<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
COMMISSION FILE NO. 017833
GREENLAND
CORPORATION
(EXACT NAME OF SMALL BUSINESS ISSUER AS
SPECIFIED IN ITS CHARTER)
NEVADA 87-0439051
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
1935 AVENIDA DEL ORO, SUITE "D"
OCEANSIDE, CA 92056
(Address of principal executive offices)
(760) 414-9941
(Issuer's telephone number)
Indicate by check mark whether the issuer (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
APPLICABLE ONLY TO CORPORATE ISSUER
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
CLASS A COMMON STOCK 59,369,865 SHARES OUTSTANDING
$0.001 PAR VALUE AS OF AUGUST 09, 2000
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT
(CHECK ONE)
YES NO X
---- ----
<PAGE>
GREENLAND CORPORATION
REPORT ON FORM 10-QSB
QUARTER ENDED JUNE 30, 2000
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I. Financial Information
ITEM 1. Financial Statements (unaudited)
- Condensed consolidated balance sheets as of June 30, 2000 and December
31, 1999
- Condensed consolidated statements of operations for the three and
six months ended June 30, 2000 and 1999
- Condensed consolidated statements of changes in stockholders' equity
for the six months ended June 30, 2000, and the year ended December 31,
1999
- Condensed consolidated statements of cash flows for the six months
ended June 30, 2000 and 1999
- Notes to condensed consolidated financial statements
ITEM 2. Management's discussion and analysis of financial condition
and results of operations
PART II. Other Information
Signatures
</TABLE>
2
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GREENLAND CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------------- -----------------
<S> <C> <C>
Current Assets:
Cash $ 519,422 $ 235,574
Accounts receivable (less allowance for uncollectible
accounts of $8,789 in 2000, and $120,300 in 1999) 379,727 6,508
Receivables from employees 245,529 26,080
Inventories 308,799 299,116
Accounts receivable - officers 221,838 161,838
Prepaid officers compensation 189,657 63,414
Other current assets 65,385 -
Notes receivable 200,000 -
---------------- -----------------
Total current assets 2,130,357 792,530
Property and equipment, net 538,368 190,004
Long term notes receivable, net - -
Investments 900,000 900,000
Intangibles, net 3,068,776 2,862,903
Other assets 151,394 7,500
---------------- -----------------
Total assets $ 6,788,895 $4,752,937
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 392,950 $ 98,100
Trade accounts payable 644,390 426,918
Accrued expenses 577,119 572,958
Current portion of capital leases 31,767 -
Notes payable to related parties 75,000 270,000
Stock subscription refunds payable - -
---------------- ------------------
Total current liabilities 1,721,226 1,367,976
Long term liabilities:
Long term portion of capital leases 105,866 -
---------------- ------------------
Total Liabilities 1,827,092 1,367,976
---------------- ------------------
Stockholders' Equity:
Common stock, $.001 par value; 100,000,000 shares
authorized, 57,105,432 (35,298,622 in 1999) issued
and outstanding 57,105 35,298
Additional paid in capital 22,742,378 16,881,759
Subscribed shares unissued - 174,437
Retained deficit (17,837,680) (13,706,533)
---------------- ------------------
Total stockholders' equity 4,961,803 3,384,961
---------------- ------------------
Total liabilities and stockholders' equity $ 6,788,895 $ 4,752,937
================ ==================
See accompanying notes to Condensed Consolidated Financial Statements
</TABLE>
3
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GREENLAND CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
---------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ 395,491 $ 1,866 $ 474,759 $ 2,500
Cost of goods sold 1,175,544 - 1,810,524 -
---------------- ---------------- --------------- ---------------
Gross income (loss) (780,053) 1,866 (1,335,765) 2,500
General and administrative expenses 1,239,157 425,121 2,039,110 1,404,936
Research and development costs 140,670 78,839 360,760 353,897
Repurchase of distributor agreement - - 320,000 -
---------------- ---------------- --------------- ---------------
Total operating costs 1,379,827 503,960 2,719,870 1,758,833
---------------- ---------------- --------------- ---------------
Operating loss (2,159,880) (502,094) (4,055,635) (1,756,333)
Other income (expenses):
Reserve for note receivable - - - -
Gain on sale of investment and PPE - 20,394 - 20,394
Loss on sale of investments - - (42,500) (1,164,750)
Reserve on note receivable - unrealized - (1,900,000) - (1,900,000)
Interest expense (18,909) (7,626) (33,487) (26,610)
Other income (expense) 2,879 - 3,675 -
---------------- ---------------- --------------- ---------------
NET LOSS FROM CONTINUING
OPERATIONS (2,175,910) (2,389,326) (4,127,947) (4,827,299)
Gain on sale of discontinued operations - 713,277 - 713,277
---------------- ---------------- --------------- ---------------
Loss from before income taxes (2,175,910) (1,676,049) (4,127,947) (4,114,022)
Income tax expense - - 3,200 -
---------------- ---------------- --------------- ---------------
Net Loss $(2,175,910) $(1,676,049) $(4,131,147) $(4,114,022)
================ ================ =============== ===============
Net loss per share:
Loss before discontinued operations (0.04) (0.13) (0.08) (0.27)
Gain from discontinued operations - 0.04 - 0.04
Basic loss per share (0.04) (0.09) (0.08) (0.23)
Diluted loss per share (0.04) (0.09) (0.08) (0.23)
Weighted average shares outstanding
Basic and diluted 55,261,956 18,163,279 49,863,008 18,163,279
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
4
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GREENLAND CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Subscribed
Common Stock Paid-in Shares Retained
Shares Amount Capital Unissued Deficit Total
--------------- ------------ ---------------- -------------- ------------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 12,708,331 $ 12,708 $12,652,183 $ -0- $ (6,884,321) $5,780,570
Shares issued to retire debt and
to purchase assets 4,273,166 4,273 766,254 - - 770,527
Sale of common stock 5,897,231 5,897 1,099,804 - - 1,105,701
Shares issued for services 12,419,894 12,420 2,358,618 - - 2,371,038
Subscribed shares unissued - - - 174,437 - 174,437
Warrants to purchase shares - - 4,900 - - 4,900
Net loss - - - - (6,822,212) (6,822,212)
----------------------------------- --------------- ------------ ---------------- -------------- ------------------ --------------
Balance at December 31, 1999 35,298,622 $ 35,298 $16,881,759 $ 174,437 $ (13,706,533) $3,384,961
----------------------------------- --------------- ------------ ---------------- -------------- ------------------ --------------
Shares issued to retire debt and
to purchase assets 3,678,551 3,679 1,342,304 - - 1,345,983
Sale of common stock 11,576,341 11,576 2,158,938 - - 2,170,514
Shares issued for services 3,604,684 3,605 1,137,951 - - 1,141,556
Subscribed shares issued 942,241 942 173,495 (174,437) - -
Exercise of warrants 2,004,993 2,005 486,322 - - 488,327
Options issued for services and - - - -
to purchase assets 561,609 561,609
Net loss - - - - (4,131,147) (4,131,147)
----------------------------------- --------------- ------------ ---------------- -------------- ------------------ --------------
Balance at June 30, 2000 57,105,432 $ 57,105 $22,742,378 $ -0- $ (17,837,680) $4,961,803
=================================== =============== ============ ================ ============== ================== ==============
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
5
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GREENLAND CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
June 30, 2000 June 30, 1999
------------------ -------------------
<S> <C> <C>
Cash from operating activities:
Net loss $ (4,131,147) $(4,114,022)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 305,517 6,566
Allowance for uncollectible account 28,659 1,900,000
Realized loss on disposal of assets 42,500 451,473
Repurchase of Distributor Agreement 320,000 -
Stock issued for services 1,141,556 1,475,921
Options issued for service 280,520 -
(Increase) decrease in
Accounts receivable (324,378) (89,852)
Inventories (9,683) (192,915)
Accounts receivable - officers and other assets (13,998) (7,991)
Increase (decrease) in:
Trade accounts payable 217,472 (29,436)
Accrued expenses 260,360 146,610
------------------ -------------------
Net cash used in operating activities (1,882,622) (453,646)
------------------ -------------------
Cash flows from investing activities:
Purchase of equipment (292,371) (14,715)
Investment in notes receivable (200,000) -
------------------ -------------------
Net cash used in investing activities (492,371) (14,715)
------------------ -------------------
Cash flows from financing activities:
Proceeds from sale of stock 2,170,514 503,356
Collection of stock subscriptions - 120,602
Amounts repaid to stockholders - (12,349)
Proceeds from sale of warrants 488,327 -
Net proceeds from loans - 21,800
------------------ -------------------
Net cash provided by financing activities 2,658,841 633,409
------------------ -------------------
Increase in cash 283,848 165,048
Cash at the beginning of period 235,574 3,332
------------------ -------------------
Cash at end of period $ 519,422 $ 168,380
================== ===================
Supplemental information:
Cash paid for interest 16,793 124
Cash paid for income taxes 3,200 -
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
6
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GREENLAND CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
Supplemental disclosure of non-cash investing and financing activities for the
six months ended June 30, 2000:
The Company acquired assets in the amount of $475,857 by issuing stock.
The Company repaid debt and other accrued expenses of $145,150 through
the issuance of stock.
The Company repaid notes payable to related parties through the
issuance of stock in the amount of $195,000.
The Company acquired receivables from its officers and employees in the
amount of $266,977 for the exercise price of certain shares issued
under the employee stock option plan, and for the repayment of the
employee portion of withholding from compensation paid in the form of
Company stock.
The Company provided compensation advances to certain officers in the
form of common stock in the amount of $64,000.
The company paid for services accrued in prior periods by issuing
shares of its common stock in the amount of $198,999.
The Company acquired equipment and furniture in the amount of $156,852
by incurring capital leases.
The Company issued options to purchase 3,961,610 shares with a weighted
average strike price of $.16 for current period services totaling
$280,520, for services accrued in prior periods of $129,000, and to
prepay services of $152,089.
See accompanying notes to Condensed Consolidated Financial Statements
7
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GREENLAND CORPORATION
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
QUARTER ENDED JUNE 30, 2000
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
General
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB. Therefore, they do
not include all information and footnotes necessary for a complete presentation
of financial position, results of operations, cash flows, and stockholders'
equity in conformity with generally accepted accounting principles. The
condensed consolidated balance sheet at December 31, 1999 was derived from the
audited balance sheet at that date which is not presented herein. Except as
disclosed herein, there has been no material change in the information disclosed
in the notes to the financial statements included in the Company's annual report
on Form 10-KSB for the year ended December 31, 1999. In the opinion of
Management, all adjustments considered necessary for a fair presentation of the
results of operations and financial position have been included, and all such
adjustments are of a normal recurring nature. Operating results for the six
months ended June 30, 2000 are not necessarily indicative of the results that
can be expected for the year ended December 31, 2000.
NOTE 2. GOING CONCERN UNCERTAINTY
As shown in the accompanying condensed consolidated financial statements, the
Company has suffered recurring losses from operations, and as of June 30, 2000
has a retained deficit of $17,837,680. These factors, among others, raise
substantial doubt about the Company's ability to continue as a going concern.
The Company's need for working capital is a key issue for management, and is an
essential component in the Company's ability to meet its goals and objectives.
The Company had working capital of $409,131 at June 30, 2000, however, the
Company used $1,882,622 to fund its ongoing operations during the six months
ended June 30, 2000. During the six months ended June 30, 2000, the Company
realized $469,300 from the exercise of Class A Warrants from its Private
Placement Offering. If all three classes of Warrants issued pursuant to the
Private Placement Offering were exercised, the Company would realize net proceed
of approximately $36 million. However, there can be no assurances that any of
the Warrants will be exercised. The Company is also pursuing institutional and
private party lending and purchase order financing. There is no assurance,
however, that the Company will be successful in meeting its goals and objectives
in the future.
NOTE 3. INVENTORIES
Inventories at June 30, 2000 were as follows:
<TABLE>
<CAPTION>
<S> <C>
Raw materials $ 229,563
Work-in-progress 175,572
Finished goods 53,872
----------------
459,007
Less allowance for obsolescence (150,208)
----------------
$ 308,799
================
</TABLE>
8
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Note 4. PROPERTY AND EQUIPMENT
Net property and equipment at June 30, 2000 were as follows:
<TABLE>
<S> <C>
Computers and equipment $ 252,386
Demonstration equipment 232,152
Furniture and fixtures 117,329
Leasehold improvements 16,373
----------------
618,240
Accumulated depreciation (79,872)
----------------
$ 538,368
================
</TABLE>
Depreciation expense for the six months ended June 30, 2000 was $70,364.
Note 5. NOTE RECEIVABLE
During March 2000, the Company repurchased the exclusive distribution rights to
the Master Distribution Agreement with SmartCash ATM, Ltd. (SmartCash). Among
other consideration the Company agreed to loan SmartCash $200,000 collateralized
by company stock (see Note 11).
Note 6. INTANGIBLE ASSETS
In 2000, the Company capitalized $429,750 of costs incurred to upgrade and
enhance the check cashing software purchased from Check Central, Inc. The
software was not ready for its intended use at June 30, 2000. The Company
amortizes capitalized software costs over 5 years.
Note 7. NOTES PAYABLE
Notes payable at June 30, 2000 are summarized as follows:
<TABLE>
<S> <C>
Notes Payable: $ 392,950
Notes Payable to Related Parties $ 75,000
</TABLE>
The Company repaid note obligations during the six months ended June 30, 2000 in
the amount of $340,150 with stock (see Note 11).
Note 8. CAPITAL LEASES
During 2000, the Company obtained financing for certain furniture and equipment
through leases. Future minimum lease payments under the capital leases for the
years ending June 30, are as follows:
<TABLE>
<S> <C>
2001 $ 60,148
2002 60,148
2003 40,818
2004 28,096
2005 16,929
----------------
Total lease payments payable 206,140
Less amount representing interest (68,506)
----------------
Net lease payable $137,633
================
</TABLE>
9
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Note 9. STOCKHOLDERS' EQUITY
Private Placements of Common Stock
On or about May 1, 1999, the Company commenced an offering to sell, pursuant to
a confidential private placement memorandum, up to 1,600,000 units at $5 per
unit. Each unit offered included 11.5 shares of common stock and warrants to
purchase 30 additional shares of common stock at prices ranging from $.50 per
share to $1.50 per share. In the first six months of 2000, the Company issued
12,518,582 shares pursuant to the offering, and realized net proceeds of
$2,170,514 after deducting costs related to the offering of $2,864,578.
In addition, during the six months ended June 30, 2000, the Company realized
$469,300 and issued 2,004,993 shares from the exercise of Class A Warrants from
its Private Placement Offering.
Additional Common Stock Issued
The Company issued 3,604,684 shares of its common stock for services during the
six months ended June 30, 2000. The Company recognized expenses for such
services in the amount of $1,141,556.
The Company issued 1,559,322 shares in settlement of notes payable and accrued
interest totaling $340,150 (see Note 7).
The Company issued 2,119,229 shares to acquire assets and pay accrued expenses
totaling $1,005,833.
In conjunction with the repurchase of the exclusive distributor agreement, the
Company issued warrants to purchase 500,000 shares of restricted Company Stock
(see Note 11).
The Company issued options to purchase 3,961,610 shares with a weighted average
strike price of $.16 for services totaling $280,520, and to purchase assets of
$281,089.
Note 10. SEGMENTS
The Company has two reportable segments consisting of (1) the sale and
distribution of automatic check cashing machines and (2) fee income earned
through check cashing transaction processing.
The following is information for the Company's reportable segments for the six
months ended June 30, 2000:
<TABLE>
<CAPTION>
Processing
Sales Segment Segment Unallocated Total
------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenue $ 175,797 $ 298,962 $ -0- $ 474,759
Gross margin (368,675) (967,090) -0- (1,335,765)
Depreciation and amortization 16,513 148,579 140,425 305,517
Interest expense 33,487 33,487
Other, net (2,758,695) (2,758,695)
Income (loss) from continuing
------------------- ---------------- ---------------- ----------------
operations before income taxes $(368,675) $ (967,090) $(2,792,182) $(4,127,947)
=================== ================ ================ ================
Identifiable assets $ 308,799 $ 3,159,915 $ 3,320,181 $ 6,788,895
Capital expenditures 801,552 388,204 1,189,756
</TABLE>
For the six months ended June 30, 1999, the Company was in the development
stage. Segment information was not applicable to that period.
Included in the processing segment was approximately $285 thousand in revenue
and $490 thousand in costs from a software development project performed in
conjunction with an Interim Work and Assignment Agreement entered into with
ACS Retail Solutions (ACS) in anticipation of a long term servicing agreement
currently under negotiations with ACS, 7-Eleven, and the Company.
The above negative gross margins include fixed overhead costs for expenses such
as supervision, labor, amortization and depreciation, communications, and
facilities, as well as the direct costs to manufacture and service
10
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the automated banking machines. Management anticipates improvements in the gross
margins as the volume of machines sold and transactions processed increase to a
level sufficient to absorb these overhead costs.
Note 11. REPURCHASE OF DISTRIBUTOR AGREEMENT
During June 2000, the Company repurchased the exclusive distribution rights to
the Master Distribution Agreement with SmartCash ATM, Ltd. (SmartCash). In
consideration, the Company agreed to loan SmartCash $200,000 collaterized by
company stock, release certain restrictions on Company common stock held by
SmartCash, issue warrants to purchase 500,000 shares of Company common stock,
and continue to pay commissions on sales of machines until said commissions
equal $320,000. In addition, the Company issued SmartCash a note payable for
$320,000 that will be repaid through the payment of commissions noted above. The
company recorded a $320,000 expense on this transaction (see Notes 5, 7 and 9).
Note 12. SOFTWARE DEVELOPMENT REVENUE
In anticipation of entering into a long term check cashing services agreement
currently under negotiation with ACS Retail Solutions, Inc (ACS), the
Company entered into an Interim Work and Assignment Agreement with ACS in
June 2000 (see exhibit). Under the terms of the interim agreement the Company
has provided software development services, and has recorded $285,012 in
revenues for these services. The Company anticipates the software development
will be completed in the third quarter. These services were accounted for on
a percentage of completion basis.
Note 13. SUBSEQUENT EVENTS
Subsequent to June 30, 2000, the Company issued 2,264,433 shares of common stock
for services.
In July the Electronic Commerce Group (ECG) of Affiliated Computer Services
(ACS) become a privately held company pursuant to a sale to GTCR Golder
Rauner LLC, a private equity firm managing in excess of $4 billion. As part
of this transaction Greenland agreed to the assignment of the distributorship
agreement between Greenland and ACS Retail Solutions to ECG. All material
terms and conditions of the distributorship agreement remain unchanged.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report contains forwarding looking statements which involve risk
and uncertainties. Forward-looking statements include, without limitation, any
statement that may predict, indicate or imply future results, performance or
achievements and may contain the words "believe," "expect," "anticipate,"
"estimate," "project," "will be," "will continue" or words or phrases of similar
meaning. Forward-looking statements involve risks and uncertainties which may
cause actual results to differ materially from the forward-looking statements.
Such risks and uncertainties include, but are not limited to, risks associated
with completing product development; commercial use of check-cashing machines;
product repairs; consumer acceptance; need for additional financing;
manufacturing risks; dependence on suppliers; dependence on distributors; rapid
technological changes; dependence on key personnel; compliance with state laws;
risks of technical problems or product defects; dependence on proprietary
technology and other factors detailed in the Company's reports filed with the
Securities and Exchange Commission.
INTRODUCTION
The following discussion pertains to the Company's operations and financial
condition as of June 30, 2000.
The Company is engaged in the development, production, distribution, servicing
and marketing of proprietary software that is capable of providing consumers
with a full range of automated financial services including payroll check
cashing, ATM, payday advance, wire transfers, bill paying, money order and phone
card dispensing services delivered through a freestanding kiosk, similar in
appearance to an ATM machine. The Company acquired this technology in May 1998,
when the Company purchased the exclusive rights to all of Check Central Inc's.
software and hardware designs for the expressed intent of completing the
development and marketing of a stand-alone Check Cashing ATM unit. 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.
PLAN OF OPERATION
The Company has invested, and continues to invest substantial amount of capital,
considerable time and effort in the development and evolution of the Check
Cashing ATM. The formation of relationships with Cisco Systems, MC
11
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Info, Sprint, Fourth Shift and Bantec reflects the emphasis the Company has
placed in assembling the best available technology and service providers. Prior
to the fourth quarter of 1999, the Company's strategy for sales of the Check
Cashing ATM was through the utilization of an established, national distributor
of ATM machines. The strategy of a single, exclusive Master Distributor was
altered in the fourth quarter of 1999 through the addition of Affiliated
Computer Services (ACS) as a distributor for the Company pursuant to a two year,
non-exclusive distributorship agreement which allows ACS certain rights to sell
and market the Check Cashing ATM in the United States. Management believes that
ACS can provide the access to large chain outlets and banking institutions that
otherwise may not be accessible to the Company (see subsequent events).
On March 20, 2000, the Company further adjusted its sales strategy by
repurchasing the rights to the Master Distributorship from SmartCash ATM.
Although SmartCash will remain a non-exclusive distributor, the Company believes
that the repurchase of the rights to the Master Distributorship provides the
Company with the certain advantages including: increase in gross hardware and
software profits, allows the Company to work directly with Independent Sales
Representatives and provides the Company with unencumbered access to corporate
chain market sales such as WalMart and Piggly Wiggly (see Note 11).
The Company added to its marketing efforts by implementing a sales and marketing
support staff at the Oceanside facility. This staff is primarily engaged in
locating and supporting qualified distributors and Independent Sales Operators
for the distribution of the Check Cashing ATM, and coordinating effective
coverage of regional and national chain accounts. Presently the Company has
contracts with approximately 37 distributors. Management has not engaged in
direct sales activity because it believes that established distributors have the
sales infrastructure in place 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 will receive revenue from two revenue streams. The first is through
the sale of the Check Cashing ATM. The Company anticipates the initial direct
material and labor cost of the machine will be approximately 60% of the
Company's selling price. The Company expects that this margin will improve as
larger volumes of machines are purchased and the Company can take advantage of
volume discounts.
The second revenue stream is generated from the fees earned in connection with
the various banking services provided on each of the machines in operation. Fees
from check cashing are regulated by the vast majority of the states and range
from 2% to 6% of the face value of the check cashed. Fees for payday advances
are also regulated by the states and range from 15% to 18% of the amount of the
advance. Fees from other services range from $0.35 per transaction to 30% of the
transaction. The Company will share this revenue stream with the owner of the
machine and/or other parties. The fee generation of the Company will increase
with the placement of additional machines, and, as machines mature in the
market, more transaction fees will be generated.
Management believes that it has created a convenient and cost effective system
for the reporting of activity and earnings generated from its Check Cashing ATMs
through a secure website. The website allows the users to view transactions in
both summary and detail formats, and to download transaction information into
spreadsheets.
The Company anticipates that its working capital needs will be met through a
combination of proceeds from three classes of warrants which may be exercised as
part of the Private Placement Offering, and from revenues earned from the sale
of the Check-Cashing ATM's. There are no assurance the Company will receive
additional proceeds from the private placement through the exercise of warrants.
The Company will also pursue additional sources of capital including, lines of
credit, and purchase order financing (See Liquidity and Capital Resources and
Change of Securities).
RESULTS OF OPERATIONS
REVENUE
The company earned revenues of $395,491 and $474,759 for the three and six
months ended June 30, 2000, respectively. During the second quarter of 2000,
revenues of $285,012 were earned from software development. This development was
performed in conjunction with the Interim Work and Assignment Agreement entered
into with ACS Retail Solutions (ACS) in anticipation of a long term servicing
agreement currently under negotiations with ACS, 7-Eleven, and the Company.
12
<PAGE>
In addition, the Company sold machines to two chains, Piggly Wiggly and Penny
Wise, two independent grocers, as well as to an independent gas station. During
the first quarter 1999 the Company was a development stage company, did not sell
machines, and ,therefore, did not generate sales revenue.
COST OF SALES
The Company incurred costs of sales of $1,175,544 and $1,810,524 for the three
and six months ended June 30, 2000, respectively. Of these costs, $294,224 and
$544,472, respectively, related to the cost of manufacturing machines. These
costs included fixed overhead expenses for items such as supervision, testing,
and facilities, as well as the direct cost of the machines sold. Management
anticipates significant improvements in the gross margin on machine sales as the
volume of machines sold increases to a level sufficient to absorb these overhead
costs. The gross sales margin for the three and six months ended June 30, 2000
was $(195,140) and $(368,675), respectively.
Costs associated with transaction processing, included in cost of sales, were
$881,320 and $1,266,052 for the three and six months ended June 30, 2000,
respectively, resulting in gross margins on transaction revenue of $(584,912)
and $(967,089), respectively. Processing costs included fixed overhead expenses
such as amortization and depreciation, labor, and communications. Management
anticipates improvements in the gross margin with the servicing of additional
machines, and their associated economies of scale.
During the first quarter of 1999, the Company was a development stage company,
and, therefore, did not manufacture machines for sale. Costs associated with
manufacturing test machines, and processing the associated transactions were
included in general and administrative expenses.
OPERATING EXPENSES
Operating expenses for the three and six months ended June 30, 2000 were
$1,379,827 and $2,719,870, respectively, compared to $503,960 and $1,758,833,
respectively, for the corresponding periods in 1999. General and Administrative
expenses for the three and six months ended June 30, 2000 were increased 191%,
and 45%, respectively, from the corresponding periods in 1999. This increase was
as result of increased infrastructure, including an in-house marketing
department.
Research and Development Costs for the three and six months ended June 30, 2000
were increased 78%, and 2%, respectively, from the comparative periods in 1999.
During March 2000, the Company repurchased the exclusive distribution rights to
the Master Distribution Agreement with SmartCash ATM, Ltd. (SmartCash). In
consideration, the Company agreed to loan SmartCash $200,000 collateralized by
company stock, release certain restrictions on Company common stock held by
SmartCash, issue warrants to purchase 500,000 shares of Company common stock,
and continue to pay commissions on sales of machines until said commissions
equal $320,000. In addition, the Company issued SmartCash a note payable for
$320,000 that will be repaid through the payment of the commissions noted above.
The company recorded a $320,000 expense on this transaction.
OTHER EXPENSE
Net Other Expense for the three and six months ended June 30, 2000 was
decreased$1,871,202 and $2,998,654 from the comparative periods in 1999. During
1999, the Company exchanged 1,100,000 convertible preferred shares in a public
company for notes receivable valued at $1,900,000 with interest at 9%. The
Company has substantial doubt about the collectibility of the notes and,
therefore, established a 100% allowance during 1999. The Company does not
recognize interest income on impaired notes. In addition, during the six months
ended June 30, 1999, the Company recorded a $1,164,750 loss reserve in
connection with the sale of 290,000 shares of convertible preferred stock in
Golden Age Homes, Inc. to one of its officers. The shares were not convertible
until December 1999 and the value at the time of conversion was uncertain. The
shares were carried at $1,450,000 at the time of sale. As part of the
transaction, the Company was relieved of debts totaling $435,250 and issued
2,800,000 shares to the officer valued at $285,250.
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NET LOSS FROM CONTINUING OPERATIONS
During the three and six months ended June 30, 2000, the Company incurred net
losses from continuing operations of $2,175,910 and $4,127,927, respectively,
which represents a 9% and 14% decrease in losses, respectively, from the
comparative periods in 1999.
DISCONTINUED OPERATIONS
In April 1999, the Company sold its automated meter reading technology (AMR
division) in exchange for shares of convertible preferred stock with a face
value of $900,000. Accordingly, the AMR division is accounted for as
discontinued operations and its operating results are shown separately in the
accompanying financial statements. The AMR division had no net sales in 1999.
The only asset identifiable with the AMR division consisted of the automated
meter reading technology. The Company realized a gain of $713,277 on the
disposal of the asset.
LIQUIDITY AND CAPITAL RESOURCES
On June 30, 2000, assets totaled $6,788,895, which represents a $2,035,958 or
43% increase from December 31, 1999's total assets of $4,752,937. The increase
is attributable to increased receivables, and cash, as well as increased
property and equipment, notes receivable, and capitalized software development
costs. The Company's total liabilities increased to $1,827,092 from $1,367,976.
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 operating
needs. Based on this review, the Company may, when appropriate, either sell or
leverage the assets for liquidity to support the Company's capital requirements.
Stockholder's equity was $4,961,803 at June 30, 2000, an increase of $1,576,842,
or 47%, from December 31, 1999, due largely to additional paid in capital
received from the Private Placement Offering. The Company has a retained deficit
of $(17,837,680).
The Company had working capital of $409,131 at June 30, 2000, which represents a
$984,577, or 171% improvement from the working capital deficiency of $(575,466)
at December 31, 1999. This improvement was primarily due to additional funds
provided to the Company from the Private Placement.
In total, the Company realized approximately $3,450,000 net proceeds from the
Offering and issued 16,000,000 restricted shares of Common Stock. If all Class A
Warrants are exercised the Company will realize approximately $6,080,000 of
proceeds, if all Class B Warrants are exercised the Company will realize
approximately $12,160,000 of proceeds and if all Class C Warrants are exercised
the Company will realize approximately $18,240,000 of proceeds. There can be no
assurance that any portion of the Class A, Class B and/or Class C Warrants will
be exercised. Said exercise is dependant upon many factors outside the control
of the Company.
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 various 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.
YEAR 2000 COMPLIANCE
In 1999, the Company completed its year 2000 compliance review of its
information technology systems and non-information technology systems and
successfully implemented all related upgrades, replacements, or modifications
necessary. The Company experienced virtually no year 2000 business interruptions
either internally or related to its major vendors. The total cost of the year
2000 related enhancements was approximately $50,000, including an estimate of
internal payroll committed to year 2000 related projects.
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Part II - OTHER INFORMATION
ITEM 1 - 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. From time
to time the Company is a defendant (actual or threatened) in certain lawsuits
encountered in the ordinary course of its business, the resolution of which, in
the opinion of management, should not have a material adverse effect on the
Company's financial position results of operations, or cash flows.
ITEM 2 - CHANGES IN SECURITIES
In February 2000, the Company fully subscribed its Private Placement Offering
(the "Offering"), which was commenced on May 1999 pursuant to Regulation D Rule
506 of the Securities Act of 1933, as amended. The Offering provided for the
sale of units, each unit consisting of 11.5 Shares of Common Stock of Greenland
and Class A Warrants to purchase 10 Shares of Greenland Common Stock at $.50,
Class B Warrants to purchase 10 Shares of Greenland Common Stock at $1.00 and
Class C Warrants to purchase 10 shares of Greenland Common Stock at $1.50. The
Class A Warrants expire in 12 months from date of issuance, Class B warrants 18
months from date of issuance and Class C Warrants 24 months from date of
issuance.
During the first quarter of 2000, the Company realized $2,170,514 in net
proceeds from the Offering, and issued 12,225,332 restricted shares of common
stock. These Securities are not registered and are deemed to be "Restricted" as
that term is defined under Rule 144 of the Securities Act of 1933. The
Securities were issued in reliance on the exemption from registration pursuant
to Section 4(2) of the Securities Act and Regulation D promulgated thereunder.
Written representations were obtained from the purchasers and legends were
placed upon the certificates issued in connection therewith.
In addition, during the six months ended June 30, 2000, the Company realized
$469,300 and issued 2,004,993 shares from the exercise of Class A Warrants from
its Private Placement Offering.
Additional Common Stock Issued
The Company issued 3,604,684 shares of its common stock for services during the
six months ended June 30, 2000. The Company has recognized expenses for such
services in the amount of $1,141,556.
The Company issued 1,559,322 shares in settlement of notes payable and accrued
interest totaling $340,150.
The Company issued 2,119,229 shares to acquire assets and pay accrued expenses
totaling $1,005,833.
In conjunction with the repurchase of the exclusive distributor agreement, the
Company issued warrants to purchase 500,000 shares of restricted Company Stock.
The Company issued options to purchase 3,961,610 shares with a weighted average
strike price of $.16 for services totaling $280,520, and to purchase assets of
$281,089.
ITEM 3 - DEFAULTS ON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTER TO VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 1 - Interim Work and Assignment Agreement between
Greenland Corporation and ACS Retail Solutions, Inc.
(b) Reports on Form 8-K
None
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SIGNATURES
In accordance with 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: August 11, 2000 By: /s/ Gene Cross
------------------
Gene Cross
Chief Financial Officer, Director
Date: August 11, 2000 By: /s/ Thomas J. Beener
------------------------
Thomas J. Beener
Secretary, Director
Date: August 11, 2000 By: /s/ Louis T. Montulli
-------------------------
Louis T. Montulli
CEO, Chairman of Board
16
