NOTE
2 – LIQUIDITY FINANCIAL CONDITION AND MANAGEMENT PLANS
These
consolidated financial statements have been prepared on the basis of a going concern which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business.
As of March 31, 2019, the Company had cash
of
￦
181,471 thousand. Historically, the Company had net losses and negative
cash flows from operations. The Company continues to experience liquidity constraints due to the continuing losses. These factors
contributed to the Company’s substantial doubt of its ability to continue as a going concern.
eMARINE
Global Inc.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019
(Unaudited)
During
the three months ended March 31, 2019 and the year ended December 31, 2018, management has addressed going concern remediation
through funding through the private placement and is continuing initiatives to raise capital to meet future working capital requirements.
However, additional capital is required to reduce the risk of going concern uncertainties for the Company beyond the next twelve
months as of the reporting date. There is no certainty that the Company will be able to arrange sufficient funding to continue
its operations.
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the accounting principles
generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to
the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and
on the same basis as the Company prepares its annual audited consolidated financial statements. In the opinion of management,
the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring
adjustments, considered necessary for a fair presentation of such interim results.
The
results for the condensed consolidated statement of operations are not necessarily indicative of results to be expected for the
year ending December 31, 2019 or for any future interim period. The condensed consolidated balance sheet at March 31, 2019 has
been derived from unaudited financial statements; however, it does not include all of the information and notes required by U.S.
GAAP for complete financial statements. The accompanying condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements for the year ended December 31, 2018, and notes thereto included in the Company’s
annual report on Form 10-K filed on April 15, 2019.
There have been no material changes in
the Company’s significant accounting policies to those previously disclosed in the Company’s annual report on Form
10-K, which was filed with the Securities and Exchange Commission on April 15, 2019.
Earnings
(Loss) Per Share
Earnings
(loss) per share are calculated in accordance with Accounting Standards Codification (“ASC”) 260 “Earnings Per
Share,” which provides for the calculation of “basic” and “diluted” earnings (loss) per share. Basic
earnings (loss) per share includes no dilution and is computed by dividing net earnings by the weighted average number of common
shares outstanding for the period. Diluted earnings (loss) per share reflect, in periods in which they have a dilutive effect,
the effect of common shares issuable upon exercise of stock options.
The
following table shows the calculation of diluted shares using the treasury stock method:
|
|
|
March 31, 2019
|
|
|
March 31, 2018
|
|
|
Shares used in computation of basic
income
per shares
|
|
|
22,927,992
|
|
|
|
-
|
|
|
Total dilutive effect of stock options
|
|
|
4,991,642
|
|
|
|
-
|
|
|
Shares used in computation of diluted
income
per share
|
|
|
27,919,634
|
|
|
|
-
|
|
The
diluted share base excludes the following incremental shares due to their antidilutive effect:
|
|
|
March 31, 2019
|
|
|
March 31, 2018
|
|
|
Common stock warrants
|
|
|
-
|
|
|
|
12,916,688
|
|
|
Potential dilutive shares
|
|
|
-
|
|
|
|
12,916,688
|
|
Recent
Accounting Pronouncements
In
February 2016, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2016-02, Leases (Topic 842), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing
arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic
842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard
establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet
for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting
the pattern and classification of expense recognition in the income statement.
eMARINE
Global Inc.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019
(Unaudited)
These ASUs are effective for fiscal years
and interim periods within those years beginning after December 15, 2018, with early adoption permitted. On January 1, 2019, the
Company adopted these ASUs, using modified retrospective transition approach.
A
modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial
application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period
presented in the financial statements as its date of initial application. The adopted the effective date as the date of initial
application. Consequently, financial information will not be updated and the disclosures required under the new standard will
not be provided for dates and periods before January 1, 2019.
On adoption, the Company recognized additional
operating liabilities of $
￦
107,387 thousand, with corresponding
ROU assets of the same amount based on the present value of the remaining minimum rental payments under current leasing standards
for existing operating leases.
In
January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.
This ASU eliminates Step 2 along with amending other parts of the goodwill impairment test. Under ASU 2017-04, an entity should
perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount,
and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair
value with the loss not exceeding the total amount of goodwill allocated to that reporting unit. This ASU is effective for annual
periods beginning after December 15, 2019, and interim periods therein with early adoption permitted for interim or annual goodwill
impairment tests performed after January 1, 2017. At adoption, this update will require a prospective approach. The Company is
currently evaluating this ASU to determine its impact on the Company’s operations, financial position, cash flows and disclosures.
Other
accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected
to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements
that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or
disclosures.
eMARINE
Global Inc.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019
(Unaudited)
NOTE
4 — INVENTORIES
The
components of inventories are as follows (in thousands of Korean Won):
|
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
Finished
goods
|
|
￦
|
861
|
|
|
￦
|
-
|
|
|
Raw
materials
|
|
|
61,073
|
|
|
|
7,217
|
|
|
|
|
|
61,934
|
|
|
|
7,217
|
|
|
Less:
Inventory reserve
|
|
|
-
|
|
|
|
-
|
|
|
Total,
net
|
|
￦
|
61,934
|
|
|
￦
|
7,217
|
|
NOTE
5 — PROPERTY AND EQUIPMENT
The
components of property and equipment are as follows (in thousands of Korean Won):
|
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
|
Office equipment
|
|
￦
|
219,980
|
|
|
￦
|
219,980
|
|
|
Fixtures and furniture
|
|
|
48,520
|
|
|
|
48,520
|
|
|
Other
|
|
|
285,113
|
|
|
|
285,112
|
|
|
Total, at cost
|
|
|
553,613
|
|
|
|
553,612
|
|
|
Less: Accumulated depreciation
|
|
|
(513,239
|
)
|
|
|
(509,388
|
)
|
|
|
|
|
40,374
|
|
|
|
44,224
|
|
|
|
|
|
|
|
|
|
|
|
|
Right-of-use lease assets - operating
|
|
|
450,933
|
|
|
|
-
|
|
|
Less: Accumulated depreciation
|
|
|
(184,152
|
)
|
|
|
-
|
|
|
Right-of-use lease assets - operating, net
|
|
|
266,781
|
|
|
|
-
|
|
|
Total, net
|
|
￦
|
307,155
|
|
|
￦
|
44,224
|
|
Depreciation
expense amounted to ￦3,851 thousand and ￦4,032 thousand for the periods ended March 31, 2019 and 2018, respectively.
Amortization
expense on right-of-use lease assets amounted to ￦31,512 thousand and nil for the periods ended March 31, 2019 and 2018,
respectively.
NOTE
6 – GOODWILL
In
2011, the Company acquired Intra-Ship Integrated Gateway business from Hyundai BS&C Co., Ltd. and recognized the goodwill
of ￦1,430,625 thousand along with the other identifiable assets and liabilities.
The
Company assessed relevant events and circumstances in evaluating whether it was more likely than not that its fair value of the
reporting unit was less than reporting unit’s carrying amount. The Company concluded that it is more likely than not that
the fair value of a reporting unit is not less than its carrying amount and did not perform the two–step impairment test.
eMARINE
Global Inc.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019
(Unaudited)
NOTE
7 – INTANGIBLE ASSETS
The
components of intangible assets that are carried at cost less accumulated amortization are as follows (in thousands of Korean
Won):
|
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
Description
|
|
Gross
Carrying Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying Amount
|
|
|
Gross
Carrying Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying Amount
|
|
|
Industrial
Property Rights
|
|
￦
|
5,960
|
|
|
￦
|
(5,331
|
)
|
|
￦
|
629
|
|
|
￦
|
5,960
|
|
|
￦
|
(5,260
|
)
|
|
￦
|
700
|
|
|
Software
|
|
|
62,782
|
|
|
|
(62,782
|
)
|
|
|
-
|
|
|
|
62,782
|
|
|
|
(62,782
|
)
|
|
|
-
|
|
|
Customers
relationship
|
|
|
500,000
|
|
|
|
(225,000
|
)
|
|
|
275,000
|
|
|
|
500,000
|
|
|
|
(200,000
|
)
|
|
|
300,000
|
|
|
Other
|
|
|
22,021
|
|
|
|
(20,645
|
)
|
|
|
1,376
|
|
|
|
22,020
|
|
|
|
(20,565
|
)
|
|
|
1,455
|
|
|
Total
|
|
￦
|
590,763
|
|
|
￦
|
(313,758
|
)
|
|
￦
|
277,005
|
|
|
￦
|
590,762
|
|
|
￦
|
(288,607
|
)
|
|
￦
|
302,155
|
|
Amortization
expense for intangible assets was ￦25,149 thousand and ￦25,225 thousand for the periods ended March 31, 2019 and
2018, respectively.
The
following table outlines the estimated future amortization expense related to intangible assets held as of March 31, 2019 (in
thousands of Korean Won):
|
Year
Ending December 31,
|
|
|
|
|
2019
|
|
￦
|
75,674
|
|
|
2020
|
|
|
100,794
|
|
|
2021
|
|
|
100,479
|
|
|
2022
|
|
|
58
|
|
|
Total
|
|
￦
|
277,005
|
|
NOTE 8 — DEBT
Short-term Borrowings
The
Company borrowed ￦260,000 thousand from Kookmin Bank at October 8, 2015 with the maturity of October 2, 2019. The borrowings
bear an interest at 6.09% and 4.70% per annum for 2018 and 2017, respectively. The Company paid ￦26,000 thousand and entered
into a refinancing agreement at October 2, 2018. At March 31, 2019 and December 31, 2018, the balance for the borrowings was ￦234,000
thousand and ￦234,000 thousand, respectively. The borrowings are guaranteed by Korea Technology Finance Corporation, a
government-funded institution.
The Company
borrowed ￦260,000 thousand from Kookmin Bank at November 4, 2015 with the maturity of November 2, 2018. The borrowings
bear an interest at 6.13% and 5.05% per annum for 2018 and 2017, respectively. The Company paid ￦26,000 thousand and entered
into a refinancing agreement at November 2, 2018. At March 31, 2019 and December 31, 2018, the balance for the borrowings was
￦234,000 thousand and ￦234,000 thousand, respectively. The borrowings are guaranteed by Korea Technology Finance
Corporation, a government-funded institution.
eMARINE
Global Inc.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019
(Unaudited)
The
Company borrowed ￦1,000,000 thousand from Woori Bank at June 2, 2015 with the maturity of June 1, 2018. The borrowings
bear an interest at 4.79% and 4.27% per annum for 2018 and 2017. The Company paid ￦1,000,000 thousand and entered into
an extension agreement at May 1, 2019 through which the maturity was extended one more year. At March 31, 2019 and December 31,
2018, the balance for the borrowings was ￦900,000 thousand and ￦900,000 thousand, respectively. The borrowings are
guaranteed by Korea Technology Finance Corporation, a government-funded institution.
The
Company borrowed ￦500,000 thousand from Suhyup Bank at July 18, 2016 with the original maturity of July 18, 2018. The maturity
was extended 1 year, which is July 18, 2019. The borrowings bear an interest at 2.50 % per annum for 2018 and 2017. At March 31,
2019 and December 31, 2018, the balance for the borrowings was ￦428,000 thousand and ￦428,000 thousand, respectively.
The borrowings are collateralized by the savings account of ￦3,000 thousand and guaranteed by Hyundai BS&C Co., Ltd.,
a nonaffiliated company.
The
Company borrowed ￦550,000 thousand from GMT Co., Ltd. at April 19, 2017 with the maturity of November 30, 2017. The borrowings
bear an interest at 6.00 % per annum for 2017. At March 31, 2019 and December 31, 2018, the balance for the borrowings was ￦195,000
thousand. The Company is in negotiation with the lender to extend the maturity. The balance is currently in default.
The
Company borrowed ￦300,000 thousand from GNC Co., Ltd. at April 18, 2017 with the maturity of November 30, 2017. The borrowings
bear an interest at 6.00 % per annum for 2017. At March 31, 2019 and December 31, 2018, the balance for the borrowings was ￦300,000
thousand. The Company is in negotiation with the lender to extend the maturity. The balance is currently in default.
The
Company borrowed ￦130,000 thousand from Kwangju Bank at September 27, 2018 with the maturity of August 24, 2019. The borrowings
bear an interest at 5.65 % per annum for 2018 and 2019. At March 31, 2019 and December 31, 2018, the balance for the borrowings
was ￦59,091 thousand and ￦94,545 thousand, respectively. The borrowings are guaranteed by Ung Gyu Kim, President.
As
of March 31, 2019 and December 31, 2018, the estimated fair value of the short-term borrowings approximate their carrying values.
Long-term
Debt
The
components of the long-term debt, including the current portion, are as follows (in thousands of Korean Won):
|
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
|
Loans from Small & medium Business Corporation borrowed at March 23, 2016 with the maturity
of March 22, 2021 and at an interest of 4.22% and 4.22% per annum for 2019 and 2018, respectively, guaranteed by Ung Gyu Kim,
President
|
|
￦
|
333,120
|
|
|
￦
|
374,760
|
|
|
Loans from Small & medium Business Corporation borrowed at February
28, 2017 with the maturity of February 28, 2022 and at an interest of 2.65% per annum, guaranteed by Ung Gyu Kim, President
|
|
|
194,250
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans from Small & medium Business Corporation borrowed at August 13, 2018 with the maturity
of August 14, 2023 and at an interest of 2.43% per annum, guaranteed by Ung Gyu Kim, President
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
627,370
|
|
|
|
674,760
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: current portion
|
|
|
(233,160
|
)
|
|
|
(222,260
|
)
|
|
Total long-term debt less current portion
|
|
￦
|
394,210
|
|
|
￦
|
452,500
|
|
As
of March 31, 2019 and December 31, 2018, the estimated fair value of the long-term debt, including the current portion, were ￦627,370
and ￦674,760, respectively.
eMARINE
Global Inc.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019
(Unaudited)
Maturities
of the long-term debt for each of the next five years and thereafter are as follows (in thousands of Korean Won):
|
Year Ending March 31,
|
|
|
|
|
2020
|
|
￦
|
174,870
|
|
|
2021
|
|
|
244,520
|
|
|
2022
|
|
|
141,480
|
|
|
2023
|
|
|
44,340
|
|
|
2024
|
|
|
22,160
|
|
|
Total
|
|
￦
|
627,370
|
|
As
of March 31, 2019 and December 31, 2018, respectively, the Company was in compliance with the financial covenant in credit agreements
as defined in the credit agreements.
NOTE
9 – PENSION PLANS
The
Company has a defined benefit plan covering all full time employees who met certain requirements of age, length of service and
hours worked per year. Benefits paid to retirees are based upon age at retirement and years of credited service.
The
components of benefit expense are as follows (in thousands of Korean Won):
|
|
|
March
31, 2019
|
|
|
March
31, 2018
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
￦
|
52,083
|
|
|
￦
|
51,436
|
|
|
Interest
cost
|
|
|
3,585
|
|
|
|
2,793
|
|
|
Prior
service cost
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
￦
|
55,668
|
|
|
￦
|
54,229
|
|
eMARINE
Global Inc.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019
(Unaudited)
NOTE
10 – STOCKHOLDERS’ DEFICIT
Authorized
and Outstanding Capital Stock
The
Company authorized 300,000,000 shares of common stock, par value $0.001, of which 22,927,992 are currently issued and outstanding.
The Company also has 10,000,000 shares of “blank check” preferred stock, par value $0.001 per share. There are currently
no shares of preferred stock outstanding.
Common
Stock
The
shareholders of common stock (the “Shareholders”) have equal ratable rights to dividends from funds legally available
therefore, when, as and if declared by the Board of Directors and are entitled to share ratably in all of the Company’s
assets available for distribution to the Shareholders upon the liquidation, dissolution or winding up of business. The Shareholders
do not have preemptive, subscription or conversion rights.
The
Shareholders are entitled to one vote per share on all matters which they are entitled to vote upon at all meetings of the Shareholders.
The Shareholders do not have cumulative voting rights, which would allow the Shareholders of more than 50% of outstanding voting
securities to elect all of directors.
The
payment of dividends, if any, in the future rests within the sole discretion of the Board of Directors and will depend, among
other things, upon earnings, capital requirements and financial condition, as well as other relevant factors. The Company has
not paid any dividends since its inception and do not intend to pay any cash dividends in the foreseeable future, but intend to
retain all earnings, if any, for use in its business.
Blank
Check Preferred Stock
The
Board of Directors will be authorized, subject to any limitations prescribed by law, without further vote or action by the Shareholders,
to issue from time to time preferred stock in one or more series. Each series of preferred stock will have the number of shares,
designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by
the Board of Directors, which may include, among other things, dividend rights, voting rights, liquidation preferences, conversion
rights and preemptive rights.
Warrants
As
of March 31, 2019, the Company has outstanding warrants to purchase up to an aggregate of 12,916,688 shares of common stock, par
value $0.001 per share, for a period of three years from the date of issuance, July 25, 2017, at an exercise price of $0.60 per
share, subject to adjustments as set forth in the warrant. The Company also has outstanding warrants to purchase up to an aggregate
of 1,100,000 shares of common stock, par value $0.001 per share, for a period of three years from the date of issuance, July 25,
2017, at an exercise price of $0.08 per share, subject to adjustments as set forth in the warrant.
The
Company may issue warrants to non-employees in capital raising transactions or for services. In accordance with ASC 718, “Compensation—Stock
Compensation”, the cost of warrants issued to non-employees is measured on the grant date based on the fair value. The fair
value is determined using the Black-Scholes option pricing model. The resulting amount is charged to expense on the straight-line
basis over the period in which the Company expects to receive the benefit, which is generally the vesting period.
Private
Placement Offering
On
July 25, 2017, the Company entered into a subscription agreement with selected accredited investors. Pursuant to the terms of
the subscription agreement, the Company offered in a private placement $2,250,000 of units. Each unit has a purchase price of
$0.50 and consisted of (i) one (1) share of the Company’s common stock, par value $0.001 per share; and (ii) warrants to
purchase two and one-half (2.5) shares of the Company’s common stock. The warrants are exercisable for a period of three
(3) years from the date of issuance at an exercise price of $0.60 per share, subject to adjustment as provided in the agreement
evidencing the warrants.
The
offering closed on July 25, 2017. At the closing, the Company received subscriptions for the full offering of $2,250,000, with
gross proceeds of $1,765,000 (approximately ￦2,009,844 thousand) being received by the Company as of such date. The Company
issued a total of 3,530,000 shares and 8,825,000 warrants to purchase up to 8,825,000 shares of the Company’s common stock.
eMARINE
Global Inc.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019
(Unaudited)
Since
the closing, the Company received gross proceeds in the amount of $165,000 (approximately ￦184,190 thousand), and issued
to the relevant investors an aggregate of 330,000 shares and warrants to purchase 825,000 shares.
On
March 23, 2018, the Company entered into a subscription agreement with selected accredited investors. Pursuant to the terms of
the Subscription Agreement, the Company sold in a private placement an aggregate of 866,675 units at a purchase price of $0.60
per unit. Each unit consists of (i) one (1) share of the Company’s common stock, par value $0.001 per share; and (ii) warrants
to purchase two and one-half (2.5) shares of the Company’s common stock. The warrants are exercisable for a period of three
(3) years from the date of issuance at an exercise price of $0.70 per share, subject to adjustment as provided in the agreement
evidencing the warrants.
At
closing, the Company issued an aggregate of 866,675 shares and 2,166,688 warrants for total gross proceeds of $520,005.
Consulting
Agreement
On
July 25, 2017, the Company entered into a consulting agreement (the “Consulting Agreement”) with Peach Management
LLC, a limited liability company organized under the laws of the Commonwealth of Puerto Rico (“Consultant”), for a
term of twenty four months, effective as of July 25, 2017 (the “Term”). Pursuant to the terms of the Consulting Agreement,
Consultant will assist the Company with introductions to investor relation firms located within and outside the United States
to develop and implement capital markets messaging reflected in press releases, shareholder letters, PowerPoint presentations,
social media and traditional media (the “Services”) during the Term. In consideration of the Services to be rendered
by Consultant, the Company shall issue to Consultant warrants to purchase up to 1,100,000 shares of the Company’s common
stock, par value $0.001 per share (the “Consultant Warrants”). The Consultant Warrants shall have a term of three
years and have an exercise price equal to $0.08 per share.
In
connection with the issuance of these warrants, the Company charged approximately ￦620,994 thousand of professional fees
to expense.
The
fair value of stock warrants was determined at the date of grant using the Black-Scholes option pricing model (the “Black-Scholes
model”) The Black-Scholes model requires management to make various estimates and assumptions, including expected term,
expected volatility, risk-free rate, and dividend yield. The expected term represents the period of time that stock-based compensation
awards granted are expected to be outstanding and is estimated based on considerations including the vesting period, contractual
term and anticipated employee exercise patterns. Expected volatility is based on the historical volatility of the Company’s
stock. The risk-free rate is based on the U.S. Treasury yield curve in relation to the contractual life of stock-based compensation
instrument. The dividend yield assumption is based on historical patterns and future expectations for the Company dividends.
The
following table includes the estimates and assumptions used in the Black-Scholes model:
|
Stock
price
|
|
$
|
0.57
|
|
|
Exercise
price
|
|
$
|
0.08
|
|
|
Contractual
term (Years)
|
|
|
3
|
|
|
Volatility
|
|
|
70.22
|
%
|
|
Risk-free
rate
|
|
|
1.53
|
%
|
|
Expected
dividend rate
|
|
|
0.00
|
%
|
eMARINE
Global Inc.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019
(Unaudited)
Other
Issuances
In
connection with the Exchange Agreement and Subscription Agreement, the Company issued to RedChip Companies, Inc. and Sichenzia
Ross Ference Kesner LLP an aggregate of 2,200,000 shares of the Company’s common stock, par value $0.001 per share. The
fair value of such shares issued is approximately ￦1,417,159 thousand and is recorded as additional paid in capital as
these shares were issued as the consideration for the capital raising.
NOTE
11 – RELATED PARTY TRANSACTIONS
The Company borrowed
￦
141,216
thousand from Ung Gyu Kim, President, at February 25, 2018 with the maturity of June 25, 2019. The borrowings bear an interest
at 4.60 % per annum. At March 31, 2019 and December 31, 2018, the balance for the borrowings was
￦
71,279
thousand and
￦
45,980, respectively.
NOTE
12 – COMMITMENTS AND CONTINGENCIES
Operating
leases
The
Company entered into noncancelable operating leases for office facilities and vehicles. The leases do not include renewal options
and, in the normal course of business, it is expected that these leases will be renewed. Rent expense under the operating leases
totaled
￦
47,921
thousand for the three month period ended March 31, 2019.
Short-term
leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and
does not record a related lease asset or liability for such leases.
The following is a maturity analysis of
the annual undiscounted cash flows of the operating lease liabilities as of March 31, 2019 (in thousands of Korean Won):
|
Year Ending March 31,
|
|
|
|
|
2020
|
|
￦
|
115,657
|
|
|
2021
|
|
|
92,590
|
|
|
2022
|
|
|
56,516
|
|
|
2023
|
|
|
15,895
|
|
|
Total
|
|
￦
|
280,658
|
|
|
|
|
March
31, 2019
|
|
|
Lease
cost:
|
|
|
|
|
|
Operating
lease cost
|
|
￦
|
46,721
|
|
|
Short-term
lease cost
|
|
|
1,200
|
|
|
|
|
|
|
|
|
Total
lease cost
|
|
￦
|
47,921
|
|
|
|
|
|
|
|
|
Other
information
|
|
|
|
|
|
Cash
paid for amounts included in the measurement of lease liabilities
|
|
￦
|
47,921
|
|
|
Operating
cash flows from operating leases
|
|
￦
|
47,921
|
|
|
Weighted-average
remaining lease term - operating leases
|
|
|
2.8
years
|
|
|
Weighted-average
discount rate - operating leases
|
|
|
5.74
|
%
|
eMARINE
Global Inc.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019
(Unaudited)
Maintenance
Bond
In
connection with service agreements with certain customers, the Company is required to provide a maintenance bond to guarantee
the maintenance for a specified period of time following completion of service. The Company purchases maintenance bonds from third-party
guarantors and is not exposed to contingent liabilities.
Legal
Proceedings
From time to time the Company may be named
in claims arising in the ordinary course of business. Currently, no legal proceedings, government actions, administrative actions,
investigations or claims are pending against the Company or involve the Company that, in the opinion of management, could reasonably
be expected to have a material adverse effect on its business and financial condition except for the lawsuit against Shinwoo E&D
Co., Ltd. (“Shinwoo”). There was an unpaid amount due
￦
84,095,000
from Shinwoo in dispute as of March 31, 2019. The Company filed a lawsuit and the ruling by the district court at January 18,
2018 was in favor of the Company. Shinwoo appealed against the court decision at February 1, 2018. The Company believes it is
probable that it will not suffer from an adverse outcome related to the case. The Company has not recorded any reserve related
to this dispute as of March 31, 2019.
NOTE
13 — CONCENTRATION OF CREDIT RISK
Financial
instruments that potentially subject the Company to significant concentrations of credit risk consist principally of accounts
receivable. Credit risk with respect to trade accounts receivable was concentrated with three and three of the Company’s
customers in March 31, 2019 and December 31, 2018, respectively.
At
March 31, 2019, G2 ICT Co., Ltd., Shinwoo E&D Co., Ltd. and Hanjin Heavy Industries & Construction Co., Ltd represented
20%, 17%, 15%, 12% and 10% of accounts receivable outstanding.
At
December 31, 2018, G2 ICT Co., Ltd., Shinwoo E&D Co., Ltd., Hyundai Heavy Industries Co., Ltd. and Hanjin Heavy Industries
& Construction Co., Ltd. represented 44%, 15%, 13% and 11% of accounts receivable outstanding.
The
Company performs ongoing credit evaluations of its customers’ financial condition to mitigate its credit risk. The deterioration
of the financial condition of its major customers could adversely impact the Company’s operations. From time to time where
the Company determines that circumstances warrant, the Company extends payment terms beyond its standard payment terms.
During
the three month period ended March 31, 2019, Naval Logistics Command represented 56% of the Company’s net sales.
During
the three month period ended March 31, 2018, Naval Logistics Command and National Information Society Agency represented 37% and
17% of the Company’s net sales.
NOTE
14 — REVENUE CLASSES
Revenue
from the sale of products and services is recorded when the performance obligation is fulfilled, usually at the time of shipment
or when the service is provided, at the net sales price (transaction price). The Company elected to present revenue net of value
added tax and other similar taxes and account for shipping and handling activities as fulfillment costs rather than separate performance
obligations.
The
Company recognizes revenue in accordance with the following five-step model:
|
|
●
|
identify
arrangements with customers;
|
|
|
●
|
identify
performance obligations;
|
eMARINE
Global Inc.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019
(Unaudited)
|
|
●
|
determine
transaction price;
|
|
|
●
|
allocate
transaction price to the separate performance obligations in the arrangement, if more than one exists; and
|
|
|
●
|
recognize
revenue as performance obligations are satisfied.
|
Accounting
Policy
Revenue
for sale of goods is recognized when the significant risks and rewards of ownership have been transferred to the customer, recovery
of the consideration is probable, the associated costs and possible return of the goods can be estimated reliably, there is no
continuing involvement with goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be
granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.
Revenue
from services is recognized by reference to the stage of performance of the services when the Company can reliably measure the
amount of revenue and the recovery of the consideration is considered probable
Disaggregation
of Revenue
Selected
financial information for the Company’s operating revenue for disaggregated revenue purposes by revenue source are as follows
(in thousands of Korean Won):
|
|
|
|
|
For
the Three months Ended
|
|
|
|
|
|
|
March
31, 2019
|
|
|
March
31, 2018
|
|
|
Products
|
|
e-Navigation
|
|
￦
|
321,898
|
|
|
￦
|
173,092
|
|
|
|
|
Smart
Ship
|
|
|
236,767
|
|
|
|
75,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projects
|
|
e-Navigation
|
|
|
721,665
|
|
|
|
931,992
|
|
|
|
|
Smart
Ship
|
|
|
-
|
|
|
|
128,489
|
|
|
Total
|
|
|
|
￦
|
1,280,331
|
|
|
￦
|
1,309,482
|
|
NOTE
15 — SUBSEQUENT EVENTS
On April 17, 2019, the Company issued 231,133
shares of warrants to purchase up to an aggregate of 231,133 shares of common stock, par value $0.001 per share, for a period
of three years from the date of issuance, April 17, 2022, at an exercise price of $0.08 per share, subject to adjustments as set
forth in the warrant
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS
The
following discussion should be read in conjunction with our unaudited financial statements and the notes thereto.
Forward-Looking
Statements
This
Management’s Discussion and Analysis and Results Operations includes a number of forward-looking statements that reflect
Management’s current views with respect to future events and financial performance. You can identify these statements by
forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,”
“estimate” and “continue,” or similar words. Those statements include statements regarding the intent,
belief or current expectations of us and members of our management team as well as the assumptions on which such statements are
based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and
involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking
statements.
Readers
are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with
the Securities and Exchange Commission. Important factors currently known to management could cause actual results to differ materially
from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect
changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that
our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made
that actual results of operations or the results of our future activities will not differ materially from our assumptions. Factors
that could cause differences include, but are not limited to, expected market demand for our products, fluctuations in pricing
for our products, and competition.
In
this quarterly report, the “eMarine,” “EMRN,” the “Company,” “we,” “us,”
and “our” and other similar designations refer to eMarine Global Inc. and its wholly-owned subsidiary, e-Marine Co,
Ltd. (“e-Marine”).
Company
Overview
eMarine
Global Inc. is a Nevada corporation (the “Company”) formed under the name “Web Views Corporation” on November
2, 2001. On October 20, 2008, we changed our name to “Pollex, Inc.”
On
July 25, 2017, we entered into a share exchange agreement (the “Exchange Agreement”) with e-Marine Co., Ltd., a corporation
organized under the laws of the Republic of Korea (“e-Marine”), and the shareholders of e-Marine (the “e-Marine
Shareholders”), pursuant to which the e-Marine Shareholders assigned, transferred and delivered, free and clear of all liens,
100% of the issued and outstanding shares of common stock of e-Marine, representing 100% of the equity interest in e-Marine (the
“e-Marine Shares”) to us in exchange for 14,975,000 restricted shares of our Common Stock (the “Share Exchange”).
As a result of the Share Exchange, e-Marine became our wholly-owned subsidiary, and the e-Marine Shareholders acquired a controlling
interest in the Company.
At
the time of the Share Exchange, the Company was engaged in the online games business by acquiring gaming licenses in order to
make them commercially available abroad. As a result of the Share Exchange, we have now assumed e-Marine’s business operations
as our own. The acquisition of e-Marine is treated as a reverse acquisition, and the business of e-Marine became the business
of the Company.
e-Marine
Co., Ltd. was organized under the laws of the Republic of Korea on January 2, 2001, and is a maritime information and communications
technology provider based in South Korea. e-Marine seeks to achieve safety of life at sea through the use of various technologies,
such as e-Navigation, Maritime Internet-of-Things (otherwise known as “I.o.T.”) and marine big data technology (collectively,
“Maritime ICT Convergence”). e-Marine’s main products and services are divided into four categories: (i) Electronic
Chart Display & Information System (“ECDIS”); (ii) Smart Ship; (iii) Overseas Solutions Distributions; and (iv)
Aids to Navigation.
On
August 15, 2017, we entered into an agreement and plan of (the “Merger Agreement”), pursuant to which we merged with
and into our newly formed wholly-owned subsidiary (the “Merger Sub” and, the transaction, the “Merger”).
As
permitted by Chapter 92A.180 of Nevada Revised Statutes, the purpose of the Merger was to effect a change of the Company’s
name from “Pollex, Inc.” to “eMARINE Global Inc.” Upon the filing of articles of merger with the Secretary
of State of Nevada on August 15, 2017 in order to effect the Merger, the Company’s articles of incorporation were deemed
amended to reflect the change in the Company’s corporate name. Upon consummation of the Merger, the separate existence of
Merger Sub ceased.
Our
principal execute offices are located at 4th Floor, 15-14, Samsan-ro 308beon-gil, Nam-gu, Ulsan, 44715 South Korea.
Overview
of Business
We
are a leading provider of information and communications technology for the maritime industry. We provide solutions for the collection,
integration and display of maritime information abroad and ashore by electronic means to enhance berth-to-berth navigation and
related services. We believe that these solutions provide the most efficient means to secure the safety of life at sea and to
protect the marine environment. We offer all of our products and services through subscription, installation, updates and/or maintenance
contracts.
Our
Products & Solutions
We
offer onboard and onshore products and solutions to customers operating within the maritime and shipbuilding industries through
our two business divisions: (i) our maritime information and communications technology (“Maritime ICT”) division and
(ii) our shipbuilding information and communications (“Shipbuilding ICT”) division.
We
focus our business on four main hardware and software products : (i) Electronic Chart Display & Information System (“ECDIS”);
(ii) Smart Ship solutions; (iii) distribution of overseas solutions; and (iv) Aids to Navigation management solutions.
Electronic
Chart Display and Information Systems
We
offer e-Navigator, our branded electronic chart display and information system (“ECDIS”), which is a computer-based
navigation system that complies with International Maritime Organization (“IMO”) regulations and can be used as an
alternative to paper navigation charters. Integrating a variety of real-time information, it is an automated decision aid capable
of continuously determining a vessel’s position in related to land, charted objects, navigation aids and unseen hazards,
which is key in helping operators monitor and plan routes. An ECDIS includes electronic navigation charts (“ENC”),
which we also offer, and integrates position information from the global positioning system (“GPS”) and other navigational
sensors, such as radar, fathometer and automatic identification systems. It can also provide additional navigation-related information,
such as sailing directions. Only the hardware is regulated by the IMO, while the software is subject to patents. We have obtained
ECDIS software and South Korean patents for ECDIS technology.
Smart
Ship Solutions
Our
Smart Ship technology is the result of our partnership with Hyundai Heavy Industries (“HHI”) and much of it has been
implemented on HHI’s newly-built ships. These systems use the marine Internet of Things (“I.o.T.”) and big data
technologies to provide solutions such as the Intra-Ship Integrated Gateway (“ISIG”), an intra-ship network that promotes
greater communication amongst a fleet while at sea; the Collision Avoidance and Optimal Voyage Systems, both dedicated to helping
mariners determine the best routes and avoid incidents at sea; and the Remote Maintenance and Engine Monitoring Systems, which
similarly promote crews’ safety by ensuring that vessels are kept in shipshape condition. Through the further development
of our Smart Ship solutions, we believe will make greater in-roads into the autonomous ship and unmanned ship markets.
Smart
Ship solutions are navigation oriented hardware and software that are developed by utilizing maritime I.o.T and big data technology.
We develop Smart Ship technology under the partnership with HHI. This partnership has resulted in the development of a number
of Smart Ship solutions that we supplied to HHI’s newly-built ships. By applying marine I.o.T. and big data technologies,
we believe we will continue to expand the development of Smart Ship solutions, by gradually entering the autonomous ship and unmanned
ship market.
Overseas
Solutions Distribution
We
have agreements with a number of maritime products manufacturers. We have an exclusive agreement with Teledyne Technologies International
Corp for the distribution of CARIS, maritime GIS software. We distribute digital charts from C-Map, The United Kingdom Hydrographic
Office and the Korea Hydrography and Research Association. In 2017, we began providing services related to a maritime-training
simulator for the Republic of Korea Navy in cooperation with ECA-Sindel. We also are the exclusive distributor of Hatteland’s
maritime-specialized hardware.
Aids
to Navigation
We
implement Aids to Navigation (“AtoN”) management systems for public maritime agencies. AtoN systems include sensors
that are attached to navigational aids at sea and management software installed at the ground control level for information collection,
display and analysis. Our AtoN System consists of the (i) Maritime Weather Signals Total Management System and the (ii) e-A2N
device.
The
Maritime Weather Signals Total Management System is a technology that collects weather information that is then transmitted to
all major ports and maritime offices for public and civic use. It collects weather signals in various formats, including AIS,
CDMA and TRS, and then simultaneously displays such information as tidal height, wind directivity, wind speed and sea temperature.
We have implemented over a dozen maritime information systems in major port cities such as Busan, Incheon and Ulsan. In 2017,
we implemented our Total Management System, which compiles all maritime weather information and delivers it through one central
center, at the National Maritime Positioning, Navigation, and Timing Office. We believe that once the IMO begins its e-Navigation
initiative, the Total AtoN Management System will be a part of the Total Maritime Traffic System.
Our
e-A2N device detects technical malfunctions and sends real-time data such as battery status and weather conditions to ground control,
bringing attention to ship components in need of maintenance. We believe that our e-A2N device results in cost reduction and unnecessary
manpower while also benefiting users, such as crew members, passengers, pilots and seaferers, by providing access to weather information
via port dashboards and smart applications. To date, we have installed e-A2N devices in over 4,000 navigational aids throughout
Korea.
Key
Factors of Our Business Model
We
cover every aspect of the ENC technology within our e-Navigator from manufacturing, modification, personalization, distribution
and maintenance. We offer our customers our e-Navigator ECDIS and ENC separately or as a package, which we believe provides us
with a cost competitive edge, as well as seamless integration and on-going maintenance.
We
have developed our e-Navigator and our ECN products in an effort to offer our customers what we believe to be the best product
possible in the market. Currently, we hold approximately 90% of the market of private ships through our government contracts with
the Republic of Korea (“R.O.K”) Navy and Coast Guard, and we hold approximately 60% of the public sector market share.
The rest of the market is held by other domestic and foreign competitors, including Japan Radio Co., Ltd., Furuno Electric Co.,
Ltd. and Martin Electric Co., Ltd. We have been the market leader of ECDIS in Korea, consistently supplying and operating maintenance
service for the Republic of Korea Navy, the Coast Guard and other public and commercial ships. We continuously provide ECDIS maintenance
services to an average of 200 navy vessels annually, with contracts renewed every one to two years
In
September 2018, we won a contract from the R.O.K. Navy to provide maintenance services to navy ships through fiscal year 2020.
This marks the 9
th
consecutive year in which we have won such contracts.
We
are a Smart Ship solutions development partner of Hyundai Heavy Industries. We supply ISIG, Optimal Navigation System and Engine
Status Monitoring System to Hyundai Heavy Industries and anticipate supplying subsequent Smart Ship products to Hyundai Heavy
Industries and other shipbuilders in South Korea such as Hanjin Heavy Industries and Samsung Heavy Industries.
Limited
Operating History
We
are in the early stages of development and have a limited operating history. We have a history of operating losses and may not
achieve or maintain profitability and positive cash flow. 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. We cannot guarantee
we will be successful in our business operations.
The
following discussion and analysis should be read in conjunction with our audited financial statements for the fiscal year ended
December 31, 2018, and accompanying notes, in the our Annual Report on Form 10-K filed with the Securities and Exchange Commission
(“Commission”) on April 15, 2019.
CRITICAL
ACCOUNTING POLICIES
Our management’s discussion and analysis
of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of these consolidated
financial statements requires us to exercise considerable judgment with respect to establishing sound accounting policies and
in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenues
and expenses, and disclosure of commitments and contingencies at the date of the consolidated financial statements.
We base our estimates
on our historical experience, knowledge of our business and industry, current and expected economic conditions, the attributes
of our products, the regulatory environment, and in certain cases, the results of outside appraisals. We periodically re-evaluate
our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications
are necessary. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources.
While we believe
that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot
guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment,
actual results could differ from such estimates.
There have been
no material changes except to the Company’s critical accounting policies and estimates as compared to the critical accounting
policies and estimates described in the Company’s 2018 Annual Report, which we believe are the most critical to our business
and the understanding of our results of operations and affect the more significant judgments and estimates that we use in the
preparation of our consolidated financial statements.
RESULTS
OF OPERATIONS
|
Line
Item
|
|
3/31/2019
(unaudited)
|
|
|
3/31/2018
(unaudited)
|
|
|
Increase
(Decrease)
|
|
|
Percentage
Increase
(Decrease)
|
|
|
Revenue
|
|
￦
|
1,280,331
|
|
|
￦
|
1,309,483
|
|
|
￦
|
(
29,152
|
)
|
|
|
(2
|
)%
|
|
Operating
expense
|
|
￦
|
733,464
|
|
|
￦
|
855,015
|
|
|
￦
|
(121,551
|
)
|
|
|
(14
|
)%
|
|
Net
income (loss
)
|
|
￦
|
108,409
|
|
|
￦
|
(10,550
|
)
|
|
￦
|
118,959
|
|
|
|
-
|
%
|
Revenue
.
Total revenue for the three months ended March 31, 2019 and 2018 was ￦1,280,331 thousand and ￦1,309,483 thousand,
respectively. The decrease of ￦29,152 thousand, or 2%, was primarily due to e-navigation sales revenue carried over to the second quarter.
Cost
of Revenue.
Total cost of revenue for the three months ended March 31, 2019 and 2018 was ￦733,464 thousand and
￦855,015 thousand, respectively. The decrease of ￦121,551, or 14%, was due to the decrease in outsourcing costs
partially offset by the increase in government subsidy.
Selling,
General and Administrative Expenses
. Selling, general and administrative expenses for the three months ended March 31,
2019 and 2018 was ￦324,334 thousand and ￦394,281, respectively. The decrease of ￦69,947 thousand, or 18%,
was primarily due to the expense saving efforts, including the reduction of rent and service fees, resulting in the decrease in
general and administrative expense.
Research
and Development
. Research and development expenses for the three months ended March 31, 2019 and 2018 was ￦71,860
thousand and ￦29,810, respectively. The increase of ￦42,050 thousand, or 141%, was primarily due to the increase
in the research and development activities on smart ship technology enhancement.
Income
from Operations.
Income from operations for the three months ended March 31, 2019 and 2018 was ￦150,673 thousand
and ￦30,377 thousand, respectively. The increase of ￦120,296 thousand, or 396%, was mainly due to the improvement
of gross margin and decrease in selling, general and administrative expenses.
Other
Expense
. Other expense for the three months ended March 31, 2019 and 2018 was ￦43,885 thousand and ￦43,857
thousand, respectively. The increase of ￦28, or 0.1%, was primarily due to the increase in other miscellaneous loss.
Net
Income (Loss)
. Net income (loss) for the three months ended March 31, 2019 and 2018 was ￦108,409 thousand and ￦(10,550)
thousand, respectively. The increase of ￦118,959 thousand, was due to the improvement of operating income.
LIQUIDITY
AND CAPITAL RESOURCES
Sources
of Liquidity
As
of March 31, 2019, the Company had ￦181,471 thousand of cash on hand. For the three months ended March 31, 2018, the
Company reported income from operations of ￦150,673 thousand and net cash provided by operating activities of ￦122,807
thousand. The Company continues to experience liquidity constraints due to the continuing losses. These factors raise substantial
doubt about the Company’s ability to continue as a going concern.
During
2019, management has been continuing initiatives to raise capital to meet future working capital requirements. However, additional
capital is required to reduce the Company’s risk of going concern uncertainties beyond the next twelve months as of May
15, 2019. There is no certainty that the Company will be able to arrange sufficient funding to continue its operations.
Operating
Cash Flows.
Net cash provided by operating activities for the three months ended March 31, 2019 was ￦137,052 thousand,
which was due to the net income of ￦108,409 thousand, the increase in operating liabilities of ￦36,028 thousand
and noncash items of ￦84,616 thousand adjusted to the net income offset by the increase in operating assets of ￦83,075,
and payments of pension benefits of ￦8,926.
Investing
Cash Flows
.
Net cash used in investing activities for the three months ended March 31, 2019 was ￦9,000 thousand,
which was due to the purchase of short-term financial instruments of ￦9,000 thousand
Financing
Cash Flows.
Net cash used in financing activities for the three months ended March 31, 2019 was ￦71,792 thousand,
which was due the repayments of short-term borrowings of ￦35,455, repayments of current portion of long-term debt of ￦47,390
thousand and repayments of loans from related parties of ￦189,047 thousand offset by the increase in loans from related
parties of ￦200,100 thousand.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements that have or 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 material to investors.