Attached files
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EX-32.1 - EXHIBIT 32.1 - EMARINE GLOBAL INC. | ex321.htm |
EX-31.2 - EXHIBIT 31.2 - EMARINE GLOBAL INC. | ex312.htm |
EX-31.1 - EXHIBIT 31.1 - EMARINE GLOBAL INC. | ex311.htm |
EX-32.2 - EXHIBIT 32.2 - EMARINE GLOBAL INC. | ex322.htm |
EXCEL - IDEA: XBRL DOCUMENT - EMARINE GLOBAL INC. | Financial_Report.xls |
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2012
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________.
Commission file number: 000-49933
Pollex, Inc.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
|
95-4886472
(I.R.S. Employer Identification No.)
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2005 De La Cruz Blvd. Suite 235
Santa Clara, CA
(Address of principal executive offices)
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95050
(Zip Code)
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Registrant’s telephone number, including area code (408) 350-7340
(Former name, former address and former fiscal year, if changed since last report.)
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. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes □ No.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of August 14, 2012, there were 5,121,688 shares of common stock, par value $0.001, issued and outstanding.
POLLEX, INC.
PART I – FINANCIAL INFORMATION
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PART I – FINANCIAL INFORMATION
This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition or Plan of Operation.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.
Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.
ITEM 1 Financial Statements
POLLEX, INC.
June 30,
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December 31,
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|||||||
2012
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2011
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|||||||
(Unaudited)
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||||||||
ASSETS
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||||||||
CURRENT ASSETS
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||||||||
Cash and cash equivalents
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$ | 14,181 | $ | 5,415 | ||||
Accounts receivable
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4,452 | - | ||||||
Total current assets
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18,633 | 5,415 | ||||||
Property and equipment, net of accumulated
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||||||||
depreciation of $6,728 and $4,982, respectively
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3,751 | 5,497 | ||||||
License agreements, net of accumulated
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||||||||
amortization of $8,648 and $2,188, respectively
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121,852 | 98,312 | ||||||
OTHER ASSETS:
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||||||||
Prepaid royalties
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10,000 | 30,000 | ||||||
Deposits
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6,000 | 6,000 | ||||||
Total other assets
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16,000 | 36,000 | ||||||
Total Assets
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$ | 160,236 | $ | 145,224 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT
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||||||||
CURRENT LIABILITIES
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||||||||
Accrued expenses and accounts payable
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$ | 712,603 | $ | 649,238 | ||||
Amounts due to affiliate under service agreement
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361,500 | 291,000 | ||||||
Advances from affiliate
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134,556 | 114,556 | ||||||
Loans payable
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1,266,800 | 1,153,734 | ||||||
Total Current Liabilities
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2,475,459 | 2,208,528 | ||||||
Stockholders' Deficit
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||||||||
Common stock, authorized 300,000,000 shares;
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||||||||
par value $0.001; 5,121,688 issued and
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||||||||
outstanding at June 30, 2012 and December 31, 2011,
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||||||||
respectively
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5,120 | 5,120 | ||||||
Additional paid-in capital
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136,874,861 | 136,874,861 | ||||||
Accumulated deficit
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(139,195,204 | ) | (138,943,285 | ) | ||||
Total Stockholders’ Deficit
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(2,315,223 | ) | (2,063,304 | ) | ||||
Total Liabilities and Stockholders’ Deficit
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$ | 160,236 | $ | 145,224 | ||||
See accompanying notes to financial statements.
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2012
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2011
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2012
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2011
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|||||||||||||
REVENUES
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$ | 17,172 | $ | 11,799 | $ | 35,092 | $ | 34,205 | ||||||||
COSTS AND EXPENSES
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||||||||||||||||
Cost of goods sold
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- | - | - | - | ||||||||||||
Selling, general and administrative
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49,343 | 82,072 | 128,183 | 130,057 | ||||||||||||
Related party service agreement
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60,000 | 23,000 | 120,000 | 23,000 | ||||||||||||
Impairment of license agreements
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- | - | - | 20,000 | ||||||||||||
Depreciation and amortization
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4,103 | 662 | 8,206 | 1,659 | ||||||||||||
Total Costs and Expenses
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113,446 | 105,734 | 256,389 | 174,716 | ||||||||||||
OPERATING LOSS
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(96,274 | ) | (93,935 | ) | (221,297 | ) | (140,511 | ) | ||||||||
OTHER INCOME (EXPENSE)
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||||||||||||||||
Gain on license termination
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- | - | 5,000 | - | ||||||||||||
Interest expense
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(18,765 | ) | (14,403 | ) | (35,622 | ) | (26,011 | ) | ||||||||
Total Other Expense
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(18,765 | ) | (14,403 | ) | (30,622 | ) | (26,011 | ) | ||||||||
LOSS BEFORE INCOME TAXES
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(115,039 | ) | (108,338 | ) | (251,919 | ) | (166,522 | ) | ||||||||
PROVISION FOR INCOME TAXES
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- | - | - | - | ||||||||||||
NET LOSS
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$ | (115,039 | ) | $ | (108,338 | ) | $ | (251,919 | ) | $ | (166,522 | ) | ||||
NET LOSS PER COMMON SHARE
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||||||||||||||||
(Basic and diluted)
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$ | (0.02 | ) | $ | (0.02 | ) | $ | (0.05 | ) | $ | (0.03 | ) | ||||
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||||||||||||||||
WEIGHTED AVERAGE SHARES
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||||||||||||||||
OUTSTANDING
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5,121,668 | 5,120,417 | 5,121,668 | 5,088,023 | ||||||||||||
See accompanying notes to financial statements.
POLLEX, INC.
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(Unaudited)
For the six months ended | ||||||||
June 30, | ||||||||
2012
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2011
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|||||||
CASH FLOWS FROM OPERATING ACTIVITIES :
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||||||||
Net loss
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$ | (251,919 | ) | $ | (166,522 | ) | ||
Adjustments to reconcile net loss to net cash
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||||||||
used in operating activities:
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||||||||
Gain on license termination
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(5,000 | ) | - | |||||
Depreciation and amortization
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8,206 | 1,659 | ||||||
Impairment of license agreements
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- | 20,000 | ||||||
Changes in assets and liabilities:
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||||||||
Increase in accounts receivable
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(4,452 | ) | - | |||||
Decrease in receivable from affiliate
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- | 1,963 | ||||||
Increase in accrued expenses and accounts payable
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63,365 | 21,245 | ||||||
Increase in amounts due affiliate under service agreement
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70,500 | - | ||||||
Net cash used in operating activities
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(119,300 | ) | (121,655 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES:
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||||||||
Purchase of property and equipment
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- | (997 | ) | |||||
Proceeds from termination of license agreement
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35,000 | - | ||||||
Acquisition of license agreements
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(40,000 | ) | - | |||||
Net cash used in investing activities
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(5,000 | ) | (997 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES:
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||||||||
Advance from affiliate
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20,000 | - | ||||||
Loan proceeds
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117,500 | 254,000 | ||||||
Repayment of loan
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(4,434 | ) | (47,480 | ) | ||||
Repayment of amount due to affiliate
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- | (59,500 | ) | |||||
Net cash provided by financing activities
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133,066 | 147,020 | ||||||
Net increase in cash
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8,766 | 24,368 | ||||||
CASH AT BEGINNING OF PERIOD
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5,415 | 11,452 | ||||||
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||||||||
CASH AT END OF PERIOD
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$ | 14,181 | $ | 35,820 | ||||
SUPPLEMENTAL CASH FLOW DISCLOSURES
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||||||||
Cash paid for interest
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$ | - | $ | - | ||||
Cash paid for taxes
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$ | - | $ | - | ||||
Settlement of accounts payable with common stock
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$ | - | $ | 20,000 | ||||
See accompanying notes to financial statements.
POLLEX, INC.
(UNAUDITED)
June 30, 2012
NOTE A – BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the financial statements not misleading have been included. Results for the three and six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. For further information, refer to the consolidated financial statements and footnotes thereto included in the Pollex, Inc. annual report on Form 10-K for the year ended December 31, 2011.
Certain reclassifications have been made to financial statements for the three and six months ended June 30, 2011 to make them comparable to the presentation for the three and six months ended June 30, 2012.
NOTE B – GOING CONCERN
As shown in the accompanying consolidated financial statements, the Company incurred net losses of $251,919 and $166,522 for the six months ended June 30, 2012 and 2011, respectively, and has an accumulated deficit of $139,195,204 at June 30, 2012. Management’s plans include raising capital through the equity markets to fund future operations and generating revenue through its license agreements. Failure to raise adequate capital and generate adequate sales revenues could result in the Company having to curtail or cease operations. Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues, there can be no assurances that the revenue will be sufficient to enable it to develop business to a level where it will generate profits and cash flows from operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. However, the accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE C – LICENSE AGREEMENTS
During 2010, the Company acquired license agreements for 16 online games for use in South Korea. These agreements called for a total of $120,500 in license fees, $30,000 in nonrefundable royalty prepayments on two of the licenses and a $5,000 non refundable deposit on one of the licenses. The Company paid $73,750 of these fees during the nine months ended September 30, 2010 and will pay the remaining fees of $81,750 when the games are launched commercially. Each license also has a royalty fee which varies for each license. Future royalties will be offset against the $30,000 prepayment. The licenses have terms of 2 to 3 years, beginning when they are launched commercially.
In 2011, the licensor terminated two of these agreements due to the licensor’s inability to install and localize the game for the South Korean territory. These licenses were for $20,000, of which $10,000 was paid by the Company. The Company has determined that the possibility of realizing these license agreements or recovering those funds advanced is minimal due to the locality of the licensor in China. As such, the Company has concluded that these licenses are impaired and has written them off.
Also in 2011, the Company decided to dissolve two of the agreements due to problems in scheduling the launch dates. The Company did not pay any deposits to acquire licenses for these two games.
POLLEX, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 2012
NOTE C – LICENSE AGREEMENTS
During 2012, the Company acquired an additional license agreement for $40,000, of which $20,000 was paid during the six months ended June 30, 2012. This game was launched commercially and the Company paid the remaining $20,000 in July of 2012. The terms of this license are similar to the Company’s other license agreements.
On March 9, 2012, the Company entered into a termination agreement relating to one of its license agreements. The license agreement had a carrying value of $10,000 and related prepaid revenue of $20,000. As part of the termination, the licensor paid the Company $35,000, plus VAT. The Company recognized a gain of $5,000 on this termination.
Amortization expense was $3,230 and $ 6,460 for the three and six months ended June 30, 2012, respectively. There was no amortization expense in three and six months ended June 30, 2011.
NOTE D – LOANS PAYABLE
The loans payable consists of borrowings from two notes. The terms of the promissory notes are one year and bear interest at an annual rate of 6%. The notes may be repaid at any time prior to its due date without a prepayment penalty, however if any amount of the principal plus accrued interest remains unpaid after the notes due date then the annual rate of interest increases to 10% per annum. During the six months ended June 30, 2012, the Company received proceeds of $117,500 from these borrowings and repaid $4,434 of these borrowings.
NOTE E – RELATED PARTY TRANSACTIONS
Certain expenses have been paid on behalf of the Company by Joytoto Korea. The Company has recognized the expenses and corresponding payable to Joytoto Korea as due to affiliate. The advances are non-interest bearing and have no specific repayment date.
On March 21, 2011, the Company, entered into a Conversion and Release Agreement (the “Agreement”) with Joytoto Korea. Pursuant to the terms of the Agreement, the Company issued 166,666 shares of its common stock, valued at $11,667 on the agreement date, to Joytoto Korea in consideration for the cancellation of $20,000 owed to Joytoto Korea by the Company. The Company recorded this $20,000 debt cancellation as a capital transaction.
The Company has entered into a Service Agreement with Gameforyou, Incorporated, a wholly-owned subsidiary of Joytoto Korea. Under this agreement, Gameforyou, Incorporated provides translation, customer support, and system operations and maintenance. The Company is required to pay Gameforyou, Incorporated $10,000 in cash and $10,000 in cash or stock each month. Any issuance of stock will be at the market value or at a price determined and agreed to by both parties. For the three and six months ended June 30, 2012, $60,000 and $120,000, respectively, were recognized in the Statement of Operations under this agreement. For the three and six months ended June 30, 2011, $23,000 and $23,000, respectively, were recognized in the Statement of Operations under this agreement. At June 30, 2012 and December 31, 2011, $361,500 and $291,000, respectively were due to Gameforyou, Incorporated under this agreement.
POLLEX, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 2012
NOTE F- EMPLOYMENT AGREEMENTS (Continued)
On March 21, 2011, the Company entered into three year employment agreements (the “Employment Agreements”) with Seong Yong Cho, its current President and Chief Executive Officer, and Seong Sam Cho, its current Chief Financial Officer. Pursuant to the terms of the Employment Agreements, Mr. Seong Yong Cho will continue to serve as President and Chief Executive Officer of the Company and Mr. Seong Sam Cho will continue to serve as Chief Financial Officer of the Company for an annual salary of $1.00 each. These employment agreements run through March 21, 2014.
NOTE G – WARRANTS
Warrant activity for the six months ended June 30, 2012 is as follows:
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Shares
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Weighted
Average
Grant Date
Fair Value
|
||||||
Outstanding, January 1, 2012
|
946,667
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$
|
41.46
|
|||||
Granted
|
-
|
-
|
||||||
Forfeited
|
-
|
-
|
||||||
Expired
|
-
|
-
|
||||||
Exercised
|
-
|
-
|
||||||
Outstanding, June 30, 2012
|
946,667
|
$
|
41.46
|
Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include, but are not limited to, international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.
Although the forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.
Overview
Pollex, Inc., formerly Joytoto USA, Inc., formerly BioStem, Inc. (the “Company,” “we,” and “us”) was incorporated on November 2, 2001, in the State of Nevada, as Web Views Corporation.
We are a majority owned subsidiary of Joytoto Co., Ltd. (“Joytoto Korea”). We are determined to focus our efforts on our Online Games business by acquiring new game licenses and making such games commercially available in South Korea and the United States.
Products and Services
Our operations are focused on Online Games. The Company has acquired licenses from various online game developers to use in South Korea. Our Online Games business segment has generated $17,172 for the fiscal quarter ended June 30, 2012.
Our major online game business is The Great Merchant. The online game is operating at the website http://www.thegreatmerchant.com. The website began open beta testing on January 2010. The game opened for full commercial service on September 1, 2011. The Great Merchant is a free-to-play MMO (Massively Multiplayer Online) PC game. Players can download the game for free from our website and interact with other players in the game to trade, fight, and explore the game world. The game is set in 14th century Asia with Korea, China, Taiwan, and Japan as the main explorable countries. As a free-to-play game, the Great Merchant offers micro-transactions through PayPal which players can purchase in game currency (GP) to further their character and purchase items to increase their character’s abilities and game looks. Additional purchase methods such as credit cards and mobile phone payments are expected to be added in the future.
Online Games
As of June 30, 2012, the Company has acquired license agreements for 13 games for use in South Korea. The Company originally acquired the licenses for 18 games, of which 5 licenses were subsequently cancelled. These agreements allow the Company to release and service these games in South Korea. The Company opened one of these games in South Korea under open beta testing on March 16, 2011. Open Beta testing allows users and players to test the game while not implementing the full revenue generating service of the game. One of the games was recently launched commercially in July 14, 2012. Two other titles that the Company has licensed are in closed beta testing and expected to be available for full commercial service during the fourth quarter of 2012. The rest of the games are expected to be launched in consecutive succession soon afterward in each following quarter.
For the game licenses, the Company was required to pay aggregate license fees of $140,500, ranging from $0 to $30,000 per game. For two games, the Company was required to prepay $30,000 in non-refundable deposits which can be used for future commission payments. For one game, the Company was required to make a $5,000 non-refundable deposit.
In 2011, licenses for four of the games referenced above were terminated by the Company due to differences in scheduling the launch dates.
During March of 2012, the Company acquired an additional license agreement for $40,000. The game was launched commercially in July 2012. This license agreement has a term of 2 years.
In March of 2012, the Company entered into a termination agreement relating to one of the licenses. The Company received $35,000, plus value added tax, to terminate a license with a carrying value of $10,000 and a related deposit of $20,000. As a result of this termination agreement, the Company’s total license fees were $130,500, deposits for future commissions were $10,000 and other deposits were $5,000.
At June 30, 2012, the Company owed $64,500 to the licensors of the game licenses. Of this amount, $20,000 was paid in July of 2012.
The Great Merchant is an economic based MMORPG (Massively Multiplayer Online Role Playing Game) online at http://www.thegreatmerchant.com. While the game is free to play and there is no cost for users to purchase and connect to the game, the game prompts the user to use micro transactions to purchase in-game points that can be used in the game to further the in-game operations of their own character. Unlike different MMORPGs on the market, the Great Merchant player can advance through the game by trading online items and virtual goods.
Revenues, Expenses and Loss from Operations
Three months ended June 30, 2012 compared to three months ended June 30, 2011
Our revenues, selling, general and administrative expenses, depreciation, amortization, total costs and expenses, and net loss for the three months ended June 30, 2012 and for the three months ended June 30, 2011 are as follows:
Three Months
Ended
June 30, 2012
|
Three Months
Ended
June 30, 2011
|
|||||||
Revenue
|
$
|
17,172
|
$
|
11,799
|
||||
Selling, general and administrative
|
49,343
|
82,072
|
||||||
Related party service agreement
|
60,000
|
23,000
|
||||||
Impairment of license agreements
|
||||||||
Depreciation and amortization
|
4,103
|
662
|
||||||
Total costs and expenses
|
113,446
|
105,734
|
||||||
Other income - gain on license termination
|
||||||||
Other expense - interest expense
|
18,765
|
14,403
|
||||||
Net Loss
|
$
|
(115,039)
|
$
|
(108,338)
|
For the three months ended June 30, 2012, we generated $17,172 in revenue compared to $11,799 for the three months ended June 30, 2011. The increase of $5,373 or 45.5% was primarily due to an increase in revenue generated from our online game, the Great Merchant, and the launch of four of the games commercially in 2012.
For the three months ended June 30, 2012, our selling, general and administrative expenses of $49,343 consisted primarily of $31,245 in professional fees, $9,036 in rental expense and $1,390 in travel expense. For the three months ended June 30, 2011, our selling, general and administrative expenses of $82,072 consisted primarily of $29,958 in professional fees and $11,752 in rental expense. The decrease of $32,729 or 39.9% in our selling, general and administrative expenses was primarily due to decrease in administrative expenses.
Depreciation is of computers and other office furniture and equipment. The amortization relates to the in service license agreements. The impairment of the license agreements relates to the cancellation of the game licenses discussed above.
For the three months ended June 30, 2012, we had $113,446 in total costs and expenses compared to $105,734 for the three months ended June 30, 2011. The increase of $7,712 or 7.3% was primarily due to increases in costs and expenses and related party service agreement which was offset by administrative expenses.
Other Expenses
Other Expenses for the three months ended June 30, 2012 was $18,765. Other Expenses for the three months ended June 30, 2011 was $14,403. The increase of $4,362 or 30.3% was primarily due to increase in interest expense of $4,362 due to an increase in loan balances.
Net Loss
Our Net Loss for the three months ended June 30, 2012 was $115,039 compared to $108,338 for the three months ended June 30, 2011. The increase of $6,701 or 6.2% was primarily due to an increase in related third party agreements.
Revenues, Expenses and Loss from Operations
Our revenues, selling, general and administrative expenses, depreciation, amortization, total costs and expenses, and net loss for the six months ended June 30, 2012 and for the six months ended June 30, 2011 are as follows:
Six months
Ended June
30, 2012
|
Six months
Ended June
30, 2011
|
|||||||
Revenue
|
$
|
35,092
|
$
|
34,205
|
||||
Selling, general and administrative
|
128,183
|
130,057
|
||||||
Related party service agreement
|
120,000
|
23,000
|
||||||
Impairment of license agreements
|
20,000
|
|||||||
Depreciation and amortization
|
8,206
|
1,659
|
||||||
Total costs and expenses
|
256,389
|
174,716
|
||||||
Other expense - interest expense
|
(35,622
|
)
|
(26,011)
|
|||||
Gain on license termination
|
5,000
|
-
|
||||||
Net Loss
|
$
|
(251,919)
|
$
|
(166,522)
|
For the six months ended June 30, 2012, we had $35,092 in revenue compared to $34,205 for the six months ended June 30, 2011. The increase of $887 or 7.5% was primarily due to the launch of four of the games commercially in 2012, offset by less revenue generated from our online game, the Great Merchant. For the six months ended June 30, 2012, our selling, general and administrative expenses of $128,183 consisted of primarily of $51,350 of professional fees, and $21,388 of rent expense For the six months ended June 30, 2011, our selling, general and administrative expenses of $153,057 consisted of primarily of $40,808 of professional fees, and $31,609 of rent expense. Depreciation is of computers and other office furniture and equipment.
Net Loss
Our Net Loss for the six months ended June 30, 2012 was $251,919 compared to $166,522 for the six months ended June 30, 2011. The increase of $85,397 was primarily due to to an increase in related third party agreements.
Liquidity and Capital Resources
Introduction
Our primary assets are cash and the online game license agreements.
During the six months ended June 30, 2012, our online games business segment generated $35,092 in total revenues.
Our cash requirements have been relatively small up to this point, but we anticipate that our cash needs will increase dramatically. We anticipate satisfying these cash needs through the sale of our common stock until we not only begin to generate revenue, but until we can generate enough revenue to sustain our operations.
As of
June 30,
2012
|
As of
December 31,
2011
|
Change
|
||||||||||
Cash
|
$
|
14,181
|
$
|
5,415
|
$
|
8,766
|
||||||
Accounts receivable
|
4,452
|
-
|
4,452
|
|||||||||
Total current assets
|
18,633
|
5,415
|
13,218
|
|||||||||
Property and equipment, net of accumulated depreciation of $6,728 and $4,982
|
3,751
|
5,497
|
(1,746)
|
|||||||||
License Agreements, net of accumulated amortization of $8,648 and $2,188
|
121,852
|
98,312
|
23,540
|
|||||||||
Prepaid Royalties
|
10,000
|
30,000
|
(20,000)
|
|||||||||
Deposits
|
6,000
|
6,000
|
-
|
|||||||||
Due from affiliated Company
|
||||||||||||
Total assets
|
160,236
|
145,224
|
15,012
|
|||||||||
Accrued expenses and accounts payable
|
712,603
|
649,238
|
63,365
|
|||||||||
Due to affiliate under service agreement
|
361,500
|
291,000
|
70,500
|
|||||||||
Advances from affiliate
|
134,556
|
114,556
|
20,000
|
|||||||||
Loans payable
|
1,266,800
|
1,153,734
|
113,066
|
|||||||||
Total Current Liabilities
|
2,475,459
|
2,208,528
|
266,931
|
Cash Requirements
As stated above, we anticipate that our cash requirements will increase substantially as we begin to increase operations to generate revenue from our license agreements.
Sources and Uses of Cash
Operations
For the six months ended June 30, 2012, we had a net loss of $(251,919) compared to $(166,522) for the six months ended June 30, 2011. This was offset by depreciation and amortization of $8,206, a gain on the disposal of license agreements of ($5,000), an increase in accounts receivable of $(4,452), an increase in amounts due to affiliate under service agreement of $70,500, and an increase in accrued expenses of $63,365, for total cash used in our operating activities of $119,300.
Investments
We had $5,000 invested in cash used in investment activities for the six months ended June 30, 2012, which relates to the proceeds from termination of a license agreement of $35,000 and the acquisition of a new license agreement of $40,000.
We had $997 invested in cash used in investment activities for the six months ended June 30, 2011, which relates the purchase of property and equipment of $997 and the acquisition of license agreements of $0.
Financing
Our cash flows from financing activities totaled $133,066, from $117,500 in loan proceeds offset by $4,434 from repayment of our loan and $0 repaid to Joytoto Korea.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with our board of directors, we have identified the following accounting policies that we believe are key to an understanding of our financial statements. These are important accounting policies that require management’s most difficult, subjective judgments.
Valuation of License Agreements
During 2010, the Company acquired license agreements for 16 online games for use in South Korea. These agreements called for a total of $120,500 in license fees, $30,000 in nonrefundable royalty prepayments on two of the licenses and a $5,000 non-refundable deposit on one of the licenses. The Company paid $73,750 of these fees as of March 31, 2012 and will pay the remaining fees of $81,750 when the games are launched commercially. Each license also has a royalty fee which varies for each license. Future royalties will be offset against the $30,000 prepayment. The licenses have terms of 2 to 3 years, beginning when they are launched commercially.
In 2011, the licensor terminated two of these agreements due to licensor’s inability to install and localize the game for the South Korean territory. These licenses were for $20,000, of which $10,000 was paid by the Company. The Company has determined that the possibility of realizing these license agreements or recovering those funds advanced is minimal due to the locality of the licensor in China As such, the Company has concluded that these licenses are impaired and has written them off.
During 2012, the Company acquired an additional license agreement for $40,000. The game launched commercially in South Korea in July 2012. This license agreement has a term of 2 years.
In March of 2012, the Company entered into a termination agreement relating to one of the licenses. The Company received $35,000, plus value added tax, to terminate a license with a carrying value of $10,000 and related deposit of $20,000.
Revenue Recognition
Revenues are recognized when all of the following criteria have been met: persuasive evidence for an arrangement exists; delivery has occurred or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured.
Off-balance Sheet Arrangements
We have no off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is deemed by our management to be material to investors.
Not applicable.
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of June 30, 2012 to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission's rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2012, our disclosure controls and procedures were not effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Legal Proceedings
|
None.
Risk Factors
|
There are no material changes to the risk factors in our most recent Annual Report on Form 10-K.
Unregistered Sales of Equity Securities and Use of Proceeds
|
None.
Defaults Upon Senior Securities
|
None.
Mine Safety Disclosures .
|
Not applicable.
Other Information
|
None.
Exhibits
|
31.1
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
|
|
31.2
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
|
|
32.1
|
Chief Executive Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Chief Financial Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101**
|
The following materials from Pollex, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Cash Flow, (iii) the Consolidated Balance Sheets, and (iv) Notes to Consolidated Financial Statements tagged as blocks of text.
|
EX-101.INS
|
XBRL INSTANCE DOCUMENT
|
|
EX-101.SCH
|
XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
|
|
EX-101.CAL
|
XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
|
|
EX-101.DEF
|
XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
|
|
EX-101.LAB
|
XBRL TAXONOMY EXTENSION LABELS LINKBASE
|
|
EX-101.PRE
|
XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
|
** In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Pollex, Inc.
|
|||
Dated: August 14, 2012
|
By:
|
/s/ Seong Yong Cho
|
|
Seong Yong Cho
|
|||
Its: Chief Executive Officer (Principal Executive Officer)
|
|||
By:
|
/s/Seong Sam Cho
|
||
Seong Sam Cho
|
|||
Its: Chief Financial Officer (Principal Financial and Accounting Officer)
|
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