Attached files

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EX-31.2 - Greenpro Capital Corp.ex31-2.htm
EX-21 - Greenpro Capital Corp.ex21.htm
EX-4.1 - Greenpro Capital Corp.ex4-1.htm
EX-3.2 - Greenpro Capital Corp.ex3-2.htm
EX-32.2 - Greenpro Capital Corp.ex32-2.htm
EX-31.1 - Greenpro Capital Corp.ex31-1.htm
EX-32.1 - Greenpro Capital Corp.ex32-1.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

 

For The Quarterly Period Ended March 31, 2016

 

or

 

[ ] 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 333-193565

 

Greenpro Capital Corp.

(Formerly known as Greenpro, Inc.)

(Exact name of registrant issuer as specified in its charter)

 

Nevada   98-1146821
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

Suite 2201, 22/F., Malaysia Building,

50 Gloucester Road, Wanchai, Hong Kong

 

 

(Address of principal executive offices, including zip code)

Registrant’s phone number, including area code (852) 3111 -7718

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

YES [X] NO [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer [  ] Accelerated Filer [  ] Non-accelerated Filer [  ] Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

 

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 March 31, 2016
Common Stock, $.0001 par value   51,963,755

 

 

 

 
 

 

TABLE OF CONTENTS
    Page
     
PART I FINANCIAL INFORMATION  
     
ITEM 1. CONDENSED FINANCIAL STATEMENTS:  
     
  Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015 (audited) F-1
     
  Condensed Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended March 31, 2016 and 2015 F-2
     
  Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015 F-3
     
  Notes to Condensed Consolidated Financial Statements F-4 -F-21
     
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 12
     
ITEM 4. CONTROLS AND PROCEDURES 12
     
PART II OTHER INFORMATION  
     
ITEM 1 LEGAL PROCEEDINGS 13
     
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 13
     
ITEM 3 DEFAULTS UPON SENIOR SECURITIES 14
     
ITEM 4 MINE SAFETY DISCLOSURES 14
     
ITEM 5 OTHER INFORMATION 14
     
ITEM 6 EXHIBITS 14
     
SIGNATURES 15

 

2
 

 

PART I FINANCIAL INFORMATION

 

ITEM 1. CONDENSED FINANCIAL STATEMENTS

 

GREENPRO CAPITAL CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2016 AND DECEMBER 31, 2015

(Currency expressed in United States Dollars (“US$”))

 

   March 31, 2016   December 31, 2015 
   (unaudited)     
ASSETS          
Current assets:          
Cash and cash equivalents  $1,183,228   $1,587,861 
Accounts receivable   167,054    186,162 
Inventory – finished property   3,747,732    3,746,977 
Amounts due from a related company   69,664    69,568 
Prepayments and other receivables   94,927    233,402 
Total current assets   5,262,605    5,823,970 
           
Non-current assets:          
Investment Property, net   1,018,092    1,030,009 
Plant and equipment, net   46,876    48,471 
Cash surrender value of life insurance, net   37,711    36,832 
Investments in unconsolidated entities   62,773    62,773 
Intangible assets, net   565,765    663,995 
Goodwill   1,472,729    1,402,316 
Total non-current assets   3,203,946    3,244,396 
TOTAL ASSETS  $8,466,551   $9,068,366 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable and accrued liabilities  $179,779   $433,350 
Deferred revenue   174,547    174,547 
Amounts due to related parties   2,013,635    2,101,715 
Amounts due to directors   142,863    180,793 
Current portion of long-term bank loans   15,108    13,610 
Income tax payable   13,534    7,988 
Total current liabilities   2,539,466    2,912,003 
           
Non-current liabilities          
Long-term bank loans   642,734    592,318 
           
Total liabilities   3,182,200    3,504,321 
           
Commitments and contingencies          
           
Stockholders’ equity:          
Preferred stock, $0.0001 par value; 100,000,000 shares authorized; no share issued and outstanding  $-   $- 
Common stock, $0.0001 par value; 500,000,000 shares authorized; 51,963,755 shares issued and outstanding at March 31, 2016 and December 31, 2015   5,196    5,196 
Additional paid in capital   5,915,294    5,915,294 
Accumulated other comprehensive income   27,993    74,503 
Accumulated deficit   (803,194)   (567,931)
Total Greenpro Capital Corp. stockholders’ equity   5,145,289    5,427,062 
Non-controlling interest   139,062    136,983 
           
Total stockholders’ equity   5,284,351    5,564,045 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   8,466,551    9,068,366 

 

See accompanying notes to the condensed consolidated unaudited financial statements.

 

F-1
 

 

GREENPRO CAPITAL CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (OPERATIONS)

AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Currency expressed in United States Dollars (“US)

(Unaudited)

 

   Three months ended March 31, 
   2016   2015 
REVENUES, NET          
- Rental income  $23,255   $8,927 
- Service income          
Related parties   45,103    5,023 
Unrelated parties   383,305    324,073 
Total revenues   451,663    338,023 
           
COST OF REVENUES          
- Cost of rental   (10,318)   (10,891)
- Cost of service Unrelated parties   (225,739)   (128,723)
Total cost of revenues   (236,057)   (139,614)
           
GROSS PROFIT   215,606    198,409 
           
OPERATING EXPENSES:          
General and administrative   (416,816)   (235,597)
           
LOSS FROM OPERATIONS   (201,210)   (37,188)
           
OTHER EXPENSES:          
Interest expense   (26,385)   (8,757)
           
LOSS BEFORE INCOME TAX AND NON-CONTROLLING INTEREST   (227,595)   (45,945)
Income tax expense   (5,589)   - 
NET LOSS BEFORE NON-CONTROLLING INTEREST   (233,184)   (45,945)
Less: Net (loss) income attributable to non-controlling interest   (2,079)   2,218 
           
NET LOSS ATTRIBUTED TO GREENPRO CAPITAL CORP. COMMON STOCKHOLDERS   (235,263)   (43,727)
Other comprehensive loss:          
- Foreign currency translation (loss) income   46,510    (8,550)
COMPREHENSIVE LOSS  $(188,753)  $(52,277)
           
NET LOSS PER SHARE, BASIC AND DILUTED  $(0.00)  $(0.00)
           
WEIGHTED AVERAGE NUMBER OF COMMON STOCK OUTSTANDING, BASIC AND DILUTED   51,963,755    22,422,800 

 

See accompanying notes to the condensed consolidated unaudited financial statements.

 

F-2
 

 

GREENPRO CAPITAL CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

 

   Three months ended March 31, 
   2016   2015 
Cash flows from operating activities:          
Net loss before non-controlling interest  $(233,184)  $(45,945)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   39,506    9,809 
Increase in cash surrender value on life insurance   (16,381)   - 
Changes in operating assets and liabilities:          
Accounts receivable   19,108    (42,038)
Inventory – finished property   (755)   - 
Prepayments and other receivables   139,598    (1,041,166)
Accounts payable and accrued liabilities   20,892    - 
Receipt in advance   (40,114)   456 
Other payable and accrued liabilities   (238,249)   (46,854)
Income tax payable   5,546    - 
           
Net cash used in operating activities   (304,033)   (1,165,738)
           
Cash flows from investing activities:          
Purchase of property, plant and equipment   (3,812)   (854)
Refund for life insurance premium   15,502    - 
           
Net cash (used in) provided by investing activities   11,690    (854)
           
Cash flows from financing activities:          
Proceeds from non-controlling interest   -    516 
Advances from / (repayments to) related parties   (107,311)   1,470,781 
Repayments to directors   (19,018)   (44,848)
Repayment of bank borrowings   (3,665)   (3,674)
           
Net cash (used in) provided by financing activities   (129,994)   1,422,775 
           
Effect of exchange rate changes in cash and cash equivalents   17,704    (3,316)
           
NET CHANGE IN CASH AND CASH EQUIVALENTS   (404,633)   252,867 
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR   1,587,861    623,370 
           
CASH AND CASH EQUIVALENTS, END OF YEAR  $1,183,228   $876,237 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
Cash paid for income tax  $-   $- 
Cash paid for interest  $26,385   $8,757 

 

See accompanying notes to the condensed consolidated unaudited financial statements.

 

F-3
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

NOTE 1 – BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in audited consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although Greenpro Capital Corp (“the Company” or “GRNQ”) believes that the disclosures made are adequate to make the information not misleading.

 

In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of the financial information for the interim periods reported have been made. Results of operations for the three months ended March 31, 2016, are not necessarily indicative of the results for the year ending December 31, 2016, or any period thereafter. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our annual report on Form 10-K for the fiscal year ended December 31, 2015, filed with the Securities and Exchange Commission on March 30, 2016.

 

NOTE 2 – GOING CONCERN UNCERTAINTIES

 

The accompanying condensed consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

 

As of March 31, 2016, the Company has an accumulated deficit of $803,194 and incurred a net operating loss of $235,263 for the three months ended March 31, 2016. The continuation of the Company as a going concern through December 31, 2016 is dependent upon improving the profitability and the continuing financial support from its stockholders. Management believes the existing shareholders or external financing will provide the additional cash to meet the Company’s obligations as they become due.

 

These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company not being able to continue as a going concern.

 

NOTE 3 – ORGANIZATION AND BUSINESS BACKGROUND

 

Greenpro, Inc. (the “Company” or “GRNQ”) was incorporated on July 19, 2013, in the state of Nevada. On May 6, 2015, the Company changed its name to Greenpro Capital Corp. The Company currently operates and provides a wide range of business solution services varying from cloud system resolution, financial consulting service and corporate accounting services to small and mid-size businesses located in Asia, with an initial focus in Hong Kong, China, and Malaysia. The Company’s comprehensive range of services cover cloud accounting solutions, cross-border business solutions, record management services, and accounting outsourcing services.

 

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 is focused on establishing a business incubator for start-up and high growth companies to support them during their critical growth periods and investing in select start-up and high growth companies. Our venture capital business is focused on companies located in East Asia and Southeast Asia including Hong Kong, Malaysia, China, Thailand, and Singapore. Another one of our venture capital business segments is focused on rental activities of commercial properties and the sale of investment properties.

 

F-4
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying consolidated financial statements and notes.

 

      Basis of presentation

 

The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

 

      Basis of consolidation

 

The condensed consolidated financial statements include the accounts of the Company and include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which the Company exercises control and, when applicable, entities for which the Company has a controlling financial interest or is the primary beneficiary. All inter-company accounts and transactions have been eliminated in consolidation. The Company records income attributable to non-controlling interest in the condensed consolidated statements of operations for any non-owned portion of consolidated subsidiaries. Non-controlling interest is recorded within the equity section but separate from GRNQ’s equity in the condensed consolidated balance sheets.

 

      Use of estimates

 

In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the periods reported. Actual results may differ from these estimates. The following are some of the areas requiring significant judgments and estimates: determinations of the useful lives of assets, estimates of allowances for doubtful accounts, cash flow and valuation assumptions in performing asset impairment tests of long-lived assets.

 

      Cash and cash equivalents

 

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

 

      Accounts receivable

 

Accounts receivable are recorded at the invoiced amount less an allowance for any uncollectible accounts and do not bear interest, which are due on demand. Management reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical collection trends and aging of receivables. Management also periodically evaluates individual customer’s financial condition, credit history, and the current economic conditions to make adjustments in the allowance when it is considered necessary. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

 

      Inventory – finished property

 

Inventory – finished property represents a multi-unit property developed for resale on a unit by unit basis. Inventory is stated at cost unless the inventory is determined to be impaired in which case the impaired inventory is written down to fair value. The cost of inventory – finished property includes the purchase price of property, legal fees, improvement costs to the building structure, and other acquisition costs. Project wide costs such as land acquisition and certain development costs are allocated to the specific units based upon their relative fair value before construction. All property is finished and ready for sale.

 

In conducting its reviews for indicators of impairment, the Company evaluates, among other things, the margins on units already sold within the project, margins on units under contract but not closed (none as of March 31, 2016), and projected margin on future unit sales. The Company pays particular attention to discern if inventory is moving at a slower than expected pace or where margins are trending downward. As at March 31, 2016, the Company determined inventory – finished property was not impaired.

 

F-5
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

      Investment Property

 

Investment Property is stated at cost less accumulated depreciation and accumulated impairment losses, if any. 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  Over the shorter of estimated useful life or term of lease   - 

 

The cost of leasehold land and buildings includes the purchase price of property, legal fees, and other acquisition costs.

 

Depreciation expense, classify as cost of rental, for the three months ended March 31, 2016 and 2015 were $7,899 and $8,212, respectively.

 

      Plant and equipment

 

Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. 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 
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   - 

 

Expenditures for maintenance and repairs are expensed as incurred. The gain or loss on the disposal of plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant assets and is recognized in the statement of operations.

 

Depreciation expense, classify as operating expenses, for the three months ended March 31, 2016 and 2015 were $3,789 and $1,491, respectively.

 

      Intangible assets

 

Intangible assets are stated at cost less accumulated amortization. Intangible assets represented the registration costs of trade marks registered in Hong Kong, the PRC, and Malaysia, which are amortized on a straight-line basis over a useful life of ten years. Intangible assets acquired in business combinations are provisionally considered customer lists amortized on a straight-line basis over a useful life of five years.

 

The Company follows ASC Topic 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. There were no impairment losses recorded on intangible assets for the three months ended March 31, 2016 and 2015.

 

F-6
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

The Company completed the analysis to determine the fair value of customer relationships as of the acquisition date and adjusted the cost and accumulative amortization of customer relationships. The cost of customer relationships has been adjusted from $694,911 to $624,500 as of the acquisition data with a corresponding increase to Goodwill. The Company valued customer relationships using the income approach, specifically the multi-period excess earnings method. In determining the fair value of the customer relationships, the multi- period excess earnings approach values the intangible asset at the present value of the incremental after-tax cash flows attributable only to the customer relationship. And the adjusted amortization reflected in the current-period income statement that would have been recognized the adjustment to provisional amounts in previous period is amount of $3,521.

 

Amortization expense for the three months ended March 31, 2016 and 2015 were $27,818 and $106, respectively.

 

      Goodwill

 

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. With the provision of ASC 350 “Goodwill and Other”, 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 property, plant and equipment and intangible assets. In accordance with the provision of ASC Topic 360-10-5, “Impairment or Disposal of Long-Lived Assets”, 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. There has been no impairment charge for the periods presented.

 

      Cash value of life insurance

 

The cash value of life insurance relates to the Company-owned life insurance policies on the general manager and executive corporate advisor of the Company, which is stated at the cash surrender value of the contract.

 

      Investments in unconsolidated entities

 

Under the equity method of accounting, investments in unconsolidated entities are initially recognized in the consolidated balance sheet at cost and are subsequently adjusted to reflect the Company’s proportionate share of net earnings or losses of the entity, distributions received, contributions and certain other adjustments, as appropriate. The Company’s share of the income or loss of the unconsolidated entity is reflected in the consolidated statements of operations and will increase or decrease, as applicable, the carrying value of the Company’s investments in unconsolidated entities on the consolidated balance sheet.

 

When the investment cost in an unconsolidated entity is reduced to zero, the Company records no further losses in its consolidated statements of operations unless the Company has an outstanding guarantee obligation or has committed additional funding to the entity. When such entity subsequently reports income, the Company will not record its share of such income until it exceeds the amount of the Company’s share of losses not previously recognized.

 

F-7
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

      Comprehensive income

 

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The Company’s accumulated other comprehensive income consists of cumulative foreign currency translation adjustments.

 

      Revenue recognition

 

The Company recognizes its revenue in accordance with ASC Topic 605, “Revenue Recognition”, upon the delivery of its products when: (1) delivery has occurred or services rendered; (2) persuasive evidence of an arrangement exists; (3) there are no continuing obligations to the customer; and (4) the collection of related accounts receivable is probable.

 

(a) Rental income

 

Revenue 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.

 

The Company leases its commercial office premises in Malaysia and Hong Kong under various non-cancelable operating leases with terms of two to three years and renewal options. For the three months ended March 31, 2016, the Company has recorded $23,255 in rental revenue, based upon its annual rental over the life of the lease under operating lease, using straight-line method.

 

(b) Service income

 

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.

 

(c) 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.

 

Revenue on sales of properties may be deferred in whole or in part until the requirements for revenue recognition have been met.

 

      Cost of revenues

 

Cost of revenue on rental shown on the accompanying statements of operations include 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.

 

Costs of revenue on provision of services primarily consist of employee compensation and related payroll benefits, company formation cost and other professional fees directly attributable to cost in related to the services rendered.

 

Cost of revenues on sale of properties primary consist 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.

 

F-8
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

      Non-controlling interest

 

Non-controlling interest represents the capital contribution, income and loss attributable to the shareholders of less than wholly-owned and consolidated entities.

 

      Income taxes

 

Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

 

The Company conducts major businesses in Hong Kong, Malaysia and China and is subject to tax in its own jurisdiction. As a result of its business activities, the Company will file separate tax returns that are subject to examination by the foreign tax authorities.

 

      Foreign currencies translation

 

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations.

 

The reporting currency of the Company is the United States Dollars (“US$”) and the accompanying financial statements have been expressed in US$. In addition, the Company’s operating subsidiaries maintain their books and record in a local currency, Malaysian Ringgit (“MYR”), Renminbi (“RMB”), and Hong Kong Dollars (“HK$”), which is also the respective functional currencies for each subsidiary as they are the primary currency of the economic environment in which each subsidiary operates.

 

In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not the US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.

 

F-9
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

Translation of amounts from the local currencies of the Company into US$ has been made at the following exchange rates for the respective periods:

 

   As of and for the three months ended March 31, 
   2016   2015 
Period-end MYR : US$1 exchange rate   3.93    3.71 
Period-average MYR : US$1 exchange rate   3.85    3.54 
Period-end RMB : US$1 exchange rate   6.46    6.11 
Period-average RMB : US$1 exchange rate   6.27    6.14 
Period-end / average HK$ : US$1 exchange rate   7.75    7.75 

 

       Related parties

 

Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.

 

      Segment reporting

 

ASC Topic 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in financial statements. The Company operates in two reportable operating segments in Hong Kong, China, and Malaysia.

 

      Fair value of financial instruments

 

The carrying value of the Company’s financial instruments: cash and cash equivalents, accounts receivable, deposits, prepayments and other receivables, accounts payable, receipts in advance, loan from shareholders, amounts due to directors, amount due to related companies, amount due to non-controlling interest party, and other payables and accrued liabilities approximate at their fair values because of the short-term nature of these financial instruments.

 

The Company follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

 

Level 1 : Observable inputs such as quoted prices in active markets;
   
Level 2 : Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
   
Level 3 : Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions

 

      Recent accounting pronouncements

 

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605)”, and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. In August 2015, the FASB issued an Accounting Standards Update to defer by one year the effective dates of its new revenue recognition standard until annual reporting periods beginning after January December 15, 2017 (2018 for calendar-year public entities) and interim periods therein. Management is currently assessing the impact the adoption of ASU 2014-09 and has not determined the effect of the standard on our ongoing financial reporting. We do not expect the adoption of this new standard to have a material impact on our consolidated financial statements.

 

F-10
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements - Going Concern, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”), which establishes management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and, if so, to provide related footnote disclosures. ASU 2014-15 provides a definition of the term “substantial doubt” and requires an assessment for a period of one year after the date that the financial statements are issued or available to be issued. Management will also be required to evaluate and disclose whether its plans alleviate that doubt. The guidance is effective for the annual periods ending after December 15, 2016 and interim periods thereafter with early adoption permitted. The Company is currently evaluating the impact the adoption of ASU 2014-15 on the Company’s financial statement presentation and disclosures. We do not expect the adoption of this new standard to have a material impact on our consolidated financial statements.

 

In September 2015, the FASB issued Accounting Standards Update No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”) , which eliminates the requirement to restate prior period financial statements for measurement period adjustments following a business combination. The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. ASU 2015-16 is effective for interim and annual periods beginning after December 15, 2015 and early adoption is permitted. This guidance is effective for us for the quarter ending March 31, 2016.

 

NOTE 5 – BUSINESS COMBINATIONS

 

On September 30, 2015, GRNQ completed the business purchase of 100% equity interest and assets of Falcon Secretaries Limited, Ace Corporate Services Limited, and Shenzhen Falcon Financial Consulting Limited (Collectively known as “F&A”). On the same day, GRNQ completed the business purchase of 60% equity interest and assets of Yabez (Hong Kong) Company Limited (“Yabez”).

 

As of the acquisition date, the preliminary allocations of the purchase price are stated as follows:

 

   F&A   Yabez   Total 
Plant and equipment  $1,270   $3,026   $4,296 
Accounts receivable   103,578    39,435    143,013 
Prepayments, deposits and other receivables   5,467    6,479    11,946 
Cash and cash equivalents   21,521    29,049    50,570 
Accounts payable and accrued liabilities   (129,039)   (39,627)   (168,666)
Provisional Intangible assets – customer relationship   449,500    175,000    624,500 

Provisional Goodwill

   1,211,863    260,866    1,472,729 
Provisional fair values of F&A and Yabez respectively  $1,664,160   $474,228   $2,138,388 
Non-controlling interest   -    (85,291)   (85,291)
Total purchase considerations*  $1,664,160   $388,937   $2,053,097 

 

*Total purchase considerations were consisted of 2,080,200 and 486,171 shares of GRNQ common stock, which is priced at 0.8 per share, for F&A and Yabez respectively.

 

Goodwill of $1,472,729, which is approximately the amount of goodwill deductible for U.S. income tax purposes, represents the premium the Company paid over the fair value of the net tangible and identifiable intangible assets it acquired. The Company paid this premium because the acquisition of F&A and Yabez will, among other things, significantly broadened the Company's corporate advisory services rendered in Hong Kong and China market. In addition, the Company paid this premium to acquire established customer relationships in the corporate advisory businesses.

 

The allocation of the purchase price to the assets and liabilities above is subject to change as the Company finalizes purchase accounting. The Company is in the process of finalizing the valuation of intangible assets. During the first quarter of 2016, the Company adjusted the intangible asset to recognize an aggregate increase of $70,413 in Goodwill. The fair value of intangible asset at the acquisition date was determined based on the present value of the incremental after-tax cash flows attributable only to the customer relationship by multi-period excess earnings approach. As of March 31, 2016, the Company recorded provisional goodwill of $1,472,729.

 

F-11
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

The unaudited pro forma information for F&A and Yabez below present statement of operations data for the three months ended March 2015 as if the acquisition of F&A and Yabez took place on January 1, 2015.

 

  

F&A and Yabez

For the three months ended
March 31, 2016
  

F&A and Yabez

For the three months ended
March 31, 2015
 
   (unaudited)   (unaudited) 
Revenue  $214,091   $180,182 
Gross profit   140,121    91,188 
Operating loss   (7,051)   (11,277)
Net loss  $(9,144)  $(12,098)
Earnings (Loss) per share  $(0.00)  $(0.00)

 

NOTE 6 – INVESTMENT PROPERTY

 

   2016   2015 
         
Leasehold land and buildings for rental purpose  $1,044,213   $1,044,213 
Furniture and fixtures   62,151    62,151 
Office equipment   10,166    8,514 
Leasehold improvement   84,907    84,907 
    1,201,437    1,199,785 
Less: Accumulated depreciation   (183,345)   (169,776)
Total  $1,018,092   $1,030,009 

 

Depreciation expense, classify as cost of rental, was $7,899 and $8,212 for the three months ended March 31, 2016 and 2015 respectively.

 

NOTE 7 – PLANT AND EQUIPMENT

 

   2016   2015 
Furniture and fixtures  $26,879   $ 33,028 
Office equipment   27,373    26,096 
Leasehold improvement   13,992    12,074 
    68,244    71,198 
Less: Accumulated depreciation   (21,368)   (22,727)
 Total  $46,876   $48,471 

 

Depreciation expense, classify as operating expenses, was $3,789 and $1,491 for the three months ended March 2016 and 2015 respectively.

 

F-12
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

NOTE 8 – CASH SURRENDER VALUE OF LIFE INSURANCE

 

On September 9, 2013, the Company purchased insurance on the life of the General Manager of the Company. As beneficiary, the Company receives the cash surrender value if the policy is terminated and, upon death of the insured, receives all benefits payable. Net cash surrender value of this life insurance is presented in the accompanying financial statement, net of surrender charge.

 

On May 15, 2015, the Company purchased additional insurance on the life of an Executive Corporate Advisor of the Company. As beneficiary, the Company receives the cash surrender value if the policy is terminated and, upon death of the insured, receives all benefits payable. The cash surrender value of this life insurance is pledged as collateral against HK$902,663 (approximately $116,473) credit facility with Hang Seng Bank Limited. Cash value of this life insurance is presented in the accompanying financial statement, net of the policy loan. The loan carries interest at an effective rate of 1.75% per annum over 1-month Hong Kong Interbank Offered Rate (“HIBOR”), payable with one lump sum on maturity in May 2016, which are secured by the cash value of the life insurance policy and personally guaranteed by Mr. Lee Chong Kuang and Mr. Loke Che Chan Gilbert, the directors of the Company.

 

A summary of net cash surrender values of life insurance as of March 31, 2016 and December 31, 2015 are reported as below:

 

   As of
March 31, 2016
   As of
December 31, 2015
 
Cash surrender value of life insurance  $154,184   $153,305 
Less: policy loan balance outstanding   (116,473)   (116,473)
Cash surrender value of life insurance, net  $37,711   $36,832 

 

NOTE 9 – INVESTMENTS IN UNCONSOLIDATED ENTITIES

 

As of March 31, 2016, the Company invested in five different unconsolidated entities, which the Company’s ownership ranges from 20% to 30%, and are accounted for under the equity method of accounting, with initial investment amount of $11,000. The Company recognized its share of loss on investments in unconsolidated entities of $5,100.

 

As of March 31, 2016, the Company invested in Greenpro Trust Limited with initial investment amount of $56,773. Greenpro Trust Limited is a company incorporated in Hong Kong with 3,400,000 ordinary shares authorized, issued and outstanding at a par value of HK$1 (approximately $0.129). Mr. Lee Chong Kuang and Mr. Loke Che Chan, Gilbert are the common directors of Greenpro Trust Limited and the Company.

 

Combined summarized financial information for all the unconsolidated entities are as follows:

 

   As of
March 31, 2016
   As of
December 31, 2015
 
         
Total assets  $5,042,243   $1,610,416 
Total liabilities  $1,538,120   $999,591 

 

   For three months
ended
March 31, 2016
   For three months
ended
December 31, 2015
 
         
Revenue  $87,267   $60,617 
Net loss for the periods end respectively  $602,887   $477,834 

 

F-13
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

NOTE 10 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

Accounts payable and accrued liabilities consist of:

 

   2016   2015 
         
Accounts payable  $20,892   $- 
Receipts in advance   16,509    55,187 
Other payables and accrued liabilities   142,378    378,163 
 Total  $179,779   $433,350 

 

NOTE 11 – AMOUNTS DUE TO RELATED PARTIES

 

   2016   2015 
         
Amounts due to shareholders  $546,278   $505,327 
Amount due to non-controlling interest party   1,467,357    1,596,388 
Amount due to a related company   -    - 
 Total  $2,013,635   $2,101,715 

 

As of March 31, 2016, a shareholder advanced $500,000 to the Company, which is unsecured, bears interest at 12% per annum and payable with one lump sum in September 2016 upon maturity, for the purpose of business development. The remaining amounts of $46,278 are temporary advances made to the Company by various shareholders, which are unsecured, interest-free and are payable on demand, for working capital purpose.

 

As of March 31, 2016, the non-controlling interest party of Forward Win International Limited advanced $1,467,357 to the Company, which is unsecured, bears no interest and payable upon demand, for the purchase of real properties for trading purpose.

 

NOTE 12 – AMOUNTS DUE TO DIRECTORS

 

As of March 31, 2016, the directors of the Company advanced collectively $142,863 to the Company, which is unsecured, bears no interest and is payable upon demand, for working capital purpose. Imputed interest is considered insignificant.

 

NOTE 13 – LONG-TERM BANK LOANS

 

   2016   2015 
Bank loans from financial institutions in Malaysia          
Standard Chartered Saadiq Berhad  $392,269   $361,596 
United Overseas Bank (Malaysia) Berhad   265,573    244,332 
    657,842    605,928 
Less: current portion   (15,108)   (13,610)
 Bank loan, net of current portion  $642,734   $592,318 

 

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 Kulua 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 controlled by the directors of the Company.

 

F-14
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

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 Kulua 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.

 

Maturities of the long-term bank loans for each of the five years and thereafter following March 31, 2016 are as follows:

 

Year ending March 31:    
2017  $15,108 
2018   15,828 
2019   16,582 
2020   17,296 
2021   18,197 
Thereafter   574,831 
      
Total  $657,842 

 

For the three months ended March 31, 2016 and 2015, the base lending rate is 6.85% per annum.

 

NOTE 14 – COMMON STOCK

 

For the three months ended March 31, 2016, the company had not issued any common stock.

 

As of March 31, 2016, the company has 51,963,755 shares issued and outstanding. There are no shares of preferred stock issued and outstanding.

 

NOTE 15 – INCOME TAXES

 

The (loss) income before income taxes of the Company for the three months ended March 31, 2016 and 2015 were comprised of the following:

 

   For the three months ended
March 31,
 
   2016   2015 
Tax jurisdictions from:          
– Local  $(286,206)  $(133,484)
– Foreign, representing:          
BVI   (102)   (2,921)
Belize   67,271    109,723 
Anguilla   1,669    (3,149)
Malaysia   (2,223)   (16,472)
Hong Kong   1,400    1,688 
The PRC   (9,404)   (1,330)
Loss before income taxes  $(227,595)  $(45,945)

 

F-15
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

Provision for income taxes consisted of the following:

 

   For the three months ended
March 31,
 
   2016   2015 
         
Current:          
– Local  $-   $- 
– Foreign, representing:          
BVI   -    - 
Belize   -    - 
Anguilla   -    - 
Hong Kong   

5,589

    - 
The PRC   -    - 
Malaysia   -    - 
           
Deferred:          
– Local   -    - 
– Foreign   -    - 
   $

5,589

   $- 

 

The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. During the periods presented, the Company has a number of subsidiaries that operates in different countries and is subject to tax in the jurisdictions in which its subsidiaries operate, as follows:

 

United States of America

 

GRNQ is registered in the State of Nevada and is subject to United States of America tax law. As of March 31, 2016, the operations in the United States of America incurred $734,628 of cumulative net operating losses which can be carried forward to offset future taxable income. The net operating loss carryforwards begin to expire in 2033, if unutilized. The Company has provided for a full valuation allowance of approximately $257,000 against the deferred tax assets on the expected future tax benefits from the net operating loss carryforwards as the management believes it is not likely that these assets will not be realized in the future.

 

British Virgin Islands

 

Under the current BVI law, the Company’s subsidiaries are not subject to tax on income. No provision for income tax is required due to operating loss incurred.

 

Belize

 

Under the current Laws of Belize, the Company’s subsidiaries are registered as a Belizean International Business Corporation which is subject to 0% income tax rate.

 

Anguilla

 

Under the current laws of the Anguilla, Greenpro Venture Capital Limited (“GPVC”) and Greenpro Venture CAP (CGN) Limited (“GPVCCGN”) are registered as an international business company which governs by the International Business Companies Act of Anguilla and there is no income tax charged in Anguilla. For the years ended March 31, 2016 and 2015, the GPVC and GPVCCGN incurred aggregated net operating profit of $1,669 and net operating loss of $3,149, respectively.

 

F-16
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

Hong Kong

 

All of the Company’s subsidiaries operating in Hong Kong subject to the Hong Kong Profits Tax, which is charged at the statutory income tax rate of 16.5% on its assessable income for its tax year. A reconciliation of income (loss) before income taxes to the effective tax rate as follows:

 

   For the three months ended March 31, 
   2016   2015 
         
Subsidiary with operating income before income tax  $

50,253

   $7,395 
Subsidiaries with loss before income tax   (21,148)   (5,707)
           
Net income before income tax   

29,105

    1,688 
           
Subsidiary with operating income before income tax  $

50,253

   $7,395 
Statutory income tax rate   16.5%   16.5%
           
Income tax at Hong Kong statutory income tax rate   

8,291

    1,220 
Tax effect of tax loss brought forward   -    (1,220)
Tax effect of tax reduction   (2,702)   - 
 Income tax expense  $

5,589

   $- 

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. There was no significant temporary difference as of March 31, 2016, therefore no deferred tax assets or liabilities have been recognized.

 

The PRC

 

Greenpro Management Consultancy (Shenzhen) Limited (“GMC(SZ)”) and Shenzhen Falcon Financial Consulting Limited (“SZ Falcon”) are operating in the PRC subject to the Corporate Income Tax governed by the Income Tax Law of the People’s Republic of China with a unified statutory income tax rate of 25%. For the three ended March 31, 2016 and 2015, the GMC(SZ) and SZ Falcon incurred aggregated net operating loss of $9,404 and $1,330, respectively.

 

Malaysia

 

Greenpro Resources Sdn Bhd (“GRSB”) and Greenpro Capital Village Sdn Bhd (“GCVSB”) are subject to the Malaysia Corporate Tax Laws at a progressive income tax rate starting from 20% on the assessable income for its tax year. For the three months ended March 31, 2016 and 2015, GRSB and GCVSB incurred an aggregated operating loss of $2,223 and $16,472, respectively which can be carried forward indefinitely to offset its taxable income. The Company has provided for a full valuation allowance against the deferred tax assets of $32,934 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.

 

F-17
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

The following table sets forth the significant components of the aggregate deferred tax assets of the Company as of March 31, 2016 and December 31, 2015:

 

   As of 
   March 31, 2016   December 31, 2015 
  (unaudited)   (audited) 
Deferred tax assets:        
Net operating loss carryforwards          
– United States of America  $257,000   $146,000 
– The PRC   52,037    49,686 
– Malaysia   32,934    32,490 
    341,971    228,176 
Less: valuation allowance   (341,971)   (228,176)
 Deferred tax assets  $-   $- 

 

Management believes that it is more likely than not that the deferred tax assets will not be fully realizable in the future. Accordingly, the Company provided for a full valuation allowance against its deferred tax assets of $341,971 as of March 31, 2016. During the three months ended March 31, 2016, the valuation allowance increased by $113,795, primarily relating to net operating loss carry forwards from the various tax regime.

 

NOTE 16 – RELATED PARTY TRANSACTIONS

 

   For the three months ended
March 31,
 
   2016   2015 
Business consulting and advisory service income          
   -   Related party A  $32,973   $3,000 
   -   Related party B   -    2,023 
   -   Related party C   11,540    - 
   -   Related party D   590    - 
           
   45,103   $ 5,023 

 

Related party A is under common control of Mr. Loke Che Chan, Gilbert, the director of the Company.

 

Related party B and C is under common control of Ms. Chen Yanhong, the director of GMC(SZ), a wholly-owned subsidiary of the Company.

 

Related party D is under common control of Mr. Lee Chong Kuang and Mr. Loke Che Chan, Gilbert, the directors of the Company.

 

All of these related party transactions are generally transacted in an arm-length basis at the current market value in the normal course of business.

 

NOTE 17 – SEGMENT INFORMATION

 

The Company operates three reportable business segments, as defined by ASC Topic 280:

 

●  Service business – provision of business solution services
   
  Real estate business – leasing and trading of commercial real estate properties in Hong Kong and Malaysia
   
  Corporate – other than the above two-segments

 

F-18
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 4). The Company had no inter-segment sales for the periods presented. Summarized financial information concerning the Company’s reportable segments is shown as below:

 

(a) By Categories

 

   For the three months ended March 31, 2016 
   Real estate  business   Service business   Corporate   Total 
                 
Revenues  $23,255   $428,408   $-   $451,663 
Cost of revenues   (10,318)   (225,739)   -    (236,057)
                     
Gross income   12,937    202,669    -    215,606 
Depreciation and amortization   7,899    3,789    27,818    39,506 
Net loss   (6,000)   (219,540)   (9,723)   (235,263)
Total assets   5,009,139    3,274,234    183,178    8,466,551 
Expenditure for long-lived assets  $1,686   $2,126   $-   $3,812 

 

   For the three months ended March 31, 2015 
   Real estate business   Service business   Corporate   Total 
                 
Revenues  $8,927   $329,096   $-   $338,023 
Cost of revenues   (10,891)   (128,723)   -    (139,614)
                     
Gross income   (1,964)   200,373    -    198,409 
Depreciation and amortization   8,212    1,491    106    9,809 
Net loss   (15,655)   (24,763)   (3,309)   (43,727)
Total assets   2,466,672    1,001,177    81,405    3,549,254 
Expenditure for long-lived assets  $492   $362   $-   $854 

 

F-19
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

NOTE 18 – CONCENTRATIONS OF RISKS

 

(a) Major customers

 

For Service income:

 

For the three months ended March 31, 2016, the customers who accounted for 10% or more of the Service income are presented as follows:

 

   For the three months ended
March 31, 2016
   As of March 31, 2016 
   Revenues   Percentage of revenues   Trade accounts receivable 
             
Customer A  $60,000    11%  $ - 
Total:  $60,000    11%  $- 

 

For the three months ended March 31, 2015, the customers who accounted for 10% or more of the Service income are presented as follows:

 

   For the three months ended
March 31, 2015
   As of March 31, 2015 
   Revenues   Percentage of revenues   Trade accounts receivable 
             
Customer B  $140,000    43%  $- 
Total:  $140,000    43%  $- 

 

For Sale of properties:

 

For the three months ended March 31, 2016 and 2015, there was no revenue generated from sale of properties.

 

(b) Major vendors

 

For the three months ended March 31, 2016 and 2015, there was no vendor who accounted for 10% or more of the Company’s cost of revenues with no accounts payable balance at year-end.

 

(c) Credit risk

 

Financial instruments that are potentially subject to credit risk consist principally of accounts receivable. The Company believes the concentration of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

 

(d) Interest rate risk

 

As the Company has no significant interest-bearing assets, the Company’s income and operating cash flows are substantially independent of changes in market interest rates. The Company’s interest-rate risk arises from bank loans. The Company manages interest rate risk by varying the issuance and maturity dates variable rate debt, limiting the amount of variable rate debt, and continually monitoring the effects of market changes in interest rates.

 

F-20
 

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Currency expressed in United States Dollars (“US $”))

(Unaudited)

 

(e) Exchange rate risk

 

The reporting currency of the Company is US$, to date the majority of the revenues and costs are denominated in MYR and RMB and a significant portion of the assets and liabilities are denominated in MYR and RMB. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between US$, MYR and RMB. If MYR and RMB depreciates against US$, the value of MYR and RMB revenues and assets as expressed in US$ financial statements will decline. The Company does not hold any derivative or other financial instruments that expose it to substantial market risk.

 

(f) Economic and political risks

 

Substantially all of the Company’s services are conducted in Malaysia, the PRC and Asian region. The Company’s operations are subject to various political, economic, and other risks and uncertainties inherent in Malaysia. Among other risks, the Company’s operations are subject to the risks of restrictions on transfer of funds; export duties, quotas, and embargoes; domestic and international customs and tariffs; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations in Malaysia.

 

The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.

 

NOTE 19 – COMMITMENTS AND CONTINGENCIES

 

GRNQ leases an office premises in Hong Kong under a non-cancellable operating lease that expire in August 2016. The leases, which cover a term of two years, generally provide for renewal options at specified rental amounts.

 

The Company’s subsidiaries lease certain office premises in the PRC under a non-cancellable operating lease that expire in December 2017. The leases, which cover a term of two years, generally provide for renewal options at specified rental amounts.

 

The aggregate lease expense for the three months ended March 31, 2016 and 2015 were $71,165 and $37,043, respectively.

 

As of March 31, 2016, the Company has future minimum rental payments of $158,603 for office premises due under a non-cancellable operating lease in the next twelve months.

 

NOTE 20 – SUBSEQUENT EVENTS

 

In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after March 31, 2016 up through the date the Company issued the condensed consolidated financial statements with this Form 10-Q.

 

The Company mutually agreed with Lepora Holdings Corporation and CGN Nanotech Inc. regarding the withdrawal of shares subscribed, and to release each other from any and all claims and/or obligations arising under the Subscription Agreement. Since April 1, 2016, the Company has not owned any shares of Lepora Holdings Corporation and CGN Nanotech Inc.

 

On May 11, 2016, the Greenpro Holding Limited incorporated Greenpro Capital Pty Ltd with 50% shareholding, remaining 50% was held by Mohammad Reza Masoumi Al Agha. The subsidiary becomes the new business arm which provides corporate advisory services such as strategic planning, cross-border business solution and advisory, transaction services.

 

F-21
 

 

Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

 

The information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended December 31, 2015 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.

 

The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Prospectus dated September 8, 2014 in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited Financial Statements and notes thereto that appear elsewhere in this report.

 

Company Overview

 

Greenpro Capital Corp. (the “Company” or “Greenpro”), was incorporated in the State of Nevada on July 19, 2013 with a fiscal year end of December 31. Our business and registered office is located at Suite 2201, 22/F., Malaysia Building 50 Gloucester Road, Wanchai, Hong Kong. Our website is at: http://www.greenprocapital.com. Information contained on our website is not part of this Annual Report on Form 10-Q or our other filings with the Securities and Exchange Commission (“SEC”). Our common stock is quoted and traded in the over-the-counter market under the symbol “GRNQ.”

 

During the quarter ended March 31, 2016, we, together with our subsidiaries, operated in three business segments:

 

  Service Business: the provision of business solution services such as cloud accounting solutions, cross-border business solutions, record management services to small and mid-size businesses located in Asia, with an initial focus on Hong Kong, Malaysia and China;
     
  Real Estate Business: the leasing and trading of commercial real estate properties in Hong Kong and Malaysia; and
     
  Corporate Business: venture capital business, ancillary support services and other activities not included in the foregoing.

 

Summary financial information regarding our three business segments as of March 31, 2016 and 2015 respectively, are set forth below.

 

   For the three months ended March 31, 2016 
   Real estate business   Service business   Corporate   Total 
Revenues  $23,255   $428,408   $-   $451,663 
Cost of revenues   (10,318)   (225,739)   -    (236,057)
                     
Gross income   12,937    202,669    -    215,606 
Depreciation and amortization   7,899    3,789    27,818    39,506 
Net loss   (6,000)   (219,540)   (9,723)   (235,263)
Total assets   5,009,139    3,274,234    183,178    8,466,551 
Expenditure for long-lived assets  $1,686   $2,126   $-   $3,812 

 

3
 

 

   For the three months ended March 31, 2015 
   Real estate business   Service business   Corporate   Total 
Revenues  $8,927   $329,096   $-   $338,023 
Cost of revenues   (10,891)   (128,723)   -    (139,614)
                     
Gross income   (1,964)   200,373    -    198,409 
Depreciation and amortization   8,212    1,491    106    9,809 
Net loss   (15,655)   (24,763)   (3,309)   (43,727)
Total assets   2,466,672    1,001,177    81,405    3,549,254 
Expenditure for long-lived assets  $492   $362   $-   $854 

 

Service Business Segment: We currently provide a wide range of business solution services varying from cloud system solution, financial consulting services and corporate accounting services to small and medium-size businesses located in Asia, with an initial focus on Hong Kong, China and Malaysia. Our comprehensive range of services cover cloud accounting solutions, 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. We hope to develop a package solution of services (“Package Solution”) that will build a cloud solution into traditional accounting services. By using a Package Solution, we believe that we can assist our clients to reduce their business costs and improve their revenues.

 

Real Estate Business: We are also engaged in the leasing and trading of commercial real estate properties in Hong Kong and Malaysia. We currently own the following investment commercial properties in Malaysia:

 

Location   Owner   Use

B-7-5, North Point Office

Mid Valley City, No. 1, Medan Syed Putra Utara

59200 Kuala Lumpur, Malaysia

  Greenpro Resources Sdn. Bhd.   Office Building

D-07-06 and D-07-07

Skypark @ One City Jalan USJ 25.1

47650 Subang Jaya, Selangor, Malaysia

       

 

Corporate Business Segment. We operate a venture capital business through Greenpro Venture Capital Limited, an Anguilla corporation. Our venture capital business is focused on establishing a business incubator for start-up and high growth companies to support them during their critical growth periods and investing in select start-up and high growth companies. We expect to target companies located in Asia and Southeast Asia including Hong Kong, Malaysia, China, Thailand, and Singapore. We also anticipate our venture capital business to also engage in the purchase, acquisition and rental of commercial properties in the same Asia and Southeast Asia region.

 

As of the date of this report, we have made investments into following companies:

 

Name  Shareholding   Business
Rito Group Corp.
(Nevada, USA)
   29.5%  Providing an online platform for merchants and customers to facilitate transactions
Forward Win International Limited (Hong Kong)   60%  Holding Hong Kong real estate for investment purpose
DSwiss, Inc. (Nevada, USA)   29.5%  Retailing in slimming and beauty products
NPQ Holdings Limited (Nevada, USA)   19.28%  Providing mobile Apps, restaurant management system and cloud ERP.

 

4
 

 

Effective April 1, 2016, the Company mutually agreed with Lepora Holdings Corporation and CGN Nanotech Inc. regarding the withdrawal of shares subscribed, refund of subscription amount $3,600 and $2,160 respectively, and to release each other from any and all claims and/or obligations arising under the Subscription Agreement. Lepora Holdings Corporation offered home products for improving air, water, home and health while CGN Nanotech Inc. traded and distributed nano-ceramc lighting products. Since April 1, 2016, the Company has not owned any shares of Lepora Holdings Corporation and CGN Nanotech Inc. At this time, we do not expect to acquire more than 30% of any single company.

 

To support our venture capital business, we partnered with QSC Asia Sdn. Bhd., an education and training company that arranges seminars and courses in Malaysia, to provide business and educational and support services. Specifically, we hope to arrange one or more seminars called the CEO & Business Owners Strategic Session (CBOSS) for business owners who are interested in the following:

 

  Developing the business globally
     
  Expanding business with increase capital funds
     
  Creating a sustainable SME business model
     
  Accelerating the growth of the business
     
  Increasing company cash flow significantly

 

The objective of the CBOSS seminar will be to educate the Chief Executive Officer or business owner on how to acquire “smart capital” and the considerations involved. We expect the seminar to include an introduction to the basic concepts of “smart capital,” “wealth and value creation,” recommendation and planning and similar topics. We believe that the seminar will synergistically support our venture capital business segment.

 

We expect to operate our venture capital related education and support services through our subsidiary Greenpro Global Advisory Sdn. Bhd., which was renamed Greenpro Capital Village Sdn. Bhd. on September 23, 2015. On October 1, 2015, QSC Asia Sdn. Bhd., an unaffiliated third party, acquired 49% of Greenpro Capital Village Sdn. Bhd. in consideration of $11,000 (RM 49,000) from Greenpro Financial Consulting Limited. Concurrently with such sale, Greenpro Financial Consulting Limited transferred 51% of Greenpro Capital Village Sdn. Bhd. to Greenpro Holding Limited, our subsidiary.

 

On May 6, 2015, Greenpro with approval of a majority of the Company’s shareholders, changed its name from Greenpro, Inc. to Greenpro Capital Corp. The board of directors believes that a change of the Company’s name to “Greenpro Capital Corp.” will facilitate the Company’s efforts to re-brand itself to develop and enhance its business.

 

Effective July 21, 2015, the Board of Directors of Greenpro approved a change in the Company’s fiscal year end from October 31 to December 31. The change is intended to improve comparability with industry peers.

 

On July 29, 2015, Greenpro acquired its related company, Greenpro Resources Limited which provides business consulting and advisory services and generates income through the subsidiaries of Greenpro Resources Limited. Greenpro Resources Sdn. Bhd, a wholly owned subsidiary of Greenpro Resources Limited, holds real estate in Malaysia as investment properties and generates rental income.

 

On September 30, 2015, Greenpro acquired 100% shareholding of A&G International Limited, Falcon Secretaries Limited, Ace Corporate Services Limited, Shenzhen Falcon Financial Consulting Limited and 60% shareholding of Yabez (Hong Kong) Company Limited. As a result of the acquisitions, we broadened the range of our services, including but not limited to company formation, advisory services and company secretarial services.

 

On September 30, 2015, Greenpro acquired its related company, Greenpro Venture Capital Limited which is an investment holding company and generates income through the subsidiaries of Greenpro Venture Capital Limited. Forward Win International Limited and Chief Billion Limited, the subsidiaries of Greenpro Venture Capital Limited, are engaged in investing and trading real estate in Hong Kong.

 

On October 1, 2015, Greenpro Financial Consulting Limited transferred 51% and 49% shares of Greenpro Capital Village Sdn. Bhd. (Formerly known as Greenpro Global Advisory Sdn. Bhd.) to Greenpro Holding Limited and QSC Asia Sdn Bhd respectively. This subsidiary becomes the new business arm which provides educational and support services.

 

5
 

 

On October 18, 2015, the Board of Directors (the “Board”) of Greenpro Capital Corp. (the “Company”) appointed Mr. Thanawat Lertwattanarak and Ms. Srirat Chuchottaworn to the Board. The company believed the presence of these new directors can help to develop our business in the Thailand market.

 

On December 30, 2015, A&G International Limited transferred 100% shares of Asia UBS Global Limited, a Belize Corporation, and Asia UBS Global Limited, a Hong Kong limited company, to Greenpro Resources Limited due to internal restructuring. A&G International Limited, a holding company, was transferred to Ms Yap Pei Ling on the same date with consideration US$1.

 

On March 14, 2016, the Board appointed Mr. Shum Albert, Mr Chin Kiew Kwong and Mr. Hee Chee Keong to the Board as the independent directors of the Company. On March 23, 2016, our Audit Committee was established and comprised of our three independent directors.

 

On May 11, 2016, the Greenpro Holding Limited incorporated Greenpro Capital Pty Ltd with 50% shareholding, remaining 50% was held by Mohammad Reza Masoumi Al Agha. The subsidiary becomes the new business arm which provides corporate advisory services such as strategic planning, cross-border business solution and advisory, transaction services.

 

Liquidity and Capital Resources

 

As of March 31, 2016, we had working capital of $2,723,139 as compared to working capital of $9,747 as of March 31, 2015. We had total current assets of $5,262,605 consisting of cash on hand of $1,183,228 and Inventory – finished property of $3,747,732. We had current liabilities of $2,539,466 consisting of amount due to shareholders of $2,013,635, and accounts payable and accrued liabilities of $179,779. The Company’s net loss was $235,263 and $43,727 for the three months ended March 31, 2016 and 2015, respectively. The Company’s comprehensive loss was $188,753 and $52,277 for the three months ended March 31, 2016 and 2015, respectively.

 

Going Concern Uncertainties

 

The continuation of the Company as a going concern is dependent upon improving our profitability and the continuing financial support from our stockholders. Our sources of capital in the past have included the sale of equity securities, which include common stock sold in private transactions and public offerings, capital leases and short-term and long-term debts. While we believe that we will obtain external financing and the existing shareholders will continue to provide the additional cash to meet our obligations as they become due, there can be no assurance that we will be able to raise such additional capital resources on satisfactory terms. We believe that our current cash and cash equivalents of $1,183,228 and other sources of liquidity discussed below are adequate to support operations for at least the next 9 months.

 

Operating activities

 

Net cash used in operating activities during the three months ended March 31, 2016, was $304,033, and consisted primarily of a net loss of $233,184, a decrease in payables and accrued liabilities of $238,249, offset by an decrease in prepayments and other receivables of $139,598.

 

During the three months ended March 31, 2015, net cash used in operating activities was $1,165,738, and consisted primarily of an increase in prepayments and other receivables of $1,041,166.

 

Investing activities

 

Net cash provided by investing activities was $11,690 for the three months ended March 31, 2016, and consisted primary of a refund of life insurance premiums of $15,502, offset by property, plant and equipment purchases of $3,812. We purchased life insurance on the life of the General Manager of the Company on September 9, 2013, and on the life of an executive corporate advisor on May 15, 2015.

 

Net cash used in investing was $854 for the three months end March 31, 2015, and consisted of property, plant and equipment purchases.

 

Financing activities

 

Net cash used in financing activities for the three months ended March 31, 2016, was $129,994 and consisted of repayments of advances from related parties (Ms. Hui Oi Kuk, the 40% shareholder of Forward Win International Limited and Falcon CPA Ltd, an entity 100% owned by Mr Loke Che Chan Gilbert, director of the Company) of $107,311, repayment to Company directors (Ms Yap Pei Ling and Ms Chen Yanhong the directors of subsidiaries) of $19,018, and repayment of bank loans of $3,665.

 

6
 

 

Net cash provided by financing activities was $1,422,775 for the three months ended March 31, 2015, and consisted primarily of $1,470,781 of advances from related parties (Mr. Thanawat Lertwattanarak and Ms. Srirat Chuchottaworn, currently the directors of the Company and Ms. Hui Oi Kuk), offset by repayments of $44,848 to Mr. Loke Che Chan Gilbert, Mr. Lee Chong Kuang and Ms. Yap Pei Ling.

 

Results of Operation

 

The following table sets forth certain operational data for the three months ended March 31, 2016, as compared to the same period ended March 31, 2015:

 

   Quarter ended March 31, 
   2016   2015 
REVENUES, NET          
- Rental income  $23,255   $8,927 
- Sale of properties   -    - 
- Service income          
Related parties   45,103    5,023 
Unrelated parties   383,305    324,073 
Total revenues   451,663    338,023 
           
COST OF REVENUES          
- Cost of rental   (10,318)   (10,891)
- Cost of properties sold   -    - 
- Cost of service   (225,739)   (128,723)
Total cost of revenues   (236,057)   (139,614)
           
GROSS PROFIT   215,606    198,409 
           
OPERATING EXPENSES:          
General and administrative   

(416,816

)   

(235,597

)
           
(LOSS) FROM OPERATIONS  (201,210)  (37,188)

 

Comparison of the three months ended March 31, 2016 and March 31, 2015

 

Revenues, net. Total revenue was $451,663 and $338,023 for the three months ended March 31, 2016, and 2015, respectively. The increase was primarily due to the increase of revenue from our real estate and service business segments. For the three months ended March 31, 2016, our service, real estate and corporate business segments accounted for approximately 94.85%, 5.15% and 0% of our net revenue respectively. For the same period ended March 31, 2015, our service, real estate and corporate business segments accounted for approximately 97.36%, 2.64% and 0% of our net revenue respectively.

 

Rental Income. Revenue from rental was $23,255 for the three months ended March 31, 2016, as compared to $8,927 for the three months ended March 31, 2015. We expect rental income to stabilize in the near future. We expect revenue from our real estate business segment to increase to the extent that we are able to profitably sell our investment properties.

 

Service Income. Revenue from the provision of services was $428,408 for the three months ended March 31, 2016, as compared to $329,096 for the three months ended March 31, 2015. The increase in revenue was primarily due to the broadening of the range of services offered and the increase in our client base. We expect revenue from our business services business segment to increase as we continue to grow our business and expand into new territories.

 

Corporate Income. We did not derive any revenue from our corporate business segment during the three months ended March 31, 2016, and 2015. We expect to generate revenue from our venture capital business when we begin our education and training seminars and at such time as we sell our interest in our portfolio companies. We hope to commence our education and training seminars during mid-2017.

 

7
 

 

Cost of Revenues. Total cost of revenues was $236,057 for the three months ended March 31, 2016, respectively, as compared $139,614 for the for the three months ended March 31, 2015. The increase was primarily due to the attributable to the increase in services rendered from our service business segment. Cost of revenue as a percentage of net revenue was approximately 52.26% as of March 31, 2016, with our real estate and business services segments accounting for approximately 4.37% and 47.89% of the cost of revenue.

 

Cost of real estate business segment. Cost of revenue from our real estate business segment was $10,318 for the three months ended March 31, 2016, as compared to $10,891 for the three months ended March 31, 2015. Cost of revenue includes the costs associated with government rent and rates, repairs and maintenance, property insurance, and other related administrative costs.

 

Cost of service segment. Costs of revenue from our service business segment was $225,739 for the three months ended March 31, 2016, as compared to $128,723 for the three months ended March 31, 2015. It primarily consisted of employee compensation and related payroll benefits, company formation cost and other professional fees.

 

Gross Profit. The gross profit for the Company was $215,606 (48% margin) for the three months ended March 31, 2016, respectively, as compared to $198,409 (59% margin) for the three months ended March 31, 2015. The decrease of gross margin was due to the increase in cost of services income.

 

General and administrative expenses. General and administrative expenses was $416,816 for the three months ended March 31, 2016, as compared to $235,597 for the three months ended March 31, 2015. The increase in general and administrative expenses was primarily due to the increase in directors’ remuneration and quarter, office rent, professional and legal fees.

 

Net Loss attributable to non-controlling interest. The Company records income attributable to non-controlling interest in the consolidated statements of operations for any non-owned portion of consolidated subsidiaries. As of March 31, 2016, the Company holds 60% shareholding of Forward Win International Limited and attributed a net income of $2,186 to the non-controlling interest of Forward Win International Limited for the three months ended March 31, 2016. Additionally, as of March 31, 2016, the Company holds 60% shareholding of Yabez (Hong Kong) Company Limited and attributed a net loss of $3,530 to the non-controlling interest of Yabez (Hong Kong) Company Limited for the three months ended March 31, 2016. Last, as of March 31, 2016, the Company holds 51% shareholding of Greenpro Capital Village Sdn Bhd and attributed a net profit of $3,423 to the non-controlling interest of Greenpro Capital Village Sdn Bhd for the three months ended March 31, 2016.

 

Comprehensive Loss. Our comprehensive loss was $188,753 for the three months ended March 31, 2016, as compared to the net loss of $52,277 for the three months ended March 31, 2015. The increase comprehensive loss was due to the increase in general and administrative expenses incurred in connection with the development and expansion of our business operations such as office rental and staff employment. We expect our comprehensive loss to decrease as we continue to develop and expand our business and income streams in the near future.

 

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 March 31, 2016.

 

Contractual Obligations and Commercial Commitments

 

As of March 31, 2016, the Company has leased an office premises in Hong Kong under a non-cancellable operating lease that expire in August 2016. The leases, which cover a term of two years, generally provide for renewal options at specified rental amounts. The Company’s subsidiaries lease certain office premises in the PRC under a non-cancellable operating lease that expire in December 2017. The leases, which cover a term of two years, generally provide for renewal options at specified rental amounts.

 

Critical Accounting Policies and Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the presentation of our financial condition and results of operations and require management’s subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following accounting policies are critical in the preparation of our financial statements.

 

8
 

 

Basis of consolidation

 

The condensed consolidated financial statements include the accounts of the Company and include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which the Company exercises control and, when applicable, entities for which the Company has a controlling financial interest or is the primary beneficiary. All inter-company accounts and transactions have been eliminated in consolidation. The Company records income attributable to non-controlling interest in the condensed consolidated statements of operations for any non-owned portion of consolidated subsidiaries. Non-controlling interest is recorded within the equity section but separate from GRNQ’s equity in the condensed consolidated balance sheets.

 

Use of estimates

 

In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the periods reported. Actual results may differ from these estimates. The following are some of the areas requiring significant judgments and estimates: determinations of the useful lives of assets, estimates of allowances for doubtful accounts, cash flow and valuation assumptions in performing asset impairment tests of long-lived assets.

 

Inventory – finished property

 

Inventory – finished property represents a multi-unit property developed for resale on a unit by unit basis. Inventory is stated at cost unless the inventory is determined to be impaired in which case the impaired inventory is written down to fair value. The cost of inventory – finished property includes the purchase price of property, legal fees, improvement costs to the building structure, and other acquisition costs. Project wide costs such as land acquisition and certain development costs are allocated to the specific units based upon their relative fair value before construction. All property is finished and ready for sale.

 

In conducting its reviews for indicators of impairment, the Company evaluates, among other things, the margins on units already sold within the project, margins on units under contract but not closed (none as of March 31, 2016), and projected margin on future unit sales. The Company pays particular attention to discern if inventory is moving at a slower than expected pace or where margins are trending downward. As at March 31, 2016, the Company determined inventory – finished property was not impaired.

 

Investment Property

 

Investment Property is stated at cost less accumulated depreciation and accumulated impairment losses, if any. 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   Over the shorter of estimated useful
life or term of lease
  -

 

The cost of leasehold land and buildings includes the purchase price of property, legal fees, and other acquisition costs.

 

Depreciation expense, classify as cost of rental, for the three months ended March 31, 2016 and 2015 were $7,899 and $8,212, respectively.

 

Plant and equipment

 

Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. 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
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
  -

 

Expenditures for maintenance and repairs are expensed as incurred. The gain or loss on the disposal of plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant assets and is recognized in the statement of operations.

 

Depreciation expense, classify as operating expenses, for the three months ended March 31, 2016 and 2015 were $3,789 and $1,491, respectively.

 

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Goodwill

 

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. With the provision of ASC 350 “Goodwill and Other”, 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.

 

Intangible assets

 

Intangible assets are stated at cost less accumulated amortization. Intangible assets represented the registration costs of trade marks registered in Hong Kong, the PRC, and Malaysia, which are amortized on a straight-line basis over a useful life of ten years. Intangible assets acquired in business combinations are provisionally considered customer lists amortized on a straight-line basis over a useful life of five years.

 

The Company follows ASC Topic 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. There were no impairment losses recorded on intangible assets for the three months ended March 31, 2016 and 2015.

 

Revenue recognition

 

The Company recognizes its revenue in accordance with ASC Topic 605, “Revenue Recognition”, upon the delivery of its products when: (1) delivery has occurred or services rendered; (2) persuasive evidence of an arrangement exists; (3) there are no continuing obligations to the customer; and (4) the collection of related accounts receivable is probable.

 

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(a) Rental income

 

Revenue 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.

 

The Company leases its commercial office premises in Malaysia and Hong Kong under various non-cancelable operating leases with terms of two to three years and renewal options. For the three months ended March 31, 2016, the Company has recorded $23,255 in rental revenue, based upon its annual rental over the life of the lease under operating lease, using straight-line method.

 

(b) Service income

 

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.

 

(c) 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.

 

Revenue on sales of properties may be deferred in whole or in part until the requirements for revenue recognition have been met.

 

Cost of revenues

 

Cost of revenue on rental shown on the accompanying statements of operations include 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.

 

Costs of revenue on provision of services primarily consist of employee compensation and related payroll benefits, company formation cost and other professional fees directly attributable to cost in related to the services rendered.

 

Cost of revenues on sale of properties primary consist 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.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item

 

Item 4. 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 March 31, 2016, 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) inadequate segregation of duties consistent with control objectives; (2) ineffective controls over period end financial disclosure and reporting processes; and (3) lack of internal audit function due to the fact that the Company lacks qualified resources to perform the internal audit functions properly and that the scope and effectiveness of the internal audit function are yet to be developed. The aforementioned material weaknesses were identified by our Chief Financial Officer in connection with the review of our financial statements as of March 31, 2016.

 

Management believes that the material weaknesses set forth in items (2) and (3) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

 

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 March 31, 2016, using 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.

 

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Based on this assessment, management has concluded that as of March 31, 2016, 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, however, we should continue to hire one or more personnel for the function. We will create a position to segregate duties consistent with control objectives. And, we plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us. 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 anticipate that these initiatives will be at least partially, if not fully, implemented by the mid of fiscal year 2016. Additionally, we plan to test our updated controls and remediate our deficiencies in year 2016.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting for the last quarter ended March 31, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We know of no materials, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any beneficial shareholder are an adverse party or has a material interest adverse to us.

 

Item 1A. Risk Factors.

 

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 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None

 

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Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

Exhibit No.   Name of Exhibit
     
3.1   Certificate of Amendment (1)
     
3.2   Amended and Restated Bylaws *
     
4.1   Form of common stock certificate *
     
10.1   Employment Contract dated August 28, 2014, by and between the Company and Loke Che Chan, Gilbert (2)
     
10.2   Employment Contract dated August 28, 2014, by and between the Company and Lee Chong Kuang (2)
     
10.3   Letter of offer of Malaysia Office- One City D-07-06 (3)
     
10.4   Letter of offer of Malaysia Office- One City D-07-07 (3)
     
14   Code of Ethics (4)
     
21   List of Subsidiaries (Up to Filing Date)*
     
31.1   Certification of Chief Executive Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange Act.*
     
31.2   Certification of Principal Financial Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange Act.*
     
32.1   Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
     
32.2   Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
     
99.1   Charter to Audit Committee (3)
     
99.2   Audit Committee Pre-Approval Procedures (3)
     
101.INS   XBRL Instance Document*
     
101.SCH   XBRL Schema Document*
     
101.CAL   XBRL Calculation Linkbase Document*
     
101.DEF   XBRL Definition Linkbase Document*
     
101.LAB   XBRL Label Linkbase Document*
     
101.PRE   XBRL Presentation Linkbase Document*

 

* Filed herewith.

 

(1) Incorporated by reference from our Form 8-K filed with the Securities and Exchange on May 13, 2015.

 

(2) Filed as an exhibit to the Company’s Form 8-K/A filed with the SEC on September 30, 2015 and incorporated herein by reference.

 

(3) Incorporated by reference from our report on Form 10-K filed on Form S-1 with the Securities and Exchange Commission on March 30, 2016.

 

(4) Incorporated by reference from Form S-1 registration statement filed with the Securities and Exchange Commission on January 27, 2014.

 

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SIGNATURES

 

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.
  (Name of Registrant)
Date: May 16, 2016  
     
  By: /s/ Lee Chong Kuang
  Title: Chief Executive Officer, President, Director
(Principal Executive Officer)
     
Date: May 16, 2016  
  By: /s/ Loke Che Chan, Gilbert
  Title: Chief Financial Officer, Secretary, Treasurer, Director
(Principal Financial Officer, Principal Accounting Officer)

 

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