republic of China on Foreign Exchange Administration, which became effective on August 5, 2008, the use of foreign exchange or RMB conversion may not be changed without authorization.
Violations of the applicable circulars and rules may result in severe penalties, including substantial fines as set forth in the Foreign Exchange Administration Regulations.
In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will always be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans to our PRC subsidiary or future capital contributions by us to our PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
Currently, we are in compliance with the above applicable ordinances and regulations in China and have not involved any lawsuit or prosecuted by the local authority resulting from any breach of the ordinances and regulations.
We do not current maintain property, business interruption and casualty insurance. As our business matures, we expect to obtain such insurance in accordance with customary industry practices in Malaysia, Hong Kong and China, as applicable.
Our businesses are not subject to seasonality.
As of April 2, 2019, we have 70 employees, located in the following territories:
|Country/Territory||Number of Employees|
As a result of the Employment Contract Law, all of our employees in China have executed standard written employment agreements with us.
We are required to contribute to the Employees Provident Fund under a defined contribution pension plan for all eligible employees in Malaysia between the ages of eighteen and fifty-five. We are required to contribute a specified percentage of the participant’s income based on their ages and wage level. The participants are entitled to all of our contributions together with accrued returns regardless of their length of service with the company. For the years ended December 31, 2018 and 2017, the contributions are $46,725 and $35,135, respectively.
We are required to contribute to the MPF for all eligible employees in Hong Kong between the ages of eighteen and sixty-five. We are required to contribute a specified percentage of the participant’s income based on their ages and wage level. For the years ended December 31, 2018 and 2017, the MPF contributions by the Company were $38,691 and $31,717, respectively. We have not experienced any significant labor disputes or any difficulties in recruiting staff for our operations.
We are required to contribute to the Social Insurance Schemes and Housing Fund Schemes for all eligible employees in PRC. For the years ended December 31, 2018 and 2017, the contributions were $24,091 and $16,306, respectively.
Our principal executive office is located at Room 1701-1703, 17/F., The Metropolis Tower, 10 Metropolis Drive, Hung Hom, Kowloon, Hong Kong. Our principal telephone number is +852 3111 7718. Our website is at: http://www.greenprocapital.com . The information contained on our website is not, and should not be interpreted to be, a part of this Form 10-K.
Future Development Plan
Greenpro is in the process of carrying out the following development plan.
ADAQ Development. ADAQ is a next generation online financial information platform that facilitates connecting private High-Growth Emerging Companies with access to potential investors and synergetic companies. ADAQ is dedicated to equipping emerging growth companies in the Asia Pacific region with the guidance and information to identify, build and stream their sustainable core values. In addition, it offers an acceleration program to incubate and assist companies to accelerate the process by which they seek to list on international exchanges such as New York Stock Exchange (NYSE), NASDAQ and Hong Kong Stock Exchange (HKEX).
|●||ADAQ has three major functions:|
1. Corporate Value Building Program
2. Online platform and acceleration process to International Capital Market Listing
3. Online Financial Information Market
We intend to strengthen the development of ADAQ as an acceleration platform to assist high growth emerging companies in the ASEAN regions covering Malaysia, Thailand, Singapore, Indonesia, Myanmar, Laos and Vietnam) and China to obtain funding and prepare for an IPO. A growing number of companies across South East Asia and the “Greater Bay Area”, (the Chinese government’s plan to link the cities of Hong Kong, Macau, Guangzhou, Shenzhen, Zhuhai, Dongguan, Foshan, Zhongshan, Jiangmen, Zhaoqing and Huizhou (i.e. “2+9”) into an integrated economic and business hub) are interested in including their listing on the ADAQ market platform. The successful development of the platform will heighten the prospects of Greenpro’s venture capital projects achieving success while aiming to widen market coverage to source for new potential projects to create more business value.
|●||Wealth Management Portfolio Development. The increase in the number of High Net Worth Individuals in the Asia Pacific Region has created opportunities and needs for cross border wealth management services. Leveraging our competitive advantages with integrated financial services and strategic offices, we are looking forward to enhancing our strategic development in wealth management, fund management and asset management businesses. We continue to look for partnerships to explore the potential of wealth management, fund management and asset management services, to combine with the assistance from our affiliates to provide customized wealth creation, wealth protection and wealth succession solutions for medium, high and ultra-high net worth individuals/families in the Asian region. We also expect to place more efforts into the development of our Wealth Network Database through Greenpro Synergy Network (G.S.N.) – a wealth and investment community focusing on wealth related information sharing.|
For our long-term plan and development, we are looking forward to initiating the “Greenpro Capital Tower” plan in ASEAN as an effort to further develop our brand, to strengthen our operational and client base with stronger customers and market confidence. We are currently in the planning stage to build a 20-storey building located in the Commercial Business District of Malaysia as our ASEAN headquarters, enabling the market in the region to have better access to our services while also strengthening our market visibility. In addition, we plan to continue to grow through mergers and acquisitions of related services to enhance our services horizontally and vertically. We are continuously sourcing synergetic and licensed financial institutions to strengthen our capabilities and scope of our services with the aim to widen our market coverage.
ITEM 1A. RISK FACTORS
You should carefully consider the risks described below and elsewhere in this report, which could materially and adversely affect our business, results of operations or financial condition. Our business faces significant risks and the risks described below may not be the only risks we face. Additional risks not presently known to us or that we currently believe are immaterial may materially affect our business, results of operations, or financial condition. If any of these risks occur, the trading price of our common stock could be decline and you may lose all or part of your investment.
Risks Related to our Business
We have a limited operating history that you can use to evaluate us, and the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company.
We were incorporated in Nevada in July 2013. For the year ended December 31, 2018 and 2017, we have generated $4,213,360 and $3,916,372, respectively, in revenues and incurred net loss of $8,325,163 and $3,116,909, respectively. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small company starting a new business enterprise and the highly competitive environment in which we are operating. We have a limited operating history upon which an evaluation of our future success or failure can be made. Our ability to achieve and maintain profitability and positive cash flow is dependent upon:
|●||our ability to market our product and services;|
|●||our ability to generate revenues; and|
|●||our ability to raise the capital necessary to continue marketing and developing our product.|
We are not currently profitable and may not become profitable.
As of December 31, 2018, we had $2,172,048 cash on hand and our Greenpro’s common stockholders’ equity was $4,499,307. We have generated $4,213,360 in revenue in 2018 and have incurred operating loss of $4,218,999 and net loss of $8,325,163. We expect to incur losses and negative operating cash flows for the foreseeable future, and we may not achieve profitability. We also expect to experience negative cash flow for the foreseeable future due to operating losses and capital expenditures. As a result, we will need to generate significant revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our business.
We may not be able to continue to operate as a going concern.
For the year ended December 31, 2018, the Company incurred a net loss of $8,325,163 and used cash in operating activities of $1,001,421, and at December 31, 2018, the Company had a working capital deficiency of $541,221. In addition, the Company’s independent registered public accounting firm, in their report on the Company’s December 31, 2018 audited financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company’s ability to continue as a going concern is dependent upon improving its profitability and the continuing financial support from its shareholders. Management believes the existing shareholders or external financing will provide the additional cash to meet the Company’s obligations as they become due. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its stock holders, in the case of equity financing.
Our operating results may prove unpredictable which could negatively affect our profit.
Our operating results are likely to fluctuate significantly in the future due to a variety of factors, many of which we have no control. Factors that may cause our operating results to fluctuate significantly include: our inability to generate enough working capital from future equity sales; the level of commercial acceptance by clients of our services; fluctuations in the demand for our service the amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure and general economic conditions. If realized, any of these risks could have a material adverse effect on our business, financial condition and operating results.
If we are unable to gain any significant market acceptance for our service or establish a significant market presence, we may be unable to generate sufficient revenue to continue our business.
Our growth strategy is substantially dependent upon our ability to successfully market our service to prospective clients. However, our planned services may not achieve significant acceptance. Such acceptance, if achieved, may not be sustained for any significant period of time. Failure of our services to achieve or sustain market acceptance could have a material adverse effect on our business, financial conditions and the results of our operations.
Management’s ability to implement the business strategy may be slower than expected and we may be unable to generate a profit.
Our business plans, including offering a cloud accounting system and consulting services, may not occur. Our growth strategy is subject to significant risks which you should carefully consider before purchasing our shares.
Our services may be slow to achieve profitability, or may not become profitable at all, which will result in losses. There can be no assurance that we will succeed.
We may be unable to enter into our intended markets successfully. The factors that could affect our growth strategy include our success in (a) developing our business plan, (b) obtaining our clients, (c) obtaining adequate financing on acceptable terms, and (d) adapting our internal controls and operating procedures to accommodate our future growth.
Our systems, procedures and controls may not be adequate to support the expansion of our business operations. Significant growth will place managerial demands on all aspects of our operations. Our future operating results will depend substantially upon our ability to manage changing business conditions and to implement and improve our technical, administrative and financial controls and reporting systems.
Competitors may enter this sector with superior service which would affect our business adversely.
We believe that barriers to entry are low to medium because of economies of scale, cost advantage and brand identity. Potential competitors may enter this sector with superior services. This would have an adverse effect upon our business and our results of operations. In addition, a high level of support is critical for the successful marketing and recurring sales of our services. Despite having accumulated customers from the past four years, we may still need to continue to improve our platform and software in order to assist potential customers in using our platform, and we also need to provide effective support to future clients. If we are unable to increase customer support and improve our platform in the face of increasing competition, with the increase in competition, our ability to sell our services to potential customers could adversely affect our brand, which would harm our reputation.
Our use of open source and third-party software could impose limitations on our ability to commercialize our services.
We intend to incorporate open source software into our platform. Although we monitor our use of open source closely, the terms of many open source licenses have not been interpreted by U.S. courts or jurisdictions elsewhere, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our services. We could also be subject to similar conditions or restrictions should there be any changes in the licensing terms of the open source software incorporated into our products. In either event, we could be required to seek licenses from third parties in order to continue our services in the event re-engineering cannot be accomplished on a timely or successful basis, any of which could adversely affect our business, operating results and financial condition.
We also intend to incorporate certain third-party technologies, including software programs, into our website and may need to utilize additional third-party technologies in the future. However, licenses to relevant third-party technology may not continue to be available to us on commercially reasonable terms, or at all. Therefore, we could face delays in releases of our platform until equivalent technology can be identified, licensed or developed, and integrated into our current products. These delays, if they occur, could materially adversely affect our business, operating results and financial condition. Any disruption in our access to software programs or third-party technologies could result in significant delays in releases of our platform and could require substantial effort to locate or develop a replacement program. If we decide in the future to incorporate into our products any other software program licensed from a third party, and the use of such software program is necessary for the proper operation of our appliances, then our loss of any such license would similarly adversely affect our ability to release our products in a timely fashion.
The security of our computer systems may be compromised and harm our business.
A significant portion of our business operations is conducted through use of our computer network. Although we intend to implement security systems and procedures to protect the confidential information stored on these computer systems, experienced computer programmers and hackers may be able to penetrate our network security and misappropriate our confidential information or that of third parties. As well, they may be able to create system disruptions, shutdowns or effect denial of service attacks. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious software programs that attack our networks or client computers, or otherwise exploit any security vulnerabilities, or that misappropriate and distribute confidential information stored on these computer systems. Any of the foregoing could result in damage to our reputation and customer confidence in the security of our products and services and could require us to incur significant costs to eliminate or alleviate the problem. Additionally, our ability to transact business may be affected. Such damage, expenditures and business interruption could seriously impact our business, financial condition and results of operations.
Adverse developments in our existing areas of operation could adversely impact our results of operations, cash flows and financial condition.
Our operations are focused on utilizing our sales efforts which are principally located in South-East Asia. As a result, our results of operations, cash flows and financial condition depend upon the demand for our services in these regions. Due to the lack of broad diversification in industry type and geographic location, adverse developments in our current segment of the midstream industry, or our existing areas of operation, could have a significantly greater impact on our results of operations, cash flows and financial condition than if our operations were more diversified.
We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. An “emerging growth company” can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to follow the extended transition period, and as a result, we will delay adoption of certain new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.
Risks Related to Doing Business in East Asia and South-East Asia
Our contractual arrangements may not be as effective in providing control over the variable interest entities as direct ownership.
We rely on contractual arrangements with our variable interest entities to hold part of our assets in Hong Kong. For a description of these contractual arrangements, see “Acquisition and Reorganization History - VIE Structure and Arrangements.” These contractual arrangements may not be as effective as direct ownership in providing us with control over our variable interest entities.
If we had direct ownership of the variable interest entities, we would be able to exercise our rights as an equity holder directly to effect changes in the boards of directors of those entities, which could effect changes at the management and operational level. Under our contractual arrangements, we may not be able to directly change the members of the boards of directors of these entities and would have to rely on the variable interest entities and the variable interest entity equity holders to perform their obligations in order to exercise our control over the variable interest entities. The variable interest entity equity holders may have conflicts of interest with us or our shareholders, and they may not act in the best interests of our company or may not perform their obligations under these contracts. For example, our variable interest entities and their respective equity holders could breach their contractual arrangements with us by, among other things, failing to conduct their operations, including maintaining our websites and using our domain names and trademarks which the relevant variable interest entities have exclusive rights to use, in an acceptable manner or taking other actions that are detrimental to our interests. Pursuant to the call option, we may replace the equity holders of the variable interest entities at any time pursuant to the contractual arrangements. Consequently, the contractual arrangements may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership.
Our business is subject to the risks of international operations.
Substantially all of our business operations are conducted in South-East Asia. Accordingly, our results of operations, financial condition and prospects are subject to a significant degree to economic, political and legal developments in the Asian countries we intend to develop business. Following the closing of our initial public offering, we will derive a significant portion of our revenue and earnings from the operation in Hong Kong, our principal business place and also in Malaysia and other South-East Asian countries. Operating in multiple foreign countries involves substantial risk. For example, our business activities subject us to a number of laws and regulations, such as anti-corruption laws, tax laws, foreign exchange controls and cash repatriation restrictions, data privacy and security requirements, labor laws, intellectual property laws, privacy laws, and anti-competition regulations. As we expand into additional countries, the complexity inherent in complying with these laws and regulations increases, making compliance more difficult and costly and driving up the costs of doing business in foreign jurisdictions. Any failure to comply with foreign laws and regulations could subject us to fines and penalties, make it more difficult or impossible to do business in that country and harm our reputation.
We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the foreign corrupt practices act could have a material adverse effect on our business.
We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business. We will have operations, agreements with third parties and make sales in South-East Asia, which may experience corruption. Our proposed activities in Asia create the risk of unauthorized payments or offers of payments by one of the employees, consultants, or sales agents of our Company, because these parties are not always subject to our control. It will be our policy to implement safeguards to discourage these practices by our employees. Also, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, or sales agents of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.
You may have difficulty enforcing judgments against us.
We are a Nevada corporation and most of our assets are and will be located outside of the United States. Almost all of our operations will be conducted in Hong Kong, Malaysia and the PRC. In addition, our officers and directors are nationals and residents of a country other than the United States. All of their assets are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon them. It may also be difficult for you to enforce in U.S. courts judgments on the civil liability provisions of the U.S. federal securities laws against us and our officer and director, since he is not a resident in the United States. In addition, there is uncertainty as to whether the courts of Hong Kong or other Asian countries would recognize or enforce judgments of U.S. courts.
Payment of dividends is subject to restrictions under Nevada, Hong Kong, Malaysia and the PRC laws.
Under Nevada law, we may only pay dividends subject to our ability to service our debts as they become due and provided that our assets will exceed our liabilities after the dividend. Our ability to pay dividends will therefore depend on our ability to generate sufficient profits. Under the Hong Kong Companies Ordinance, we are permitted to make payments of dividends from distributable profits (that is, accumulated realized profits less its accumulated realized losses). Under the Laws of Malaysia, we may only make a distribution to the shareholders out of our profits available if we are solvent. The Company is regarded as solvent if the Company is able to pay its debts as and when the debts become due within twelve months immediately after the distribution is made. In addition, because of the various rules applicable to our operations in China and the regulations on foreign investments as well as the applicable tax law, we may be subject to further limitations on our ability to declare and pay dividends to our shareholders.
We can give no assurance that we will declare dividends of any amounts, at any rate or at all in the future. The declaration of future dividends, if any, will be at the discretion of our board of directors and will depend upon our future operations and earnings, capital requirements, general financial conditions, legal and contractual restrictions and other factors that our board of directors may deem relevant.
We face the risk that changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and the profitability of such business.
The PRC’s economy is in a transition from a planned economy to a market-oriented economy subject to five-year and annual plans adopted by the central government that set national economic development goals. Policies of the PRC government can have significant effects on the economic conditions of the PRC. The PRC government has confirmed that economic development will follow the model of a market economy. Under this direction, we believe that the PRC will continue to strengthen its economic and trading relationships with foreign countries and business development in the PRC will follow market forces. While we believe that this trend will continue, we cannot assure you that this will be the case. A change in policies by the PRC government could adversely affect our interests by, among other factors: changes in laws, regulations or the interpretation thereof, confiscatory taxation, restrictions on currency conversion, imports or sources of supplies, or the expropriation or nationalization of private enterprises. Although the PRC government has been pursuing economic reform policies for more than two decades, we cannot assure you that the government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting the PRC’s political, economic and social environment.
Introduction of new laws or changes to existing laws by the PRC government may adversely affect our business.
The PRC legal system is a codified legal system made up of written laws, regulations, circulars, administrative directives and internal guidelines. Unlike common law jurisdictions like the U.S., decided cases (which may be taken as reference) do not form part of the legal structure of the PRC and thus have no binding effect on subsequent cases with similar issues and fact patterns. Furthermore, in line with its transformation from a centrally-planned economy to a more free market-oriented economy, the PRC government is still in the process of developing a comprehensive set of laws and regulations. As the legal system in the PRC is still evolving, laws and regulations or the interpretation of the same may be subject to further changes. For example, the PRC government may impose restrictions on the amount of service fees that may be payable by municipal governments to wastewater and sludge treatment service providers. Also, the PRC central and municipal governments may impose more stringent environmental regulations which would affect our ability to comply with, or our costs to comply with, such regulations. Such changes, if implemented, may adversely affect our business operations and may reduce our profitability
The Hong Kong economy may be vulnerable to slowdown in Chinese activity and world trade.
Since Hong Kong is now closely linked to China with respect to economic and political development, Hong Kong economic and political development will be more likely to be affected by China’s development. As there are more and more mainland Chinese companies listed on The Hong Kong Stock Exchange and industries in general are becoming delocalized to mainland China, the Hong Kong stock market and local economy will become more vulnerable to the economic development in the mainland China. If the economic development in China becomes unstable, the Hong Kong economy will be negatively affected. Besides, the Hong Kong economy is externally oriented and highly dependent on trade with the rest of the world. Our business may be subject to the cyclical effect of the economic development in the world.
We face the risk that changes in the world economy and political developments in Malaysia may adversely affect our business.
In recent years, there have been political instabilities in Malaysian government which may reduce investors’ confidence, result in reduction in foreign direct investment and weigh on consumer and business sentiment, depressing growth. In addition, the Malaysian economy is reliant on external demand. Any possible worsening global demand is likely to hinder the export development and any economic weakness may possibly lead to market intervention and the government may impose capital controls. Under these circumstances, our business operation may be adversely affected.
Together, our Chief Executive Officer, Mr. Lee Chong Kuang, and our Chief Financial Officer, Mr. Loke Che Chan Gilbert, own a large percentage of our outstanding stock and could significantly influence the outcome of our corporate matters.
Mr. Lee Chong Kuang, our CEO, beneficially owns 32.26% of our outstanding shares of common stock, and Mr. Loke Che Chan Gilbert, our CFO, beneficially owns 32.26% of our outstanding shares of common stock. As a result, Messrs. Lee and Loke are able to exercise significant influence over all matters that require us to obtain shareholder approval, including the election of directors to our board and approval of significant corporate transactions that we may consider, such as a merger or other sale of our company or its assets. This concentration of ownership in our shares by executive officers will limit the other shareholders’ ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.
Future sales of substantial amounts of the shares of common stock by existing shareholders could adversely affect the price of our common stock.
If our existing shareholders sell substantial amounts of the shares, then the market price of our common stock could fall. Such sales by our existing shareholders might make it more difficult for us to issue new equity or equity-related securities in the future at a time and place we deem appropriate. If any existing shareholders sell substantial amounts of shares, the prevailing market price for our shares could be adversely affected.
The market price of our shares is likely to be highly volatile and subject to wide fluctuations in response to factors such as:
|●||variations in our actual and perceived operating results;|
|●||news regarding gains or losses of customers or partners by us or our competitors;|
|●||news regarding gains or losses of key personnel by us or our competitors;|
|●||announcements of competitive developments, acquisitions or strategic alliances in our industry by us or our competitors;|
|●||changes in earnings estimates or buy/sell recommendations by financial analysts;|
|●||general market conditions or other developments affecting us or our industry; and|
|●||the operating and stock price performance of other companies, other industries and other events or factors beyond our control.|
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of the shares.
In the event that our shares trade under $5.00 per share they will be considered penny stock. Trading in penny stocks has many restrictions and these restrictions could severely affect the price and liquidity of our shares.
If our stock trades below $5.00 per share, our stock would be known as a “penny stock”, which is subject to various regulations involving disclosures to be given to you prior to the purchase of any penny stock. The U.S. Securities and Exchange Commission (the “SEC”) has adopted regulations which generally define a “penny stock” to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Depending on market fluctuations, our common stock could be considered to be a “penny stock”. A penny stock is subject to rules that impose additional sales practice requirements on broker/dealers who sell these securities to persons other than established Members and accredited investors. For transactions covered by these rules, the broker/dealer must make a special suitability determination for the purchase of these securities. In addition, he must receive the purchaser’s written consent to the transaction prior to the purchase. He must also provide certain written disclosures to the purchaser. Consequently, the “penny stock” rules may restrict the ability of broker/dealers to sell our securities and may negatively affect the ability of holders of shares of our common stock to resell them. These disclosures require you to acknowledge that you understand the risks associated with buying penny stocks and that you can absorb the loss of your entire investment. Penny stocks are low priced securities that do not have a very high trading volume. Consequently, the price of the stocks is often volatile, and you may not be able to buy or sell the stock when you want to.
We do not anticipate paying cash dividends on our common stock in the foreseeable future.
We do not anticipate paying cash dividends in the foreseeable future. Presently, we intend to retain all of our earnings, if any, to finance development and expansion of our business. Consequently, your only opportunity to achieve a positive return on your investment in us will be if the market price of our common stock appreciates.
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
Our principal executive office is located at Room 1701-1703, 17/F., The Metropolis Tower, 10 Metropolis Drive, Hung Hom, Kowloon, Hong Kong. We are subject to a three-year operating lease from May 1, 2018 and expiring on April 30, 2021.
|B-7-5, North Point Office, Mid Valley City, No. 1, Medan Syed Putra Utara~59200 Kuala Lumpur, Malaysia||Greenpro Resources Sdn. Bhd.||Self-use business premises|
|D-07-06 and D-07-07~Skypark @ One City Jalan USJ 25.1~47650 Subang Jaya, Selangor, Malaysia||Greenpro Resources Sdn. Bhd.||Investment for rental and capital gains|
Room 05, 22/F., Di Wang Building
No.5002 Shen Nan Dong Road
Luohu District, Shenzhen, China
|Greenpro Management Consultancy (Shenzhen) Limited||Self-use business premises|
|Factory Units A7, A8, B1, B6, B7, B8, B9, C3, C5, C6, C7, C8, C9, D8, D9 on 14/F., Wang Cheung Industrial Building, 6 Tsing Yeung Circuit, Tuen Mun, N.T., Hong Kong||Forward Win International Limited||Investment for rental and capital gains|
In May 2013, the Company obtained a loan in the principal amount of MYR1,629,744 (approximately $495,170) from Standard Chartered Saadiq Berhad, a financial institution in Malaysia to finance the acquisition of leasehold office units at Skypark One City, Selangor in Kuala Lumpur, Malaysia which bears interest at the base lending rate less 2.1% per annum with 300 monthly installments of MYR9,287 (approximately $2,840) each and will mature in May 2038. The mortgage loan is secured by (i) the first legal charge over the property, (ii) personally guaranteed by Mr. Lee Chong Kuang and Mr. Loke Che Chan Gilbert, the directors of the Company, and (iii) corporate guaranteed by a related company which is controlled by the directors of the Company.
In August 2013, the Company, through Mr. Lee Chong Kuang, the director of the Company, obtained a loan in the principal amount of MYR1,074,696 (approximately $326,530) from United Overseas Bank (Malaysia) Berhad, a financial institution in Malaysia to finance the acquisition of a leasehold office unit at Northpoint, Mid Valley City in Kuala Lumpur, Malaysia which bears interest at the base lending rate less 2.2% per annum with 360 monthly installments of MYR5,382 (approximately $1,645) each and will mature in August 2043. The mortgage loan is secured by the first legal charge over the property.
In December 2017, the Company obtained a loan in the principal amount of RMB9,000,000 (approximately $1,383,360) from Bank of China Limited, a financial institution in China to finance the acquisition of leasehold office units of approximately 5,000 square feet at the Di Wang Building (Shun Hing Square), Shenzhen, China. The loan bears interest at a 25% premium above the 5-year-or-above RMB base lending rate per annum with 120 monthly installments and will mature in December 2027. The current interest rate of the loan is 6.125% per annum. The monthly installment will be determined by the sum of (i) a 25% premium above the 5-year-or-above RMB base lending rate per annum on the 20 th day of each month for the interest payment and (ii) RMB75,000 (approximately $11,528) for the fixed repayment of principal. The mortgage loan is secured by (i) the first legal charge over the property, (ii) a Restricted-Cash Fixed Deposit of RMB1,000,000 (approximately $153,707) of Greenpro Management Consultancy (Shenzhen) Limited, (iii) the accounts receivable of Greenpro Management Consultancy (Shenzhen) Limited, (iv) corporate guaranteed by Greenpro Financial Consulting Limited, (v) corporate guaranteed by a related company which is controlled by the Loke Che Chan Gilbert, and (vi) personally guaranteed by Ms. CHEN Yanhong, the legal representative of Greenpro Management Consultancy (Shenzhen) Limited and a shareholder of the Company.
We believe that the current facilities are adequate for our current needs. We intend to secure new facilities or expand existing facilities as necessary to support future growth. We believe that suitable additional space will be available on commercially reasonable terms as needed to accommodate our operations.
ITEM 3. LEGAL PROCEEDINGS
As of the date hereof, we know of no material pending legal proceedings against to which we or any of our subsidiaries is a party or of which any of our property is the subject. There are no proceedings in which any of our directors, executive officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest. From time to time, we may be subject to various claims, legal actions and regulatory proceedings arising in the ordinary course of business.
ITEM 4. MINE SAFETY DISCLOSURES
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is currently listed on the NASDAQ Capital Market under the trading symbol “GRNQ.” Our common stock did not trade prior to July 9, 2015.
|Fiscal Year 2019||High Bid||Low Bid|
|First Quarter (through April 2, 2019)||$||4.90||$||1.70|
|Fiscal Year 2018||High Bid||Low Bid|
|Fiscal Year 2017||High Bid||Low Bid|
As of April 2, 2019, we had 54,723,889 shares of our common stock issued and outstanding. There were approximately 283 record holders of our common stock. Such number does not include any shareholders holding shares in nominee or “street name.”
We have not declared or paid dividends on our common stock since our formation, and we do not anticipate paying dividends in the foreseeable future. Declaration or payment of dividends, if any, in the future, will be at the discretion of our board of directors and will depend on our then current financial condition, results of operations, capital requirements and other factors deemed relevant by the board of directors. There are no contractual restrictions on our ability to declare or pay dividends.
Recent Sales of Unregistered Securities
All sales of unregistered common stock of the Company were made in reliance upon Section 4(a)(2) of the Securities Act of 1933, as amended (the “ Securities Act ”), and D and Rule 903 of Regulation S promulgated thereunder.
|Date||Shares of common stock issued||
|Recipients of Shares|
|July 20, 2018 (1)||38,524||$||288,930||Two shareholders|
|July 20, 2018 (2)||578||$||4,335||One shareholder|
The Company issued 38,524 shares of restricted common stock at a price of $7.50 per share for aggregate gross proceeds of $288,930 plus cash of $75,000 for acquisition of 49% shareholding of KSP Holding Group Company Limited (renamed to Greenpro KSP Holding Company Limited on August 7, 2018).
|2.||The Company issued 578 shares of restricted common stock at a price of $7.50 per share for aggregate gross proceeds of $4,335 for stock issuance fee to Network 1 Financial Securities.|
Equity Compensation Plan Information
We have not adopted or approved an equity compensation plan. None of options, warrants or other convertible securities have been granted outside of an approved equity compensation plan.
Transfer Agent and Registrar
The transfer agent for our capital stock is VStock Transfer, LLC, with an address at 18 Lafayette Place, Woodmere, NY 11598, telephone number is 212-828-8436.
ITEM 6. SELECTED FINANCIAL DATA
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our results of operations and financial condition for fiscal years ended December 31, 2018 and 2017, should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this report. Some of the information contained in this management’s discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and related financing, includes forward looking statements that involve risks, uncertainties and assumptions. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in this Annual Report.
Greenpro Capital Corp. (the “Company” or “Greenpro”), was incorporated in the State of Nevada on July 19, 2013. We provide cross-border business solutions and accounting outsourcing services to small and medium-size businesses located in Asia, with an initial focus on Hong Kong, Malaysia and China. Greenpro provides a range of services as a package solution (the “Package Solution”) to our clients and we believe that our clients can reduce their business costs and improve their revenues.
In addition to our business solution services, we also operate a venture capital business through Greenpro Venture Capital Limited, an Anguilla corporation. One of our venture capital business segments focuses on (1) establishing a business incubator for start-up and high growth companies to support such companies during critical growth periods, which will include education and support services, and (2) searching the investment opportunities in selected start-up and high growth companies, which may generate significant returns to the Company. Our venture capital business focuses on companies located in Asia and Southeast Asia, including Hong Kong, Malaysia, China, Thailand and Singapore. Another venture capital business segment focuses on rental activities of commercial properties and the sale of investment properties.
Results of Operations
For information regarding our controls and procedures, see Part II, Item 9A - Controls and Procedures, of this Annual Report.
During the years ended December 31, 2018 and 2017, we operated in three regions: Hong Kong, Malaysia and China. We derived revenue from rental activities of our commercial properties, sale of properties, and the provision of services. A table further describing our revenue and cost of revenues is set forth below:
|Year ended December 31,|
|Service revenue (including $420,730 and $281,962 of service revenue from related parties, respectively)||$||2,680,748||$||3,313,819|
|Sale of properties||1,368,220||423,871|
|Rental revenue (including $0 and $47,683 of rental revenue from related parties, respectively)||164,392||178,682|
|OPERATING COSTS AND EXPENSES:|
|Cost of service revenue||(998,783||)||(1,071,910||)|
|Cost of properties sold||(1,019,791||)||(347,479||)|
|Cost of rental revenue||(62,610||)||(68,412||)|
|General and administrative||(4,286,753||)||(3,350,896||)|
|Impairment of goodwill and intangible assets||(997,137||)||(1,898,721||)|
|Impairment of notes receivable||(77,088||)||-|
|Impairment of other investments||(990,197||)||-|
|Total operating costs and expenses||(8,432,359||)||(6,737,418||)|
|INCOME (LOSS) FROM OPERATIONS||(4,218,999||)||(2,821,046||)|
Comparison of the years ended December 31, 2018 and 2017
Total revenue was $4,213,360 and $3,916,372 for the years ended December 31, 2018 and 2017, respectively. The increased amount of $296,988 was due to the broadening of the range of business services offered and the increase in our client base. We expect revenue from our business services segment to increase as we continue to grow our business and expand into new territories.
Revenue from the provision of business services was $2,680,748 and $3,313,819 for the years ended December 31, 2018 and 2017, respectively. It was derived principally from the provision of business consulting and advisory services as well as company secretarial, accounting and financial review services. We experienced a decrease in service income but expect revenue from our business consulting and advisory services will have a steady growth in the following years.
Revenue from rentals was $164,392 and $178,682 for the years ended December 31, 2018 and 2017, respectively. It was derived principally from leasing properties in Malaysia and Hong Kong. We believe our rental income will be stable in the near future.
Sale of properties
Revenue from the sale of properties was $1,368,220 for the year ended December 31, 2018, which was derived from the sale of certain commercial properties located in Hong Kong. There was revenue of $423,871 generated from the sale of properties for the year ended December 31, 2017.
As opportunities permit, management expects to continue to purchase and sell commercial real estate in the near future. Accordingly, we expect revenue and costs attributable to the sale of properties to fluctuate on a going forward basis.
Total Operating Costs and Expenses
Total operating costs and expenses were $8,432,359 and $6,737,418 for the years ended December 31, 2018 and 2017, respectively. They consist of cost of service revenue, cost of properties sold, cost of rental income, general and administrative, impairment of goodwill and intangible assets and impairment of other investments.
The losses from operations for the Company for the years ended December 31, 2018 and 2017 were $4,218,999 and $2,821,046, respectively. The increase in a loss from operations was mainly due to an increase in general and administrative expenses of $935,857 and an increase in cost of properties sold of $672,312.
Cost of rental revenue
Cost of rental revenue was $62,610 and $68,412 for the years ended December 31, 2018 and 2017, respectively. It includes the costs associated with government rent and rates, repairs and maintenance, property insurance, depreciation and other related administrative costs. Property management fee and utility expenses are paid directly by tenants.
Cost of service revenue
Costs of revenue on provision of services were $998,783 and $1,071,910 for the years ended December 31, 2018 and 2017, respectively. It primarily consists of employee compensation and related payroll benefits, company formation cost and other professional fees directly attributable to cost related to the services rendered.
Cost of properties sold
Costs of revenue on properties sold were $1,019,791 and $347,479 for the years ended December 31, 2018 and 2017, respectively. It primarily consists of the purchase price of property, legal fees, improvement costs to the building structure, and other acquisition costs. Selling and advertising costs are expensed as incurred.
General and administrative expenses
General and administrative (“G&A”) expenses were $4,286,753 and $3,350,896 for the years ended December 31, 2018 and 2017, respectively. The general and administrative expenses consist primarily of salary and wages of $1,405,514, rent and rates of $386,359, advertising and promotion of $352,08, directors’ remuneration of $330,000, and audit, legal, and other professional fees of $535,340. We expect our G&A expenses will continue to increase as we integrate our business acquisitions, expand our businesses and offices into new jurisdictions, and strengthening our existing businesses.
Impairment of Goodwill and Intangible Assets
The impairment losses of goodwill were $892,137 and $1,734,384 for the years ended December 31, 2018 and 2017, respectively. The impairment losses of Intangible Assets were $105,000 and $164,337 for the years ended December 31, 2018 and 2017, respectively. The Company performed an impairment test on the goodwill as of December 31, 2018 based on ASC 350 “Goodwill and Other”. We compared the actual and forecasted performances for our acquired subsidiaries in the past three years and found that two of these subsidiaries underperformed, even probably in the downside trend. As a result, we decided to impair all of the goodwill and intangible assets of these two subsidiaries at December 31, 2018.
Impairment of Notes Receivable
The Company determined a notes receivable was impaired and has made provision for impairment loss of $77,088 for the year ended December 31, 2018. No impairment was recorded in 2017.
Impairment of Other Investments
As of December 31, 2018, the Company determined that its investments in Acorn Group Holdings Limited and Greenpro KSP Holding Group Limited were impaired and recorded an impairment of unconsolidated investments of $618,265.
During 2018, the Company made a deposit on a potential real estate acquisition that was subsequently cancelled. As of December 31, 2018, the deposit was not returned, and the Company determined that the deposit was impaired and recorded an impairment of the deposit of $371,932.
As a result, total impairment loss of other investments of $990,197 was recorded for the year ended December 31, 2018 and no impairment was recorded in 2017.
Fair value of common stock issued in connection with financing transaction
On July 18, 2018, the Company sold 906,666 shares of the Company’s common stock in a private placement to V1 Group Limited (“V1 Group”). The Company determined the fair value of the 906,666 shares issued to V1 Group was $6 per share based on the Company’s contemporaneous public offering price, or $5,440,000. The Company received a net of $800,000 from V1 Group’s investment. The difference of $4,640,000 was recorded as an expense of the transaction.
Attributable to noncontrolling interest
The Company recorded income attributable to noncontrolling interest in the consolidated statements of operations for any noncontrolling interest of consolidated subsidiaries.
At December 31, 2018, the Company holds 80% shareholding of Greenpro International Limited, and 60% shareholdings of Forward Win International Limited and Yabez (Hong Kong) Company Limited, respectively. At December 31, 2018, the Company holds 51% shareholding of Greenpro Capital Village Sdn. Bhd.
The Company recorded net income attributable to noncontrolling interest of $224,604 for the year ended December 31, 2018 and net loss attributable to noncontrolling interest of $832,350 for the year ended December 31, 2017. In 2017, net loss attributable to noncontrolling interest was mainly due to impairment of goodwill of $551,222 allocated to noncontrolling interests in Billion Sino Holdings Limited. There was no impairment recorded in 2018. In 2018, net income attributable to noncontrolling interests was primarily due to a net profit of $360,591 generated from Forward Win International Limited and the share of profit to noncontrolling interests was $144,237.
Net losses were $8,325,163 and $3,116,909 for the year ended December 31, 2018 and 2017, respectively. The increase in net loss was mainly due to the fair value of common stock issued in connection with financing transaction expense of $4,640,000 in 2018.
There were no seasonal aspects that had a material effect on the financial condition or results of operations of the Company.
Other than as disclosed elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2018 that are reasonably likely to have a material adverse effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders as of December 31, 2018.
As of December 31, 2018, the Company’s subsidiary leased an office in Hong Kong under a non-cancellable operating lease that would have expired in April 2018. In January 2018, the tenancy agreement had been renewed for three years commencing from May 1, 2018 and expiring on April 30, 2021.
Related Party Transactions
Related party transactions amounted to $420,730 in service income for the year ended December 31, 2018 and $329,645 in service revenue and rental revenue for the year ended December 31, 2017.
The amount due from related parties was $95,794 and $1,761 as of December 31, 2018 and 2017, respectively. The amounts due to related parties were $862,532 and $1,813,930 as of December 31, 2018 and 2017, respectively.
Our related parties are mainly those companies in which Greenpro Venture Capital Limited or Greenpro Resources Limited owns a certain percentage of the shares of such companies, or those companies that the Company can exercise significant influence over those companies in making financial and operating policy decisions. Some of the related parties are either controlled by or under common control of Mr. Loke Che Chan, Gilbert or Mr. Lee Chong Kuang, the director of the Company and the other entity. One of the related parties is controlled by Ms. Chen Yanhong, the director of one of our subsidiaries.
Critical Accounting Policies and Estimates
Use of estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates include certain assumptions related to, among others, the allowance for doubtful accounts receivable, impairment analysis of real estate assets and other long-term assets including goodwill, valuation allowance on deferred income taxes, and the accrual of potential liabilities. Actual results may differ from these estimates.
Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
|Categories||Expected useful life||Residual value|
|Office leasehold||26 years||-|
|Furniture and fixtures||3 - 10 years||5||%|
|Office equipment||3 - 10 years||5% - 10||%|
|Leasehold improvement||Over the shorter of estimated useful life or term of lease||-|
Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value.
Investment in real estate
Real estate held for sale is reported at the lower of its carrying amount or fair value, less estimated costs to sell. The cost of real estate held for sale includes the purchase price of property, legal fees, improvement costs to the building structure, and other acquisition costs. Project wide costs such as land and building acquisition and certain development costs are allocated to the specific units based upon their relative fair value before construction. We continue to actively market all properties that are designated as held for sale. Real estate held for sale is not depreciated.
Real estate held for investment is stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:
|Categories||Expected useful life||Residual value|
|Leasehold land and buildings||50 years||-|
|Furniture and fixtures||3 – 10 years||5||%|
|Office equipment||3 – 10 years||5% - 10||%|
|Leasehold improvement||Shorter of the estimated useful life or term of lease||-|
Intangible assets, net
Intangible assets are stated at cost less accumulated amortization. Intangible assets represented customer lists and order backlogs acquired in business combinations and certain trademarks registered in Hong Kong, the PRC, and Malaysia. Intangible assets are amortized on a straight-line basis over their estimated useful life’s ranging from five to ten years.
The Company follows ASC 350 in accounting for intangible assets, which requires impairment losses to be recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by the assets are less than the assets’ carrying amounts. The Company’s policy is to perform its annual impairment testing for its intangible assets on December 31, of each fiscal year.
Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. Under the guidance of ASC 350, goodwill is not amortized, rather it is tested for impairment annually, and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. An impairment loss generally would be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit and would be measured as the excess carrying value of goodwill over the derived fair value of goodwill. The Company’s policy is to perform its annual impairment testing for its reporting units on December 31, of each fiscal year.
Impairment of long-lived assets
Long-lived assets primarily include real estate held for investment, real estate held for use, and equipment and intangible assets. In accordance with the provision of ASC 360, the Company generally conducts its annual impairment evaluation to its long-lived assets, usually in the fourth quarter of each year, or more frequently if indicators of impairment exist, such as a significant sustained change in the business climate. The recoverability of long-lived assets is measured at the reporting unit level. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset.
Prior to January 1, 2018, the Company recognized its revenue in accordance with Accounting Standards Codification (ASC) 605 Revenue Recognition , upon the delivery of its services or products when: (1) delivery had occurred or services rendered; (2) persuasive evidence of an arrangement existed; (3) there are no continuing obligations to the customer; and (4) the collection of related accounts receivable was probable.
Effective January 1, 2018, the Company adopted the guidance of ASC 606, Revenue from Contracts . The implementation of ASC 606 did not have a material impact on the Company’s consolidated financial statements. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients. The adoption of ASC 606 had no effect on previously reported balances.
Revenue from the provision of (i) business consulting and advisory services and (ii) company secretarial, accounting and financial review services are recognized when there is (i) an existence of contract or an arrangement (ii) services are rendered, (iii) the service price is fixed or determinable, and (iv) collectability is reasonable assured.
For certain service contracts, the completed performance method is applied. Revenue, expenses and gross profit are deferred until the performance obligation is complete and collectability is reasonably assured. For contracts where performance is not completed, deferred costs related to revenue are recorded as incurred and deferred revenue is recorded for any payments received on such yet to be completed performance obligations. When all contractual performance obligations have been met, revenue and expenses will be recorded. On an ongoing basis, management monitors these contracts for profitability and when needed may record a liability if a determination is made that costs will exceed revenue. For other service contracts such as company secretarial, accounting and financial review services, revenue is recognized as services are rendered.
Revenues from rental of leasehold land and buildings are recognized on a straight-line basis over the lease term when collectability is reasonably assured and the tenant has taken possession or controls the physical use of the leased assets.
Sale of properties
Revenue from the sale of properties is recognized at the time each unit is delivered and title and possession are transferred to the buyer. Specifically, the Company utilizes the full accrual method where recognition occurs when (i) the collectability of the sales price is reasonably assured, (ii) the seller is not obligated to perform significant activities after the sale, (iii) the initial investment from the buyer is sufficient, and (iv) the Company recognizes revenue when it satisfies a performance obligation by transferring control of a promised property to a customer.
Recent accounting pronouncements
Refer to Note 1 in the accompanying financial statements.
Liquidity and Capital Resources
As of December 31, 2018, we had working capital deficiency of $541,221 as compared to working capital deficiency of $2,070,201 as of December 31, 2017. The decrease of deficiency amount was mainly due to an increase of cash and cash equivalents, prepaids and other current assets and deferred costs of revenue. We had total current assets of $3,176,197 consisting of cash and cash equivalents of $2,172,048, accounts receivable of $188,054, prepaids and other current assets of $397,427, and deferred costs of revenue of $418,668, compared to total current assets of $1,853,878 as of December 31, 2017. The increase was mainly due to the increase of cash and cash equivalents, prepaids and other current assets and deferred costs of revenue. We had current liabilities of $3,717,418 mainly consisting of amounts due to related parties of $862,532, accounts payable and accrued liabilities of $575,594 and deferred revenue of $1,816,358. The Company’s net losses were $8,325,163 and $3,116,909 for the year ended December 31, 2018 and 2017, respectively. The increase in net loss was mainly due to fair value of common stock issued in connection with financing transaction of $4,640,000 in 2018.
For the year ended December 31, 2018, the Company incurred a net loss of $8,325,163 and used cash in operating activities of $1,001,421, and at December 31, 2018, the Company had a working capital deficiency of $541,221. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report on our December 31, 2018 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company’s ability to continue as a going concern is dependent upon improving its profitability and the continuing financial support from its shareholders. Management believes the existing shareholders or external financing will provide the additional cash to meet the Company’s obligations as they become due. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its stock holders, in the case of equity financing.
As of December 31, 2018, $822,194 was due to a related party for advance payment to the Company to purchase real estate held for sale in 2014. This advance payment is non-interest bearing and is due upon demand.
As of December 31, 2018, our long-term liabilities consist of loans secured by real estate from:
|(a)||Standard Chartered Saadiq Berhad, with 300 monthly installments of MYR9,287 (approximately $2,840) each and will mature in May 2038;|
|(b)||United Overseas Bank (Malaysia) Berhad, with 360 monthly installments of MYR5,382 (approximately $1,645) each and will mature in August 2043;|
|(c)||Bank of China Limited, with 120 monthly instalments of an amount determined by the sum of (i) 25% premium above the 5-year-or-above RMB base lending rate per annum on 20th day of each month for the interest payment and (ii) RMB75,000 (Approximately $11,528) for the fixed repayment of principal. The current interest rate of the loan is 6.125% per annum, assuming the 5-year-or-above RMB base lending rate to be maintained at 4.90% for the whole period of loan agreement.|
The maturities of the long-term bank loans for each of the five years and thereafter following December 31, 2018 are as follows:
|Year ending December 31:|
Net cash used in operating activities was $1,001,421 for the year ended December 31, 2018 as compared to net cash used in operating activities of $442,711 for the year ended December 31, 2017. The cash used in operating activities in 2018 was mainly from net loss for the year, an increase of deferred costs of revenue and a gain on fair value change of financial instruments, while the cash used in operating activities in 2017 was mainly from net loss for the year. Non-cash expenses totaled $6,985,443 and $2,426,577 for the years ended December 31, 2018 and 2017, respectively, which were primarily composed of depreciation and amortization of $233,940, impairment of goodwill and intangible assets of $997,137, impairment of notes receivable of $77,088, impairment of other investments of $990,197, fair value of common stock issued in connection with financing transaction of $4,640,000 for the year ended December 31, 2018.
The Company has incurred operating losses and used cash in its operating activities for the past two years. In fiscal 2018, the Company suffered an increase in prepaids and other current assets and deferred costs of revenue, which resulted in negative operating cash flow. The increase in prepaids and other current assets was due to an increase in amount due from related parties in 2018. The increase in deferred costs of revenue was due to an increase in the listing advisory businesses but some of the services have not yet been rendered before the end of 2018.
Net cash provided by investing activities was $461,134 for the year ended December 31, 2018 and net cash used in investing activities was $2,813,869 in 2017.
The cash provided by investing activities was mainly the cash proceeds from real estate held for sale of $1,248,887 in 2018. Net cash used in investing activities was primarily consisted of purchase of investments of $696,932, and a loan to a related party of $300,000 in 2018.
Net cash provided by financing activities for the year ended December 31, 2018 was $1,567,644 while net cash provided by financing activities for the year ended December 31, 2017 was $3,367,258.
The cash provided by financing activities mainly resulted from the proceeds from share issuances of $3,463,705 in 2018.
Below is the tabular summary of the financing activities of the Company during 2018 and 2017:
common stock issued
|Recipients of Shares|
|January 13, 2017 (1)||199,922||$||359,860||Two shareholders|
|March 8, 2017 (2)||278,162||$||556,324||Two shareholders|
|April 18, 2017 (3)||27,472||$||68,680||One Shareholder|
|April 25, 2017 (4)||340,645||$||-||Two shareholders|
|May 24, 2018 to June 6, 2018 (5)||535,559||$||3,213,354||Twenty shareholders|
|July 18, 2018 (6)||906,666||$||698 ,000||One shareholder|
|July 20, 2018 (7)||38,524||$||288,930||Two shareholders|
|July 20, 2018 (8)||578||$||4,335||One shareholder|
|1.||The Company completed the sale of 199,922 shares of restricted common stock at a price of $1.80 per share for aggregate gross proceeds of approximately $359,860 in a private placement to Dato Seri Dr. How Kok Choong and Fortune Wealth (Asia) Limited.|
|2.||The Company completed the sale of 278,162 shares of restricted common stock at a price of $2.00 per share for aggregate gross proceeds of $556,324 in a private placement to CPN Investment Ltd and Fortune Wealth (Asia) Limited.|
|3.||The Company completed the sale of 27,472 shares of restricted common stock at a price of $2.50 per share for aggregate gross proceeds of $68,680 in a private placement to Fortune Wealth (Asia) Limited.|
|4.||The Company issued 340,645 restricted shares of common stock for acquisition of 60% of the issued and outstanding securities of Billion Sino Holdings Limited.|
|5.||The Company completed the sale of 535,559 shares of restricted common stock at a price of $6.00 per share for aggregate gross proceeds of $3,213,354 for public offering.|
On July 18, 2018, the Company sold 906,666 shares of the Company’s common stock in a private placement to V1 Group Limited (“V1 Group”), a public company listed on the Hong Kong Stock Exchange, for total proceeds of $6,800,000. The transaction was structured as a capital stock subscription. The Company used the proceeds of the offering to make an investment to a private company for $6,000,000. The investment was structured as a note receivable to the private company to be collected in two years. The Company determined that the economic substance of the two transactions was a capital transaction with the Company issuing 906,666 shares of its common stock for $6,800,000, made up of $800,000 cash and $6,000,000 due from a note receivable to be collected in two years. As the Company cannot determine the collectability of the note receivable, the funds will be recognized as a capital contribution when collected. After deduction of $102,000 paid to Network 1 Financial Securities, Inc., the net proceeds were $698,000.
The Company issued 38,524 shares of restricted common stock at a price of $7.50 per share for aggregate gross proceeds of $288,930 plus cash of $75,000 for acquisition of 49% shareholding of KSP Holding Group Company Limited (renamed Greenpro KSP Holding Company Limited on August 7, 2018).
|8.||The Company issued 578 shares of restricted common stock at a price of $7.50 per share for aggregate gross proceeds of $4,335 for stock issuance fee to Network 1 Financial Securities, Inc.|
As of December 31, 2018, there were 54,715,287 shares of Common Stock issued and outstanding.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this item are located following the signature page of this Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures”, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2018, that our disclosure controls and procedures were not effective. The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) The Company’s control environment did not sufficiently promote effective internal control over financial reporting, which contributed to the other material weakness described below. Principal contributing factors included: (i) an insufficient number of personnel with an appropriate level of U.S. GAAP knowledge and experience and ongoing training in the application of U.S. GAAP commensurate with our financial reporting requirements; and (ii) an insufficient number of personnel appropriately qualified to perform control design, execution and monitoring activities; (2) The Company did not have adequate risk assessment controls to continuously formally assess the financial reporting risks associated with executing new, significant or unusual transactions, contracts or business initiatives. As a result, the Company did not adequately identify and analyze changes in the business and hence implement effective process level controls and monitoring controls that were responsive to these changes and aligned with financial reporting objectives. This failure to identify and analyze changes occurred in connection with the recording of the Company’s financing transactions; (3) the Company did not maintain effective controls over its financial statement close and reporting process. Specifically, the Company: (i) had insufficient preparation and review procedures for disclosures accompanying the Company’s financial statements; and (ii) did not have effective controls over the completeness, existence and accuracy of related party disclosures; (4) The Company’s Board of Directors and Audit Committee do not review and approve significant transactions; and (5) There are inadequate controls associated with the recording of nonroutine, complex, and unusual transactions. These material weaknesses resulted in the restatement of our condensed consolidated financial statements for the three and nine months ended September 30, 2018. The aforementioned material weaknesses were identified by our Chief Financial Officer in connection with the review of our financial statements as of December 31, 2018.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The internal controls for the Company are provided by executive management’s review and approval of all transactions. Our internal control over financial reporting also includes those policies and procedures that:
1. pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
2. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management; and
3. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of these controls.
Based on this assessment, management has concluded that as of December 31, 2018, our internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:
We have increased our personnel resources and technical accounting expertise within the accounting function and intend to hire one or more additional personnel for the function due to turnover. We will create a position to segregate duties consistent with control objectives. We also plan to prepare written policies and procedures for accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity and debt transactions. We plan to test our updated controls and remediate our deficiencies in the year 2019.
This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting for the year ended December 31, 2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth certain information about our executive officers and directors as of the date of this Annual Report.
|Name||Age||Positions and Offices|
|Lee, Chong Kuang||45||President, Chief Executive Officer, Chairman of the Board|
|Loke, Che Chan Gilbert||64||Chief Financial Officer, Secretary, Treasurer, Director|
|Chuchottaworn, Srirat (1)||50||Director|
|Hee, Chee Keong (1)(2)(3)||47||Director|
|Shum, Albert (1)(2)(3)||59||Director|
|(1)||Member of the Audit Committee.|
|(2)||Member of the Compensation Committee.|
|(3)||Member of the Nominating and Corporate Governance Committee.|
Lee, Chong Kuang , age 45, has served as our Chief Executive Officer, President and Chairman of the Board since July 19, 2013. From 2003 until January 2015, Mr. Lee served as a director of Asia UBS Global Ltd, a Hong Kong company, which he founded in 2003. He served as director, Chief Financial Officer and Treasurer of Odenza Corp. from February 4, 2013 to April 29, 2016. He also served as the Chief Financial Officer and director of Moxian Corporation from October 2012 until December 2014. Mr. Lee served as director of Greenpro Talents Ltd. from November 16, 2015 to June 6, 2017. Mr. Lee served as director of GC Investment Management Limited, which is the investment manager of Greenpro Asia Strategic SPC, since April 6, 2016. From 1997 to 2000, Mr. Lee worked at K. Y. Ho & Co, Chartered Accountants. He began his professional career with Siva Tan & Co., a Chartered Accountant firm in Malaysia in 1995 where he remained until 1997. As a qualified member of the ACCA and Malaysia Institute of Accountants, Mr. Lee earned his professional qualification from the Hong Kong Institute of Certified Public Accountants and extended his professional services covering accounting, tax, corporate structuring planning with special focus in cross-border client nature, in addition to his accounting software businesses. Mr. Lee established the Cross-Border Business Association (CBBA) – a NGO (Non-Government Organization) established under Hong Kong Society Act - to provide information and professional advice in Cross Border Business for its investment members. For the Cross-Border Investment especially in the mining resources companies which are growing fast since 2011, Mr. Lee continues to support its clients by using cloud platform to strengthen its clientele through the use of technology advancement and models such as SaaS, PaaS, etc., for accounting and management solution purposes. Mr. Lee brings to the board of directors his business leadership, corporate strategy and accounting and financial expertise.
Loke, Che Chan Gilbert , age 64, has served as our Chief Financial Officer, Treasurer and Director since inception on July 19, 2013. Mr. Loke has extensive knowledge in accounting and has been an accountant for more than 35 years. He was trained and qualified with UHY (formerly known as Hacker Young), Chartered Accountants, one of the large accounting firms based in London, England between 1981 and 1988. His extensive experience in auditing, accounting, taxation, SOX compliance and corporate listing has prompted him to specialize in corporate advisory, risk management and internal controls serving those small medium-sized enterprises. From September 1999 until June 2013, Mr. Loke served as an adjunct lecturer in ACCA P3 Business Analysis at HKU SPACE (HKU School of Professional and Continuing Education), which is an extension of the University of Hong Kong and provides professional and continuing education. Mr. Loke worked as an independent, non-executive director of ZMay Holdings Limited, a public company listed on the Hong Kong Stock Exchange from January 2008 to July 2008 and as Chief Financial Officer for Asia Properties Inc. from May 31, 2011 to March 28, 2012 and Sino Bioenergy Inc., with both companies listed on the OTC Markets in the US, from 2011 to 2012. Mr. Loke has served as the Chief Executive Officer and a director of Greenpro Resources Corporation since October 16, 2012. He has also served the Chief Executive Officer and a director of Moxian Corporation from October 2012 until December 2014. Mr. Loke served as an independent director of Odenza Corp. from February 2013 to May 2015. He has also served as the Chief Financial Officer, Secretary, Treasurer, and a director of CGN Nanotech, Inc. from September 4, 2014 to September 28, 2016.
Mr. Loke served as director of Greenpro Talents Ltd. from November 16, 2015 to June 6, 2017. Mr. Loke served as director of GC Investment Management Limited, which is the investment manager of Greenpro Asia Strategic SPC, since April 6, 2016. Mr. Loke earned his degree of MBA from Bulacan State University, Philippines, and earned his professional accountancy qualifications from the ACCA, AIA and HKICPA. He also earned other professional qualifications from the HKICS, ICSA as Chartered Secretary, FPAM - Malaysia as Certified Financial Planner, ATIHK as tax adviser in Hong Kong and CWM Institute as Chartered Wealth Manager in Hong Kong. Mr. Loke brings to the board of directors accounting and financial expertise and business leadership.
Chuchottaworn, Srirat, age 50, joined us as an Independent Director on October 18, 2015. Ms. Chuchottaworn has more than 20 years in the IT and consulting business. In 1997, she became an SAP consultant for finance and controlling (FI/CO) and held a certificate of FI/CO. In 2004, she found I AM Group and has been the group director since then. She is an experienced project manager and holds multiple SAP certifications. She earned a Bachelor’s in Engineering Degree from the King Monkut’s Institute of Technology Ladkrabang and Master of Science in Information Technology from the Chulalongkorn University. Ms. Chuchottaworn brings to the board of directors business leadership and experience and familiarity with conducting business in Thailand.
Hee, Chee Keong, age 47, joined us as an Independent Director of the Company on March 14, 2016. From June 2014 to October 2015, Mr. Hee served as the Chief Financial Officer of Galasys Plc. From June 2013 to September 2014, he served as the Chief Financial Officer of Apple Green Holding, Inc. (formerly called Blue Sun Media, Inc). Mr. Hee was the Finance Director and Non-Independent & Non-Executive Director at NetX Holdings Berhad (known as Global Soft Berhad) from November 2004 to January 2009 and January 2009 to June 2013, respectively. Mr. Hee is a Chartered Accountant of the Malaysian Institute of Accountants (MIA) and a fellow member of Association of Chartered Certified Accountants (FCCA). He has more than 18 years of working experience in both private and public companies. Mr. Hee has also worked as the Group Accountant and Principal Accounting Officer in his career. During the course of his career, Mr. Hee was involved in various industries, including accounting, information technology, manufacturing, trading, property, construction, leisure and entertainment. He has hands-on experience with the due diligence process, IPOs, issuance of warrants, corporate and debt restructuring in different fields and industries especially in accounting and finance. He brings to the board of directors deep finance, audit and business experience.
Shum, Albert , age 59, joined us as an Independent Director of the Company on March 14, 2016. Mr. Shum is a certified Project Management Practitioner with over 30 years of experience in leading projects and people, implementing and overseeing technology programs, and administering all facets of technology initiatives. Mr. Shum has served as the Global Head of IT (ADM) in the Intertrust Group since May 2010, where he was responsible for leading the delivery of core information technology services through a global team to business units across more than twenty jurisdictions. Mr. Shum was fully accountable for the implementation of professional and effective solutions to ensure that the underlying functions, coupled with effective internal controls and worked together with the business to achieve its overall strategy across all locations. Prior to that time, Mr. Shum served as the Chief Information Officer in the South China Morning Post Group from January 2007 to March 2010 and the Regional CIO for Schindler Group from October 2000 to December 2006. Mr. Shum earned a Bachelor of Business Administration from Pacific States University, USA, a Diploma in Computer Science from the Computer Learning Institute, USA and had attended program for Executive Development at IMD business school in Lausanne, Switzerland. Mr. Shum brings to the board of directors his wide experience in internal controls and information technology.
There are no family relationships between any of our directors or executive officers.
Involvement in Certain Legal Proceedings
No executive officer or director is a party in a legal proceeding adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries. No executive officer or director has been involved in the last ten years in any of the following:
|●||Any bankruptcy petition filed by or against any business or property of such person, or of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;|
|●||Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);|
|●||Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;|
|●||Being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;|
|●||Being the subject of or a party to any judicial or administrative order, judgment, decree or finding, not subsequently reversed, suspended or vacated relating to an alleged violation of any federal or state securities or commodities law or regulation, or any law or regulation respecting financial institutions or insurance companies, including but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail, fraud, wire fraud or fraud in connection with any business entity; or|
|●||Being the subject of or a party to any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act, any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.|
Board of Directors
All directors hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified. Directors are elected at the annual meetings to serve for one-year terms. Officers are elected by, and serve at the discretion of, the board of directors. Our board of directors shall hold meetings on at least a quarterly basis.
As a Nasdaq listed company, we comply with the NASDAQ Listing Rules with respect to certain corporate governance matters. As a smaller reporting company, under the NASDAQ rules we are required to maintain a board of directors comprised of a majority of independent directors, and an audit committee of at least three members, comprised solely of independent directors who also meet the requirements of Rule 10A-3 under the Securities Exchange Act of 1934.
The board of directors has reviewed the independence of our directors, applying the NASDAQ independence standards. Based on this review, the board of directors determined that each of Chuchottaworn Srirat, Hee Chee Keong, and Shum Albert are independent within the meaning of the NASDAQ rules. In making this determination, our board of directors considered the relationships that each of these non-employee directors has with us and all other facts and circumstances our board of directors deemed relevant in determining their independence. As required under applicable NASDAQ rules that our independent directors will meet on a regular basis as often as necessary to fulfill their responsibilities, including at least annually in executive session without the presence of non-independent directors and management.
Our board of directors has established standing committees in connection with the discharge of its responsibilities. These committees include an Audit Committee, a Compensation Committee and a Corporate Governance and Nominating Committee. Our board of directors has adopted written charters for each of these committees. Copies of the charters are available on our website. Our board of directors may establish other committees as it deems necessary or appropriate from time to time.
Board Leadership Structure and Role in Risk Oversight
Mr. Lee Chong Kuang holds the positions of chief executive officer and chairman of the board of the Company. The board believes that Mr. Lee’s services as both chief executive officer and chairman of the board is in the best interest of the Company and its shareholders. Mr. Lee possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing the Company in its business and is thus best positioned to develop agendas that ensure that the Board’s time and attention are focused on the most critical matters relating to the business of the Company. His combined role enables decisive leadership, ensures clear accountability, and enhances the Company’s ability to communicate its message and strategy clearly and consistently to the Company’s shareholders, employees and customers.
The board has not designated a lead director. Given the limited number of directors comprising the Board, the independent directors call and plan their executive sessions collaboratively and, between meetings of the Board, communicate with management and one another directly. Under these circumstances, the directors believe designating a lead director to take on responsibility for functions in which they all currently participate might detract from rather than enhance performance of their responsibilities as directors.
Management is responsible for assessing and managing risk, subject to oversight by the board of directors. The board oversees our risk management policies and risk appetite, including operational risks and risks relating to our business strategy and transactions. Various committees of the board assist the board in this oversight responsibility in their respective areas of expertise.
|●||The Audit Committee assists the board with the oversight of our financial reporting, independent auditors and internal controls. It is charged with identifying any flaws in business management and recommending remedies, detecting fraud risks and implementing anti-fraud measures. The audit committee further discusses Greenpro policies with respect to risk assessment and management with respect to financial reporting.|
|●||The Compensation Committee oversees compensation, retention, succession and other human resources-related issues and risks.|
|●||The Corporate Governance and Nominating Committee overviews risks relating to our governance policies and initiatives.|
Our Audit Committee was established on March 23, 2016 and is currently comprised of three of our independent directors: Mr. Hee Chee Keong (Chairman), Mr. Shum Albert and Ms. Chuchottaworn Srirat. Mr. Hee Chee Keong qualifies as the Audit Committee financial expert as defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities Act.
According to its charter, the Audit Committee consists of at least three members, each of whom shall be a non-employee director who has been determined by the Board to meet the independence requirements of NASDAQ, and also Rule 10A-3(b)(1) of the SEC, subject to the exemptions provided in Rule 10A-3(c). The Company’s website contains a copy of the Audit Committee Charter. The Audit Committee Charter describes the primary functions of the Audit Committee, including the following:
|●||Oversee the Company’s accounting and financial reporting processes;|
|●||Oversee audits of the Company’s financial statements;|
|●||Discuss policies with respect to risk assessment and risk management, and discuss the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures;|
|●||Review and discuss with management the Company’s audited financial statements and review with management and the Company’s independent registered public accounting firm the Company’s financial statements prior to the filing with the SEC of any report containing such financial statements.|
|●||Recommend to the board that the Company’s audited financial statements be included in its annual report on Form 10-K for the last fiscal year;|
|●||Meet separately, periodically, with management, with the Company’s internal auditors (or other personnel responsible for the internal audit function) and with the Company’s independent registered public accounting firm;|
|●||Be directly responsible for the appointment, compensation, retention and oversight of the work of any independent registered public accounting firm engaged to prepare or issue an audit report for the Company;|
|●||Take, or recommend that the board take, appropriate action to oversee and ensure the independence of the Company’s independent registered public accounting firm; and|
|●||Review major changes to the Company’s auditing and accounting principles and practices as suggested by the Company’s independent registered public accounting firm, internal auditors or management.|
The Compensation Committee will be responsible for, among other matters:
|●||reviewing and approving, or recommending to the board of directors to approve the compensation of our CEO and other executive officers and directors reviewing key employee compensation goals, policies, plans and programs;|
|●||administering incentive and equity-based compensation;|
|●||reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and|
|●||appointing and overseeing any compensation consultants or advisors.|
Our Compensation Committee was established on March 17, 2017 and currently consists of Mr. Hee Chee Keong and Mr. Shum Albert. Mr. Hee Chee Keong serves as chairman of the Compensation Committee.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee will be responsible for, among other matters:
|●||selecting or recommending for selection candidates for directorships;|
|●||evaluating the independence of directors and director nominees;|
|●||reviewing and making recommendations regarding the structure and composition of our board and the board committees;|
|●||developing and recommending to the board corporate governance principles and practices;|
|●||reviewing and monitoring the Company’s Code of Business Conduct and Ethics; and|
|●||overseeing the evaluation of the Company’s management.|
Our Corporate Governance and Nominating Committee was established on March 17, 2017 and currently consists of Mr. Shum Albert and Mr. Hee Chee Keong. Mr. Shum Albert serves as chairman of the Corporate Governance and Nominating Committee.
Material Changes to the Procedures by which Security Holders May Recommend Nominees to the Board
We do not currently have a procedure by which security holders may recommend nominees to the Board.
The Board of Directors is responsible for overseeing the Company’s business consistent with their fiduciary duty to the stockholders. This significant responsibility requires highly-skilled individuals with various qualities, attributes and professional experience. There are general requirements for service on the Board that are applicable to directors and there are other skills and experience that should be represented on the Board as a whole but not necessarily by each director. The Board considers the qualifications of director candidates individually and in the broader context of the Board’s overall composition and the Company’s current and future needs.
In its assessment of each potential candidate, including those recommended by the stockholders, the Board will consider the nominee’s judgment, integrity, experience, independence, understanding of the Company’s business or other related industries and such other factors it determines are pertinent in light of the current needs of the Board. The Board also takes into account the ability of a director to devote the time and effort necessary to fulfill his or her responsibilities to the Company. evaluate the business experience, specialized skills and experience of director candidates. Diversity of background including diversity of race, ethnicity, international background, gender and age, may be considered by the Nominating and Corporate Governance Committee when evaluating candidates for Board membership.
Code of Business Conduct and Ethics
Our board of directors has adopted a code of ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. The code addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on inside information, and reporting of violations of the code. The code of ethics is available on the Company’s website at www.greenprocapital.com.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms furnished to us and written representations by our officers and directors regarding their compliance with applicable reporting requirements under Section 16(a) of the Exchange Act, we believe that all Section 16(a) filing requirements for our executive officers, directors and 10% stockholders were met during the year ended December 31, 2018.
ITEM 11. EXECUTIVE COMPENSATION
Set forth below is information regarding the compensation paid during the year ended December 31, 2018 and 2017 to our principal executive officer and principal financial officer, who are collectively referred to as “named executive officers” elsewhere in this Annual Report.
|Name and Principal Position||Year||
|Other Compensation ($)||Total ($)|
|Lee Chong Kuang||2018||156,000||24,000||180,000|
|Chief Executive Officer and President||2017||156,000||24,000||180,000|
|Loke Che Chan Gilbert||2018||156,000||24,000||180,000|
|Chief Financial Officer, Treasurer and Secretary||2017||156,000||24,000||180,000|
Each of Loke Che Chan Gilbert, our Chief Financial Officer, Secretary, and director, and Mr. Lee Chong Kuang, our Chief Executive Officer, signed new employment agreements on July 28, 2017. The new employment agreements came into effect on September 1, 2017 and will expire on August 31, 2020. The terms of the agreements are the same as that of the existing employment agreements.
Under the terms of the agreements, each of Messrs. Loke and Lee will receive a monthly salary equal to $13,000, and a monthly housing allowance of $2,000, both which may also be payable in Hong Kong Dollars.
Messrs. Loke and Lee are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with their services on our behalf. The employment agreements also contain normal and customary terms relating to confidentiality, indemnification, non-solicitation and ownership of intellectual property.
Outstanding Equity Awards at Fiscal Year-End
During our fiscal years ended December 31, 2018 and 2017, we provided $500 per month as compensation to our independent directors, including Mr. Hee Chee Keong, Mr. Shum Albert, Mr. Chin Kiew Kwong (up to November 30, 2018) and Ms. Chuchottaworn Srirat (start from December 1, 2018), who are also the members of the audit committee.
We currently have no plan for compensating our executive directors for their services in their capacity as directors, although we may elect to issue stock options or provide cash compensation to such persons from time to time in the future. However, we are compensating the independent directors who serve on the board. These independent directors are entitled to the reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.
Compensation Committee Interlocks and Insider Participation
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth, as of April 2, 2019, certain information concerning the beneficial ownership of our common stock by (i) each stockholder known by us to own beneficially five percent or more of our outstanding common stock or series a common stock; (ii) each director; (iii) each named executive officer; and (iv) all of our executive officers and directors as a group, and their percentage ownership and voting power.
The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within sixty (60) days through the conversion or exercise of any convertible security, warrant, option, or other right. More than one (1) person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within sixty (60) days, by the sum of the number of shares outstanding as of such date. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown.
|Name of Beneficial Owner (1)||
|Officers and Directors|
President, Chief Executive Officer and Director
Che Chan Gilbert
Chief Financial Officer and Director
|Greenpro Talents Ltd||5,024,469||9.18||%|
|Chuchottaworn Srirat Independent Director||1,221,500||2.23||%|
|Hee Chee Keong Independent Director||-||-|
|Shum Albert Independent Director||-||-|
|Chin Kiew Kwong Independent Director (resigned on November 30, 2018)||-||-|
|How Kok Choong Independent Director (resigned on November 30, 2018)||55,400||0.10||%|
|All officers and directors as a group (7 persons named above)||36,587,834||66.85||%|
|(1)||Except as otherwise set forth below, the address of each beneficial owner is Room 1701-1703, 17/F., The Metropolis Tower, 10 Metropolis Drive, Hung Hom, Kowloon, Hong Kong.|
|(2)||Based on 54,723,889 shares of common stock outstanding as of April 2, 2019, together with securities exercisable or convertible into shares of common stock within 60 days of April 2, 2019. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock that a person has the right to acquire beneficial ownership of upon the exercise or conversion of options, convertible stock, warrants or other securities that are currently exercisable or convertible or that will become exercisable or convertible within 60 days of April 2, 2019, are deemed to be beneficially owned by the person holding such securities for the purpose of computing the number of shares beneficially owned and percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.|
|(3)||Represents 17,655,467 shares held directly by Mr. Lee Chong Kuang and 1,661,150 shares held by his spouse Yap Pei Ling.|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE
Related Party Transactions
Except as set forth below, we have not been a party to any transaction since January 1, 2017, in which the amount involved in the transaction exceeded or will exceed the lesser of $120,000 or one percent of the average of our total assets as at the year-end for the last two completed fiscal years, and to which any of our directors, executive officers or beneficial holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest.
Our policy is that a contract or transaction either between the Company and a director, or between a director and another company in which he is financially interested is not necessarily void or void-able if the relationship or related party transactions are approved or ratified by the Audit Committee.
Transactions with certain companies which Greenpro Venture Capital Limited owns certain percentage of their company shares and companies that we have determined that we can significantly influence based on our common business relationships.
Related party transactions amounted to $420,730 in service income for the year ended December 31, 2018 and $329,645 in service revenue and rental revenue for the year ended December 31, 2017.
Our related parties are mainly those companies in which Greenpro Venture Capital Limited or Greenpro Resources Limited owns a certain percentage of the shares of such companies, or those companies that the Company can exercise significant influence over them in making financial and operating policy decisions. Some of the related parties are either controlled by or under common control of Mr. Loke Che Chan, Gilbert or Mr. Lee Chong Kuang, the director of the Company and the other entity. One of the related parties is controlled by Ms. Chen Yanhong, the director of one of our subsidiaries. All of these related party transactions are generally transacted at an arm’s-length basis at the current market value in the normal course of business.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table sets forth the aggregate fees billed to the Company by its independent registered public accounting firms for the fiscal years ended December 31, 2018 and 2017. In late 2017, we engaged Weinberg & Company P.A. (“Weinberg”) as its principal accountant. The accounting fees and services charged by Weinberg for 2018 and 2017 are shown in the following table.
Weinberg & Company P.A.
|ACCOUNTING FEES AND SERVICES||2018||2017|
|All other fees||-||-|
The category of “Audit fees” includes fees for our annual audit, quarterly reviews and services rendered in connection with regulatory filings with the SEC, such as the issuance of comfort letters and consents.
The category of “Audit-related fees” includes employee benefit plan audits, internal control reviews and accounting consultation.
The category of “Tax services” includes tax compliance, tax advice, tax planning.
The category of “All other fees” generally includes advisory services related to accounting rules and regulations.
The policies and procedures contained in the Audit Committee Charter provide that the Committee must pre-approve the audit services, audit-related services and non-audit services provided by the independent auditor and the provision for such services by Weinberg were compatible with the maintenance of the firm’s independence in the conduct of its audits.
Pre-approval Policies and Procedures
Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of the independent auditor. Our Audit Committee has adopted certain pre-approval policies and procedures which are more fully described in Exhibit 99.2.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements
The following are filed as part of this report:
The following financial statements of Greenpro Capital Corp. and Report of Independent Registered Public Accounting Firm are presented in the “F” pages of this Report:
|AUDITED CONSOLIDATED FINANCIAL STATEMENTS|
|Report of Independent Registered Public Accounting Firm||F-2|
|Consolidated Balance Sheets as of December 31, 2018 and December 31, 2017||F-3|
|Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2018 and December 31, 2017||F-4|
|Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2018 and December 31, 2017||F-5|
|Consolidated Statements of Cash Flows for the years ended December 31, 2018 and December 31, 2017||F-6|
|Notes to Consolidated Financial Statements||F-7 – F-23|
|3.1||Articles of Incorporation, as amended (1)|
|3.2||Bylaws, as amended (2)|
|4.1||Form of common stock certificate (2)|
|10.1||Letter of offer of Malaysia Office- One City D-07-06 (3)|
|10.2||Letter of offer of Malaysia Office- One City D-07-07 (3)|
|10.3||Exclusive Business Cooperation Agreement, dated June 13, 2016, by and between Greenpro Holding Limited and Greenpro Synergy Network Limited (4)|
|10.4||Loan Agreement, dated June 13, 2016, by and among Greenpro Holding Limited and Loke Che Chan, Gilbert, Lee Chong Kuang (4)|
|10.5||Share Pledge Agreement, dated June 13, 2016, by and among Greenpro Holding Limited, Loke Che Chan, Gilbert, Lee Chong Kuang and Greenpro Synergy Network Limited (4)|
|10.6||Power of Attorney of Loke Che Chan Gilbert dated June 13, 2016 (4)|
|10.7||Power of Attorney of Lee Chong Kuang dated June 13, 2016 (4)|
|10.8||Exclusive Option Agreement, dated June 13, 2016, by and among Greenpro Holding Limited, Loke Che Chan, Gilbert, Lee Chong Kuang and Greenpro Synergy Network Limited (4)|
|10.9||Sale and Purchase Agreement, dated as of April 25, 2017, between Greenpro Capital Corp. and Mr. Yiu Yau Wing and Mr. Chui Sang Derek (5)|
|10.10||Asset Purchase Agreement, dated as of April 27, 2017, between Greenpro Resources Limited and Gushen Credit Limited (6)|
|10.11||Employment Contract dated July 28, 2017, by and between the Company and Loke Che Chan, Gilbert (7)|
|10.12||Employment Contract dated July 28, 2017, by and between the Company and Lee Chong Kuang (7)|
|10.13||Independent Director Agreement, dated October 18, 2015, by and between the Company and Chuchottaworn Srirat (7)|
|10.14||Independent Director Agreement, dated March 14, 2016, by and between the Company and Shum Albert (7)|
|10.15||Independent Director Agreement, dated March 14, 2016, by and between the Company and Hee Chee Keong (7)|
|10.16||Placement Agency Agreement, dated May 31, 2018 (11)|
|10.17||Subscription Agreement and Supplemental Agreement dated as of July 18, 2018 (12)|
|10.18||Form of Loan Agreement dated July 17, 2018 between the Company and Shenzhen Rong Jin Jia Cheng Investment Limited (13)|
|14.1||Code of Ethics (8)|
|21.1||List of Subsidiaries *|
|31.1||Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer*|
|31.2||Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial officer*|
|32.1||Section 1350 Certification of principal executive officer*|
|32.2||Section 1350 Certification of principal financial officer and principal accounting officer*|
|99.1||Charter of the Audit Committee (3)|
|99.2||Audit Committee Pre-Approval Procedures (3)|
|99.3||Charter of the Compensation Committee (8)|
|99.4||Charter of the Corporate Governance and Nominating Committee (10)|
* Filed herewith
(1) Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed with SEC on May 13, 2015.
(2) Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 16, 2016.
(3) Previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed with the SEC on March 30, 2016.
(4) Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 15, 2016.
(5) Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on April 25, 2017.
(6) Previously filed as an exhibit to the Company’s Current Report on Form 8-K/A filed with the SEC on July 25, 2017.
(7) Previously filed as an exhibit to the Company’s registration statement on Form S-1 filed with the SEC on August 2, 2017.
(8) Previously filed as an exhibit to the Company’s registration statement on Form S-1 filed with the SEC on January 27, 2014.
(9) Previously filed as an exhibit to the Company’s registration statement on Form S-1/A filed with the SEC on September 6, 2017.
(10) Previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2017.
(11) Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on June 6, 2018.
(12) Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2018.
(13) Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on December 10, 2018.
ITEM 16. FORM 10-K SUMMARY
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
|Greenpro Capital Corp.|
|Date: April 2, 2019||By:||/s/ Lee Chong Kuang|
|Lee Chong Kuang|
|President and Chief Executive Officer|
|(Principal Executive Officer)|
Pursuant to the requirements of the Securities Act of 1933, this report has been signed by the following persons in the capacities and on the dates indicated.
|/s/ Lee Chong Kuang||Chairman, President and Chief Executive Officer||April 2, 2019|
|Lee Chong Kuang||(Principal Executive Officer)|
|/s/ Loke Che Chan, Gilbert||Chief Financial Officer||April 2, 2019|
|Loke Che Chan, Gilbert||(Principal Financial and Accounting Officer)|
|/s/ Chuchottaworn Srirat||Director||April 2, 2019|
|/s/ Hee Chee Keong||Director||April 2, 2019|
|Hee Chee Keong|
|/s/ Shum Albert||Director||April 2, 2019|
GREENPRO CAPITAL CORP.
Consolidated Financial Statements
For The Years Ended December 31, 2018 And 2017
(With Report of Independent Registered Public Accounting Firm Thereon)
GREENPRO CAPITAL CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|Report of Independent Registered Public Accounting Firm||F-2|
|Consolidated Balance Sheets as of December 31, 2018 and 2017||F-3|
|Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2018 and 2017||F-4|
|Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2018 and 2017||F-5|
|Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2017||F-6|
|Notes to Consolidated Financial Statements||F-7 – F-23|
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of
Greenpro Capital Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Greenpro Capital Corporation (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the years ended December 31, 2018 and 2017, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2018 and 2017, and the consolidated results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, during the year ended December 31, 2018 the Company incurred a net loss and utilized cash flows in operations, and at December 31, 2018 had a working capital deficiency. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement, whether due to error fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 2017.
Weinberg & Company, P.A.
Los Angeles, California
April 2, 2019
GREENPRO CAPITAL CORP.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2018, AND 2017
(Expressed in U.S. Dollars)
|December 31, 2018||December 31, 2017|
|Cash and cash equivalents (including $145,385 of restricted cash at December 31, 2018)||$||2,172,048||$||1,162,394|
|Accounts receivable, net||188,054||345,734|
|Prepaids and other current assets (including due from related parties of $95,794 and $1,761 as of December 31, 2018 and 2017, respectively)||397,427||270,760|
|Deferred costs of revenue (including $184,000 and $0 to related parties as of December 31, 2018 and 2017, respectively)||418,668||74,990|
|Total current assets||3,176,197||1,853,878|
|Property and equipment, net||2,998,513||3,266,829|
|Real Estate investments:|
|Real estate held for sale||2,530,183||3,430,641|
|Real estate held for investment, net||818,465||868,984|
|Intangible assets, net||57,142||251,655|
|Other investments (includes investment in related party of $51,613 as of December 31, 2018 and 2017, respectively)||163,728||130,457|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Accounts payable and accrued liabilities||$||575,594||$||768,994|
|Current portion of loans secured by real estate||147,416||928,147|
|Due to related parties||862,532||1,813,930|
|Income tax payable||73,595||68,008|
|Total current liabilities||3,717,418||3,924,079|
|Long term portion of loans secured by real estate||1,617,106||1,842,840|
|Commitments and contingencies|
|Preferred stock, $0.0001 par value; 100,000,000 shares authorized; no shares issued and outstanding||-||-|
|Common stock, $0.0001 par value; 500,000,000 shares authorized; 54,715,287 and 53,233,960 shares issued and outstanding, respectively||5,472||5,323|
|Additional paid in capital||16,376,192||8,465,294|
|Accumulated other comprehensive loss||(66,277||)||(40,199||)|
|Total Greenpro Capital Corp. common stockholders’ equity||4,499,307||5,164,105|
|Noncontrolling interests in consolidated subsidiaries||230,123||83,283|
|Total stockholders’ equity||4,729,430||5,247,388|
|TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY||$||10,063,954||$||11,014,307|
See accompanying notes
GREENPRO CAPITAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(Expressed in U.S. Dollars)
|Year ended December 31,|
|Service revenue (including $420,730 and $281,962 of service revenue from related parties, respectively)||$||2,680,748||$||3,313,819|
|Sale of properties||1,368,220||423,871|
|Rental revenue (including $0 and 47,683 of rental revenue from related parties, respectively)||164,392||178,682|
|OPERATING COSTS AND EXPENSES:|
|Cost of service revenue (including $66,000 and $0 cost of service to related parties, respectively)||998,783||1,071,910|
|Cost of properties sold||1,019,790||347,479|
|Cost of rental revenue||62,611||68,412|
|General and administrative||4,286,753||3,350,896|
|Impairment of goodwill and intangible assets||997,137||1,898,721|
Impairment of notes receivable-related party
|Impairment of other investments (including $250,000 of related party investments)||990,197||-|
|Total operating costs and expenses||8,432,359||6,737,418|
|LOSS FROM OPERATIONS||(4,218,999||)||(2,821,046||)|
|OTHER INCOME (EXPENSE)|
|Gain on sale of equity method investments (including $15,000 of gain from related parties)||315,645||-|
|Change in fair value of derivative liabilities||266,666||-|
|Fair value of common stock issued in connection with financing transaction||(4,640,000||)||-|
|Loss on other investments||(4,116||)||(196,082||)|
|LOSS BEFORE INCOME TAX||(8,308,927||)||(3,048,537||)|
|Income tax expense||(16,236||)||(68,372||)|
|Net (income) loss attributable to noncontrolling interest||(224,604||)||832,350|
|NET LOSS ATTRIBUTED TO COMMON STOCKHOLDERS||(8,549,767||)||(2,284,559||)|
|Other comprehensive loss:|
|- Foreign currency translation loss||(26,078||)||71,619|
|PER SHARE, BASIC AND DILUTED||$||(0.15||)||$||(0.04||)|
|WEIGHTED AVERAGE NUMBER OF COMMON STOCK OUTSTANDING, BASIC AND DILUTED||53,981,607||53,060,323|
See accompanying notes
GREENPRO CAPITAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
(Expressed in U.S. Dollars)
|Common Stock||Additional||Accumulated Other||Non-|
|Accumulated Deficit||Controlling Interest||
|Balance as of December 31, 2016, as restated||52,387,759||$||5,239||$||6,628,901||$||(111,818||)||$||(981,754||)||$||319,143||$||5,859,711|
|Shares issued for cash||505,556||50||984,814||-||-||-||984,864|
|Share issued for acquisition||340,645||34||851,579||-||-||-||851,613|
|Noncontrolling interest related to acquisition||-||-||-||-||-||567,742||567,742|
|Acquisition of common controlled company||-||-||-||-||-||28,748||28,748|
|Foreign currency translation, as restated||-||-||-||71,619||-||-||71,619|
|Net Income (loss) for the period, as restated||-||-||-||-||(2,284,559||)||(832,350||)||(3,116,909||)|
|Balance as of December 31, 2017,||53,233,960||5,323||8,465,294||(40,199||)||(3,266,313||)||83,283||5,247,388|
|Common stock sold in public offering, net of offering costs of $956,238||535,559||54||2,257,062||-||-||-||2,257,116|
|Common stock sold in private placement, net of offering costs of $102,000||906,666||91||697,909||-||-||-||698,000|
|Fair value of common stock issued in connection with financing transaction||-||-||4,640,000||-||-||-||4,640,000|
|Common stock issued for acquisition of equity method investee||39,102||4||293,261||-||-||-||293,265|
|Disposal of noncontrolling interest||-||-||-||-||-||(26,254||)||(26,254||)|
Acquisition of noncontrolling interest
|Foreign currency translation||-||-||-||(26,078||)||-||-||(26,078||)|
|Net loss for the period||-||-||-||-||(8,549,767||)||224,604|