ITEM
1. BUSINESS
Corporate
History
We
were incorporated on July 19, 2013 in the state of Nevada under the name Greenpro, Inc. On May 6, 2015, we changed our name to
Greenpro Capital Corp. Our corporate structure is set forth below:
A
list of our subsidiaries and VIE entities together with a brief description of their business is set forth below:
Name
(Domicile)
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Business
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Greenpro Capital Corp. (Nevada, USA)
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Provides financial
consulting services and corporate services
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Greenpro Resources Limited (British Virgin Islands)
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Holding company
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Greenpro Holding Limited (Hong Kong)
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Holds life insurance
products
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Greenpro Resources (HK) Limited (Hong Kong)
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Holds Greenpro intellectual
property and currently holds six trademarks and applications thereof
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Greenpro Resources Sdn. Bhd. (Malaysia)
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Holds investment
in commercial real estate in Malaysia
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Greenpro Management Consultancy (Shenzhen) Limited
(China)
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Provides corporate
advisory services such as tax planning, cross-border listing solution and advisory, transaction services in China
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Shenzhen Falcon Financial Consulting Limited
(China)
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Provides Hong Kong
company formation advisory services & company secretarial services and financial services. It focuses on China clients.
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Greenpro Capital Village Sdn. Bhd. (Malaysia)
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Provides educational
and support services through seminars and courses to new start-up companies or SMEs.
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Greenpro Global Capital Sdn. Bhd. (Formerly
known as Greenpro Wealthon Sdn. Bhd.) (Malaysia)
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Provides corporate
advisory services such as company review, bank loan advisory and bank products analysis services.
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Greenpro Management Pty Ltd (Australia)
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Holding company
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Greenpro Financial Consulting
Limited (Belize)
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Provides
corporate advisory services such as tax planning, cross-border listing solution and advisory, transaction services
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Asia UBS Global Limited (Belize)
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Provides business
advisory services with main focus on offshore company formation advisory and company secretarial service, such as tax planning,
bookkeeping and financial review. It focuses on South-East Asia and China clients.
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Asia UBS Global Limited (Hong Kong)
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Provides business
advisory services with main focus on Hong Kong company formation advisory and company secretarial service, such as tax planning,
bookkeeping and financial review. It focuses on Hong Kong clients.
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Falcon Corporate Services Limited (Hong Kong)
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Provides offshore
company formation advisory services & company secretarial services. Clients based in Hong Kong & China
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Falcon Secretaries Limited (Hong Kong)
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Provides Hong Kong
company formation advisory services & company secretarial services. Clients based in Hong Kong & China
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Yabez (Hong Kong) Company Limited (Hong Kong)
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Provides Hong Kong
company formation advisory services, corporate secretarial services and IT related services to Hong Kong based clients.
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Yabez Business Service (SZ) Company Limited
(China)
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Provides Shenzhen
company formation advisory services, corporate secretarial services and IT related services to China based clients.
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Greenpro Credit Limited (Hong Kong)
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Provides loan and
credit services in Hong Kong. Holder of Money Lenders License.
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Greenpro Family Office Limited (Hong Kong)
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Provides professional
multi-family office offers services such as wealth planning, administration, asset protection & management, asset consolidation,
asset performance monitoring, charity services, tax and legal services, trusteeship and risk management, investment planning
& management, and business support services.
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Greenpro Venture Capital Limited (Anguilla)
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Holding company
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Forward Win International Limited (Hong Kong)
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Holds investment
in commercial Hong Kong real estate
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Greenpro International Limited (Seychelles)
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Holding company
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Greenpro Property Development Limited (Formerly
known as Chief Billion Limited) (Hong Kong)
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Holding company
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Greenpro Venture Cap (Qianhai) Limited (Anguilla)
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Holding company
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Greenpro Synergy Network Limited (Hong Kong)
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Holds universal
life insurance policies and provides a borderless platform through networking events and programs in Hong Kong.
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Greenpro Synergy Network (Shenzhen) Limited
(China)
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Provides a borderless
platform through networking events and programs in China for our members to seek professional services, business opportunities,
and to exchange sources of information and research
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Acquisition
and Reorganization History
Acquisition
of entities under common control
Acquisition
of Greenpro Resources Limited, a British Virgin Islands company
On
July 31, 2015, we acquired 100% of the issued and outstanding securities of Greenpro Resources Limited, a British Virgin Islands
corporation that was our affiliate at the time of the acquisition (“GRBV”). As consideration thereof, we issued to
the shareholders of GRBV 9,070,000 restricted shares of our common stock (valued at $3,174,500 based on the average closing price
of the six trading days preceding July 28, 2015, which was $0.35 per share) and paid US$25,500 in cash, representing an aggregate
purchase price of US$3,200,000. The purchase price was determined based on the existing business value of GRBV, carrying value
of GRBV properties, brand names of GRBV and settlement of GRBV founder initial investment.
GRBV
provides corporate advisory services such as tax planning, cross-border listing solutions and advisory and transaction services
to start-up and high–growth companies. It also owns real estate in Selangor Darul Ehsan, Malaysia and Kuala Lumpur, Malaysia
that are investment properties, which are currently generating rental income. Through our acquisition of GRBV, we hope to expand
our customer and revenue base as well as broaden the range of services we offer.
Lee
Chong Kuang, our Chief Executive Officer, President and director, was also the Chief Executive Officer, President and director
of GRBV at the time of the acquisition. Mr. Lee holds 44.6% of our issued and outstanding securities and held 50% of the issued
and outstanding securities of GRBV at the time of the acquisition. Loke Che Chan Gilbert, our Chief Financial Officer, Secretary,
Treasurer and director, is also the Chief Financial Officer and director of GRBV. Mr. Loke holds 44.6% of our issued and outstanding
securities and held 50% of the issued and outstanding securities of GRBV at the time of the acquisition. Upon the consummation
of the acquisition, Messrs. Lee and Loke received, in the aggregate, US$25,500 in cash and 9,070,000 shares of our restricted
common stock.
Acquisition
of A&G International Limited, a Belize company
On
September 30, 2015, we acquired 100% of the issued and outstanding securities of A&G International Limited, a Belize corporation
(“A&G”). In connection therewith, we issued to Yap Pei Ling, the shareholder of A&G, 1,842,000 restricted
shares of our common stock, representing an aggregate purchase price of $957,840 based on the average closing price of the ten
trading days preceding July 31, 2015, the date of the acquisition agreement, of $0.52 per share. The purchase price was determined
based on the existing business value generated from A&G.
Ms.
Yap Pei Ling, the director and sole shareholder of A&G, is the spouse of Lee Chong Kuang, our Chief Executive Officer, President
and director.
A&G
provides corporate and business advisory services through its wholly-owned subsidiaries, Asia UBS Global Limited (Hong Kong) and
Asia UBS Global Limited (Belize).
On
December 30, 2015, A&G International Limited transferred all of the issued and outstanding securities of Asia UBS Global Limited,
a Belize Corporation, and Asia UBS Global Limited, a Hong Kong limited company, to Greenpro Resources Limited to simplify our
corporate structure. A&G International Limited, now a corporation with no assets, was subsequently transferred back to Ms.
Yap Pei Ling.
Acquisition
of Greenpro Venture Capital Limited, an Anguilla corporation
On
September 30, 2015, we acquired all of the issued and outstanding securities of Greenpro Venture Capital Limited, an Anguilla
corporation, (“GPVC”) from its shareholders, Lee Chong Kuang and Loke Che Chan Gilbert. As consideration thereof,
we issued to the shareholders of GPVC an aggregate of 13,260,000 restricted shares of our common stock (valued at $7,956,000 based
on the signed Memorandum of Understanding on July 25, 2015 of $0.60 per share) and paid $6,000 in cash, representing an aggregate
purchase price of $7,962,000. The purchase price was determined based on the existing business value of GPVC, including all customers,
fixed assets, investments, cash and cash equivalents and assuming certain liabilities of GPVC. Mr. Lee Chong Kuang, our Chief
Executive Officer, President and director, was also the Chief Executive Officer, President and director of GPVC at the time of
the acquisition. Mr. Lee holds 43.02% of our issued and outstanding shares and held 50% of the issued and outstanding shares of
GPVC at the timed of the acquisition. Mr. Loke Che Chan Gilbert, our Chief Financial Officer, Secretary, Treasurer and director,
was also the Chief Financial Officer and director of GPVC. Mr. Loke holds 43.02% of our issued and outstanding shares and held
50% of the issued and outstanding shares of GPVC at the time of the acquisition.
Incorporation
and deregistration of Greenpro Capital Pty Ltd, an Australian company
Greenpro
Capital Pty Ltd was formed on May 11, 2016 with 50% held by Greenpro Holding Limited, one of our subsidiaries, and 50% was held
by Mohammad Reza Masoumi Al Agha. On June 29, 2018, both parties agree to apply for deregistration of Greenpro Capital Pty Ltd
due to discrepancies on the business development.
Acquisition
of Greenpro Wealthon Sdn. Bhd., a Malaysia company
On
May 23, 2016, our subsidiary. Greenpro Holding Limited (“GPHL”) acquired 400 shares of Greenpro Wealthon Sdn. Bhd.
from Mr. Lee Chong Kuang with MYR 1 (approximately $0.25). On June 7, 2016, GPHL acquired an additional 200 shares of Greenpro
Wealthon Sdn. Bhd. for MYR120,000 (approximately $30,000), resulting in GPHL owing 60% of Greenpro Wealthon Sdn. Bhd.
On
June 13, 2018, Greenpro Wealthon Sdn. Bhd. was renamed to Greenpro Global Capital Sdn. Bhd.
On
August 30, 2018, the
remaining 40% of Greenpro Global Capital Sdn. Bhd. were transferred
to GPHL. As of today, GPHL holds 100% of Greenpro Global Capital Sdn. Bhd.
Acquisition
of Greenpro Family Office Limited, a Hong Kong company
On
July 21, 2017, Greenpro Resources Limited, the wholly owned subsidiary of GRNQ, acquired 51% of the shareholdings of Greenpro
Family Office Limited (“GFOL”). GFOL allotted 231,895 shares of GFOL to Greenpro Resources Limited, representing 51%
of the shareholdings of GFOL.
On
September 21, 2018, the
remaining 49% of
GFOL
were
transferred to
Greenpro Resources Limited
. As of today,
Greenpro Resources
Limited
holds 100% of GFOL.
Incorporation
of Greenpro International Limited, a Seychelles company
Greenpro
International Limited was formed on July 4, 2018 with 80% held by Greenpro Venture Capital Limited, one of our subsidiaries, and
20% was held by Mr. Loke Yu, a related party of one of our directors.
On
September 18, 2018,
Greenpro Venture Capital Limited
transferred all of the issued
and outstanding securities of Greenpro Property Development Limited (formerly known as Chief Billion Limited), a Hong Kong Corporation,
to
Greenpro International Limited
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VIE
Structure and Arrangements
Greenpro
Synergy Network Ltd (“GSN”) was incorporated in Hong Kong on March 2, 2016, as a variable interest entity (“VIE”)
that is subject to consolidation with the Company. GSN’s principal activities are to hold certain of our universal life
insurance policies. Loke Che Chan, Gilbert,
our
Chief Financial Officer, Secretary, Treasurer and director
and Lee Chong Kuang,
our
Chief Executive Officer, President and director
are the sole shareholders of GSN. We control
GSN through a series of contractual arrangements (the “VIE Agreements”) between GPHL and GSN. The VIE agreements include
(i) an Exclusive Business Cooperation Agreement, (ii) a Loan Agreement, (iii) a Share Pledge Agreement, (iv) a Power of Attorney
and (v) an Exclusive Option Agreement with the shareholder of GSN.
Set
forth below is a more detailed description of each of the VIE agreement.
Exclusive
Business Cooperation Agreement: Pursuant to the Exclusive Business Cooperation Agreement, GPHL serves as the exclusive provider
of technical support, consulting services and management services to GSN. In consideration of such services, GSN has agreed to
pay a service fee to GPHL, which is based on the time of services rendered multiplied by the corresponding rate, plus amount of
the services fees or ratio decided by the board of directors of GPHL. The Agreement has a term of 10 years but may be extended
by GPHL at its discretion.
Loan
Agreement: Pursuant to the Loan Agreement, GPHL granted interest-free loans to the shareholders of the GSN for the sole purpose
of increasing the registered capital of the GSN. These loans are eliminated with the capital of GSN during consolidation.
Share
Pledge Agreement: Pursuant to the Share Pledge Agreement, the shareholders of GSN pledged to GPHL a first security interest in
all of their equity interests in GSN to secure GSN’s timely and complete payment and performance of its obligations under
the Exclusive Business Cooperation Agreement. During the term of the Share Pledge Agreement, the pledgors agreed, among other
things, not to transfer, place or permit the existence of any security interest or other encumbrance on their interest in GSN
without the prior written consent of GPHL. The pledge shall remain in effect until 10 years after the obligations under the principal
agreement will have been fulfilled. However, upon the full payment of the consulting and service fees under the Exclusive Business
Cooperation Agreement and upon the termination of GSN’s obligations under the Exclusive Business Cooperation Agreement,
the Share Pledge Agreement shall be terminated and GPHL shall terminate this agreement as soon as reasonably practicable.
Power
of Attorney: Pursuant to the Power of Attorney, Messrs. Lee and Loke, as the sole shareholders of GSN, granted to the GPHL the
right to (i) attend shareholders meetings of GSN (ii) exercise all shareholder rights (including voting rights) with respect to
such equity interests in GSN and (iii) designate and appoint on behalf of such shareholders the legal representative, directors,
supervisors, and other senior management members of GSN. The Power of Attorney is irrevocable and is continuously valid from the
date of execution of such Power of Attorney, so long as such persons remain shareholders of GSN.
Exclusive
Option Agreement: Pursuant to the Exclusive Option Agreement, the shareholders of GSN granted to the GPHL an irrevocable and exclusive
right and option to purchase all of their equity interests in GSN. The purchase price shall be equal to the capital paid in by
the shareholders, adjusted pro rata for the purchase of less than all of the equity interests. The Agreement is effective for
a term of 10 years, and may be renewed at GPHL’s election.
Acquisitions
Acquisition
of Yabez (Hong Kong) Company Limited, a Hong Kong company
On
September 30, 2015, we acquired 60% of the issued and outstanding securities of Yabez (Hong Kong) Company Limited, a Hong Kong
corporation (“Yabez”). As consideration thereto, we issued to the shareholders of Yabez 486,171 restricted shares
of our common stock, representing an aggregate purchase price of $252,808 based on the average closing price of the ten trading
days preceding July 31, 2015, the date of the acquisition agreement, of $0.52 per share. The purchase price was determined based
on the existing business value generated from Yabez. Yabez provides Hong Kong company formation advisory services, corporate secretarial
services and IT related services to Hong Kong based clients.
Acquisition
of Falcon Secretaries Limited and Ace Corporate Services Limited, each Hong Kong companies, and Shenzhen Falcon Financial Consulting
Limited, a Shenzhen, China company
On
September 30, 2015, we acquired all of the issued and outstanding securities of Falcon Secretaries Limited, Ace Corporate Services
Limited and Shenzhen Falcon Financial Consulting Limited (these companies collectively known as “F&A”). As consideration
thereto, we issued to Ms. Chen Yanhong, the sole shareholder of F&A, 2,080,200 restricted shares of our common stock, representing
an aggregate purchase price of $1,081,704 based on the average closing price of the ten trading days preceding July 31, 2015,
the date of the acquisition agreement, of $0.52 per share. The purchase price was determined based on the existing business value
generated from F&A. Ace Corporate Services Limited renamed to Falcon Corporate Services Limited on August 26, 2016.
Ms.
Chen Yanhong, the director and sole shareholder of F&A, is also the director and legal representative of Greenpro Management
Consultancy (Shenzhen) Limited, one of our subsidiaries.
Acquisition
and disposal of Billion Sino Holdings Limited, a Seychelles company
On
April 25, 2017, GRNQ and Mr. Yiu Yau Wing and Mr. Chui Sang Derek, representing the 91% & 9% shareholders of Billion Sino
Holdings Limited respectively, a Seychelles corporation (“BSHL”), entered into a Sale and Purchase Agreement, pursuant
to which GRNQ acquired 60% of the issued and outstanding shares of BSHL. As consideration thereto, GRNQ agreed to issue to the
shareholders of BSHL in the aggregate 340,645 restricted shares of GRNQ’s common stock.
On
November 20, 2018, due to the continuing loss making of BSHL, the Company decided to dispose BSHL. The Company sold 60%
of
the issued and outstanding shares of BSHL to Ms. Lam Ying Wai, at consideration of $60.
Acquisition
of Gushen Credit Limited, a Hong Kong company
On
April 27, 2017, Greenpro Resources Limited, the wholly owned subsidiary of GRNQ and Gushen Credit Limited, a Hong Kong corporation
(“GCL”), entered into an Asset Purchase Agreement, pursuant to which GRNQ purchased the assets in GCL. As consideration
thereto, GRNQ agreed to pay the purchase price of $105,000.
GCL
operates a money lending business in Hong Kong, located at 1701-03, 17/F, Metropolis Tower, 10 Metropolis Drive, Hung Hom, Kowloon,
Hong Kong. On April 28, 2017, GSHL sold two (2) ordinary shares of GCL to GRNQ, representing 100% ownership, for a total consideration
of $0.26 in cash. The purchase price is determined based on the mutual agreement between GSHL and GRNQ. GCL was renamed to Greenpro
Credit Limited on May 16, 2017.
Business
Overview
We
currently operate and provide a wide range of business solution services to small and medium-size businesses located in Asia and
South-East Asia, with an initial focus on Hong Kong, China and Malaysia, and subsequently in Thailand and Taiwan. Our comprehensive
range of services includes cross-border business solutions, record management services, and accounting outsourcing services. Our
cross-border business services include, among other services, tax planning, trust and wealth management, cross border listing
advisory services and transaction services. As part of the cross-border business solutions, we have developed a package solution
of services (“Package Solution”) that can reduce business costs and improve revenues.
We
also operate a venture capital business through Greenpro Venture Capital Limited, an Anguilla corporation. Our venture capital
business is focused on (1) establishing a business incubator for start-up and high growth companies to support such companies
during critical growth periods, which includes education and support services that operates through our subsidiary, Greenpro Capital
Village Sdn. Bhd., and (2) searching for investment opportunities in selected start-up and high growth companies, which we expect
can generate significant returns to the Company. We expect to target companies located in Asia and South-East Asia including Hong
Kong, Malaysia, China, Thailand and Singapore. We anticipate our venture capital business will also engage in the purchase, acquisition
and rental of commercial properties in the same Asia and South-East Asia region.
Our
Services
We
provide a range of services to our clients as part of the Package Solution that we have developed. We believe that our clients
can reduce their business costs and improve their revenues by utilizing our Package Solution.
Cross-Border
Business Solutions/Cross-Border Listing Solutions
We
provide a full range of cross-border services to small to medium-sized businesses to assist them in conducting their business
effectively. Our “Cross-Border Business Solution” includes the following services:
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Advising clients
on company formation in Hong Kong, the United States, the British Virgin Islands and other overseas jurisdictions;
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Providing assistance
to set up bank accounts with banks in Hong Kong to facilitate clients’ banking operations;
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Providing bank loan
referral services;
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Providing company
secretarial services;
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Assisting companies
in applying for business registration certificates with the Inland Revenue Department of Hong Kong;
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Providing corporate
finance consulting services;
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Providing due diligence
investigations and valuations of companies;
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Advising clients
regarding debt and company restructurings;
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Providing liquidation,
insolvency, bankruptcy and individual voluntary arrangement advice and assistance;
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Designing a marketing
strategy and promoting the company’s business, products and services;
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Providing financial
and liquidity analysis;
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Assisting in setting
up cloud invoicing systems for clients;
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Assisting in liaising
with investors for purposes of raising capital;
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Assisting in setting
up cloud inventory system to assist clients to record, maintain and control their inventories and track their inventory levels;
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Assisting in setting
up cloud accounting system to enable clients to keep track of their financial performance;
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Assisting clients
in payroll matters operated in our cloud payroll system;
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Assisting clients
in tax planning, preparing the tax computation and making tax filings with the Inland Revenue Department of Hong Kong;
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Cross-border listing
advisory services, including but not limited to, United States, United Kingdom, Hong Kong, Australia;
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International tax
planning in China;
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Advising on Trust
and wealth management; and
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Transaction services.
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There
is a growing market in East Asia and South-East Asia of companies who are seeking to go public and become listed on a recognized
exchange in a foreign jurisdiction. We see tremendous opportunity to the extent that this trend continues worldwide. With respect
to cross border listing advisory services, we are assisting private companies in their desire to list and trade on public exchanges,
including the U.S. OTC markets. The Jumpstart Our Business Startups Act, or JOBS Act, signed in 2012, eases the initial public
offering (“IPO”) process for “emerging growth companies” and reduces their regulatory burden, (2) improves
the ability of these companies to access capital through private offerings and small public offerings without SEC registration,
and (3) allows private companies with a substantial shareholder base to delay becoming a public reporting company.
Through
our cross-border listing advisory services, we seek to form the bridge between these companies seeking to conduct their IPO (or
in some cases self-directed public offerings), and their goal of becoming a listed company on a recognized U.S. national exchange,
such as NASDAQ and the NYSE.
While
there are several alternatives for companies seeking to go public and trade on the U.S. OTC markets, we primarily focus on three
methods:
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Registration Statement
on Form S-1
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Regulation A+ offering
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The Form 10 shell
company
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The
manner in which the OTC markets are structured provides companies the ability to “uplist” in the marketplace as they
provide better transparency. These markets include:
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OTCQX Best Marketplace:
offers transparent and efficient trading of established, investor-focused U.S. and global companies.
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OTCQB Venture Marketplace:
for early-stage and developing U.S. and international companies that are not yet able to qualify for OTCQX.
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OTC Pink Open Marketplace:
offers trading in a wide spectrum of securities through any broker. With no minimum financial standards, this market includes
foreign companies that limit their disclosure, penny stocks and shells, as well as distressed, delinquent, and dark companies
not willing or able to provide adequate information to investors.
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We
act as a case reference for our clients, as we originally had our shares quoted in the OTC markets and subsequently “uplisted”
to The Nasdaq Stock Market LLC., a U.S. national securities exchange.
With
growing competition and increasing economic sophistication, we believe more companies need strategies for cross-border restructuring
and other corporate matters. Our plan is to bundle our Cross-Border Business Solution services with our Cloud Accounting Solution
and Accounting Outsourcing Services described below.
Accounting
Outsourcing Services
We
intend to develop relationships with professional firms from Hong Kong, Malaysia, China and Thailand that can provide company
secretarial, business centers and virtual offices, book-keeping, tax compliance and planning, payroll management, business valuation,
and wealth management services to our clients. We intend to include local accounting firms within this network to provide general
accounting, financial evaluation and advisory services to our clients. Our expectation is that firms within our professional network
will refer their international clients to us that may need our book-keeping, payroll, company secretarial and tax compliance services.
We believe that this accounting outsourcing service arrangement will be beneficial to our clients by providing a convenient, one-stop
firm for their local and international business and financial compliance and governance needs.
Our
Service Rates
We
intend to have a two-tiered rate system based upon the type of services being offered. We may impose project-based fees, where
we charge 10% -25% of the revenues generated by the client on projects that are completed using our services, such as transaction
projects, contract compliance projects, and business planning projects. We may also charge a flat rate fee or fixed fee based
on the estimated complexity and timing of a project when our professionals provide specified expertise to our clients on a project.
For example, for the cross-border business solutions, we plan to charge our client a monthly fixed fee.
Our
Venture Capital Business Segment
Venture
Capital Investment
As
a result of our acquisition of Greenpro Venture Capital Limited (“GPVC”) in 2015, we entered the venture capital business
in Hong Kong with a focus on companies located in Asia and South-East Asia, including Hong Kong, Malaysia, China, Thailand and
Singapore. Our venture capital business is focused on (1) establishing a business incubator for start-up and high growth companies
to support such companies during critical growth periods and (2) investment opportunities in select start-up and high growth companies.
We
believe that a company’s life cycle can be divided into five stages, including the seed stage, start-up stage, expansion
stage, mature stage and decline stage.
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Seed stage: Financing
is needed for assets, and research and development of an initial business concept. The company usually has relatively low
costs in developing the business idea. The ownership model is considered and implemented.
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Start-up stage:
Financing is needed for product development and initial marketing. Firms in this phase may be in the process of setting up
a business or they might have been in operating the business for a short period of time but may not have sold their products
commercially. In this phase, costs are increasing due to product development, market research and the need to recruit personnel.
Low levels of revenues are starting to generate.
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Expansion stage:
Financing is needed for growth and expansion. Capital may be used to finance increased production capacity, product or marketing
development or to hire additional personnel. In the early expansion phase, sales and production increases but there is not
yet any profit. In the later expansion stage, the business typically needs extra capital in addition to organically generated
profit, for further development, marketing or product development.
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We
anticipate that most of a company’s funding needs will occur during these first three stages.
We
intend for our business incubators to provide valuable support to young, emerging growth and potential high growth companies at
critical junctures of their development. For example, our incubators will offer office space at a below market rental rate. We
will also provide our expertise, business contacts, introductions and other resources to assist their development and growth.
Depending on each individual circumstance, we may also take an active advisory role in our venture capital companies including
board representation, strategic marketing, corporate governance, and capital structuring. We believe that there will be potential
investment opportunities for us in these start-up companies.
Our
business processes for our investment strategy in select start-up and high growth companies is as follows:
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Step 1. Generating
Deal Flow: We expect to actively search for entrepreneurial firms and to generate deal flow through our business incubator
and the personal contacts of our executive team. We also anticipate that entrepreneurs will approach us for financing.
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Step 2. Investment
Decision: We will evaluate, examine and engage in due diligence of a prospective portfolio company, including but not limited
to product/services viability, market potential and integrity as well as capability of the management. After that both parties
arrive at an agreed value for the deal. Following that is a process of negotiation, which if successful, ends with capital
transformation and restructuring.
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Step 3. Business
Development and Value Adding: In addition to capital contribution, we expect to provide expertise, knowledge and relevant
business contacts to the company.
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Step 4. Exit: There
are several ways to exit an investment in a company. Common exits are:
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IPO (Initial Public
Offering): The company’s shares are offered in a public sale on an established securities market.
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Trade sale (Acquisition):
The entire company is sold to another company.
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Secondary sale:
The company’s firm sells only part of its shares.
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Buyback or MBO:
Either the entrepreneur or the management of the company buys back the company’s shares of the firm.
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Reconstruction,
liquidation or bankruptcy: If the project fails the company will restructure or close down the operations.
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Our
objective is to achieve a superior rate of return through the eventual and timely disposal of investments. We expect to look for
businesses that meet the following criteria:
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high growth prospects
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ambitious teams
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viability of product
or service
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experienced management
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ability to convert
plans into reality
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justification of
venture capital investment and investment criteria
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Our
Venture Capital Related Education and Support Services.
In
addition to providing venture capital services through GPVC, we also provide educational and support services that we believe
will be synergistic with our venture capital business. We have arranged few seminars called the CEO & Business Owners Strategic
Session (“CBOSS”) in Malaysia and Singapore for business owners who are interested in the following:
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Developing their
business globally;
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Expanding business
with increased capital funding;
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Creating a sustainable
SME business model;
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Accelerating the
growth of the business; or
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Significantly increasing
company cash flows.
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The
objective of the CBOSS seminar is to educate the chief executive officers or business owners on how to acquire “smart capital”
and the considerations involved. The seminar includes an introduction to the basic concepts of “smart capital,” “wealth
and value creation,” recommendation and planning and similar topics. We believe that this seminar will synergistically support
our venture capital business segment.
China
Service Centers Expansion
Our
expansion strategy is to establish service centers in the Tier 1 cities of Guangzhou, Beijing and Shanghai, where a majority of
the HNWIs reside. The centers will cater to customers’ needs by providing and delivering professional, high quality service
and assistance before, during, and after the customer’s requirements are met. Our strategy is to rent office space ranging
from 180 to 250 square meters (approximate 2,150 to 2,690 square feet) and recruiting a team of 10 people (estimated) in the first
year we are present in the city. The plan in each city would be based on various factors, such as property availability and job
market conditions. In 2018, we had a strategic alliance with ETR Law Firm, one of the most reputable and largest professional
law firms in Guangzhou. We will utilize the strength of ETR Law Firm to enhance our business development. ETR Law Firm will provide
comprehensive support and assistance to Greenpro relating to mergers and acquisitions, project management, investment evaluation
and other financial services.
Sales
and Marketing
We
plan to deploy three strategies to market the Greenpro brand: leadership, market segmentation and sales management process development.
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Building Brand
Image:
Greenpro’s marketing efforts will focus on building the image of our extensive expertise and knowledge of
our professionals. We intend to conduct a marketing campaign through media visibility, seminars, webinars, and the creation
of a wide variety of white papers, newsletters, books, and other information.
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Market segmentation:
We plan to devote marketing resources to highly measurable and high return on investment tactics that specifically target
those industries and areas where Greenpro has particularly deep experience and capabilities. These efforts typically involve
local, regional or national trade show and event sponsorships, targeted direct mail, email, and telemarketing campaigns, and
practice and industry specific micro-sites and newsletters in the Asia region.
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Social Media:
We plan to begin a social media campaign utilizing blogs, Twitter, Facebook and LinkedIn after we secure sufficient financing.
A targeted campaign will be made to the following groups of clients: law firms, auditing firms, consulting firms and small
to medium-size enterprises in different industries, including biotechnology, intellectual property, information technologies
and real estate.
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Worldwide
Wealth Wisdom Development
Worldwide
Wealth Wisdom Development (“WWW”) is our marketing and promotional campaign, which is focused on building long-term
awareness of our brand. WWW targets the following markets (i) business owners and senior management; (ii) high and medium net
worth individuals in China and (iii) financial services providers, such as Certified Financial Planners in China. The campaign
involves sharing content, knowledge and information about wealth management, including wealth creation, wealth protection and
wealth succession.
The
objectives of WWW are:
1.
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To arouse public
awareness resulting in the recognition of Greenpro as a well-known advocate of the wealth principles described above;
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2.
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For our philosophy
to gain recognition so that our clients are confident and comfortable with our services and trust us;
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3.
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To educate existing
clients and potential prospects; and
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4.
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To act as a channel
of communication to gather market data and feedback.
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Set
forth below are the marketing strategies that we expect to develop.
Awareness
& Optimization
1.
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Email Blasts and E-Newsletter
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Email
blasts are one of the commonly used tactics to disseminate information. Our email database will be collected through leads generated
by online marketing (social media) and promotional events. Future event invitations and monthly/quarterly newsletters will be
sent to the email database in order to boost event participation and provide updates on Company development.
2.
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Media PR and News Releases
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Our
post event information will be sent to news and media platforms as part of our publicity effort to increase public awareness about
our events and developments, and to encourage more participants to join our upcoming events. We will also share our analysis on
various industries and industry trends to the media network providers for free. We believe that this strategy will strengthen
the relationship between Greenpro and the media network providers.
To
generate more leads and subscribers, two to four articles related to wealth management will be shared in our official WeChat account.
These articles are tools we use to share content online, through social media platforms such as WeChat, Jinri Toutiao and Facebook,
which increases our online presence.
4.
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Online Search Engine Optimization
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Online
Search Engine Optimization (SEO) will be used as a supporting strategy to enhance our online presence campaign. We will seek a
SEO expert team in China and Malaysia to assist in the promotion of the campaign by using an advertising and keyword tagging strategy
to drive traffic to our social media accounts and our company website. The major search engines are Baidu and Google as these
are the common search engine worldwide.
Interaction
& Conversion
1.
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Seminars and Conferences
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Seminars
and conferences will be held once a month to deliver and educate the attendees on wealth management. We target between 80 and
100 attendees each time. We intend to invite professionals and strategic partners to share their ideas, resources and knowhow
in the seminars and conferences. The seminars and conferences will focus on our three core wealth management principles, namely
“Wealth Creation, Wealth Protection and Wealth Succession”.
2.
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Private Events by Invitation
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Private
and exclusive events are planned to be held quarterly with a target between 30 and 40 attendees. These events are exclusive and
by-invitation only, at which we will share insights into our services and explain to attendees how they can proceed with wealth
management planning.
3.
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Small Group Meet Ups and Networking
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Small
Group Meet Ups will be held twice a month targeting the public with an estimated five to ten attendees per session. The objective
of these sessions is to encourage idea exchanges, to provide a platform for networking and potentially future collaboration opportunities,
and foster better understanding between the participants and us, as well as among themselves.
Market
Opportunities
We
believe the main drivers for the growth of our business are the products and services together with the resources such as an office
network, professional staff members and operational tools to make the advisory and consulting business more competitive.
We
intend to assist our clients in the cost-effective preparation of their financial statements and provide security based on such
financial information since the data will be stored in the cloud system. We anticipate a market with growing needs in East Asia
and South-East Asia. We believe that there is currently an increasing need for enterprises in different industries to maximize
their performance with cost-effective methods. We believe our services will create numerous competitive advantages for our clients.
We believe that with us handling the administrative and logistic support, our clients can focus on developing their businesses
and expanding their own client portfolio.
Customers
Our
revenues are generated from clients located globally, including those from Hong Kong, China, Malaysia, Singapore, Indonesia, Thailand,
Australia, Japan, Taiwan, Russia and the United States. Our venture capital business will initially focus on Hong Kong and South-East
Asia start-ups and high growth companies. We hope to generate deal flow through personal contacts of our management team as well
as through our business incubator.
We
generated revenues of 4,213,360 during the fiscal year ended December 31, 2018 and $3,916,372 during the fiscal year ended
December 31, 2017. Our venture capital business accounted for approximately 36% percent of our revenues. We are not a party
to any long-term agreements with our customers.
Competition
We
operate in a mature, competitive industry. We consider our focus to be on a niche market of small and medium-sized businesses.
Competition in the general field of business advisory services is quite intense, particularly in Hong Kong. We face competition
principally from established law firms and consulting service providers in the corporate finance industry, such as Marbury, King
& Wood Mallesons, QMIS Financial Group, First Asia Finance Group Limited and their respective affiliates, as well as from
certain accounting firms, including those that specialize in a tax planning and corporate restructuring. The competition in China
and Malaysia is not as fierce as in Hong Kong. Our major competitors in China are JP Investment Group and QMIS Financial Group
while our major competitors in Malaysia are Global Bridge Management Sdn. Bhd. and QMIS Financial Group. These competitors generate
significant traffic and have established brand recognition and financial resources. New or existing competition that uses a business
model that is different from our business model may pressure us to change so that we can remain competitive.
We
believe that the principal competitive factors in our market include quality of analysis; applicability and efficacy of recommendations;
strength and depth of relationships with clients; ability to meet the changing needs of current and prospective clients; and service
scope. By utilizing our competitive strengths, we believe that we have a competitive edge over other competitors due to the breadth
of our service offerings, one stop convenience, pricing, marketing expertise, coverage network, service levels, track record,
brand and reputation. We are confident we can retain and enlarge our market share.
Intellectual
Property
We
intend to protect our investment in the research and development of our products and technologies. We intend to seek the widest
possible protection for significant product and process developments in our major markets through a combination of trade secrets,
trademarks, copyrights and patents, if applicable. We anticipate that the form of protection will vary depending upon the level
of protection afforded by a particular jurisdiction. Currently, our revenue is derived principally from our operations in Hong
Kong, China and Malaysia, where intellectual property protection may be limited and difficult to enforce. In such instances, we
may seek protection of our intellectual property through measures taken to increase the confidentiality of intellectual property.
We
have registered trademarks as a means of protecting the brand names of our companies and products. We intend to protect our trademarks
against infringement and also seek to register design protection where appropriate. Currently, there are six trademarks registered
under the name of Greenpro Resources (HK) Limited.
Trademark Owner
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Country / Territory
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Registration Date
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Brief Description
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Greenpro
Resources (HK)
Limited
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Hong
Kong
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August
11, 2010, June 25, 2013 and December 3, 2014
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Advertising,
business management, business administration, office functions, research services, education, training
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The
U.S.
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February
2, 2016
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Business administration
services, Business assistance, management and information services, Business knowledge management and consulting services
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China
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December
28, 2014
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Advertising, business
management, business administration, office functions and research services
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Singapore
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July 22, 2013
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Advisory services
related to business management and administration, computer software and security
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We
rely on trade secrets and un-patentable know-how that we seek to protect, in part, by confidentiality agreements. Our policy is
to require all employees to execute confidentiality agreements upon the commencement of employment with us. These agreements provide
that all confidential information developed or made known to the individual during the course of the individual’s relationship
with us is to be kept confidential and not disclosed to third parties except in specific limited circumstances. The agreements
also provide that all inventions conceived by the individual while rendering services to us shall be assigned to us as the exclusive
property of our company. There can be no assurance, however, that all persons who we desire to sign such agreements will sign,
or if they do, that these agreements will not be breached, that we would have adequate remedies for any breach, or that our trade
secrets or unpatentable know-how will not otherwise become known or be independently developed by competitors.
Government
Regulation
We
provide our Package Solution initially in Hong Kong, China and Malaysia, which we believe are locations that would need outsourcing
support services. Further, we believe these markets are the central and regional markets for many customers doing cross border
business in Asia. We target those customers from East Asia and South-East Asia doing international business and plan to provide
our Package Solution to meet their needs. Our planned Packaged Solution will be structured in Hong Kong but services may be outsourced
to lower cost jurisdictions such as Malaysia and China, which encourage and welcome outsourcing services.
The
following regulations are the laws and regulations that may be applicable to us:
Hong
Kong
Our
businesses located in Hong Kong are subject to the general laws in Hong Kong governing businesses, including labor, occupational
safety and health, general corporations, intellectual property and other similar laws. Because our website is maintained through
the server in Hong Kong, we expect that we will be required to comply with the rules and regulations and Hong Kong governing the
data usage and regular terms of service applicable to our potential customers. As the information of our potential customers is
preserved in Hong Kong, we will need to comply with the Hong Kong Personal Data (Privacy) Ordinance (Cap 486).
The
Employment Ordinance is the main piece of legislation governing conditions of employment in Hong Kong. It covers a comprehensive
range of employment protection and benefits for employees, including Wage Protection, Rest Days, Holidays with Pay, Paid Annual
Leave, Sickness Allowance, Maternity Protection, Statutory Paternity Leave, Severance Payment, Long Service Payment, Employment
Protection, Termination of Employment Contract, Protection Against Anti-Union Discrimination.
An
employer must also comply with all legal obligations under the Mandatory Provident Fund Schemes Ordinance, (Cap 485). These include
enrolling all qualifying employees in Mandatory Provident Fund (“MPF”) schemes and making MPF contributions for them.
Except for exempt persons, employers should enroll both full-time and part-time employees who are at least 18 but under 65 years
of age in an MPF scheme within the first 60 days of employment. The 60-day employment rule does not apply to casual employees
in the construction and catering industries.
We
are required to make MPF contributions for our Hong Kong employees once every contribution period (generally the wage period).
Employers and employees are each required to make regular mandatory contributions of 5% of the employee’s relevant income
to an MPF scheme, subject to the minimum and maximum relevant income levels. For a monthly-paid employee, the minimum and maximum
relevant income levels are $7,100 and $30,000 respectively.
We
are in compliance with the above applicable ordinances and regulations in Hong Kong and have not been involved any lawsuit or
prosecuted by the local authority resulting from any breach of the ordinances and regulations.
Malaysia
Our
businesses located in Malaysia are subject to the general laws in Malaysia governing businesses including labor, occupational
safety and health, general corporations, intellectual property and other similar laws including the Computer Crime Act 1997 and
The Copyright (Amendment) Act 1997. We believe that the focus of these laws is censorship in Malaysia, however we believe this
does not impact our businesses because the censorship focus is on media controls and does not relate to cloud base technology
which we plan to use.
Our
real estate investments are subject to extensive local, city, county and state rules and regulations regarding permitting, zoning,
subdivision, utilities and water quality as well as federal rules and regulations regarding air and water quality and protection
of endangered species and their habitats. Such regulation may result in higher than anticipated administrative and operational
costs.
We
are in compliance with the above applicable ordinances and regulations in Malaysia and have not involved any lawsuit or prosecuted
by the local authority resulting from any breach of the ordinances and regulations.
China
A
portion of our acquired businesses are located in China and subject to the general laws in China governing businesses including
labor, occupational safety and health, general corporations, intellectual property and other similar laws.
Employment
Contracts
The
Employment Contract Law was promulgated by the National People’s Congress’ Standing Committee on June 29, 2007 and
took effect on January 1, 2008. The Employment Contract Law governs labor relations and employment contracts (including the entry
into, performance, amendment, termination and determination of employment contracts) between domestic enterprises (including foreign-invested
companies), individual economic organizations and private non-enterprise units (collectively referred to as the “employers”)
and their employees.
a.
Execution of employment contracts
Under
the Employment Contract Law, an employer is required to execute written employment contracts with its employees within one month
from the commencement of employment. In the event of contravention, an employee is entitled to receive double salary for the period
during which the employer fails to execute an employment contract. If an employer fails to execute an employment contract for
more than 12 months from the commencement of the employee’s employment, an employment contract would be deemed to have been
entered into between the employer and employee for a non-fixed term.
b.
Right to non-fixed term contracts
Under
the Employment Contract Law, an employee may request a non-fixed term contract without an employer’s consent to renew. In
addition, an employee is also entitled to a non-fixed term contract with an employer if he has completed two fixed term employment
contracts with such employer; however, such employee must not have committed any breach or have been subject to any disciplinary
actions during his employment. Unless the employee requests to enter into a fixed term contract, an employer who fails to enter
into a non-fixed term contract pursuant to the Employment Contract Law is liable to pay the employee double salary from the date
the employment contract is renewed.
c.
Compensation for termination or expiry of employment contracts
Under
the Employment Contract Law, employees are entitled to compensation upon the termination or expiry of an employment contract.
Employees are entitled to compensation even in the event the employer (i) has been declared bankrupt; (ii) has its business license
revoked; (iii) has been ordered to cease or withdraw its business; or (iv) has been voluntarily liquidated. Where an employee
has been employed for more than one year, the employee will be entitled to such compensation equivalent to one month’s salary
for every completed year of service. Where an employee has been employed for less than one year, such employee will be deemed
to have completed one full year of service.
d.
Trade union and collective employment contracts
Under
the Employment Contract Law, a trade union may seek arbitration and litigation to resolve any dispute arising from a collective
employment contract; provided that such dispute failed to be settled through negotiations. The Employment Contract Law also permits
a trade union to enter into a collective employee contract with an employer on behalf of all the employees.
Where
a trade union has not been formed, a representative appointed under the recommendation of a high-level trade union may execute
the collective employment contract. Within districts below county level, collective employment contracts for industries such as
those engaged in construction, mining, food and beverage and those from the service sector, etc., may be executed on behalf of
employees by the representatives from the trade union of each respective industry. Alternatively, a district-based collective
employment contract may be entered into.
As
a result of the Employment Contract Law, all of our employees have executed standard written employment agreements with us. We
have not experienced any significant labor disputes or any difficulties in recruiting staff for our operations.
On
October 28, 2010, the National People’s Congress of China promulgated the PRC Social Insurance Law, which became effective
on July 1, 2011. In accordance with the PRC Social Insurance Law, the Interim Regulations on the Collection and Payment of Social
Security Fund and other relevant laws and regulations, China establishes a social insurance system including basic pension insurance,
basic medical insurance, work-related injury insurance, unemployment insurance and maternity insurance. An employer shall pay
the social insurance for its employees in accordance with the rates provided under relevant regulations and shall withhold the
social insurance that should be assumed by the employees. The authorities in charge of social insurance may request an employer’s
compliance and impose sanctions if such employer fails to pay and withhold social insurance in a timely manner. Under the Regulations
on the Administration of Housing Fund effective in 1999, as amended in 2002, PRC companies must register with applicable housing
fund management centers and establish a special housing fund account in an entrusted bank. Both PRC companies and their employees
are required to contribute to the housing funds.
The
Ministry of Human Resources and Social Security promulgated the Interim Provisions on Labor Dispatch on January 24, 2014. The
Interim Provisions on Labor Dispatch, which became effective on March 1, 2014, sets forth that labor dispatch should only be applicable
to temporary, auxiliary or substitute positions. Temporary positions shall mean positions subsisting for no more than six months,
auxiliary positions shall mean positions of non-major business that serve positions of major businesses, and substitute positions
shall mean positions that can be held by substitute employees for a certain period of time during which the employees who originally
hold such positions are unable to work as a result of full-time study, being on leave or other reasons. The Interim Provisions
further provides that, the number of the dispatched workers of an employer shall not exceed 10% of its total workforce, and the
total workforce of an employer shall refer to the sum of the number of the workers who have executed labor contracts with the
employer and the number of workers who are dispatched to the employer.
Foreign
Exchange Control and Administration
Foreign
exchange in China is primarily regulated by:
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The Foreign Currency
Administration Rules (1996), as amended; and
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The Administration
Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.
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Under
the Foreign Currency Administration Rules, if documents certifying the purposes of the conversion of RMB into foreign currency
are submitted to the relevant foreign exchange conversion bank, the RMB will be convertible for current account items, including
the distribution of dividends, interest and royalty payments, and trade and service-related foreign exchange transactions. Conversion
of RMB for capital account items, such as direct investment, loans, securities investment and repatriation of investment, however,
is subject to the approval of SAFE or its local counterpart.
Under
the Administration Rules for the Settlement, Sale and Payment of Foreign Exchange, foreign-invested enterprises may only buy,
sell and/or remit foreign currencies at banks authorized to conduct foreign exchange business after providing valid commercial
documents and, in the case of capital account item transactions, obtaining approval from SAFE or its local counterpart.
As
an offshore holding company with a PRC subsidiary, we may (i) make additional capital contributions to our PRC subsidiaries, (ii)
establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, (iii) make loans to our PRC subsidiaries
or consolidated affiliated entities, or (iv) acquire offshore entities with business operations in China in offshore transactions.
However, most of these uses are subject to PRC regulations and approvals. For example:
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Capital contributions
to our PRC subsidiaries, whether existing or newly established ones, must be approved by the Ministry of Commerce or its local
counterparts;
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Loans by us to our
PRC subsidiaries, each of which is a foreign-invested enterprise, to finance their activities cannot exceed statutory limits
and must be registered with SAFE or its local branches; and
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Loans by us to our
consolidated affiliated entities, which are domestic PRC entities, must be approved by the National Development and Reform
Commission and must also be registered with SAFE or its local branches.
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On
August 29, 2008, SAFE promulgated the Circular on the Relevant Operating Issues concerning the Improvement of the Administration
of Payment and Settlement of Foreign Currency Capital of Foreign-invested Enterprises, or “Circular 142”. On March
30, 2015, SAFE issued the Circular of the State Administration of Foreign Exchange Concerning Reform of the Administrative Approaches
to Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or “Circular 19”, which became effective
on June 1, 2015, to regulate the conversion by foreign invested enterprises, or FIEs, of foreign currency into RMB by restricting
how the converted RMB may be used. Circular 19 requires that RMB converted from the foreign currency-dominated capital of a FIE
shall be managed under the Accounts for FX settlement and pending payment. The expenditure scope of such Accounts includes
expenditure within the business scope, payment of funds for domestic equity investment and RMB deposits, repayment of the
RMB loans after completed utilization and so forth. A FIE shall truthfully use its capital by itself within the business scope
and shall not, directly or indirectly, use its capital or RMB converted from the foreign currency-dominated capital for (i) expenditure
beyond its business scope or expenditure prohibited by laws or regulations, (ii) disbursing RMB entrusted loans (unless permitted
under its business scope), repaying inter-corporate borrowings (including third-party advance) and repaying RMB bank loans already
refinanced to any third party. Where a FIE, other than a foreign-invested investment company, foreign-invested venture capital
enterprise or foreign-invested equity investment enterprise, makes domestic equity investment by transferring its capital in the
original currency, it shall obey the current provisions on domestic re-investment. Where such a FIE makes domestic equity investment
by its RMB conversion, the invested enterprise shall first go through domestic re-investment registration and open a corresponding
Accounts for FX settlement and pending payment, and the FIE shall thereafter transfer the conversion to the aforesaid Account
according to the actual amount of investment. In addition, according to the Regulations of the People’s Republic of China
on Foreign Exchange Administration, which became effective on August 5, 2008, the use of foreign exchange or RMB conversion may
not be changed without authorization.
Violations
of the applicable circulars and rules may result in severe penalties, including substantial fines as set forth in the Foreign
Exchange Administration Regulations.
In
light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding
companies, we cannot assure you that we will always be able to complete the necessary government registrations or obtain the necessary
government approvals on a timely basis, if at all, with respect to future loans to our PRC subsidiary or future capital contributions
by us to our PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or
otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our
ability to fund and expand our business.
Currently,
we are in compliance with the above applicable ordinances and regulations in China and have not involved any lawsuit or prosecuted
by the local authority resulting from any breach of the ordinances and regulations.
Insurance
We
do not current maintain property, business interruption and casualty insurance. As our business matures, we expect to obtain such
insurance in accordance with customary industry practices in Malaysia, Hong Kong and China, as applicable.
Seasonality
Our
businesses are not subject to seasonality.
Employees
As
of April 2, 2019, we have 70 employees, located in the following territories:
Country/Territory
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Number
of Employees
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Malaysia
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16
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China
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27
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Hong Kong
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27
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As
a result of the Employment Contract Law, all of our employees in China have executed standard written employment agreements with
us.
We
are required to contribute to the Employees Provident Fund under a defined contribution pension plan for all eligible employees
in Malaysia between the ages of eighteen and fifty-five. We are required to contribute a specified percentage of the participant’s
income based on their ages and wage level. The participants are entitled to all of our contributions together with accrued returns
regardless of their length of service with the company. For the years ended December 31, 2018 and 2017, the contributions are
$46,725 and $35,135, respectively.
We
are required to contribute to the MPF for all eligible employees in Hong Kong between the ages of eighteen and sixty-five. We
are required to contribute a specified percentage of the participant’s income based on their ages and wage level. For the
years ended December 31, 2018 and 2017, the MPF contributions by the Company were $38,691 and $31,717, respectively. We have not
experienced any significant labor disputes or any difficulties in recruiting staff for our operations.
We
are required to contribute to the Social Insurance Schemes and Housing Fund Schemes for all eligible employees in PRC. For the
years ended December 31, 2018 and 2017, the contributions were $24,091 and $16,306, respectively.
Executive
Office
Our
principal executive office is located at Room 1701-1703, 17/F., The Metropolis Tower, 10 Metropolis Drive, Hung Hom, Kowloon,
Hong Kong. Our principal telephone number is +852 3111 7718. Our website is at:
http://www.greenprocapital.com
. The information
contained on our website is not, and should not be interpreted to be, a part of this Form 10-K.
Future
Development Plan
Greenpro
is in the process of carrying out the following development plan.
ADAQ
Development. ADAQ is a next generation online financial information platform that facilitates connecting private High-Growth Emerging
Companies with access to potential investors and synergetic companies. ADAQ is dedicated to equipping emerging growth companies
in the Asia Pacific region with the guidance and information to identify, build and stream their sustainable core values. In addition,
it offers an acceleration program to incubate and assist companies to accelerate the process by which they seek to list on international
exchanges such as New York Stock Exchange (NYSE), NASDAQ and Hong Kong Stock Exchange (HKEX).
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ADAQ
has three major functions:
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1.
Corporate Value Building Program
2.
Online platform and acceleration process to International Capital Market Listing
3.
Online Financial Information Market
We
intend to strengthen the development of ADAQ as an acceleration platform to assist high growth emerging companies in the ASEAN
regions covering Malaysia, Thailand, Singapore, Indonesia, Myanmar, Laos and Vietnam) and China to obtain funding and prepare
for an IPO. A growing number of companies across South East Asia and the “Greater Bay Area”, (the Chinese government’s
plan to link the cities of Hong Kong, Macau, Guangzhou, Shenzhen, Zhuhai, Dongguan, Foshan, Zhongshan, Jiangmen, Zhaoqing and
Huizhou (i.e. “2+9”) into an integrated economic and business hub) are interested in including their listing on
the ADAQ market platform. The successful development of the platform will heighten the prospects of Greenpro’s venture capital
projects achieving success while aiming to widen market coverage to source for new potential projects to create more business
value.
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Wealth
Management Portfolio Development. The increase in the number of High Net Worth Individuals
in the Asia Pacific Region has created opportunities and needs for cross border wealth
management services. Leveraging our competitive advantages with integrated financial
services and strategic offices, we are looking forward to enhancing our strategic development
in wealth management, fund management and asset management businesses. We continue to
look for partnerships to explore the potential of wealth management, fund management
and asset management services, to combine with the assistance from our affiliates to
provide customized wealth creation, wealth protection and wealth succession solutions
for medium, high and ultra-high net worth individuals/families in the Asian region. We
also expect to place more efforts into the development of our Wealth Network Database
through Greenpro Synergy Network (G.S.N.) – a wealth and investment community focusing
on wealth related information sharing.
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For
our long-term plan and development, we are looking forward to initiating the “Greenpro Capital Tower” plan in ASEAN
as an effort to further develop our brand, to strengthen our operational and client base with stronger customers and market confidence.
We are currently in the planning stage to build a 20-storey building located in the Commercial Business District of Malaysia as
our ASEAN headquarters, enabling the market in the region to have better access to our services while also strengthening our market
visibility. In addition, we plan to continue to grow through mergers and acquisitions of related services to enhance our services
horizontally and vertically. We are continuously sourcing synergetic and licensed financial institutions to strengthen our capabilities
and scope of our services with the aim to widen our market coverage.
ITEM
1A. RISK FACTORS
You
should carefully consider the risks described below and elsewhere in this report, which could materially and adversely affect
our business, results of operations or financial condition. Our business faces significant risks and the risks described below
may not be the only risks we face. Additional risks not presently known to us or that we currently believe are immaterial may
materially affect our business, results of operations, or financial condition. If any of these risks occur, the trading price
of our common stock could be decline and you may lose all or part of your investment.
Risks
Related to our Business
We
have a limited operating history that you can use to evaluate us, and the likelihood of our success must be considered in light
of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company.
We
were incorporated in Nevada in July 2013. For the year ended December 31, 2018 and 2017, we have generated $4,213,360 and
$3,916,372, respectively, in revenues and incurred net loss of $8,325,163 and $3,116,909, respectively. The likelihood
of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered
by a small company starting a new business enterprise and the highly competitive environment in which we are operating. We have
a limited operating history upon which an evaluation of our future success or failure can be made. Our ability to achieve and
maintain profitability and positive cash flow is dependent upon:
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our ability to market
our product and services;
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our ability to generate
revenues; and
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our ability to raise
the capital necessary to continue marketing and developing our product.
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We
are not currently profitable and may not become profitable.
As
of December 31, 2018, we had $2,172,048 cash on hand and our Greenpro’s common stockholders’ equity
was $4,499,307. We have generated $4,213,360 in revenue in 2018 and have incurred operating loss of $4,218,999 and
net loss of $8,325,163. We expect to incur losses and negative operating cash flows for the foreseeable future, and we
may not achieve profitability. We also expect to experience negative cash flow for the foreseeable future due to operating
losses and capital expenditures. As a result, we will need to generate significant revenues in order to achieve and maintain profitability.
We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability
could negatively impact the value of our business.
We
may not be able to continue to operate as a going concern.
For
the year ended December 31, 2018, the Company incurred a net loss of $8,325,163 and used cash in operating activities of
$1,001,421, and at December 31, 2018, the Company had a working capital deficiency of $541,221. In addition, the Company’s
independent registered public accounting firm, in their report on the Company’s December 31, 2018 audited financial statements,
raised substantial doubt about the Company’s ability to continue as a going concern. These factors raise substantial doubt
about the Company’s ability to continue as a going concern within one year of the date that the financial statements are
issued. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as
a going concern.
The
Company’s ability to continue as a going concern is dependent upon improving its profitability and the continuing financial
support from its shareholders. Management believes the existing shareholders or external financing will provide the additional
cash to meet the Company’s obligations as they become due. No assurance can be given that any future financing, if needed,
will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able
to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing,
or cause substantial dilution for its stock holders, in the case of equity financing.
Our
operating results may prove unpredictable which could negatively affect our profit.
Our
operating results are likely to fluctuate significantly in the future due to a variety of factors, many of which we have no control.
Factors that may cause our operating results to fluctuate significantly include: our inability to generate enough working capital
from future equity sales; the level of commercial acceptance by clients of our services; fluctuations in the demand for our service
the amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure
and general economic conditions. If realized, any of these risks could have a material adverse effect on our business, financial
condition and operating results.
If
we are unable to gain any significant market acceptance for our service or establish a significant market presence, we may be
unable to generate sufficient revenue to continue our business.
Our
growth strategy is substantially dependent upon our ability to successfully market our service to prospective clients. However,
our planned services may not achieve significant acceptance. Such acceptance, if achieved, may not be sustained for any significant
period of time. Failure of our services to achieve or sustain market acceptance could have a material adverse effect on our business,
financial conditions and the results of our operations.
Management’s
ability to implement the business strategy may be slower than expected and we may be unable to generate a profit.
Our
business plans, including offering a cloud accounting system and consulting services, may not occur. Our growth strategy is subject
to significant risks which you should carefully consider before purchasing our shares.
Our
services may be slow to achieve profitability, or may not become profitable at all, which will result in losses. There can be
no assurance that we will succeed.
We
may be unable to enter into our intended markets successfully. The factors that could affect our growth strategy include our success
in (a) developing our business plan, (b) obtaining our clients, (c) obtaining adequate financing on acceptable terms, and (d)
adapting our internal controls and operating procedures to accommodate our future growth.
Our
systems, procedures and controls may not be adequate to support the expansion of our business operations. Significant growth will
place managerial demands on all aspects of our operations. Our future operating results will depend substantially upon our ability
to manage changing business conditions and to implement and improve our technical, administrative and financial controls and reporting
systems.
Competitors
may enter this sector with superior service which would affect our business adversely.
We
believe that barriers to entry are low to medium because of economies of scale, cost advantage and brand identity. Potential competitors
may enter this sector with superior services. This would have an adverse effect upon our business and our results of operations.
In addition, a high level of support is critical for the successful marketing and recurring sales of our services. Despite having
accumulated customers from the past four years, we may still need to continue to improve our platform and software in order to
assist potential customers in using our platform, and we also need to provide effective support to future clients. If we are unable
to increase customer support and improve our platform in the face of increasing competition, with the increase in competition,
our ability to sell our services to potential customers could adversely affect our brand, which would harm our reputation.
Our
use of open source and third-party software could impose limitations on our ability to commercialize our services.
We
intend to incorporate open source software into our platform. Although we monitor our use of open source closely, the terms of
many open source licenses have not been interpreted by U.S. courts or jurisdictions elsewhere, and there is a risk that such licenses
could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our
services. We could also be subject to similar conditions or restrictions should there be any changes in the licensing terms of
the open source software incorporated into our products. In either event, we could be required to seek licenses from third parties
in order to continue our services in the event re-engineering cannot be accomplished on a timely or successful basis, any of which
could adversely affect our business, operating results and financial condition.
We
also intend to incorporate certain third-party technologies, including software programs, into our website and may need to utilize
additional third-party technologies in the future. However, licenses to relevant third-party technology may not continue to be
available to us on commercially reasonable terms, or at all. Therefore, we could face delays in releases of our platform until
equivalent technology can be identified, licensed or developed, and integrated into our current products. These delays, if they
occur, could materially adversely affect our business, operating results and financial condition. Any disruption in our access
to software programs or third-party technologies could result in significant delays in releases of our platform and could require
substantial effort to locate or develop a replacement program. If we decide in the future to incorporate into our products any
other software program licensed from a third party, and the use of such software program is necessary for the proper operation
of our appliances, then our loss of any such license would similarly adversely affect our ability to release our products in a
timely fashion.
The
security of our computer systems may be compromised and harm our business.
A significant portion of our business operations is conducted through use of our computer network. Although
we intend to implement security systems and procedures to protect the confidential information stored on these computer systems,
experienced computer programmers and hackers may be able to penetrate our network security and misappropriate our confidential
information or that of third parties. As well, they may be able to create system disruptions, shutdowns or effect denial of service
attacks. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious software programs
that attack our networks or client computers, or otherwise exploit any security vulnerabilities, or that misappropriate and distribute
confidential information stored on these computer systems. Any of the foregoing could result in damage to our reputation and customer
confidence in the security of our products and services and could require us to incur significant costs to eliminate or alleviate
the problem. Additionally, our ability to transact business may be affected. Such damage, expenditures and business interruption
could seriously impact our business, financial condition and results of operations.
Adverse
developments in our existing areas of operation could adversely impact our results of operations, cash flows and financial condition.
Our
operations are focused on utilizing our sales efforts which are principally located in South-East Asia. As a result, our results
of operations, cash flows and financial condition depend upon the demand for our services in these regions. Due to the lack of
broad diversification in industry type and geographic location, adverse developments in our current segment of the midstream industry,
or our existing areas of operation, could have a significantly greater impact on our results of operations, cash flows and financial
condition than if our operations were more diversified.
We
are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging
growth companies will make our common stock less attractive to investors.
We
are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies that are not “emerging growth companies”
including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not
previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common
stock and our stock price may be more volatile.
In
addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
An “emerging growth company” can therefore delay the adoption of certain accounting standards until those standards
would otherwise apply to private companies. We are choosing to follow the extended transition period, and as a result, we will
delay adoption of certain new or revised accounting standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies.
Risks
Related to Doing Business in East Asia and South-East Asia
Our
contractual arrangements may not be as effective in providing control over the variable interest entities as direct ownership.
We
rely on contractual arrangements with our variable interest entities to hold part of our assets in Hong Kong. For a description
of these contractual arrangements, see “Acquisition and Reorganization History - VIE Structure and Arrangements.”
These contractual arrangements may not be as effective as direct ownership in providing us with control over our variable interest
entities.
If
we had direct ownership of the variable interest entities, we would be able to exercise our rights as an equity holder directly
to effect changes in the boards of directors of those entities, which could effect changes at the management and operational level.
Under our contractual arrangements, we may not be able to directly change the members of the boards of directors of these entities
and would have to rely on the variable interest entities and the variable interest entity equity holders to perform their obligations
in order to exercise our control over the variable interest entities. The variable interest entity equity holders may have conflicts
of interest with us or our shareholders, and they may not act in the best interests of our company or may not perform their obligations
under these contracts. For example, our variable interest entities and their respective equity holders could breach their contractual
arrangements with us by, among other things, failing to conduct their operations, including maintaining our websites and using
our domain names and trademarks which the relevant variable interest entities have exclusive rights to use, in an acceptable manner
or taking other actions that are detrimental to our interests. Pursuant to the call option, we may replace the equity holders
of the variable interest entities at any time pursuant to the contractual arrangements. Consequently, the contractual arrangements
may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership.
Our
business is subject to the risks of international operations.
Substantially
all of our business operations are conducted in South-East Asia. Accordingly, our results of operations, financial condition and
prospects are subject to a significant degree to economic, political and legal developments in the Asian countries we intend to
develop business. Following the closing of our initial public offering, we will derive a significant portion of our revenue and
earnings from the operation in Hong Kong, our principal business place and also in Malaysia and other South-East Asian countries.
Operating in multiple foreign countries involves substantial risk. For example, our business activities subject us to a number
of laws and regulations, such as anti-corruption laws, tax laws, foreign exchange controls and cash repatriation restrictions,
data privacy and security requirements, labor laws, intellectual property laws, privacy laws, and anti-competition regulations.
As we expand into additional countries, the complexity inherent in complying with these laws and regulations increases, making
compliance more difficult and costly and driving up the costs of doing business in foreign jurisdictions. Any failure to comply
with foreign laws and regulations could subject us to fines and penalties, make it more difficult or impossible to do business
in that country and harm our reputation.
We
may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the foreign corrupt
practices act could have a material adverse effect on our business.
We
are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments
to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute for the
purpose of obtaining or retaining business. We will have operations, agreements with third parties and make sales in South-East
Asia, which may experience corruption. Our proposed activities in Asia create the risk of unauthorized payments or offers of payments
by one of the employees, consultants, or sales agents of our Company, because these parties are not always subject to our control.
It will be our policy to implement safeguards to discourage these practices by our employees. Also, our existing safeguards and
any future improvements may prove to be less than effective, and the employees, consultants, or sales agents of our Company may
engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions,
and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition.
In addition, the government may seek to hold our Company liable for successor liability FCPA violations committed by companies
in which we invest or that we acquire.
You
may have difficulty enforcing judgments against us.
We
are a Nevada corporation and most of our assets are and will be located outside of the United States. Almost all of our operations
will be conducted in Hong Kong, Malaysia and the PRC. In addition, our officers and directors are nationals and residents of a
country other than the United States. All of their assets are located outside the United States. As a result, it may be difficult
for you to effect service of process within the United States upon them. It may also be difficult for you to enforce in U.S. courts
judgments on the civil liability provisions of the U.S. federal securities laws against us and our officer and director, since
he is not a resident in the United States. In addition, there is uncertainty as to whether the courts of Hong Kong or other Asian
countries would recognize or enforce judgments of U.S. courts.
Payment
of dividends is subject to restrictions under Nevada, Hong Kong, Malaysia and the PRC laws.
Under
Nevada law, we may only pay dividends subject to our ability to service our debts as they become due and provided that our assets
will exceed our liabilities after the dividend. Our ability to pay dividends will therefore depend on our ability to generate
sufficient profits. Under the Hong Kong Companies Ordinance, we are permitted to make payments of dividends from distributable
profits (that is, accumulated realized profits less its accumulated realized losses). Under the Laws of Malaysia, we may only
make a distribution to the shareholders out of our profits available if we are solvent. The Company is regarded as solvent if
the Company is able to pay its debts as and when the debts become due within twelve months immediately after the distribution
is made. In addition, because of the various rules applicable to our operations in China and the regulations on foreign investments
as well as the applicable tax law, we may be subject to further limitations on our ability to declare and pay dividends to our
shareholders.
We
can give no assurance that we will declare dividends of any amounts, at any rate or at all in the future. The declaration of future
dividends, if any, will be at the discretion of our board of directors and will depend upon our future operations and earnings,
capital requirements, general financial conditions, legal and contractual restrictions and other factors that our board of directors
may deem relevant.
We
face the risk that changes in the policies of the PRC government could have a significant impact upon the business we may be able
to conduct in the PRC and the profitability of such business.
The
PRC’s economy is in a transition from a planned economy to a market-oriented economy subject to five-year and annual plans
adopted by the central government that set national economic development goals. Policies of the PRC government can have significant
effects on the economic conditions of the PRC. The PRC government has confirmed that economic development will follow the model
of a market economy. Under this direction, we believe that the PRC will continue to strengthen its economic and trading relationships
with foreign countries and business development in the PRC will follow market forces. While we believe that this trend will continue,
we cannot assure you that this will be the case. A change in policies by the PRC government could adversely affect our interests
by, among other factors: changes in laws, regulations or the interpretation thereof, confiscatory taxation, restrictions on currency
conversion, imports or sources of supplies, or the expropriation or nationalization of private enterprises. Although the PRC government
has been pursuing economic reform policies for more than two decades, we cannot assure you that the government will continue to
pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership,
social or political disruption, or other circumstances affecting the PRC’s political, economic and social environment.
Introduction
of new laws or changes to existing laws by the PRC government may adversely affect our business.
The
PRC legal system is a codified legal system made up of written laws, regulations, circulars, administrative directives and internal
guidelines. Unlike common law jurisdictions like the U.S., decided cases (which may be taken as reference) do not form part of
the legal structure of the PRC and thus have no binding effect on subsequent cases with similar issues and fact patterns. Furthermore,
in line with its transformation from a centrally-planned economy to a more free market-oriented economy, the PRC government is
still in the process of developing a comprehensive set of laws and regulations. As the legal system in the PRC is still evolving,
laws and regulations or the interpretation of the same may be subject to further changes. For example, the PRC government may
impose restrictions on the amount of service fees that may be payable by municipal governments to wastewater and sludge treatment
service providers. Also, the PRC central and municipal governments may impose more stringent environmental regulations which would
affect our ability to comply with, or our costs to comply with, such regulations. Such changes, if implemented, may adversely
affect our business operations and may reduce our profitability
The
Hong Kong economy may be vulnerable to slowdown in Chinese activity and world trade.
Since
Hong Kong is now closely linked to China with respect to economic and political development, Hong Kong economic and political
development will be more likely to be affected by China’s development. As there are more and more mainland Chinese companies
listed on The Hong Kong Stock Exchange and industries in general are becoming delocalized to mainland China, the Hong Kong stock
market and local economy will become more vulnerable to the economic development in the mainland China. If the economic development
in China becomes unstable, the Hong Kong economy will be negatively affected. Besides, the Hong Kong economy is externally oriented
and highly dependent on trade with the rest of the world. Our business may be subject to the cyclical effect of the economic development
in the world.
We
face the risk that changes in the world economy and political developments in Malaysia may adversely affect our business.
In
recent years, there have been political instabilities in Malaysian government which may reduce investors’ confidence, result
in reduction in foreign direct investment and weigh on consumer and business sentiment, depressing growth. In addition, the Malaysian
economy is reliant on external demand. Any possible worsening global demand is likely to hinder the export development and any
economic weakness may possibly lead to market intervention and the government may impose capital controls. Under these circumstances,
our business operation may be adversely affected.
Together,
our Chief Executive Officer, Mr. Lee Chong Kuang, and our Chief Financial Officer, Mr. Loke Che Chan Gilbert, own a large percentage
of our outstanding stock and could significantly influence the outcome of our corporate matters.
Mr.
Lee Chong Kuang, our CEO, beneficially owns 32.26% of our outstanding shares of common stock, and Mr. Loke Che Chan Gilbert, our
CFO, beneficially owns 32.26% of our outstanding shares of common stock. As a result, Messrs. Lee and Loke are able to exercise
significant influence over all matters that require us to obtain shareholder approval, including the election of directors to
our board and approval of significant corporate transactions that we may consider, such as a merger or other sale of our company
or its assets. This concentration of ownership in our shares by executive officers will limit the other shareholders’ ability
to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.
Future
sales of substantial amounts of the shares of common stock by existing shareholders could adversely affect the price of our common
stock.
If
our existing shareholders sell substantial amounts of the shares, then the market price of our common stock could fall. Such sales
by our existing shareholders might make it more difficult for us to issue new equity or equity-related securities in the future
at a time and place we deem appropriate. If any existing shareholders sell substantial amounts of shares, the prevailing market
price for our shares could be adversely affected.
The
market price of our shares is likely to be highly volatile and subject to wide fluctuations in response to factors such as:
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variations in our
actual and perceived operating results;
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news regarding gains
or losses of customers or partners by us or our competitors;
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news regarding gains
or losses of key personnel by us or our competitors;
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announcements of
competitive developments, acquisitions or strategic alliances in our industry by us or our competitors;
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changes in earnings
estimates or buy/sell recommendations by financial analysts;
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potential litigation;
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general market conditions
or other developments affecting us or our industry; and
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the operating and
stock price performance of other companies, other industries and other events or factors beyond our control.
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In
addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related
to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market
price of the shares.
In
the event that our shares trade under $5.00 per share they will be considered penny stock. Trading in penny stocks has many restrictions
and these restrictions could severely affect the price and liquidity of our shares.
If
our stock trades below $5.00 per share, our stock would be known as a “penny stock”, which is subject to various regulations
involving disclosures to be given to you prior to the purchase of any penny stock. The U.S. Securities and Exchange Commission
(the “SEC”) has adopted regulations which generally define a “penny stock” to be any equity security that
has a market price of less than $5.00 per share, subject to certain exceptions. Depending on market fluctuations, our common stock
could be considered to be a “penny stock”. A penny stock is subject to rules that impose additional sales practice
requirements on broker/dealers who sell these securities to persons other than established Members and accredited investors. For
transactions covered by these rules, the broker/dealer must make a special suitability determination for the purchase of these
securities. In addition, he must receive the purchaser’s written consent to the transaction prior to the purchase. He must
also provide certain written disclosures to the purchaser. Consequently, the “penny stock” rules may restrict the
ability of broker/dealers to sell our securities and may negatively affect the ability of holders of shares of our common stock
to resell them. These disclosures require you to acknowledge that you understand the risks associated with buying penny stocks
and that you can absorb the loss of your entire investment. Penny stocks are low priced securities that do not have a very high
trading volume. Consequently, the price of the stocks is often volatile, and you may not be able to buy or sell the stock when
you want to.
We
do not anticipate paying cash dividends on our common stock in the foreseeable future.
We
do not anticipate paying cash dividends in the foreseeable future. Presently, we intend to retain all of our earnings, if any,
to finance development and expansion of our business. Consequently, your only opportunity to achieve a positive return on your
investment in us will be if the market price of our common stock appreciates.