<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 MARCH 31, 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
of incorporation or organization) Identification 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 53,102,481
$0.001 PAR VALUE AS OF APRIL 28, 2000
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT
(CHECK ONE)
YES NO X
--- ---
<PAGE>
GREENLAND CORPORATION
REPORT ON FORM 10-QSB
QUARTER ENDED MARCH 31, 2000
TABLE OF CONTENTS
PART I. Financial Information
ITEM 1. Financial Statements (unaudited)
- Condensed consolidated balance sheets as of March 31, 2000 and
December 31, 1999
- Condensed consolidated statements of operations for the three
months ended March 31, 2000 and 1999
- Condensed consolidated statements of changes in stockholders'
equity for the three months ended March 31, 2000, and the year
ended December 31, 1999
- Condensed consolidated statements of cash flows for the three
months ended March 31, 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
2
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------------ ---------------
<S> <C> <C>
Current Assets:
Cash $ 1,059,748 $ 235,574
Accounts receivable (less allowance for uncollectible
accounts of $148,959 in 2000, and $120,300 in 1999) 115,723 6,508
Receivables from employees 72,928 26,080
Inventories 282,387 299,116
Accounts receivable - officers 161,838 161,838
Prepaid officers compensation 64,000 63,414
Notes receivable 200,000 -0-
Other current assets 20,540 -0-
------------------ ---------------
Total Current Assets 1,977,164 792,530
Property and equipment, net 430,012 190,004
Long term notes receivable, net -0- -0-
Investments 900,000 900,000
Intangibles, net 3,184,539 2,862,903
Other assets 112,986 7,500
------------------ ---------------
Total Assets $ 6,604,701 $4,752,937
================== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable 392,950 $ 98,100
Trade accounts payable 294,719 426,918
Accrued expenses 531,543 572,958
Current portion of capital leases 12,977 -0-
Note payable to related parties 100,000 270,000
------------------ ---------------
Total Current Liabilities 1,332,189 1,367,976
Long term liabilities:
Long term portion of capital leases 138,357 -0-
------------------ ---------------
Total Liabilities 1,470,546 1,367,976
------------------ ---------------
Stockholders' Equity:
Common stock $.001 par value; 100,000,000 shares authorized,
51,570,581 (35,298,622 in 1999) issued and outstanding 51,571 35,298
Additional paid-in capital 20,691,598 16,881,759
Subscribed shares unissued 52,754 174,437
Retained deficit (15,661,768) (13,706,533)
------------------ ---------------
Total Stockholders' Equity 5,134,155 3,384,961
------------------ ---------------
Total Liabilities and Stockholders' Equity $ 6,604,701 $ 4,752,937
================== ===============
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
3
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31
2000 1999
---------------------- -----------------
<S> <C> <C>
Revenues $ 79,268 $ 634
Cost of goods sold 634,980 0
---------------------- -----------------
Gross loss (555,712) 634
---------------------- -----------------
Operating Expense:
General and administrative expenses 799,952 979,815
Research and development costs 220,090 275,058
Repurchase of distributor agreement 320,000 0
---------------------- -----------------
Total operating expenses 1,340,042 1,254,873
---------------------- -----------------
Operating loss (1,895,754) (1,254,239)
---------------------- -----------------
Other income (expense):
Loss on sale of investments (42,500) (1,164,750)
Interest expense (14,577) (18,984)
Other income (expense) 796 0
---------------------- -----------------
Total other income (expense) (56,281) (1,183,734)
---------------------- -----------------
Loss before income taxes (1,952,035) (2,437,973)
Income tax expense 3,200 0
---------------------- -----------------
Net Loss $ (1,955,235) $(2,437,973)
====================== =================
Net loss per share:
Basic loss per share (0.04) (0.16)
Diluted loss per share (0.04) (0.16)
Weighted average shares outstanding
Basic 44,441,140 15,515,958
Diluted 44,441,140 15,515,958
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
4
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Subscribed
-------------------------- 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 $ $ (6,884,321) $5,780,570
Shares issued to retire debt and
to purchase asset 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 asset 2,121,540 2,122 1,031,329 1,033,451
Sale of common stock 11,576,341 11,576 2,158,938 2,170,514
Shares issued for services 1,925,087 1,926 490,622 492,548
Subscribed shares issued 648,991 649 121,034 (121,683) 0
Warrants to purchase shares 7,916 7,916
Net loss (1,955,235) (1,955,235)
------------ ------------- ---------------- --------------- ------------------ --------------
Balance at March 31, 2000 51,570,581 $ 51,571 $20,691,598 $ 52,754 $ (15,661,768) $5,134,155
============ ============= ================ =============== ================== ==============
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
5
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31, March 31,
2000 1999
----------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,955,235) $ (2,437,973)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 127,030 3,283
Allowance for uncollectible account 28,659 -
Realized loss on disposal of investments 42,500 -
Unrealized decrease in investments - 1,164,750
Repurchase of distributor agreement 320,000
Stock issued for services 492,548 938,306
(Increase) decrease in
Account receivable (60,374) 19,250
Inventories 16,729 (53,205)
Prepaid expenses 63,414 626
Account receivable - officers and other assets (106,698) -
Increase (decrease) in:
Trade account payable (132,199) 13,780
Accrued expenses 116,709 19,020
----------------- ------------------
Net cash used in operating activities (1,046,917) (332,163)
Cash flows from investing activities:
Purchase of equipment (107,340) (8,182)
Investment in notes receivable (200,000) -
----------------- ------------------
Net cash used in investing activities (307,340) (8,182)
----------------- ------------------
Cash flows from financing activities:
Proceeds from sale of stock 2,170,514 277,500
Amounts borrowed from stockholders - 55,587
Proceeds from sale of warrants 7,916 -
Proceeds from new loans -0- 38,000
----------------- ------------------
Net cash provided by financing activities 2,178,431 371,087
----------------- ------------------
Increase (decrease) in cash 824,174 30,742
Cash at the beginning of period 235,574 3,332
----------------- ------------------
Cash at end of period $1,059,748 $ 34,074
================= ==================
Supplemental information:
Cash paid for interest 14,577 124
Cash paid for income taxes 3,200 -
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
6
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
Supplemental disclosure of non-cash investing and financing activities:
The Company acquired assets in the amount of $429,750 by issuing stock
in 2000.
The Company repaid debt and other accrued expenses of $145,150 through
the issuance of stock in 2000.
The Company repaid notes payable to related parties through the
issuance of stock in the amount of $170,000 in 2000.
In 2000, the Company acquired a receivable from its employees in the
amount of $66,177 for the repayment of the employee portion of
withholding from compensation paid in the form of Company stock.
In 2000, 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 1999 by issuing shares of its
common stock in the amount of $158,374.
The Company acquired equipment and furniture in the amount of $156,852
by incurring capital leases.
See accompanying notes to Condensed Consolidated Financial Statements
7
<PAGE>
GREENLAND CORPORATION
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
QUARTER ENDED MARCH 31, 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 quarter
ended March 31, 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 has a retained deficit of $15,661,768 as of
March 31, 2000. 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 necessary for the Company to meet its goals
and objectives. Although the Company had working capital of
$644,975 at March 31, 2000, the cash used in operating
activities during the quarter totaled $1,046,917. The Company
continues to meet its obligations and pursue additional
capitalization opportunities. Subsequent to March 31, 2000, the
Company realized $459,800 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 proceeds 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.
<TABLE>
<S> <C> <C>
Note 3. INVENTORIES
Inventories at March 31, 2000 were as follows:
Raw materials $ 241,605
Work-in-process 102,296
Finished goods -0-
-----------------
343,901
Less allowance for obsolescence (61,514)
-----------------
$282,387
=================
Note 4. PROPERTY AND EQUIPMENT
Net property and equipment at March 31, 2000 was as follows:
Computers and equipment $ 228,375
Demonstration equipment 118,825
Furniture and fixtures 123,391
Leasehold improvements 12,975
-----------------
483,566
Accumulated depreciation 53,554
$ 430,012
=================
</TABLE>
Depreciation expense for the quarters ended March 31, 2000 and
December 31, 1999 was $22,137 and $3,283, respectively.
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 considerations, the
Company agreed to loan SmartCash $200,000 collateralized by
company stock (see Note 11).
8
<PAGE>
Notes to Condensed Consolidated Statements (continued)
Quarter Ended March 31, 2000
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 March 31, 2000. The Company amortizes capitalized software
costs over 5 years.
Note 7. NOTES PAYABLE
Notes payable at March 31, 2000 are summarized as follows:
<TABLE>
<S> <C>
Notes Payable: $392,950
Notes Payable to Related Parties: $100,000
</TABLE>
The Company repaid note obligations during the quarter in the
amount of $195,670 with stock (see Note 11).
Note 8. CAPITAL LEASES
During the first quarter of 2000, the Company obtained financing
for certain furniture and equipment through leases. Future
minimum lease payments under the capital lease for years ending
March 31, are as follows:
<TABLE>
<S> <C>
2001 $ 60,148
2002 60,148
2003 53,350
2004 28,096
2005 25,902
----------
Total lease payments payable $ 227,644
Less amount representing interest (76,310)
----------
Net lease payable $ 151,334
==========
</TABLE>
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 quarter of 2000, the
Company issued 12,225,332 shares pursuant to the offering, and
realized net proceeds of $2,170,514 after deducting costs related
to the offering of $2,864,578.
Additional Common Stock Issued
The Company issued 1,925,087 shares of its common stock for
services during the quarter. The Company has recognized expenses
for such services in the amount of $492,548.
The Company issued 1,228,000 shares in settlement of notes
payable and accrued interest totaling $197,320 (see Note 7).
The Company issued 893,540 shares to acquire assets and pay
accrued expenses totaling $836,131.
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).
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 quarter ended March 31, 2000:
<TABLE>
<CAPTION>
Sales Processing
Segment Segment Unallocated Total
----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Revenue 76,713 $ 2,555 $ -0- $ 79,268
Gross margin (173,535) (382,177) -0- (555,712)
Depreciation and amortization 10,454 69,530 47,046 127,030
Interest expense 14,577 14,577
Other, net 1,334,700 1,334,700
Income (loss) from continuing
operations before income
taxes (173,535) (382,177) (1,396,323) (1,952,035)
Identifiable assets 70,671 $ 1,448,423 $ 5,085,607 $ 6,604,701
Capital expenditures 40,337 429,750 223,855 693,942
</TABLE>
For the quarter ended March 31, 1999 the Company was in the
development stage. Segment information was not applicable to
that period.
The above negative gross margins includes 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 the 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 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 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 Note 5,7
and 9).
Note 12. SUBSIQUENT EVENTS
Subsequent to March 31, 2000, the Company realized net proceeds
of $459,800 from the exercise of Class A Warrants, and issued
1,235,000 restricted shares of common stock.
Subsequent to March 31, 2000, the Company issued 296,900 shares
of common stock for services.
9
<PAGE>
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 the end of the first quarter March 31, 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 continuing development and evolution of the
Check Cashing ATM. The formation of relationships with Cisco Systems, MC 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.
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.
10
<PAGE>
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
from 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. 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). There are no
assurance the Company will receive additional proceeds from the private
placement through the exercise of warrants.
RESULTS OF OPERATIONS
REVENUE
The company earned revenues of $79,268 for the quarter ending March 31, 2000,
primarily from the sale of machines. The company sold machines to two chains,
Piggly Wiggly and Penny Wise, as well as to an independent gas station in
Michigan.
In late March, the Company placed five check cashing machines at five WalMart
locations in California. The machines will operate as a test for WalMart. The
Company will retain all fee revenues generated from the operation of the
machines, and the Company will pay WalMart a monthly fee of $1,000 per location.
The term of this agreement is 120 days. There can be no assurance that the
arrangement will be continued and/or that an arrangement with new terms and
conditions will be agreed upon.
During the first quarter 1999 the Company was a development stage company, and,
therefore, did not sell machines.
COST OF SALES
The Company incurred costs of sales of $634,980 for the quarter ending March
31, 2000. Of these costs, $250,248 related to the cost of manufacturing
machines, resulting in a $(173,535) gross sales margin. 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.
Costs associated with transaction processing, included in cost of sales, were
$384,732 for quarter ending March 31, 2000, resulting in a gross margin on
transaction revenue of $(382,177). Processing costs included fixed overhead
expenses such as amortization and depreciation, labor, and communications.
Management anticipates improvements in the gross margin with the placement of
additional machines in the field, and the 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.
11
<PAGE>
OPERATING EXPENSES
Operating expenses for the quarter ended March 31, 2000 were $1,340,042 compared
to $1,254,873 for first quarter 1999, resulting in a $85,169, or 7%, decrease.
General and Administrative expenses for the quarter ended March 31, 2000 were
$799,952 compared to $979,815 for first quarter of 1999, resulting in a
$179,863, or 18%, decrease. The primary cause of this decrease was the
classification of manufacturing and processing costs as a cost of sale during
2000, which is in contrast to 1999 when, as a result of the Company being in the
development stage, they were included in general and administrative expense.
Research and Development Costs for the quarter ended March 31, 2000 were
$220,090 compared to $275,058 for first quarter 1999, resulting in a $54,968, or
20%, decrease. This decrease reflected the transition from a development stage
company to an operating company.
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 quarter ended March 31, 2000 was $56,281 compared
to $1,183,734 for first quarter 1999, resulting in a $1,127,453, or 95%,
decrease. During the quarter ending March 31, 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.
NET LOSS
During the quarter ending March 31, 2000, the Company incurred a net loss of
$1,955,235 which represents an $482,738, or 20%, decrease from the quarter
ending March 31, 1999's net loss of $2,437,973. The primary cause of this
reduction was the $1,164,750 decrease in other expense noted above. However,
a combined $324,715 increase in cost of sales and operating expenses,
resulting from the increased infrastructure required to support operations,
somewhat offset the reduction in other expense. In addition, the Company
incurred a $320,000 expense for the repurchase of the exclusive master
distributor agreement.
LIQUIDITY AND CAPITAL RESOURCES
On March 31, 2000, assets totaled $6,604,701, which represents an $1,851,764
increase from December 31, 1999's total assets of $4,752,937. The increase is
attributable to an increase in cash, as well as increased property and
equipment, notes receivable, and capitalized software development costs. The
Company's total liabilities increased for the first quarter 2000 to
$1,470,546 from $1,367,976 for the year ending December 31, 1999.
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 $5,134,155 at March 31, 2000, an increase of $1,749,194
from December 31, 1999, due largely to additional paid in capital from the
Private Placement Offering. The Company has a retained deficit of $(15,661,768).
The Company had working capital of $644,975 at March 31, 2000, which represents
a $1,220,441 improvement from the working capital deficiency of $(575,466) at
December 31, 1999. This improvement was due to additional funds provided to the
Company from the Private Placement Offering pursuant to Regulation D Rule 506 of
the Securities Act of 1933, as amended.
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.
12
<PAGE>
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.
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.
The Company issued 1,200,000 shares to repay notes payable to related parties
during the first quarter of 2000. (see the Condensed Consolidated Statement
of Cash Flows for the three months ended March 31, 2000, and Note 7.)
The Company issued 482,267 shares to acquire assets during the first quarter
of 2000 (see the Condensed Consolidated Statement of Cash Flows for the
three months ended March 31, 2000).
The Company repaid debt and other accrued expenses through the issuance of
439,273 shares during the first quarter of 2000 (see the Condensed
Consolidated Statement of Cash Flows for the three months ended March 31,
2000).
The Company issued 1,925,087 shares to pay for services during the first
quarter of 2000 (see the Condensed Consolidated Statement of Cash Flows for
the three months ended March 31, 2000).
13
<PAGE>
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) Exhibits - None
(b) Reports on Form 8-K
None
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: May 15, 2000 By: /s/ Gene Cross
--------------
Gene Cross
Chief Financial Officer, Director
Date: May 15, 2000 By: /s/ Thomas J. Beener
--------------------
Thomas J. Beener
Secretary, Director
Date: May 15, 2000 By: /s/ Louis T. Montulli
---------------------
Louis T. Montulli
CEO, Chairman of Board
14
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<PERIOD-START> JAN-01-2000
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