UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Mark one:
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to _______
Commission File Number 000-50065
PPOL, Inc.
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(Exact name of registrant as specified in its charter.)
California 95-4436774
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(State of Incorporation) (IRS Employer Identification No.)
1 City Boulevard West, Suite 870, Orange, California 92868
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 221-7250
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock $0.001 par value 17,993,752
----------------------------- --------------------------------
(Class) (Outstanding at August 9, 2004.)
PPOL, Inc.
2004 Quarterly Report on Form 10-Q
Table of Contents
PART 1: 3
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ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS 3
Consolidated Balance Sheets as of June 30, 2004 and March 31, 2004 3
Consolidated Statements of Income and Comprehensive Income for
the Three Months Ended June 30, 2004 and 2003 4
Consolidated Statements of Cash Flows for Three Months Ended
June 30, 2004 and 2003 5
Notes to Consolidated Financial Statements 6
ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 9
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 12
ITEM 4: CONTROLS AND PROCEDURES 19
PART 2: 20
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ITEM 1: LEGAL PROCEEDINGS 20
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS 20
ITEM 3: DEFAULTS UPON SENIOR SECURITIES 20
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 20
ITEM 5: OTHER INFORMATION 20
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 20
SIGNATURES 22
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EXHIBITS: 23
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Exhibit 31.2 - CEO Certification 23
Exhibit 31.2 - CFO Certification 24
Exhibit 32.1 - Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 25
2
PART 1:
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
PPOL, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2004 March 31, 2004
-------------- --------------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 8,629,489 $ 28,334,777
Restricted Cash 17,473,584 --
Trade accounts receivable, net of allowance for
doubtful accounts of $ 0 and $ 0 364,274 309,063
Merchandise inventories 4,265,438 2,651,259
Deferred costs 55,800,702 63,159,328
Deferred income taxes 8,418,201 9,467,524
Prepaid expenses and other 581,651 281,784
-------------- --------------
Total current assets 95,533,339 104,203,735
PROPERTY AND EQUIPMENT, net 1,235,668 1,250,975
SOFTWARE, net 8,819,200 7,444,657
DEFERRED COSTS 31,164,114 37,042,494
DEFERRED INCOME TAXES 5,074,685 5,494,095
LEASE DEPOSITS 736,896 766,457
DEPOSITS 4,102,853 3,984,883
OTHER ASSETS 457,961 181,987
-------------- --------------
$ 147,124,716 $ 160,369,283
============== ==============
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable, including related parties $ 10,613,500 $ 11,281,024
Advances received - Cube 17,473,584 --
Advances received 2,160,462 17,604,942
Deferred revenue 75,089,228 84,644,397
Bank debt 2,768,038 --
Due to majority shareholder 830,412 --
Income taxes payable 7,188 1,086,260
Other current liabilities 1,975,782 1,888,976
-------------- --------------
Total current liabilities 110,918,194 116,505,599
DEFERRED REVENUE 41,207,575 49,155,662
-------------- --------------
Total liabilities 152,125,769 165,661,261
-------------- --------------
SHAREHOLDERS' DEFICIT:
Common Stock; $0.001 par value; 100,000,000 shares
authorized; 17,993,752 shares issued and
outstanding as of June 30, 2004 (unaudited) and
March 31, 2004, respectively 17,994 17,994
Additional paid-in capital 3,362,359 3,362,359
Total other comprehensive income 1,082,298 316,307
Accumulated deficit (9,463,704) (8,988,638)
-------------- --------------
Total shareholders' deficit (5,001,053) (5,291,978)
-------------- --------------
$ 147,124,716 $ 160,369,283
============== ==============
The accompanying notes are an integral part of these consolidated financial statements.
3
PPOL, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three months Three months
ended ended
June 30, 2004 June 30, 2003
------------- -------------
(Unaudited) (Unaudited)
NET REVENUE:
Product sales and network services $ 26,485,853 $ 28,579,162
Other on-line services 5,522,895 4,680,027
------------- -------------
Total 32,008,748 33,259,189
------------- -------------
COSTS AND EXPENSES:
Cost of sales 7,697,965 7,681,813
Distributor incentives 15,852,493 17,343,364
Selling, general and administrative expenses 7,396,202 5,987,994
------------- -------------
Total costs and expenses 30,946,660 31,013,171
------------- -------------
OPERATING INCOME 1,062,088 2,246,018
OTHER (EXPENSE) INCOME, net (33,065) 686,895
------------- -------------
INCOME BEFORE INCOME TAXES 1,029,023 2,932,913
------------- -------------
INCOME TAXES:
Current 35,356 86,217
Deferred 1,468,733 1,675,870
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Total income taxes 1,504,089 1,762,087
------------- -------------
NET (LOSS) INCOME (475,066) 1,170,826
OTHER COMPREHENSIVE GAIN
Foreign currency translation 765,991 363,240
------------- -------------
COMPREHENSIVE INCOME $ 290,925 $ 1,534,066
============= =============
NET (LOSS) INCOME PER COMMON SHARE,
Basic $ (0.03) $ 0.07
============= =============
Diluted $ (0.03) $ 0.07
============= =============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic 17,993,752 17,994,920
============= =============
Diluted 17,993,752 17,994,920
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
4
PPOL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months Three months
Ended Ended
June 30, 2004 June 30, 2003
------------- -------------
(Unaudited) (Unaudited)
CASH FLOWS (USED FOR) PROVIDED BY OPERATING ACTIVITIES:
Net (loss) income $ (475,066) $ 1,170,826
------------- -------------
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Depreciation and amortization 846,603 429,236
Loss on sales/disposal of property and equipment 2,351 61,517
Deferred income taxes 1,468,733 1,675,870
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Restricted Cash - Cube (17,473,584) --
Trade accounts receivables (66,377) (479,675)
Merchandise inventories (1,697,146) (446,487)
Advance payments to related parties -- 2,639,707
Deferred costs 9,267,108 10,431,523
Prepaid expenses and other (307,817) 733,137
INCREASE (DECREASE) IN LIABILITIES:
Accounts payable (230,627) 1,201,900
Advances received - Cube 17,473,584 --
Advances received (paid) (note 4) (14,599,581) 1,259,734
Deferred revenue (12,204,165) (13,069,708)
Income taxes payable (1,013,165) (786,901)
Other liabilities 153,769 715,343
------------- -------------
Total adjustments (18,380,314) 4,365,196
------------- -------------
Net cash (used for) provided by operating activities (18,855,380) 5,536,022
------------- -------------
CASH FLOWS (USED FOR) PROVIDED BY INVESTING ACTIVITIES:
Purchase of property and equipment (156,954) (47,233)
Software & software CIP (2,366,738) (1,593,667)
Investment in subsidiary (300,000) --
Other assets (260,529) (1,682,961)
------------- -------------
Net cash (used for) provided by investing activities (3,084,221) (3,323,861)
------------- -------------
CASH FLOWS (USED FOR) PROVIDED BY FINANCING ACTIVITIES:
Short-term debt 2,736,935 --
Loan from majority shareholder 830,412 --
------------- -------------
Net cash provided by financing activities 3,567,347 --
------------- -------------
EFFECTS OF EXCHANGE RATE (1,333,034) (234,722)
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (19,705,288) 1,977,439
CASH AND CASH EQUIVALENTS, beginning of period 28,334,777 14,313,063
------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 8,629,489 $ 16,290,502
============= =============
SUPPLEMENTAL CASH FLOW INFORMATION -
Income taxes paid $ 1,048,522 $ 85,132
============= =============
Interest paid $ 5,997 $ --
============= =============
The accompanying notes are an integral part of these consolidated financial statements.
5
PPOL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION:
PPOL, Inc. ("PPOL") (formerly Diversified Strategies, Inc.),
incorporated on May 19, 1993 in California, is primarily
engaged in sales of multi-functional telecommunications
equipment called MOJICO. The Company distributes MOJICO
throughout Japan through a network marketing system. The
Company has a network of registered distributors located
throughout Japan that introduce purchasers to the Company. The
Company operates in one operating segment.
Using MOJICO, the Company provides original telecommunication
services called "Pan Pacific Online," including MOJICO
bulletin board and mail services. The Company also provides
various other on-line services through Pan Pacific Online such
as ticket and mail-order services. These sales and services
are provided in Japan.
On August 15, 2002, the Company amended its articles of
incorporation to increase its authorized shares of common
stock from 10,000,000 to 100,000,000, change its name to PPOL,
Inc. and effected a 1 for 7 reverse stock split. All share
data presented in these consolidated financial statements
reflect the reverse stock split.
Effective April 1, 2002, AJOL Co., LTD. ("AJOL") was acquired
by PPOL in a transaction accounted for as a reverse merger.
The Company, upon closing of the transaction on August 15,
2002, issued 899,746 shares (post split) of its common stock
for all of the issued and outstanding common stock of AJOL.
For legal purposes, PPOL is the acquirer. For accounting
purposes, AJOL has been treated as the acquirer and
accordingly, AJOL is presented as the continuing entity, and
the historical financial statements are those of AJOL. Prior
to the reverse merger PPOL had no business activity, thus
pro-forma information as though PPOL and AJOL had been
combined for all periods has not been provided. AJOL and PPOL
are collectively referred to herein as the "Company."
Gatefor, Inc. (Gatefor) was incorporated in Japan on June 16,
2004. PPOL owns 2,000 shares of Gatefor common stock or 100%
of the issued and outstanding stock of Gatefor which has 8,000
shares authorized. Gatefor was created to implement the new
growth strategy of the Company and will act as the distributor
of US and European sourced technologies into Japan.
BASIS OF PRESENTATION:
The unaudited consolidated financial statements have been
prepared by PPOL, Inc. (the "Company"), pursuant to the rules
and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally present
in annual consolidated financial statements prepared in
accordance with accounting principles generally accepted in
the United States of America have been omitted pursuant to
such rules and regulations. The information furnished herein
reflects all adjustments (consisting of normal recurring
accruals and adjustments), which are, in the opinion of
management, necessary to fairly present the operating results
for the periods presented herein. These consolidated financial
statements should be read in conjunction with the audited
consolidated financial statements and footnotes for the years
6
ended March 31, 2004 and 2003 included in the Company's Form
10-K. The results of the three months ended June 30, 2004 are
not necessarily indicative of the results to be expected for
the full year ending March 31, 2005.
RECLASSIFICATIONS:
Certain reclassifications have been made to the prior period
consolidated financial statements in order to conform to the
current period presentation. These reclassifications did not
have any effect on previously reported net income or
shareholders' deficit.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include accounts of the
PPOL, Inc. and its wholly owned subsidiaries, AJOL, Ltd. and
Gatefor, Inc. All significant intercompany balances and
transactions have been eliminated upon consolidation.
NET (LOSS) INCOME PER SHARE:
The Company reports both basic net income per share, which is
based on the weighted average number of common shares
outstanding, and diluted net income per share, which is based
on weighted average number of common shares outstanding and
dilutive potential common shares. Diluted earnings (loss) per
share is computed similar to basic earnings (loss) per share
except that the numerator is increased by the amount of
interest expense attributable to any convertible notes payable
and the denominator is increased to include the number of
additional common shares that would have been outstanding if
the potential common shares had been issued and if the
additional common shares were dilutive. For the 3 months ended
June 30, 2004, convertible notes payable has not been included
in calculating diluted loss per share because the effect would
be antidilutive.
FORFEITED DISTRIBUTOR COMMISSIONS:
In April 2003, the Company amended its policy regarding
distributor commissions to state that distributor commissions
are not paid out unless they exceed a minimum threshold of
approximately $30.00. If a distributor does not attain the
minimum commission threshold within one year, then the
commissions will be forfeited to the Company. In the quarter
ending June 30, 2003, the Company has recognized approximately
$714,000 of other income for the write-off of previously
accrued distributor commissions that exceeded the one year
threshold at March 31, 2003. This amount, related to the
change in accounting policy, is included in other income on
the statements of income and comprehensive income for the
three months ended June 30, 2003. Distributor commissions
outstanding greater than one year for the three month periods
ended June 30, 2004 and 2003 approximated $365,000 and
$148,000, respectively. These amounts are offset against
distributor incentives on the statement of income for the
three months ended June 30, 2004 and 2003.
RECENT ACCOUNTING PRONOUNCEMENTS:
In March 2004, the Financial Accounting Standards Board (FASB)
approved the consensus reached on the Emerging Issues Task
Force (EITF) Issue No. 03-1, "The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain
Investments." The objective of this Issue is to provide
guidance for identifying impaired investments. EITF 03-1 also
provides new disclosure requirements for investments that are
deemed to be temporarily impaired. The accounting provisions
of EITF 03-1 are effective for all reporting periods beginning
after June 15, 2004, while the disclosure requirements for
certain investments are effective for annual periods ending
after December 15, 2003, and for other investments such
disclosure requirements are effective for annual periods
ending after June 15, 2004. The Company has evaluated the
impact of the adoption of EITF 03-1 and does not believe the
impact will be significant to the Company's overall results of
operations or financial position.
7
(2) RELATED PARTY TRANSACTIONS:
The following summarizes amounts due from or to Forval and related
transaction amounts.
Three months Three months
ended ended
June 30, 2004 June 30, 2003
------------- -------------
(Unaudited) (Unaudited)
Due to Forval - convertible debt $ 830,412 $ --
In June 2, 2004, the Company borrowed 90,000,000 Japanese yen ($830,412
at June 2, 2004) from its majority shareholder, due December 30, 2004,
with interest payable at two percent (2%) per annum. The borrowing is
unsecured and will automatically convert to common stock at the closing
market price on December 29, 2004 if there has been no additional
capital contributions between the borrowing and due date.
(3) INVESTMENT:
On May 26, 2004, PPOL entered into a stock purchase agreement for an
investment of $300,000 in Object Innovation's (hereafter, OI) common
stock representing a 15% interest. This investment is classified under
Other Assets on the June 30, 2004 balance sheet. A vesting schedule, as
defined in the agreement, for the ownership is tied to revenues derived
from PPOL's sales of OI products under an exclusive Japan distribution
agreement entered into concurrently. If revenue thresholds are not met,
OI has the option to repurchase PPOL's investment at face value for the
unvested shares. This investment is accounted for under the cost basis
method of accounting.
(4) ADVANCES RECEIVED AND RESTRICTED CASH:
AJOL had collected monthly cash advance payments from members through a
prepayment system known as Cube. These prepayements were accounted for
as a liability called Advances Received on AJOL's balance sheet. These
advance payments were prepayments for orders that the members would
place in the future via the Cube system. There were no restrictions on
AJOL's use of this cash. Upon receiving orders from these members for
goods or services, the member's account would be charged. On May 28,
2004, AJOL remitted approximately $16.3 million to Kamome Mutual
Benefit Association (the Association), an unrelated non-profit
membership organization, to administer these advance payments from AJOL
members pursuant to the Cube Preservation Agreement (the Agreement)
dated May 21, 2004. Subsequently, advance payments from members have
been received by the the Association and not AJOL. Only AJOL members or
their family may become members of the Association, but are not
required to do so.
The Agreement provides that the Association will
provide custodial services over the advances received from AJOL
members. It also states that the cash will only be used in
satisfaction of orders received from members. The agreement does
not provide for the transfer of the liability associated with the
Advances Received to Association. Therefore, AJOL now accounts
for this cash as restricted cash to be used only in satisfaction of
orders received from members.
The Association is an independent, non-profit membership organization.
AJOL has no controlling interest in the Association and the
Association does not meet the criteria to be classified as a
Variable Interest Entity under FIN 46-Consolidation of Variable
Interest Entities. As such, the Company is not required to include the
Association into its consolidated financial statements.
8
(5) BANK LOAN:
AJOL drew (Y)300,000,000 (US $2,768,038) on an unsecured bank line of
credit which was the maximum borrowing under the line of credit. The
line of credit expires on August 31, 2004 and is automatically
renewable for successive one year terms. Interest is payable at the
annual rate of 1.06% as of June 30, 2004. This line of credit is
generally used to finance temporary operating cash requirements. The
Company expects to repay this debt within one year.
(6) DEFERRED REVENUES AND DEFERRED COSTS:
Activity for deferred revenues and deferred costs are contained in the
table below:
Deferred Costs Deferred Revenues
------------------------------- -------------------------------
Current Non-current Current Non-current
------------- ------------- ------------- -------------
Beginning balance, April 1, 2004 $ 63,159,328 $ 37,042,494 $ 84,644,397 $ 49,155,662
Additional deferrals 13,310,055 5,133,068 18,413,229 6,575,987
Released amounts (18,177,512) (9,532,859) (24,633,242) (12,560,322)
Exchange rate effect (2,491,169) (1,478,589) (3,335,156) (1,963,752)
------------- ------------- ------------- -------------
Ending balance, June 30, 2004 $ 55,800,702 $ 31,164,114 $ 75,089,228 $ 41,207,575
============= ============= ============= =============
(7) OTHER ON-LINE SERVICES:
The Company's wholly owned subsidiary, AJOL, provides certain services
to Kamome Mutual Benefit Association (The Association), an unrelated
non-profit membership organization. In return, the Association pays
AJOL a handling fee which is included in Other on-line services in the
Company's income statement. The Association provides insurance services
to its members. Only AJOL members and their family may join the
Association, but are not required to do so. AJOL earned handling fees
from the Association of $2,733,835 and $2,469,764 in the three months
ended June 30, 2004 and 2003 respectively.
(8) SUBSEQUENT EVENTS:
On July 22, 2004, PPOL extended a working capital loan of approximately
$243,000 to its wholly owned subsidiary, Gatefor, Inc. The loan is due
and payable back to PPOL on December 30, 2004 with early repayment
acceptable upon approval from PPOL. Interest accrues at the rate of 2%
per annum and any unpaid, delinquent balance will be assessed a 14.6%
penalty.
9
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements:
Certain matters discussed in this Quarterly Report on Form 10-Q are
"forward-looking statements" intended to qualify for the safe harbor
from liability provided by the Private Securities Litigation Reform Act
of 1995. These forward-looking statements can generally be identified
as such because the context of the statement will include words such as
PPOL "believes", "anticipates", "expects", or words of similar import.
Similarly, statements which describe PPOL's future plans, objectives or
goals are also forward-looking statements. Such forward-looking
statements are subject to certain risks and uncertainties which are
described in close proximity to such statements and which could cause
actual results to differ materially from those anticipated as of the
date of this Report. Shareholders, potential investors and other
readers are urged to consider these factors in evaluating the
forward-looking statements and are cautioned not to place undue
reliance on such forward-looking statements. The forward-looking
statements included herein are only made as of the date of this Report
and PPOL undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or
circumstances, except as required under applicable laws.
Overview
PPOL, Inc., a California corporation, conducts its business primarily
though its wholly owned Japanese subsidiary, AJOL, Ltd., a Japanese
corporation (hereafter, collectively referred to as PPOL or the
"Company.") At the present time, the Company has administrative
functions occurring in California, but does not otherwise have any
business in the US.
The Company's revenues are currently derived from the sales of (1) its
"MOJICO" hardware, a multifunctional facsimile based machine with
networking capabilities, (2) subscriptions to PPOL's proprietary "Pan
Pacific Online" interactive database that can only be accessed through
it MOJICO hardware and (3) various consumer products that utilize the
Company's "Kamome" brand.
Results of Operations - Three Months Ended June 30, 2004
PRODUCT SALES AND NETWORK SERVICES. For the three months ended June 30,
2004, revenues of this category have decreased by 7.3% in comparison to
the same period of the prior year. The decrease is primarily due to a
decline in MOJICO unit sales and corresponding initial Pan Pacific
Online subscription fees.
OTHER ONLINE SERVICES REVENUE. For the three months end June 30, 2004,
revenues increased 18.0% over the comparable period of the prior year.
This is a result of the Company's continuing efforts to expand the
on-line service business which is a continuing corporate objective.
COST OF SALES. For the three months ended June 30, 2004, the change in
cost of sales, expressed as a percentage of sales, increased 0.95% in
comparison to the same period of the prior year. The increase is due to
the higher costs involved in producing the more advanced MOJICO SF 70
model in comparison to the MOJICO SF 60 in the prior period.
10
DISTRIBUTOR INCENTIVES. For the three months ended June 30, 2004,
distributor incentives declined by approximately $1.5 million or 8.6%
in comparison to the same period of the prior year. The overall
decrease in distributor incentives is primarily the result of lower
sales in the current period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the three months
ended June 30, 2004, selling, general and administrative expenses have
increased by approximately $1.4 million or 23.5% in comparison to the
same period of the prior year. The increase is primarily due the
incurrence of approximately $1.1 million of software related research
costs to develop its new commission calculation system, order &
receiving system and software development for the next generation
MOJICO.
OTHER INCOME. For the three months ended June 30, 2004, other income
decreased approximately $720,000 in comparison to the same period of
the prior year. Effective in April 2003, the Company revised its
commission policy to state that the Company would not pay any
commissions less than a minimum threshold of approximately $30.00. If
the distributor does not earn the minimum threshold within one year,
then the commissions were to be forfeited. The decrease is primarily
due to the Company recognizing in April 2003 approximately $714,000 of
income associated with commissions that did not meet the minimum
threshold of the new commission policy and had been outstanding greater
than one year as of March 31, 2003. No material amount of such income
was recognized in the current period.
DEFERRED INCOME TAX EXPENSE. For the three months ended June 30, 2004,
deferred income tax expense decreased approximately $207,000 or 12.4%
in comparison to the same period of the prior year. The decrease was
primarily the result of the decline experienced in deferred costs and
deferred revenues associated with the sales of the Company's MOJICO
hardware and related Pan Pacific On-line subscription services.
Liquidity and Capital Resources
Historically, our principal needs for funds have been for operating
expenses including distributor incentives, working capital (principally
inventory purchases), capital expenditures and the development of
operations throughout Japan. We have generally relied on cash flow from
operations to meet our cash needs and business objectives without
relying on long-term debt to fund operating activities.
Cash and cash equivalents totaled $8,629,489 and $28,334,777 at June
30, 2004 and March 31, 2004, respectively. Cash (used) provided from
operations for the three months ended June 30, 2004 and 2003 was
$(18,380,314) and $4,276,288, respectively. The use of cash in
operations for the three months ended June 30, 2004 was primarily due
to the $17.5 million transfer of cash to Kamome Mutual Benefit
Association wherein such cash has now been classified as restricted
cash - see note 4 to the financial statements. Cash used for investing
activities for the three months ended June 30, 2004 and 2003 was
$3,084,221 and $2,064,127, respectively. The cash used for investing
activities for the quarter ended June 30, 2004 was primarily for the
purchase of software and software in progress. No cash was used for
financing activities in the three months ended June 30, 2003. Cash
provided by financing activities for the three months ended June 30,
2004 was primarily the result of a bank loan and a short term
convertible loan from our majority shareholder, Forval Corporation.
This revolving bank credit facility is generally used to finance
temporary operating cash requirements and was fully utilized at June
30, 2004. Management believes that cash flow from operations, the
revolving credit facility and contemplated financings will adequately
meet the working capital needs for the foreseeable future.
11
Contractual Obligations
The Company's operating lease, purchase, and debt obligations
as of June 30, 2004 are as follows:
Payments due by period
-----------------------------------------------------------------------
More
Less than 1 1-3 3-5 than 5
Contractual obligations Total year years years years
----------------------- ----------- ----------- ----------- ----------- -----------
Operating Lease Obligations $ 837,610 $ 727,801 $ 109,809 $ -- $ --
Short term loan repayments 3,598,450 3,598,450 (1) -- -- --
Service Provider Contracts 1,499,668 1,499,668 -- -- --
----------- ----------- ----------- ----------- -----------
Total $5,935,728 $5,825,919 $ 109,809 $ -- $ --
=========== =========== =========== =========== ===========
The Company projects that it will need to satisfy at least
$5.9 million of lease, contract and debt service obligations within the
fiscal year ending March 31, 2005.
Critical Accounting Policies and Estimates
Management's Discussion and Analysis of Financial Condition and Results
of Operations discusses the Company's consolidated financial
statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The
preparation of these consolidated financial statements requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses
during the reporting period. On an on-going basis, management evaluates
its estimates and judgments, including those related to revenue
recognition, impairment of long-lived and intangible assets,
depreciation and amortization, financing operations, inventory
valuation, income tax and contingencies and litigation. Management
bases its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments
about the carrying value of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The most
significant accounting estimates inherent in the preparation of the
Company's consolidated financial statements include estimates as to the
appropriate carrying value of certain assets and liabilities which are
not readily apparent from other sources. These accounting policies are
described in the notes to the consolidated financial statements for the
years ended March 31, 2004 and 2003 included in our Form 10-K.
---------------
(1) Includes $830,412 of debt payable to Forval Corporation which may be
converted into equity. See footnote (2) to the financial statements.
12
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INVESTMENT IN PRIVATELY HELD COMPANY
We have invested in a privately held company which can still be
considered in the startup or in the development stage. This investment
is inherently risky as the markets for the technologies or products
they have under development are typically in the early stages and may
never materialize or may never be fully developed. We could lose our
entire initial investment in this company. As of June 30, 2004, this
investment was $300,000.
WE WILL RELY ON THE AVAILABILITY OF THIRD-PARTY LICENSES
Many of our future products to be sold under our new growth strategy
will include software or other intellectual property licensed from
third parties. It may be necessary in the future to seek or renew
licenses relating to various aspects of these products. There can be no
assurance that the necessary license would be available on acceptable
terms, if at all. The inability to obtain certain licenses or other
rights or to obtain such licenses or rights on favorable terms, or the
need to engage in litigation regarding these matters, could have a
material adverse effect on our business, operating results, and
financial condition.
LIMITED OPERATING HISTORY
We have a limited operating history in Japan upon which we can be
evaluated. Any investment in us must be considered in light of the
risks, expenses and difficulties encountered by companies in the early
stage of development in new and rapidly evolving markets, including the
risks described herein. There can be no assurances that we will be
successful in addressing these risks.
UNPROVEN BUSINESS MODEL
We cannot predict whether or not we will be successful because our
business model is unproven and its market is developing. It is too
early to reliably ascertain market penetration for our products and
services. If future demand for AJOL's products and services, including,
but not limited to demand for the MOJICO hardware and Kamome brand
products is lower than anticipated, or the costs of attracting
subscribers is higher than anticipated, then our financial condition
and results from operations will be materially and adversely affected.
FLUCTUATIONS IN OPERATING RESULTS
Our operating results may fluctuate significantly in the future as a
result of a variety of factors, many of which are outside of our
control. These factors include the demand for the telecommunications
products and services offered by us, introduction of new products or
services by us or our competitors, delays in the introduction or
enhancement of products and services by us or our competitors, changes
in our pricing policies or those of our competitors, our ability to
anticipate and effectively adapt to developing markets and rapidly
changing technologies, changes in the mix or Japanese vs. non-Japanese
revenue, changes in foreign currency exchange rates, the mix of
products and services sold by us and the channels through which those
products and services are sold, general economic conditions, and
specific economic conditions in Internet and related industries.
Additionally, in response to evolving competitive conditions, we may
elect from time to time to make certain pricing, service, marketing or
acquisition decisions that could have a material adverse affect on its
financial performance.
13
FOREIGN CURRENCY (YEN) FLUCTUATIONS
Substantially all of our revenue and expenses are received and incurred
in Japanese Yen. Variation in foreign exchange rates may substantially
affect our revenue, expenses, and net income in U.S. dollar terms. In
preparing our financial statements, we translate revenue and expenses
from Japanese Yen into U.S. dollars using weighted average exchange
rates. If the U.S. dollar strengthens relative to the Yen, our reported
revenue, gross profits and net income will likely be reduced. For
example, in 2001, the Japanese Yen significantly weakened, which
reduced our operating results on a U.S. dollar reported basis. The
Company's 2005 operating results could be similarly harmed if the
Japanese Yen weakens from current levels. Given the unpredictability of
exchange rate fluctuations, we cannot estimate the effect these
fluctuations may have upon future reported results, product pricing or
our overall financial condition.
POOR JAPANESE ECONOMIC CONDITIONS
Economic conditions in Japan have been poor in recent years and may
worsen or not improve. Continued or worsening economic and political
conditions in Japan could further reduce our revenue and net income.
RELIANCE ON HANDWRITTEN MOJI CHARACTERS AS PREFERRED METHOD OF WRITTEN
COMMUNICATIONS
We rely on the desire of subscribers and potential subscribers to use
handwritten Moji (characters) as their preferred method of written
communication as an underlying material assumption for the continuing
success of its business. A subscriber's or potential subscriber's
desire to use handwritten Moji (characters) is a matter of personal
preference, which is unpredictable. Any negative changes in perception
by subscribers and potential subscribers as to their desire to use
handwritten Moji characters as their preferred method of written
communication, for any reason, including the emergence of new,
different, or alternative forms of written communications, could have a
materially adverse affect on us and our business.
DEPENDENCE ON NEW SUBSCRIBERS
Our operating results generally depend on revenues received from sales
of the MOJICO product. In previous years, MOJICO sales have accounted
for up to 78% of our annual revenue. MOJICO sales are primarily made to
our new customers. As a result, future revenues are primarily dependent
on our ability to generate new customers for our MOJICO hardware and
Pan Pacific Online services. There can be no assurances that we will be
able to continue to generate new subscribers at the rate that we have
been able to in the past, nor that we will be able to generate
sufficient new subscribers to remain profitable. We do not have any
substantial historical basis for predicting the rate of increase in our
subscriber base.
DEPENDENCE ON SUBSCRIBERS FOR CONTENT OF NETWORK
The information transmitted to our subscribers via our information
network Pan Pacific Online is primarily generated by other of our
subscribers. There can be no assurances that our subscribers will
continue to generate information that other subscribers will find
sufficiently entertaining, useful, or desirable so as to allow us to
profitably market the products and services that provide access to our
network.
14
LIABILITY FOR CONTENT OF NETWORK
As a provider of messaging and communications services, we may incur
liability for defamation, negligence, copyright, patent or trademark
infringement and other claims based on the nature and content of the
materials transmitted via our information network. To minimize our
liability, we use a centralized hub to manually process and screen hard
copies for adult themes, slander, patent/copyright infringement and
objectionable material. However, there can be no assurances that we
will be able to effectively screen all of the content generated by our
subscribers. We may be exposed to liability with respect to this
content. Our insurance may not cover claims of these types or may not
be adequate to indemnify us for all liability that may be imposed. Our
liability coverage limit is 100,000,000 Japanese yen, approximately
$950,000 at current exchange rates, per occurrence. There is a risk
that a single claim or multiple claims, if successfully asserted
against us, could exceed the total of our coverage limits. There is
also a risk that a single claim or multiple claims asserted against us
may not qualify for coverage under our insurance policies as a result
of coverage exclusions that are contained within these policies. Any
imposition of liability, particularly liability that is not covered by
insurance or is in excess of insurance coverage, could have a material
adverse affect on our reputation, financial condition, and operating
results.
RELIANCE ON EXISTING DISTRIBUTORS AND NEED TO RECRUIT ADDITIONAL
DISTRIBUTORS
We depend on subscriber distributors to generate substantially all of
our revenues. To increase our revenue, we must increase the number of
and/or the productivity of our distributors. Our distributors may
terminate their status as a distributor at any time. The number of
distributors may not increase and could decline in the future. We
cannot accurately predict how the number and productivity of
distributors may fluctuate because we rely upon our existing
distributors to recruit, train and motivate new distributors. Our
operating results could be harmed if our existing and new business
opportunities and products do not generate sufficient interest to
retain existing distributors and attract new distributors.
The loss of a group of high-level distributors, or a group of leading
distributors in the distributor's network of lower level distributors,
whether by their own choice or through disciplinary actions for
violations of our policies and procedures could negatively impact the
growth of distributors and our revenue. There is no leading distributor
whose departure, alone, will have a material impact on the financial
position or results of operations. In addition, our operations in Japan
face significant competition from existing and new competitors. Our
operations would also be harmed if our planned growth initiatives fail
to generate continued interest and enthusiasm among our distributors in
this market and fail to attract new distributors.
DEPENDENCE ON MR. AOTA
We are highly dependent upon our President Yoshihiro Aota to recruit
and retain subscribers. Mr. Aota represents the personification of
AJOL. Mr. Aota's talents, efforts, personality and leadership have
been, and continue to be, critical to us and our success. The
diminution or loss of the services of Mr. Aota, and any negative market
or industry perception arising from that diminution or loss, would have
a material adverse affect on our business. We are investigating, but
have not obtained "Key Executive Insurance" with respect to Mr. Aota.
One of our business strategies is to reduce our dependence on Mr. Aota.
This will be done through additional external training courses of
employees and flattening of the organization to three levels, senior
management, leaders, general, so more employees get on the job training
from senior management. We have also involved more staff on strategic
planning and product development task teams. Externally, our
distributors have become more knowledgeable and are making
15
presentations to prospective subscribers. If we are unsuccessful in
accomplishing this strategy, and Mr. Aota's services become
unavailable, our business and prospects could be materially adversely
affected. We do not have an employment agreement with Mr. Aota. If we
lose Mr. Aota's services, for any reason, including as a result of Mr.
Aota's voluntary resignation or retirement, our business could be
materially adversely affected.
FAILURE OF NEW PRODUCTS AND SERVICES TO GAIN MARKET ACCEPTANCE
A critical component of our business is our ability to develop new
products and services that create enthusiasm among our distributor
force. If any new product or service fails to gain market acceptance,
for any reason including quality problems, this could harm our results
of operations.
LOSING SOURCES OF KAMOME PRODUCTS
The loss of any of our sources of Kamome products, or the failure of
sources to meet our needs, could restrict our ability to distribute
Kamome products and harm our revenue as a result. Further, our
inability to obtain new sources of Kamome products at prices and on
terms acceptable to us could harm our results of operations.
COMMENCING FOREIGN OPERATIONS
We continue to explore the possibility of commencing business
activities in South Korea, China, and Taiwan. In past years, these
nations have experienced significant economic and/or political
instability. If we commence business activities in these nations,
future instability will have a material adverse affect on our ability
to do business in these nations and may jeopardize our investment in
establishing business operations in those countries.
COMPETITION WITH TECHNICALLY SUPERIOR PRODUCTS AND SERVICES
Our products and services utilize the facsimile-like MOJICO hardware
and rely on human personnel to screen and process information for our
database. Our products and services are much less technically
sophisticated than those offered by other companies offering
interactive telecommunications products and services. This may put us
at a substantial competitive disadvantage with present and/or future
competitors.
INTERNET USAGE RATES AND LONG DISTANCE TELEPHONE RATES
Our subscribers obtain access to AJOL's network via either the Internet
or telephone service. The costs that subscribers incur in obtaining
access to our network via these channels are beyond the control of
AJOL. Any increase in long distance telephone rates or rates for
accessing the Internet could materially and adversely affect demand for
our products and services.
RELIANCE ON INTERNET AS TRANSMISSION MEDIUM
Our future success will depend upon our ability to route our customers'
traffic through the Internet and through other data transmission media.
Our success is largely dependent upon the viability of the Internet as
a medium for the transmission of subscriber related data. There can be
no assurance that the Internet will prove to be a viable communications
media, that document transmission will be reliable, or that capacity
constraints which inhibit efficient document transmission will not
16
develop. The Internet may not prove to be a viable avenue to transmit
communications for a number of reasons, including lack of acceptable
security technologies, lack of access and ease of use, traffic
congestion, inconsistent quality or speed of service, potentially
inadequate development of the necessary infrastructure, excessive
governmental regulation, uncertainty regarding intellectual property
ownership or lack of timely development and commercialization of
performance improvements.
TECHNOLOGICAL CHANGES OF THE MESSAGING AND COMMUNICATIONS INDUSTRY
The messaging and communications industry is characterized by rapid
technological change, changes in user and customer requirements and
preferences, and the emergence of new industry standards and practices
that could render our existing services, proprietary technology and
systems obsolete.
Our success depends, in part, on our ability to develop new services,
functionality and technology that address the needs of existing and
prospective subscribers. If we do not properly identify the feature
preferences of subscribers and prospective subscribers, or if we fail
to deliver features that meet their standards, our ability to market
our products and services successfully and to increase revenues could
be impaired. The development of proprietary technology and necessary
service enhancements entail significant technical and business risks
and require substantial expenditures and lead-time. We may not be able
to keep pace with the latest technological developments. We may also be
unable to use new technologies effectively or adapt services to
customer requirements or emerging industry standards.
We must accurately forecast the features and functionality required by
subscribers and prospective subscribers. In addition, we must design
and implement service enhancements that meet subscriber requirements in
a timely and efficient manner. We may not successfully determine
subscriber and prospective subscriber requirements and may be unable to
satisfy their demands. Furthermore, we may not be able to design and
implement a service incorporating desired features in a timely and
efficient manner. In addition, if subscribers do not favorably receive
any new service offered by us, our reputation could be damaged. If we
fail to accurately determine desired feature requirements or service
enhancements or to market services containing such features or
enhancements in a timely and efficient manner, our business and
operating results could suffer materially.
POSSIBLE INADEQUATE INTELLECTUAL PROPERTY PROTECTIONS
Our success depends to a significant degree upon our proprietary
technology. We rely on a combination of patent, trademark, trade secret
and copyright law and contractual restrictions to protect our
proprietary technology. However, these measures provide only limited
protection, and the Company may not be able to detect unauthorized use
or take appropriate steps to enforce our intellectual property rights.
In addition, we may face challenges to the validity and enforceability
of our proprietary rights and may not prevail in any litigation
regarding those rights. Any litigation to enforce our intellectual
property rights would be expensive and time-consuming, would divert
management resources and may not be adequate to protect our business.
POSSIBLE INFRINGEMENT CLAIMS
We could be subject to claims that we have infringed the intellectual
property rights of others. In addition, we may be required to indemnify
our distributors and users for similar claims made against them. Any
claims against us could require us to spend significant time and money
in litigation, pay damages, develop new intellectual property or
acquire licenses to intellectual property that is the subject of the
infringement claims. These licenses, if required, may not be available
17
at all or on acceptable terms. As a result, intellectual property
claims against us could have a material adverse effect on our business,
prospects, financial conditions and results of operations.
POSSIBLE SYSTEM FAILURE OR BREACH OF NETWORK SECURITY
Our operations are dependent on our ability to protect our network from
interruption by damage from fire, earthquake, power loss,
telecommunications failure, unauthorized entry, computer viruses or
other events beyond our control. As precautions, we utilize distributed
processing systems, back-up systems, Internet firewalls, 24/7
installation environment surveillance, and private power generators as
backup. There can be no assurance that our existing and planned
precautions of backup systems, regular data backups and other
procedures will be adequate to prevent significant damage, system
failure or data loss.
Despite the implementation of security measures, our infrastructure may
also be vulnerable to computer viruses, hackers or similar disruptive
problems. Persistent problems continue to affect public and private
data networks, including computer break-ins and the misappropriation of
confidential information. Computer break-ins and other disruptions may
jeopardize the security of information stored in and transmitted
through the computer systems of the individuals and businesses
utilizing our services, which may result in significant liability to us
and also may deter current and potential subscribers from using our
services. Any damage, failure or security breach that causes
interruptions or data loss in our operations or in the computer systems
of our customers could have a material adverse effect on our business,
prospects, financial condition and results of operations.
RELIANCE ON THIRD PARTY ACCESS FOR TELECOMMUNICATIONS
We rely on third parties to provide our subscribers with access to the
Internet. There can be no assurance that a third party's current
pricing structure for access to and use of the Internet will not change
unfavorably and, if the pricing structure changes unfavorably, our
business, prospects, financial condition and results of operations
could be materially and adversely affected.
EFFECT OF GOVERNMENT REGULATIONS
We provide access to our database and services through data
transmissions over public telephone lines and other facilities provided
by telecommunications companies. These transmissions are subject to
regulatory government agencies. These regulations affect the prices
that subscribers must pay for transmission services, the competition we
face from telecommunications services and other aspects of our market.
There can be no assurance that existing or future laws, governmental
action or rulings will not materially and adversely affect our
operations. Additionally, we operate through a network marketing
strategy which is subject to government regulation concerning consumer
protection. Changes in these regulations could affect compliance with
these regulations and jurisdictions where we carry on our business.
DEPENDENCE ON VENDOR
The MOJICO machine is produced by an unrelated third party. Should this
third party become incapable or unwilling to produce the MOJICO for any
reason, we could face a temporary decline in MOJICO sales until another
electronics manufacturer is sourced and ready to produce the machines.
18
CONTROL BY OFFICERS AND DIRECTORS
Our executive officers, directors and entities affiliated with them, in
the aggregate, beneficially own common stock representing approximately
94.4% of PPOL.
MINORITY SHAREHOLDER STATUS
Forval Corporation and Leo Global Fund, former direct shareholders of
AJOL, hold 58.62% and 35.79% respectively of PPOL's common stock.
Acting alone, Forval Corporation, as a majority shareholder, has
significant influence on PPOL's policies. Forval Corporation and Leo
Global Fund, collectively, control 94.40% of PPOL's outstanding shares,
representing 94.4% of PPOL's voting power. As a result, Forval
Corporation and Leo Global Fund, acting together, will have the ability
to control the outcome of all matters requiring stockholder approval,
including the election and removal of PPOL's entire Board of Directors,
any merger, consolidation or sale of all or substantially all of PPOL's
assets, and the ability to control PPOL's and our management and
affairs.
NO LOCK-UP AGREEMENT BETWEEN FORVAL CORPORATION AND LEO GLOBAL FUND
To date, PPOL has not entered into a separate lock-up arrangement with
Forval Corporation and Leo Global Fund pursuant to which these
shareholders would agree to be subject to volume and sale restrictions
that will limit their ability to sell shares in addition to the
restrictions set forth under Rule 144. If a suitable lock-up agreement
is not in effect, then Forval Corporation and/or Leo Global Fund may be
eligible to sell a large volume of shares, which could cause the price
of PPOL's shares to decline.
NO HISTORY AS REPORTING COMPANY
Prior to the effective date of the PPOL's filing of Form 10,
PPOL has never been a public company, subject to the reporting
requirements of the Securities and Exchange Act of 1934, as amended,
and PPOL expects that the obligations of being a public company,
including substantial public reporting and investor relations
obligations, will require significant continuing additional
expenditures, place additional demands on our management and may
require the hiring of additional personnel. We may need to implement
additional systems in order to adequately function as a reporting
public company. Such expenditures could adversely affect our financial
condition and results of operations.
ITEM 4: CONTROLS AND PROCEDURES
We have established and maintain disclosure controls and procedures and
conclude these controls/procedures are effective based on our
evaluation as of the "Evaluation Date," which is as of the end of the
period covered in the filing of this 10-Q. There were no significant
changes in our internal controls or in other factors that could
significantly affect our internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
19
PART 2:
ITEM 1: LEGAL PROCEEDINGS
None
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5: OTHER INFORMATION
None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K:
A - Exhibits:
Exhibit 10.1 - LICENSING AND EXCLUSIVE DISTRIBUTION AGREEMENT
WITH OBJECT INNOVATION, INC. (PREVIOUSLY FILED WITH THE SEC AS
AN EXHIBIT TO THE COMPANY'S FORM 8-K FILED ON JUNE 1, 2004 AND
IS INCORPORATED HEREIN BY REFERENCE.
Exhibit 31.1 - CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2 - CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(B) OF THE
EXCHANGE ACT AND 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.
B - Reports on Form 8-K
1. On April 5, 2004, the Company furnished a report on
Form 8-K relating to its new growth strategy focused
on in-licensing proven and promising information
technologies developed in the United states and
Europe for introduction to Asia.
2. On April 21, 2004, the Company furnished a report on
Form 8-K relating to the naming of Mr. Hideo Ohkubo
as honorary chairman of PPOL, Inc.
3. On April 26, 2004, the Company furnished a report on
Form 8-K announcing that Yoshihiro Aota, would step
down from the post of President effective April 26,
2004 in order to focus his efforts on AJOL, Co.,
PPOL's wholly owned subsidiary and that Peter Pomeroy
would succeed as president.
4. On June 1, 2004, the Company furnished a report on
Form 8-K that it had signed a licensing and exclusive
distribution agreement on May 26, 2004 with Object
Innovation, Inc. Additionally, the Company had made
an investment of $300,000 in the form of purchasing
1,500 shares of Object Innovation's common stock,
representing 15% of Object Innovation's equity,
20
subject to a certain vesting schedule tied to
revenues derived on the sale of the BridgeGate
software by PPOL.
5. On June 30, 2004, the Company furnished a report on
Form 8-K announcing that it has named Mr. Toshiaki
Shimojo as Chief Financial Officer and Secretary,
effective immediately, replacing Mr. Yoichi
Awagakubo.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
PPOL, Inc.
-----------------------------------------
(Registrant)
August 20, 2004 /s/ Hideo Ohkubo
--------------- -----------------------------------------
Date Hideo Ohkubo, Chief Executive Officer
August 20, 2004 /s/ Toshiaki Shimojo
--------------- -----------------------------------------
Date Toshiaki Shimojo, Chief Financial Officer
22