UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One) FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number: 0-15937
GREATER CHINA CORPORATION
(f/k/a BRIGHTON INFORMATION SYSTEMS CORPORATION)
(Name of Small business issuer in its charter)
Delaware 22-3057451
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
27 East 61st Street, Third Floor, New York, New York 10021
(Address of principal executive offices)
212) 935-0561
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.02 par value per share
(Title of Class)
Check whether the issuer: (i) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (ii) has been subject to such filing requirements for the
past 90 days. Yes _ No X
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The issuer's revenues for the most recent audited fiscal year ended September
30, 1995 were $2,988,307.
The aggregate market value of the voting stock held by non-affiliates
(7,148,757 shares), based on the average bid and asked prices ($.14) of the
issuer's common stock as of May 23, 1997, was $1,000,826.
The number of shares outstanding of the issuer's common stock as of May 30,
1997 was 8,784,899 shares.
Transitional Small Business Disclosure Format: Yes No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
General Development of Business:
Greater China Corporation (f/k/a Brighton Information Systems Corporation)
("GCC" or the "Company") is a Delaware corporation formed in 1979. The
Company has been primarily engaged in the business of selling and servicing
integrated computer systems in Hong Kong and the People's Republic of China
("China"). The Company currently acts as a holding company with six (6)
wholly-owned subsidiaries, Dataprep (Hong Kong) Ltd., a Hong Kong corporation
("Dataprep"), China Infonet, Ltd. (formerly known as Brighton Information
Technology Corporation Ltd., a Hong Kong corporation ("Brighton-Hong Kong")
and Shanghai Brighton Information Technology, Ltd., a China company
("Brighton-Shanghai").
The Company also has three subsidiaries that are in the process of being
wound-up. These subsidiaries include Brighton Information Systems (Australia)
("Brighton-Australia"), Brighton Information Systems (Singapore) Pte. Ltd.,
and Brighton Information System (Pacific) Pty. Ltd. ("Brighton Pacific")
which had formerly acted as a holding company and is inactive as a result of
the discontinuation of the Company's Australian operations. In addition, the
Company had previously conducted business in Singapore through Brighton
Information Systems (Singapore) Pte. Ltd. However, the Company closed its
Singapore offices during the 1992 fiscal year and operations moved to a
service office. During the 1993 fiscal year, the service office was closed
and the Singapore operation became inactive.
In September, 1994, the Company entered into an agreement with Stratus
Computer, Inc. ("Stratus") for the sale of substantially all of the assets of
Brighton-Australia, which consisted primarily of contract rights for
maintenance and professional services contracts. Existing contracts between
the parties and their affiliates were also terminated. As consideration for
the transfer, Stratus paid an aggregate of $392,113.
Amerinex Services Corporation ("ASC") has been a dormant subsidiary of the
Company for the past six years. Management intends to wind-up operations of
ASC during the fiscal year ending September 30, 1997. However no assurance to
this effect can be given. As of September 30, 1996, the Board of Directors of
the Company wrote off all assets and liabilities associated with ASC.
On January 27, 1997, Mr. Kit Kung, the Managing Director of the Company's
subsidiaries and former Chairman of the Board, President and a principal
shareholder of the Company was removed for cause as a Director and officer of
these subsidiaries. This Board action was taken for failure by Mr. Kung to
provide the records of the activities of these subsidiaries for audit and for
actions perceived by the Board of Directors of the Company to include
violation of the principal of corporate opportunity and conflict of interest.
The Company believes that the assets and business opportunities of these sub-
sidiaries have been diverted into the operations of Brighton Technology
Corporation, Inc. ("BTC") a publicly traded company believed to be controlled
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by Mr. Kung and for which he acts as its Chairman and President. In literature
distributed by BTC, BTC has claimed to have as some of its assets, customers,
historical revenues and business opportunities of the Company's subsidiaries.
Since Mr. Kung has failed to produce the books and records of the Company's
subsidiaries, the Company is unable to determine the disposition of its assets
and/or previous business opportunities. As a result, pending legal action
against Mr. Kung, the Board of Directors of the Company has written off,
effective September 30, 1996, all assets associated with Mr. Kung and
disavowed all liabilities to Mr. Kung and/or companies associated with Mr.
Kung. (See NARRATIVE DESCRIPTION OF BUSINESS).
During 1993, Brighton-Hong Kong, through Brighton Telecommunications Systems
(Pacific) Ltd. ("BTSP"), an affiliate of Kit Kung, entered into a joint
venture agreement with Shenyang Huitong Scientific and Technical Development
Center ("Shenyang Huitong"), a China government agency, to build and organize
a mobile radio telephone communication network in Shenyang, China. The joint
venture agreement allocated 3% of the net profit after tax derived from the
joint venture to BTSP as well as reimbursement of all expenses incurred by
BTSP in the procurement of the project. The Company entered into a sub-
contractor agreement with BTSP pursuant to which it assumed all obligations
and was assigned all of the rights and benefits under the joint venture
agreement. See "ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS." The
Company advanced the joint venture the amount of $650,000 to purchase
equipment. This advance was originally scheduled to be repaid in the amounts
of $65,000 on September 30, 1993, $162,500 on December 1, 1993, $195,000 on
March 1, 1994 and $227,500 on June 1, 1994. The network was expected to be
operational on June 1, 1993. However, as a result of certain delays in
obtaining the related equipment, the network was not operational until
December 15, 1993. During 1994, the Company received the first installment of
$65,000. During Fiscal Year 1995, the Company received an additional payment
of $52,616. Due to rapid changes in telecommunications technology, a total of
only 50 handsets had been sold as of September 30, 1994 and the Company
does not expect to sell additional handsets in the future. Because of the
uncertainties, the remaining investment of $535,671 at September 30, 1994 was
written off during the fiscal year ended September 30, 1994. Do to the
actions of Mr. Kung, the Company and its legal counsel are considering legal
action against Mr. Kung to recover its investment. See Financial Statements.
Acquisitions:
On September 30, 1994, Brighton-Hong Kong purchased from Mr. Kung, a
controlling interest in Brighton-Shanghai, at a price of $297,403, which
represented previous advances by the Company to Mr. Kung. See Item 12
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS". Brighton-Shanghai was
engaged in the business of selling and servicing integrated computer systems
in China, including to clients of Brighton-Hong Kong and Dataprep, as well
as selling personal computers assembled in Hong Kong. As of September 30,
1996, the Board of Directors wrote off all assets and liabilities associated
with Brighton-Shanghai. See "BUSINESS - Brighton Information Technology
Corporation."
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On June 30, 1990 the Company acquired 100% of the outstanding shares of
Dataprep (Hong Kong) Limited ("Dataprep").
DPHK is a company incorporated in Hong Kong which sells integrated data
processing equipment and software to customers located in Hong Kong and China
with emphasis on the hotel and financial institution industries. The purchase
price of DPHK's shares totaled $1,218,512. This amount was paid in cash and a
note totaling $621,441, which has been paid in full, with the remainder
paid in shares of the Company's restricted common stock valued at $.50 per
share. AS of September 30, 1996, the Board of Directors wrote off all assets
and liabilities associated with Dataprep.
Narrative Description of Business:
Since its inception, the Company has been a computer and communications
systems integrator with operations principally in Hong Kong and China.
Operations were conducted primarily through three subsidiaries of the
Company: Dataprep, Brighton-Hong Kong and Brighton-Shanghai.
On March 30, 1996, the operations of these subsidiaries were discontinued by
Mr. Kung without authorization by the Board of Directors. At that time, Mr.
Kung was the Managing Director and officer in charge of these operations. Mr.
Kung claimed that the subsidiary companies could no longer support their
operations.
The Company is in dispute with Mr. Kung over a number of unauthorized actions
he has taken with regard to the Company and its subsidiaries. After repeated
written demands over the past ten months, Mr. Kung has still failed to provide
to the Company the books and records of its subsidiaries which were under his
control. As a result, the Company has been unable to prepare its audited
financial statement for the period ending September 30, 1996 and its quarterly
financial statements for the periods ending December 31, 1996 and March 31,
1997. Though Mr. Kung indicated on April 29, 1997 his intent to release the
Company's records, as of May 30, 1997, he has failed to do so. The Company
and its legal counsel are currently considering what legal actions should
be taken against Mr. Kung for his actions.
Principal Products and Services, their Markets and their Distribution:
The Company has traditionally been involved in the sales of computer and
communications systems including the design, installation, service and
maintenance of integrated systems. These systems consist mainly of
commercially available computer and communication hardware which is integrated
along with commercial and proprietary software programs into a single system
to meet the specific needs of the customer for whom the system is designed.
The Company has concentrated on certain industries which management believes
offer competitive advantages. These include: financial services (banking,
brokerage, and insurance); manufacturing (CAD/CAM/CAE and CIM); tourism (hotel
and restaurant support systems); scientific applications, and government
systems.
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The Company's product distribution lines have included a variety of computer
input and output devices, as well as processing and communication systems from
a number of manufacturers. The services which complement these products
include: consultation, design, installation, integration, maintenance,
upgrade, training and software development. The Company has also provided its
customers with training, service and maintenance. The training was provided
at the Company's facilities, at the facilities of the Company's customer or at
the facilities of the Company's supplier depending upon customer preference
and system availability. Service and maintenance contracts have been provided
for the convenience of the Company's customers. A typical service contract
has a duration of 5 years and requires a monthly payment to cover parts and
service.
The Company's operations have been concentrated in Hong Kong and China.
Brighton-Hong Kong focused its operations on the systems integration business
in China for scientific and financial applications. Dataprep focused its Hong
Kong and China operations on commercial activities including hotel management
systems and hardware/software maintenance services.
The Company has marketed its services and products through a local sales staff
that have distribution responsibilities in Hong Kong, Beijing, Shanghai,
Shenzhen and Macau.
Brighton Information Technology Corporation ("Brighton-Hong Kong")
Brighton-Hong Kong, which was formed in 1988, conducted its business
principally in Hong Kong and China. Brighton-Hong Kong's offices have been
located in Hong Kong, Beijing and Shanghai. On September 30, 1994, Brighton-
Hong Kong purchased Brighton-Shanghai and combined all operations. Initially,
Brighton-Hong Kong was engaged in computer systems integration both in Hong
Kong and China. After the completion of the Company's acquisition of Dataprep
in 1990, Brighton-Hong Kong switched its focus to China and the Hong Kong
operation was left with Dataprep.
Shanghai Brighton Information Technology Ltd., a wholly owned subsidiary of
Brighton-Hong Kong, was acquired in September 1994 from Mr Kung, at a
price of $297,403, which represented previous advances by the Company to Mr.
Kung. The Company has provided integrated computer systems to government
ministries and other institutions in China.
Brighton-Hong Kong has provided scientific computing equipment to various
governmental ministries in China. In addition, Brighton-Hong Kong sold and
supported Digital Equipment Corporation's VAX and Data General's MV computing
equipment, as well as Sun workstations and the IBM RS6000 series workstations.
Dataprep (Hong Kong) Limited ("Dataprep")
Dataprep was formed in 1970 and has conducted its business primarily in Hong
Kong and China.
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There have been three major areas of business to Dataprep's Hong Kong
operations. First, the business of selling, training and supporting Property
Management Systems ("PMS") in the hotel industry. Dataprep has had over 50
customers in the region including the Regent Hotel, Hong Kong. Revenues
generated from this PMS related business including software and hardware
maintenance were approximately 46% of Dataprep's total Hong Kong business for
the fiscal year ended September 30, 1995.
Dataprep has also sold and supported computer hardware, peripherals and
related supplies to a variety of customers, such as banks, factories,
commercial offices and software houses. Dataprep has been a dealer for
Decision Data, Dataproducts, Andrews and other vendors. This business
including software and hardware maintenance contributed approximately 52% of
total Dataprep revenues for the fiscal year ended September 30, 1995.
Mr. Kung was, up until January 27, 1997, responsible for the operation and
development of these businesses for the Company. On that date Mr. Kung was
removed from all his official functions by the Board for failure to provide
the historical books and records of the Company and for failure to provide an
accounting of the status of the assets of these subsidiaries as well as due to
actions that involved issues of corporate opportunity and conflict of
interest.
Competition:
The Company has traditionally competed for business with some of the
manufacturers it represents (including IBM, Digital Equipment and Sun
Microsystems), and other manufacturers. There are numerous other entities in
the computer and communications systems industry in Hong Kong and China with
which the Company has also competed.
Sources and Availability of Products and Principal Suppliers and Licenses:
The Company has purchased its hardware and software from multiple suppliers.
Some of the software which the Company provided to its customers, under
licenses, included Oracle-Data Base Management, ON/2 OLTP Packages, various
CAD/CAM products, and Informex. The Company has had hardware distribution
agreements with IBM, Digital Equipment, Sun Microsystems and other
manufacturers. The licenses ranged in length from one to five years and are
generally renewable thereafter. The current status of these license
agreements is unknown to the Company as they were under the control of Mr.
Kung, the former Managing Director of the subsidiaries.
Governmental Regulations:
The conduct of the Company's businesses, the distribution and use of its
products, were subject to various federal laws as well as to various foreign
laws, including an Individual Validated License (IVL) required for supplying
certain high tech computing systems to the PRC. In the opinion of management,
such regulations have no material adverse effect on the Company's business.
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Employees:
As of May 30, 1997, the Company and its consolidated subsidiaries had a total
of 2 full-time employees and 2 part-time employees as follows:
Greater China Corporation 2 Full Time 2 Part time
Research and Development:
During the fiscal years ended September 30, 1996 and 1995, the Company had an
aggregate of expenditures consisting of less than $2,000 of research and
development expenses and no customer sponsored research activities.
Patent, Trademarks or Copyrights:
The Company does not hold any patents which it deems material to its business
and does not generally seek patent protection for the technology it uses in
its products. Although software systems may be copyrighted, copyright laws
provide only limited protection. The Company attempts to protect the program
codes used in its products as trade secrets by utilizing nondisclosure
agreements with its employees, customers and others who are permitted access
to such codes.
To date, the Company has no knowledge of any difficulty in enforcing its
nondisclosure agreements except with regard to the actions of Mr. Kung. The
Company has not filed any trademark registration applications in the U.S.
Patent and Trademark Office. To date, the Company has obtained software
copyrights in the following names: Brighton Call Billing Systems and Brighton
Accounting Systems.
Foreign and Domestic Operations:
Previous operations of the Company, except for certain administrative
operations, have been conducted outside of the United States. No single
customer accounted for 10% or more of the Company's sales during the last two
fiscal years. Since the Company is unable to audit the operations of its
subsidiaries for the period ending September 30, 1996, the Company has written
off such operations, including all assets and liabilities of these
subsidiaries, related to Mr. Kung.
Concentration of Credit Risk and Risk of Foreign Operations:
The majority of the Company's business operations have been concentrated in
Hong Kong and China. The majority of the Company contracts have been arranged
with hotel clients and governmental agencies in those geographic areas. This
resulted in a concentration of credit risk as well as a foreign exchange risk.
The Company has previously mitigated its foreign exchange risk by requiring
clients to provide U.S. dollar denominated letters of credit against product
deliveries. Management also considers the impending transformation in 1997 of
the Hong Kong government from a colonial government ruled by the British to a
government of China to be an event which raises some uncertainty.
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A deterioration in relationships between China and the United States could
have a material impact on the ability of the Company to market and sell its
products in China. See "ITEM 6. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATIONS".
Going Concern:
The previous two years Report of the Independent Certified Public Accountants
for the Company provides that the Company's financial statements have been
prepared assuming that the Company will continue as a going concern. The
Company incurred a net loss of approximately $695,000 and $1,860,000 for the
fiscal years ended September 30, 1995 and 1994, respectively. Further, the
Company had a deficiency in stockholders' equity of approximately $908,000 and
current liabilities exceeds current assets by approximately $1,142,000, at
September 30, 1995. As of September 30, 1996, the Company had a net loss of
$972,730 and a deficiency in shareholder equity of 1,138,277. Subsequent to
September 30, 1996, all shares required to be issued for liability for stock
to be issued ($804,200) have been issued.
In view of the questionable activities of Mr. Kung during his tenure as an
officer and Director of the Company and as Managing Director of its
subsidiaries, the Board of Directors have written down all assets and
labilities associated with Mr. Kung effective September 30, 1996.
The Company has undertaken several steps to achieve future profitability. It
is focusing its activities on opportunities in the information technology
field within the Greater China market. Information technology is one of the
world's most profitable and fastest growing industries and China is the
world's most rapidly developing economy. By combining these two fundamental
elements, in a public company that meets international standards for
management, SEC disclosure and accounting, it is management's believe that the
greatest value for shareholders can be achieved.
The Company is actively seeking to raise additional funds from several sources
in order to redevelop the Company and fund a number of additional
opportunities which management has been negotiating. On May 27, 1997, the
Board of Directors authorized the placement of $500,000 of such funding. No
assurance can be given that the Company will be able to obtain such financing
at all or on terms favorable to the Company. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION."
ITEM 2. PROPERTIES.
The Company maintains it corporate headquarters at 27 East 61st Street, Third
Floor, New York, New York 10021, with the offices of Spring Investment
Corporation, an affiliate of John W. Allen, an officer and director of the
Company. The Company accrues a $5,000 per month charge to cover the cost of
rent, utilities, telephone, fax and administrative services at this location.
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ITEM 3. LEGAL PROCEEDINGS.
A former provider of services to the Company has asserted breach of contract
and other claims against the Company in the amount of $87,201.60 as well as
failure to issue 87,500 shares of the Company's Common Stock. The Company
believes that it has valid defenses against these claims as well as
affirmative claims for relief against the claimant, however, there can be no
assurances as to the resolution or outcome of this matter. Additionally,
Hamilton Brighton Computer Systems, Inc., a company controlled by the wife of
Mr. Kit Kung, has asserted a claim against the Company for $197,047.13 plus
interest of $48,316.71. The Company believes it has a valid defense against
this claim and intends to aggressively defend itself, however, there can be no
assurances as to the resolution or outcome of this matter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
As of November 13, 1995, the Company's stockholders adopted the following
resolutions by written consent by a vote of 2,809,917 shares in favor and none
opposed or abstaining, adopted and approved a Certificate of Amendment to the
Certificate of Incorporation of the Company, which generally had the effect
of: (a) changing the Company's name from "Brighton Information Systems
Corporation" to "Greater China Corporation," and (b) completing a
recapitalization of the Company's securities to decrease the authorized number
of shares of Common Stock of the Company from 100,000,000 shares, par value
$0.02 per share, to 25,000,000 shares, par value $0.02 per share.
PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
As of February 22, 1996 the authorized capital stock of the Company consisted
of 25,000,000 shares of common stock, par value $0.02 per share (the "Common
Stock"). As of May 30, 1997, there were issued and outstanding 8,784,899
shares of Common Stock.
The Company's Common Stock is listed for trading on the OTC Bulletin Board or
in the "pink sheets" maintained by the National Quotation Bureau, Inc. The
Common Stock is quoted under the symbol "GCHC." The following table sets
forth the bid and asked prices for the Common Stock for the periods indicated
below, based upon quotations between dealers, without adjustments for retail
mark-ups, markdowns or commissions, and therefore, may not represent actual
transactions:
Bid Prices Asked Prices
High Low High Low
Year Ended September 30, 1995
1st Quarter .................. 1 11/16 1/16 2 1/8 3/4
2nd Quarter .................. 2 13/32 1 1/4 2 7/8 2
3rd Quarter .................. 7 5/8 1 1/4 10 1/4 1 3/4
4th Quarter .................. 5 1/4 3/4 7 1 3/4
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Year Ended September 30, 1996
1st Quarter .................. 4 7/8 1 3/8 5 3/8 1 3/4
2nd Quarter .................. 2 3/32 7/8 2 3/16 1 3/16
3rd Quarter .................. 1 9/16 3/8 1 25/32 7/16
4th Quarter................... 15/16 9/32 1 1/32 13/32
On May 23, 1997, the closing price for the Company's Common Stock in the over-
the-counter market was bid $.09375 (3/32) per share and asked of $.1875 (3/16)
per share, respectively. As of May 23, 1997, the Company had approximately
1,500 stockholders of record. This number was derived from the records of the
transfer agent of the Company and by determining the number of stockholders
owning shares in "street name." The Company currently has approximately
seven (7) market makers for the Company's Common Stock, including, Barclay
Investments, Barron Chase Securities, William Frankel & Co., M.H. Meyerson &
Co., Inc., Naib Trading Corp., Nash Weiss & Co. and Wien Securities.
No dividend has been declared or paid by the Company since inception. The
Company does not anticipate that any dividends will be declared or paid in the
future.
The transfer agent for the Company is Jersey Transfer & Trust Company, 201
Bloomfield Avenue, P.O. Box 36, Verona, New Jersey 07044.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS.
The following discussion and analysis should be read in conjunction with the
1996 Fiscal Year Unaudited Financial Statement:
Results of Operation:
Since results of the subsidiary companies are not available to the Company as
of September 30, 1996, the Company is unable to provide meaningful comparative
results. The Company is providing unaudited figures for the parent Company,
Greater China Corporation, and will provide comparative results upon
completion of its audit of the parent.
Liquidity and Capital Resources:
On or about December 1, 1995, the Company issued $710,000 principal amount of
Convertible Debentures pursuant to exemption from registration under
Regulation S to certain unaffiliated third parties. The Convertible
Debentures were convertible into shares of the Company's Common Stock at a
conversion price per share equal to sixty-five percent (65%) of the average of
the lowest reported trade price for the Common Stock during the 3-business day
period ending on the date prior to the conversion of the Convertible
Debentures. The Convertible Debentures bore interest at the rate of eight
percent (8%) per annum, with interest payable quarterly in arrears, and with
the full amount of the Convertible Debentures due and payable on December 1,
1997. All debt and interest due and payable to the debenture holders has been
converted into shares of the Company's common stock.
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On March 6, 1996, the Company entered into an agreement with Edelson
Technology Partners III ("ETP") whereby ETP loaned to the Company $150,000 due
and payable within 90 days at an interest rate of 12% per annum. In
conjunction with this note, the Company agreed to provide to ETP warrants to
purchase common shares of GCC stock with the Company having the right to buy
back these warrants from ETP based on the repayment date of the note. Since
the note was unpaid as of September 30, 1996, ETP is entitled to 600,000
warrants, the maximum due under the agreement.
Management is currently in discussion with a number of sources of capital that
management hopes will facilitate the growth and expansion of the Company. The
Company has no commitments for such financing and there can be no assurances
that such financing can be obtained at all or on terms favorable to the
Company. An inability to obtain the required financing will adversely impact
Company operations.
The Company's successful transition from a development stage company to
profitable operations is dependent upon obtaining adequate financing to fund
current operations and acquisitions and for the development of a market for
the Company's products and services.
The Company's auditors have previously included an explanatory paragraph in
their Report of Independent Certified Public Accountants to the effect that
recoverability of the Company's recorded asset amount is dependent upon the
Company's ability to operate profitably, obtain additional financing and to
generate sufficient cash flow to meet its obligations on a timely basis, and
that the financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. There can be no assurances that such a
financing can be completed on terms favorable to the Company or at all, or
that the business of the Company will ever achieve profitable operations.
In the event the Company fails to raise additional funds from such financing,
and fails to generate any additional revenues from operations, the Company may
not be able to meet all of its obligations. There can be no assurances that
any sources of financing will be available from existing stockholders or
external sources on terms favorable to the Company, or at all, or that the
business of the Company will ever achieve profitable operations. In the event
the Company does not receive any such financing or generate profitable
operations, management's options will be to suspend or discontinue its
business activity in its present form.
Outlook:
The Company intends to continue to concentrate its resources on business
opportunities in the China where with more then 12 years of operating
experience management believes the Company has its greatest competitive
advantage. The Company believes that a China based, flexible business
organization can build revenues and enhance operating margins. Although the
Company is exposed to various opportunities in this market, it has not, as
yet, been able to capitalize on them due primarily to a lack of sufficient
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funding. Management is currently addressing this problem by talking with
potential joint venture partners and institutional investors who have fin-
ancial resources that might be made available to the Company. In order to
increase revenues, the Company intends to make acquisitions. Management has
targeted three specific growth areas for development. These are (i) optical
fiber production and distribution (ii) wireless communications and (iii)
information content and distribution services (internet/intranet). The
Company has identified specific opportunities in these three areas where it
hopes to enter into joint ventures and acquisitions that will positively
impact operations and cash flow. There can be, however, no guarantee that the
Company will complete such agreements or be successful in expanding its
operations.
Significant Transactions:
During Fiscal Year 1996, the Company reached an agreement with Newsdata
Network Systems Ltd. ("Newsdata") for the acquisition of a controlling
interest in the company. Newsdata has developed proprietary products and
systems in the field of wireless communications in China. Due to the
inability of the Company to complete its audit and SEC filings for fiscal year
1996, this transaction has not been completed although discussions with
Newsdata have continued on a positive basis.
Effective September 30, 1996, the Board of Directors wrote down all assets and
liabilities associated with Mr. Kit Kung in Hong Kong and in China. Mr. Kung
was the former Chairman of the Board, President and principal shareholder of
the Company as well as the former Managing Director of its subsidiaries. He
was dismissed by the Board from his remaining duties with the Company on
January 27, 1997 due to his questionable activities and failure to provide the
books and records of the subsidiaries over which he had control, as well as
the books and records of the former Brighton Information Systems Corporation
that was under his control when he was Chairman, President and CEO of the
parent Company.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The unaudited financial statements are attached hereto as Exhibit "A" and
incorporated herein by this reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS.
The directors of the Company currently have terms which will end at the next
annual meeting of the stockholders of the Company or until their successors
-12-
<PAGE>
are elected and qualify, subject to their prior death, resignation or removal.
Officers serve at the discretion of the Board of Directors. There are no
family relationships among any of the Company's directors and executive
officers.
The Board of Directors are divided into three classes as nearly equal in
number as may be, with the terms of office of one class expiring each year.
In 1990, directors of the first class were elected to hold office for a term
expiring at the next succeeding annual meeting (the Class I directors),
directors of the second class were elected to hold office for a term expiring
at the second succeeding annual meeting (the Class II directors) and
directors of the third class were elected to hold office for a term expiring
at the third succeeding annual meeting (the Class III directors). The
Corporate Bylaws provide that at each annual meeting of stockholders held
thereafter successors to the directors whose term shall then expire shall be
elected to hold office for terms expiring at the third succeeding annual
meeting except that any director elected to a directorship newly created
since the last annual meeting shall hold office for the same term as the other
directors of the class which such director has been assigned. When the number
of directors is changed any newly created directorship or any decrease in
directorship(s) are so assigned among the classes by a majority of the
directors then in office through less than a quorum or by a sole remaining
director, as to make all classes as nearly equal in number as may be possible
and to the extent of any inequality within the limits of the foregoing, the
class or classes caused to have the greatest or greater number of directors
shall be the class or classes then having the last date for expiration of its
or their terms. The effect of the classification of directors could be to
prevent or impair a change in control or takeover of the Company.
NAME POSITION AGE
John W. Allen Chairman, President and Director (1) 58
Peter R. Barker Executive Vice President,
Secretary/Treasurer and Director (2) 45
Walter J. Culver Director (2) 58
(1) Indicates Class II director
(2) Indicates Class I director
(3) Indicates Class III director
RESUMES OF OFFICERS AND DIRECTORS:
John W. Allen, 58, was elected President and Chairman of the Board in October,
1994. He has been a director since 1989. He previously also held the
position of Vice President and Treasurer. Since 1989 Mr. Allen has also been
Chairman, President and Director of Spring Investment Corporation, a U.S.
based company engaged in establishing and funding new corporate oppor-
tunities. He also serves as a Director or trustee of a number of other
-13- <PAGE>
corporations and foundations. He is a graduate of Yale University and Harvard
Business School with a degree in Economics and Political Science as well as an
MBA.
Peter R. Barker, 45, was elected Vice President, Secretary and Director of the
Company on August 26 1994. On September 30, 1994, Mr. Barker was elected
Executive Vice President and Treasurer of the Company. Prior to joining the
Company, during the period April 1982 to July 1994, Mr. Barker was the senior
executive and Director of Global Intermediary, Inc., Global Excess Services,
Inc. and The Argyle Holding Corporation, international insurance and
reinsurance firms he co-founded. Mr. Barker is currently a director and
officer of AmeRussia Corporation and an officer of Spring Investment
Corporation. He graduated from The Colorado College in 1974 with a degree in
Political Science.
Dr. Walter J. Culver, 58, has been a director of the Company since 1991. Mr.
Culver has acted as Chairman of the Board and CEO of W.J. Culver Consulting,
Inc., a Delaware corporation ("WJC"), (a systems integration consulting firm)
since January, 1990. Dr. Culver received a BEE from the University of Detroit
in 1960. He received his MSEE and Ph.D. (Systems) from Case-Western Reserve
University in 1961 and 1963 respectively.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Section 16(a) of the
Securities Exchange Act of 1934 requires the Company's executive officers and
directors as well as beneficial owners of more than 10% of any class of equity
securities to file initial reports of ownership and reports of changes of
ownership of the Company's Securities with the Securities and Exchange
Commission. These persons or entities are required to furnish the Company
with copies of all Section 16(a) forms that they filed. Based upon a review
of these filings and certain written representations that no other reports
were required, the Company notes the following late reports were filed: 2 late
Forms 4.
Item 10. Executive Compensation.
Summary Compensation Table. The following table sets forth certain
information concerning compensation of certain of the Company's current and
former executive officers, including the Company's Chief Executive Officer and
all executive officers whose total annual salary and bonus exceeded $100,000,
for the fiscal years September 30, 1996 and 1995:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term
Compensation
Awards Payouts
Restricted
Other Annual Stock Options/LTIP All Other
Name and Principal Fiscal Salary Bonus Compensation Awards SARS Payouts Compensation
Position Year ($) ($) ($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John W. Allen (1) 1996 $ 90,000 0 0 0 0 0 0
1995 $ 90,000 0 21,250 0 0 0 0
Kit Kung (2) 1995 $200,000 0 0 0 0 0 0
-14-
<PAGE>
1. John W. Allen has served as the Company's Chief Executive Officer since
October, 1994. A company controlled by Mr. Allen, Spring Investment
Corporation, received $15,000 of compensation for consulting services during
fiscal year ended 1994. During Fiscal Year ended September 30, 1995, Mr.
Allen accrued $90,000 of salary. During the Fiscal Year ended September 30,
1996, Mr. Allen accrued and additional $90,000 of salary. Effective September
30, 1996, all outstanding salary due to Mr. Allen was converted into 439,641
restricted shares of the Company's common stock. Spring Investment
Corporation, during Fiscal Year 1995, received 85,000 shares of restricted
common stock valued at $21,250, the market price at the time of the award, as
part of a management incentive plan. On September 30, 1996, the Company
converted outstanding debts owed to Spring Investment Corp. into 434,837 of
restricted common stock. Spring designated that out of its 434,837 shares,
209,150 were to be issued to VSI Profit Sharing Trust, a non-related entity,
and 61,458 were to be issued to Peter R. Barker, the Executive Vice President
of the Company, in repayment of debts owed by Spring.
2. Kit Kung served as the Company's Chief Executive Officer from 1989 to
October, 1994. Mr. Kung accrued $200,000 of salary in the fiscal year ended
September 30, 1995.
Director Compensation
The Company has agreed that Dr. Walter Culver a member of the Board of
Directors will receive 313 shares of Common Stock for each directors' meeting
he attends in person or by conference telephone call. For the fiscal year
ended September 30, 1996, Dr. Culver was entitled to receive, in the
aggregate, 1,252 shares of Common Stock for attendance at directors' meetings
of the Company. In addition, the Company has entered into an agreement with
W.J. Culver Consulting, Inc., a corporation controlled by Dr. Culver, to
provide consulting services at a rate of $200 per hour, payable 50% in cash
and 50% common stock of the Company based on the market price of the stock
plus reimbursement of expenses. During the year ended September 30, 1996, Mr.
Culver did not provide or receive compensation for any consulting services to
the Company.
During Fiscal Year 1995, all Directors received 25,000 shares of common stock
as part of a management incentive plan to build the Company and its
operations.
-15-
<PAGE>
John W. Allen, and Peter R. Barker are officers, directors and/or principal
stockholders of Spring Investment Corporation ("Spring"). During the fiscal
year ended September 30, 1995, fees of $15,000 were paid to Spring Investment
for providing administrative services to the Company as well as a total of
85,000 shares of restricted Common Stock as part of a management incentive
plan. Peter R. Barker was also paid a fee of $5,000 for services performed
prior to being an officer or director of the Company and during Fiscal Year
1995 received a total of 65,000 shares of common stock as part of the
management incentive plan. During Fiscal Year 1996, John W. Allen received
439,641 restricted shares in lieu of accrued salary. Peter R. Barker received
338,542 restricted shares in lieu of accrued salary and Spring Investment
Corporation received $60,000 for administrative services rendered during
Fiscal Year 1996 and 434,837 shares of restricted common stock for debts owed
to Spring by the Company.
All officers and directors are reimbursed for out of pocket expenses on behalf
of the Company.
Employment Contracts:
The Company has entered into any employment agreements with John W. Allen and
Peter R. Barker covering the period October 1, 1994 through September 30,
1997. The annual compensation is $90,000 and $75,000 to Messrs. Allen and
Barker respectively. Additionally, Messrs. Allen and Barker are entitled to
receive medical and health insurance benefits from the company and
reimbursement for $400/month in automobile expense respectively. The health
insurance and automobile expense reimbursement has not, as yet, been paid by
the Company.
Employee Incentive Stock Option Plan:
The Company provides an incentive stock option plan (the "Plan") pursuant to
which employees who make substantial contributions to the success and growth
of the Company and/or its subsidiaries may receive options to purchase shares
of stock of the Company. The Plan, which is administered by the Finance
Committee of the Board of Directors, the members of which either are not
eligible to participate or waive any right to participate in the Plan, became
effective in June of 1991. The Finance Committee currently consists of Mr.
Allen, and Mr. Barker. A maximum of 156,250 shares of the Company's Common
Stock, par value $.02 per share (either previously unissued or reacquired),
may be sold under the plan after registration under the Securities Act of
1933, as amended, is effective. Such registration has not been effected at
the date hereof and no options have been awarded under the Plan.
The Plan provides that options shall not be granted after the expiration of
ten years from the date the Plan was adopted by the Board. The option price
per share shall not be less than the fair market value on the date of the
grant. Options granted under the Plan shall (a) expire in any event not later
than ten years from the date of the grant, (b) be exercisable during lifetime
-16-
<PAGE>
only by the employee and not transferable by the employee otherwise than by
last will and testament or by the law of descent and distribution, (c) not be
exercisable after the expiration of (I) three months from the date of termin-
ation of employment (12 months if termination is for total and permanent disa-
bility) and (ii) 15 months from date of death, (d) be exercisable in the order
awarded, i.e., any incentive stock options previously `granted to the employee
to purchase shares of the Common Stock of the Company must be exercised, and
(e) be exercisable from time to time at the discretion of the employee upon
full payment of the total purchase price of the shares purchased.
The Finance Committee administering the Plan has not met nor has it approved
the grant of any options to any officer, directors (who are employees) or
other employees as of the date hereof.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table reflects, as of May 27, 1997, the beneficial Common Stock
ownership of: (a) each director of the Company, (b) each executive officer
named in the summary compensation table, (c) each person known by the Company
to be a beneficial owner of five percent (5%) or more of its Common Stock, and
(d) all executive officers and directors of the Company as a group:
Name and Address
of Beneficial Owner No. of
Shares# Percent
John W. Allen 716,182(2) 8.15%
27 East 61st Street, Third Floor
New York, New York 10021
Peter R. Barker 465,000 5.29%
27 East 61st Street, Third Floor
New York, New York 10021
Walter J. Culver 44,421 *
8500 Leesburg Pike, #402
Vienna, VA 22182
Kit Kung 410,539(1) 4.60%
1403 Block B, Sea View Estate
North Point, Hong Kong
All executive officers
and directors as a group
(3 persons) 1,225,603 13.95%
#Pursuant to the rules of the Securities and Exchange Commission, shares of
Common Stock which an individual or group has a right to acquire within 60
days pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person shown in the table.
* Less than 1%
-17- <PAGE>
(1) Includes (i) 266,039 shares owned by Brighton Electronics Corporation
Limited, a company wholly-owned by Mr. Kung for which Mr. Kung has sole
investment and voting power, and (ii) 144,500 shares owned by Hamilton
Brighton Computer Systems, Inc., a company wholly owned by Mr. Kung's wife,
Mrs. Hong Yun for which Mr. Kung claims no investment or voting power. Shares
owned by Mr. Kung and Brighton Electronics Corporation in the Company's
possession (675,312 and 341,250 shares respectively) have been cancelled and
placed into Treasury by the Board of Directors of the Company effective
September 30, 1996.
(2) Includes 276,541 shares owned of record by Spring Investment Corporation,
a company of which Mr. Allen is an officer, director and principal stockholder
and for which Mr. Allen has shared investment and voting power.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Transactions between Companies affiliated with Kit Kung:
Mr. Kit Kung former Executive Officer and principal stockholder and former
director of the Company is an affiliate of and/or an officer, director and
principal shareholder of Brighton Technology Corporation, Inc. ("BTC"),
Hamilton Brighton Computer Systems, Inc. ("Hamilton Brighton"); Brighton
Electronics Corporation, Ltd. ("Brighton Electronics"); Brighton Elevator,
Ltd. ("Brighton Elevator"); The Brighton Industries Corporation ("Brighton
Industries"); Brighton Information Technology Corp. (Shanghai) ("BITCS");
Brighton OLTP Systems, Limited ("Brighton OLTP"); Brighton Information
Technology Limited and Brighton Telecommunication Systems, (Pacific) Ltd.
("BTSP"). Brighton Electronics is a company wholly-owned by Mr. Kit Kung
which owns directly approximately 3% of the Company at September 30, 1996.
Brighton Electronics had developed computer technology and software for which
license rights had been extended to the Company. In 1994, the Company also
subleased space in its New Jersey office to Brighton Electronics for $1,154
and Brighton - Elevator for $6,307. This New Jersey office is now closed.
Amounts due to and from related parties:
At September 30, 1995, $56,177 was the net amount due from Mr. Kit Kung for
expenses incurred and purchases made on behalf of Brighton-Shanghai during
1994. This amount was due on demand with no interest. As of September 30,
1996, $52,000 was due from Kit Kung. This sum was written off by the Board
of Directors as uncollectible effective September 30, 1996.
At September 30, 1996 and 1995, $197,047 was allegedly due to HBCS. Effective
September 30, 1996 the Company has denied liability for this sum since the
Board of Directors never authorized or approved a purported loan agreement
signed by Mr. Kung with his wife, Hung Yun, who has claimed to be the sole
shareholder and President of HBCS (See ITEM 3 - LEGAL PROCEEDINGS).
As of September 30, 1996, $172,407.95 was due to the Company from Brighton
Electronics. Effective September 30, 1996, the Board of Directors of the
Company wrote down this amount as uncollectible.
-18-
<PAGE>
At September 30, 1996 and 1995, $9,548, was allegedly due to Hong Yun, an
employee of Hamilton Brighton and the wife of Mr. Kit Kung. Such amounts were
purportedly advanced to Brighton-Hong Kong and the Company for operating
purposes under an informal arrangement which did not provide for the accrual
or payment of interest. During 1996 and 1995, $ 0 and $32,411 respectively
were repaid and effective September 30, 1996, liability for $9,548 has due to
the actions of Mr. Kung, been denied and written off by Board resolution.
At September 30, 1995, $390,461 was allegedly due to Brighton Industries. And
$12,739 was allegedly due from Brighton Industries. Such amounts were
allegedly advanced to the Company's subsidiaries for operating purposes under
an informal arrangement which did not provide for the accrual or payment of
interest. As of September 30, 1996, $398,688.10 was allegedly due to Brighton
Industries. As a result of the actions of Mr. Kung, the Company has denied
all liability for any and all amounts purportedly due to Brighton Industries
and has written off any amount due from Brighton Industries.
The Board of Directors of the Company has determined that a number of
transactions allegedly incurred by, and on behalf of, Mr. Kung are of a
suspicious nature. The Company, despite numerous attempts, has been
unsuccessful in obtaining from Mr. Kung any of the books and records of its
subsidiaries that were under his control to independently verify the specific
use of funds allegedly advanced to the Company by Mr. Kung and/or his
affiliated companies. Additionally, it has become clear to management that
the related activities of Mr. Kung represent a conflict of interest whereby
Mr. Kung's actions may have breached a number of statutes with regard to
corporate opportunity. Since the Company is unable to audit the records of
its subsidiaries with the potential conflict of interest issues of Mr. Kung in
mind, the Board of Directors of the Company has decided to write down,
effective September 30, 1996, all assets associated with Mr. Kung's activities
and to disavow all liabilities to Mr. Kung and/or his affiliated companies
including Hamilton Brighton Computer Systems Inc. a company controlled by Mr.
Kung's wife, Hung Yun and Brighton Industries.
At September 30, 1995, $384,904 was due to Spring Investment Corporation
("Spring"), a related party. This amount consisted of expenses for rent and
administration of $45,563, an advance of $100,000 plus interest of $10,000,
$45,000 in non reimbursed expenses and accrued management expense of
$184,341. John W. Allen, the Chairman of the Company, is also a shareholder of
Spring. Additionally, the Company entered into an agreement with Spring,
effective October 1, 1994, to provide certain corporate and administrative
services including rent, utilities, communication and other expenses for a
fixed $5,000 per month. However, if annual corporate revenue of GCC exceeds
$6,000,000, an additional fee will be charged at 1% of monthly gross revenues
exceeding $500,000. As part of a management incentive plan, Spring also
received 85,000 shares of restricted common stock during Fiscal Year 1995.
As of September 30, 1996, $166,978 was due to Spring. This amount consisted
of $66,978 due to Spring for travel expenses and other advance payments to or
on behalf of the Company and $100,000 owed for a previous loan by Spring to
the Company. These sums were converted into 434,837 restricted shares of the
Company's common stock at a conversion price
-19- <PAGE>
of $.384 representing an arms length price at which common shares had been
converted with regard to the payment of Convertible Debentures of the Company
dated December 1, 1995 and December 11, 1995. As of September 30, 1996, all
accrued sums due Spring Investment Corporation were paid in full through
conversion into restricted shares of common stock.
The Company believes that the above transactions with Spring Investment
Corporation are on terms no less favorable to the Company than could have been
obtained from unaffiliated parties under the circumstances in which the
transactions were completed. All other transactions with related parties have
been written down effective September 30, 1996.
Transactions relating to other directors:
Directors of the Company have entered into agreements with the Company as set
forth in "ITEM 10 - EXECUTIVE COMPENSATION".
As of September 30, 1996, Mr, John W. Allen, Chairman and President of the
Company received 439,641 shares of the Company's common stock in lieu of
$168,822. accrued but unpaid salary. Mr. Peter R. Barker also received
338,542 restricted shares of the Company's common stock in lieu of $130,000 of
accrued but unpaid salary. These sums were converted into restricted shares of
the Company's common stock at a conversion price of $.384 representing an arms
length price at which common shares had been converted with regard to the
payment of Convertible debentures of the Company dated December 1, 1995 and
December 11, 1995. As of September 30, 1996, all accrued sums due John W.
Allen and Peter R. Barker were paid in full through conversion into restricted
shares of common stock.
Subsequent to the close of the fiscal year ended September 30, 1996, and in
accordance with the terms of their employment contracts, Mr. Allen received
552,632 shares of the Company's common stock in lieu of $52,500 salary for the
period October 1, 1996 - April 30, 1997 and Mr. Barker received 460,526 shares
of the Company's common stock in lieu of $43,750 of salary for the period
October 1, 1996 - April 30, 1997.
-20-
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
A. Financial Statements
The Financial Statements attached as Exhibit "A" to this Form 10- KSB for the
fiscal year ended September 30, 1996 include the unaudited balance sheet of
the Company as of September 30, 1996, and the related statements of operations
and shareholders' equity (deficiency) and cash flows for each of the two years
in the period ended September 30, 1996.
B. Reports on Form 8-K
No Current Reports on Form 8-K were filed by the Company during the fiscal
year ended September 30, 1996.
C. Other Exhibits
21.1 List of subsidiaries of the Company
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 1997 GREATER CHINA CORPORATION
By:/s/ John W. Allen
----------------------------
John W. Allen
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated below.
GREATER CHINA CORPORATION
Dated: May 30, 1997 By:/s/ John W. Allen
------------------------------
John W. Allen
Chief Executive Officer
Dated: May 30, 1997 By:/s/ Peter R. Barker
------------------------------
Peter R. Barker
Chief Financial Officer
-22-
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
21.1 List of subsidiaries of the Company 24
_______________________
-23-
<PAGE>
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
JURISDICTION NAME UNDER WHICH
NAME INCORPORATED DOING BUSINESS
Dataprep (Hong Kong) Ltd. Hong Kong (1) Dataprep (Hong Kong) Ltd*.
Brighton Information Brighton Information
Technology Corporation Hong Kong (1) Technology Corporation.*
Shanghai Brighton Shanghai Brighton
Information Technology, Ltd. Shanghai, China (1) Information Technology, Ltd.**
Brighton Information Brighton Information
Systems (Pacific) Pte. Ltd. Singapore(1) Systems (Pacific) Pte. Ltd.*
Brighton Information Brighton Information
Systems (Australia) Pte. Ltd. Australia(1) Systems (Australia) Pte. Ltd.***
Brighton Information Brighton Information
Systems (Singapore)Pte. Ltd. Singapore(1) Systems (Singapore) Pte. Ltd.***
Amerinex Services Corporation Delaware*(1) Amerinex Services Corporation
* Indicates wholly owned subsidiary of Brighton Information Systems
Corporation.
** Indicates wholly owned subsidiary of Brighton Information Technology
Corporation.
***Indicates wholly owned subsidiary of Brighton Information Systems
(Pacific) Pte, Ltd.
(1) Indicates inactive subsidiary
-24-
<PAGE>
</TABLE>
<TABLE>
GREATER CHINA CORPORATION
(f/k/a) Brighton Information Systems Corporation)
Unaudited Balance Sheet at September 30, 1996 and
Consolidated Audited Balance Sheet at September 30, 1995
<CAPTION>
September 30, 1996 Sept. 30, 1995
ASSETS (Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash $ 5,273 $267,680
Compensating balances
Receivables
Trade -0- 227,300
Other receivables -0- 133,909
Inventories -0- 348,577
Prepaid expenses and
other current assets -0- 183,031
---------- --------
Total Current Assets 5,273 1,160,497
Fixed assets, net 1,869 165,019
Due from related parties -0- 68,916
---------- ----------
7,142 233,935
---------- ----------
Total Assets $ 7,142 $1,394,432
<FN>
See Accompanying Notes to Unaudited Financial Statements.
</TABLE>
- F1 -
PAGE
<PAGE>
<TABLE>
GREATER CHINA CORPORATION
(f / k/ a Brighton Information Systems Corporation)
Unaudited Balance Sheet at September 30, 1996 and
Consolidated Audited Balance Sheet at September 30, 1995
<CAPTION>
September 30, 1996 September 30, 1995
LIABILITIES AND (Unaudited) (Audited)
STOCKHOLDERS' DEFICIENCY
(Net Capital Deficiency)
<S> <C> <C>
Current Liabilities:
Notes payable $ 175,000 $25,000
Short term debt
Trade accounts payable 150,824 723,100
Accrued expenses 15,395 503,921
Deferred revenue
Customer deposits -0- 13,741
Due to related parties -0- 1,036,806
Liability for stock to
be issued 804,200
--------- ----------
Total Current Liabilities 1,145,419 2,302,568
Total Liabilities 2,589,213 2,302,568
-------------- -----------
Stockholders' Equity:
Common stock, $.02 par value;
authorized 25,000,000,
issued 5,965,810. 119,317 108,549
Additional paid-in capital 5,748,771 5,803,680
Foreign currency translation
adjustment -0- (3,951)
Accumulated deficit (6,968,010) (6,778,059)
----------- -----------
(1,099,922) (869,781)
Less shares held in
Treasury at cost
(38,555 shares) (38,355) (38,355)
--------- -------------
Total Stockholders' Equity (1,138,277) (908,136)
Total Liabilities and Stockholders $ 7,142 $1,394,432
Deficiency ----------- ----------
----------- ----------
See Accompanying Notes to Unaudited Financial Statements.
</TABLE>
- F2 -
<PAGE> <PAGE>
<TABLE>
GREATER CHINA CORPORATION
(f / k / a Brighton Information Systems Corporation)
Unaudited Statements of Operations for
the period October 1, 1995 to September 30, 1996 and
Audited Consolidated Statements of Operations for
the period October 1, 1995 to September 30, 1995
<CAPTION>
1996 1995
----- ------
<S> <C> <C>
Revenues, net $ 60,000 $2,998,307
Cost of Sales 1,303,767
-------- ---------
Gross Profit 60,000 1,684,540
Selling, general and 976,912 2,475,169
administrative expenses
Depreciation and
amortization 588 82,835
--------- --------
Loss from operations ( 917,500) (873,464)
Other income (expense):
Other income -0- 99,324
Gain/(Loss) on sale/
write-off of Subsidiary (9,289) 103,536
Interest expense (45,891) (24,562)
-------- --------
(55,180) 178,298
-------- --------
Loss before income taxes (972,730) (695,166)
Income taxes 50 280
--------- ---------
Net loss ( 972,730) (695,446)
Income/(Loss) per share ($0.17) ($0.13)
<FN>
See Accompanying Notes to Unaudited Financial Statements
</TABLE>
- F3 -
PAGE
<PAGE>
<TABLE>
GREATER CHINA CORPORATION
(f/k/a Brighton Information Systems Corporation)
Unaudited Statements of Cash flows for
the Period from October 1, 1995 to September 30, 1996
and Audited Consolidated Statements of Cash flows for
the Period from October 1, 1994 to September 30, 1995
<CAPTION>
1996 1995
------ -------
<S> <C> <C>
Cash flows from Operating Activities:
Net Income/(Loss) ($ 972,730) ($695,446)
---------- ---------
Adjustments to reconcile net
(Loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 588 82,835
Loss on disposal of fixed
assets 12,624
Gain on sale of Subsidiary (103,536)
Provision for loss on investment
in Joint venture 52,616
Change in foreign currency
translation adjustment 31,732
Shares issued as Compensation 103,000
(Increase) Decrease in assets:
Trade receivables 384,945
Other receivables (133,909)
Due from related parties 284,842
Inventories 87,599
Prepaid expenses and other 101,321
assets
Increase (Decrease) in liabilities:
Trade payables 7,653 (479,523)
Accrued expenses 3,077 (335,885)
Due to related parties 673,558
Deferred revenue (155,493)
Customer Deposits (152,317)
Income Taxes Payable (64,996)
---------- ----------
Net Cash (used in) provided by (961,412) (306,033)
Operating Activities: ------------ -----------
- F4 -
<PAGE>
GREATER CHINA CORPORATION
(f/k/a Brighton Information Systems Corporation)
Unaudited Statements of Cash flows for
the Period from October 1, 1995 to September 30, 1996
and Audited Consolidated Statements of Cash flows
from October 1, 1994 to September 30, 1995
(continued)
1996 1995
------ -------
Cash flows from Investing
Activities:
Purchase of fixed assets (1,133) (24,572)
Investment in Joint Venture 52,616
Disposal of fixed assets
------- --------
Net Cash provided (used) by
Investing Activities ( 1,133) 28,044
-------- ---------
Cash flows From Financing
Activities
Increase in Notes Payable 150,000 25,000
Net decrease of overdraft
borrowing (611,779)
Increase in Liability for
Stock to be Issued 804,200
Loss on Write-off of Subsidiary 8,634
--------- -----------
Cash Provided by (used in) 962,834 (586,779)
Financing Activities ---------- -----------
Net Increase (Decrease) in Cash 289 (864,768)
Cash, at Beginning of Period 4,984 1,132,448
----------- -----------
Cash at end of Period $ 5,273 $267,680
-------- ---------
-------- ---------
Supplemental schedule of cash flow information:
Cash paid during the year for
Interest 24,562
Income Taxes - -
Transactions the consideration for which
was stock
Expenses paid 94,760
<FN>
See Accompanying Notes to Unaudited Financial Statements.
- F5 -
<PAGE>
/TABLE
<PAGE>
<TABLE>
GREATER CHINA CORPORATION
(f/k/a Brighton Information Systems Corporation)
Consolidated Statement of Stockholders's Equity (Deficiency)
Years Ended September 30, 1996 and 1995
<CAPTION>
Common Stock Additional Accumulated Treasury Stock
Shares Amount Paid-in Capital deficit Shares Amount Total
<S> <C> <C> <C> <C> <C> <C> <C>
--------- ------- -------- ----------- ------ -------- ----------
Balance at October 30, 1995 5,427,364 108,549 5,803,680 (5,995,280) 38,355 (38,355) (121,406)
Stock issued to redeem subordinated
Debentures plus interest 1,555,098 31,102 711,580 (742,682)
Cancellation of shares in
connection with divestiture of
foreign subsidiaries (1,016,652) (20,333) (766,489) (786,822)
Net Loss for the year (972,730) (972,730)
---------- -------- -------- ---------- ------ ------- ---------
Balance at September 30, 1996 5,965,810 $119,318 $5,748,771 $(6,968,010) 38,355 $(38,355) $(1,138,276)
<FN>
See Accompanying Notes to Unaudited Financial Statements.
</TABLE>
- F6 -
<PAGE>
GREATER CHINA CORPORATION
(f/k/a Brighton Information Systems Corporation)
Notes to Unaudited Financial Statements
September 30, 1996
NOTE A
The attached financial statements for the fiscal year ended September 30, 1996
are unaudited and prepared by management for the parent company, Greater China
Corporation only. At this time, the Company is unable to prepare consolidated
audited financial statements due to the fact that the Managing Director of the
Company's subsidiaries and former Chairman of the Board, President and a
principal shareholder has withheld all books and records of the Company's
subsidiaries.
The Company is in the process of having its auditors audit the books and
records of the parent Company, Greater China Corporation only and attest
to their accuracy.
In light of the fact that the Company is unable to obtain the books and
records of its subsidiaries, the Board of Directors have adopted a resolution
on May 27, 1997 to write off, effective September 30, 1996, all activities,
assets and liabilities associated with these subsidiary companies for
which the records are unavailable.
-F7-
<PAGE>
