SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
COMMISSION FILE NUMBER: 017833
GREENLAND CORPORATION
(Exact Name of Registrant as specified in its charter)
NEVADA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87-0439051
(State of other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
17075 Via Del Campo
San Diego, CA 92127
(Address of principal executive offices)
(858) 451-6120
(Issuer's telephone number)
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 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 $0.001 PAR VALUE
139,089,377 SHARES OUTSTANDING AS OF May 16, 2003
DOCUMENTS INCORPORATED BY REFERENCE
None
Traditional Small Business Disclosure Format (check one):[X] YES NO
Greenland Corporation
(A Subsidiary of Imaging Technologies Corporation)
Report on Form 10-QSB
Quarter Ended MARCH 31, 2003
Table of Contents
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Consolidated balance sheets as of March 31, 2003 (unaudited)
Consolidated statements of operations for the three months ended March 31, 2003
and 2002
Consolidated statements of cash flows for the three months ended March 31, 2003
and 2002
Notes to consolidated financial statements
Item 2. Management's discussion and analysis of financial condition and
results of operations
Part II. Other Information
Item 1. Legal Matters
Item 6. Exhibits and Reports on Form 8-K
Signatures
GREENLAND CORPORATION
(A Subsidiary of Imaging Technologies Corporation)
CONSOLIDATED BALANCE SHEETS
ASSETS
(in thousands, except share amounts) . . . . . . . . . . . . . . . . . MARCH 31, 2003
(unaudited)
Current assets
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . $ 37
Prepaid expenses and other. . . . . . . . . . . . . . . . . . . . 42
------------------
Total current assets . . . . . . . . . . . . . . . . . . . . 79
Property and equipment, net. . . . . . . . . . . . . . . . . . . . . . 77
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Investment - PEO contracts . . . . . . . . . . . . . . . . . . . . . . 269
------------------
$ 443
==================
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . $ 855
PEO payroll taxes and other payroll deductions. . . . . . . . . . 312
Inter-company transactions. . . . . . . . . . . . . . . . . . . . (129)
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . 852
Current maturities of obligations under capital lease . . . . . . 98
Accrued payroll . . . . . . . . . . . . . . . . . . . . . . . . . 765
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . 114
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . 817
------------------
Total current liabilities. . . . . . . . . . . . . . . . . . . 3,684
Obligations under capital lease less current maturities. . . . . . . . 28
------------------
3,712
Stockholders' net capital deficiency
Convertible Preferred Class A stock, $.001 par value;
10,000 shares authorized, no shares issued or outstanding . . . . -
Common stock, $0.001 par value, 500,000,000 shares
authorized, 137,097,181 and 12,789,281 shares
issued and outstanding, respectively . . . . . . . . . . . . . . 596
Common stock warrants . . . . . . . . . . . . . . . . . . . . . . . 14
Subscribed shares and receivables . . . . . . . . . . . . . . . . . (2,822)
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 31,433
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . (32,490)
------------------
Total shareholders' net capital deficiency . . . . . . . . . (3,269)
$ 443
==================
See accompanying notes to condensed consolidated financial statements
GREENLAND CORPORATION
(A Subsidiary of Imaging Technologies Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
In thousand, except per share amounts. . . . . . . . . . . . . . . . . THREE MONTHS ENDED
MARCH 31,
2003 2002
-------------------- ------------
Revenues
Product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ -
PEO Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,402 -
-------------------- ------------
1,402 -
Costs and expenses
Cost of goods sold. . . . . . . . . . . . . . . . . . . . . . . . . - 101
Cost of PEO services. . . . . . . . . . . . . . . . . . . . . . . . 1,379 -
Selling, general, and administrative. . . . . . . . . . . . . . . . 299 714
-------------------- ------------
1,678 815
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . (276) (815)
Other income (expenses):
Impairment of goodwill. . . . . . . . . . . . . . . . . . . . . . . - (1,565)
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . (21) (37)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . 42 -
-------------------- ------------
Total other income (expense). . . . . . . . . . . . . . . . . 21 (1,602)
Loss before taxes and extraordinary item . . . . . . . . . . . . . . . (255) (2,417)
Provision for income tax . . . . . . . . . . . . . . . . . . . . . . . - -
Extraordinary item - loss on settlement of debts . . . . . . . . . . . - (11)
-------------------- ------------
- (11)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (255) (2,428)
-------------------- ------------
Basic and diluted net loss per share . . . . . . . . . . . . . . . . . (0.01) (0.57)
-------------------- ------------
Basic and diluted weighted average number
of common stock outstanding . . . . . . . . . . . . . . . . . . 119,376,239 4,258,740,
See accompanying notes to condensed consolidated financial statements
GREENLAND CORPORATION
(A Subsidiary of Imaging Technologies Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2003 AND 2002
(in thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2003 2002
-------------------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (255) $ (2,428)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . 13 126
Impairment of goodwill . . . . . . . . . . . . . . . . . . . . - 1,565
Net loss on settlement of debt . . . . . . . . . . . . . . . . - 11
Stock issued for services. . . . . . . . . . . . . . . . . . . - 433
Stock issued for salaries & reimbursement. . . . . . . . . . . 76 45
(Increase) / decrease in current assets:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . - 6
Interest receivable. . . . . . . . . . . . . . . . . . . . . (42) -
Prepaid Expense. . . . . . . . . . . . . . . . . . . . . . . - 22
Other assets . . . . . . . . . . . . . . . . . . . . . . . . - 4
Increase in current liabilities:
Account payable and accrued expense. . . . . . . . . . . . . 290 129
-------------------- ---------------------
Total Adjustments . . . . . . . . . . . . . . . . . . . . 337 2,341
-------------------- ---------------------
Net cash provided by (used in) operating activities . . . . . . . . 82 (87)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital leases . . . . . . . . . . . . . . . . (35) (33)
Principal payments on line of credit . . . . . . . . . . . . . . . . (59) -
Principal payment on note payable. . . . . . . . . . . . . . . . . . (22) -
Proceeds from the exercise of warrants & options . . . . . . . . . . - 42
Proceeds from note payable-related party . . . . . . . . . . . . . . 67 76
-------------------- ---------------------
Net cash provided by (used in) financing activities. . . . . . . . . (49) 85
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS . . . . . . . . . . 33 (2)
CASH & CASH EQUIVALENTS , BEGINNING BALANCE. . . . . . . . . . . . . . 4 7
-------------------- ---------------------
CASH & CASH EQUIVALENTS , ENDING BALANCE . . . . . . . . . . . . . . . $ 37 $ 5
-------------------- ---------------------
SUPPLEMENTAL INFORMATION:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . $ - $ 14
-------------------- ---------------------
Cash paid for income tax . . . . . . . . . . . . . . . . . . . . . . $ - $ -
-------------------- ---------------------
See accompanying notes to condensed consolidated financial statements
GREENLAND CORPORATION
(A Subsidiary of Imaging Technologies Corporation)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated interim financial statements
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission for the presentation of interim financial
information, but do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. The
audited consolidated financial statements for the two years ended December 31,
2002 was filed on April 7, 2003 with the Securities and Exchange Commission and
is hereby referenced. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the
three months period ended March 31, 2003 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2003.
NOTE 2. GOING CONCERN UNCERTAINTY
As shown in the accompanying consolidated financial statements, the Company has
suffered recurring losses from operations, has a net working capital deficiency
of approximately $3.6 million and an accumulated deficit of $32.5million as of
March 31, 2003. 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. The Company continues to meet its obligations and pursue
additional capitalization opportunities. There is no assurance, however, that
the Company will be successful in meeting its goals and objectives in the
future.
In view of the matters described in the preceding paragraph, recoverability of a
major portion of the recorded asset amounts shown in the accompanying balance
sheet is dependent upon continued operations of the Company, which in turn is
dependent upon the Company's ability to raise additional capital, obtain
financing, and to succeed in its future operations. The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern.
NOTE 3. RECENT PRONOUNCEMENTS
In May 2002, the Board issued SFAS No. 145, Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS
145"). SFAS 145 rescinds the automatic treatment of gains or losses from
extinguishments of debt as extraordinary unless they meet the criteria for
extraordinary items as outlined in APB Opinion No. 30, Reporting the Results of
Operations, Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS
145 also requires sale-leaseback accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions and makes
various technical corrections to existing pronouncements. The provisions of SFAS
145 related to the rescission of FASB Statement 4 are effective for fiscal years
beginning after May 15, 2002, with early adoption encouraged. All other
provisions of SFAS 145 are effective for transactions occurring after May 15,
2002, with early adoption encouraged. The adoption of SFAS 145 does not have a
material effect on the earnings or financial position of the Company.
In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with
exit or Disposal Activities." This Statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." This Statement requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Under Issue 94-3 a liability for an
exit cost as defined, was recognized at the date of an entity's commitment to an
exit planThe adoption of SFAS 146 does not have a material effect on the
earnings or financial position of the Company.
In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions." SFAS No. 147 removes the requirement in SFAS No. 72 and
Interpretation 9 thereto, to recognize and amortize any excess of the fair value
of liabilities assumed over the fair value of tangible and identifiable
intangible assets acquired as an unidentifiable intangible asset. This statement
requires that those transactions be accounted for in accordance with SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." In addition, this statement amends SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," to include certain financial
institution-related intangible assetsThe adoption of SFAS 147 does not have a
material effect on the earnings or financial position of the Company.
In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45). FIN 45 requires that upon
issuance of a guarantee, a guarantor must recognize a liability for the fair
value of an obligation assumed under a guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and annual financial
statements about the obligations associated with guarantees issued. The
recognition provisions of FIN 45 are effective for any guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002The adoption of this pronouncement does not have a material effect on the
earnings or financial position of the Company.
In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock Based
Compensation-Transition and Disclosure". SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock Based Compensation", to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used, on reported
results. The Statement is effective for the Companies' interim reporting period
ending January 31, 2003The adoption of SFAS 148 does not have a material effect
on the earnings or financial position of the Company.
On April 30, the FASB issued FASB Statement No. 149 (FAS 149), Amendment of
Statement 133 on Derivative Instruments and Hedging Activities. FAS 149 amends
and clarifies the accounting guidance on (1) derivative instruments (including
certain derivative instruments embedded in other contracts) and (2) hedging
activities that fall within the scope of FASB Statement No. 133 (FAS 133),
Accounting for Derivative Instruments and Hedging Activities. FAS 149 also
amends certain other existing pronouncements, which will result in more
consistent reporting of contracts that are derivatives in their entirety or that
contain embedded derivatives that warrant separate accounting. FAS 149 is
effective (1) for contracts entered into or modified after June 30, 2003, with
certain exceptions, and (2) for hedging relationships designated after June 30,
2003. The guidance is to be applied prospectively. The Company does not expect
the adoption of SFAS No. 149 to have a material impact on its financial position
or results of operations or cash flows.
NOTE 4. REVENUE RECOGNITION
The Company recognizes its revenues associated with its PEO business pursuant to
EITF 99-19 "Reporting Revenue Gross as a Principal versus Net as an Agent." In
assessing whether revenue should be reported gross with a separate display of
cost of sales to arrive at gross profit or on a net basis, the Securities and
Exchange Commissions (SEC) staff considers whether the registrant: (1) acts as
principal in the transaction; (2) takes title to the products; (3) has risks and
rewards of ownership, such as the risk of loss for collection, delivery, or
returns; and (4) acts an a gent or broker (including performing services, in
substance, as an agent or broker) with compensation on a commission or fee
basis. If the company performs as an agent or broker without assuming the risks
and rewards of ownership of the goods, sales should be reported on a net basis.
The Company's revenues are derived from comprehensive service fees, which are
based upon each worksite employee's gross pay and a markup computed as a
percentage of the gross pay. The Company includes the component of the
comprehensive service fees related to the gross pay of its worksite employees
In accordance with the EITF consensus, the Company believes it is deemed to be a
principal in its personnel management services because it assumes a significant
number of risks as a co-employer of its worksite employees. Among the more
significant of those risks is the Company's assumption of risk for the payment
of its direct costs, including the gross pay of its worksite employees,
regardless of whether our clients pay their comprehensive service fees on a
timely basis or at all.
The Company offers and/or provides health insurance coverage, workers'
compensation insurance coverage, and other services to its worksite employees
through a national network of carriers and suppliers of its choosing and pass
these costs plus mark-up on to its clients. The Company establishes the selling
price to its clients. There is no fixed selling price. The Company's charges for
such services are included in its service fees. Since the Company performs a
service ordered by clients such that the selling price is greater as a result of
the Company's efforts, that fact is indicative that the Company should recognize
revenue gross.
The Company is involved in determining the nature, type, and characteristics of
its service to its clients and worksite employees, which also indicates that the
Company should record revenue gross. As a PEO, the Company provides
comprehensive personnel management services based upon a Client Service
Agreement with clients that causes the Company to become a co-employer. This
arrangement creates a liability on the part of the Company related to all
compensation requirements of its client. As a PEO, the Company offers a broad
range of services, including benefits and payroll administration, health and
workers' compensation insurance programs, personnel records management, employer
liability management, employee recruiting and selection, performance management,
and training and development.
The company and its clients establish common law employment relationships with
worksite employees. Each has a right to independently decide whether to hire or
discharge an employee. Each has a right to direct and control worksite employees
- - the Company directs and controls worksite employees in matters involving human
resource management and compliance with employment laws, and the client directs
and controls worksite employees in manufacturing, production, and delivery of
its products and services.
The Company's clients provide worksite employees with the tools,
instrumentalities, and place of work. The Company ensures that worksite
employees are provided with a workplace that is safe, conducive to productivity,
and operated in compliance with employment laws and regulations. In addition,
the Company provides worksite employees with workers' compensation insurance,
unemployment insurance and a broad range of employee benefits programs.
The Company manages its employment liability exposure by monitoring and
requiring compliance with employment laws, developing policies and procedures
that apply to worksite employees, supervising and disciplining worksite
employees, exercising discretion related to hiring new employees, and ultimately
terminating worksite employees who do not comply with Company requirements.
While the Company does not specifically establish wage levels, it is directly
involved in decisions related to benefits (including insurance, workers'
compensation, and other benefits) provided to worksite employees. As stated
above, the Company is involved in worksite employee acceptability standards as
they relate to employment laws, policies and procedures, worksite supervision
and discipline, and procedures and policies for hiring new employees.
The Company's Client Services Agreement calls for payment of net wages,
insurance and benefits costs, taxes due to federal, state, and local
authorities, ancillary services (on a case-by-case basis) and a management fee
for the Company's services, which is negotiated with each Agreement. The Company
does not charge fees on a "per transaction" basis.
The Company generally requires its clients to pay their comprehensive service
fees (including salaries, wages, workers' compensation and other insurance,
other benefits, and management fees) no later than one day prior to the
applicable payroll date. The Company maintains the right to terminate its Client
Service Agreement and associated worksite employees, or to require prepayment,
letters of credit or other collateral, upon deterioration in a client's
financial position or upon nonpayment by a client.
The Company maintains an allowance for doubtful accounts for estimated losses
resulting from the inability of its clients to pay the comprehensive service
fees. The Company believes that the success of its business is heavily dependent
on its ability to collect these comprehensive service fees for several reasons,
including (i) the large volume and dollar amount of transactions processed by
the Company; (ii) the periodic and recurring nature of payroll and associated
costs of benefits and other services; and (iii) the fact that the Company is at
risk for the payment of its direct costs regardless of whether its clients pay
their comprehensive service fees. To mitigate this risk, the Company has
established very tight credit policies.
As a result of these efforts, the outstanding balance of accounts receivable and
subsequent losses related to client nonpayment have, to date, been low as a
percentage of revenues. However, if the financial condition of the Company's
clients were to deteriorate rapidly, resulting in nonpayment, accounts
receivable balances could grow significantly and the Company could be required
to provide for additional allowances, which would decrease net income in the
period that such determination was made.
NOTE 5. PROPERTY AND EQUIPMENT
Net property and equipment at March 31, 2003 was as follows:
(In thousands)
Computers and equipment. . . . . . . . . . $ 321
Furniture & fixtures . . . . . . . . . . . 122
Demonstration equipment. . . . . . . . . . 127
Leasehold improvements . . . . . . . . . . -0-
570
Accumulated depreciation & amortization
(Including accumulated amortization of
$204,249 on leased assets). . . . . . . (493)
$ 77
Depreciation expenses, including amortization of capital lease assets, for the
three months ended March 31, 2003 and 2002 were $13 thousand and $126 thousand,
respectively.
NOTE 6. NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties at March 31, 2003 were as follows:
(in thousands)
Note payable to a stockholder of the Company.
Interest at 8%. Principal due at various dates through September 2003.
Interest expense as of March 31, 2003 is $3,633. . . . . . . . . . . . $ 169
Notes payable to a stockholder and officer of the Company.
Interest at 8%. Principal due at various dates through April 2003.
Interest expense as of March 31, 2003 is $2,240. . . . . . . . . . . . 116
Other notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---------------
$ 286
NOTE 7. NOTES PAYABLE
Notes payable at March 31, 2003 were as follows:
(in thousands)
Note payable to an unrelated party, with interest at 10%. Due through
the payment of commissions earned through March 9, 2001.. . . . . . . $ 320
Note payable related to acquisition of client services contracts from
A third party, payable without interest through May 2005. . . . . . . 246
---------------
$ 566
NOTE 8. STOCKHOLDERS' EQUITY
Convertible Preferred Stock
The Company is authorized to issue 10,000 shares of Class A convertible
preferred stock with a face value of ten thousand Dollars ($10,000) and a par
value of $.001 per share. The Company is authorized to issue 10,000 shares of
Class B convertible preferred stock with a face value and with a par value to be
determined at the discretion of the Board of directors. The Company has no
convertible preferred stock outstanding through March 31, 2003.
Common Stock Issued During the Period
The Company issued 115.1 million shares to Imaging Technologies Corporation
(ITEC) pursuant to a share purchase agreement for a convertible promissory note,
payable in two years, in the amount of $2.25 million.
The Company issued 3.9 million shares to related parties to retire notes payable
in the amount of $27 thousand.
The Company issued 8.3 million and 41.7 million shares for services for the
three months ended March 31, 2003 and 2002, respectively. The Company has
recognized expenses for such services in the amount of $76 thousand and $433
thousand in 2003 and 2002, respectively.
NOTE 9. BASIC AND DILUTED NET LOSS PER SHARE
Basic and diluted net loss per share for the three month periods ended March 31,
2003 and 2002 were determined by dividing net loss for the periods by the
weighted average number of both basic and diluted shares of common stock. The
basic and diluted net income (loss) per share has been restated to retroactively
effect a reverse stock split of 50:1. The weighted average number of shares used
to compute basic and diluted loss per share is the same since the effect of
dilutive securities is anti-dilutive.
NOTE 10. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The Company prepares its statements of cash flows using the indirect method as
defined under the Financial Accounting Standard No. 95.
The cash flow statements do not include following non-cash investing and
financing activities:
The Company paid for services in the amount of $76 thousand and $433 thousand
for the three months ended March 31, 2003 and 2002, respectively, by issuing its
common stock.
The Company paid for salaries in the amount of $45 thousand for the three month
period ended March 31, 2002 by issuing common stock. No such transactions were
made in the three month period ended March 31, 2003.
The Company repaid notes payable to related parties of $27 thousand in the three
month period ended March 31, 2003, by the issuance of common stock. No such
payments were made in the prior year period.
The Company issued 115.1 million shares to Imaging Technologies Corporation
(ITEC) pursuant to a share purchase agreement for a convertible promissory note,
payable in two years, in the amount of $2.25 million.
NOTE 11. SEGMENTS AND MAJOR CUSTOMERS
The Company has two reportable segments consisting of (1) the sale and
distribution of automatic check cashing machines (ABM) and (2) PEO services. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance
based on sales, gross profit margins and operating profit before income taxes.
The following is information for the Company's reportable segments for the three
month ended March 31, 2003:
ABM PEO
(in thousands). . . . . . . . . . . . . . . Segment Segment Unallocated Total
-------- --------- ------------ -------
Revenue . . . . . . . . . . . . . . . . . . $ - $ 1,402 $ - $1,402
Gross margin, before selling, general and
administrative expense . . . . . . . . - 23 - 23
Depreciation and amortization . . . . . . . - - 13 13
Operating expenses. . . . . . . . . . . . . - (307) - (307)
Interest, net . . . . . . . . . . . . . . . - - 21 21
Loss from continuing operations before tax. - (284) 8 (276)
Identifiable assets . . . . . . . . . . . . 137 306 - 443
Capital expenditures. . . . . . . . . . . . - - - -
The following is information for the Company's reportable segments for the three
month ended March 31, 2002. The data relate to the automated check cashing
business only as the Company did not enter the PEO business until January 2003.
Sales Processing
In thousands . . . . . . . . . . . . . . . . Segment Segment Unallocated Total
-------- ------------ ------------- --------
Revenue. . . . . . . . . . . . . . . . . . . $ - $ - $ - $ -
Gross margin, before selling, general and
administrative expense. . . . . . . . . - (101) - (101)
Depreciation and amortization. . . . . . . . - 101 714 815
Interest expense . . . . . . . . . . . . . . - - 37 37
Other, net . . . . . . . . . . . . . . . . . - - (2,279) (2,279)
Loss from continuing operations before taxes - (101) (2,316) (2,417)
Identifiable assets. . . . . . . . . . . . . 146 902 1,253 2,301
Capital expenditures . . . . . . . . . . . . - - - -
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 the automated
banking machines.
NOTE 12. LEGAL PROCEEDINGS
The Company, along with Seren Systems ("Seren"), its then current and primary
software developer and supplier for its own ABM terminals, was in the process of
completing development of the check cashing service interface to the Mosaic
Software host system being implemented to support a large network of V.com
terminals. In September 2000, Seren unilaterally halted testing and effectively
shut-down any further check cashing development for the V.com project. The
parties participating in this project may have been financially damaged, related
to the delay in performance by the Company and Seren. None of the parties have
brought suit against the Company and/or Seren at this time. There is no
assurance, however, that such suit(s) will not be brought in the future.
On May 23, 2001 the Company filed a Complaint in San Diego County naming Michael
Armani as the defendant. The Complaint alleges breach of contract by Michael
Armani in connection with two separate stock purchase agreements. The Company
seeks damages in the amount of $474,595. On August 7, 2001 the Company filed a
request for Entry of Default against Mr. Armani in the amount of $474,595 and
the court granted entry of default. Subsequently Mr. Armani filed a motion to
set aside the entry of default and on October 26, 2001 the court granted said
motion and the entry of default was set aside. The Company and Mr. Armani
participated in mediation and as a result entered into a settlement agreement
whereby Mr. Armani agreed to make certain cash payments to the Company and the
parties entered into mutual release of all claims. Mr. Armani defaulted in his
obligation to make the first cash payment and consequently, the Company obtained
a judgment against Mr. Armani for $100,000. The Company is continuing its
efforts to collect on the judgment.
On May 23, 2001 Arthur Kazarian, Trustee for the General Wood Investment Trust
(the "Landlord") filed a Complaint in San Diego County naming Greenland
Corporation as a defendant. The Complaint alleges breach of contract pursuant to
the terms of the lease agreement between the Company and the Landlord for the
real property located at 1935 Avenida Del Oro, Oceanside, California and
previously occupied by the Company. The Complaint seeks damages in the amount of
approximately $500,000. Although the Company remains liable for the payments
remaining for the term of the lease, the Landlord has a duty to mitigate said
damages. The Company recorded a lease termination liability of $275 thousand
during the year ended December 31, 2001. The Company entered into a settlement
agreement with Arthur Kazarian, Trustee for the General Wood Investment Trust
(the "Landlord") where by the Company agreed to pay the sum of $220,000 to the
Landlord in installments payments of $20,000 in May 2002, $50,000 in October
2002 and the remaining balance in December 2002. In the event Greenland defaults
in any or all scheduled payments, the Landlord is entitled to a stipulated
judgment of approximately $275,000. The Company was unable to make the
scheduled payments and as a result, on July 8, 2002, the Landlord has entered a
judgment lien against the Company in the amount of $279,654.
The Company entered into an agreement with Intellicorp, Inc. ("Intellicorp")
whereby Intellicorp agreed to invest $3,000,000 in exchange for seats on the
board of directors and restricted shares of common stock of the Company. After
making the initial payment of $500,000, Intellicorp defaulted on the balance.
The Company is seeking a recovery of the unpaid $2,500,000. The defendant's
ability to pay is unknown. The Company had issued 46,153,848 shares of common
stock for the investment. The shares were returned back to the Company and were
cancelled. A default judgment was entered against defendant IntelliCorp,
IntelliGroup, and Isaac Chang. On May 16, 2003 the Court held a prove-up hearing
for proof of damages. The Company is seeking compensatory damages of
approximately $3,500,000 for breach of contract and fraud, plus punitive
damages. The court has requested that the Company submit a supplemental brief
regarding the request for punitive damages.
On July 5, 2001 Max Farrow, a formal officer of the Company, filed a Complaint
in San Diego County naming Greenland Corporation, Thomas J. Beener,
Intelli-Group, Inc., Intelli-Group LLC and Intelli-Corp, Inc. as defendants. The
Complaint alleges breach of contract in connection with Mr. Farrow's resignation
as an officer and director of the Company in January 2001. The Company and Mr.
Thomas Beener, entered into a settlement agreement with Max Farrow whereby Mr.
Farrow agreed to release Mr. Beener from all claims, obligations etc., in
exchange for the issuance of 8 million restricted shares of Greenland
Corporation common stock. The good faith settlement was approved by the court
and the agreed upon consideration was delivered to Mr. Farrow. The Company
entered into a settlement with Farrow whereby the Company agreed to a judgment
of $125,000. However, the judgment will not be enforced until such time as
efforts to collect against IntelliCorp et al, have been exhausted. In the event
funds are collected from IntelliCorp. Mr. Farrow will receive the first $125,000
plus 50% of the next $200,000 collected. The Company will retain all amounts
collected thereafter.
Fund Recovery, a temporary staffing services filed a complaint against Greenland
Corporation alleging breach of contract. A summary judgment motion is pending.
The Company recorded the liability amount of $14 thousand in the consolidated
financial statements.
John Ellis has filed a demand for arbitration in San Diego County against the
Company seeking damages of approximately $70,000 for an alleged breach of
contract action. The Company believes it has valid defenses to the allegations.
Mr. Ellis appears to have abandoned this action in arbitration and has elected
to pursue a civil suit.
John Ellis has filed an action in San Diego County against the Company seeking
damages of approximately $60,000 for an alleged breach of contract action. The
Company believes it has valid defenses to the allegations. This amount was
recorded as a liability in the consolidated financial statements. The Company
has filed a motion to quash service of the civil action and to compel
arbitration.
NKS Enterprises, Inc. commenced a legal action against the Company in San Diego
Superior Court in Vista California seeking damages in connection with the
purchase and operation of a MaxCash ABM. The case was settled in December 2002.
The maximum amount to be paid under the settlement is $100,000. In exchange,
Greenland will receive the MaxCash ABM sold to NKS Enterprises. This amount was
recorded as a liability in the consolidated financial statements.
The Company's officers and directors are aware of no other 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.
NOTE 13. SUBSEQUENT EVENTS
Subsequent to March 31, 2003, 2,804 shares of Greenland common stock were
returned by the holders of said shares and cancelled.
In April 2003, the Company entered into a consulting agreement with DDM
Consulting Services, LLC. Pursuant to this Agreement, the Company issued
2,000,000 shares of restricted Greenland common stock.
NOTE 14. ITEC ACQUISITION AGREEMENT
On January 14, 2003, Greenland Corporation ("Greenland" or the "Company")
completed its sale of 19,183,390 shares of Greenland common stock, which
represent sixty percent (60%) of the issued and outstanding shares of the
Company,. to Imaging Technologies Corporation ("ITEC"), Accordingly, there has
been a change of control.
Additionally, the Company sold warrants to purchase 95,319,510 shares of
Greenland common stock to ITEC, which will represent an additional thirty
percent (30%) of the issued and outstanding shares of the Company.
The sale price for the shares and the exercise of the warrants was $2,250,000 in
the form of a promissory note convertible into shares of common stock of ITEC,
the number of which will be determined by a formula applied to the market price
of the shares at the time that the promissory note is converted.
The warrants have been exercised. 115.1 million Greenland common shares were
issued to ITEC and delivered pursuant to the terms of the Closing Agreement. The
conditions of the exercise of warrants pursuant to the Closing Agreement have
been met. Accordingly, ITEC holds voting rights to 115.1 million shares of
Greenland common stock, representing 83% of the total outstanding Greenland
common shares at May 16, 2003.
Also on January 14, 2003, four new directors were elected to serve on
Greenland's Board of Directors as nominees of ITEC. As of the date of this
report, ITEC holds four seats of seven. Greenland's Chief Executive Officer
remains in his position. ITEC's CEO serves as Chairman of Greenland's Board of
Directors.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Quarterly Report contains forward-looking statements that 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 our reports filed with the Securities
and Exchange Commission.
INTRODUCTION
The following discussion pertains to our operations and financial condition
as of March 31, 2003, and should be read in conjunction with our financial
statements and notes thereto, and other financial information included elsewhere
in this report.
Our current strategy is: (1) to expand our PEO business; (2) to
commercialize our MAXcash ABM products and technology.
To successfully execute our current strategy, we will need to improve our
working capital position. The report of the Company's independent auditors
accompanying our December 31, 2002 financial statements includes an explanatory
paragraph indicating there is a substantial doubt about our ability to continue
as a going concern, due primarily to the decreases in our working capital and
net worth. We plan to overcome the circumstances that impact our ability to
remain a going concern through a combination of achieving profitability, raising
additional and financing, and renegotiating existing obligations.
There can be no assurance, however, that we will be able to complete any
additional financings on favorable terms or at all, or that any such financings,
if completed, will be adequate to meet our capital requirements. Any additional
equity or convertible debt financings could result in substantial dilution to
our shareholders. If adequate funds are not available, we may be required to
delay, reduce or eliminate some or all of our planned activities, including any
potential mergers or acquisitions. Our inability to fund our capital
requirements would have a material adverse effect on the Company.
Professional Employer Organization
We provide, through our wholly-owned ExpertHR subsidiary, comprehensive
personnel management services. We provide a broad range of services, including
benefits and payroll administration, health and workers' compensation insurance
programs, personnel records management, and employer liability management to
small and medium-sized businesses.
Administrative Functions. We perform a wide variety of processing and
record keeping tasks, mostly related to payroll administration and government
compliance. Specific examples include payroll processing, payroll tax deposits,
quarterly payroll tax reporting, employee file maintenance, unemployment claims
processing and workers' compensation claims reporting.
Benefit Plans Administration. We sponsor benefit plans including group
health coverage. We are responsible for the costs and premiums associated with
these plans, act as plan sponsor and administrator of the plans, negotiate the
terms and costs of the plans, maintain the plans in accordance with applicable
federal and state regulations, and serve as liaison for the delivery of such
benefits to worksite employees.
Personnel Management. We provide a variety of personnel management
services, which provide our client companies access to resources normally found
in the human resources departments of larger companies. Our client companies
will have access to a personnel guide, which will set forth a systematic
approach to administering personnel policies and practices.
Employer Liability Management. Under our Client Services Agreement ("CSA"),
we assume many employment-related responsibilities associated with
administrative functions and benefit plans administration. Upon request, we can
also provide our clients guidance on avoiding liability for discrimination,
sexual harassment, and civil rights violations. We employ counsel specializing
in employment law.
Client Service Agreement. All clients enter into our CSA, which establishes
our service fee. The CSA is subject to periodic adjustments to account for
changes in the composition of the client's workforce and statutory changes that
affect our costs. The CSA also establishes the division of responsibilities
between our Company and the client as co-employers. Pursuant to the CSA, we are
responsible for personnel administration and are liable for certain
employment-related government regulation. In addition, we assume liability for
payment of salaries, wages (including payroll taxes), and employee benefits of
worksite employees. The client retains the employees' services and remains
liable for the purposes of certain government regulations.
The PEO business is growing rapidly, but profit margins are small.
Consequently, profitability depends on (1) economies of scale leading to greater
operating efficiencies; and (2) value-added services such as training,
education, Internet support, and other services that may be used by employers
and employees.
The income model for this business includes fees charged per employee.
While gross profit is low, revenues are generally substantial. To this end, we
have pursued acquisitions of small PEO firms. Each acquisition is expected to
include retention of some existing management and staff in order to assure
continuity of operations.
In April 2003, we entered into a Stock Purchase Agreement along with ITEC,
to acquire an Oklahoma-based PEO company, which we have organized as
ExpertHR-OK, a wholly-owned subsidiary of Greenland. The Oklahoma facilities and
personnel provide a substantial amount of the administration duties associated
with our PEO business, including the implementation of system software.
Also in March 2003, we entered into a Agreement and Assignment of Rights to
acquire all right title and interest in and to the rights and benefits arising
under or out of personal staffing agreements with the existing clients of Staff
Pro Leasing, Inc and Staff Pro Leasing 2, both Michigan corporations .
In February 2003, we entered into an Agreement and Assignment of Rights to
acquire all right, title, and interest in and to the rights and benefits arising
under or out of PEO service agreements with certain existing clients of Accord
Human Resources, Inc, an Oklahoma corporation
The PEO business is highly competitive, with approximately 900 firms
operating in the U.S. There are several firms that operate on a nationwide basis
with revenues and resources far greater than ours. Some large PEO companies are
owned by insurance carriers; and some are public companies whose shares trade on
Nasdaq, including Administaff, Inc., Team Staff, Inc., Barrett Business
Services, and Staff Leasing, Inc.
Government Regulation
We are subject to regulation in several jurisdictions in which we operate,
including jurisdictions that regulate check cashing fees and payday advance
fees. We are subject to federal and state regulations relating to the reporting
and recording of certain currency transactions. There can be no assurance that
additional state or federal statutes or regulations will not be enacted at some
future date which could inhibit the ability of us to expand, significantly
decrease the service charges for check cashing and/or other services, or
prohibit or more stringently regulate the sale of certain goods which could
cause a significant adverse effect on our future prospects. States have
different licensing requirements. Some states require that the owner of a
check-cashing machine obtain the license; others require that the provider of
the cash in the machine ("vault cash") obtain a license or the possessor of the
machine obtain the license or that we, jointly with the owner, possessor, or
vault cash provider obtain a license. Certain states require that the entity to
be licensed maintain certain levels of liquid assets for each location at which
a machine is placed.
Under the bank Secrecy Act regulations of the U.S. Department of the Treasury
(the "Treasury Department"), transactions involving currency in an amount
greater than $10,000 or the purchase of monetary instruments for cash in amounts
from $3,000 to $10,000 must be recorded. In general, every financial
institution, including Greenland, must report each deposit, withdrawal, exchange
of currency or other payment or transfer, whether by, through or to the
financial institution, that involves currency in an amount greater than $10,000.
In addition, multiple currency transactions must be treated as single
transactions if the financial institution has knowledge that the transactions
are by, or on behalf of any person and result in either cash in or cash out
totaling more than $10,000 during any one business day.
There can be no assurance that additional local, state or federal legislation
will not be enacted or that existing laws and regulations will not be amended
which could have a material adverse effect on our operations and financial
condition. (Also see "Risks and Uncertainties.")
Client Services Agreement
All clients enter into ExpertHR's Client Service Agreement ("CSA"). The CSA
generally provides for an on-going relationship, subject to termination by us or
the client upon written notice.
The CSA establishes our comprehensive service fee, which is subject to
periodic adjustments to account for changes in the composition of the client's
workforce and statutory changes that affect our costs. The CSA also establishes
the division of responsibilities between us and our client as co-employers.
Pursuant to the CSA, we are responsible for personnel administration and are
liable for certain employment-related government regulation. In addition, we
assume liability for payment of salaries and wages (including payroll taxes) of
our worksite employees and responsibility for providing employee benefits to
such persons, regardless of whether our client company makes timely payment of
the associated service fee. Our client retains the employees' services and
remains liable for the purposes of certain government regulations, compliance
which requires control of the worksite or daily supervisory responsibility or is
otherwise beyond our ability to assume. A third group of responsibilities and
liabilities are shared by us and our client where such joint responsibility is
appropriate.
We are responsible for: payment of wages and related tax reporting and
remittance (state and federal withholding, FICA, FUTA, state unemployment);
workers' compensation compliance, procurement, management and reporting;
compliance with COBRA, IRCA, HIPAA and ERISA (for employee benefit plans
sponsored by ExpertHR only), as well as monitoring changes in other governmental
regulations governing the employer/employee relationship and updating the client
when necessary; and employee benefits administration.
Our clients are responsible for: payment, through ExpertHR, of commissions,
bonuses, paid leaves of absence and severance payments; payment and related tax
reporting and remittance of non-qualified deferred compensation and equity-based
compensation; assignment to, and ownership of, all intellectual property rights;
compliance with Section-414(o) of the Internal Revenue Code regarding benefit
discrimination; compliance with OSHA regulations, EPA regulations, FLSA, WARN
and state and local equivalents and compliance with government contracting
provisions; compliance with NLRA, including all organizing efforts and expenses
related to a collective bargaining agreement and related benefits; professional
licensing requirements, fidelity bonding and professional liability insurance;
and products produced and/or services provided.
We are jointly responsible, with our clients, for: implementation of
policies and practices relating to the employee/employer relationship; and
compliance with all federal, state and local employment laws, including, but not
limited to Title VII of the Civil Rights Act of 1964, ADEA, Title I of ADA,
FMLA, the Consumer Credit Protection Act, and immigration laws and regulations.
Because we are a co-employer with our client companies for some purposes,
it is possible that we could incur liability for violations of such laws even if
it is not responsible for the conduct giving rise to such liability. The CSA
addresses this issue by providing that the client will indemnify us for
liability incurred to the extent the liability is attributable to conduct by the
client. Notwithstanding this contractual right to indemnification, it is
possible that we could be unable to collect on a claim for indemnification and
may therefore be ultimately responsible for satisfying the liability in
question.
Clients are required to remit their comprehensive service fees no later
than one day prior to the applicable payroll date by wire transfer or automated
clearinghouse transaction. Although are ultimately liable, as the employer for
payroll purposes, to pay employees for work previously performed, we retain the
ability to terminate the CSA and associated worksite employees or to require
prepayment, letters of credit, or other collateral upon deterioration in a
client's financial condition or upon non-payment by a client.
Check Cashing
We have developed proprietary software that is capable of providing support for
delivery to consumers of a range of on-line financial services including check
cashing, ATM, money orders and phone card dispensing services. We have
developed, manufactured and has delivered limited numbers of freestanding
kiosks, under the trademarked brand name MAXcash ABM. The unit is similar in
appearance to an ATM machine. We acquired our base technology in May 1998, when
Check Central was incorporated into Greenland as a wholly-owned subsidiary.
We have invested capital, time, and effort in the development and evolution of
our back-office, risk management and transaction support software systems. Due
to shortages of working capital and litigation with a key supplier, we altered
our plans for ongoing development, production, and marketing of the MAXcash ABM
system. However, we believe that there is further opportunity to market the
MAXcash ABM kiosk through PEO customers of our ExpertHR subsidiary; and to
clients of other PEO companies in order to provide check cashing and other
automated banking services to employees.
In the past, our strategy has been oriented around two revenue streams: (1)
sales of the MAXcash ABM and (2) fees earned in connection with the various
banking services provided on each of the machines in operation. However, without
sufficient numbers of machines in the field, this revenue stream has not produce
material results.
While we are optimistic that we can successfully produce and sell MAXcash ABM
kiosks to PEO clients (ours and others), there can be no assurance that we will
achieve our goals in this regard.
The markets for our check cashing products and services are highly
competitive. Our ability to compete in our markets depends on a number of
factors, including selling prices, product performance, product distribution,
marketing ability, and customer support. A key element of our strategy is to
provide competitively priced, quality products and services.
RESULTS OF OPERATIONS
Revenue
We had total revenues of $1.4 million, all from our PEO business, for the
three months ended March 31, 2003. We had no revenues in the prior year period.
The Company's sales operations related to check cashing , was temporarily
suspended primarily due to a legal dispute with its software provider and the
associated financial risks to the Company represented by the dispute. Management
is currently working to re-establish these operations, especially as they relate
to value-added products and services to the Company's PEO clientele.
Cost of Sales
The Company incurred total costs of PEO services of $1.4 million for the
three-month period ended March 31, 2003. Cost of goods sold in the prior year
period, associated with check cashing operations, was $101 thousand, which were
associated with the since-suspended operations related to transaction
processing.
Operating Expenses
Selling, general and administrative expenses for the three months ended March
31, 2003 and 2002 were $299 thousand and $714 thousand, respectively. The
decrease of $451 thousand (58%) was due primarily to the suspension of check
cashing operations and manufacturing.
Other Expense
Net other income was $21 thousand for the three month period ended March 31,
2003. Net other expenses were $1.6 million for the year-earlier period. The
difference is due primarily to a charge for impairment of goodwill in the period
ended March 31, 2002.
Net Loss
The net loss for the three months ended March 31, 2003 was $225 thousand
compared to a net loss of $2.4 million for comparative period in 2002, a
decrease of $2.2 million, or 90%. Losses were reduced due primarily to reduced
costs and expenses associated with suspension of our check cashing operations.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have financed our operations through cash generated from
the sale of equity securities and debt financing. During the first quarter ended
March 31, 2003, operations were supported, in part, with cash from Imaging
Technologies Corporation (ITEC). We anticipate that we will, moving forward, be
able to support our operations through sales of PEO services.
At March 31, 2003, we had a working capital deficit of $3.6 million
compared with a working capital deficit of $3.2 million at December 31, 2002.
The decrease in working capital of $407 thousand, or 13% resulted primarily from
an increase in notes payable and increased accounts payable and accrued
expenses.
Stockholders' deficit increased for the three months ended March 31, 2003
from the previous fiscal year by $151 thousand, due primarily to our $255
thousand net loss.
The Company's officers and directors are aware of no other threatened or
pending litigation, not otherwise discussed in Item 1, Legal Matters, 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.
The Company's auditors have expressed their uncertainty as to the Company's
ability to continue as a going concern. They cite recurring losses from
operations, the Company's working capital deficiency, and limited cash
resources.
In order to address this uncertainty, the Company has taken steps to raise
additional funds to finance its operations and to continue to grow its PEO
business.
RISKS AND UNCERTAINTIES
LIMITED OPERATING HISTORY:
We began our check cashing operations in 1998 and has been inactive for the
past two years. Additionally, we entered the PEO business in January 2003.
Accordingly, we have a limited operating history and our business and prospects
must be considered in light of the risks and uncertainties to which early stage
companies in rapidly evolving industries such as automated check cashing and
professional employment services are exposed. We cannot provide assurances that
its business strategy will be successful or that we will successfully address
these risks and the risks described herein.
IF WE ARE UNABLE TO SECURE FUTURE CAPITAL, WE WILL BE UNABLE TO CONTINUE OUR
OPERATIONS.
Our business has not been profitable in the past and it may not be
profitable in the future. We may incur losses on a quarterly or annual basis for
a number of reasons, some within and others outside our control. (See "Potential
Fluctuation in Our Quarterly Performance.") The growth of our business will
require the commitment of substantial capital resources. If funds are not
available from operations, we will need additional funds. We may seek such
additional funding through public and private financing, including debt or
equity financing. Adequate funds for these purposes, whether through financial
markets or from other sources, may not be available when we need them. Even if
funds are available, the terms under which the funds are available to us may not
be acceptable to us. Insufficient funds may require us to delay, reduce or
eliminate some or all of our planned activities.
To successfully execute our current strategy, we will need to improve our
working capital position. The report of our independent auditors accompanying
our December 31, 2002 financial statements includes an explanatory paragraph
indicating there is a substantial doubt about the Company's ability to continue
as a going concern, due primarily to the decreases in our working capital and
net worth. We plan to overcome the circumstances that impact our ability to
remain a going concern through a combination of increased revenues and decreased
costs, with interim cash flow deficiencies being addressed through additional
equity financing.
POTENTIAL FLUCTUATION IN QUARTERLY PERFORMANCE:
Quarterly operating results can fluctuate significantly depending on a
number of factors, any one of which could have a material adverse effect on our
results of operations. The factors include: the timing of product/services
announcements and subsequent introductions of new or enhanced products and/or
services by us and by our competitors, the availability and cost of inventories,
the market acceptance of products and services, changes in our prices and in our
competitors' prices, the timing of expenditures for staffing and related support
costs, the extent and success of advertising, research and development
expenditures, and changes in general economic conditions.
We may experience significant quarterly fluctuations in revenues and
operating expenses as we introduce new products and services; especially as we
enter the PEO business. Furthermore, quarterly results are not necessarily
indicative of future performance for any particular period.
RISK OF TECHNICAL PROBLEMS OR PRODUCT DEFECTS:
There can be no assurances that, despite testing and quality assurance
efforts that may be performed by us and/or our manufacturers and subcontractors,
that technical problems or product defects will not be found. These problems or
product defects could result in the loss or delay in market acceptance and
sales, diversion of development resources, injury to our reputation, and/or
increased service and support costs, any one of which could have material
adverse effects on our business, financial condition, and results of operations.
GOVERNMENT REGULATION:
We are subject to regulation in several jurisdictions in which we operate,
including jurisdictions that regulate check cashing fees and payday advance
fees. We could also become subject to federal and state regulations relating to
the reporting and recording of certain currency transactions. There can be no
assurance that additional state or federal statutes or regulations will not be
enacted at some future date which could inhibit our ability to expand,
significantly decrease the service charges for check cashing, payday advances
and/or other services, or prohibit or more stringently regulate the sale of
certain goods and services, which could cause a significant adverse effect on
our future prospects.
SINCE OUR COMPETITORS HAVE GREATER FINANCIAL AND MARKETING RESOURCES THAN WE DO,
WE MAY EXPERIENCE A REDUCTION IN MARKET SHARE AND REVENUES.
The markets for our products and services are highly competitive and
rapidly changing. Some of our current and prospective competitors have
significantly greater financial, technical, manufacturing and marketing
resources than we do. Our ability to compete in our markets depends on a number
of factors, some within and others outside our control. These factors include:
the frequency and success of product and services introductions by us and by our
competitors, the selling prices of our products and services and of our
competitors' products and services, the performance of our products and of our
competitors' products, product distribution by us and by our competitors, our
marketing ability and the marketing ability of our competitors, and the quality
of customer support offered by us and by our competitors.
The PEO industry is highly fragmented. While many of our competitors have
limited operations, there are several PEO companies equal or substantially
greater in size than ours. We also encounter competition from "fee-for-service"
companies such as payroll processing firms, insurance companies, and human
resources consultants. The large PEO companies have substantially more resources
than us and provide a broader range of resources than we do.
IF WE ACQUIRE COMPLEMENTARY BUSINESSES, WE MAY NOT BE ABLE TO EFFECTIVELY
INTEGRATE THEM INTO OUR CURRENT OPERATIONS, WHICH WOULD ADVERSELY AFFECT OUR
OVERALL FINANCIAL PERFORMANCE.
In order to grow our business, we may acquire businesses that we believe
are complementary. To successfully implement this strategy, we must identify
suitable acquisition candidates, acquire these candidates on acceptable terms,
integrate their operations and technology successfully with ours, retain
existing customers and maintain the goodwill of the acquired business. We may
fail in our efforts to implement one or more of these tasks. Moreover, in
pursuing acquisition opportunities, we may compete for acquisition targets with
other companies with similar growth strategies. Some of these competitors may be
larger and have greater financial and other resources than we do. Competition
for these acquisition targets likely could also result in increased prices of
acquisition targets and a diminished pool of companies available for
acquisition. Our overall financial performance will be materially and adversely
affected if we are unable to manage internal or acquisition-based growth
effectively. Acquisitions involve a number of risks, including: integrating
acquired products and technologies in a timely manner, integrating businesses
and employees with our business, managing geographically-dispersed operations,
reductions in our reported operating results from acquisition-related charges
and amortization of goodwill, potential increases in stock compensation expense
and increased compensation expense resulting from newly-hired employees, the
diversion of management attention, the assumption of unknown liabilities,
potential disputes with the sellers of one or more acquired entities, our
inability to maintain customers or goodwill of an acquired business, the need to
divest unwanted assets or products, and the possible failure to retain key
acquired personnel.
Client satisfaction or performance problems with an acquired business could
also have a material adverse effect on our reputation, and any acquired business
could significantly under perform relative to our expectations. We cannot be
certain that we will be able to integrate acquired businesses, products or
technologies successfully or in a timely manner in accordance with our strategic
objectives, which could have a material adverse effect on our overall financial
performance.
In addition, if we issue equity securities as consideration for any future
acquisitions, existing stockholders will experience ownership dilution and these
equity securities may have rights, preferences or privileges superior to those
of our common stock.
DEVELOPING MARKETS AND APPLICATIONS:
The markets for our products and services are relatively new and are still
developing. We believe that there has been growing market acceptance for check
cashing services. We cannot be certain, however, that these markets will
continue to grow. Other technologies are constantly evolving and improving. We
cannot be certain that products and services based on these other technologies
will not have a material adverse effect on the demand for our products and
services.
DEPENDENCE UPON SUPPLIERS:
We depend on acquiring products and software from outside suppliers. We
rely heavily on these suppliers for upgrades and support. We cannot be certain
that all of our suppliers will continue to make their products and technologies
available to us, or that these suppliers will not provide their products and
technologies to other companies simultaneously.
COMPONENT AVAILABILITY AND COST; DEPENDENCE ON SINGLE SOURCES:
We presently outsource the production of some of our manufactured products
through a number of vendors. These vendors assemble products, using components
we purchase from other sources or from their own inventory. The terms of supply
contracts are negotiated separately in each instance. Although we have not
experienced any difficulty in the past in engaging contractors or in purchasing
components, present vendors may not have sufficient capacity to meet projected
market demand for our products and alternative production sources may not be
available without undue disruption.
While most components are available locally from multiple vendors, certain
components used in our products are only available from single sources. Although
alternative suppliers are readily available for many components, for some
components the process of qualifying replacement suppliers, replacing tooling or
ordering and receiving replacement components could take several months and
cause substantial disruption to operations. Any significant increase in
component prices or decrease in component availability could have a material
adverse effect on our business and overall financial performance.
DEPENDENCE ON KEY PERSONNEL:
Our success is dependent, in part, upon our ability to attract and retain
qualified management and technical personnel. Competition for these personnel is
intense, and we will be adversely affected if it is unable to attract additional
key employees or if it loses one or more key employees. We may not be able to
retain our key personnel.
POSSIBILITY OF CHALLENGE TO PRODUCTS OR INTELLECTUAL PROPERTY RIGHTS:
We intend to protect our technology by filing copyright and patent
applications for the patentable technologies that we consider important to the
development of our business. We also intend to rely upon trade secrets, know-how
and continuing technological innovations to develop and maintain competitive
advantage.
We have filed a copyright application with the U. S. Patent and Trademark
Office with respect to our server technology. We may file patent applications
with respect to our kiosk system and any other technology we have developed for
use with the MAXcash ABM. There can be no assurance that any U.S. Patent
application, if and when filed, will be granted or, if obtained, will
sufficiently protect our proprietary rights.
Even if the patents we apply for are granted, they do not confer on us the
right to manufacture and market products if such products infringe patents held
by others. We have not undertaken or conducted any comprehensive patent
infringement searches or studies. If any such third parties hold any such
conflicting rights, we 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 we would be able to
obtain or maintain any such licenses on acceptable terms or at all.
Additionally, competitors may assert that we infringe on their patent
rights. If we fail to establish that we have not violated the asserted rights,
we could be prohibited from marketing the products that incorporate the
technology and we could be liable for damages. We could also incur substantial
costs to redesign our products or to defend any legal action taken against us.
RELIANCE ON INDIRECT DISTRIBUTION:
Sales of the MAXcash ABM are principally made through distributors, which
may carry competing product lines. These distributors could reduce or
discontinue sales of our products, which could materially and adversely affect
our future success. These independent distributors may not devote the resources
necessary to provide effective sales and marketing support of our products. In
addition, distributors are not required to carry any inventory of MAXcash ABM
systems. These distributors are substantially dependent on general economic
conditions and other unique factors affecting our markets. We believe that our
growth and success, in the near-term, will depend in part upon our distribution
channels. Our business could be materially and adversely affected if our
distributors fail to provide sales of our products.
INCREASES IN HEALTH INSURANCE PREMIUMS, UNEMPLOYMENT TAXES, AND WORKERS'
COMPENSATION RATES WILL HAVE A SIGNIFICANT EFFECT ON OUR FUTURE FINANCIAL
PERFORMANCE.
Health insurance premiums, state unemployment taxes, and workers'
compensation rates are, in part, determined by our claims experience, and
comprise a significant portion of our direct costs. We employ risk management
procedures in an attempt to control claims incidence and structure our benefits
contracts to provide as much cost stability as possible. However, should we
experience a large increase in claims activity, the unemployment taxes, health
insurance premiums, or workers' compensation insurance rates we pay could
increase. Our ability to incorporate such increases into service fees to clients
is generally constrained by contractual agreements with our clients.
Consequently, we could experience a delay before such increases could be
reflected in the service fees we charge. As a result, such increases could have
a material adverse effect on our financial condition or results of operations.
WE CARRY SUBSTANTIAL LIABILITY FOR WORKSITE EMPLOYEE PAYROLL AND BENEFITS COSTS.
Under our client service agreements, we become a co-employer of worksite
employees and we assume the obligations to pay the salaries, wages, and related
benefits costs and payroll taxes of such worksite employees. We assume such
obligations as a principal, not merely as an agent of the client company. Our
obligations include responsibility for (a) payment of the salaries and wages for
work performed by worksite employees, regardless of whether the client company
makes timely payment to us of the associated service fee; and (2) providing
benefits to worksite employees even if the costs incurred by us to provide such
benefits exceed the fees paid by the client company. If a client company does
not pay us, or if the costs of benefits provided to worksite employees exceed
the fees paid by a client company, our ultimate liability for worksite employee
payroll and benefits costs could have a material adverse effect on the Company's
financial condition or results of operations.
AS A MAJOR EMPLOYER, OUR OPERATIONS ARE AFFECTED BY NUMEROUS FEDERAL, STATE, AND
LOCAL LAWS RELATED TO LABOR, TAX, AND EMPLOYMENT MATTERS.
By entering into a co-employer relationship with employees assigned to work
at client company locations, we assume certain obligations and responsibilities
or an employer under these laws. However, many of these laws (such as the
Employee Retirement Income Security Act ("ERISA") and federal and state
employment tax laws) do not specifically address the obligations and
responsibilities of non-traditional employers such as PEOs; and the definition
of "employer" under these laws is not uniform. Additionally, some of the states
in which we operate have not addressed the PEO relationship for purposes of
compliance with applicable state laws governing the employer/employee
relationship. If these other federal or state laws are ultimately applied to our
PEO relationship with our worksite employees in a manner adverse to the Company,
such an application could have a material adverse effect on the Company's
financial condition or results of operations.
While many states do not explicitly regulate PEOs, 21 states have passed
laws that have licensing or registration requirements for PEOs, and several
other states are considering such regulation. Such laws vary from state to
state, but generally provide for monitoring the fiscal responsibility of PEOs
and, in some cases, codify and clarify the co-employment relationship for
unemployment, workers' compensation, and other purposes under state law. There
can be no assurance that we will be able to satisfy licensing requirements of
other applicable relations for all states. Additionally, there can be no
assurance that we will be able to renew our licenses in all states.
THE MAINTENANCE OF HEALTH AND WORKERS' COMPENSATION INSURANCE PLANS THAT COVER
WORKSITE EMPLOYEES IS A SIGNIFICANT PART OF OUR BUSINESS.
The current health and workers' compensation contracts are provided by
vendors with whom we have an established relationship, and on terms that we
believe to be favorable. While we believe that replacement contracts could be
secured on competitive terms without causing significant disruption to our
business, there can be no assurance in this regard.
OUR STANDARD AGREEMENTS WITH PEO CLIENTS ARE SUBJECT TO CANCELLATION ON 60-DAYS
WRITTEN NOTICE BY EITHER THE COMPANY OR THE CLIENT.
Accordingly, the short-term nature of these agreements make us vulnerable
to potential cancellations by existing clients, which could materially and
adversely affect our financial condition and results of operations.
Additionally, our results of operations are dependent, in part, upon our ability
to retain or replace client companies upon the termination or cancellation of
our agreements.
A NUMBER OF LEGAL ISSUES REMAIN UNRESOLVED WITH RESPECT TO THE CO-EMPLOYMENT
AGREEMENT BETWEEN A PEO AND ITS WORKSITE EMPLOYEES, INCLUDING QUESTIONS
CONCERNING THE ULTIMATE LIABILITY FOR VIOLATIONS OF EMPLOYMENT AND
DISCRIMINATION LAWS.
Our client service agreement establishes a contractual division of
responsibilities between us and our clients for various personnel management
matters, including compliance with and liability under various government
regulations. However, because we act as a co-employer, we may be subject to
liability for violations of these or other laws despite these contractual
provisions, even if we do not participate in such violations. Although our
agreement provides that the client is to indemnify us for any liability
attributable to the conduct of the client, we may not be able to collect on such
a contractual indemnification claim, and thus may be responsible for satisfying
such liabilities. Additionally, worksite employees may be deemed to be agents of
the Company, subjecting us to liability for the actions of such worksite
employees.
VOLATILITY OF STOCK PRICE:
The market price of our common stock historically has fluctuated
significantly. Our stock price could fluctuate significantly in the future based
upon any number of factors such as: general stock market trends; announcements
of developments related to our business; fluctuations in our operating results;
announcements of technological innovations, new products or enhancements by us
or our competitors; general conditions in the markets we serve; general
conditions in the U.S. economy; developments in patents or other intellectual
property rights; and developments in our relationships with our customers and
suppliers.
In addition, in recent years, the stock market in general, and the market
for shares of technology stocks in particular, have experienced extreme price
fluctuations, which have often been unrelated to the operating performance of
affected companies. Similarly, the market price of our common stock may
fluctuate significantly based upon factors unrelated to our operating
performance.
IF OUR OPERATIONS CONTINUE TO RESULT IN A NET LOSS, NEGATIVE WORKING CAPITAL AND
A DECLINE IN NET WORTH, AND WE ARE UNABLE TO OBTAIN NEEDED FUNDING, WE MAY BE
FORCED TO DISCONTINUE OPERATIONS.
For several recent periods, up through the present, we had a net loss,
negative working capital and a decline in net worth, which raise substantial
doubt about our ability to continue as a going concern. Our losses have resulted
primarily from an inability to achieve revenue targets due to insufficient
working capital. Our ability to continue operations will depend on positive cash
flow, if any, from future operations and on our ability to raise additional
funds through equity or debt financing. Although we have reduced our work force
and suspended some of our operations, if we are unable to achieve the necessary
product sales or raise or obtain needed funding, we may be forced to discontinue
operations.
ABSENCE OF DIVIDENDS:
We have not paid any cash dividends on our common stock to date and we do
not anticipate paying cash dividends in the foreseeable future.
LIQUIDITY OF COMMON STOCK:
Trading of Greenland common stock is conducted over-the-counter through the
NASD Electronic Bulletin Board and covered by Rule 15g-9 under the Securities
Exchange Act of 1934. Under this rule, broker/dealers who recommend these
securities to persons other than established customers and accredited investors
must make a special written suitability determination for the purchaser and
receive the purchaser's written agreement to a transaction prior to sale.
Securities are exempt from this rule if the market price is at least $5.00 per
share.
The Securities and Exchange Commission adopted regulations that generally
define a "penny stock" as any equity security that has a market price of less
than $5.00 per share. Additionally, if the equity security is not registered or
authorized on a national securities exchange or the Nasdaq and the issuer has
net tangible assets under $2,000,000, the equity security also would constitute
a "penny stock." Greenland common stock does constitute a penny stock because
our common stock has a market price less than $5.00 per share and our common
stock is not quoted on Nasdaq. As Greenland common stock falls within the
definition of penny stock, these regulations require the delivery, prior to any
transaction involving Greenland common stock, of a disclosure schedule
explaining the penny stock market and the risks associated with it. Furthermore,
the ability of broker/dealers to sell Greenland common stock and the ability of
shareholders to sell Greenland common stock in the secondary market may be
limited. As a result, the market liquidity for Greenland common stock is
adversely affected. The Company can provide no assurance that trading in
Greenland common stock will not be subject to these or other regulations in the
future, which may negatively affect the market for Greenland common stock.
Furthermore, this lack of liquidity also may make it more difficult for the
Company to raise capital in the future.
PART II OTHER INFORMATION
ITEM 1. - LEGAL MATTERS
Greenland, along with Seren Systems ("Seren"), its then current and primary
software developer and supplier for its own ABM terminals, was in the process of
completing development of the check cashing service interface to the Mosaic
Software host system being implemented to support a large network of V.com
terminals. In September 2000, Seren unilaterally halted testing and effectively
shut-down any further check cashing development for the V.com project. The
parties participating in this project may have been financially damaged, related
to the delay in performance by Greenland and Seren. None of the parties have
brought suit against us and/or Seren at this time. There is no assurance,
however, that such suit(s) will not be brought in the future.
On May 23, 2001 we filed a Complaint in San Diego County naming Michael
Armani as the defendant. We allege breach of contract by Michael Armani in
connection with two separate stock purchase agreements. We seek damages in the
amount of $474,595. On August 7, 2001 we filed a request for Entry of Default
against Mr. Armani in the amount of $474,595 and the court granted entry of
default. Subsequently Mr. Armani filed a motion to set aside the entry of
default and on October 26, 2001 the court granted said motion and the entry of
default was set aside. Greenland and Mr. Armani participated in mediation and as
a result entered into a settlement agreement whereby Mr. Armani agreed to make
certain cash payments to us and the parties entered into mutual release of all
claims. Mr. Armani defaulted in his obligation to make the first cash payment
and consequently, we obtained a judgment against Mr. Armani for $100,000. We are
continuing our efforts to collect on the judgment.
On May 23, 2001 Arthur Kazarian, Trustee for the General Wood Investment
Trust (the "Landlord") filed a Complaint in San Diego County naming Greenland as
a defendant. The Complaint alleges breach of contract pursuant to the terms of
the lease agreement between Greenland and the Landlord for the real property
located at 1935 Avenida Del Oro, Oceanside, California and previously occupied
by us. The Complaint seeks damages in the amount of approximately $500,000.
Although we remain liable for the payments remaining for the term of the lease,
the Landlord has a duty to mitigate said damages. We recorded a lease
termination liability of $275 thousand during the year ended December 31, 2001.
We entered into a settlement agreement with Arthur Kazarian, Trustee for the
General Wood Investment Trust (the "Landlord") where by we agreed to pay the sum
of $220,000 to the Landlord in installments payments of $20,000 in May 2002,
$50,000 in October 2002 and the remaining balance in December 2002. In the event
we default in any or all scheduled payments, the Landlord is entitled to a
stipulated judgment of approximately $275,000. We were unable to make the
scheduled payments and as a result, on July 8, 2002, the Landlord has entered a
judgment lien against Greenland in the amount of $279,654.
The Company entered into an agreement with Intellicorp, Inc. ("Intellicorp")
whereby Intellicorp agreed to invest $3,000,000 in exchange for seats on the
board of directors and restricted shares of common stock of the Company. After
making the initial payment of $500,000, Intellicorp defaulted on the balance.
The Company is seeking a recovery of the unpaid $2,500,000. The defendant's
ability to pay is unknown. The Company had issued 46,153,848 shares of common
stock for the investment. The shares were returned back to the Company and were
cancelled. A default judgment was entered against defendant IntelliCorp,
IntelliGroup, and Isaac Chang. On May 16, 2003 the Court held a prove-up hearing
for proof of damages. The Company is seeking compensatory damages of
approximately $3,500,000 for breach of contract and fraud, plus punitive
damages. The court has requested that the Company submit a supplemental brief
regarding the request for punitive damages.
On July 5, 2001 Max Farrow, a formal officer of the Company, filed a Complaint
in San Diego County naming Greenland Corporation, Thomas J. Beener,
Intelli-Group, Inc., Intelli-Group LLC and Intelli-Corp, Inc. as defendants. The
Complaint alleges breach of contract in connection with Mr. Farrow's resignation
as an officer and director of the Company in January 2001. The Company and Mr.
Thomas Beener, entered into a settlement agreement with Max Farrow whereby Mr.
Farrow agreed to release Mr. Beener from all claims, obligations etc., in
exchange for the issuance of 8 million restricted shares of Greenland
Corporation common stock. The good faith settlement was approved by the court
and the agreed upon consideration was delivered to Mr. Farrow. The Company
entered into a settlement with Farrow whereby the Company agreed to a judgment
of $125,000. However, the judgment will not be enforced until such time as
efforts to collect against IntelliCorp et al, have been exhausted. In the event
funds are collected from IntelliCorp. Mr. Farrow will receive the first $125,000
plus 50% of the next $200,000 collected. The Company will retain all amounts
collected thereafter.
Fund Recovery, a temporary staffing services filed a complaint against us
alleging breach of contract. A summary judgment motion is pending. We recorded
the liability amount of $14 thousand in the consolidated financial statements.
John Ellis has filed an action in San Diego County against the Company
seeking damages of approximately $60,000 for an alleged breach of contract
action. The Company believes it has valid defenses to the allegations. This
amount was recorded as a liability in the consolidated financial statements.
The Company has filed a motion to quash service of the civil action and to
compel arbitration.
NKS Enterprises, Inc. commenced a legal action against us in San Diego
Superior Court in Vista California seeking damages in connection with the
purchase and operation of a MaxCash ABM. The case was settled in December 2002.
The maximum amount to be paid under the settlement is $100,000. In exchange, we
will receive the MaxCash ABM sold to NKS Enterprises. This amount was recorded
as a liability in the consolidated financial statements.
There are several vendors and/or trade creditors we owe money to and that
have threatened litigation. We continue to attempt to resolve these matters but
due to the lack of cash we are not certain that suitable arrangements can be
made. These potential actions may, alone or together, have a material adverse
impact on our ability to operate.
Greenland's officers and directors are aware of no other threatened or pending
litigation, which would have a material, adverse effect on us. From time to time
we are 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 our financial position
results of operations, or cash flows.
ITEM 2 - CHANGES IN SECURITIES
The Company issued 115.1 million shares to Imaging Technologies Corporation
(ITEC) pursuant to a share purchase agreement for a convertible promissory note,
payable in two years, in the amount of $2.25 million.
The Company issued 3.9 million shares to related parties to retire notes
payable in the amount of $27 thousand.
The Company issued 8.3 million and 41.7 million shares for services for the
three months ended March 31, 2003 and 2002, respectively. The Company has
recognized expenses for such services in the amount of $76 thousand and $433
thousand in 2003 and 2002, respectively.
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
10(a) - Closing Agreement, dated January 7, 2003, between ITEC and Greenland,
incorporated by reference to Form 8-K dated January 21, 2003.
10(b) - Agreement and Assignment of Rights, dated February 1, 2003, between
Accord Human Resources, Inc., Greenland, and ITEC, incorporated by reference to
Exhibit 10(k) to Form 10-KSB filed April 7, 2003.
10(c) - Agreement and Assignment of Rights, dated March 1, 2003, between
StaffPro Leasing 2, Greenland, and ExpertHR, incorporated by reference to
Exhibit 10(l) to Form 10-KSB filed April 7, 2003.
10(d) - Promissory Note, dated March 1, 2003, payable to StaffPro Leasing 2 by
Greenland, incorporated by reference to Exhibit 10(m) to Form 10-KSB filed April
7, 2003.
10(e) - Stock Purchase Agreement among Greenland, ITEC, and ExpertHR Oklahoma,
Inc., dated March 18, 2003.
99.1 - Certification of the Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
99.2 - Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
On January 21, 2003, the Company filed Form 8-K to report a change in control
related to the acquisition of shares by Imaging Technologies Corporation.
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 20, 2003 . . . . By: /s/ Thomas J. Beener
Thomas J. Beener
CEO, President
Date: May 20, 2003 . . . . By: /s/ James Downey
James Downey
Chief Accounting Officer