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 June 30, 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 August 1 5, 2016

Common Stock, $.0001 par value   52,221,255

 

 

 

 
 

 

TABLE OF CONTENTS

 

    Page
PART I FINANCIAL INFORMATION  
ITEM 1. CONDENSED FINANCIAL STATEMENTS:  
  Condensed Consolidated Balance Sheets as of June, 2016 and December 31, 2015 (audited) F-1
  Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Six Months Ended June 30, 2016 and 2015 F-2
  Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015 F-3
  Notes to Condensed Consolidated Financial Statements F-4 - F-23
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 17
ITEM 4. CONTROLS AND PROCEDURES 17
PART II OTHER INFORMATION  
ITEM 1 LEGAL PROCEEDINGS 18
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 18
ITEM 3 DEFAULTS UPON SENIOR SECURITIES 18
ITEM 4 MINE SAFETY DISCLOSURES 19
ITEM 5 OTHER INFORMATION 19
ITEM 6 EXHIBITS 19
SIGNATURES 20

 

2
 

 

GREENPRO CAPITAL CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2016 AND DECEMBER 31, 2015

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

 

    June 30, 2016     December 31, 2015  
    (unaudited)        
ASSETS                
Current assets:                
Cash and cash equivalents   $ 1,336,509     $ 1,587,861  
Accounts receivable     182,161       186,162  
Inventory – finished property     3,747,732       3,746,977  
Amounts due from a related company     68,703       69,568  
Prepayments and other receivables     104,266       233,402  
Total current assets     5,439,371       5,823,970  
                 
Non-current assets:                
Investment Property, net     1,019,149       1,030,009  
Plant and equipment, net     45,487       48,471  
Cash surrender value of life insurance, net     53,764       36,832  
Investments in unconsolidated entities     60,613       62,773  
Intangible assets, net     534,427       663,995  
Goodwill     1,472,729       1,402,316  
Total non-current assets     3,186,169       3,244,396  
TOTAL ASSETS   $ 8,625,540     $ 9,068,366  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable and accrued liabilities   $ 128,253     $ 433,350  
Deferred revenue     -       174,547  
Trade Payable     27,445       -  
Amounts due to related parties     2,000,176       2,101,715  
Amounts due to directors     107,919       180,793  
Current portion of long-term bank loans     14,906       13,610  
Income tax payable     22,648       7,988  
Total current liabilities     2,301,347       2,912,003  
                 
Non-current liabilities                
Long-term bank loans     622,942       592,318  
                 
Total liabilities     2,924,289       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; 52,221,255 and 51,963,755 shares issued and outstanding at June 30, 2016 and December 31, 2015 respectively     5,222       5,196  
Additional paid in capital     6,327,268       5,915,294  
Accumulated other comprehensive income     41,820       74,503  
Accumulated deficit     (810,583 )     (567,931 )
Total Greenpro Capital Corp. stockholders’ equity     5,563,727       5,427,062  
Non-controlling interest     137,524       136,983  
                 
Total stockholders’ equity     5,701,251       5,564,045  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 8,625,540     $ 9,068,366  

 

See accompanying notes to the condensed consolidated financial statements.

 

  F- 1  
     

 

GREENPRO CAPITAL CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (OPERATIONS)

AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015

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

(Unaudited)

 

    Three months ended June 30,     Six months ended June 30,  
    2016     2015     2016     2015  
REVENUES, NET                                
- Rental income   $ 20,871     $ 11,211     $ 44,126     $ 20,138  
- Service income                                
Related parties     111,345       -       156,448       5,023  
Third parties     621,031       558,720       1,004,336       882,793  
Total revenues     753,247       569,931       1,204,910       907,954  
                                 
COST OF REVENUES                                
- Cost of rental     (16,396 )     (8,937 )     (26,714 )     (19,828 )
- Cost of service                                
Third parties     (276,476 )     (184,644 )     (502,215 )     (313,367 )
Total cost of revenues     (292,872 )     (193,581 )     (528,929 )     (333,195 )
                                 
GROSS PROFIT     460,375       376,350       675,981       574,759  
                                 
OPERATING EXPENSES:                                
General and administrative     (440,951 )     (263,969 )     (857,767 )     (499,566 )
                                 
PROFIT(LOSS) FROM OPERATIONS     19,424       112,381       (181,786 )     75,193  
                                 
OTHER EXPENSES:                                
Interest expense     (19,301 )     (8,550 )     (45,686 )     (17,307 )
                                 
PROFIT (LOSS) BEFORE INCOME TAX AND NON-CONTROLLING INTEREST     123       103,831       (227,472 )     57,886  
Income tax expense     (9,157 )     -       (14,746 )     -  
NET PROFIT (LOSS) BEFORE NON-CONTROLLING INTEREST     (9,034 )     103,831       (242,218 )     57,886  
Less: Net (loss) income attributable to non-controlling interest     1,644       5,867       (435 )     8,085  
                                 
NET PROFIT (LOSS) ATTRIBUTED TO GREENPRO CAPITAL CORP. COMMON STOCKHOLDERS     (7,390 )     109,698       (242,653 )     65,971  
Other comprehensive loss:                                
- Foreign currency translation (loss) income     (13,827 )     (2,082 )     32,683       (10,632 )
COMPREHENSIVE INCOME(LOSS)   $ (21,217 )   $ 107,616     $ (209,970 )   $ 55,339  
                                 
NET LOSS PER SHARE, BASIC AND DILUTED   $ (0.00 )   $ 0.00     $ (0.00 )   $ 0.00  
                                 
WEIGHTED AVERAGE NUMBER OF COMMON STOCK OUTSTANDING, BASIC AND DILUTED     52,079,771       22,422,800       52,021,764       22,422,800  

   

See accompanying notes to the condensed consolidated financial statements.

 

  F- 2  
     

 

GREENPRO CAPITAL CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND 2015

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

(Unaudited)

 

    Six months ended June 30,  
    2016     2015  
Cash flows from operating activities:                
Net income (loss)   $ (242,218 )   $ 57,886  
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     82,847       20,608  
Gain on investment in securities     (3,600 )     -  
Increase in cash surrender value on life insurance     (16,932 )     (13,284 )
Changes in operating assets and liabilities:                
Accounts receivable     4,001       (44,510 )
Prepayment & Other receivables     132,965       -  
Inventory – finished property     (755 )     -  
Prepayments and other receivables     -       (1,651,499 )
Accounts payable     27,445       -  
Receipt in advance     (55,280 )     1,338  
Deferred Revenue     (174,546 )     -  
Other payable and accrued liabilities     (252,562 )     370,384  
Income tax payable     14,660       -  
                 
Net cash used in operating activities     (483,975 )     (1,259,077 )
                 
Cash flows from investing activities:                
Purchase of property, plant and equipment     (13,933 )     (9,207 )
Refund (Payment) for life insurance premium     -       (5,163 )
Withdrawal of shares subscribed of associates     2,160       -  
Investments in unconsolidated entities     -       (40,210 )
                 
Net cash used in investing activities     (11,773 )     (54,580 )
                 
Cash flows from financing activities:                
Proceeds from share issuance     412,000       -  
Proceeds from non-controlling interest     106       516  
Advances from related parties    

21,187

    1,442,442  

Repayments to related parties

   

(129,034

)     -  
Repayments to directors     (63,993 )     (70,393 )
Repayment of bank borrowings     (7,467 )     (7,232 )
                 
Net cash provided by financing activities     232,799       1,365,333  
                 
Effect of exchange rate changes in cash and cash equivalents     11,597       (16,095 )
                 
NET CHANGE IN CASH AND CASH EQUIVALENTS     (251,352 )     35,581  
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR     1,587,861       623,370  
                 
CASH AND CASH EQUIVALENTS, END OF YEAR   $ 1,336,509     $ 658,951  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                
Cash paid for income tax   $ -     $ -  
Cash paid for interest   $ 45,686     $ 17,307  

 

See accompanying notes to the condensed consolidated financial statements.

 

  F- 3  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 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 six months ended June 30, 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 co ntemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

 

As of June 30, 2016, the Company has an accumulated deficit of $810,583 and incurred a net operating loss of 242,653 for the six months ended June 30, 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 cl assification 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 SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

Greenpro Capital Pty Ltd was formed on May 11, 2016, with 50% held by Greenpro Holding Limited (“GPHL”), one of our subsidiaries, and 50% held by Mohammad Reza Masoumi Al Agha.

 

On May 23, 2016, GPHL acquired 400 shares of Greenpro Wealthon Sdn Bhd. from Mr. Lee Chong Kuang for MYR 1 (approximately US$0.25). On June 7, 2016, GPHL acquired an additional 200 shares of Greenpro Wealthon Sdn Bhd. for MYR120,000 (approximately US$30,000), resulting in an aggregate of 60% of Greenpro Wealthon Sdn Bhd. The remaining 40% of Greenpro Wealthon Sdn. Bhd. is held by Mr. Yiap Soon Keong.

 

We expect the foregoing subsidiaries to provide corporate advisory services such as strategic planning, cross-border business solution and advisory, transaction services in different regions.

 

Greenpro Synergy Network Limited (“GSN”) was incorporated in Hong Kong on March 2, 2016, as a variable interest entity (“VIE”) that is subject to consolidation with the Company. GSN’s principal activities are to hold certain insurance policies of the company. Loke Che Chan, Gilbert and Lee Chong Kuang are the sole shareholders of GSN.

 

The Company controls GSN through a series of contractual arrangements (the “VIE Agreements”) between GPHL and GSN. The VIE agreements include (i) Exclusive Business Cooperation Agreement, (ii) Loan Agreement, (iii) Share Pledge Agreement (iv) Power of Attorney and (v) Exclusive Option Agreement with the shareholder of GSN.

 

Set forth below is a more detailed description of each of the VIE agreement.

 

Exclusive Business Cooperation Agreement: Pursuant to the Exclusive Business Cooperation Agreement, GPHL serves as the exclusive provider of technical support, consulting services and management services to GSN. In consideration of such services, GSN has agreed to pay a service fee to GPHL, which is based on the time of services rendered multiplied by the corresponding rate, plus amount of the services fees or ratio decided by the board of directors of GPHL. The Agreement has a term of 10 years but may be extended GPHL in its discretion.

 

Loan Agreement: Pursuant to the Loan Agreement, GPHL granted interest-free loans to the shareholders of the GSN for the sole purpose of increasing the registered capital of the GSN. These loans are eliminated with the capital of GSN during consolidation.

 

Share Pledge Agreement: Pursuant to the Share Pledge Agreement, the shareholders of GSN pledged to GPHL a first security interest in all of their equity interests in GSN to secure GSN’s timely and complete payment and performance of its obligations under the Exclusive Business Cooperation Agreement. During the term of the Share Pledge Agreement, the pledgors agreed, among other things, not to transfer, place or permit the existence of any security interest or other encumbrance on their interest in GSN without the prior written consent of GPHL. The pledge shall remain in effect until 10 years after the obligations under the principal agreement will have been fulfilled. However, upon the full payment of the consulting and service fees under the Exclusive Business Cooperation Agreement and upon the termination of GSN’s obligations under the Exclusive Business Cooperation Agreement, the Share Pledge Agreement shall be terminated and GPHL shall terminate this agreement as soon as reasonably practicable.

 

Power of Attorney: Pursuant to the Power of Attorney, Messrs. Lee and Loke, as the sole shareholders of GSN, granted to the GPHL the right to (i) attend shareholders meetings of GSN (ii) exercise all shareholder rights (including voting rights) with respect to such equity interests in GSN and (iii) designate and appoint on behalf of such shareholders the legal representative, directors, supervisors, and other senior management members of GSN. The Power of Attorney is irrevocable and is continuously valid from the date of execution of such Power of Attorney, so long as such persons remain shareholders of GSN.

 

Exclusive Option Agreement: Pursuant to the Exclusive Option Agreement, the shareholders of GSN granted to the GPHL an irrevocable and exclusive right and option to purchase all of their equity interests in GSN. The purchase price shall be equal to the capital paid in by the shareholders, adjusted pro rata for the purchase of less than all of the equity interests. The Agreement is effective for a term of 10 years, and may be renewed at GPHL’s election

 

  F- 5  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 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 and its VIE 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.

 

  F- 6  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 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 six months ended June 30, 2016 and 2015 were $15,924 and $16,320, 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 six months ended June 30, 2016 and 2015 were $7,767 and $4,089, respectively.

 

●          Intangible assets

 

Intangible assets are stated at cost less accumulated amortization. Intangible assets represented the registration costs of trademarks 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 six months ended June 30, 2016 and 2015.

 

  F- 7  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

On May 3, 2016, 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 was determined at $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 six months ended June 30, 2016 and 2015 were $59,155 and $199, 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.

 

●         Variable Interest Entity

 

A variable interest entity (“VIE”) is a legal entity that possess any of the following characteristics: an insufficient amount of equity at risk to finance its activities, equity owners who do not have the power to direct the significant activities of the entity (or have voting rights that are disproportionate to their ownership interest), or equity owners who do not have the obligations to absorb expected loss or the right to receive the expected residual returns of entity.

 

In accordance to ASC Topic 810 “Consolidation”, the Company it required to include in its consolidated financial statements, the financial statement of its VIE. ASC 810 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. VIEs are those entities in which a company, through contractual agreements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity.

 

Through the VIE agreement s disclosed in Note 3, the Company is deemed to be the primary beneficiary of GSN. According, the financial result of GSN has been included in the accompanying consolidated financial statements.

 

  F- 8  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

●          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.

 

●          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 six months ended June 30, 2016, the Company has recorded $44,126 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.

 

  F- 9  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

●         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.

 

●         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”), Australian Dollar (“AUD”) 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.

 

  F- 10  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

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.

 

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 six months ended June 30,  
    2016     2015  
Period-end MYR : US$1 exchange rate     4.03       3.78  
Period-average MYR : US$1 exchange rate     3.87       3.60  
Period-end RMB : US$1 exchange rate     6.64       6.09  
Period-average RMB : US$1 exchange rate     6.32       6.13  
Period-end AUD : US$1 exchange rate     1.35       -  
Period-average AUD : US$1 exchange rate     1.30       -  
Period-end / average HK$ : 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.

 

  F- 11  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

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 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.

 

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”).

 

  F- 12  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

As of the acquisition date, the 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     21,520       29,050       50,570  
Accounts payable and accrued liabilities     (129,039 )     (39,627 )     (168,666 )
Intangible assets     449,500       175,000       624,500  
Goodwill     1,211,864       260,865       1,472,729  
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.

  

NOTE 6 – INVESTMENT PROPERTY

 

    2016     2015  
     (unaudited)        
Leasehold land and buildings for rental purpose   $ 1,044,213     $ 1,044,213  
Furniture and fixtures     64,719       62,151  
Office equipment     11,134       8,514  
Leasehold improvement     88,257       84,907  
      1,208,323       1,199,785  
Less: Accumulated depreciation     (189,174 )     (169,776 )
Total   $ 1,019,149     $ 1,030,009  

 

Depreciation expense, classify as cost of rental, was $15,924 and $16,320 for the six months ended June 30, 2016 and 2015 respectively.

 

  F- 13  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

NOTE 7 – PLANT AND EQUIPMENT

 

    2016     2015  
    (unaudited)        
Furniture and fixtures Furniture and fixtures   $ 26,952     $ 33,028  
Office equipment     30,004       26,096  
Leasehold improvement     13,992       12,074  
      70,948       71,198  
Less: Accumulated depreciation     (25,461 )     (22,727 )
Total   $ 45,487     $ 48,471  

 

Depreciation expense, classify as operating expenses, was $7,767 and $4,089 for the six months ended June 30, 2016 and 2015 respectively.

 

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. On June 16, 2016, this additional insurance has been transferred to GSN. GSN entered a series of VIE agreement and have been included in the accompanying consolidated financial statements.

 

A summary of net cash surrender value of life insurance as of June 30, 2016 and December 31, 2015 are reported respectively as below:   

 

    As of
June 30, 2016
    As of
December 31, 2015
 
   

(unaudited)

       
Cash surrender value of life insurance   $ 170,237     $ 153,305  
Less: policy loan balance outstanding     (116,473 )     (116,473 )
Cash surrender value of life insurance, net   $ 53,764     $ 36,832  

 

NOTE 9 – VARIABLE INTEREST ENTITY

 

The following financial statement amounts and balance of GSN have been included in the accompanying consolidated financial statements.

 

    June 30, 2016  
    (unaudited)  
ASSETS        
Current assets:        
Cash and cash equivalents   $ 14  
Cash surrender value of life insurance, net     23,524  
TOTAL ASSETS   $ 23,538  
         
LIABILITIES        
Current liabilities:        

Amount due to fellow subsidiary

  $ 77  
Accounts payable and accrued liabilities   591  
TOTAL LIABILITIES   $ 668  
         
STOCKHOLDER’S EQUITY        
Stockholder’s Equity        
-Registered Capital   $ 23,388  

Loss for the year

  (518 )
TOTAL EQUITY   $ 22,870  

 

  F- 14  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

    Six months ended
June 30, 2016
 
    (unaudited)  
       
Revenue   $ -  
Expenses     (518 )
         
Net loss   $ (518 )

 

    Six months ended
June 30, 2016
 
    (unaudited)  
         
Net cash (used in) provided by operating activities   $ (63 )
Net cash (used in) investing activities     (23,388 )
Net cash provided by financing activities     23,465  
Effect of exchange rate changes on cash     -  
         
Net (decrease) increase in cash   $ 14  

 

  F- 15  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

NOTE 10 – INVESTMENTS IN UNCONSOLIDATED ENTITIES

 

As of June 30, 2016, the Company invested in three different unconsolidated entities through Greenpro Venture Capital Limited, 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 $10,500. The Company recognized its share of loss on investments in unconsolidated entities of $1,500.

 

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. The reason of withdrawal was due to divergence of business visions and plans. Since April 1, 2016, the Company has not owned any shares of Lepora Holdings Corporation and CGN Nanotech Inc.  

As of June 30, 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.

 

As of June 30, 2016, the investments in the following unconsolidated entities:

 

Entity   Type of business   Ownership interest  
           
Rito Group Corp.   Providing an online platform for merchants and customers to facilitate transactions     29.60 %
             
DSwiss Inc.   Retailing in slimming and beauty products     29.50 %
             
NPQ Holdings Limited
  Provision of business solutions – Enterprise Mobile Apps and Mobile Point-Of-Sale (POS) for Restaurants
    19.28 %
             
Greenpro Trust Limited, related company   Provision of trustee services     11.80 %

 

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

 

    As of June 30, 2016  
     (unaudited)  
Total assets   $ 4,792,254  
Total liabilities   $ 1,773,063  
Total Equity   $ 3,019,191  

 

 

    For the six months
ended
June 30, 2016
 
    (unaudited)  
Revenue   $ 38,340  
Expenses   (1,073,987 )
Net loss for the period   $ (1,035,647 )

 

NOTE 11 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

Accounts payable and accrued liabilities consist of:

 

    2016     2015  
     (unaudited)        
Accounts payable   $ 27,445     $ -  
Receipts in advance     1,325       55,187  
Other payables and accrued liabilities     126,928       378,163  
Total   $ 155,698     $ 433,350  

 

NOTE 12 – AMOUNTS DUE FROM RELATED PARTIES

 

    2016     2015  
     (unaudited)        
Amount due from related parties   $ 68,703     $ 69,568  
    $ 68,703     $ 69,568  

 

NOTE 13 – AMOUNTS DUE TO RELATED PARTIES

    2016     2015  
    (unaudited)        
Amounts due to shareholders   $ 532,822     $ 505,327  
Amount due to non-controlling interest party     1,467,354       1,596,388  
Amount due to a related company     -       -  
Total   $ 2,000,176     $ 2,101,715  

 

  F- 16  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

As of September 11, 2015, 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 $32,822 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 June 30, 2016, the non-controlling interest party of Forward Win International Limited advanced $1,467,354 to the Company, which is unsecured, bears no interest and payable upon demand, for the purchase of real properties for trading purpose.

 

NOTE 14 – AMOUNTS DUE TO DIRECTORS

 

As of June 30, 2016, the directors of the Company advanced collectively $107,919 to the Company, which is unsecured, bears no interest and is payable upon demand, for working capital purpose. Imputed interest is considered insignificant.

 

NOTE 15 – BANK LOANS

 

    2016     2015  
    (unaudited)        
Bank loans from financial institutions in Malaysia                
Standard Chartered Saadiq Berhad   $ 380,077     $ 361,596  
United Overseas Bank (Malaysia) Berhad     257,771       244,332  
      637,848       605,928  
Less: current portion     (14,906 )     (13,610 )
Bank loan, net of current portion   $ 622,942     $ 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.

 

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 June 30, 2016 are as follows:

 

Year ending June 30:      
2017   $ 14,906  
2018     15,617  
2019     16,361  
2020     17,066  
2021     17,954  
Thereafter     555,944  
         
Total   $ 637,848  

 

For the six months ended June 30, 2016 and 2015, the base lending rate is 6.85% per annum.

 

  F- 17  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

NOTE 16 – COMMON STOCK

 

On May 20, 2016, GRNQ entered into three Subscription Agreements with three investors relating to the private placement of a total of 257,500 shares of common stocks at a subscription price of $1.60 per share, for an aggregate gross proceeds of $412,000.

 

As of June 30, 2016, the company has 52,221,255 shares issued and outstanding. There are no shares of preferred stock issued and outstanding.

 

NOTE 17 – RELATED PARTY TRANSACTIONS

 

    For the six months ended June 30,  
    2016     2015  
   

(unaudited)

       
Business consulting and advisory service income                
- Related party A   $ 131,079     $ 3,000  
- Related party B     -       2,023  
- Related party C     23,092       -  
- Related party D     590       -  
- Related party E     1,688       -  
                 
    $ 156,449     $ 5,023  

 

  F- 18  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

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

 

NOTE 18 – 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

 

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 June 30, 2016 (unaudited)  
    Real estate business     Service business     Corporate     Total  
                         
Revenues   $ 20,871     $ 732,376     $ -     $ 753,247  
Cost of revenues     (16,396 )     (276,476 )     -       (292,872 )
                                 
Gross income     4,475       455,900       -       460,375  
Depreciation and amortization     -       3,978       31,338       35,316  
Net profit (loss)     7,838       17,826       (33,054 )     (7,390 )
Total assets     5,012,246       3,318,797       294,497       8,625,540  
Expenditure for long-lived assets   $ 8,891     $ 5,042     $ (2,160 )    $ 11,773  

 

    For the three months ended June 30, 2015  
    Real estate business     Service business     Corporate     Total  
                         
Revenues   $ 11,211     $ 558,720     $ -     $ 569,931  
Cost of revenues     (8,937 )     (184,644 )     -       (193,581 )
                                 
Gross income     2,274       374,076       -       376,350  
Depreciation and amortization     16,320       2,598       93       19,011  
Net profit (loss)     (15,912 )     173,350       (47,740 )     109,698  
Total assets     3,256,984       527,332       219,984       4,004,300  
Expenditure for long-lived assets   $ 7,968     $ 39,949     6,663      $ 54,580  

 

  F- 19  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

    For the six months ended June 30, 2016 (unaudited)  
    Real estate business     Service
business
    Corporate     Total  
                         
Revenues   $ 44,126     $ 1,160,784     $ -     $ 1,204,910  
Cost of revenues     (26,714 )     (502,215 )     -       (528,929 )
                                 
Gross income     17,412       658,569       -       675,981  
Depreciation and amortization     -       7,767       59,155       66,922  
Net profit (loss)     1,838       (201,714 )     (42,777 )     (242,653 )
Total assets     5,012,246       3,318,797       294,497       8,625,540  
Expenditure for long-lived assets   $ 8,891     $ 5,042     $ (2,160 )   $ 11,773  

 

    For the six months ended June 30, 2015  
    Real estate business     Service business     Corporate     Total  
                         
Revenues   $ 20,138     $ 887,816     $ -     $ 907,954  
Cost of revenues     (19,828 )     (313,367 )     -       (333,195 )
                                 
Gross income     310       574,449       -       574,759  
Depreciation and amortization     16,320       4,089       199       20,608  
Net profit (loss)     (31,567 )     148,587       (51,049 )     65,971  
Total assets     3,256,984       527,332       219,984       4,004,300  
Expenditure for long-lived assets   $ 7,968     $ 39,949     $ 6,663     $ 54,580  

 

NOTE 19 – CONCENTRATIONS OF RISKS

 

(a) Major customers

 

For Service income:

 

For the three months ended June 30, 2016, the customers who accounted for 10% or more of the Service income are presented as follows:

 

    For the three months ended June 30, 2016     As of June 30, 2016  
    (unaudited)    

(unaudited)

 
    Revenues     Percentage of revenues     Trade accounts
receivable
 
                   
Customer A   $ 200,000       27 %     -  
Customer B, Related party     98,106       13 %        
Total:   $ 298,106       40 %   $ -  

 

  F- 20  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

For the three months ended June 30, 2015, the customers who accounted for 10% or more of the Service income are presented as follows:

 

    For the three months ended June 30, 2015     As of June 30, 2015  
    Revenues     Percentage of revenues     Trade accounts receivable  
                   
Customer A     150,000       26 %        
Total:   $ 150,000       26 %   $ -  

 

For the six months ended June 30, 2016, the customers who accounted for 10% or more of the Service income are presented as follows:

 

    For the six months ended June 30, 2016     As of June 30, 2016  
   

(unaudited)

   

(unaudited)

 
    Revenues     Percentage of revenues     Trade accounts
receivable
 
                   
Customer A   $ 200,000       17 %     -  
Customer B, Related Party     131,079       11 %        
Total:   $ 331,079       28 %   $ -  

 

For the six months ended June 30, 2015, the customers who accounted for 10% or more of the Service income are presented as follows:

 

    For the six months ended June 30, 2015     As of June 30, 2015  
    Revenues     Percentage of revenues     Trade accounts receivable  
                   
Customer A   $ 150,000       17 %   $ -  
Customer C     140,000       15 %        
Total:   $ 290,000       3 2 %   $ -  

 

  F- 21  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

 

For Sale of properties:

 

For the six months ended June 30, 2016 and 2015, there was no revenue generated from sale of properties.

 

(b) Major vendors

 

For the six months ended June 30, 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.

 

(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.

 

  F- 22  
     

 

GREENPRO CAPITAL CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

(Unaudited)

 

NOTE 20 – COMMITMENTS AND CONTINGENCIES

 

GRNQ leases 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 six months ended June 30, 2016 and 2015 were $140,053 and $70,782 respectively.

 

As of June 30, 2016, the Company has future minimum rental payments of $113,028 for office premises due under a non-cancellable operating lease in the next twelve months.

 

NOTE 21 – 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 June 30, 2016 up through the date the Company issued the condensed consolidated financial statements with this Form 10-Q.

 

On July 12, 2016, Mr. Thanawat Lertwattanarak resigned from the Board of Directors of the Company.

 

  F- 23  
     

 

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 June 30, 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, Malaysita 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 June 30, 2016 and 2015 respectively, are set forth below.

 

    For the three months ended June 30, 2016 (unaudited)  
    Real estate
business
    Service
business
    Corporate     Total  
                         
Revenues   $ 20,871     $ 732,376     $ -     $ 753,247  
Cost of revenues     (16,396 )     (276,476 )     -       (292,872 )
                                 
Gross income     4,475       455,900       -       460,375  
Depreciation and amortization     -       3,978       31,338       35,316  
Net profit (loss)     7,838       17,826       (33,054 )     (7,390 )
Total assets     5,012,246       3,318,797       294,497       8,625,540  
Expenditure for long-lived assets   $ 8,891     $ 5,042     $ (2,160 )   $ 11,773  

 

3
     

 

    For the three months ended June 30, 2015  
    Real estate
business
    Service
business
    Corporate     Total  
                         
Revenues   $ 11,211     $ 558,720     $ -     $ 569,931  
Cost of revenues     (8,937 )     (184,644 )     -       (193,581 )
                                 
Gross income     2,274       374,076       -       376,350  
Depreciation and amortization     16,320       2,598       93       19,011  
Net profit (loss)     (15,912 )     173,350       (47,740 )     109,698  
Total assets     3,256,984       527,332       219,984       4,004,300  
Expenditure for long-lived assets   $ 7,968     $ 39,949     $ 6,663     $ 54,580  

 

    For the six months ended June 30, 2016 (unaudited)  
    Real estate
business
    Service
business
    Corporate     Total  
                         
Revenues   $ 44,126     $ 1,160,784     $ -     $ 1,204,910  
Cost of revenues     (26,714 )     (502,215 )     -       (528,929 )
                                 
Gross income     17,412       658,569       -       675,981  
Depreciation and amortization     -       7,767       59,155       66,922  
Net profit (loss)     1,838       (201,714 )     (42,777 )     (242,653 )
Total assets     5,012,246       3,318,797       294,497       8,625,540  
Expenditure for long-lived assets   $ 8,891     $ 5,042     $ (2,160 )   $ 11,773  

 

    For the six months ended June 30, 2015  
    Real estate
business
    Service
business
    Corporate     Total  
                         
Revenues   $ 20,138     $ 887,816     $ -     $ 907,954  
Cost of revenues     (19,828 )     (313,367 )     -       (333,195 )
                                 
Gross income     310       574,449       -       574,759  
Depreciation and amortization     16,320       4,089       199       20,608  
Net profit (loss)     (31,567 )     148,587       (51,049 )     65,971  
Total assets     3,256,984       527,332       219,984       4,004,300  
Expenditure for long-lived assets   $ 7,968     $ 39,949     $ 6,663     $ 54,580  

 

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:

 

4
     

 

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)

    29.60 %   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)
    29.50 %   Retailing in slimming and beauty products
NPQ Holdings Limited
(Nevada, USA)
    19.28 %   Providing mobile Apps, restaurant management system and cloud ERP.

 

Effective April 1, 2016, we disposed of our security holdings in Lepora Holdings Corporation, which offered home products for improving air, water and home and health, and CGN Nanotech Inc., which traded and distributed nano-ceramic lighting products. 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

 

5
     

 

  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.

 

Name Change and Fiscal Year End Change

 

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.

 

Acquisitions and Reorganizations

 

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.

 

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.

 

6
     

 

On March 14, 2016, th e 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 April 1, 2016, 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.

 

Greenpro Capital Pty Ltd was formed on May 11, 2016, with 50% held by Greenpro Holding Limited (“GPHL”), one of our subsidiaries, and 50% held by Mohammad Reza Masoumi Al Agha.

 

On May 23, 2016, GPHL acquired 400 shares of Greenpro Wealthon Sdn Bhd. from Mr. Lee Chong Kuang for MYR 1 (approximately US$0.25). On June 7, 2016, GPHL acquired an additional 200 shares of Greenpro Wealthon Sdn Bhd. for MYR120,000 (approximately US$30,000), resulting in an aggregate of 60% of Greenpro Wealthon Sdn Bhd. The remaining 40% of Greenpro Wealthon Sdn. Bhd. is held by Mr. Yiap Soon Keong.

 

We expect the foregoing subsidiaries to provide corporate advisory services such as strategic planning, cross-border business solution and advisory, transaction services in different regions.

 

Greenpro Synergy Network L imited (“GSN”) was incorporated in Hong Kong on March 2, 2016, as a variable interest entity (“VIE”) that is subject to consolidation with the Company. GSN’s principal activities are to hold certain insurance policies of the company. Loke Che Chan, Gilbert and Lee Chong Kuang are the sole shareholders of GSN. The Company controls GSN through a series of contractual arrangements (the “VIE Agreements”) between GPHL and GSN. The VIE agreements include (i) Exclusive Business Cooperation Agreement, (ii) Loan Agreement, (iii) Share Pledge Agreement (iv) Power of Attorney and (v) Exclusive Option Agreement with the shareholder of GSN, all of which are attached hereto as Exhibits.

 

On July 12, 2016, Mr. Thanawat Lertwattanarak resigned from the Board of Directors of the Company.

 

Liquidity and Capital Resources

 

As of June 30, 2016, we had working capital of $3,138,024 as compared to negative working capital of $114,905 as of June 30, 2015. We had total current assets of $5,439,371 consisting of cash on hand of $1,336,509 and Inventory – finished property of $3,747,732. We had current liabilities of $2,301,347 consisting of amount due to shareholders of $2,000,176, and accounts payable and accrued liabilities of $128,253. The Company’s net loss was $7,390 for the three months ended June 30, 2016 and net profit was $109,698 for the three months ended June 30, 2015. The Company’s comprehensive loss was $21,217 for the three months ended June 30, 2016 and comprehensive income was $107,616 for the three months ended June 30, 2015.

 

The following is a summary of cash provided by or used in each of the indicated types of activities during the six months ended June 30, 2016 and 2015, respectively.

 

    2016     2015  
    (unaudited)        
Net cash provided by (used in) operating activities   $ (483,975 )   $ (1,259,077 )
Net cash provided by (used in) investing activities     (11,773 )     (54,580 )
Net cash provided by (used in) financing activities   $ 232,799     $ 1,365,333  

 

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 $1,336,509 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 six months ended June 30, 2016, was $483,975, and consisted primarily of a net loss of $242,218, a decrease in other payables and accrued liabilities of $252,562, offset by a decrease in prepayments and other receivables of $132,965.

 

During the six months ended June 30, 2015, net cash used in operating activities was $1,259,077, and consisted primarily of an increase in prepayments and other receivables of $1,651,499.

 

7
     

 

Investing activities

 

Net cash provided by investing activities was $11,773 for the six months ended June 30, 2016, and consisted primarily of property, plant and equipment purchases of $13,933, offset by refund of life insurance premium $2,160.

 

Net cash used in investing was $54,580 for the six months ended June 30, 2015, and consisted primarily of investment in unconsolidated entities $40,210. As of June 30, 2015, the Company invested in different unconsolidated entities, which the Company’s ownership ranges from 20% to 30%.

 

Financing activities

 

Net cash used in financing activities for the six months ended June 30, 2016, was $232,799 and consisted of proceeds from a private placement from our shareholders of $412,000, offset by a 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 $1 29,034, repayment to Company directors (Ms Yap Pei Ling and Ms Chen Yanhong, the directors of subsidiaries) of $63,993, and repayment of bank loans of $7,467.

 

Net cash provided by financing activities was $1,365,333 for the six months ended June 30, 2015, and consisted primarily of $1,442,442 of advances from related parties (Ms. Srirat Chuchottaworn, currently the directors of the Company, Mr. Thanawat Lertwattanarak and and Ms. Hui Oi Kuk), offset by repayments of $70,393 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 and six months ended June 30, 2016, as compared to the same period ended June 30, 2015:

 

    Three months ended June 30,     Six months ended June 30,  
    2016     2015     2016     2015  
   

(unaudited)

          (unaudited)        
REVENUES, NET                                
- Rental income   $ 20,871     $ 11,211     $ 44,126     $ 20,138  
- Service income                                
Related parties     111,345       -       156,448       5,023  
Unrelated parties     621,031       558,720       1,004,336       882,793  
Total revenues     753,247       569,931       1,204,910       907,954  
                                 
COST OF REVENUES                                
- Cost of rental     (16,396 )     (8,937 )     (26,714 )     (19,828 )
- Cost of service
Unrelated parties
    (276,476 )     (184,644 )     (502,215 )     (313,367 )
Total cost of revenues     (292,872 )     (193,581 )     (528,929 )     (333,195 )
                                 
GROSS PROFIT     460,375       376,350       675,981       574,759  
                                 
OPERATING EXPENSES:                                
General and administrative     (440,951 )     (263,969 )     (857,767 )     (499,566 )
                                 
LOSS FROM OPERATIONS   $ 19,424     $ 112,381     $ (181,786 )   $ (75,193 )

 

8
     

 

Comparison of the three months ended June 30, 2016 and June 30, 2015

 

Revenues, net. Total revenue was $753,247 and $569,931 for the three months ended June 30, 2016, and 2015, respectively. The increase was primarily due to the increase of revenue from rental and service segments. For the three months ended June 30, 2016, our rental and service business segments accounted for approximately 3% and 97% of our net revenue respectively. For the same period ended June 30, 2015, our rental and service business segments accounted for approximately 2% and 98% of our net revenue respectively.

 

Rental Income . Revenue from rental was $20,871 for the three months ended June 30, 2016, as compared to $11,211 for the three months ended June 30, 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 $732,376 for the three months ended June 30, 2016, as compared to $558,720 for the three months ended June 30, 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 June 30, 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 at the end of 2016.

 

Cost of Revenues . Total cost of revenues was $292,872 for the three months ended June 30, 2016, respectively, as compared $193,581 for the for the three months ended June 30, 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 39% as of June 30, 2016, with our rental and services business segments accounting for approximately 6% and 94% of the cost of revenue.

 

Cost of rental . Cost of revenue on rental was $16,396 for the three months ended June 30, 2016, as compared to $8,937 for the three months ended June 30, 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. Costs of revenue from our service business segment was $276,476 for the three months ended June 30, 2016, as compared to $184,644 for the three months ended June 30, 2015. It primarily consisted of employee compensation and related payroll benefits, company formation cost and other professional fees.

 

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Gross Profit . The gross profit for the Company was $460,375 (61% margin) for the three months ended June 30, 2016, respectively, as compared to $376,350 (66% margin) for the three months ended June 30, 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 $440,951 for the three months ended June 30, 2016, as compared to $263,969 for the three months ended June 30, 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. The net loss was $21,217 for the three months ended June 30, 2016, as compared to the net income of $107,616 for the three months ended June 30, 2015.The increase in net loss was due to the increase in general and administrative expenses such as premise lease expenses and labor costs incurred in connection with the development and expansion of our business operations. We expect these losses to stabilize in the near future.

 

Comparison of the six months ended June 30, 2016 and June 30, 2015

 

Revenues, net. Total revenue was $1,204,910 and $907,954 for the three months ended June 30, 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 June 30, 2016, our rental and service business segments accounted for approximately 4% and 96% of our net revenue respectively. For the same period ended June 30, 2015, our rental and service business segments accounted for approximately 2% and 98% of our net revenue respectively.

 

Rental Income . Revenue from rental was $44,126 for the three months ended June 30, 2016, as compared to $20,138 for the three months ended June 30, 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 $1,160,784 for the three months ended June 30, 2016, as compared to $887,816 for the three months ended June 30, 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 six months ended June 30, 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 at the end of 2016.

 

Cost of Revenues . Total cost of revenues was $528,929 for the three months ended June 30, 2016, respectively, as compared $333,195 for the for the three months ended June 30, 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 44% as of June 30, 2016, with our rental and services business segments accounting for approximately 5% and 95% of the cost of revenue.

 

Cost of rental . Cost of revenue from our real estate business segment was $26,714 for the three months ended June 30, 2016, as compared to $19,828 for the three months ended June 30, 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 . Costs of revenue from our service business segment was $502,215 for the three months ended June 30, 2016, as compared to $313,367 for the three months ended June 30, 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 $675,981 (56% margin) for the three months ended June 30, 2016, respectively, as compared to $574,759 (63% margin) for the three months ended June 30, 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 $857,767 for the three months ended June 30, 2016, as compared to $499,566 for the three months ended June 30, 2015. The increase in general and administrative expenses was primarily due to the increase in directors’ remuneration and quarter, office rent, and professional and legal fees.

 

Net Loss . The net loss was $209,970 for the six months ended June 30, 2016, as compared to the net income of $55,339 for the six months ended June 30, 2015.The net loss is due to the commencement and development of the business and the cost of business expense such as office rental and staff employment.

 

10
     

 

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 June 30, 2016.

 

Contractual Obligations and Commercial Commitments

 

As of June 30, 2016, the Company leased office premises in Hong Kong under a non-cancellable operating lease that expires in August 2016. The lease, which covers a term of two years, generally provides for renewal options at specified rental amounts. On July, 2016 the Company renewed the lease agreement and the new expiry date is on August 2018. The Company’s subsidiaries lease certain office premises in the PRC under a non-cancellable operating lease that expires in December 2017. The lease, which covers a term of two years, generally provides 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.

 

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 and its VIE 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.

 

  11  
 

 

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.

 

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 six months ended June 30, 2016 and 2015 were $15,924 and $16,320, 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 six months ended June 30, 2016 and 2015 were $7,767 and $4,089, respectively.

 

Intangible assets

 

Intangible assets are stated at cost less accumulated amortization. Intangible assets represented the registration costs of trademarks 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 six months ended June 30, 2016 and 2015.

 

  12  
 

 

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 six months ended June 30, 2016 and 2015 were $59,155 and $199, 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.

 

Variable Interest Entity

 

A variable interest entity (“VIE”) is a legal entity that possess any of the following characteristics: an insufficient amount of equity at risk to finance its activities, equity owners who do not have the power to direct the significant activities of the entity (or have voting rights that are disproportionate to their ownership interest), or equity owners who do not have the obligations to absorb expected loss or the right to receive the expected residual returns of entity.

 

In accordance to ASC Topic 810 “Consolidation”, the Company it required to include in its consolidated financial statements, the financial statement of its VIE. ASC 810 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. VIEs are those entities in which a company, through contractual agreements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity.

 

Through the VIE agreements disclosed in Note 3, the Company is deemed to be the primary beneficiary of GSN. According, the financial result of GSN has been included in the accompanying consolidated financial statements.

 

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.

 

  13  
 

 

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.

 

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 six months ended June 30, 2016, the Company has recorded $44,126 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.

 

  14  
 

 

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.

 

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”), Australian Dollar (“AUD”) 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.

 

  15  
 

 

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 six months ended June 30,  
    2016     2015  
Period-end MYR : US$1 exchange rate     4.03       3.78  
Period-average MYR : US$1 exchange rate     3.87       3.60  
Period-end RMB : US$1 exchange rate     6.64       6.09  
Period-average RMB : US$1 exchange rate     6.32       6.13  
Period-end AUD : US$1 exchange rate     1.35       -  
Period-average AUD : US$1 exchange rate     1.30       -  
Period-end / average HK$ : 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 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.

 

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.

 

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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 June 30, 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 June 30, 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.

 

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Management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 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.

 

Based on this assessment, management has concluded that as of June 30, 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. We also established an audit committee comprised of three independent directors On March 23, 2016 . The audit committee has oversight in the establishment and monitoring of the required internal controls and procedures such as reviewing and approving estimates and assumptions made by management. 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 end of fiscal year 2016. Additionally, we plan to test our updated controls and remediate our deficiencies in year 2016.

 

This quarterly report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the quarter ended June 30, 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.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

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Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits

 

10.1   Employment Contract dated August 28, 2014, by and between the Company and Loke Che Chan, Gilbert (1)
     
10.2   Employment Contract dated August 28, 2014, by and between the Company and Lee Chong Kuang (1)
     
10.3   Letter of offer of Malaysia Office- One City D-07-06 (2)
     
10.4   Letter of offer of Malaysia Office- One City D-07-07 (2)
     
10.5   Exclusive Business Cooperation Agreement, dated June 13, 2016, by and between Greenpro Holding Limited and Greenpro Synergy Network Limited*
     
10.6   Loan Agreement*
     
10.7   Share Pledge Agreement, dated June 13, 2016, by and among Greenpro Holding Limited, Loke Che Chan, Gilbert, Lee Chong Kuang and Greenpro Synergy Network Limited*
     
10.8   Power of Attorney of Loke Che Chan Gilbert dated June 13, 2016*
     
10.9   Power of Attorney of Lee Chong Kuang dated June 13, 2016*
     
10.10   Exclusive Option Agreement, dated June 13, 2016, by and among Greenpro Holding Limited, Loke Che Chan, Gilbert, Lee Chong Kuang and Greenpro Synergy Network Limited*
     
21   List of Subsidiaries/Variable Interest Entities*
     
31.1   Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer*
     
31.2   Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial officer*
     
32.1   Section 1350 Certification of principal executive officer*
     
32.2   Section 1350 Certification of principal financial officer and principal accounting officer*
     
99.1   Charter of the Audit Committee (2)
     
99.2   Audit Committee Pre-approval Procedures(2)
     
101.INS   XBRL Instance Document**
101.SCH   XBRL Taxonomy Extension Schema Document**
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB   XBRL Taxonomy Extension Label Linkbase Document**
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document**

 

*Filed herewith

 

** In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this Annual Report on Form 10-K shall be deemed “furnished” and not “filed”.

 

(1) 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.

 

(2) Incorporated herein by reference to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2016.

 

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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: August 15, 2016    
  By: /s/ Lee Chong Kuang
  Title: Chief Executive Officer,
    President, Director (Principal
    Executive Officer)
Date: August 15, 2016    
  By: /s/ Loke Che Chan, Gilbert
  Title: Chief Financial Officer,
    Secretary, Treasurer, Director
    (Principal Financial Officer,
    Principal Accounting Officer)

 

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Exclusive Business Cooperation Agreement

 

This Exclusive Business Cooperation Agreement (this “Agreement”) is made and entered into by and between the following parties on June 13, 2016 in Hong Kong (“HK”).

 

Party A: Greenpro Holding Limited
Address: Suite 2201, 22/F, Malaysia Building, 50 Gloucester Road, Wan Chai, Hong Kong
   
Party B: Greenpro Synergy Network Limited
Address: Suite 2201, 22/F, Malaysia Building, 50 Gloucester Road, Wan Chai, Hong Kong

 

Each of Party A and Party B shall be hereinafter referred to as a “Party” respectively, and as the “Parties” collectively.

 

Whereas,

 

1.

 

 Party A is a Limited Liability Company established in Hong Kong, and has the necessary resources to provide consulting services;

   
2. Party B is a company with exclusively domestic capital registered in Hong Kong and may engage in for providing an integrated platform for members to create and grow their wealth (collectively, the “Principal Business”);
   
3. Party A is willing to provide Party B with technical support, consulting services and management services on exclusive basis in relation to the Principal Business during the term of this Agreement, utilizing its advantages in technology, human resources, and information, and Party B is willing to accept such services provided by Party A or Party A’s designee(s), each on the terms set forth herein.

 

Now, therefore, through mutual discussion, the Parties have reached the following agreements:

 

1

Services Provided by Party A

     
   1.1 Party B hereby appoints Party A as Party B’s exclusive services provider to provide Party B with complete technical support, business support and related consulting services during the term of this Agreement, in accordance with the terms and conditions of this Agreement, which may include all necessary services within the scope of the Principal Business as may be determined from time to time by Party A, such as but not limited to Provides information technology consulting services, management software development, sales computer hardware and software research, development and sales.
     
   1.2 Party B agrees to accept all the consultations and services provided by Party A. Party B further agrees that unless with Party A’s prior written consent, during the term of this Agreement, Party B shall not directly or indirectly accept the same or any similar consultations and/or services provided by any third party and shall not establish similar corporation relationship with any third party regarding the matters contemplated by this Agreement. Party A may appoint other parties, who may enter into certain agreements described in Section 1.3 with Party B, to provide Party B with the consultations and/or services under this Agreement.

 

     
 

 

   1.3 Service Providing Methodology
       
     1.3.1  Party A and Party B agree that during the term of this Agreement, where necessary, Party B may enter into further technical service agreements or consulting service agreements with Party A or any other party designated by Party A, which shall provide the specific contents, manner, personnel, and fees for the specific technical services and consulting services.
       
     1.3.2