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.
BALANCE SHEETS
(Unaudited)
|
|
September 30,
|
|
December 31,
|
|
|
2016
|
|
2015
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
12,879
|
|
|
$
|
5,922
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
12,879
|
|
|
|
5,922
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated depreciation of $10,479 and $10,479 at September 30,
2016 and December 31, 2015, respectively
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Other asset - Deposit
|
|
|
1,300
|
|
|
|
1,300
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
14,179
|
|
|
$
|
7,222
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
498,895
|
|
|
$
|
498,895
|
|
Accrued expenses
|
|
|
605,974
|
|
|
|
485,393
|
|
Amounts due to affiliate under service agreement
|
|
|
1,416,000
|
|
|
|
1,251,000
|
|
Advances from affiliate
|
|
|
332,050
|
|
|
|
356,263
|
|
Loans payable
|
|
|
1,215,799
|
|
|
|
1,215,799
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
4,068,718
|
|
|
|
3,807,350
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit
|
|
|
|
|
|
|
|
|
Common stock, authorized 300,000,000 shares;
|
|
|
|
|
|
|
|
|
par value $0.001; 5,121,688 issued and outstanding
|
|
|
|
|
|
|
|
|
at September 30, 2016 and December 31, 2015, respectively
|
|
|
5,120
|
|
|
|
5,120
|
|
Additional paid-in capital
|
|
|
137,094,861
|
|
|
|
137,034,861
|
|
Accumulated deficit
|
|
|
(141,154,520
|
)
|
|
|
(140,840,109
|
)
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Deficit
|
|
|
(4,054,539
|
)
|
|
|
(3,800,128
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Deficit
|
|
$
|
14,179
|
|
|
$
|
7,222
|
|
See accompanying notes to financial
statements.
POLLEX, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
37,650
|
|
|
$
|
23,086
|
|
|
$
|
116,693
|
|
|
$
|
65,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
68,238
|
|
|
|
41,340
|
|
|
|
196,343
|
|
|
|
151,006
|
|
Related party service agreement
|
|
|
60,000
|
|
|
|
60,000
|
|
|
|
180,000
|
|
|
|
180,000
|
|
Total Costs and Expenses
|
|
|
128,238
|
|
|
|
101,340
|
|
|
|
376,343
|
|
|
|
331,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING LOSS
|
|
|
(90,588
|
)
|
|
|
(78,254
|
)
|
|
|
(259,650
|
)
|
|
|
(265,145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(18,387
|
)
|
|
|
(18,387
|
)
|
|
|
(54,761
|
)
|
|
|
(54,561
|
)
|
Total Other Expense
|
|
|
(18,387
|
)
|
|
|
(18,387
|
)
|
|
|
(54,761
|
)
|
|
|
(54,561
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(108,975
|
)
|
|
|
(96,641
|
)
|
|
|
(314,411
|
)
|
|
|
(319,706
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION FOR INCOME TAXES
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(108,975
|
)
|
|
$
|
(96,641
|
)
|
|
$
|
(314,411
|
)
|
|
$
|
(319,706
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER COMMON SHARE (Basic and Diluted)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING
|
|
|
5,121,688
|
|
|
|
5,121,688
|
|
|
|
5,121,688
|
|
|
|
5,121,688
|
|
See accompanying notes to financial statements.
POLLEX, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
For the nine months ended September 30,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(314,411
|
)
|
|
$
|
(312,206
|
)
|
Adjustments to reconcile net loss to net cash used
in continuing operating activities:
|
|
|
|
|
|
|
|
|
Contributed Service
|
|
|
60,000
|
|
|
|
60,000
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase) decrease in receivable from affiliate
|
|
|
-
|
|
|
|
(9,929
|
)
|
Increase (decrease) in account payable
|
|
|
-
|
|
|
|
4,081
|
|
Increase (decrease) in accrued expenses
|
|
|
120,581
|
|
|
|
58,062
|
|
Increase (decrease) in amounts due affiliate under service agreement
|
|
|
180,000
|
|
|
|
180,000
|
|
Net cash used in operating activities
|
|
|
46,170
|
|
|
|
(19,992
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from advance from affiliate
|
|
|
-
|
|
|
|
28,720
|
|
Repayment of advance from affiliate
|
|
|
(39,213
|
)
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by
(used in) financing activities
|
|
|
(39,213
|
)
|
|
|
27,720
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
6,957
|
|
|
|
7,728
|
|
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF YEAR
|
|
|
5,922
|
|
|
|
4,329
|
|
|
|
|
|
|
|
|
|
|
CASH AT END OF YEAR
|
|
$
|
12,879
|
|
|
$
|
12,057
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW DISCLOSURES:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Assumption of accounts receivable by lender
|
|
$
|
-
|
|
|
$
|
-
|
|
See accompanying notes to financial
statements.
POLLEX, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2016
(UNAUDITED)
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 nine months ended September 30, 2016
are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. For further information,
refer to the financial statements and footnotes thereto included in the Pollex, Inc. annual report on Form 10-K for the year ended
December 31, 2015.
NOTE B – GOING CONCERN
As shown in the accompanying financial statements,
the Company incurred net losses of $314,411 and $319,706 for the nine months ended September 30, 2016 and 2015, respectively, had
negative working capital of $4,055,839 at September 30, 2016 and had an accumulated deficit of $141,154,520 at September 30, 2016.
In order to fund future operations, the Company will need to raise capital through the equity markets and generate 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 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 – LICENSE AGREEMENTS
The Company began operating The Great Merchant,
in open beta testing in January 2010, and the game opened for full commercial service in September 2011. During the nine months
ended September 30, 2016 and 2015, the Company generated revenues of $116,693 and $65,861, respectively, from The Great Merchant.
POLLEX, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2016
(UNAUDITED)
NOTE D – RELATED PARTY TRANSACTIONS
Certain expenses have been paid on behalf of
the Company by Joytoto Co., Ltd (“Joytoto Korea”), of which the Company is a majority owned subsidiary. 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. During the nine months ended September 30, 2016, the Company repaid $39,213.
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 nine months ended September 30, 2016 and 2015, $180,000 and $180,000, respectively, were recognized
in the Statement of Operations under this agreement. At September 30, 2016 and December 31, 2015, $1,416,000 and $1,251,000 respectively
were due to Gameforyou, Incorporated.
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 September 30, 2016 and December 31, 2015, BCasual owed the Company $0 and $59,934, respectively, 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 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.
NOTE E – LOANS PAYABLE
The loans payable consists of borrowings from
two notes. The terms of both promissory notes are one year and bear interest at an annual rate of 6% and are unsecured. The notes
may be repaid at any time prior to its due date without a prepayment penalty.
NOTE F - INCOME TAXES
At September 30, 2016 and December 31, 2015,
the Company had unused net operating loss carryforwards of approximately $6,900,000 and $6,600,000, respectively, for income
tax purposes, which expire between 2027 and 2036. The net operating loss carryforwards may result in future income tax benefits
of approximately $2,269,000 and $2,250,000, respectively; however, because realization is uncertain at this time, a valuation reserve
equal to the potential future tax benefit 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.
POLLEX, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2016
NOTE F - INCOME TAXES (Continued)
Significant components of the Company’s
deferred tax liabilities and assets at September 30, 2016 and December 31, 2015 are as follows:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Deferred tax liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred tax asset-
|
|
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
|
2,269,000
|
|
|
|
2,250,000
|
|
Valuation allowance
|
|
|
(2,269,000
|
)
|
|
|
(2,250,000
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The income tax expense (benefit) differs from
the amount computed by applying the United States statutory corporate income tax rate as follows:
|
|
September 30, 2016
|
|
|
December 31, 2015
|
|
U.S statutory income tax rate
|
|
|
34
|
%
|
|
|
34
|
%
|
Change in valuation allowance of deferred tax assets
|
|
|
34
|
%
|
|
|
34
|
%
|
Net tax expense
|
|
|
-
|
%
|
|
|
-
|
%
|
NOTE G- COMMITMENTS AND CONTINGENCIES
Property Leases:
On September 5, 2012, the Company signed a
lease for office space in Santa Clara, California. The lease term is through September 30, 2016. The Company made a
deposit of $1,300 and the rent payments are $1,685 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 minimum future lease commitment at September
30, 2016 on the above lease is $16,850, through September 30, 2017, exclusive of $11,250 in noncancelable subleases.
Employment Agreements:
On March 21, 2014, the Company entered into
three-year employment agreement Seong Sam Cho, to serve as Chief Executive Officer, President and Chairman for an annual salary
of $1.00.
For the nine months ended September 30, 2016
and 2015, the Company recorded $60,000 and $60,000, respectively, for the fair value of the services contributed by Seong Sam Cho.
|
ITEM 2
|
Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
|
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, under the name “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.
Our operations are focused on Online Games.
Our Online Games business has generated $116,693 for the nine months ended September 30, 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. 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 in-game looks. We
anticipate that other purchase methods such as credit cards and mobile phone payments will be added in the future.
Revenues, Expenses and Loss from Operations
Three months ended September 30, 2016 compared to three months
ended September 30, 2015
Our revenues, selling, general and administrative
expenses, depreciation, amortization, total costs and expenses, and net loss for the three months ended September 30, 2016 and
for the three months ended September 30, 2015 are as follows:
|
|
Three Months
Ended
September 30,
2016
|
|
|
Three Months
Ended
September 30,
2015
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
37,650
|
|
|
$
|
23,086
|
|
Selling, general and administrative
|
|
|
68,238
|
|
|
|
41,340
|
|
Related party service agreement
|
|
|
60,000
|
|
|
|
60,000
|
|
Total costs and expenses
|
|
|
128,238
|
|
|
|
101,340
|
|
Other expense - interest expense
|
|
|
(18,387
|
)
|
|
|
(18,387
|
)
|
Net Loss
|
|
$
|
(108,975
|
)
|
|
$
|
(96,641
|
)
|
For the three months ended September 30, 2016,
we generated $37,650 in revenue compared to $23,086 for the three months ended September 30, 2015. The increase of $14,564
or 39% was primarily due to increase in paying players and micro-transactions from our online game.
For the three months ended September 30, 2016,
our selling, general and administrative expenses of $68,238 consisted primarily of $33,910 in professional fees, $20,000 in contributed
services and $14,327 in office expense. For the three months ended September 30, 2015, our selling, general and administrative
expenses of $41,340 consisted primarily of $16,470 in professional fees, $20,000 in contributed services and $4,870 in office expenses.
The increase of $26,898 or 39% was primarily due to increase in professional fees and corporate income tax.
The related party service agreement is
for services provided by a related party for game translation, customer support, and system operations and maintenance. The Company
is required to pay $10,000 in cash and $10,000 in cash or stock each month.
For the three months ended September 30, 2016,
we had $128,238 in total costs and expenses compared to $101,340 for the three months ended September 30, 2015. The
increase of $26,898 or 21% was primarily due to increase in professional fees and corporate income tax.
Other Expenses for the three months ended September
30, 2016 consisted of $18,387. Other Expenses for the three months ended September 30, 2015 consisted of $18,387. There was no
change in interest expense.
Net Loss
Our Net Loss for the three months ended
September 30, 2016 was $108,975 compared to $96,641 for the three months ended September 30, 2015. The increase of $12,334
or 11% was primarily due to increase in professional fees and corporate income tax.
Nine months ended September 30, 2016 compared to nine months
ended September 30, 2015
Our revenues, selling, general and administrative
expenses, depreciation, amortization, total costs and expenses, and net loss for the nine months ended September 30, 2016 and for
the nine months ended September 30, 2015 are as follows:
|
|
Nine Months
Ended
September 30,
2016
|
|
|
Nine Months
Ended
September 30,
2015
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
116,693
|
|
|
$
|
65,861
|
|
Selling, general and administrative
|
|
|
196,343
|
|
|
|
151,006
|
|
Related party service agreement
|
|
|
180,000
|
|
|
|
180,000
|
|
Total costs and expenses
|
|
|
376,343
|
|
|
|
331,006
|
|
Other expense - interest expense
|
|
|
(54,761
|
)
|
|
|
(54,761
|
)
|
Net Loss
|
|
$
|
(314,411
|
)
|
|
$
|
(319,706
|
)
|
For the nine months ended September 30, 2016,
we generated $116,693 in revenue compared to $65,861 for the nine months ended September 30, 2015. The increase of $50,832
or 44% was primarily due to increase in paying players and micro-transactions from our online game.
For the nine months ended September 30, 2016,
our selling, general and administrative expenses of $196,343 consisted primarily of $98,475 in professional fees, $60,000 in contributed
services, and $37,866 in office expenses. For the nine months ended September 30, 2015, our selling, general and administrative
expenses of $151,006 consisted primarily of $72,350 in professional fees, $60,000 in contributed services, and $18,656 in office
expenses. The increase of $45,337 or 23% was primarily due to increase in professional fees and corporate income tax.
The related party service agreement is for
services provided by a related party for game translation, customer support, and system operations and maintenance. The Company
is required to pay $10,000 in cash and $10,000 in cash or stock each month.
For the nine months ended September 30, 2016,
we had $376,343 in total costs and expenses compared to $331,006 for the nine months ended September 30, 2015. The increase
of $45,337 or 12% was primarily due to increase in professional fees and corporate income tax.
Other Expenses for the nine months ended September
30, 2016 consisted of $54,761. Other Expenses for the nine months ended September 30, 2015 consisted of $54,761. There was no change
in interest expense.
Net Loss
Our Net Loss for the nine months ended September
30, 2016 was $314,411 compared to $319,706 for the nine months ended September 30, 2015. The increase of $5,295 or 2%
was primarily due to increase in our selling, general and administrative fees offset by increase in our revenue generated from
our online game.
Liquidity and Capital Resources
Our primary asset is cash.
During the nine months
ended September 30, 2016, our online games business segment generated $116,693 in total revenues while in commercial service.
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 can generate enough revenue to sustain our operations.
|
|
As of
September 30,
2016
|
|
|
As of
December 31,
2015
|
|
|
Change
|
|
Cash and cash equivalents
|
|
$
|
12,879
|
|
|
$
|
5,922
|
|
|
$
|
6,957
|
|
Total current assets
|
|
|
12,879
|
|
|
|
5,922
|
|
|
|
6,957
|
|
Deposits
|
|
|
1,300
|
|
|
|
1,300
|
|
|
|
—
|
|
Total assets
|
|
|
14,179
|
|
|
|
7,222
|
|
|
|
6,957
|
|
Accounts payable
|
|
|
498,895
|
|
|
|
498,895
|
|
|
|
—
|
|
Accrued expenses
|
|
|
605,974
|
|
|
|
485,393
|
|
|
|
120,581
|
|
Due to affiliate under service agreement
|
|
|
1,416,000
|
|
|
|
1,251,000
|
|
|
|
165,000
|
|
Advances from affiliate
|
|
|
332,050
|
|
|
|
356,263
|
|
|
|
(24,213
|
)
|
Loans payable
|
|
|
1,215,799
|
|
|
|
1,215,799
|
|
|
|
—
|
|
Total Current Liabilities
|
|
|
4,068,718
|
|
|
|
3,807,350
|
|
|
|
261,368
|
|
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 agreement.
Sources and Uses of Cash
Operations
For the nine months ended September 30, 2016
we had a net loss of $314,411 compared to $319,706 for the nine months ended September 30, 2015. This was offset by
contributed services of $60,000, increase in accrued expenses of $120,581 and an increase in amounts due to affiliate under service
agreement of $180,000 for total cash used in our operating activities of $46,170.
Investments
We did not use any cash in investment activities
for the three and nine months ended September 30, 2016.
We did not use any cash in investment activities
for the three and nine months ended September 30, 2015.
Financing
For the nine months ended September 30, 2016,
our cash flows from financing activities totaled $39,213 from a repayment of an advance from affiliate.
For the nine months ended September 30, 2015,
our cash flows from financing activities totaled $27,720 from $28,720 in net cash from proceeds advanced from affiliate offset
by $1,000 in repayment of advance from affiliate.
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 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.