UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Quarter ended March 31, 2019

Commission File Number: 000-49933

EMARINE GLOBAL INC.

(Exact name of registrant as specified in its charter)

Nevada		95-4886472
(State of organization)		(I.R.S. Employer Identification No.)

4th Floor, 15-14, Samsan-ro 308beon-gil, Nam-gu, Ulsan, 44715 Republic of Korea

(Address of principal executive offices)

+82-70-7204-9352

Registrant’s telephone number, including area code

Former address if changed since last report

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
None		None		None

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. [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]

Accelerated filer [ ]

Non-accelerated filer [ ]

Smaller reporting company [X]

(Do not check if smaller reporting company)

Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ] Yes [X] No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

As of May 17, 2019, the registrant had 23,159,105 shares of common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS

	PART I - FINANCIAL INFORMATION

ITEM 1.	INTERIM FINANCIAL STATEMENTS	F-1
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS	2
ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	7
ITEM 4	CONTROLS AND PROCEDURES	7

	PART II - OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	8
ITEM 1A.	RISK FACTORS	8
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES	8
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	8
ITEM 4.	MINE SAFETY DISCLOSURES	8
ITEM 5.	OTHER INFORMATION	8
ITEM 6.	EXHIBITS	9

SIGNATURES		10

PART I – FINANCIAL INFORMATION

ITEM 1. INTERIM FINANCIAL STATEMENTS

eMARINE Global Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of Korean Won, except share and per share amounts)

	March 31, 2019			December 31, 2018
	(Unaudited)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	￦	181,471		￦	126,406
Short-term financial instruments		27,000			18,000
Accounts receivable, net of allowance for doubtful accounts of ￦11,227 as of March 31, 2019 and December 31, 2018		581,610			546,671
Inventories		61,934			7,217
Other current assets		42,026			48,608
Total Current Assets		894,041			746,902

Property and equipment, net		307,155			44,224
Goodwill		1,430,625			1,430,625
Intangible assets, net		277,005			302,155
Deposits		103,199			103,199
Total Assets	￦	3,012,025		￦	2,627,105

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES:
Accounts payable	￦	1,203,100		￦	1,393,676
Nontrade payables		1,502,310			1,307,079
Other current liabilities		256,768			238,073
Short-term borrowings		2,350,091			2,385,545
Loans from related parties		71,279			45,980
Current portion of long-term debt		233,160			222,260
Total Current Liabilities		5,616,708			5,592,613

Long-term debt		394,210			452,500
Lease liabilities		266,781			-
Accrued benefit pension liability		1,220,105			1,180,730
Total Liabilities		7,497,804			7,225,843

Commitments and Contingencies (Note 14)

STOCKHOLDERS’ DEFICIT :
Common stock, $0.001 par value, 300,000,000 shares authorized, 22,927,992 shares issued and outstanding as of March 31, 2019 and December 31, 2018		26,198			26,198
Additional paid-in capital		7,229,972			7,221,875
Accumulated other comprehensive loss		(219,160	)		(215,614	)
Accumulated deficit		(11,522,789	)		(11,631,198	)
Total Stockholders’ Deficit		(4,485,779	)		(4,598,739	)
Total Liabilities and Stockholders’ Deficit	￦	3,012,025		￦	2,627,104

The accompanying footnotes are an integral part of these condensed consolidated financial statements.

F-1

eMARINE Global Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands of Korean Won, except share and per share amounts)

	Three Months Ended
	March 31, 2019			March 31, 2018
	(Unaudited)			(Unaudited)
Revenue
Product	￦	558,665		￦	249,001
Service		721,666			1,060,482
Total revenue		1,280,331			1,309,483
Cost of revenue
Product		251,520			182,387
Service		481,944			672,628
Total cost of revenue		733,464			855,015
Gross margin		546,867			454,468

Selling, general and administrative expenses		324,334			394,281
Research and development		71,860			29,810
Income from operations		150,673			30,377

Other expense:
Interest expense, net		(39,698	)		(39,817	)
Other expense, net		(4,187	)		(4,040	)
Total other expense		(43,885	)		(43,857	)

Income (Loss) before provision for income taxes		106,788			(13,480	)

Income tax benefit		(1,621	)		(2,930	)

Net income (loss)	￦	108,409			(10,550	)

Basic net income (loss) per share	￦	4.73			(0.48	)
Diluted net income (loss) per share		3.92			(0.48	)
Basic weighted average shares outstanding		22,927,992			22,119,095
Diluted weighted average shares outstanding		27,680,416			22,119,095

Net income (loss)	￦	108,409			(10,550	)
Other comprehensive income (loss):
Foreign exchange translation gain (loss)		(7,855	)		1,783
Remeasurement of pension liabilities		4,309			10,388
Other comprehensive income (loss), net of tax:		(3,546	)		12,171
Comprehensive income	￦	104,863			1,621

The accompanying footnotes are an integral part of these condensed consolidated financial statements.

F-2

eMARINE Global Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of Korean Won)

	Three Months Ended
	March 31, 2019			March 31, 2018
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	￦	108,409		￦	(10,551	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		29,001			29,256
Pension plan expenses		55,668			54,229
Deferred income taxes		(1,621	)		(2,930	)
Foreign currency loss		1,568			(1,534	)
Changes in operating assets and liabilities:
Accounts receivable		(34,939	)		(5,154	)
Inventories		(54,718	)		(31,896	)
Other current assets		6,582			(1,758	)
Deposits		-			20,300
Accounts payable		(192,144	)		(381,746	)
Nontrade payables		209,477			34,506
Other current liabilities		18,695			13,434
Pension benefits payments		(8,926	)		(22,081	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		137,052			(305,925	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in loans to related parties		-			163,962
Purchase of short-term financial instruments		(9,000	)		-
Proceeds from disposals of short-term financial instruments		-			281,000
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(9,000	)		445,965
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from private placement, net		-			557,336
Drawdown of short-term borrowings		-			12,669
Repayment of short-term borrowings		(35,455	)		(309,736	)
Repayment of current portion of long-term debt		(47,390	)		(30,000	)
Increase in loans from related parties		200,100			111,826
Repayment of loans from related parties		(189,047	)		(4,607	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(71,792	)		337,488
Effect of exchange rate on cash and cash equivalents		(1,195	)		(11,034	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		55,065			466,494
CASH AND CASH EQUIVALENTS- beginning of year		126,406			109,316
CASH AND CASH EQUIVALENTS- end of year	￦	181,471			575,810
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest	￦	39,723		￦	40
Income taxes	￦	-		￦	-
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Recognition of right-of-use assets and lease liabilities	￦	107,387		￦	-
Increase in loans from related parties due to payment of general expenses by related parties	￦	14,246		￦	-

The accompanying footnotes are an integral part of these condensed consolidated financial statements.

F-3

eMARINE Global Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

For the Three Months Ended March 31, 2019 and 2018

(In thousands of Korean Won, except share amounts)

(Unaudited)

	Common Stock						Accumulated Other						Total
	$0.001 Par Value				Additional		Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Paid-in Capital		Loss			Deficit			Deficit
Balance, December 31, 2017		22,061,317		25,265		6,577,829		(56,593	)		(10,492,538	)		(3,946,037	)
Private placement		866,675		933		558,997								559,930
Foreign exchange translation gain								1,783						1,783
Remeasurement of pension liabilities								10,389						10,389
Net loss											(10,551	)		(10,551	)
Balance, March 31, 2018		22,927,992	￦	26,198	￦	7,136,826	￦	(44,421	)	￦	(10,503,089	)	￦	(3,384,486	)

Balance, December 31, 2018		22,927,992	￦	26,198	￦	7,221,875	￦	(215,614	)	￦	(11,631,198	)	￦	(4,598,739	)
Foreign exchange translation gain						8,097		(7,855	)					242
Remeasurement of pension liabilities								4,309						4,309
Net loss											108,409			108,409
Balance, March 31, 2019		22,927,992		26,198		7,229,972		(219,160	)		(11,522,789	)		(4,485,779	)

The accompanying footnotes are an integral part of these condensed consolidated financial statements.

F-4

eMARINE Global Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

NOTE 1 – DESCRIPTION OF BUSINESS AND ORGANIZATION

eMarine Global Inc. is a Nevada corporation (the “Company”) formed under the name of Web Views Corporation on November 2, 2001. On October 20, 2008, the Company changed its name to Pollex, Inc. (“Pollex”)

On July 25, 2017, the Company 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”) in exchange for 14,975,000 restricted shares of its common stock (the “Share Exchange”). As a result of the Share Exchange, e-Marine became the Company’s wholly-owned subsidiary, and the e-Marine Shareholders acquired a controlling interest in the Company.

For accounting purposes, the Share Exchange was treated as an acquisition of Pollex and a recapitalization of the Company. The Company is the accounting acquirer, and the results of its operations carryover. Accordingly, the operations of Pollex are not carried over and have been adjusted to ￦0. The assets and liabilities of the Company have been brought forward at its book value and no goodwill has been recognized as a result of the transaction.

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, the Company assumed e-Marine’s business operations as its own. The acquisition of e-Marine is treated as a reverse acquisition, and the business of e-Marine became the business of the Company.

As part of the recapitalization, the Pollex Shareholders assigned, transferred and delivered, free and clear of all liens, 1,012,233 of the issued and outstanding shares of common stock of Pollex, in exchange for 1,026,317 restricted shares of its common stock.

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: (1) Electronic Chart Display & Information System (“ECDIS”); (2) Smart Ship; (3) Overseas Solutions Distributions; and (4) Aids to Navigation.

On August 15, 2017, the Company entered into an agreement and plan of (the “Merger Agreement”), pursuant to which it merged with and into a 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.

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.

F-5

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.

F-6

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.

F-7

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.

F-8

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.

F-9

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.

F-10

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

F-11

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.

F-12

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	%

F-13

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	%

F-14

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;

F-15

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

F-16

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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management has concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report to provide the reasonable assurance discussed above.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act). Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2019. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). Our management has concluded that, as of March 31, 2019, our internal control over financial reporting is not effective based on these criteria.

Turner Stone & Company, the independent registered public accounting firm, was not required to issue an attestation report on our internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended March 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time we may be involved in litigation incidental to the conduct of our business. In the ordinary course of business, we may be a party to inquiries, legal proceedings and claims including, from time to time, disagreements with vendors and customers.

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 thousand 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.

ITEM 1A. RISK FACTORS.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

The Company did not have any unregistered sales of equity securities during the first quarter of 2019. Subsequently, on April 22, 2019, upon receiving the warrant exercise notice from a warrant holder, the Company issued an aggregate of 231,113 shares of its common stock to such warrant holder. The exercise price of such warrant is $0.08 per share of common stock.

In connection with the foregoing issuances, the Company relied upon the exemption from securities registration provided by Section 4(a)(2) under the Securities Act for transactions not involving a public offering.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit No.		Description

31.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document
101 SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101 LAB		XBRL Extension Labels Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

SIGNATURES

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

	EMARINE GLOBAL INC.

Date: May 20, 2019	By:	/s/ Ung Gyu Kim
		Ung Gyu Kim
		Chief Executive Officer

EMARINE GLOBAL INC. 10-Q