SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 017833
GREENLAND
CORPORATION
(Exact Name of Registrant as specified in its charter)
Nevada 87-0439051
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
7084 Miramar Road
San Diego, CA 92121
(Address and zip code of principal executive offices
(619) 566-9604
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: 25,000,000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] YES NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (*229.405 of this chapter) is not contained herein, and will
not 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-K
or any amendment to this Form 10-K. [X]
As of March 31, 1999, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $2,340,000, based upon a $0.18 per share
trading price on that date. Indicate the number of shares outstanding of each of
the registrant's classes of common stock, as of the latest practicable date.
Class A Common Stock 19,736,628 Shares Outstanding
$0.001 par value as of March 31, 1999
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Part III of this Form 10-KSB is included by
reference to the Company's definitive proxy statement filed in accordance with
rule 14a-101, Schedule 14A.
Traditional Small Business Disclosure Format (check one): Yes [X] No []
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Part I
Item 1.
Business
Greenland is a corporation formed on July 17, 1986, as Zebu, Inc. On September
11, 1994, the shareholders approved changing the name of the company to
Greenland Corporation. In September 1994, the Company acquired GAM Properties,
Inc., which it sold for stock, to Golden Age Homes, Inc. in December, 1997.
The Company, for the prior three years, was engaged in the development and
marketing of advanced communications technology known as automated meter reading
("AMR"), which enable utilities to automate meter reading functions via the
Company's AirLink system. The technology was developed initially by Areil
Systems, Inc. This ownership was acquired by Greenland in December, 1995. In May
1996, the Company and Areil entered into an exchange agreement which provided
for the transfer of the AMR technology to Greenland. The Company marketed its
automated meter reading ("AMR") technology to utilities. Greenland has funded
research and development of a system called AirLink TM that provides wireless
AMR services to utilities.
The Company entered into a definitive agreement with Telenetics Corporation, a
publicly traded company, for the sale of its AMR technology, including AirLink
and consummated the sale on April 5, 1999. The Company received shares of
convertible preferred stock of Telenetics with a face value of $900,000.
In May 1998, as reported on Form 8-K, the Company entered into an exchange
agreement and acquired all the issued and outstanding stock of Check Central,
Inc ("Check Central"), making Check Central, Inc., a wholly owned subsidiary of
Greenland. Check Central is the inventor of proprietary software that is capable
of providing consumers with automated payroll check cashing, ATM and money order
services delivered through a freestanding kiosk, similar in appearance to an ATM
machine (the "Check Cashing ATM" or "System" or "Product"). (See Notes to
Financial Statements).
Business Operations
The Company is engaged exclusively in the development of proprietary software
that is capable of providing consumers with automated payroll check cashing, ATM
and money order services delivered through a freestanding kiosk, similar in
appearance to an ATM machine. The Company acquired this technology in May 1998,
when Check Central was incorporated into Greenland Corporation as a wholly-owned
subsidiary. Greenland purchased the exclusive rights to Check Central's software
and hardware designs for the expressed intent of completing the development of a
Check Cashing ATM.
The Company is addressing an ever-increasing market demand. During the last
decade, the number of consumers who have no bank affiliation has grown
substantially and now numbers 28% of US households. Accordingly, check-cashing
businesses are proliferating. These businesses cash checks for a fee based upon
a percentage of the face amount of the check (up to 6%). It has been estimated
that the check cashing industry generates over $1.5 billion in fees annually.
Until very recently, check-cashing stores have been a one stop, one service
industry generally centered in lower economic neighborhoods. Companies such as
Ace Cash Express, Dollar Financial, USA Check Cashing and United Check Cashing
have managed independent dedicated storefront businesses. In the 1990's, many of
these stores have expanded services by selling stamps, money orders, and special
event tickets.
The Company is prepared to capture a significant share of the $1.5 billion in
fees by offering automated payroll check cashing, ATM, money order services,
advanced payroll loans and other services. The Check Cashing ATM is designed for
installation in retail environments such as convenience stores, liquor stores,
military exchange stores, entertainment establishments, banks, supermarkets and
other locations where our clientele
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frequent. In addition to revenue generated from the sale of the Check Cashing
ATM, the Company will receive a continuous revenue stream from transaction fees
from check cashing, ATM and money order services.
The Company has two beta test units in the field, installed in January and
February 1999, that are providing check cashing and ATM services. The first
commercial machines available for sale, in April 1999, will provide payroll
check cashing, ATM and money order services.
The Company plans to add future services including: bill-paying, wire transfers,
on-line purchases, payday loans and electronic tax filings, all provided through
new software upgrades. The Company believes these services will not only
increase the Company's competitive advantage but will generate additional
revenues for both the owner of the Check Cashing ATM and the Company as part of
the ongoing transaction revenue stream.
The Company is not aware of any comparable check-cashing system in the market
today that offers the potential benefits and broad menu that the Company intends
to incorporate into the Check Cashing ATM. The Company believes that the
technology is ahead of the competition, that competitor's machines are
substantially larger (taking too much store space), substantially more
expensive, and do not offer the full complement of services offered by the Check
Cashing ATM. The Company believes that it has the opportunity to change the
manner in which check-cashing services are performed and to become a significant
competitor in the market for check cashing and related services.
Recent Developments
After considerable market study, the Check Cashing ATM was designed in early
1998. During the next six months integrating software was written and the
modular low maintenance sub-components were defined, purchased, and housed in an
attractive steel cabinet. The first fully working prototype was completed in
August 1998. Besides providing important engineering data, this unit has been
shown at numerous trade shows, receiving extremely high industry interest from
banks, independent markets, and chain outlet representatives.
Company strategy since August has centered on providing a final manufacturing
prototype, completing all software, testing, and preparation for manufacturing
start-up. In support of the Company's objective to produce a highly reliable
system, the Company chose to introduce two company-owned beta units into
operational stores during January/March 1999. The first unit was installed,
January 5, 1999, in La Loma Market in Southern Los Angeles, California. A third
fully operational beta unit and two bench units have been installed in a
simulated market environment and used for accelerated age testing. As a result
of the Company's in-store beta tests and in-house testing, management expects
that the first Check Cashing ATM's in the market will exhibit mature and trouble
free services.
Check Central believes it is introducing the latest innovation in self-service
check cashing. This new high-tech kiosk provides the high returns of check
cashing without incurring the excessive franchise fees, overhead costs, or
normal security risks. Engineered with security in mind, the Check Cashing ATM
takes up minimal floor space and provides full vault protection against theft.
With a look and feel of a standard ATM, the Check Cashing ATM is the ideal
method of providing multiple financial services for customers. With it's user
friendly touch screen technology, the Check Cashing ATM can perform a variety of
financial services including check cashing, ATM transactions and money orders.
Future services are expected to include payday loans, bill paying, wire
transfers, electronic tax filings, and on-line purchases. The Company believes
that automating the delivery of financial services into a self-service kiosk,
the Check Cashing ATM will build traffic and increase sales without adding staff
or huge overhead expense for retail outlets.
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Industry Overview
Check-cashing businesses are proliferating. These businesses cash checks for a
fee based upon a percentage of the face amount of the check (up to 6%). It has
been estimated that the check-cashing industry generates over $1.5 billion in
fees annually.
Until very recently, check-cashing stores have been a one stop, one service
industry generally centered in lower economic neighborhoods. Companies such as
Ace Cash Express, Dollar Financial, USA Check Cashing and United Check Cashing
have managed independent, dedicated store-front businesses. In the 1990's, many
of these stores have expanded services by selling stamps, money orders, and
special event tickets.
In the 1990's, a strong trend emerged in the convenience store industry toward
providing alternative financial services to its customers. As an example,
convenience stores are currently the leading vendors of money orders and over
50% have ATM machines on premise. In addition, 90% of these stores felt forced
to cash increasing numbers of personal payroll checks to ensure adequate
customer traffic but many also suffered uncontrolled loses due to bad checks.
Therefore, the check-cashing kiosk with ATM and money order services offers the
convenience store owner a new reliable profit center requiring only a small
amount of space, increased retail customer traffic, and the generation of new
customers with ready cash to make purchases.
As a result of the increasing number of new customers seeking payroll
check-cashing services outside a banking environment and their tendency to turn
toward neighborhood convenience stores for these services, it is natural that
several companies were attracted to the idea of providing this capability from a
free-standing kiosk. The Company is aware of two other companies besides Check
Central that have attempted to build free-standing, ATM, check-cashing kiosks.
One is Mr. Payroll and the other is Southland Corporation which operates 7-11
stores. The Company believes that each have used machines with retail purchase
prices substantially higher than the Company's product.
Market Opportunity
As the number of consumers without bank services grows, so do the check-cashing
businesses that cater to them. These consumers generally do not have checking
accounts; some do not have any formal banking relationship whatever. Bills are
generally paid with money orders.
The payroll check-cashing industry serves a population that transacts
approximately one trillion dollars annually. This market segment is estimated to
be 28% of U.S. households. Additionally, there are at least 10 million Americans
who receive some form of government payment but cannot afford bank services,
according to the U.S. Treasury Department.
Check-cashing businesses (in storefronts) are proliferating. These businesses
cash checks for a fee based upon a percentage of the face amount of the check
(up to 6%). These businesses have to absorb traditional operating costs such as
rent, telephone, and personnel. Additionally, losses due to bad checks can be
substantial. Until recently, there has never been a cash machine that could cash
a check. Check Central provides a highly rational and profitable alternative to
serve a large population that requires check cashing/ATM/money orders/on- line
transaction services. The underlying technology mitigates much of the risk of
bad checks and theft.
The check-cashing industry generates an estimated $1.5 billion in fees annually.
These charges represent a base platform to provide additional services, which
are estimated as follows:
Payroll: 80%
Government: 10%
Personal: 5%
Other: 5%
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There are a wide variety of retail establishments that could profit from the
Check Cashing ATM. These include: convenience stores, supermarkets, laundromats,
liquor stores, military exchange stores and entertainment establishments. Even
businesses with large workforces, such as factories, could benefit from the
installation of the Check Cashing ATM.
In 1996, there were approximately 93,000 convenience stores in operation in the
U.S. The industry is large and growing. 1995 sales were $144 billion; there is
an annual growth rate of 9%. Average annual sales per location is $1.8 million.
There is an emerging trend in the convenience store industry toward providing
alternative financial services to its customers. Convenience stores are
currently the leading vendors of money orders and the industry is emerging also
as a leader in providing ATM services with over 50% currently providing machines
on-site. Over 90% of convenience stores accept personal checks.
Soon after the first prototype of the Check Central Check Cashing ATM was
completed in August 1998, it was demonstrated at a trade show. Extremely high
interest was shown from distributors, banks, and large chain outlet
representatives. This early product reception from key customers has provided
the company with significant reassurance that a strong and receptive market
exists for the Check Central Check Cashing ATM.
The Check Cashing ATM provides the perfect solution for those retailers who want
to increase sales, profits, and market share. This exciting new technology will
draw new customers to the store and instantly put cash in their hands. Customers
who use the Check Cashing ATM will often be prone to impulse spending right
after they cash a check or withdraw cash. The Check Cashing ATM provides a full
check-cashing operation with no additional staffing overhead and no loss
exposure from bad checks.
By cashing checks, dispensing money orders, accepting ATM cards, and dispensing
phone cards, the Check Cashing ATM generates multiple sources of revenue from a
single piece of equipment.
How It Works
The Check Central Check Cashing ATM has been designed for easy customer use.
A potential check-cashing customer can enroll for a check-cashing membership at
any Check Cashing ATM location by simply filling out an application and
inserting the application and payroll check into the Check Cashing ATM scanner.
The check is scanned and returned to the customer. A photo image of the
customer, the application, and the check are transmitted for approval to the
Check Central customer service processing center. The initial approval process
may take as little as 10 minutes, depending upon how quickly the applicant's
information can be verified. The approval process involves confirmation of basic
information such as employment, employer's bank account, driver's license, and
address. Upon approval, customers can then cash their payroll check by inserting
the check into the scanner and following the on screen directions. The customer
has a choice of selecting either Spanish or English by simply touching the
screen.
Once the check is inserted, the customer will be prompted to enter a Personal
Identification Number ("PIN") the customer selected when filling out the
application. If there are any questions, a phone handset is conveniently
provided and when lifted by the customer, it dials directly into the customer
service center. With the video camera display, a well-trained customer service
professional can easily help the customer through the prompts in either Spanish
or English. If there are no questions, the screen will prompt the customer to
enter the check date and amount, insert the check into the scanner, and once
approved, the check is cashed. The advanced processing software used by the
Check Central customer service center quickly performs up to one hundred and
twenty-four separate algorithms and can approve the check in seconds. Any checks
that are not approved are rejected and returned to the customer.
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For all future transactions, the customer will be mailed a membership card that
contains a magnetic strip and looks like an ATM card. If a card is lost or
stolen, customers will still be able to cash checks by remembering the social
security or unique identification number and PIN. If the customer loses his card
and forgets all his numbers, Check Central can still cash the check by comparing
the customer's original photo with the person standing in front of the Check
Cashing ATM camera.
Once the check is approved, the check-cashing fee is deducted from the face
value of the check and the remaining balance is then available to the customer
to be taken as cash and/or money orders. The customer is prompted to select the
amount to be dispensed in any combination of cash or money orders. No coins are
dispensed so the Check Cashing ATM dispenses cash to the customer in increments
of $50's and $20's with any balance paid via a voucher. This in-store voucher is
good for purchases or cash back at the register. The Company may elect to
install a four-drawer dispensing model which may have $1, $5, $20 and $100
denominations which means the in-store voucher could be in amounts less than $
1, or rounded up to the nearest whole dollar and vouchers eliminated.
This in-store voucher feature provides a valuable means of getting the
check-cashing customers to spend more while they are in the store.
The checks cashed during the day are stored in a keyed lock box. The retailer
will remove from the Check Cashing ATM at the end of the day and deposit the
checks into a designated clearing account at a local bank. A fee of 1.2% of the
total amount of checks authorized will be deducted from the clearing account on
a daily basis. A transaction detail report will be provided that clearly shows
the fee breakdown along with all in-store vouchers, money orders, checks cashed
and ATM withdrawals. This detailed report enables the retailer to quickly
reconcile the daily check deposits to the daily summary.
Cash loading is the responsibility of the retailer, unless other arrangements
are made. Most successful check- cashing stores cash between $150,000 -
$1,000,000 worth of checks each month. For those retailers who do not have
enough cash on hand, there are alternative sources for vault cash. The Small
Business Administration (SBA) has approved a loan package to purchase the Check
Cashing ATM at $32,000 along with $100,000 for vault cash, subject to customer
qualifications. There are also third-party cash providers that are normally
willing to provide cash to qualified customers.
Competition
There is limited competition for Check Cashing ATM because the technology is
relatively new and automated check cashing has only a limited operating history.
However, check cashing is a growing industry. Traditional check-cashing
businesses are now considering automating some of their operations as well.
Ace Cash Express, Inc. is the largest chain of check-cashing services with a
network of over 900 locations. Ace Cash Express, Inc., charges a franchise fee
and on-going royalties to any location. The Company's stock is traded on NASDAQ
under the symbol AACE.
Mr. Payroll is the next most significant competitor. Mr. Payroll has
approximately 95 machine-operated, check- cashing outlets. The company is wholly
owned by Cash America International.
Other competitors who are significant in the check-cashing industry include:
Dollar Financial, USA Check Cashing, Pay-O-Matic, United Check Cashing, and Nix
Check Cashing. Dollar Financial is growing rapidly by acquiring other
check-cashing firms and has nearly 400 locations.
Check Central expects to be highly competitive with retail pricing of $32,000
per machine. In addition, no other competitor can offer the power and security
provided by Check Central's central command system, which improves a
check-cashing site's operating efficiency while reducing losses due to fraud.
Check Central machines operate very simply. They need no trained person on site.
Thus, store owners will be relieved of hiring and
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training in-store check cashiers. They will no longer be concerned with
unanticipated check loss and can concentrate on building their store profits
from reliable Check Central fee payments and increased store traffic.
Sales Strategy
The principal strategy selected for Check Central product sales is through an
experienced ATM kiosk master distributor for both independent store outlets and
chain markets. As a result, during late 1998, and early 1999, the Company
engaged in discussions with several large ATM distributors and several
check-cashing companies that were interested in exclusive territorial or
selected outlet licenses to sell Check Cashing ATMs.
In March 1999, the Company consummated an agreement with SmartCash ATM, an
affiliate of ATM International, Inc., to be the Master Distributor on a
exclusive basis for the Company. Under the terms of the master Distributor
Agreement, SmartCash ATM is required to order 385 Check Cashing ATMs in 1999,
1,200 Check Cashing ATMs in 2000 and 2,000 Check Cashing ATMs in 2001 to remain
the exclusive distributor of Check Central.
In addition, successful completion of product beta tests in the first quarter of
1999 will, in the Company's opinion, allow the Company to begin a high-rate
manufacturing start-up, with deliveries beginning in early summer of 1999.
The banking industry interest in the Check Cashing ATM has subtle differences
from those in the convenience store business sector. Both want to provide
customers a reliable and highly desired service at a profitable fee. However,
banks unlike other customer sectors, will also want to convert the best clients
into full time bank customers or at least provide them additional banking
services such as car, home, or other loans.
The Company believes that it is in its best interest to develop a strategic
banking relationship with possibly one or two nationwide banks that will become
the cash provider, and master check processor to Check Central. In return, Check
Central will pay for these financial services and provide the selected bank with
exclusive on-screen advertisement to help handle customers who need additional
banking services.
Company strategy since August 1998, has centered on providing a final,
manufacturing prototype, completing all software, testing, and preparing for
manufacturing start-up. In support of our objective to produce a highly reliable
system, the Company has chosen to introduce three company-owned beta units into
operational stores during January/April 1999. The first unit was installed
January 5, 1999, in La Loma Market in Southern Los Angeles, California.
Manufacturing and Quality Control
The Check Cashing ATM has been designed using a fully modular approach. The
outside case is made of a thick, high-grade steel to provide maximum protection.
Each sub-component (monitor, magnetic card reader, printer, scanner, money
dispenser, CPU, etc.) is common to ATM machines and chosen for its high
reliability. All key sub-components are mounted on easy access slides to
facilitate replacement if necessary. Brackets, power supplies, cable bundles,
hinges and all other peripherals are heavy-duty components to ensure long life
and low repair cost. In addition, Check Central has taken special care in the
final design phase to provide itself a complete design package with full CAD/
CAM digital drawings which will be used to set up a multiple vendor supply
system.
Presently, Check Central has a fully certified set of subcontractors, suppliers
and assemblers to build machines to meet the Company's requirements. To ensure
its ability to ramp up to manufacture and deliver hundreds of units per month by
late spring of 2000, discussions are underway with several major ATM machine
manufacturers who have expressed an interest in becoming "build to print"
suppliers.
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Patents and Proprietary Technology
The Company will protect its technology by filing copyright and patent
applications for the patentable technologies that it considers important to the
development of its business. The Company also intends to rely upon trade
secrets, know-how and continuing technological innovations to develop and
maintain a competitive advantage.
The Company has filed a copyright application with the United States Patent and
Trademark Office with respect to its proprietary server technology. The Company
also plans to file patent applications in the future with respect to its
proprietary kiosk system and any other technology it may develop for use with
the Check Cashing ATM. There can be no assurance that any U.S. patent
application filed by the Company will be granted or, if obtained, will
sufficiently protect the Company's proprietary rights.
Even if the patents the Company applies for are granted, they do not confer on
the Company the right to manufacture and market products if such products
infringe patents held by others. The Company has not undertaken or conducted any
comprehensive patent infringement searches or studies. If any such third parties
hold any such conflicting rights, the Company may be required in the future to
stop making, using or selling its products or to obtain licenses from and pay
royalties to others, which could have a significant and material adverse effect
on the Company. Further, in such event, there can be no assurance that the
Company would be able to obtain or maintain any such licenses on acceptable
terms or at all.
Employees
Including its officers, the Company presently employs 8 full-time employees. The
Company uses independent consultants for a variety of tasks, including
engineering, shareholder relations, and marketing.
Item 2.
Description of Property
Greenland currently occupies approximately 7,500 square feet of office space
comprising the entire fourth floor of 7084 Miramar, San Diego, California 92121.
The Company entered into a three-year lease, commencing January 1, 1997, with
three (3) three-year options to extend its tenancy.
Item 3.
Legal Proceedings
The Company's officers and directors are aware of no threatened or pending
litigation which would have a material, adverse effect on the Company.
Item 4.
Submission of Matters to a Vote of Security Holders
NONE
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Item 5.
Market for Registrant's Common Equity and Related Stockholder Matters
The Company's common stock is traded in the over-the-counter market, and quoted
on the OTC Electronic Bulletin Board. The Company's common stock has traded,
during the fiscal year ended December 31, 1998 between $4.84 (effect of 1-10
reverse stock split) and $0.08 per share. The number of shares of record of
common stock, $.001 par value, of the Company was 12,679,331 at December 31,
1998 and 19,736,628 at March 31, 1999. The Company has not yet adopted any
policy regarding payment of dividends.
High Low
Quarter ended Mar.31 $ 1.25 $ 0.31
Quarter ended Jun.30 4.84 0.31
Quarter ended Sep.30 1.09 0.14
Quarter ended Dec.31 0.34 0.08
- ------------------------------ ---------- --------------
At the Annual Meeting of Shareholders held June 12, 1998, the shareholders
authorized the Company to effect a 1 for 10 reverse stock split of the Company's
Common Stock. The proposal provided that each ten (10) issued and outstanding
shares of Common Stock would be automatically converted into one (1) new share
of Common Stock, par value $0.001. The number of authorized shares and the par
value designation of the Common Stock was unaffected, the rights and privileges
of the holders of the Common Stock was unaffected, and each Stockholder's
percentage ownership interest in the Company, proportional voting power and
other rights were unchanged by the proposal. The proposal was approved by the
Shareholders and the reverse split was implemented on July 2, 1998.
Item 6.
Management's Discussion and Analysis or Plan of Operation
The following discussion pertains to the Company's operations and financial
condition as of the end of the year December 31, 1998.
In May of 1998, the Company purchased the exclusive rights to all of Check
Central Inc., software and hardware designs for the expressed intent of
completing the development and marketing of a Check Cashing ATM. Check Central's
technology was acquired through an exchange of all the issued and outstanding
stock of Check Central, Inc. for 35,000,000 (pre-reverse split) restricted
shares of the Company's common stock valued at $2,625,000.
In late 1998, after completion of further market and engineering studies, the
Company determined that a significant amount of additional capital and a
substantial commitment of labor resources would be required to complete research
and development of AMR. Since the Company was making rapid progress with the
Check Cashing ATM and believed that it was faster to market, took less resources
and offered a greater financial potential for the Company, a strategic decision
was made to pursue the development of the Company's Check Cashing ATM on a full
resource basis. Therefore, the Company entered into a transaction, on April 5,
1999, with Telenetics Corporation, whereby Telenetics acquired the advanced
communication technology known as automated meter reading ("AMR") in exchange
for shares of Convertible Preferred Stock of Telenetics with a face value of
$900,000.
As a result of the sale of AMR, the Company is engaged exclusively in the
development of proprietary software and hardware that is capable of providing
consumers with automated payroll check cashing, ATM and money order services
delivered through a free standing kiosk, similar to an ATM machine (the "Check
Cashing ATM").
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The Company has invested, and continues to invest, considerable time and effort
in development of the Check Cashing ATM, assembling a development team,
analyzing the market, planning the business, creating prototype and beta test
units, and locating reliable manufacturers for the Check Cashing ATM.
The Company's strategy for marketing and sales of the Check Cashing ATM has been
directed at locating an established large, national distributor of ATM machines.
Established distributors have the infrastructure in place to sell, service and
maintain a large volume of machines and are best equipped to penetrate the
market quickly and efficiently. This strategy allows the Company to concentrate
its resources on doing what it does best, develop reliable, efficient products.
The Company successfully implemented this strategy by consummating a Master
Distributor Agreement with SmartCash ATM, Ltd. a Dallas, Texas based national
distributor (see Subsequent Events Schedule).
This sales strategy will effect two significant revenue streams for the Company.
The first source of revenue will result from the sales of Check Cashing ATMs.
Initially, the Master Distributor will purchase the machines at a wholesale
price that will initially result in gross margins of approximately 50%. The
Company expects these margins to improve as Check Central begins to order
machines in larger quantities taking advantage of volume discounts and economies
of sale. The second revenue source will result in the continuity of transaction
fees generated from each Check Cashing ATM. Check Central will share in the
transaction fees along with the owners of the Check Cashing ATM. The fee
generation of Check Central will get larger with the placement of additional
machines and as machines mature in the market, more transaction fees will be
generated.
Results of Operations
Revenue - The Company reported no revenue in 1998. With the acquisition of Check
Central in mid 1998, the company focused its efforts and available capital to
further develop the Check Central technology. To validate the market and test
mechanical and systems reliability, management produced its first demo check
cashing model by the third quarter of 1998 followed by two beta test units in
late 1998. After the initial "debugging" period, Check Central placed its first
two working machines in Southern California in January and February of 1999.
With the successful completion of beta testing and consummation of the agreement
with SmartCash ATM (see Subsequent Events Schedule), Check Central is expected
to begin shipping the first production models to market by late second quarter
of 1999.
Operations - The Company continues to fund its operations for the development
and deployment of Check Cashing ATM. The two beta units and the one
demonstration unit were financed primarily from funds received from equity
private placements.
The Company spent a significant part of the year building the infrastructure
necessary to support not only the research and development effort but laying the
ground work for the various support groups that will be required for successful
transition from a development stage company to a complete manufacturing,
marketing and service organization. The Company has successfully blended both
employee and consultant based infrastructure that is comprised of mechanical and
design engineers, software engineers, back-end support personnel, with payroll
check cashing experience, and financial support personnel. This organization
will be critical to the successful ramp-up of production schedule for late
second quarter of 1999.
Check Central has a fully certified set of subcontractors, suppliers and
assemblers to build machines to meet the Company's requirements. To ensure its
ability to meet production schedules and gear for increased output (estimated
100 units monthly by late spring 2000), the Company has engaged in discussion
with major ATM machine manufacturers who have expressed an interest in becoming
turnkey manufacturing partners.
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Expenses - General and Administrative expenses for the year ended December 31,
1998 were $2,656,095 compared with $1,820,050 for 1997. The major reason for the
increase in G&A was due directly to the Check Central acquisition and extensive
product development costs. In addition to this increase for Check Central,
limited resources were allocated to Airlink Systems. Depreciation, interest,
property taxes and other expenses decreased from $95,099 in 1997 to $54,726 in
1998. Due to lack of capital, the Company has paid the officers and certain
consultants their compensation in the form of stock and as a result the Company
has issued shares of its common stock which is reflected as G&A expense.
Income (Loss) - During the year ending December 31, 1998, the Company had losses
of $3,322,163 compared to losses of $1,663,040 for the calendar year ending
1997. The increase in losses were due to the loss on the sale of the Lake
Elsinore property of $627,025 and increases in product development costs for
Check Central.
Liquidity and Capital Resources
Assets increased substantially in 1998 due to the acquisition of Check Central
of $2,625,000. The year ending December 31, 1997 assets totaled $4,410,000
versus $6,337,242 for year ending 1998. The Company's total liabilities
decreased for 1998 through efforts of management to pay down existing
obligations and bring vendors current. Total liabilities were $556,672 for the
year ending December 31, 1998 compared with $812,000 for year ending December
31, 1997.
The Company's strategy has been and will continue to be to maximize the return
of assets for the Company and its shareholders. The Company reevaluates its
assets on an on-going basis to determine the most effective use and benefit to
the Company in relation to the Company's operations needs. Based on this review,
the Company will either sell or leverage the asset for liquidity to support the
Company's capital requirements. As a result of this process, the Company will
continue to evaluate its assets, including a promissory note from Quantix
Corporation and the convertible preferred shares of GAHI.
Stockholder's equity was $5,780 at December 31, 1998, and increase of
$2,184,262.
The Company has a working capital deficiency of $(457,422) at December 31, 1998
and a retained deficit of $(6,884,321). The Company's needs for working capital
is a key issue for management and necessary for the Company to meet its goals
and objectives. The Company continues to pursue additional capitalization
through private placement and other activities in order to raise funds for
ongoing operations, including institutional lending, lines of credit, purchase
order financing and the sale of or financing of its assets.
Management believes that institutional lending will be available to the Company
once the Company establishes a track record of production and shipping
stability.
Subsequent Events
Subsequent to December 31, 1998, the Company entered into a transaction, on
April 5, 1999, with Telenetics Corporation, whereby Telenetics acquired the
advanced communication technology known as automated meter reading ("AMR") in
exchange for shares of Convertible Preferred Stock of Telenetics with a face
value of $900,000. In late 1998, after completion of further market and
engineering studies, the Company determined that a significant amount of
additional capital and a substantial commitment of labor resources would be
required to complete research and development of AMR. Since the Company was
making rapid progress with the Check Cashing ATM and believed that it was faster
to market, took less resources and offered a greater financial potential for the
Company, a strategic decisions was made to pursue the development of the
Company's Check Cashing ATM on a full resource basis.
Subsequent to December 31, 1998, the Company entered into a transaction on March
30, 1999, with SmartCash ATM, Ltd. ("SmartCash") whereby the Company entered
into a Master Distributor Agreement with SmartCash
11
<PAGE>
ATM, an affiliate of ATM International (collectively, "SmartCash ATM") located
in Dallas, Texas. Under the terms of the Master Distributor Agreement, SmartCash
ATM is required to order 385 Check Cashing ATMs in 1999, 1,200 Check Cashing
ATMs in 2000 and 2,000 Check Cashing ATMs in 2001 in order to remain the
exclusive distributor for Check Central. The Company believes this relationship
will enable Check Central to achieve rapid market penetration by utilizing the
services of an existing operation with marketing and sales personnel in place.
The Company will also pursue direct corporate sales on a limited basis and will
pay SmartCash ATM a commission on said sales.
Subsequent to December 31, 1998, the Board of Directors of Greenland has
approved the commencement of a private placement offering. The Company
anticipates commencing the offering shortly.
Item 7.
Financial Statements and Supplementary Data
See index to financial statements included herein
Item 8.
Change in and Disagreements with Accountants on Accounting and Financial
Disclosure
None
Item 9.
Directors, Executive Officers, Promoters and Control Persons, Compliance with
Section 16(a) of the Exchange Act
The information required by this item relating to the Company's directors and
nominees and disclosure relating to compliance with Section 16(a) of the
Securities Exchange Act of 1934 is included under the captions "Election of
Directors" and "Compliance with Section 16(a) of the Securities Exchange Act of
1934" in the Registrant's Proxy Statement for the 1999 Annual Meeting of
Shareholders and is incorporated herein by reference.
Item 10.
Executive Compensation
The information required by item 10 of Form 10-KSB is incorporated by reference
to the information contained in the section captioned "Executive Compensation"
in the Proxy Statement to be filed with the Commission on or before April 30,
1999.
Item 11.
Security Ownership of Certain Beneficial Owners and Management
The information required by item 11 of Form 10-KSB is incorporated by reference
to the information contained in the section captioned "Security Ownership of
Certain Beneficial Owners and Management" in the Proxy Statement to be filed
with the Commission on or before April 30, 1999.
12
<PAGE>
Item 12.
Certain Relationships and Related Transactions
The information required by item 12 of Form 10-KSB is incorporated by reference
to the information contained in the section captioned "Certain Relationships and
related Transactions" in the Proxy Statement to be filed with the Commission on
or before April 30, 1999.
Item 13.
Exhibits and Reports on Form 8-K
(A) List of documents filed as part of this report.
(1) Financial Statements
Reference is made to the index to Financial Statements under
Item 7 in Part II hereof, where these documents are listed.
(2) Financial Statement Schedules
None
(3) Exhibits
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Greenland Corporation
Date: April 15, 1999 By:
Louis T. Montulli
CEO, Chairman of Board
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 15, 1999 By:
Lee R. Swanson
Chief Financial Officer, Director
Date: April 15, 1999 By:
Thomas J. Beener
Secretary, Director
Date: April 15, 1999 By:
Richard Wray
Director, COO
Date: April 15, 1999 By:
Louis T. Montulli
CEO, Chairman of Board
13
<PAGE>
CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT........................................ F-2
CONSOLIDATED BALANCE SHEET.......................................... F-3
CONSOLIDATED STATEMENTS OF OPERATIONS............................... F-4
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY.......... F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS............................... F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.......................... F-7
See Notes to Consolidated Financial Statements.
F-1
<PAGE>
SMITH & COMPANY
A PROFESSIONAL CORPORATION OF
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: 10 WEST 100 SOUTH, SUITE 700
AMERICAN INSTITUTE OF SALT LAKE CITY, UTAH 84101
CERTIFIED PUBLIC ACCOUNTANTS TELEPHONE: (801) 575-8297
UTAH ASSOCIATION OF FACSIMILE: (801) 575-8306
CERTIFIED PUBLIC ACCOUNTANTS E-MAIL: [email protected]
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Greenland Corporation
We have audited the accompanying consolidated balance sheet of Greenland
Corporation (a development stage company) and subsidiary as of December 31,
1998, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for the years ended December 31, 1998 and
1997, and for the period of July 17, 1986 (date of inception) to December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Greenland
Corporation (a development stage company) and subsidiary as of December 31,
1998, and the results of their operations, changes in stockholders' equity, and
their cash flows for the years ended December 31, 1998 and 1997, and for the
period of July 17, 1986 (date of inception) to December 31, 1998, in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the consolidated
financial statements, the Company has a working capital deficiency of $(457,422)
at December 31, 1998, and a retained deficit of $(6,884,321). The Company has
suffered losses from operations and has a substantial need for working capital.
This raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 3 to the
consolidated financial statements. The accompanying financial statements do not
include any adjustments that may result from the outcome of this uncertainty.
Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
April 5, 1999
F-2
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
December 31, 1998
<TABLE>
<CAPTION>
ASSETS
Current Assets
<S> <C>
Cash in banks $ 3,332
Accounts receivable - officers (Note 2) 44,250
Prepaid expenses - current portion 51,668
----------------
TOTAL CURRENT ASSETS 99,250
Equipment, net of depreciation of $18,453 (Note 1) 24,600
Other Assets
Prepaid expenses 51,669
Notes Receivable (Note 4) 1,900,000
Investments (GAHI) (Note 4) 1,450,000
Capitalized software costs (Note 1) 186,723
Licenses - Check Central (Note 6) 2,625,000
----------------
$ 6,337,242
================
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 172,672
Notes payable (Note 7) 150,000
Note payable - related party (Note 7) 223,000
Stock subscription refunds payable 11,000
----------------
TOTAL CURRENT LIABILITIES 556,672
STOCKHOLDERS' EQUITY
Common Stock $.001 par value:
Authorized -100,000,000 shares
Issued and outstanding 12,708,331 shares 12,708
Additional paid-in capital 12,652,183
Deficit accumulated during development stage (6,884,321)
----------------
TOTAL STOCKHOLDERS' EQUITY 5,780,570
----------------
$ 6,337,242
================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
7/17/86
(Date of
Year Ended December 31, inception) to
1998 1997 12/31/98
------------- ------------- -------------
REVENUES
<S> <C> <C> <C>
AMR Sales $ 0 $ 15,000 $ 55,000
Other income 15,683 11,381 76,004
------------- ------------- -------------
15,683 26,381 131,004
EXPENSES
General and administrative 2,656,095 1,820,050 5,217,863
Depreciation 6,319 12,134 18,453
Interest 22,349 38,257 64,590
Property taxes and other taxes 26,058 44,708 79,767
Bad debts 0 0 59,668
------------- ------------- -------------
2,710,821 1,915,149 5,440,341
------------- ------------- -------------
LOSS FROM OPERATIONS (2,695,138) (1,888,768) (5,309,337)
OTHER INCOME (LOSS)
Gain on disposition of subsidiary 0 531,388 531,388
Loss on sale of investments (627,025) (115,000) (742,025)
------------- ------------- -------------
NET LOSS FROM CONTINUING OPERATIONS (3,322,163) (1,472,380) (5,519,974)
Loss from discontinued operations (Note 1) 0 (190,660) (1,364,347)
------------- ------------- -------------
NET LOSS BEFORE INCOME TAXES (3,322,163) (1,663,040) (6,884,321)
PROVISION FOR INCOME TAXES 0 0 0
------------- ------------- -------------
NET LOSS $ (3,322,163) $ (1,663,040) $ (6,884,321)
============= ============= =============
Loss before discontinued operations $ (.43) $ (.73)
Loss from discontinued operations .00 (.09)
------------- -------------
NET LOSS PER WEIGHTED AVERAGE SHARE $ (.43) $ (.82)
============= =============
Weighted average number of common shares used to
compute net income (loss) per weighted average share 7,702,050 2,027,017
============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
Par Value $0.001 Paid - in Retained
Shares Amount Capital Deficit
-------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Balances at 7/17/86 (date of inception) 0 $ 0 $ 0 $ 0
Issuance of common stock (restricted)
At $.02 per share at 7/17/86 100,000 100 1,900
Net loss for period (1,950)
-------------- ---------------- ---------------- ----------------
Balances at 12/31/86 100,000 100 1,900 (1,950)
Net loss for period (10)
-------------- ---------------- ---------------- ----------------
Balances at 12/31/87 100,000 100 1,900 (1,960)
Net loss for period (10)
-------------- ---------------- ---------------- ----------------
Balances at 12/31/88 100,000 100 1,900 (1,970)
Net loss for period (10)
-------------- ---------------- ---------------- ----------------
Balances at 12/31/89 100,000 100 1,900 (1,980)
Net loss for period (10)
-------------- ---------------- ---------------- ----------------
Balances at 12/31/90 100,000 100 1,900 (1,990)
Net loss for period (10)
-------------- ---------------- ---------------- ----------------
Balances at 12/31/91 100,000 100 1,900 (2,000)
Net loss for period 0
-------------- ---------------- ---------------- ----------------
Balances at 12/31/92 100,000 100 1,900 (2,000)
Net loss for period 0
-------------- ---------------- ---------------- ----------------
Balances at 12/31/93 100,000 100 1,900 (2,000)
Issuance of common stock (restricted)
at $.33 per share for cash 120,000 120 39,880
to acquire subsidiary at $30.40 per
share at 10/1/94 10,000 10 303,983 (257,612)
to acquire additional rental properties
at $29.20 per share at 10/1/94 52,415 52 1,530,275
at par 10/21/94 for services rendered 13,200 13 119
Net loss for period (110,338)
-------------- ---------------- ---------------- ----------------
Balance at 12/312/94 295,615 295 1,876,157 (369,950)
Issuance of common stock (regulation
S) at $1.00 per share for stock
subscription 110,000 110 109,890
Issuance of common stock (restricted)
at $48.29 per share to cancel debt 2,554 3 123,317
at $.01 per share for services 20,940 21 188
at $.85 per share for assets 850,000 850 718,479
at $20.00 per share for assets 840 1 16,807
at $50.00 per share to cancel debt 2,000 2 99,998
at $51.43 per share to cancel debt 500 0 25,719
at $60.34 per share to land option 40,851 41 2,464,959
Cancellation of restricted common
stock (4,275) (4) (124,825)
Net loss for period (587,153)
-------------- ---------------- ---------------- ----------------
Balances at 12/31/95 1,319,025 1,319 5,310,689 (957,103)
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Continued)
<TABLE>
<CAPTION>
Common Stock Additional
Par Value $0.001 Paid - in Retained
Shares Amount Capital Deficit
-------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Balances at 12/31/95 1,319,025 1,319 5,310,689 (957,103)
Issuance of common stock (restricted)
correction to issue price of shares
previously sold on subscription (14,195)
at $.001 per share for assets 127,036 127 (127)
at $.001 per share for services 11,886 12 (12)
at $5.00 per share for cash 24,250 24 121,226
at $2.50 per share for cash 143,850 144 359,482
at $20.00 per share for cash 5,450 6 108,994
at $10.00 per share for cash 60 0 600
at $50.00 per share for cash 20 0 1,000
at $30.00 per share for cash 2,800 3 83,997
at $8.17 per share for services 6,000 6 48,994
at $10.68 per share for cash 289 0 3,087
at $7.56 per share for services 450 0 3,401
at $3.10 per share for cash 13,200 13 40,905
Cancellation of restricted common stock (132,870) (133) (459,299)
Net loss for year (886,162)
-------------- ---------------- ---------------- ----------------
Balances at 12/31/96 1,521,446 1,521 5,608,742 (1,843,265)
Issuance of common stock (restricted)
at $2.50 per share for cash 88,700 89 221,661
at $2.60 per share for cash 1,500 2 3,898
at $2.83 per share for services 530 1 1,499
at $2.50 per share for services 16,500 16 41,234
at $2.60 per share for services 1,650 2 4,288
at $1.50 per share for cash 200,000 200 299,800
at par $.001 to settle lawsuit 6,138 6 (6)
at $2.50 to settle debt 20 0 50
at $1.00 per share for cash 294,400 294 294,106
at $2.20 per share for services 30,000 30 65,970
at $1.00 per share for services 26,810 27 26,783
at $2.77 per share for services 1,084 1 3,002
S-8 shares at
$2.60 per share for services 70,000 70 181,930
$2.00 per share for services 10,000 10 19,990
$1.00 per share for services 210,000 210 209,790
$.75 per share for services 231,000 231 173,019
Disposition of subsidiary (55,853)
Net loss for year (1,663,040)
-------------- ---------------- ---------------- ----------------
Balances at 12/31/97 2,709,778 2,710 7,155,756 (3,562,158)
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Continued)
<TABLE>
<CAPTION>
Common Stock Additonal
Par Value $0.001 Paid - in Retained
Shares Amount Capital Deficit
-------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Balances at 12/31/97 2,709,778 $ 2,710 $ 7,155,756 $ (3,562,158)
Issuance of common stock
S-8 shares
$.13 per share for services 1,000,000 1,000 129,000
$.19 per share for services 674,000 674 127,386
$.20 per share for services 300,000 300 59,700
$.275 per share for services 200,000 200 54,800
$.30 per share for services 291,666 292 87,208
$.50 per share for services 246,500 246 123,004
$.60 per share for services 760,000 760 455,240
$.70 per share for services 167,500 167 117,083
$1.00 per share for services 20,000 20 19,980
$1.50 per share for services 96,053 96 143,988
Regulation "S" shares
$.40 per share to retire debenture 500,000 500 199,500
$.50 per share to retire debenture 100,000 100 49,900
$1.00 per share to retire debenture 400,000 400 399,600
Issuance of restricted shares
$.07 per share for services 310,386 310 21,417
$.10 per share for services 20,000 20 180
$.14 per share for services 26,900 27 3,739
$.275 per share for services 115,000 115 31,510
$.295 per share for services 161,028 161 47,342
$.40 per share for services 145,000 145 57,855
$.45 per share for services 35,000 35 15,715
$.50 per share for cash 22,200 22 11,078
$.50 per share for services 208,729 209 104,051
$.75 per share for subsidiary 3,500,000 3,500 2,621,500
$.75 per share for services 350,000 350 262,150
$.85 per share for services 3,000 3 2,547
$1.00 per share for cash 341,300 341 340,959
$2.00 per share for services 2,500 3 4,997
$2.50 per share for services 2,000 2 4,998
Net loss for year (3,322,163)
-------------- ---------------- ---------------- ----------------
Balances at 12/31/98 12,708,331 $ 12,708 $ 12,652,183 $ (6,884,321)
============== ================ ================ ================
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
7/17/86
(Date of
Year Ended December 31, inception) to
1998 1997 12/31/98
------------- ------------- -------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $ (3,322,163) $ (1,663,040) $ (6,884,321)
Adjustments to reconcile net loss
to cash provided (required) by operating activities:
Depreciation and amortization 6,319 192,881 582,669
Unrealized decrease in investments 189,143 47,576 272,969
Book value of disposed assets/liabilities 500,000 (313,465) 700,374
Stock issued for services 1,929,025 728,153 2,752,447
Changes in operating assets and liabilities:
Accounts receivable 102,336 (16,188) 15,418
Escrow accounts 0 7,518 0
Prepaid expenses (103,337) 0 (102,795)
Accounts payable 49,170 48,952 172,672
Accrued expenses (78,508) (27,572) 11,000
Deposits 0 (20,814) 0
Property taxes payable 0 (83,782) (112,522)
------------- ------------- -------------
NET CASH REQUIRED BY
OPERATING ACTIVITIES (728,015) (1,099,781) (2,592,089)
INVESTING ACTIVITIES
Capitalization of software costs 0 0 (186,723)
Purchase of stock 0 0 (55,000)
Purchase of equipment (581) 0 (18,139)
Organization cost 0 0 (50)
------------- ------------- -------------
NET CASH USED BY INVESTING ACTIVITIES (581) 0 (259,912)
FINANCING ACTIVITIES
Cash from subsidiary 0 0 23,415
Proceeds from sale of stock 352,400 820,050 1,989,736
Collections of stock subscription 0 0 40,000
Amounts borrowed from (repaid to) stockholders 223,000 (290,790) 223,000
Repayment of loans 0 (29,860) (243,818)
Proceeds from new loans 150,000 600,000 823,000
------------- ------------- -------------
NET CASH PROVIDED
BY FINANCING ACTIVITIES 725,400 1,099,400 2,855,333
------------- ------------- -------------
INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS (3,196) (381) 3,332
Cash and cash equivalents at beginning of year 6,528 6,909 0
------------- ------------- -------------
CASH AND CASH
EQUIVALENTS AT END OF YEAR $ 3,332 $ 6,528 $ 3,332
============= ============= =============
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 22,349 $ 306,892 $ 973,670
Assets acquired by assumption of debt and issuance of stock 2,625,000 0 13,558,790
Cancellation of stock previously issued for
assets determined to be worthless (Note 4) 0 0 459,432
Investment received in exchange for non-cash assets 0 3,850,000 3,850,000
Net book value of assets exchanged for investment 0 (1,412,077) (1,412,077)
Land option exchanged for investment 0 (2,515,000) (2,515,000)
Stock issued to cancel debt 650,000 0 907,039
------------- ------------- -------------
$ 3,297,349 $ 229,815 $ 15,821,854
============= ============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
F-8
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Principal Operations
The principal business of the Company is the marketing of
advanced communications technology, which automates check
- cashing through machines similar to bank ATMs through
its wholly-owned subsidiary Check Central, Inc. The
Company's efforts to further enhance and market its
AirLink automated meter reading system have been postponed
pending additional funding.
Accounting Methods
The Company recognizes income and expenses based on the
accrual method of accounting.
Basis of Consolidation
The consolidated financial statements include the accounts
of Greenland Corporation and its wholly-owned subsidiary
Check Central, Inc. All significant intercompany
transactions and accounts have been eliminated in
consolidation.
Discontinued Operations
In December, 1997 the Company disposed of its wholly-owned
subsidiary Gam Properties, Inc. (which was in the real
estate rental business). The net loss from operations of
the subsidiary during 1997 was $(190,660).
Development Stage
The Company was in the development stage prior to 1994,
when it acquired its subsidiary Gam Properties, Inc. Upon
the disposition of the subsidiary at December 31, 1997,
the Company has re-entered the development stage.
Equipment
Equipment is recorded at cost. Depreciation is provided
for using the straight-line method over a seven year life.
The cost of assets sold or retired and the related amounts
of accumulated depreciation are removed from the accounts
in the year of disposal. Any resulting gain or loss is
reflected in current operations.
Expenditures for maintenance and repairs are charged to
operations as incurred; additions and improvements are
capitalized.
Dividend Policy
The Company has not yet adopted any policy regarding
payment of dividends.
Capitalized Software
The Company has capitalized expenses incurred to install
live test sites for its AirLink automated meter reading
systems. Those costs will be amortized against revenues
from sales of the systems over a period not to exceed five
years.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
certain reported amounts and disclosures.
Accordingly, actual results could differ from those
estimates.
Fair Market Value of Financial Instruments
The Company considers all highly liquid investments with a
maturity of three months or less to be cash equivalents
and are deemed to approximate fair value. In management's
opinion, the carrying value of long-term debt also
approximates fair value.
Income Taxes
The Company records the income tax effect of transactions
in the same year that the transactions enter into the
determination of income, regardless of when the
transactions are recognized for tax purposes. Tax credits
are recorded in the year realized. Since the Company has
not yet realized income as of the date of this report, no
provision for income taxes has been made.
F-9
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued)
Income Taxes (continued)
The Company utilizes the liability method of accounting
for income taxes as set forth in Statement of Financial
Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). Under the liability method, deferred
taxes are determined based on the difference between the
financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse. An
allowance against deferred tax assets is recorded when it
is more likely than not that such tax benefits will not be
realized.
At December 31, 1997, a deferred tax asset has not been
recorded due to the Company's lack of operations to
provide income to use the net operating loss carryover
which expires as follows:
<TABLE>
<CAPTION>
Year Ended Expires Amount
--------------------- ------------------------ ---------------
<S> <C> <C> <C>
December 31, 1986 December 31, 2001 $ 1,950
December 31, 1987 December 31, 2002 10
December 31, 1988 December 31, 2003 10
December 31, 1989 December 31, 2004 10
December 31, 1990 December 31, 2005 10
December 31, 1991 December 31, 2006 10
December 31, 1994 December 31, 2009 39,780
December 31, 1995 December 31, 2010 378,664
December 31, 1996 December 31, 2011 718,121
December 31, 1997 December 31, 2012 1,892,413
December 31, 1998 December 31, 2018 3,000,000
---------------
$ 6,030,978
===============
</TABLE>
NOTE 2: ACCOUNTS RECEIVABLE - OFFICERS
During 1996 through 1998, the Company advanced $147,507 to
officers and employees. $44,250 was paid in January 1999.
The balance was converted to prepaid expenses to be used
in 1999 and 2000.
NOTE 3: GOING CONCERN ITEMS
The Company's financial statements have been presented on
the basis that it is a going concern, which contemplates
the realization of assets and satisfaction of liabilities
in the normal course of business. The Company has incurred
losses from inception and has a retained deficit of
$(6,884,321).
Management believes the Company will be able to continue
as a going concern for the following reasons:
1. The Company is in the process of a private placement
offering to sell shares of restricted common stock to
raise up to $5,000,000.
2. The Company expects to leverage some of its
investments in other publicly-held corporations
to borrow funds for working capital.
See Note 9: Subsequent Events
NOTE 4: INVESTMENTS
Investments consist of the following items:
1. 25,000 shares of common stock in a public
company. The cost was $55,000. The stock is not
currently trading; this asset has been fully
reserved.
2 A 49% interest in a limited liability company
which is reported at $134,143 under the equity
method. The Company has been unsuccessful in
locating the principals of this LLC in the last
three years; this asset is fully reserved.
3. 1,100,000 convertible preferred shares in a
public company. The basis in the land option
given in exchange for these shares was
$2,515,000. During 1998, the Company exchanged
the shares for notes receivable valued at
$1,900,000. The investment has been reflected at
a value of $1,900,000 as of December 31, 1998.
The shares are convertible in 1999 to the number
of common shares (at the then-current market
price) equivalent to $2,860,000.
4. 290,000 convertible preferred shares in GAHI, a
public company. The net book value of the
Company's subsidiary which was exchanged for
these shares was $1,412,077. The negotiated price
at December 31, 1997 was $1,630,000. The shares
are convertible in 1999 to the number of common
shares (at the then-current market price)
equivalent to $1,450,000, which is the value
reflected on these financial statements.
F-10
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE 5: LEASES
In January, 1997, the Company entered into a three-year
operating lease of office space. Required lease payments
are $73,313 in 1998, and $79,560 in 1999.
NOTE 6: LICENCES
During 1998, the Company acquired 100% of Check Central,
Inc. (a Nevada corporation) by issuing 3,500,000 shares of
its common stock. The sole of asset of Check Central, Inc.
was a license to use certain software in the development
of check-cashing machines. The transaction was accounted
for as a purchase and recorded at the fair market value of
the stock issued.
NOTE 7: NOTES PAYABLE
Notes payable at December 31, 1998 are summarized as
follows:
Individual 125,000 at 8% due December 31, 1998
Individual 25,000 at 0% paid January 20, 1999
Officer 223,000 at 8% due February 28, 2000
As additional inducement to the person to loan money to
the Company, certain warrants have been promised, but not
yet issued as follows:
2000,000 shares at $.33 effective for 2 years
from August 31, 1998 10,000 shares at $.50
effective for 2 years from August 23, 1998 10,000
shares at $.40 effective for 2 years from
September 10, 1998 10,000 shares at $.19
effective for 2 years from September 23, 1998
15,000 shares at $.41 effective for 2 years from
October 23, 1998
NOTE 8: REVERSE STOCK SPLIT
The Company effected a 1:10 reverse stock split on July 2,
1998. All references to stock prices, and numbers of
shares in these financial statements have been adjusted to
reflect the reverse split as if it were effective on the
earliest date reported.
NOTE 9: SUBSEQUENT EVENTS
Subsequent to December 31, 1998, the Company entered into
a transaction on April 5, 1999, with Telenetics
Corporation, whereby Telenetics acquired the advanced
communication technology known as automated meter reading
("AMR") in exchange for shares of Convertible Preferred
Stock of Telenetics with a face value of $900,000.
Subsequent to December 31, 1998, the Company entered into
a transaction on March 30, 1999, with SmartCash ATM, Ltd.
("SmartCash") whereby the Company entered into a Master
Distributor Agreement with Smart Cash ATM, an affiliate of
ATM International (Collectively, "SmartCash ATM") located
in Dallas, Texas. Under the terms of the Master
Distributor Agreement, SmartCash ATM is required to order
385 Check Cashing ATMs in 1999, 1,200 Check Cashing ATMs
in 2000, and 2,000 Check Cashing ATMs in 2001 in order to
remain the exclusive distributor for Check Central. The
Company believes this relationship will enable Check
Central to achieve rapid market penetration by utilizing
the services of an existing operation with marketing and
sales personnel in place. The Company will also pursue
direct corporate sales on a limited basis and will pay
SmartCash ATM a commission on said sales.
Subsequent to December 31, 1998, the Board of Directors of
the Company has approved the commencement of a private
placement offering. The Company anticipates commencing the
offering shortly.
F-11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Greenland Corporation December 31, 1998 financial
statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000852127
<NAME> Greenland Corporation
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,332
<SECURITIES> 0
<RECEIVABLES> 44,250
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 99,250
<PP&E> 43,053
<DEPRECIATION> (18,453)
<TOTAL-ASSETS> 6,337,242
<CURRENT-LIABILITIES> 556,672
<BONDS> 0
0
0
<COMMON> 12,708
<OTHER-SE> 5,767,862
<TOTAL-LIABILITY-AND-EQUITY> 6,337,242
<SALES> 0
<TOTAL-REVENUES> 15,683
<CGS> 0
<TOTAL-COSTS> 2,688,472
<OTHER-EXPENSES> 627,025
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,349
<INCOME-PRETAX> (3,322,163)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,322,163)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,322,163)
<EPS-PRIMARY> (.43)
<EPS-DILUTED> (.43)
</TABLE>
