ITEM 1 - BUSINESS
Business Overview
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 an 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.
Our principal executive offices are located at 2005 De La Cruz Blvd, Suite 142, Santa Clara, CA 95050. Our telephone number is (408) 350-7340.
Products and Services
Our operations are focused on Online Games. Our Online Games business segment has generated $160,428 for the fiscal year ended December 31, 2016.
Our major online game business is The Great Merchant. The online game is operating at its website http://www.thegreatmerchant.com. The website operated in open beta testing on January 2010 and 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 (game points) to further their character and purchase items to increase their character’s abilities and in-game looks. Additional purchase methods such as credit cards and mobile phone payments will be added in the future.
Online Games
The Company operates The Great Merchant under a master leasing agreement with Joytoto Korea. 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 download and connect to the game, the game prompts the user to use micro-transactions to purchase in-game points that can be used to further the in-game operations of their own character. Unlike different MMORPGs on the market, players of The Great Merchant can advance through the game by trading online items and virtual goods.
Customer Service
We focus on retention of our current players and believe our ability to establish and maintain long-term relationships with players depends, in part, on the strength of our customer support and service operations. We utilize frequent communication and feedback from our players to continually improve our website and our service. Our players can communicate with our customer service representatives by email and in-game messages. We are focused on eliminating the need for customer support calls by automating certain self-service features on our website.
Marketing and Advertising
Our sales and marketing efforts are designed to attract visitors to our website and convert and retain them as paying players in a cost effective manner. We intend to employ a multi-channel customer advertising strategy and market and advertise to potential players through a combination of paid and unpaid sources in the 3rd quarter of 2017. We believe that our paid marketing efforts will be significantly enhanced by the benefits of word-of-mouth advertising and referrals by existing players. We regularly monitor the effectiveness of our marketing efforts primarily by conducting surveys during our registration process. We use the survey results to actively manage our online and offline media and channel mix in order to improve the efficiency of our marketing expenditures.
We are currently pursuing the following customer advertising activities:
Online advertising. We will advertise online through search engines, advertising networks and partner websites. We use a pay-per-click spending model on search engines and pay-per-conversion model on our various online advertising, affiliate and partner networks, in order to match our costs with new customer additions.
Word-of-mouth referrals. We believe that we have developed a loyal customer base, and new customers frequently indicate they have heard about us from existing customers.
Competition
Our business is extremely competitive, particularly with respect to the online gaming marketplace. In addition, the market for the products we develop is subject to rapid technological change. We intend to compete with numerous online gaming companies, many of which have significantly greater financial, technical, and marketing resources than we do.
In general, our products compete with other forms of entertainment for leisure time and discretionary spending of consumers. These other forms of entertainment include movies, television, music, online content and social media. For example, we have experienced significant increased competition from providers of premium casual games for smartphones. More specifically, the market for interactive entertainment products is highly competitive and relatively few products achieve significant market acceptance. We continue to face significant competition with respect to our products, which may also result in price reductions, reduced gross margins and loss of market share. Many of our competitors have significantly greater financial, marketing and product development resources than we do.
Current and future competitors may be able to:
•respond more quickly to new or emerging technologies or changes in customer preferences;
•gain access to wider distribution channels;
•undertake more extensive marketing campaigns;
•adopt more aggressive pricing policies;
•devote greater resources to securing the rights to valuable licenses;
•develop stronger relationships with leading software developers; and
•make higher royalty payments.
Competitive factors such as the foregoing may have a material adverse effect on our business.
Research and Development
We have not expended funds for research and development costs since inception.
Distribution
As our game licenses are distributed as free-to-play, there is no need for brick and mortar distribution channels. We will be distributing our games through online marketing channels, digital distribution outlets, PC gaming portals, social media sites to increase our core audience. Usage of online marketing tools such as pay per click and pay per view advertising on online channels and platforms will be used to grow and maintain our current user base.
Reports to Security Holders
We will file the necessary reports with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including but not limited to, current reports on Form 8-K, annual reports on Form 10-K, and quarterly reports on Form 10-Q. You may read and copy these reports, statements or other information filed by us in the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. Our SEC filings are also available to the public at the Website maintained by the SEC at www.sec.gov .
Employees
As of December 31, 2016, we have one employee, who is full time.
ITEM 1A
ITEM 1A - RISK FACTORS
We have a limited operating history and limited historical financial information upon which you may evaluate our performance.
We are in our early stages of development and face risks associated with growth within our industry. We may not successfully address these risks and uncertainties or successfully implement our operating strategies. If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair the value of our common stock to the point investors may lose their entire investment. Even if we accomplish these objectives, we may not generate positive cash flows or the profits we anticipate in the future.
Our share ownership is concentrated.
Joytoto Co. Ltd., a Korean company, beneficially owns approximately 42.3% of our voting shares (including shares owned by its wholly-owned subsidiary, Joyon Entertainment Co., Ltd.). As a result, this stockholder can exert significant influence over all matters requiring stockholder approval, including the election and removal of directors, any merger, consolidation or sale of all or substantially all of assets, as well as any charter amendment and other matters requiring stockholder approval. In addition, this stockholder may dictate the day to day management of the business. This concentration of ownership may delay or prevent a change in control and may have a negative impact on the market price of our common stock by discouraging third party investors. In addition, the interests of this stockholder may not always coincide with the interests of our other stockholders.
We have licensed, or will license, from third parties certain intellectual properties. If these licenses terminate, or if these third parties do not comply with the terms of our license, or if the underlying licensed patents are found to be invalid, our business could be negatively impacted.
We have licensed, or will license, from third parties, certain intellectual properties necessary to service games in a region or territory of agreement. In return for the use of their technology, we have paid or agreed to pay, or will agree to pay the licensor, certain fees and royalties based on sales of the product. If these licenses terminate, if the licensors fail to abide by the terms of the license or fail to prevent infringement by third parties, if the licensed patents or other rights are found to be invalid or if we are unable to enter into necessary licenses on acceptable terms, our business could be negatively impacted.
When we make acquisitions, we may not be able to successfully integrate them or attain the anticipated benefits.
We may, in the future, acquire other businesses that are synergistic with ours. If we are unsuccessful in integrating our acquisitions, or if integration is more difficult than anticipated, we may experience disruptions that could have a material adverse effect on our business. In addition, we may not realize all of the anticipated benefits from our acquisitions, which could result in an impairment of goodwill or other intangible assets.
We lack proper internal controls and procedures.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, who is also our Chief Financial Officer, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” in Rule 13a-15(e). In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
During the course of the preparation of our December 31, 2016 financial statements, we identified certain material weaknesses relating to our internal controls and procedures. Some of these internal control deficiencies may also constitute deficiencies in our disclosure and internal controls.
Our business may require additional capital for continued growth, and our growth may be slowed if we do not have sufficient capital.
The continued growth and operation of our business may require additional funding for working capital. We may be unable to secure such funding when needed in adequate amounts or on acceptable terms, if at all. To execute our business strategy, we may issue additional equity securities in public or private offerings, potentially at a price lower than the market price at the time of such issuance. Similarly, we may seek debt financing and may be forced to incur significant interest expense. If we cannot secure sufficient funding, we may be forced to forego strategic opportunities or delay, scale back or eliminate operations, acquisitions, and other investments.
Our ability to obtain needed financing may be impaired by such factors as the condition of the economy and capital markets, both generally and specifically in our industry, and the fact that we are not profitable, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations.
Our inability to use shares of our common stock to finance future acquisitions could impair the growth and expansion of our business.
The extent to which we will be able or willing to use shares of our common stock to consummate acquisitions will depend on (i) the market value of our securities which will vary, (ii) liquidity, which is presently limited, and (iii) the willingness of potential sellers to accept shares of our common stock as full or partial payment for their business. Using shares of our common stock for this purpose may result in significant dilution to existing stockholders. To the extent that we are unable to use common stock to make future acquisitions, our ability to grow through acquisitions may be limited by the extent to which we are able to raise capital through debt or equity financings. We may not be able to obtain the necessary capital to finance any acquisitions. If we are unable to obtain additional capital on acceptable terms, we may be required to reduce the scope of expansion or redirect resources committed to internal purposes. Our failure to use shares of our common stock to make future acquisitions may hinder our ability to actively pursue our acquisition program.
We are subject to financial reporting and other requirements for which our accounting, and other management systems and resources may not be adequately prepared.
We are subject to reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act. Section 404 requires us to conduct an annual management assessment of the effectiveness of our internal controls over financial reporting. These reporting and other obligations will place significant demands on our management, administrative, operational and accounting resources. We anticipate that we may need to (i) upgrade our systems, (ii) implement additional financial and management controls, reporting systems and procedures, (iii) implement an internal audit function, and (iv) hire additional accounting, internal audit and finance personnel. If we are unable to accomplish these objectives in a timely and effective manner, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies could be impaired. Any failure to maintain effective internal controls could have a negative impact on our ability to manage our business and on our stock price.
Public company compliance requirements may make it more difficult to attract and retain officers and directors.
The Sarbanes-Oxley Act and rules implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, we expect these rules and regulations to increase our compliance costs in 2017 and beyond and to make certain activities more time consuming and costly. As a public company, we also expect that these rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers, and to maintain insurance at reasonable rates, or at all.
Shares of our stock suffer from low trading volume and wide fluctuations in market price.
Our common stock is currently quoted on the OTC Pink Marketplace under the symbol “PLLX”. An investment in our common stock currently is illiquid and subject to significant market volatility. This illiquidity and volatility may be caused by a variety of factors including low trading volume and market conditions.
In addition, the value of our common stock could be affected by actual or anticipated variations in our operating results; changes in the market valuations of other similarly situated companies serving similar markets; announcements by us or our competitors of significant acquisitions, strategic partnerships, collaborations, joint ventures or capital commitments; adoption of new accounting standards affecting our industry; additions or departures of key personnel; introduction of new products or services by us or our competitors; actual or expected sales of our common stock or other securities in the open market; conditions or trends in the market in which we operate; and other events or factors, many of which are beyond our control.
Stockholders may experience wide fluctuations in the market price of our securities. These fluctuations may have an extremely negative effect on the market price of our securities and may prevent a stockholder from obtaining a market price equal to the purchase price such stockholder paid when the stockholder attempts to sell our securities in the open market. In these situations, the stockholder may be required either to sell our securities at a market price which is lower than the purchase price the stockholder paid, or to hold our securities for a longer period of time than planned. An inactive market may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies by using common stock as consideration or to recruit and retain managers with equity-based incentive plans.
Our common stock is traded on the OTC Pink Marketplace of the OTC Markets Group which may make it more difficult for investors to resell their shares due to suitability requirements.
Our common stock is currently traded on the OTC Pink Marketplace and the OTC Markets Group where we expect it to remain in the foreseeable future. Broker-dealers often decline to trade in OTC Pink Marketplace stocks given the market for such securities is often limited, the stocks are more volatile, and the risk to investors is greater. These factors may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of their shares. This could cause our stock price to decline.
There is substantial doubt about our ability to continue as a going concern.
Our independent registered public accounting firm has issued an opinion on our financial statements that states that the financial statements were prepared assuming we will continue as a going concern and further states that our net losses of $372,885 and $418,868 in 2016 and 2015, respectively, and accumulated deficit of $141,212,994 at December 31, 2016 raise substantial doubt about our ability to continue as a going concern. Our plans concerning these matters include raising capital through the equity markets to fund future operations and generating revenue through our license agreements. Additionally, even if we do raise sufficient capital to support our operating expenses and generate adequate revenues, there can be no assurances that the revenue will be sufficient to enable us to develop business to a level where it will generate profits and cash flows from operations.
Our stock price may be volatile.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:
●changes in our industry;
●competitive pricing pressures;
●our ability to obtain working capital financing;
●additions or departures of key personnel;
●sales of our common stock;
●our ability to execute our business plan;
●operating results that fall below expectations;
●loss of any strategic relationship;
●regulatory developments; and
●economic and other external factors.
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
Our common stock is subject to the “Penny Stock” rules of the SEC, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
Our common stock is considered a “Penny Stock”. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock. The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a stockholder's ability to buy and sell our stock. In addition to the "penny stock" rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit investors’ ability to buy and sell our stock and have an adverse effect on the market for our shares.
We have never paid nor do we expect in the near future to pay dividends.
We have never paid cash dividends on our capital stock and do not anticipate paying any cash dividends on our common stock for the foreseeable future. Investors should not rely on an investment in our Company if they require income generated from dividends paid on our capital stock. Any income derived from our common stock would only come from rise in the market price of our common stock, which is uncertain and unpredictable.
ITEM 1B
ITEM 1B - UNRESOLVED STAFF COMMENTS
None.
ITEM 2
ITEM 2 - PROPERTIES
The Company leases approximately 1,021 square feet of office space in Santa Clara, California, for $1,685 per month pursuant to the terms of a month-to-month lease agreement that commenced October 1, 2016.
ITEM 3
ITEM 3 - LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings
ITEM 4
ITEM 4 - MINE SAFETY DISCLOSURES.
Not Applicable.
PART II
ITEM 5
ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is currently quoted on the OTC Pink Marketplace. Our common stock has traded under the symbol “PLLX” since October 24, 2008.
The following table sets forth the high and low bid information for each quarter within the two most recent fiscal years, as provided by The NASDAQ Stock Market. The information reflects prices between dealers, and does not include retail markup, markdown, or commission, and may not represent actual transactions.
Our transfer agent is Corporate Stock Transfer.
As of April 14, 2017, the number of holders of record of shares of our common stock is 32.
Dividend Policy
There have been no cash dividends declared on our common stock. Dividends are declared at the sole discretion of our Board of Directors.
Recent Sales of Unregistered Securities
The Company did not consummate any unregistered sales of its securities during the fiscal year ended December 31, 2016.
Securities Authorized for Issuance Under Equity Compensation Plans.
None.
ITEM 6
ITEM 6 - SELECTED FINANCIAL DATA
As a smaller reporting company we are not required to provide the information required by this Item.
ITEM 7
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
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 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 Annual Report on Form 10-K 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.
Results of Operations
Introduction
The Company was incorporated on November 2, 2001, in the State of Nevada, as Web Views Corporation.
We are a subsidiary of 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.
Year ended December 31, 2016 compared to the Year ended December 31, 2015
Revenues, Expenses and Loss from Operations
Our revenues expenses, and net loss for the year ended December 31, 2016 and for the year ended December 31, 2015 are as follows:
Revenue
Total revenue for the year ended December 31, 2016 was $160,428 compared to $88,542 for the year ended December 31, 2015. The increase of $71,886 or 81% was primarily due to an increase in paying players and micro-transactions from our online game.
Selling, General and Administrative
Selling, General and Administrative expenses for the year ended December 31, 2016 were $220,165 compared to $194,462 for the year ended December 31, 2015. The increase of $25,703 or 13% was primarily due to increases in professional fees.
Related party service agreement
Costs incurred with a related party service agreement for the year ended December 31, 2016 were $240,000 compared to $240,000 for the year ended December 31, 2015. No change is due to no changes in the service agreement with Gameforyou Inc.
Interest expense
Interest expense for the year ended December 31, 2016 was $73,148 compared to $72,948 for the year ended December 31, 2015. The increase of $200 or 0.2% was primarily due to an increase in average loan balances during 2016 compared to 2015.
Net Loss
Our Net Loss for the year ended December 31, 2016 was $372,885 compared to $418,868 for the year ended December 31, 2015. The decrease of $45,983 or 11% was primarily due to an increase in online game revenue.
Liquidity and Capital Resources
Introduction
We have very few current assets. Our cash requirements have been relatively small up to this point, but as our operations increase, 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 more revenue, but until we can generate enough revenue to sustain our operations.
Cash Requirements
As stated above, we anticipate that our cash requirements will increase substantially as we begin to increase operations to generate greater revenue from our game, The Great Merchant.
Operations
Our Net Loss for the year ended December 31, 2016 was $372,885 compared to $418,868 for the year ended December 31, 2015. The decrease of $45,983 or 11% was primarily due to an increase in online game revenue.
Revenue for the year ended December 31, 2016 was $160,428 compared to $88,542 for the year ended December 31, 2015. The increase of $71,886 or 81% was primarily due to an increase in paying players and micro-transactions from our online game.
Our cash flows provided by operating activities for the year ended December 31, 2016 were $32,506 compared to net cash used in operating expenses of $26,127 for the year ended December 31, 2015. The increase of $58,633 or 45% was primarily due to increase in accrued expenses of $136,004 and an increase in amounts due to affiliate under service agreement of $189,387 offset by the loss of $372,885.
Investments
For the year ended December 31, 2016, we did not make any investments.
For the year ended December 31, 2015, we did not make any investments.
Financing
For the year ended December 31, 2016, our cash flows used in financing activities totaled $29,268, from $5,155 in proceeds from advance from affiliate offset by the repayment of $34,423 in loans.
For the year ended December 31, 2015, our cash flows from financing activities totaled $27,720, from $28,720 in proceeds from advance from affiliate offset by the repayment of $1,000 in advances.
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.
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.
ITEM 7A
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company we are not required to provide the information required by this Item.
ITEM 8
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Pollex Inc.
We have audited the accompanying balance sheet of Pollex, Inc. as of December 31, 2016 and the related statements of operations, stockholders’ deficit, and cash flows for the year then ended. Pollex, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pollex, Inc. as of December 31,2016, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that Pollex, Inc. will continue as a going concern. As discussed in Note B to the financial statements, the Company has substantial negative working capital and a significant accumulated deficit. These conditions raise substantial doubt about the ability of the Company to continue as a going concern. Management’s plans regarding those matters also are described in Note B. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
MSpc
Certified Public Accountants and Advisors,
A Professional Corporation
Cranford, New Jersey
April 17,2017
www.mspc-cpa.com
340 North Avenue, Cranford, NJ 07016-2496 Tel 908 272-7000 Fax 908 272-7101
546 5th Avenue, New York, NY 10036-5000 Tel 212 682-1234 Fax 212 687-8846
Member of the American Institute of Certified Public Accountants Center for Public Company Audit Firms and Private Companies Practice Section
Report of Independent Registered Public Accounting Firm
To the Board of Directors
Pollex, Inc.
Santa Clara, CA.
We have audited the accompanying balance sheet of Pollex, Inc. as of December 31, 2015, and the related statements of operations, stockholders’ deficit, and cash flows for the year then ended. Pollex, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pollex, Inc. as of December 31, 2015, and the results of its operations and its cash flows for the year ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note B to the financial statements, the Company incurred net losses of $418,868 for the year ended December 31, 2015, had negative working capital of $3,801,428 and an accumulated deficit of $140,840,109 at December 31, 2015. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note B. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.
/s/ Cowan, Gunteski & Co., P.A.
April 1, 2016
Tinton Falls, NJ
Reply to: 730 Hope Road Tinton Falls NJ 07724 Phone: 732.676.4100 Fax: 732.676.4101
Bey Lea Road, Suite A101 Toms River NJ 08753 Phone: 732.349.6880 Fax: 732.349.1949
Member of CPAmerica International
www.CowanGunteski.com
POLLEX, INC.
BALANCE SHEETS
See accompanying notes to financial statements.
POLLEX, INC.
STATEMENTS OF OPERATIONS
See accompanying notes to financial statements.
POLLEX, INC.
STATEMENTS OF STOCKHOLDERS’ DEFICIT
For the years ended December 31, 2015 and 2016
See accompanying notes to financial statements.
POLLEX, INC.
STATEMENTS OF CASH FLOWS
See accompanying notes to financial statements.
POLLEX, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
Pollex, Inc. (the “Company”) is an owned subsidiary of Joytoto Co., Ltd. (“Joytoto Korea”). Our operations are focused in Online Games by acquiring new game licenses and by providing commercial service of such games in South Korea and the United States. The Company is currently operating “The Great Merchant”.
NOTE B - GOING CONCERN
As indicated in the accompanying financial statements, the Company incurred net losses of $372,885 and $418,868 for the years ended December 31, 2016 and 2015, respectively, had negative working capital of $4,093,013 at December 31, 2016 and had an accumulated deficit of $141,212,994 at December 31, 2016. Management’s plans include raising capital through the equity markets to fund future operations and generating revenue through its license agreement. 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, 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 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 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 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly-liquid investments with an original maturity of three months or less to be cash equivalents. In addition, amounts on deposit with Paypal and Paymentwall, a third-party payment processor, are considered cash equivalents in the amount of $9,160 as of December 31, 2016.
Revenue Recognition
The Company recognizes revenue from the sale of products and services in accordance with Accounting Standards Codification (“ASC”) 605, “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. The Company recognizes revenues from the sale of micro-transactions of its game, The Great Merchant. All payments are made through Paypal and Paymentwall.
POLLEX, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.
The Company recognizes and measures uncertain tax positions and records tax benefits when it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties as a component of income tax expense.
At December 31, 2016 and 2015, the Company had not incurred any liability for the payment of tax related interest and there was no tax interest or penalties recognized in the statements of operations.
Net Loss Per Common Share
Basic earnings per share (“EPS”) is computed by dividing the income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock and common stock equivalents outstanding during the periods. There are no potential dilutive common shares at December 31, 2016 and 2015.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09 - Revenue From Contracts with Customers, to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. Generally Accepted Accounting Principles ("GAAP") and International Financial Reporting Standards. The core principle of the guidance is that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In August 2015, the FASB issued ASU 2015-14 - Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, deferring the effective date for one year to interim and annual periods beginning after December 15, 2017. Early adoption is also permitted as of the original effective date (interim and annual periods beginning after December 15, 2016) and retrospective application is required. Management is currently evaluating the impact of this ASU on the consolidated financial statements.
POLLEX, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements (Continued)
In February 2016, the FASB issued a comprehensive new lease standard ASU No. 2016-02, which will supersede previous lease guidance. The standard requires a lessee to recognize assets and liabilities related to long-term leases that were classified as operating leases under previous guidance in its balance sheet. An asset would be recognized related to the right to use the underlying asset and a liability would be recognized related to the obligation to make lease payments over the term of the lease. The standard also requires expanded disclosures surrounding leases. The standard is effective for fiscal periods beginning after December 15, 2018, and requires modified retrospective adoption, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures.
Reclassification
Certain amounts have been reclassified for presentation purposes. The amounts of $380,761 from the year ended December 31, 2015 in accounts payable were reclassified as advances from affiliate.
NOTE D - LICENSE AGREEMENTS
On April 18, 2007, the Company entered into a master license agreement with Joytoto Korea granting the Company a 10 year license through April 2017 for up to 4 online games, including The Great Merchant. This license is renewable for two additional 5 year terms for $10,000. Prior to the launch of the Great Merchant in 2010, the Company determined that the master license agreement was fully impaired.
POLLEX, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 and 2015
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.
For the years ended December 31, 2016 and 2015, the Company also borrowed $5,155 and $28,720, respectively, from Joytoto Korea. For the years ended December 31, 2016 and 2015, the Company repaid $34,423 and $1,000, respectively, to Joytoto Korea. At December 31, 2016 and 2015, $707,756 and $737,024 were due to Joytoto Korea.
On July 1, 2010, the Company 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. There has been no issuance of stock and any issuance of stock will be at the market value or price determined by both parties and must be agreed by both parties. For the years ended December 31, 2016 and 2015, $240,000 and $240,000, respectively, were recognized in the Statement of Operations under this agreement.
During the year ended December 31, 2014, the Company began making purchases of computer equipment for resale by a related company, BCasual, Incorporated (“BCasual”.) At December 31, 2015, BCasual owed the Company $59,934 relating to these transactions. Effective December 31, 2015, Joytoto Korea agreed to assume the amounts due from BCasual. As such, the payable to Joytoto Korea has been offset by the $59,934 which was due from BCasual at December 31, 2015.
In June 2014, the Company entered a sublease agreement with BCasual for its existing office space. BCasual agreed to pay the Company $1,250 per month under this agreement. The agreement terminated on December 31, 2016.
NOTE F - LOANS PAYABLE
The loans payable consists of unsecured borrowings from two notes from AK Interactive, Co. Ltd. and Mr. Seung Han Shin 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 their due date without a prepayment penalty. There is no collateral associated with these notes. For years ended December 31, 2016 and 2015, the accrued interest was $73,148 and $72,948, respectively.
At December 31, 2016 and 2015, the Company owed $1,215,799 under such notes which is payable on demand.
POLLEX, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE G - INCOME TAXES
At December 31, 2016, the Company had an unused net operating loss carryforward of approximately $6,990,000 for income tax purposes, which expires between 2027 and 2036. This net operating loss carryforward may result in future income tax benefits of approximately $2,377,000 ; however because realization is uncertain at this time, a valuation allowance in the same amount has been established. Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2016, and 2015 are as follows:
The income tax expense (benefit) differs from the amount computed by applying the United States statutory corporate income tax rate as follows:
POLLEX, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE H - COMMITMENTS AND CONTINGENCIES
Property Leases:
On September 5, 2012, the Company signed a lease for office space in Santa Clara, California. The lease term was through September 30, 2015. The Company’s made a deposit of $1,300 and the rent payments were $1,380 per month. In June 2014, the Company entered a sublease agreement with BCasual for its’ existing office space. BCasual agreed to pay the Company $1,250 per month under this agreement. The lease terminated on December 31, 2016.
On October 1, 2016, the Company signed a month-to-month lease with rent payments of $3,255.
Rent expense for the years ended December 31, 2016 and 2015 was $3,255 and $1,860, respectively
Employment Agreements:
On March 21, 2014, the Company entered into three-year employment agreement through March 21, 2017 with Mr. Seong Sam Cho, to serve as Chief Executive Officer, President and Chairman for an annual salary of $1.00. For the years ended December 31, 2016 and 2015, the Company recorded $80,000 and $80,000, respectively, for the fair value of the services contributed by Seong Sam Cho. Services include development and implementation of the Company’s strategy, ensure that Company is organized and risks are monitored and managed, and effective communication with shareholders and the public.
On April 6, 2017, the Company entered into a new one year employment agreement through April 6, 2018 with Mr. Seong Sam Cho, to serve as Chief Executive Officer, President and Chairman for an annual salary of $80,000.
ITEM 9
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
As previously reported in our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 22, 2016, on April 18, 2016, we were informed Cowan, Gunteski & Co., P.A. (“Cowan”), that it had effectively resigned as our independent registered public accounting firm. As a result of the resignation, MSPC Certified Public Accountants and Advisors, P.C. (“MSPC”) became our independent registered public accounting firm. The engagement of MSPC as our independent registered public accounting firm was ratified by the Board of Directors on April 22, 2016.
The audit reports of Cowan on the Company’s financial statements as of and for the years ended December 31, 2015 and 2014 did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles, except as to its ability to continue as a going concern.
In connection with the audits of the Company’s financial statements for each of the fiscal years ended December 31, 2015 and 2014, and through the date of the Current Report, there were no disagreements (within the meaning of Item 304(a) of Regulation S-K) between the Company and Cowan on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement(s), if not resolved to the satisfaction of Cowan, would have caused Cowan to make reference to the subject matter of the disagreement(s) in its reports on the Company’s financial statements for such years, and (ii) no reportable events of the type described in Item 304(a)(1)(v) of Regulation S-K.
During the Company’s two fiscal years ended December 31, 2015 and 2014 and through April 18, 2016, the Company did not consult with MSPC on (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that may be rendered on the Company’s financial statements, and MSPC did not provide either a written report or oral advice to the Company that MSPC concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue; or (ii) the subject of any disagreement, as defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable event, as defined in Item 304(a)(1)(v) of Regulation S-K.
ITEM 9A
ITEM 9A - CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act as a process designed by, or under the supervision of a Company's principal executive and principal financial officer and effected by a Company's Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
We conducted an evaluation, with the participation of our Chief Executive Officer, who is also our 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 December 31, 2016, 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 has concluded that as of December 31, 2016, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.
In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. AS 2201) or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following three material weaknesses that have caused management to conclude that, as of December 31, 2016, our disclosure controls and procedures were not effective at the reasonable assurance level:
1. We do not have formalized documentation related to our internal control policies and procedures; however, there are informal policies and procedures that cover the recording and reporting of financial transactions. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act and was applicable to us for the year ended December 31, 2016. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
2. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
3. We do not have sufficient personnel working on our accounting functions to ensure we can timely file our quarterly and annual reports. Management evaluated the impact of our lack of internal accounting personnel to ensure we can timely file our required quarterly and annual reports and has concluded that the control deficiency that resulted represented a material weakness.
To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.
Remediation of Material Weaknesses
To remediate the material weaknesses in our disclosure controls and procedures identified above, we have continued to refine our internal procedures to begin to implement segregation of duties and to seek additional internal accounting personnel.
Management’s Report On Internal Control Over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
●Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
●Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the Company; and
●Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
We assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013).
Based on our assessment, we concluded that, as of December 31, 2016, our internal control over financial reporting is not effective based on those criteria.
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission.
Changes in Internal Control over Financial Reporting
Except as noted above, 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.
ITEM 9B
ITEM 9B - OTHER INFORMATION
There are no events required to be disclosed by the Item.
PART III
ITEM 10
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The following table sets forth the names and ages of our current directors and executive officers, the principal offices and positions held by each person. The directors serve one year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. Unless described below, there are no family relationships among any of the directors and officers.
Name
Age
Position(s)
Seong Sam Cho
President, Chief Executive Officer, Chief Financial Officer, Secretary, and Chairman
Seong Sam Cho (Sam Cho), 51, has been the President, Chief Executive Officer and Chairman of the Company since December 4, 2012 and the Chief Financial Officer, Secretary, and a Director since October 31, 2007. He has been the CEO of Joytoto Co., Ltd. since December 2006, and has been a director of Joytoto Co. Ltd. since December 2005. He served as the COO of Joytoto Co., Ltd. from December 2005 to November 2006. He has been the Chairman of the Board of Joyon Entertainment Co. Ltd., which is a subsidiary of Joytoto Co., since December 1999. Mr. Cho lectures on digital content and culture at the faculty of Sookmyung Women's University as a professor. He also participates actively as a member of the committee for Ministry of Information & Communication and Ministry of Culture & Tourism of the Korean government. Mr. Cho is a subcommittee member of the Federation of Korean Industries and Mirae Forum division of the game department. He has been engaged in the IT industry for approximately 20 years. He founded Sam Electronics Co., Ltd. in 1988. He received the prize of the Ministry of Information and Communication for the Software Industry Development on December 2001. Mr. Cho is qualified to be a director of the Company based on his experience and history in the online games industry in South Korea and abroad.
Family Relationships
There are no family relationships between or among any of the current directors, executive officers or persons nominated or charged by the Company to become directors or executive officers.
Involvement in Certain Legal Proceedings
None of our directors or executive officers has, during the past ten years:
●been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
●had any bankruptcy petition filed by or against any business of which he was a general partner or executive officer, either at the time of the bankruptcy or within two years prior to that time;
●been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities; or
●been found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Other Directorships
None of our officers and directors are directors of any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.
Director Independence
Our board of directors has determined that currently none of it members qualify as “independent” as the term is used in Item 407 of Regulation S-K as promulgated by the SEC and in the listing standards of The Nasdaq Stock Market, LLC.
Board Leadership Structure and Role in Risk Oversight
Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined that it is in the best interests of the Company and its shareholders to partially combine these roles. Due to the small size of the Company, we believe it is currently most effective to have the Chairman and Chief Executive Officer positions partially combined.
Seong Sam Cho, our Chairman, also serves as the Company’s Chief Executive Officer. The Company is seeking other qualified individuals to serve on the Company’s Board of Directors. At this time, the Company does not have Directors and Officers liability insurance which has been a deterring factor in seeking other qualified directors. Mr. Cho is actively involved in oversight of the Company’s day-to-day activities.
Our Board of Directors is primarily responsible for overseeing our risk management processes. The Board of Directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our Company’s assessment of risks. The Board of Directors focuses on the most significant risks facing our Company and our Company’s general risk management strategy, and also ensures that risks undertaken by our Company are consistent with the Board’s appetite for risk. While the Board oversees our Company, our Company’s management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our Company and that our Board leadership structure supports this approach.
Board Diversity
While we do not have a formal policy on diversity, our Board considers diversity to include the skill set, background, reputation, type and length of business experience of our Board members as well as a particular nominee’s contributions to that mix. Although there are many other factors, the Board seeks individuals with experience on public company boards as well as experience with advertising, marketing, legal and accounting skills.
Board Assessment of Risk
Our risk management function is overseen by our Board. Our management keeps our Board apprised of material risks and provides our directors access to all information necessary for them to understand and evaluate how these risks interrelate, how they affect the Company, and how management addresses those risks. Once material risks are identified, Mr. Seong Sam Cho, our sole director and Chief Executive Officer, determines how to best address such risk. If the identified risk poses an actual or potential conflict with management, our independent directors, if any, may conduct the assessment. The Board focuses on these key risks and interfaces with management on seeking solutions. Currently Mr. Cho is currently the sole director of the Company.
Meetings and Committees of the Board of Directors
Our Board of Directors did not hold any formal meetings during the fiscal year ended December 31, 2016.
We currently do not maintain any committees of the Board of Directors. Given our size and the development of our business to date, we believe that the board through its meetings can perform all of the duties and responsibilities which might be contemplated by a committee.
Except as may be provided in our bylaws, we do not currently have specified procedures in place pursuant to which whereby security holders may recommend nominees to the Board of Directors.
Compliance with Section 16(a) of the Securities Exchange Act of 1934, as Amended
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers and persons who own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than ten percent shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. To the best of the Company’s knowledge, officers, directors and greater than 10% shareholders have been in compliance with Section 16(a) of the Securities Exchange Act of 1934 for the year ended December 31, 2016.
Code of Ethics
We have not yet adopted a Code of Ethics although we expect to as we develop our infrastructure and business.
ITEM 11
ITEM 11 - EXECUTIVE COMPENSATION
Executive Officers and Directors
The following tables set forth certain information about compensation paid, earned or accrued for services by (i) our Chief Executive Officer and (ii) all other executive officers who earned in excess of $100,000 in the fiscal year ended December 31, 2016 (“Named Executive Officers”):
Employment Contracts
On March 21, 2014, the Company entered into a three year employment agreement with Seong Sam Cho, to serve as Chief Executive Officer, President and Chairman for an annual salary of $1.00. This agreement is to be renewed and extended for an additional year.
For the years ended December 31, 2016 and 2015, the Company recorded $80,000 and $80,000, respectively, for the fair value of the services contributed by Seong Sam Cho.
On April 6, 2017, the Company and Seong Sam Cho, the Company’s Chief Executive Officer, entered into an employment agreement (the “Agreement”) pursuant to which Mr. Cho shall continue to serve as Chief Executive Officer of the Company for a period of one year in consideration for an annual salary of $80,000. In the event Mr. Cho’s employment is terminated due to death or disability (as such terms are defined in the Agreement), Mr. Cho will be entitled to be paid his compensation through the remainder of the calendar month during which such termination is effective. In the event Mr. Cho is terminated for cause (as such term is defined in the Agreement), Mr. Cho will be entitled only to receive such compensation as he is entitled through the date of termination.
There are no other employees.
Other Compensation
We do not have employment agreements with any of our other employees.
Director Compensation
We do not provide any compensation to our directors for serving as directors.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information concerning outstanding stock awards held by the Named Executive Officers as of December 31, 2016:
Equity Compensation Plan Information
The Company has not adopted an equity compensation plan.
ITEM 12
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth, as of April 14, 2017, certain information with respect to the Company’s equity securities owned of record or beneficially by (i) each Officer and Director of the Company; (ii) each person who owns beneficially more than 5% of each class of the Company’s outstanding equity securities; and (iii) all Directors and Executive Officers as a group.
(1) Unless indicated otherwise, the address of the shareholder is c/o Pollex, Inc., 2005 De La Cruz Blvd. Suite 142, Santa Clara, CA 95050.
(2) Unless otherwise indicated, based on 5,121,689 shares of common stock issued and outstanding. Shares of common stock subject to options or warrants currently exercisable or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for the purposes of computing the percentage of any other person.
(3) Joyon Entertainment Co., Ltd. is a wholly-owned subsidiary of Joytoto Co. Ltd., and as such, the shares of common stock held by both are attributed to the other. Combined, they own 42.3% of our outstanding common stock. Seong Sam Cho has voting and dispositive power over shares of common stock held by Joyon Entertainment Co., Ltd. and Joytoto Co. Ltd.
(4) Indicates one of our officers or directors. Beneficial ownership by these officers does not include shares owned by Joytoto Co., Ltd. or Joyon Entertainment Co., Ltd.
The issuer is not aware of any person who owns of record, or is known to own beneficially, five percent or more of the outstanding securities of any class of the issuer, other than as set forth above. There are no classes of stock other than common stock issued or outstanding.
There are no current arrangements which will result in a change in control.
Securities Authorized for Issuance Under Equity Compensation Plans
The Company has not adopted an Equity Compensation Plan.
ITEM 13
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
On July 1, 2010, the Company 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 price determined by both parties and must be agreed by both parties. For the years ended December 31, 2016 and 2015, $240,000 and $240,000, respectively, were recognized as Related Party Service Agreement expense in the Statement of Operations under this agreement.
ITEM 14
ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
During the year ended December 31, 2016 (through April 18, 2016), Cowan Gunteski & Co., P.A. billed us $22,000 in fees for professional services for the audit of our financial statements and review of financial statements included in our Form 10-Q’s, as applicable.
During the year ended December 31, 2016 (from April 18, 2016 through December 31, 2016), MSPC Certified Public Accountants and Advisors, P.C. billed us $15,000 in fees for professional services for the audit of our financial statements and review of financial statements included in our Form 10-Q’s, as applicable.
During the year ended December 31, 2015, Cowan, Gunteski & Co., P.A. billed us $37,000 in fees for professional services for the audit of our financial statements and review of financial statements included in our Form 10-Q’s, as applicable.
Audit - Related Fees
During the year ended December 31, 2016 (through April 18, 2016), Cowan, Gunteski & Co., P.A. billed us $22,000 relating to procedures performed in connection with proxy and registration information filed with the SEC. There were no amounts billed related to any assurance and related services related to the performance of the audit or review of our financial statements.
During the year ended December 31, 2016 (from April 18, 2016 through December 31, 2016), MSPC Certified Public Accountants and Advisors, P.C. billed us $15,000 relating to procedures performed in connection with proxy and registration information filed with the SEC. There were no amounts billed related to any assurance and related services related to the performance of the audit or review of our financial statements.
During the year ended December 31, 2015, Cowan, Gunteski & Co., P.A. billed us $0 relating to procedures performed in connection with proxy and registration information filed with the SEC. There were no amounts billed related to any assurance and related services related to the performance of the audit or review of our financial statements.
Tax Fees
During the year ended December 31, 2016 (through April 18, 2016), Cowan, Gunteski & Co., P.A. billed us $0 for professional services for tax preparation.
During the year ended December 31, 2016 (from April 18, 2016 through December 31, 2016), MSPC Certified Public Accountants and Advisors, P.C. billed us $0 for professional services for tax preparation.
During the year ended December 31, 2015, Cowan, Gunteski & Co., P.A. billed us $0 for professional services for tax preparation.
All Other Fees
During the year ended December 31, 2016 (through April 18, 2016), Cowan, Gunteski & Co., P.A. did not bill us for any other fees.
During the year ended December 31, 2016 (from April 18, 2016 through December 31, 2016), MSPC Certified Public Accountants and Advisors, P.C. did not bill us for any other fees.
During the years ended December 31, 2015, Cowan, Gunteski & Co., P.A. did not bill us for any other fees.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
We do not currently have an Audit Committee. The policy of our Board of Directors, which acts as our Audit Committee, is to pre-approve all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to our Board of Directors regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The Board of Directors may also pre-approve particular services on a case-by-case basis.
PART IV
ITEM 15
ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(b) Exhibits
*
Filed Herewith
(1)
Incorporated by reference from our Registration Statement on Form 10SB12G filed with the Commission on July 23, 2002.
(2)
Incorporated by reference from our Current Report on Form 8-K filed with the Commission on June 25, 2003.
(3)
Incorporated by reference from our Current Report on Form 8-K filed with the Commission on January 7, 2005.
(4)
Incorporated by reference from our Current Report on Form 8-K filed with the Commission on November 6, 2007.
(5)
Incorporated by reference from our Current Report on Form 8-K filed with the Commission on October 31, 2007.
(6)
Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on November 14, 2007.
(7)
Incorporated by reference from our Current Report on Form 8-K filed with the Commission on December 14, 2007.
(8)
Incorporated by reference from our Current Report on Form 8-K filed with the Commission on August 16, 2010.
(9)
Incorporated by reference from our Current Report on Form 8-K filed with the Commission on March 25, 2011.
(10)
Incorporated by reference from our Current Report on Form 8-K filed with the Commission on April 7, 2017.
(11)
Incorporated by reference from our Current Report on Form 8-K filed with the Commission on April 22, 2016.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pollex, Inc.
Dated: April 18, 2017 By: /s/ Seong Sam Cho
Seong Sam Cho
President, Chief Executive Officer, Chief Financial Officer,
Secretary and Chairman (Principal Executive Officer and Principal Financial and Accounting Officer)
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the issuer and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Seong Sam Cho
President, Chief Executive Officer, Chief Financial Officer,
April 18, 2017
Seong Sam Cho
Secretary and Chairman (Principal Executive Officer and
Principal Financial and Accounting Officer)