Pollex, Inc.

We lead the military and security market in South Korea. Our major competitors are Japan Radio Co., Ltd. and Furuno Electric Co., Ltd., who each hold 30% of South Korean commercial market share respectively. The majority of the commercial market is made up of European and Japanese navigation and communication products. With its ECDIS technology, we plan to develop a new solution: eMarine Integrated Communication System (“e-ICS”). We allocated $1,060,000 for the system’s development and introduced it during the second quarter of 2018. In 2019, we integrated e-CIS with our Smart Ship technology to produce Integrated Navigation System (“INS”) In developing e-ICS, its protocols and interface specifications will be provided by Hyundai in cooperation with communication equipment’s suppliers.

On January 18, 2018, the Company commenced a lawsuit in the district court in the Republic of Korea against a customer, Shinwoo E&D., Ltd. (“Shinwoo”), to recover an unpaid balance of ￦ 84,095,000 which was due during fiscal year 2017. The district court ruled in favor of the Company. On February 1, 2018, Shinwoo filed an appeal against the district court’s decision. The Company has not recorded any reserve related to this dispute as of December 31, 2019.

Cost of Revenue . Total cost of revenue for the years ended December 31, 2019 and 2018 was ￦3,600,606 thousand and ￦3,069,644 thousand, respectively. The increase of ￦530,962 thousand, or 17%, was due to the increase in revenue and new contracts in new business field.

The Company borrowed ￦2,000 from Tak Gu Gyun, Senior Manager, on August 28, 2019. The borrowings bear an interest of 4.60 % per annum. As of December 30, 2019, the balance for the borrowings was nil.

During the year ended December 31, 2019, Naval Logistics Command, Ulsan ICT Promotion Agency, Hyundai Global Service Co., Ltd. and Korea Coast Guard. represented 23%, 10%, 6% and 5% of the Company’s net sales.