NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020
(In
U.S. dollars, except share and per share data)
(Unaudited)
NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Greenpro
Capital Corp. (the “Company” or “GRNQ”) was incorporated on July 19, 2013 in the state of Nevada. The Company
currently provides a wide range of business consulting and corporate advisory services, including cross-border listing advisory services,
tax planning, advisory and transaction services, record management services, and accounting outsourcing services. Our focus is on companies
located in Asia and Southeast Asia, including Hong Kong, Malaysia, China, Thailand, and Singapore. As part of our business consulting
and corporate advisory business segment, Greenpro Venture Capital Limited provides a business incubator for start-up companies and focuses
on investments in select start-up and high growth potential companies. In addition to our business consulting and corporate advisory
business segment, we operate another business segment that focuses on the acquisition and rental of real estate properties held for investment
and the acquisition and sale of real estate properties held for sale.
Basis
of presentation and principles of consolidation
The
accompanying unaudited condensed consolidated financial statements as of and for the six months ended June 30, 2021 and 2020, have been
prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) that permit reduced
disclosure for interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted.
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the period ended June 30, 2021 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2020. The Condensed Consolidated Balance Sheet information as of December 31, 2020 was derived from
the Company’s audited Consolidated Financial Statements as of and for the year ended December 31, 2020 included in the Company’s
Annual Report on Form 10-K/A filed with the SEC on April 12, 2021. These financial statements should be read in conjunction with that
report.
The
accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries
and majority-owned subsidiaries which the Company controls and entities for which the Company is the primary beneficiary. For those consolidated
subsidiaries where the Company’s ownership is less than 100%, the outside shareholders’ interests are shown as noncontrolling
interests in equity. Acquired businesses are included in the consolidated financial statements from the date on which control is transferred
to the Company. Subsidiaries are deconsolidated from the date that control ceases. All inter-company accounts and transactions have been
eliminated in consolidation.
Going
Concern
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. During the six months ended June 30, 2021, the Company incurred a net
loss of $6,928,407 and
used cash in operations of $1,331,655.
These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that
the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report on
the Company’s December 31, 2020 financial statements, has expressed substantial doubt about the Company’s ability to continue
as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue
as a going concern.
The
Company’s ability to continue as a going concern is dependent upon improving its profitability and the continuing financial support
from its shareholders. Management believes the existing shareholders or external financing will provide the additional cash to meet the
Company’s obligations as they become due. Despite the amount of funds that we have raised in the past, no assurance can be given
that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company.
Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case
of debt financing, or cause substantial dilution for its stockholders, in the case of equity financing.
COVID-19
outbreak
In
March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. The COVID-19
pandemic has negatively impacted the global economy, workforces, customers, and created
significant volatility and disruption of financial markets. It has also disrupted the normal operations of many businesses, including
ours. This outbreak could decrease spending, adversely affect demand for our services and harm our business and results of operations.
It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business
or results of operations at this time.
Use
of estimates
The
preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Significant accounting estimates include certain assumptions related to,
among others, the allowance for doubtful accounts receivable, impairment analysis of real estate assets and other long-term assets including
goodwill, valuation allowance on deferred income taxes, the assumptions used in the valuation of the derivative liability, and the accrual
of potential liabilities. Actual results may differ from these estimates.
Cash,
cash equivalents, and restricted cash
Cash
consists of funds on hand and held in bank accounts. Cash equivalents includes demand deposits placed with banks or other financial institutions
and all highly liquid investments with original maturities of three months or less, including money market funds. Restricted cash represents
cash restricted for the loan collateral requirements as defined in a loan agreement and also the minimum paid-up share capital requirement
for insurance brokers specified under the Insurance Ordinance of Hong Kong.
At
June 30, 2021 and December 31, 2020, cash included funds held by employees of $19,643 and $10,911, respectively, and was held to facilitate
payment of expenses in local currencies and to facilitate third-party online payment platforms in which the Company had not set up corporate
accounts (WeChat Pay and Alipay).
SCHEDULE OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
|
|
|
As
of
June
30, 2021
|
|
|
As
of
December
31, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Cash,
cash equivalents, and restricted cash
|
|
|
|
|
|
|
|
|
|
Denominated
in United States Dollars
|
|
$
|
4,393,140
|
|
|
$
|
147,371
|
|
|
Denominated
in Hong Kong Dollars
|
|
|
1,829,775
|
|
|
|
623,652
|
|
|
Denominated
in Chinese Renminbi
|
|
|
339,788
|
|
|
|
270,014
|
|
|
Denominated
in Malaysian Ringgit
|
|
|
176,577
|
|
|
|
45,716
|
|
|
Cash,
cash equivalents, and restricted cash
|
|
$
|
6,739,280
|
|
|
$
|
1,086,753
|
|
Revenue
recognition
The
Company follows the guidance of Accounting Standards Codification (ASC) 606, Revenue from Contracts. ASC 606 creates a five-step
model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts
or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction
price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance
obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect
the consideration it is entitled to in exchange for the services it transfers to its clients (see Note 2).
Investments
Investments
in equity securities
The
Company accounts for its investments that represent less than 20% ownership, and for which the Company does not have the ability to exercise
significant influence, using ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and
Financial Liabilities. The Company measure investments in equity securities without a readily determinable fair value using a measurement
alternative that measures these securities at the cost method minus impairment, if any, plus or minus changes resulting from observable
price changes on a non-recurring basis. Gains and losses on these securities are recognized in other income and expenses.
At
June 30, 2021, the Company had twenty three investments in equity securities without readily determinable fair values of related parties
valued at $11,718,110, from which ten investments in equity securities without readily determinable fair values of related parties had
been fully impaired with carrying value of $nil (see Note 3).
At
December 31, 2020, the Company had nineteen investments in equity securities without readily determinable fair values of related parties
valued at $6,829,660, from which ten investments in equity securities without readily determinable fair values of related parties had
been fully impaired with carrying value of $nil (see Note 3).
Debt
discount
During
the six months ended June 30, 2021, the Company incurred $570,000 of debt discount related to the issuance of convertible promissory
notes, as described in Note 5. The discount was amortized over the life of the convertible promissory notes and the Company recognized
$160,077 of related amortization expense for the six months ended June 30, 2021.
Debt
issuance costs
During
the six months ended June 30, 2021, the Company incurred direct costs associated with the issuance of convertible promissory notes, as
described in Note 5, and recorded $290,000 of debt issuance costs as a discount to the convertible promissory notes and amortized over
the life of the convertible promissory notes. The Company recognized approximately $56,959 of related amortization expense for the six
months ended June 30, 2021.
Derivative
financial instruments
Derivative
financial instruments consist of financial instruments that contain a notional amount and one or more underlying variables such as interest
rate, security price, variable conversion rate or other variables, require no initial net investment and permit net settlement. The derivative
financial instruments may be free-standing or embedded in other financial instruments. The Company evaluates its financial instruments
to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company follows the provision
of ASC 815, Derivatives and Hedging for derivative financial instruments that are accounted for as liabilities, the derivative instrument
is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the
statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities
or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet
as current or non-current based on whether net-cash settlement of the derivative instrument could be required within 12 months of the
balance sheet date. At each reporting date, the Company reviews its convertible securities to determine that their classification is
appropriate.
Income
(loss) per share
Basic
income (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted average number
of common shares outstanding during the period. Diluted net loss per share is calculated by dividing the net loss by the weighted average
number of common shares outstanding during the period plus any potentially dilutive shares related to the issuance of shares from stock
warrants. For the three and six months ended June 30, 2021 and 2020, the only outstanding Common Stock equivalents were warrants
for 53,556
potentially dilutive shares outstanding. These
warrants have been excluded from the calculation of weighted average shares as the effect would have been anti-dilutive and therefore,
basic and diluted net loss per share were the same.
Foreign
currency translation
The consolidated financial statements are presented
in United States Dollars (“US$”), which is the functional and reporting currency of the Company. In addition, the Company’s
operating subsidiaries maintain their books and records in their respective functional currency, which consists of the Malaysian Ringgit
(“MYR”), Chinese Renminbi (“RMB”), Hong Kong Dollars (“HK$”) and Australian Dollars (“AU$”).
In
general, for consolidation purposes, assets and liabilities of the Company’s subsidiaries whose functional currency is not the
US$, are translated into US$ 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 a foreign subsidiary are recorded
as a separate component of accumulated other comprehensive loss within 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:
SCHEDULE OF FOREIGN CURRENCIES TRANSLATION
|
|
|
As
of and for the six months ended
June
30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Period-end
MYR : US$1 exchange rate
|
|
|
4.15
|
|
|
|
4.29
|
|
|
Period-average
MYR : US$1 exchange rate
|
|
|
4.10
|
|
|
|
4.26
|
|
|
Period-end
RMB : US$1 exchange rate
|
|
|
6.46
|
|
|
|
7.07
|
|
|
Period-average
RMB : US$1 exchange rate
|
|
|
6.46
|
|
|
|
7.05
|
|
|
Period-end
HK$ : US$1 exchange rate
|
|
|
7.77
|
|
|
|
7.75
|
|
|
Period-average
HK$ : US$1 exchange rate
|
|
|
7.76
|
|
|
|
7.76
|
|
|
Period-end
AU$ : US$1 exchange rate
|
|
|
1.33
|
|
|
|
1.45
|
|
|
Period-average
AU$ : US$1 exchange rate
|
|
|
1.31
|
|
|
|
1.52
|
|
Fair
value of financial instruments
The
Company follows the guidance of ASC 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
|
The
Company believes the carrying amount reported in the balance sheet for cash and cash equivalents, accounts receivable, prepaids and other
current assets, accounts payable and accrued liabilities, income tax payable, deferred costs of revenue, deferred revenue, and due to
related parties, approximate their fair values because of the short-term nature of these financial instruments.
As
of June 30, 2021 and December 31, 2020, the Company’s balance sheet includes Level 3 liabilities comprised of the fair value of
derivative liabilities of $40,242 and $1,189,786, respectively (see Note 6). The following table sets forth a summary of the changes
in the estimated fair value of our derivative during the six-month period ended June 30, 2021:
SCHEDULE OF FAIR VALUE OF EMBEDDED DERIVATIVE LIABILITIES
|
|
|
Derivative
liability
|
|
|
Fair
value as of December 31, 2020
|
|
$
|
1,189,786
|
|
|
Net
change in the fair value of derivative liability associated with warrants
|
|
|
(39,744
|
)
|
|
Derecognition
of derivative liability resulting from convertible note redemptions
|
|
|
(1,109,800
|
)
|
|
Fair
value as of June 30, 2021 (Unaudited)
|
|
$
|
40,242
|
|
Concentrations
of risks
For
the three months ended June 30, 2021, two customers accounted for 40% (23% and 17%) of revenues. For the six months ended June 30, 2021,
three customers accounted for 51% (22%, 19% and 10%) of revenues. For the three months ended June 30, 2020, no customer accounted for
10% or more of revenues. For the six months ended June 30, 2020, one customer accounted for 28% of revenues. For the period ended June
30, 2021, three customers accounted for 48% (28%, 10% and 10%) of accounts receivable. For the period ended June 30, 2020, two customers
accounted for 22% (12% and 10%) of accounts receivable.
For
the three and six months ended June 30, 2021 and 2020, no vendor accounted for 10% or more of the Company’s cost of revenues. For
the period ended June 30, 2021, three vendors accounted for 47% (21%, 15% and 11%) of accounts payable. For the period ended June 30,
2020, two vendors accounted for 34% (20% and 14%) of accounts payable.
Economic
and political risks
Substantially
all the Company’s services are conducted in the Asian region, primarily in Hong Kong, Malaysia, and the People’s Republic
of China (“PRC”). Among other risks, the Company’s operations in Malaysia 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 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.
Recent
accounting pronouncements
The
FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326) in June 2016. ASU 2016-13 requires
entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on
certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses.
ASU 2016-13 is effective for the Company beginning January 1, 2023, and early adoption is permitted. The Company does not believe the
potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations
and cash flows.
Other
recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public
Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s
present or future financial statements.
NOTE
2 - REVENUE FROM CONTRACTS WITH CUSTOMERS
The
Company’s revenue consists of revenue from providing business consulting and corporate advisory services (“service revenue”),
revenue from the sale of real estate properties, and revenue from the rental of real estate properties.
Revenue
from services
For
certain of our service contracts providing assistance to clients in capital market listings (“Listing services”), our services
provided are considered to be one performance obligation. Revenue and expenses are deferred until the performance obligation is complete
and collectability of the consideration is probable. For service contracts where the performance obligation is not completed, deferred
costs of revenue are recorded as incurred and deferred revenue is recorded for any payments received on such yet to be completed performance
obligations. On an ongoing basis, management monitors these contracts for profitability, and may record a liability if costs exceed revenue
is determined.
For
other services such as company secretarial, accounting, financial analysis and related services (“Non-listing services”),
the Company’s performance obligations are satisfied, and the related revenue is recognized, as services are rendered. For contracts
in which we act as an agent, the Company reports revenue net of expenses paid.
The
Company offers no discounts, rebates, rights of return, or other allowances to clients which would result in the establishment of reserves
against service revenue. Additionally, to date, the Company has not incurred incremental costs in obtaining a client contract. The adoption
of ASC 606 had no impact on the Company’s consolidated financial statements.
Revenue
from the sale of real estate properties
The
Company follows the guidance of ASC 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC
610-20”) in accounting for the sale of real estate properties. The Company records the sale based on completed performance obligations,
which typically occurs upon the transfer of ownership of a real estate asset to the buyer. During the three and six months ended June
30, 2021, there was no sales of real estate and one unit of real estate property sold to a buyer, respectively. The Company recorded
no sales revenue from the real estate property held for sale for the three and six months ended June 30, 2020.
Revenue
from the rental of real estate properties
Rental
revenue represents lease rental income from the Company’s tenants. The tenants pay monthly in accordance with lease agreements
and the Company recognizes the income ratably over the lease term as this is the most representative of the pattern in which the benefit
is expected to be derived from the underlying asset.
Cost
of revenues
Cost
of service revenue primarily consists of employee compensation and related payroll benefits, company formation costs, and other professional
fees directly attributable to the services rendered.
Cost
of real estate properties sold primarily consists of the purchase price of property, legal fees, improvement costs to the building structure,
and other acquisition costs. Selling and advertising costs are expensed as incurred.
Cost
of rental revenue primarily includes costs associated with repairs and maintenance, property insurance, depreciation and other related
administrative costs. Property management fees and utility expenses are paid directly by tenants.
The
following table provides information about disaggregated revenue based on revenue by service lines and revenue by geographic area:
SCHEDULE OF DISAGGREGATED REVENUE BASED ON REVENUE BY SERVICE LINES AND REVENUE BY GEOGRAPHIC AREA
|
|
|
Three
Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Revenue
by service lines:
|
|
|
|
|
|
|
|
|
|
Corporate
advisory – Non-listing services
|
|
$
|
457,364
|
|
|
$
|
355,075
|
|
|
Corporate
advisory – Listing services
|
|
|
300,000
|
|
|
|
13,385
|
|
|
Rental
of real estate properties
|
|
|
34,661
|
|
|
|
32,680
|
|
|
Total
revenue
|
|
$
|
792,025
|
|
|
$
|
401,140
|
|
|
|
|
Three
Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Revenue
by geographic area:
|
|
|
|
|
|
|
|
|
|
Hong
Kong
|
|
$
|
578,879
|
|
|
$
|
248,980
|
|
|
Malaysia
|
|
|
146,940
|
|
|
|
107,312
|
|
|
China
|
|
|
66,206
|
|
|
|
44,848
|
|
|
Total
revenue
|
|
$
|
792,025
|
|
|
$
|
401,140
|
|
|
|
|
Six
Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Revenue
by service lines:
|
|
|
|
|
|
|
|
|
|
Corporate
advisory – Non-listing services
|
|
$
|
816,699
|
|
|
$
|
806,788
|
|
|
Corporate
advisory – Listing services
|
|
|
500,000
|
|
|
|
355,385
|
|
|
Rental
of real estate properties
|
|
|
64,899
|
|
|
|
55,508
|
|
|
Sale
of real estate properties
|
|
|
383,445
|
|
|
|
-
|
|
|
Total
revenue
|
|
$
|
1,765,043
|
|
|
$
|
1,217,681
|
|
|
|
|
Six
Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Revenue
by geographic area:
|
|
|
|
|
|
|
|
|
|
Hong
Kong
|
|
$
|
1,340,487
|
|
|
$
|
911,473
|
|
|
Malaysia
|
|
|
282,841
|
|
|
|
231,254
|
|
|
China
|
|
|
141,715
|
|
|
|
74,954
|
|
|
Total
revenue
|
|
$
|
1,765,043
|
|
|
$
|
1,217,681
|
|
Our
contract balances include deferred costs of revenue and deferred revenue.
Deferred
Revenue
For
service contracts where the performance obligation is not completed, deferred revenue is recorded for any payments received in advance
of the performance obligation. Changes in deferred revenue were as follows:
SCHEDULE OF CHANGES IN DEFERRED REVENUE
|
|
|
Six
Months
Ended
June 30, 2021
|
|
|
|
|
(Unaudited)
|
|
|
Deferred
revenue, January 1, 2021
|
|
$
|
1,634,075
|
|
|
New
contract liabilities
|
|
|
646,138
|
|
|
Performance
obligations satisfied
|
|
|
(500,000
|
)
|
|
Deferred
revenue, June 30, 2021
|
|
$
|
1,780,213
|
|
Deferred
Costs of Revenue
For
service contracts where the performance obligation is not completed, deferred costs of revenue are recorded for any costs incurred in
advance of the performance obligation.
Deferred
revenue and deferred costs of revenue at June 30, 2021 and December 31, 2020 are classified as current assets or current liabilities
and totaled:
SCHEDULE OF DEFERRED REVENUE AND DEFERRED COSTS OF REVENUE
|
|
|
As
of
June
30, 2021
|
|
|
As
of
December
31, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Deferred
revenue
|
|
$
|
1,780,213
|
|
|
$
|
1,634,075
|
|
|
Deferred
costs of revenue
|
|
$
|
97,978
|
|
|
$
|
81,246
|
|
NOTE
3 - OTHER INVESTMENTS
SCHEDULE OF OTHER INVESTMENTS
|
|
|
As
of
|
|
|
As
of
|
|
|
|
|
June
30, 2021
|
|
|
December
31, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(A)
Investment in equity securities without readily determinable fair values of affiliates:
|
|
|
|
|
|
|
|
|
|
(1)
Greenpro Trust Limited (a related party)
|
|
$
|
51,613
|
|
|
$
|
51,613
|
|
|
(2)
Other related parties
|
|
|
11,666,497
|
|
|
|
6,413,547
|
|
|
(B)
Stock option (a related party)
|
|
|
-
|
|
|
|
364,500
|
|
|
Total
|
|
$
|
11,718,110
|
|
|
$
|
6,829,660
|
|
|
(A)
|
Investment
in equity securities without readily determinable fair values of affiliates (related parties):
|
Equity
securities without readily determinable fair values are investments in privately held companies without readily determinable market values.
The Company adopted the guidance of ASC 321, Investments - Equity Securities, which allows an entity to measure investments in equity
securities without a readily determinable fair value using a measurement alternative that measures these securities at cost minus impairment,
if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investment of
same issuer (the “Measurement Alternative”). The fair value of equity securities without readily determinable fair values
that have been remeasured due to impairment are classified within Level 3. Management assesses each of these investments on an individual
basis. Additionally, on a quarterly basis, management is required to make a qualitative assessment of whether the investment is impaired.
For the three and six months ended June 30, 2021, the Company recognized an impairment loss of $3,246,000 for one of the equity securities
without readily determinable fair values. During the year ended December 31, 2020, the Company did not recognize any fair value adjustments
for equity securities without readily determinable fair values.
In
addition, the Company held equity securities without readily determinable fair values that were recorded at cost. For these cost method
investments, we recorded as other investments in our condensed consolidated balance sheets. We reviewed all of our cost method investments
quarterly to determine if impairment indicators were present; however, we were not required to determine fair value of these investments
unless impairment indicators exist. When impairment indicators exist, we generally used discounted cash flow analyses to that the fair
values of our cost method investments approximated or exceeded their carrying values as of June 30, 2021.
At
June 30, 2021 and December, 31 2020, the carrying values of equity securities without readily determinable fair values are as follows:
SCHEDULE OF CARRYING VALUES OF EQUITY SECURITIES WITHOUT READILY DETERMINABLE FAIR VALUES
|
|
|
As
of
|
|
|
As
of
|
|
|
|
|
June
30, 2021
|
|
|
December
31, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Original
cost
|
|
$
|
15,338,339
|
|
|
$
|
6,839,389
|
|
|
Unrealized
gains (losses)
|
|
|
-
|
|
|
|
-
|
|
|
Provision
for impairment or decline in value
|
|
|
(3,620,229
|
)
|
|
|
(374,229
|
)
|
|
Equity
securities without readily determinable fair values, net
|
|
$
|
11,718,110
|
|
|
$
|
6,465,160
|
|
The
Company had cost method investments with a carrying value of $11,718,110 and $6,465,160 as of June 30, 2021 and December 31, 2020, respectively.
(a)
Angkasa-X Holdings Corp.:
On
February 3, 2021, Greenpro Venture Capital Limited, a subsidiary of the Company (“GVCL”) entered into a subscription agreement
with Angkasa-X Holdings Corp., a British Virgin Islands corporation, which principally provides internet connectivity to rural areas
in Southeast Asia (“Angkasa”). Pursuant to the agreement, GVCL acquired 28,000,000 ordinary shares of Angkasa at a price
of $2,800 or $0.0001 per share. The investment was recognized at historical cost of $2,800 under other investments.
(b)
First Bullion Holdings Inc.:
On
February 17, 2021, First Bullion Holdings Inc. (“FBHI”), a British Virgin Islands corporation, issued to our wholly owned
subsidiary, GVCL, 160,000 ordinary shares of FBHI pursuant to Section 2.2 of a stock purchase and option agreement dated October 19,
2020 between the Company, Mr. Tang Ka Siu Johnny (“Mr. Tang”) and FBHI. FBHI had, under Section 2.2 of the agreement, granted
the Company an option to purchase an additional 8% of the shares sold under the agreement valued at $20,000,000.
In
partial consideration of the FBHI shares, the Company had previously issued 250,000
restricted shares of its Common Stock
on December 11, 2020 at $364,500
or $1.458
per share. The Company agreed to issue an additional
342,592
restricted shares of its Common Stock based on
the average closing price of the Company’s Common Stock for the five trading days preceding the date of exercise of the option.
On
February 26, 2021, the Company issued 342,592 restricted shares of its Common Stock to two designees of Mr. Tang at $2.70 per share (valued
at approximately $925,000).
At
June 30, 2021, together with the 10% shareholdings or 200,000 ordinary shares of FBHI acquired at a consideration of $1,000,000 or $1.458
per share on December 11, 2020, GVCL in aggregate holds 360,000 ordinary shares of FBHI, representing 18% of the total issued and outstanding
shares of FBHI. The investment was recognized at historical cost of $2,289,000 under other investments.
(c)
Simson Wellness Tech. Corp.:
On
February 19, 2021, GVCL entered into a subscription agreement with Simson Wellness Tech. Corp., a Nevada corporation, which is
a digital platform that acts as middleware for distribution of optical products (“Simson”). Pursuant to the agreement, GVCL
acquired 5,000,000
shares of common stock of Simson at a price of
$500
or $0.0001
per share. The investment was recognized at historical
cost of $500
under other investments.
(d)
Innovest Energy Fund:
On
February 11, 2021, Greenpro Resources Limited, a subsidiary of the Company (“GRL”) entered into a subscription agreement
with Innovest Energy Fund, a global multi-asset fund incorporated in the Cayman Island, and is principally engaged in developing
a multi-faceted suite of products and services for the cryptocurrency industry and economy (the “Fund”). Pursuant to the
agreement, GRL agreed to subscribe for $7,206,000
worth of Class B shares of the Fund by issuing
3,000,000
restricted shares of
the Company’s Common Stock, par value $0.0001
per share, valued at
$7,206,000
to the Fund.
On
April 7, 2021, the Company issued 3,000,000 restricted shares of its Common Stock to the Fund and issued 60,000 restricted shares of
its Common Stock to a designee of the Fund as a subscription fee of $144,120 ($2.402 per share) associated with the investment.
At
June 30, 2021, the Company determined that its investment in the Fund was impaired and revalued at $3,960,000, and an impairment loss
of $3,246,000 was recorded.
(e)
Jocom Holdings Corp.:
On
June 2, 2021, GVCL entered into a subscription agreement with Jocom Holdings Corp., a Nevada corporation, which operates a Malaysia-based
m-commerce platform specializing in online grocery shopping via smartphones (“Jocom”). Pursuant to the agreement, GVCL acquired
1,500,000
shares of common stock of Simson at a price of
$150
or $0.0001
per share. The investment was recognized at historical
cost of $150
under other investments.
Impairment
of other investments
For
the three and six months ended June 30, 2021, the Company recognized an impairment loss of $3,246,000 of other investments. For the year
ended December 31, 2020, there was no impairment of other investments recorded.
NOTE
4 - OPERATING LEASES
The
Company has two separate operating lease agreements for one office space in Hong Kong with remaining lease terms of 20.5 months and one
office space in Malaysia with remaining lease terms of 9 months. The Company does not have any other leases. Leases with an initial term
of 12 months or less are not recorded on the balance sheet. The Company accounts for the lease and non-lease components of its leases
as a single lease component. Lease expense is recognized on a straight-line basis over the lease term.
Operating
lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease
payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent
our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily
determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s
incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease
ROU asset includes any lease payments made and excludes lease incentives.
The
components of lease expense and supplemental cash flow information related to leases for the period are as follows:
SCHEDULE OF COMPONENTS OF LEASE EXPENSE AND SUPPLEMENTAL CASH FLOW INFORMATION
|
|
|
Six
Months Ended
June 30, 2021
|
|
|
|
|
(Unaudited)
|
|
|
Lease
Cost
|
|
|
|
|
|
Operating
lease cost (included in general and administrative expenses in the Company’s unaudited condensed statement of operations)
|
|
$
|
127,568
|
|
|
|
|
|
|
|
|
Other
Information
|
|
|
|
|
|
Cash
paid for amounts included in the measurement of lease liabilities for the six months ended June 30, 2021
|
|
$
|
103,060
|
|
|
Weighted
average remaining lease term – operating leases (in years)
|
|
|
1.71
|
|
|
Average
discount rate – operating leases
|
|
|
4.0
|
%
|
The
supplemental balance sheet information related to leases for the period is as follows:
SCHEDULE OF SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO LEASES
|
|
|
As
of June 30, 2021
|
|
|
|
|
(Unaudited)
|
|
|
Operating
leases
|
|
|
|
|
|
Long-term
right-of-use assets
|
|
$
|
142,305
|
|
|
|
|
|
|
|
|
Short-term
operating lease liabilities
|
|
$
|
88,217
|
|
|
Long-term
operating lease liabilities
|
|
|
64,282
|
|
|
Total
operating lease liabilities
|
|
$
|
152,499
|
|
Maturities
of the Company’s lease liabilities are as follows:
SCHEDULE OF MATURITIES OF LEASE LIABILITIES
|
|
|
As
of June 30, 2021
|
|
|
Year
Ending
|
|
Operating
Leases
|
|
|
|
|
(Unaudited)
|
|
|
2021
(remaining 6 months)
|
|
$
|
46,355
|
|
|
2022
|
|
|
92,711
|
|
|
2023
|
|
|
18,941
|
|
|
Total
lease payments
|
|
|
158,007
|
|
|
Less:
Imputed interest/present value discount
|
|
|
(5,508
|
)
|
|
Present
value of lease liabilities
|
|
$
|
152,499
|
|
Lease
expenses were $49,924 and $127,568 during the three and six months ended June 30, 2021, respectively, and $71,303 and $172,030 during
the three and six months ended June 30, 2020, respectively.
NOTE
5 - CONVERTIBLE NOTES PAYABLE, NET
Convertible
Notes issued in October 2020:
Convertible
Note Financing with Streeterville Capital, LLC, FirstFire Global Opportunities Fund, LLC and Granite Global Value Investments Ltd.
On
October 13, 2020, the Company issued three unsecured convertible promissory notes to Streeterville Capital, LLC, FirstFire Global Opportunities
Fund, LLC and Granite Global Value Investments Ltd. (collectively, the “Investors”), respectively. The notes were issued
with combined principal amount of $1,790,000 and the initial issuance discount of $190,000. As part of debt issuance, the Company also
incurred brokers’ fees of $130,000, recorded as a debt discount. The notes bear the face interest rate of 10% and have contractual
maturity of 18 months since the issuance.
Investor
Conversion and Early Redemption Options
At
the Investors’ option, the notes can be converted in Company’s Common Stock at any time at the conversion price of $1 per
share, subject to standard anti-dilution protection clauses (the lender’s conversion price).
The
Investors have an option to redeem the notes prior to their contractual maturity (put option) but not before 6 months since the issuance
date. If the put option is exercised, Investors’ monthly redemption amounts including principal and face interest are capped at
$108,000. In case of early redemption, the Company has an option to settle its obligation in cash or, if certain conditions are met,
in stock. Stock settlement is performed at the rate determined as the lesser of (i) the lender’s conversion price and (ii) 0.75
multiplied by the weighted average trading price of the Company’s Common Stock calculated for a specified period.
The
Investors have an option to demand the repayment of debt upon default, as defined in the terms of the notes.
Issuer
Early Redemption Option
The
Company has an option to prepay the notes ahead of contractual maturity at 120%
of the outstanding balance of the note.
The
Company assessed the Investors’ conversion option for the scope exception for contracts involving a reporting entity’s own
equity. The Company concluded that the conversion option is indexed to Company’s own stock, is considered “conventional”
and can be classified in Company’s stockholders’ equity. The conversion option was not separated from but presented as part
of the debt instrument.
Investors’
conversion option was determined to be in the money at the commitment date. The non-detachable option was determined to be a beneficial
conversion feature measured at the intrinsic value and recorded in Company’s additional paid-in capital. The intrinsic value was
determined by calculating the initial effective conversion price. Effective conversion price was calculated as the ratio between the
total proceeds allocated to the convertible instrument and the number of shares into which it is convertible. The proceeds allocated
to the conversion instrument were impacted by the initial issuance discount. The number of shares issuable under the terms of the conversion
option was 1,790,000. The overall amount of beneficial conversion feature recognized at issuance was $995,500.
The
Company assessed Investors’ put option and Investors’ option to redeem the debt upon default using bifurcation guidance per
ASC 815-15, Embedded Derivatives. The Company concluded that economic characteristics and risks of Investors’ put option are not
considered clearly and closely related to debt host and that Investors’ put option should be separated from the host instrument.
The Company noted that certain events triggering the default including fundamental transaction and non-compliance with listing requirements
are not directly related to Company’s creditworthiness. Economic characteristics and risks of Investors’ put option triggered
by the occurrence of such events are not considered clearly and closely related to the economic characteristics and risks of the host
instrument.
Investors’
put option and the option to redeem the debt upon default triggered by events not directly linked to Company’s creditworthiness
were separated from the debt instrument and presented as a “compound” derivative liability (see Note 6).
Estimated
fair value of the derivative liability, $408,800 for each of two promissory notes and $489,100 for the other promissory note, in aggregate
of $1,306,700. Proceeds allocated to debt net of debt discount were $148,000 for each of the two promissory notes and $178,500 for the
other note, in aggregate of $474,500. The excess of estimated fair value of derivative liability and other debt discount over the debt
proceeds was $832,200 (the excess). The excess was due to the terms of debt financing transactions and management effort to address Company’s
liquidity issues. The Company recognized the excess as an upfront interest expense in the income statement. Net carrying value of promissory
notes at issuance was $nil.
At
October 13, 2020, net carrying value of three short-term convertible notes issued on October 13, 2020 is as follows:
SCHEDULE OF CARRYING VALUE OF SHORT-TERM CONVERTIBLE NOTES
|
|
|
At
Issuance
October
13, 2020
|
|
|
Face
value of convertible notes
|
|
$
|
1,790,000
|
|
|
Initial
discount
|
|
|
(190,000
|
)
|
|
Discount
related to debt issuance costs
|
|
|
(130,000
|
)
|
|
Discount
related to beneficial conversion feature
|
|
|
(995,500
|
)
|
|
Discount
related to put options
|
|
|
(474,500
|
)
|
|
Net
carrying value of convertible notes payable
|
|
$
|
-
|
|
On
April 14, 2021, Streeterville Capital, LLC (“Streeterville”), exercised an option defined in the terms of the convertible
promissory note issued by the Company on October 13, 2020, to redeem the note after 6 months from issuance date, at a conversion price
of $1
per share. The note was repaid upon issuance
of 704,738
restricted shares of the Company’s Common
Stock to Streeterville on April 16, 2021.
On
April 12 and 16, 2021, the Company exercised an option defined in the terms of the convertible promissory notes issued to FirstFire
Global Opportunities Fund, LLC (“FirstFire”) and Granite Global Value Investments Ltd. (“Granite”) on October
13, 2020, to prepay the notes ahead of contractual maturity of April
12, 2022 at 120%
of
the notes’ principal value and accrued and unpaid face interest. The notes issued to FirstFire and Granite with additional
charge for early redemption of $235,638,
were repaid with cash of $705,600
and $707,515,
respectively on April 19, 2021.
At
June 30, 2021, fair value of the derivative liability related to Investors’ early redemption options, resulting from redemption
of notes was zero (see Note 6).
Convertible
Note issued in January 2021:
Convertible
Note Financing with Streeterville Capital, LLC
On
January 8, 2021, the Company entered into a securities purchase agreement with Streeterville Capital, LLC, an accredited investor (“Streeterville”),
pursuant to which the Company issued and sold to Streeterville in a private placement an unsecured convertible promissory note in the
original principal amount $1,660,000 (the “Original Principal Amount”), convertible into shares of Common Stock at a conversion
price of $1.00 per share. The note carries an original issue discount of $150,000 (“OID”) and the Company agreed to pay $10,000
to Streeterville to cover Streeterville’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred
in connection with the agreement (the “Transaction Expense Amount”). The purchase price for the note shall be $1,500,000
(the “Purchase Price”), computed as follows: Original Principal Balance of $1,660,000, less the OID of $150,000 and the Transaction
Expense Amount of $10,000. After the payment of $90,000 to cover a broker’s fee (“Broker Fee”), the Company received
net proceeds of $1,410,000 on January 14, 2021.
The
note may be prepaid by the Company in an amount equal to 120% of the outstanding balance of the note. The shares of Common Stock issuable
upon conversion of the note is subject to full-ratchet anti-dilution protection. The note may be redeemed by Streeterville at any time
after the six-month anniversary of the issuance date of the note subject to the maximum monthly redemption amount of $350,000, convertible
into shares of Common Stock at a conversion price equal to the lesser of (i) $1.00 and (ii) 75% of the average of the lowest VWAP during
the ten trading days immediately preceding the measurement date. Pursuant to the agreement, Streeterville was granted a “most favored
nations” right.
Events
of default (“Events of Default”) under the note include but are not limited to: (a) failure to pay any principal, interest,
fees, charges, or any other amount when due; (b) failure to deliver any conversion shares in accordance with the terms of the note; (c)
a receiver, trustee or other similar official shall be appointed over Company or a material part of its assets and such appointment shall
remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (d) Company becomes insolvent;
(e) Company makes a general assignment for the benefit of creditors; (f) Company files a petition for relief under any bankruptcy, insolvency
or similar law (domestic or foreign); an involuntary bankruptcy proceeding is commenced or filed against Borrower; (g) Company defaults
or otherwise fails to observe or perform any covenant, obligation, condition or agreement of Company in the note or in any other transaction
document; (h) any representation, warranty or other statement made or furnished by or on behalf of Company is false, incorrect, incomplete
or misleading in any material respect when made or furnished; (i) the occurrence of a Fundamental Transaction (as defined in the note)
without Streeterville’s prior written consent; (j) Company fails to reserve a sufficient number of shares to issue upon conversion
of the note; (k) Company effectuates a reverse split of its Common Stock without twenty trading days prior written notice to Streeterville;
(l) any money judgment, writ or similar process is entered or filed against the Company or any subsidiary of the Company or any of its
property or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of twenty calendar days
unless otherwise consented to by Streeterville; (m) the Company fails to be DWAC eligible; (n) the Company fails to observe or perform
any covenant set forth in Section 4 of the agreement; or (o) the Company, any affiliate of the Company, or any pledgor, trustor, or guarantor
of the note breaches any covenant or other term or condition contained in any other financing or material agreements. In the case of
an Event of Default, interest shall accrue under the note at the annual rate of 22%. Certain Major Defaults (as defined in the note)
will result in an additional 15% of the Original Principal Amount of the note outstanding at such time being added to the total outstanding
amount of such note. The number of shares of Common Stock that may be issued upon conversion of this note and the other notes disclosed
herein shall not exceed the requirement of Nasdaq Listing Rule 5635(d).
At
January 8, 2021, net carrying value of a short-term convertible note issued on January 8, 2021 is as follows:
SCHEDULE OF CARRYING VALUE OF SHORT-TERM CONVERTIBLE NOTES
|
|
|
At
Issuance
January
8, 2021
|
|
|
|
|
(Unaudited)
|
|
|
Face
value of convertible note
|
|
$
|
1,660,000
|
|
|
Initial
discount
|
|
|
(160,000
|
)
|
|
Discount
related to debt issuance costs
|
|
|
(90,000
|
)
|
|
Discount
related to beneficial conversion feature
|
|
|
(1,410,000
|
)
|
|
Net
carrying value of convertible note payable
|
|
$
|
-
|
|
Convertible
Note issued in February 2021:
Convertible
Note Financing with Streeterville Capital, LLC
On
February 11, 2021, the Company entered into a securities purchase agreement with Streeterville Capital, LLC, an accredited investor (“Streeterville”),
pursuant to which the Company issued and sold to Streeterville in a private placement an unsecured convertible promissory note in the
original principal amount $4,410,000 (the “Original Principal Amount”), convertible into shares of Common Stock at a conversion
price of $1.50 per share. The note carries an original issue discount of $400,000 (“OID”) and the Company agreed to pay $10,000
to Streeterville to cover Streeterville’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred
in connection with the agreement (the “Transaction Expense Amount”). The purchase price for the note shall be $4,000,000
(the “Purchase Price”), computed as follows: Original Principal Balance of $4,410,000, less the OID of $400,000 and the Transaction
Expense Amount of $10,000. After the payment of $200,000 to cover a broker’s fee (“Broker Fee”), the Company received
net proceeds of $3,800,000 on February 17, 2021.
The
Company has covenanted to use part of the proceeds from the note to repay the outstanding notes it issued to FirstFire Global Opportunities
Fund, LLC (“FirstFire”) and Granite Global
Value Investments Ltd. (“Granite”) in relation to their respective securities purchase agreement signed on October 13, 2020.
The
note may be prepaid by the Company in an amount equal to 120% of the outstanding balance of the note. The shares of Common Stock issuable
upon conversion of the note is subject to full-ratchet anti-dilution protection. The note may be redeemed by Streeterville at any time
after the six-month anniversary of the issuance date of the note subject to the maximum monthly redemption amount of $962,500, convertible
into shares of Common Stock at a conversion price equal to the lesser of (i) $1.50 and (ii) 75% of the average of the lowest VWAP during
the ten trading days immediately preceding the measurement date. Pursuant to the agreement, Streeterville was granted a “most favored
nations” right.
On
February 21, 2021, the Company entered into an amendment to convertible promissory note with Streeterville. Pursuant to the amendment,
the obligation in Section 1.3 of the note to repay the outstanding note issued to EMA Financial, LLC within fifteen (15) days of the
Effective Date is deleted from the note.
Events
of Default under the note include the same Events of Default listed above under the description of the Streeterville convertible note
financing on January 8, 2021. In the case of an Event of Default, interest shall accrue under the note at the annual rate of 22%. Certain
Major Defaults (as defined in the note) will result in an additional 15% of the Original Principal Amount of the note outstanding at
such time being added to the total outstanding amount of such note. The number of shares of Common Stock that may be issued upon conversion
of this note and the other notes disclosed herein shall not exceed the requirement of Nasdaq Listing Rule 5635(d).
At
February 11, 2021, net carrying value of a short-term convertible note issued on February 11, 2021 is as follows:
SCHEDULE OF CARRYING VALUE OF SHORT-TERM CONVERTIBLE NOTES
|
|
|
At
Issuance
February
11, 2021
|
|
|
|
|
(Unaudited)
|
|
|
Face
value of convertible note
|
|
$
|
4,410,000
|
|
|
Initial
discount
|
|
|
(410,000
|
)
|
|
Discount
related to debt issuance costs
|
|
|
(200,000
|
)
|
|
Discount
related to conversion option
|
|
|
(3,800,000
|
)
|
|
Net
carrying value of convertible notes payable
|
|
$
|
-
|
|
Pursuant
to the obligation in Section 1.3 of the note issued to Streeterville on February 11, 2021, the
Company agreed to use the proceeds received hereunder to repay the outstanding convertible notes it issued to FirstFire Global
Opportunities Fund, LLC and Granite Global Value Investments Ltd on October 13, 2020 (the “Outstanding Investor Notes”)
within fifteen (15) days of the Effective Date (the “Repayment Date”). In the event the Company fails to repay the Outstanding
Investor Notes by the Repayment Date, the Outstanding Balance will automatically increase by twenty-five percent (25%).
At
February 26, 2021 (the Repayment Date), net carrying value of a short-term convertible note issued on February 11, 2021 is as follows:
SCHEDULE OF CARRYING VALUE OF SHORT-TERM CONVERTIBLE NOTES
|
|
|
At
Repayment
Date
February
26, 2021
|
|
|
|
|
(Unaudited)
|
|
|
Face
value of convertible note
|
|
$
|
4,410,000
|
|
|
Accrued
interest from February 11 to February 26, 2021
|
|
|
11,025
|
|
|
Outstanding
Balance (before additional 25%)
|
|
|
4,421,025
|
|
|
Additional
25% to Outstanding Balance due to non-fulfillment of use of proceeds requirements
|
|
|
1,105,256
|
|
|
Outstanding
Balance (after additional 25%)
|
|
|
5,526,281
|
|
|
Initial
discount
|
|
|
(403,736
|
)
|
|
Discount
related to debt issuance costs
|
|
|
(197,680
|
)
|
|
Discount
related to conversion option
|
|
|
(3,737,248
|
)
|
|
Discount
related to beneficial conversion feature
|
|
|
(1,065,380
|
)
|
|
Net
carrying value of convertible notes payable
|
|
$
|
122,237
|
|
The
Company amortized debt discount associated with the derivative liability using the straight-line method.
Amount
of unamortized debt discount including initial issuance discount, transaction cost, beneficial conversion feature, and separated derivative
liability was $5,424,545 at June 30, 2021 and $1,647,527 at December 31, 2020, respectively.
Summary
of convertible debt’s interest expense is as follows:
SUMMARY OF CONVERTIBLE DEBT'S INTEREST EXPENSE
|
|
|
Three
Months
Ended
June
30, 2021
|
|
|
Six
Months
Ended
June
30, 2021
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Coupon
interest
|
|
$
|
188,717
|
|
|
$
|
328,409
|
|
|
Amortization
of discount on convertible notes
|
|
|
89,281
|
|
|
|
160,077
|
|
|
Amortization
of debt issuance costs
|
|
|
32,029
|
|
|
|
56,959
|
|
|
Interest
expense associated with conversion of notes
|
|
|
995,312
|
|
|
|
1,700,909
|
|
|
Interest
expense associated with accretion of convertible notes payable
|
|
|
-
|
|
|
|
8,561,440
|
|
|
Interest
expense due to non-fulfillment of use of proceeds requirements
|
|
|
-
|
|
|
|
1,105,256
|
|
|
Additional
charge for early redemption
|
|
|
235,638
|
|
|
|
235,638
|
|
|
Total
|
|
$
|
1,540,977
|
|
|
$
|
12,148,688
|
|
All
convertible promissory notes were classified as short-term due to lender’s earlier redemption or put option.
At
June 30, 2021 and December 31, 2020, carrying values of the short-term convertible notes are as follows:
SCHEDULE OF CARRYING VALUE OF SHORT-TERM CONVERTIBLE NOTES
|
|
|
June
30,
2021
|
|
|
December
31,
2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Face
value of convertible notes
|
|
$
|
7,860,000
|
|
|
$
|
1,790,000
|
|
|
Additional
25% to Outstanding Balance due to non-fulfillment of use of proceeds requirements
|
|
|
1,105,256
|
|
|
|
-
|
|
|
Initial
discount
|
|
|
(584,801
|
)
|
|
|
(174,878
|
)
|
|
Discount
related to debt issuance costs
|
|
|
(356,261
|
)
|
|
|
(123,220
|
)
|
|
Discount
related to beneficial conversion feature
|
|
|
(2,736,110
|
)
|
|
|
(943,584
|
)
|
|
Discount
related to put options
|
|
|
(327,631
|
)
|
|
|
(405,845
|
)
|
|
Discount
related to conversion option
|
|
|
(2,872,661
|
)
|
|
|
-
|
|
|
Redemptions
|
|
|
(337,080
|
)
|
|
|
-
|
|
|
Net
convertible notes payable
|
|
|
1,750,712
|
|
|
|
142,473
|
|
|
Accrued
interest during the period / year
|
|
|
274,936
|
|
|
|
38,742
|
|
|
Carrying
value of convertible notes payable
|
|
$
|
2,025,648
|
|
|
$
|
181,215
|
|
Contractual
maturities on the convertible debt and carrying value are as follows:
SCHEDULE OF MATURITIES OF CONVERTIBLE DEBT
|
|
|
|
June 30, 2021
|
|
|
Period
ending June 30,
|
|
|
|
|
|
2022
|
|
$
|
8,248,782
|
|
|
Less:
Interest
|
|
|
(6,223,134
|
)
|
|
Carrying
value
|
|
$
|
2,025,648
|
|
The
Company determined the fair value of debt to be $7,992,100 and $3,669,500 at June 30, 2021 and December 31, 2020, respectively. The level
of the fair value hierarchy is Level 3 of the fair value hierarchy because certain unobservable inputs were used in the valuation model.
Components
and costs of two convertible promissory notes issued during the period ended June 30, 2021 are as follows:
SCHEDULE OF CONVERTIBLE PROMISSORY NOTES
|
|
|
Six
Months Ended
June
30, 2021
|
|
|
|
|
(Unaudited)
|
|
|
Original
Principal Amount
|
|
$
|
6,070,000
|
|
|
Less:
Original issue discount (OID)
|
|
|
(550,000
|
)
|
|
Less:
Transaction Expense Amount
|
|
|
(20,000
|
)
|
|
Purchase Price
|
|
|
5,500,000
|
|
|
Less:
Broker Fee
|
|
|
(290,000
|
)
|
|
Net
proceeds
|
|
$
|
5,210,000
|
|
NOTE
6 - DERIVATIVE LIABILITIES
SCHEDULE OF DERIVATIVE LIABILITIES
|
|
|
As
of
|
|
|
As
of
|
|
|
|
|
June
30, 2021
|
|
|
December
31, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Fair
value of warrants
|
|
$
|
40,242
|
|
|
$
|
79,986
|
|
|
Fair
value of options associated with convertible promissory notes
|
|
|
-
|
|
|
|
1,109,800
|
|
|
Total
|
|
$
|
40,242
|
|
|
$
|
1,189,786
|
|
At
June 30, 2021, the Company has outstanding warrants exercisable into 53,556
shares of the Company’s Common Stock.
The strike price of warrants is denominated in US dollars, a currency other than the Company’s functional currencies, the HK$,
RMB, and MYR. As a result, the warrants are not considered indexed to the Company’s own stock, and the Company characterized the
fair value of the warrants as a derivative liability upon issuance. The derivative liability is re-measured at the end of every reporting
period with the change in value reported in the statement of operations.
At
December 31, 2020, the balance of the derivative liabilities related to warrants was $79,986. During the six months ended June 30, 2021,
the Company recorded a decrease in fair value of derivatives of $39,744. At June 30, 2021, the balance of the derivative liabilities
related to warrants was $40,242.
The
derivative liabilities related to warrants were valued using the Black-Scholes-Merton valuation model with the following assumptions:
SCHEDULE OF ESTIMATED DERIVATIVE LIABILITIES AT FAIR VALUE ASSUMPTIONS
|
|
|
As
of
|
|
|
As
of
|
|
|
|
|
June
30, 2021
|
|
|
December
31, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Risk-free
interest rate
|
|
$
|
2.1
|
%
|
|
$
|
1.7
|
%
|
|
Expected
volatility
|
|
|
178
|
%
|
|
|
181
|
%
|
|
Contractual
life (in years)
|
|
|
2.0
years
|
|
|
|
2.4
years
|
|
|
Expected
dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
Fair
value of warrants
|
|
$
|
40,242
|
|
|
$
|
79,986
|
|
The
risk-free interest rate is based on the yield available on U.S. Treasury securities. The Company estimates volatility based on the historical
volatility of its Common Stock. The contractual life of the warrants is based on the expiration date of the warrants. The expected
dividend yield was based on the fact that the Company has not paid dividends to common shareholders in the past and does not expect to
pay dividends to common shareholders in the future. For the six months ended June 30, 2021, the Company recognized a gain of $39,744
associated with the revaluation of above derivative
liability.
Convertible
debt early redemption options
On
October 13, 2020, the Company issued three unsecured convertible promissory notes with certain Investors’ early redemption options,
that are considered derivative liabilities (see Note 5).
On
April 14, 2021, Streeterville Capital, LLC (“Streeterville”), exercised an option defined in the terms of the convertible
promissory note issued by the Company on October 13, 2020, to redeem the note after 6 months from issuance date, at a conversion price
of $1
per share. The note was repaid upon 704,738
restricted shares of the Company’s Common
Stock were issued to Streeterville on April 16, 2021.
On
April 12 and 16, 2021, the Company exercised an option defined in the terms of the convertible promissory notes issued to FirstFire
Global Opportunities Fund, LLC (“FirstFire”) and Granite Global Value Investments Ltd. (“Granite”) on October
13, 2020, to prepay the notes ahead of contractual maturity of April
12, 2022 at 120%
of the notes’ principal value and accrued and unpaid face interest. The notes issued to FirstFire and Granite with
additional charge for early redemption of $235,638,
were repaid with cash of $705,600
and $707,515,
respectively on April 19, 2021.
At
June 30, 2021, fair value of the derivative liability related to Investors’ early redemption options, resulting from redemption
of notes was zero (see Note 5).
The
Company used Trinomial Option Pricing Model to estimate the fair value of the derivative liability related to Investors’ early
redemption options. The derivative liability was classified within Level 3 of the fair value hierarchy because certain unobservable inputs
were used in the valuation model. The Company estimated the fair value of the derivative liability to be $0 and $1,109,800 at June 30,
2021 and December 31, 2020, respectively.
The
Company estimated the fair value of derivative liabilities using the following assumptions:
SCHEDULE OF ESTIMATED DERIVATIVE LIABILITIES AT FAIR VALUE ASSUMPTIONS
|
|
|
As
of
|
|
|
As
of
|
|
|
|
|
June 30, 2021
|
|
|
December
31, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Risk
free rate
|
|
|
0.00
|
%
|
|
|
0.11
|
%
|
|
Fair value of underlying
stock
|
|
$
|
-
|
|
|
$
|
2.05
|
|
|
Expected
term (in years)
|
|
|
-
|
|
|
|
1.28
|
|
|
Stock price volatility
|
|
|
-
|
%
|
|
|
206.17
|
%
|
|
Expected
dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
Fair value of options
|
|
$
|
-
|
|
|
$
|
1,109,800
|
|
At
June 30, 2021, the fair value of derivative liability was zero, resulting from redemptions of three convertible notes issued in October
2020.
NOTE
7 - WARRANTS
In
2018, the Company issued warrants exercisable into 53,556 shares of Common Stock. The warrants were fully vested when issued, have an
exercise price of $7.20 per share, and expire in 2023. A summary of warrant activity during the six months ended June 30, 2021 is presented
below:
SUMMARY OF WARRANTS ACTIVITY
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
Number
|
|
|
|
|
|
Contractual
|
|
|
|
|
of
|
|
|
Exercise
|
|
|
Life
|
|
|
|
|
Shares
|
|
|
Price
|
|
|
(in
Years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
outstanding at December 31, 2020
|
|
|
53,556
|
|
|
$
|
7.20
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
Warrants
outstanding at June 30, 2021
|
|
|
53,556
|
|
|
$
|
7.20
|
|
|
|
2.0
|
|
|
Warrants
exercisable at June 30, 2021
|
|
|
53,556
|
|
|
$
|
7.20
|
|
|
|
2.0
|
|
At
June 30, 2021, the intrinsic value of outstanding warrants was zero.
NOTE
8 - RELATED PARTY TRANSACTIONS
SCHEDULE OF DUE FROM RELATED PARTIES
|
Due
from related parties:
|
|
June
30, 2021
|
|
|
December
31, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
|
|
|
|
|
|
|
Due
from related party B (net of allowance of $41 and $8,025 as of June 30, 2021 and December 31, 2020, respectively)
|
|
$
|
41
|
|
|
$
|
152,475
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
from related parties
|
|
|
|
|
|
|
|
|
|
Due
from related party D
|
|
|
36
|
|
|
|
-
|
|
|
Due
from related party G
|
|
|
1,225
|
|
|
|
2,320
|
|
|
Due
from related party H
|
|
|
60,000
|
|
|
|
60,000
|
|
|
Total
|
|
$
|
61,302
|
|
|
$
|
214,795
|
|
SCHEDULE OF DUE TO RELATED PARTIES
|
Due
to related parties:
|
|
June
30, 2021
|
|
|
December
31, 2020
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Due
to related party A
|
|
$
|
9,922
|
|
|
$
|
586
|
|
|
Due
to related party B
|
|
|
16,053
|
|
|
|
9,580
|
|
|
Due
to related party G
|
|
|
5,022
|
|
|
|
-
|
|
|
Due
to related party I
|
|
|
1,698
|
|
|
|
-
|
|
|
Due
to related party J
|
|
|
704,601
|
|
|
|
744,428
|
|
|
Due
to related party K
|
|
|
346,408
|
|
|
|
354,047
|
|
|
Total
|
|
$
|
1,083,704
|
|
|
$
|
1,108,641
|
|
SCHEDULE OF REVENUE AND EXPENSE TRANSACTIONS OF RELATED PARTIES
|
|
|
For the six months ended
June 30,
|
|
|
Related party revenue and expense transactions:
|
|
2021
|
|
|
2020
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Service revenue from related parties
|
|
|
|
|
|
|
|
|
|
- Related party A
|
|
$
|
79,391
|
|
|
$
|
18,709
|
|
|
- Related party B
|
|
|
563,073
|
|
|
|
73,174
|
|
|
- Related party C
|
|
|
115
|
|
|
|
831
|
|
|
- Related party D
|
|
|
16,579
|
|
|
|
5,911
|
|
|
- Related party E
|
|
|
3,819
|
|
|
|
9,390
|
|
|
- Related party G
|
|
|
1,427
|
|
|
|
-
|
|
|
- Related party I
|
|
|
585
|
|
|
|
-
|
|
|
- Related party K
|
|
|
-
|
|
|
|
(44
|
)
|
|
Total
|
|
$
|
664,989
|
|
|
$
|
107,971
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service revenue to related parties
|
|
|
|
|
|
|
|
|
|
- Related party B
|
|
$
|
-
|
|
|
$
|
2,190
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
2,190
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses to related parties
|
|
|
|
|
|
|
|
|
|
- Related party A
|
|
$
|
4,397
|
|
|
$
|
180
|
|
|
- Related party B
|
|
|
1,932
|
|
|
|
1,932
|
|
|
- Related party D
|
|
|
644
|
|
|
|
-
|
|
|
- Related party G
|
|
|
-
|
|
|
|
934
|
|
|
Total
|
|
$
|
6,973
|
|
|
$
|
3,046
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of other investments with related parties:
|
|
|
|
|
|
|
|
|
|
- Related party B
|
|
$
|
3,246,000
|
|
|
$
|
-
|
|
|
Total
|
|
$
|
3,246,000
|
|
|
$
|
-
|
|
Related
party A is under common control of Mr. Loke Che Chan Gilbert, the Company’s CFO and a major shareholder.
Related
party B represents companies where the Company owns a percentage of the company (ranging from 4% to 18%).
Related
party C is controlled by a director of a wholly owned subsidiary of the Company.
Related
party D represents a company that we have determined that we can significantly influence based on our common business relationships.
Related
party E represents companies whose CEO is a consultant to the Company, and who is also a director of Aquarius Protection Fund, a shareholder
in the Company.
Related
party F represents a family member of Mr. Loke Che Chan Gilbert, the Company’s CFO and a major shareholder.
Related
party G is under common control of Mr. Lee Chong Kuang, the Company’s CEO and a major shareholder.
Related
party H represents a company in which we currently have an approximate 48% equity-method investment. At June 30, 2021 and December 31,
2020, amounts due from Related party H are unsecured, bear no interest, and are payable upon demand. During 2018, the Company acquired
49% of Related party H for total consideration of $368,265. At December 31, 2018, the Company determined that its investments in Related
party H was impaired and recorded an impairment of other investments of $368,265.
Related
party I is controlled by a family member of Mr. Lee Chong Kung, the Company’s CEO and a major shareholder.
Related
party J represents the noncontrolling interest in the Company’s subsidiary that owns its real estate held for sale. The amounts
due to Related party J are unsecured, bear no interest, are payable on demand, and related to the initial acquisition of the real estate
held for sale.
Related
party K represents shareholders and directors of the Company. Due to Related party K represents expenses paid by the shareholders or
directors to third parties on behalf of the Company, are non-interest bearing, and are due on demand.
NOTE
9 - SEGMENT INFORMATION
ASC
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 services categories, business segments and major customers
in financial statements. The Company has two reportable segments that are based on the following business units: service business and
real estate business. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision
maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating
resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting,
establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products
and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating
units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in economic characteristics;
nature of products and services; and procurement, manufacturing and distribution processes. The Company operates two reportable business
segments:
|
●
|
Service
business – provision of corporate advisory and business solution services
|
|
|
|
|
●
|
Real
estate business – leasing and trading of commercial real estate properties in Hong Kong and Malaysia
|
The
Company had no inter-segment sales for the periods presented. Summarized financial information concerning the Company’s reportable
segments is shown as below:
SCHEDULE OF SEGMENT INFORMATION
(a)
By Categories
|
|
|
For
the six months ended June 30, 2021 (Unaudited)
|
|
|
|
|
Real
estate
business
|
|
|
Service
business
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
448,344
|
|
|
$
|
1,316,699
|
|
|
$
|
-
|
|
|
$
|
1,765,043
|
|
|
Cost
of revenues
|
|
|
278,582
|
|
|
|
171,570
|
|
|
|
-
|
|
|
|
450,152
|
|
|
Depreciation
and amortization
|
|
|
78,352
|
|
|
|
1,556
|
|
|
|
4,761
|
|
|
|
84,669
|
|
|
Net
income (loss)
|
|
|
152,930
|
|
|
|
(3,842,690
|
)
|
|
|
(3,238,647
|
)
|
|
|
(6,928,407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
2,440,299
|
|
|
|
14,953,540
|
|
|
|
7,946,633
|
|
|
|
25,340,472
|
|
|
Capital
expenditures for long-lived assets
|
|
$
|
-
|
|
|
$
|
7,241,133
|
|
|
$
|
928,450
|
|
|
$
|
8,169,583
|
|
|
|
|
For
the six months ended June 30, 2020 (Unaudited)
|
|
|
|
|
Real
estate
business
|
|
|
Service
business
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
55,508
|
|
|
$
|
1,162,173
|
|
|
$
|
-
|
|
|
$
|
1,217,681
|
|
|
Cost
of revenues
|
|
|
26,241
|
|
|
|
200,444
|
|
|
|
-
|
|
|
|
226,685
|
|
|
Depreciation
and amortization
|
|
|
75,148
|
|
|
|
48,515
|
|
|
|
5,095
|
|
|
|
128,758
|
|
|
Net
income (loss)
|
|
|
10,497
|
|
|
|
(508,569
|
)
|
|
|
(307,658
|
)
|
|
|
(805,730
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
2,466,329
|
|
|
|
4,936,420
|
|
|
|
4,123,285
|
|
|
|
11,526,034
|
|
|
Capital
expenditures for long-lived assets
|
|
$
|
-
|
|
|
$
|
2,042
|
|
|
$
|
4,000,000
|
|
|
$
|
4,002,042
|
|
(b)
By Geography*
|
|
|
For
the six months ended June 30, 2021 (Unaudited)
|
|
|
|
|
Hong
Kong
|
|
|
Malaysia
|
|
|
China
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,340,487
|
|
|
$
|
282,841
|
|
|
$
|
141,715
|
|
|
$
|
1,765,043
|
|
|
Cost
of revenues
|
|
|
336,728
|
|
|
|
98,958
|
|
|
|
14,466
|
|
|
|
450,152
|
|
|
Depreciation
and amortization
|
|
|
6,149
|
|
|
|
16,819
|
|
|
|
61,701
|
|
|
|
84,669
|
|
|
Net
income (loss)
|
|
|
(6,804,232
|
)
|
|
|
154,917
|
|
|
|
(279,092
|
)
|
|
|
(6,928,407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
20,020,037
|
|
|
|
1,168,435
|
|
|
|
4,152,000
|
|
|
|
25,340,472
|
|
|
Capital
expenditures for long-lived assets
|
|
$
|
8,169,225
|
|
|
$
|
2,079
|
|
|
$
|
2,279
|
|
|
$
|
8,169,583
|
|
|
|
|
For
the six months ended June 30, 2020 (Unaudited)
|
|
|
|
|
Hong
Kong
|
|
|
Malaysia
|
|
|
China
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
911,473
|
|
|
$
|
231,254
|
|
|
$
|
74,954
|
|
|
$
|
1,217,681
|
|
|
Cost
of revenues
|
|
|
131,956
|
|
|
|
93,736
|
|
|
|
993
|
|
|
|
226,685
|
|
|
Depreciation
and amortization
|
|
|
52,665
|
|
|
|
17,079
|
|
|
|
59,014
|
|
|
|
128,758
|
|
|
Net
loss
|
|
|
(474,989
|
)
|
|
|
(75,760
|
)
|
|
|
(254,981
|
)
|
|
|
(805,730
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
7,679,172
|
|
|
|
910,594
|
|
|
|
2,936,268
|
|
|
|
11,526,034
|
|
|
Capital
expenditures for long-lived assets
|
|
$
|
4,000,000
|
|
|
$
|
2,042
|
|
|
$
|
-
|
|
|
$
|
4,002,042
|
|
|
*
|
Revenues and costs are
attributed to countries based on the location where the entities operate.
|
