REYMUNDO CORPORATION

STATEMENTS OF FINANCIAL POSITION

December 31
2010 2009

ASSETS
Current Assets
Cash and cash equivalents P 4,289,266 P 23,275,942 18,986,676
Trade and other receivables 49,158,368 25,409,534 (23,748,834)
Inventories 34,619,728 50,322,217 15,702,489
Other current assets 17,973,674 157,508 (17,816,166)
Total Current Assets 106,041,036 99,165,201
Noncurrent Assets
Property, plant and equipment 64,095,073 27,957,899 (36,137,174)
Intangible assets 101,189 - (101,189)
Other non-current assets 176,560 - (176,560)
Total Noncurrent Assets 64,372,822 27,957,899

TOTAL ASSETS P 170,413,858 P 127,123,100

LIABILITIES AND EQUITY

Current Liabilities
Trade and other payables P 45,160,534 P 36,589,992 (8,570,542)
Loans payable - current portion 33,132,889 43,500,000 10,367,111
Income tax payable 1,844,692 1,972,502 127,810
Other current liabilities 666,507 (1,374,647) 2,041,154
Total Current Liabilities 80,804,622 80,687,847

Noncurrent Liabilities
Loans payable - net of current portion 38,609,900 1,116,444 (37,493,456)
Due to related parties 5,840,017 10,840,017 5,000,000
Total Liabilities 44,449,917 11,956,461
Equity
Paid-up Capital 35,000,000 30,000,000 (5,000,000)
Retained earnings 10,159,319 4,478,792 (5,680,527)
Total Equity 45,159,319 34,478,792

TOTAL LIABILITIES AND EQUITY P 170,413,858 P 127,123,100

See Notes to Financial Statements.
7 CASTLES, INC.
STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31

Notes 2010

REVENUES 414,664,349
COST OF SALES 343,553,361
GROSS PROFIT 71,110,988
OTHER INCOME (4,288,139)
TOTAL INCOME 66,822,849
DISTRIBUTION COSTS 16,576,682
ADMINISTRATIVE EXPENSES 35,395,515
FINANCE COSTS 6,735,613
PROFIT (LOSS) BEFORE INCOME TAX 8,115,039
INCOME TAX EXPENSE (BENEFIT) 2,434,512

PROFIT (LOSS) FOR THE YEAR 5,680,527

See Notes to Financial Statements.
s Ended December 31

2009

301,014,688
255,246,402
45,768,286
(1,029,863)
44,738,423
8,554,223
24,967,752
4,641,444
6,575,004
1,972,501

4,602,503
7 CASTLES, INC.
STATEMENTS OF CHANGES IN EQUITY
For the Years Ended December 31, 2010 and 2009

Share capital Earnings/(Deficit) Total

Balance at January 1, 2010 P 30,000,000 P 4,478,792 P 34,478,792

Increase in Share Capital 5,000,000 P 5,000,000
Profit for the year 5,680,527 5,680,527
Balance at December 31, 2010 P 35,000,000 P 10,159,319 P 45,159,319

Balance at January 1, 2009 P 30,000,000 (123,711) P 29,876,289

Profit for the year 4,602,503 4,602,503

Balance at December 31, 2009 P 30,000,000 P 4,478,792 P 34,478,792

See Notes to Financial Statements.

7 CASTLES, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31
Notes 2010 2009

Cash Flows from Operating Activities

Profit (Loss) for the year P 5,680,527 P 4,602,503
Adjustments for:
Depreciation 3,706,643 3,091,879
Operating cash flows before working capital changes 9,387,170 7,694,382
Decrease (Increase) in:
Trade and other receivables (23,748,834) (4,311,068)
Inventories 15,702,489 14,602,051
Other current assets (17,816,166) ###

Increase (Decrease) in:

Trade and other payables 8,570,542 13,936,002
Income Tax Payable (127,810)
Loans Payable – Non current (10,367,111)
Other current liabilities 2,041,154 -
Net cash provided by (used in) operating activities (16,358,566) 31,921,367
Cash Flows from Investing Activities
Intangibles (102,264)
Other Noncurrent assets (176,560)
Additions to property and equipment (39,842,742) (20,175,294)
Net cash provided by (used in) investing activities (40,121,566) (20,175,294)
Cash Flows from Financing Activities
Net proceeds (payments) of loans payable 37,493,456 2,116,980
Dues to Related Parties (5,000,000)
Increase in paid-up capital 5,000,000
Net cash provided by (used in) financing activities 37,493,456 2,116,980
Net Increase in Cash (18,986,676) 13,863,053
Cash, Beginning 23,275,942 9,412,888
Cash, End P 4,289,266 P 23,275,942

See Notes to Financial Statements.

NOTE 4 : CASH AND CASH EQIVALENTS
This account consists of the following:
2010
Cash in bank P 4,149,266 P
Cash on hand -
Petty cash fund 140,000
Cash equivalents -
P 4,289,266 P

Cash in bank represents savings and current account in local banks. Savings account deposits earn interest at the respective
bank deposit rates and current account deposits do not earn interest. Cash in banks are unrestricted and immediately
available for use in current operations.

Petty cash fund are working funds wherein small amount of expenses are being disbursed.

NOTE 5 : TRADE AND OTHER RECEIVABLES

This account consists of the following:
2010
Trade
Export P 17,858,672 P
Local 19,748,856
Other receivables
Advances to officers & employees 1,184,958
Advances others 10,111,975
Others 253,907
P 49,158,368 P

Trade receivables are noninterest-bearing arising from sales of goods both export and local and are normally due in 60
days.

Advances to officers and employees include personal loans obtained from the Company, which are noninterest-bearing and
payable through salary deduction depending on the amount granted. Other advances to employees are subject for
liquidations.

Others include receivables from SSS, Sun Cellular and Proserv Outsourcing Centrum .

After careful evaluation by the Company’s management, no indication of impairment on the accounts was noted.

No receivables has been pledged as security for any liabilities

NOTE 6 : INVENTORIES

This account consists of the following:

2010
Raw materials P 8,466,652 P
Production Supplies 1,595,610
Finished goods 24,557,466
P 34,619,728 P

The Company measures its inventory at the lower of cost and estimated selling price less cost to sell and complete.
The cost of inventories recognized as expense during the period was Php 343,553,360 and Php 255,246,402 in 2010 and
2009, respectively.

Impairment tests conducted show that there were no inventories found impaired. Thus, no allowance for obsolescence was
provided. The carrying amount of the inventories approximates their estimated selling price less costs to complete and sell.
There were no inventories pledged as collateral to its loans payable.

NOTE 7 : OTHER CURRENT ASSETS

This account consists of the following:

2010
Input tax P 17,757,674 P
Office supplies -
Prepaid expenses 216,000
P 17,973,674 P

Input tax represents excess of VAT imposed on the Company by its suppliers for the acquisition of goods and services as
required by Philippine taxation laws and regulations, over the output tax.

Office supplies represents unused office supplies owned by the Company.

Prepaid expenses comprise of unconsumed advance rentals paid.

NOTE 8 : PROPERTY AND EQUIPMENT

(Please see a separate schedule)

NOTE 9 : INTANGIBLE ASSETS

(Please see a separate schedule)

NOTE 10 : OTHER NON-CURRENT ASSETS

This account consist of the following:

2010
Rental deposits P 176,560 P
P 176,560 P

Rental deposits consist of rental deposits which shall be refunded, without interest to the Company after deducting
whatever sum may be determined as due and owing to the Company under the terms of the agreement.

NOTE 11 : TRADE AND OTHER PAYABLES

This account consists of the following:
2010
Trade P 7,432,141 P
Deposit Payable 4,607,891
Accrued expenses 4,695,473
Retention payable 576,543
Others 27,848,486
 P 45,160,534 P

Trade payables are unpaid liabilities from trade purchases which are noninterest-bearing and are normally due within 60
days.

Customers' deposits are noninterest-bearing advances from customers and be offset upon billing of receivables.

Accrued expenses include accruals of administrative expenses such as commission, salaries, communications, light and
water and other administrative expenses.

Retention payable refers to remaining contract price not yet release relating to construction of Building A.

Others include outstanding obligation arising from other than usual trade or business.

NOTE 12 : OTHER CURRENT LIABILITIES

This account consists of the following:
2010
Taxes payable P 487,631 P
SSS, PHIC and HDMF payable 178,876
P 666,507 P

Taxes payable includes income tax payable and withholding tax payable which are due within the following month.

SSS, PHIC and HDMF payable are statutory obligations consisting of premium contributions and loans payable deducted
from employees' salaries payable within the following month.

NOTE 13 : INTEREST BEARING LOANS AND BORROWINGS/SHORT -TERM LOANS PAYABLE

This account consists of the following:

2010
Bank loans P 33,132,889 P
P 33,132,889 P

Bank loans represents short-term and renewable loans obtained from Land Bank of the Philippines, Planters Development
Bank and Sterling Bank of Asia with lump sum principal repayment at maturity which bears an annual fixed interest rate of
10-10.5%, 9.39-14.5% and 11.25-11.5%, respectively, per annum. These loans are for working capital requirements.

The loan is collateralized by Real Estate Motgage over the property of Mrs. Asuncion Ma. S. Faustmann and Francisco Sy-
Quia located at Nasugbu, Batangas with an area of 3,500 sq.m, property of Iskandrea Development Corp. located at Brgy.
Mambugan, Antipolo City with an area of 2,107 sq.m., Chattel Mortgage on machineries & equipments owned by 7
Castles, and property located at Mabini St., Ermita, Manila with an area of 687.7 sq.m.equivalent to the outstanding
balance of the loans (see Note 13).

NOTE 14 : INTEREST BEARING LOANS AND BORROWINGS/LONG-TERM LOANS PAYABLE

This account consists of the following:
2010
Bank loan P 38,609,900 P
Total loans 38,609,900
Bank loans represents long-term loans from Planters Development Bank with equal monthly installment term which bears
an annual fixed interest rate of 11.5% per annum. These loans are for acquisition of land, construction of building, and
purchase of three (3) delivery vehicles.

The loan is collateralized by Chattel Mortgage of land, building, and delivery vehicles equivalent to the outstanding
balance of the loans (see Note 14).

NOTE 15 : DUE TO RELATED PARTIES

This account consists of the following:

2,010
Deposit for future stock subscription/Advances from stockholders P 5,840,017 P
P 5,840,017 P

Deposit for future stock subscription represents non-interest bearing deposits/advances from stockholders payable in cash
beyond one (1) year, to be converted as share capital for future increase in the Company's authorized share capital.

NOTE 16 : EQUITY

Share Capital
As of December 31, 2010 and 2009, the Company's share capital consists of:

2010
Authorized Share Capital
500,000 shares at P100 par value 50,000,000

Subscribed
350,000 shares at P100 par value 35,000,000
Less: Subscription receivable -
PAID-UP CAPITAL 35,000,000

The Company is 100% Filipino owned and has one class of ordinary shares which carry no right to fixed income.

On June 25, 2010, the Board of Directors (BOD) approved the increase of the Company’s authorized capital stock from P
30,000,000 divided into 300,000 shares with a par value of P 100 per share, to P 35,000,000 divided into 350,000 shares
with a par value of P 100 per share. The increase in capital stock is approved by the Securities and Exchange Commission
on August 23, 2010.

NOTE 17 : REVENUE

2010
Sales
Export P 409,484,247 P
Local 6,376,688
Less:
Sales Returns and Allowance 141,786
Sales Discount 1,054,799
P 414,664,349 P

NOTE 18 : COST OF SALES

 2010
Beginning Inventory Balances
Finished Goods 10,743,330
Raw Materials 37,930,562
Production Supplies 1,648,325 50,322,217

Add: Current Purchases

Raw Materials (Note 18.1) 202,643,177
Production Supplies 6,434,498 209,077,675

Total Material Cost

Production Cost (Labor/Other Cost)
Direct Labor 68,464,593
Indirect Labor 7,677,338
Other Production Cost (FOH) 42,631,265 118,773,196
Total Manufacturing Cost

Deduct: Ending Inventory

Finished Goods 24,557,466
Raw Materials 8,466,652
Production Supplies 1,595,610 34,619,728

Cost of sales 343,553,361

18.1. Total Purchases – Raw Materials

2010
Silver P 189,223,284
Other Raw Materials 10,827,256
Gold -
Investment Powder 2,411,606
Aqua Wax 181,032
P 202,643,178

NOTE 19 : DISTRIBUTION AND/OR SELLING EXPENSES

This account consists of the following:

2010
Transportation Expense P 780,108 P
Store/Shop Supplies 378,231
Advertisng and Promotion 12,776,267
Gas and Oil 401,039
Depreciation Expense 450,818
Freight Charges (61,206)
Travelling Expense 1,851,425
P 16,576,682 P

NOTE 20: ADMINISTRATIVE EXPENSES

This account consists of the following:
Notes 2010
Compensation and other benefits P 18,081,280 P
Office and Stationery Supplies 612,732
Representation Expense 628,677
Light and Water 782,236
Repairs & Maintenance 576,321
Communications 650,296
Professional Fee 4,353,452
Trainings and Seminars 883,439
Security Services 761,262
Depreciation Expense 3,255,824
Insurance 1,402,874
Legal and Audit Fee 95,000
Bank Charges 443,667
Rent Expense 729,148
Dionation and Contribution 513,000
Taxes and Licenses 723,322
Miscellaneous Expense 885,580
Loss/Theft 17,405
P 35,395,515 P

NOTE 21 : COMPENSATION AND OTHER BENEFITS

This account consists short-term benefits as follows:

Administrative Expenses
2010
Short-term benefits
Salaries and wages 14,761,026
Salaries and wages - 13th Mo. 2,342,388
SSS, PHIC and HDMF contributions 977,866
18,081,280

The Company recognizes a liability net of amounts already paid and an expense for services rendered by employees during
the accounting period. Short-term benefits given by the Company to its employees include salaries and wages, statutory
contributions, short-term compensated absences, bonuses and other monetary benefits.

NOTE 22 : FINANCE COST

2010
Interest Expense P 6,735,613 P
P 6,735,613 P

NOTE 23 : DEPRECIATION
The details of depreciation of the Company are as follows:
Distribution and Selling Administrative Expenses
2010 2009 2010
Transportation Equipment P450,818 P465,159 P - P
Machineries and Equipment - - 2,093,374
Office Equipments - - 280,306
Furnitures and Fixtures - - 260,347
Building - - 247,909
Tools - - 367,674
Store Equipment - - 5,139
P450,818 P465,159 P 3,254,749 P

NOTE 23 : LEASES

The Company entered into a lease contract with a local Company for warehousing, space rental, and photocopier rental for
one (1) year and is renewable upon mutual agreement of both parties.

Rent expense charged against current operations amounted to Php 729,148 and Php 394,377 in 2010 and 2009,
respectively.

NOTE 24 : RELATED PARTY TRANSACTION

A party is related to an entity if:

(a) directly, or indirectly through one or more intermediates, the party:
-controls, is controlled by, or is under common control with, the entity (this includes parents, subsidiaries and fellow
subsidiaries);
-has an interest in the entity that gives it significant influence over the entity; or
-has joint control over the entity;
(b) the party is an associate of the entity;
(c) the party is a joint venture in which the entity is a venture;
(d) the party is a member of the key management personnel of the entity or its parent;
(e) the party is a close member of the family of any individual referred to in (a) or (d);
the party is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting
(f)
power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or
the party is a post-employment benefit plan for the benefit of employees of the entity, or of any
(g) entity that is a related party of the entity.

In the normal course of business, the company has transactions with related parties as described below:

The remuneration of the Directors and other members of key management personnel of the Company are set out below in
aggregate for each of the categories specified in PAS 24," Related Party Disclosure:
a The Company's stockholders made noninterest-bearing deposits to the Company intended to be converted for future
issuances of stocks. As of December 31, 2010, there has not been any application for the increase in the Company's
share capital.

Outstanding balances as a result of the above transactions are as follows:

2010
Due from related parties:
Advances to stockholders P 5,840,017 P
P 5,840,017 P

Remuneration of Key Management Personnel

The remuneration of the Directors and other members of key management personnel are set out below in aggregate:

2010
Short-term P 2,844,740 P
employees
Total P 2,844,740 P
benefits

Transactions between related parties are accounted for at arm's length prices or on terms similar to those offered to non-
related entities in an economically compatible market.

NOTE 24 : MANAGEMENT DECLARATION ON TAXES AND OTHER RELATED INFORMATION

In compliance with Revenue Regulation 15-2010 as required by the BIR, presented below are information on taxes and
licenses:
a. VAT
1. The amount of output VAT declared during the year

Vatable sales P
Zero rated sales
Exempt sales
Total output VAT P

2. The amount of input taxes claimed is as follows:

Beginning of the year P

Current year's domestic purchases/payment for:
Goods for resale/manufacture or further proccessing P
Goods other than for resale
Capital goods subject to amortization
Capital goods not subject to amortization
Services lodged under cost of goods sold
Services lodged under other accounts
Total purchases payments P
Claims for tax credit/refund and other adjustments
Balance at the end of the year P

3. Landed cost of imports P

Tariff fees
Custom duties
Total P

b. Excise Tax
The amount of excise tax /es, clasified per major product category
Tobacco products P
Alcohol products
Automobile
Oil and petroleum products
Total excise taxes P

c. Documentary stamp tax (DST)

Loan intruments P
Shares of stocks
Other items
Total DST P
d. Withholding Taxes
Taxes on compensation and benefits P
Expanded witholding tax
Final witholding tax
Total witholding tax P

e. Other taxes
Real propery tax P
Business lincenses and permits
Community tax certificate
Annual BIR registration fee
Total P

f. Tax Assessments
Period Covered
P

Tax deficiency in under protest and the managemnet believes that the BIR assesments has no merits.

g. Tax Cases

[Discuss case status and the amount involved]

The management believes that the cases has no merits.

1 Output VAT declared for 2010

Account Title Net sales/receipts

Taxable Sales
Sale of goods xxxxxx
Rental income xxxxxx
Total taxable sales xxxxxx
Zero Rated Sales xxxxxx
Exempt Sales xxxxxx
Total xxxxxx

For Company has zero-rated sales pursuant to Section 106(A)(2) or 108(b) of the NIRC? Sales to PEZA registered
companies? Sales to BOI Registered Exporters

The Company has VAT exempt sales pursuant to Section 109 (1)(a,b,c……u.v.) of the NIRC? Sales to senior
citizens?

TRANSITION TO PFRS for SMEs

In compliance with the pronouncements of the FRSC and the regulations of the Securities and Exchange Commission
(SEC), the Company adopted all the relevant PFRSs for SMEs the first time in its financial statements for the year ended
December 31, 2009, with January 1, 2009 as its transition date.

Reconciliation of Equity as of December 31, 2009 and January 1, 2008

There are no differences between statements of changes in equity prepared under PFRS for SMEs and statements of
changes in equity prepared under previous GAAP.

Reconciliation of Comprehensive Income for the year ended December 31, 2009
 There are no differences between statements of comprehensive income prepared under PFRS for SMEs and statements
of comprehensive income prepared under previous GAAP.

(See separate attached schedule)

 2009
23,160,942
-
115,000
-
23,275,942

erest at the respective

cted and immediately

2009

7,506,587
16,922,354

950,068
-
30,525
25,409,534

rmally due in 60

oninterest-bearing and
oyees are subject for

was noted.

2009
37,930,562
1,648,325
10,743,330
50,322,217

nd complete.
,246,402 in 2010 and

for obsolescence was

to complete and sell.

2009
-
157,508
-
157,508

goods and services as

2009

pany after deducting

.

2009
13,952,714
-
-
-
22,637,278
 36,589,992

rmally due within 60

eivables.

munications, light and

g A.

2009
(1,280,895)
(93,752)
(1,374,647)

owing month.

ans payable deducted

YABLE

2009
43,500,000
43,500,000

Planters Development
l fixed interest rate of
al requirements.

ann and Francisco Sy-

Corp. located at Brgy.
ipments owned by 7
nt to the outstanding

ABLE

2009
1,116,444
1,116,444
ment term which bears
ction of building, and

nt to the outstanding

2,009
10,840,017
10,840,017

lders payable in cash

hare capital.

2009

50,000,000

30,000,000
-
30,000,000

ed income.

d capital stock from P

d into 350,000 shares
xchange Commission

2009

298,467,205
3,476,514

783,838
145,193
301,014,688
 15,749,665
47,420,400
1,846,275

124,411,139
7,834,917

42,914,398
13,427,899
51,963,926

10,743,330
37,930,562
1,648,325

2009
196,595
96,318
4,844,642
281,006
465,159
426,943
2,243,560
8,554,223

2009
 11,980,474
648,580
1,184,973
870,594
340,949
525,831
1,491,666
314,482
656,798
2,626,720
1,252,596
149,720
265,423
394,377
285,000
1,127,447
530,342
321,780
24,967,752

ative Expenses
2009

10,022,791
1,235,094
722,589
11,980,474

by employees during
and wages, statutory

2009
4,641,444
4,641,444

ative Expenses
2009
-
2,015,496
 -
363,612
-
247,612
-
2,626,720

hotocopier rental for

in 2010 and 2009,

ubsidiaries and fellow

hich significant voting

w:

are set out below in

onverted for future

e in the Company's

2009

1,084,017
1,084,017
 in aggregate:

2009
1,440,000
1,440,000

se offered to non-

MATION

tion on taxes and

379,642
-
-
379,642

165,419
165,419

459,084

459,084
 1,379,404
2,585,535

3,964,939

50,047
76,215
13,085
500
139,847

Deficiency

Output tax

xxxxxx
xxxxxx
xxxxxx
xxxxxx
xxxxxx
xxxxxx

s to PEZA registered

Sales to senior

ge Commission
for the year ended

s and statements of
SMEs and statements
 TRANSITION TO PFRS

In compliance with the pronouncements of the FRSC and the regulations of the Securities and Exchange Commission (SEC), the Company
adopted all the relevant PFRSs for SMEs the first time in its financial statements for the year ended December 31, 2009, with January 1, 2009 as
its transition date.

Reconciliation of Equity as of December 31, 2009 and January 1, 2009

There are no differences between statements of changes in equity prepared under PFRS for SMEs and statements of changes in equity
prepared under previous GAAP.

Reconciliation of Comprehensive Income for the year ended December 31, 2009
There are no differences between statements of comprehensive income prepared under PFRS for SMEs and statements of comprehensive
income prepared under previous GAAP.
NOTE 8 : PROPERTY, PLANT AND EQUIPMENT

The composition of and movements of this account are as follows:

December 31, 2010
Building and Machineries & Transportation Office Store
Land Tools
Improvements Equipment Equipment Equipment Equipment
Gross carrying amount
Balance at January 1, 2010 10,000,000 6,974,162 11,121,765 4,357,409 2,757,567 - -
Additions - 35,135,030 1,230,687 980,500 835,860 743,243 169,455
Balance at December 31, 2010 10,000,000 42,109,192 12,352,452 5,337,910 3,593,427 743,243 169,455
Accumulated Depreciation and impairment loss
Balance at January 1, 2010 - - 2,890,641 2,857,859 2,222,512 - -
Depreciation during the year - 247,909 2,093,374 450,818 367,674 280,306 5,139
Balance at December 31, 2010 - 247,909 4,984,015 3,308,677 2,590,186 280,306 5,139
Net carrying amount at
December 31, 2010 10,000,000 41,861,283 7,368,437 2,029,233 1,003,241 462,937 164,316

December 31, 2009

Building and Machineries & Transportation Office Store
Land Tools
Improvements Equipment Equipment Equipment Equipment
Gross carrying amount
Balance at January 1, 2009 P0 P0 P 10,869,446 P 2,798,491 P 2,173,232 P0 P0
Additions 10,000,000 6,974,162 252,318 1,558,919 584,335
Balance at December 31, 2009 10,000,000 6,974,162 11,121,765 4,357,410 2,757,567 - -
Accumulated Depreciation and impairment loss
Balance at January 1, 2009 875,145 2,392,700 1,974,900
Depreciation during the year 2,015,496 465,159 247,612
Balance at December 31, 2009 - - 2,890,641 2,857,859 2,222,512 - -
Net carrying amount at
December 31, 2009 P 10,000,000 P 6,974,162 P 8,231,124 P 1,499,551 P 535,055 P 0 P 0

Property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.
Impairment tests performed indicates that there are no property, plant and equipment found impaired.
Furnitures and
Total
Fixtures

2,448,378 37,659,282
747,966 39,842,742
3,196,344 77,502,024

1,730,371 9,701,383
260,347 3,705,568
1,990,718 13,406,951

1,205,626 64,095,073

Furnitures and
Total
Fixtures

P 1,642,819 P 17,483,988
805,559 P 20,175,293
2,448,378 37,659,282

1,366,759 P 6,609,504
363,612 P 3,091,879
1,730,371 9,701,383

P 718,007 P 27,957,899
NOTE 9 : INTANGIBLE ASSETS

The composition of and movements of this account are as follows:

Software Total
Gross carrying amount
Balance at January 1, 2010 - -
Additions 102,264 102,264
Balance at December 31, 2010 102,264 102,264
Balance at January 1, 2010
Amortization during the year 1,075 1,075
Balance at December 31, 2010 1,075 1,075
Net carrying amount at
December 31, 2010 101,189 101,189

Software Total

Gross carrying amount

Balance at January 1, 2009 P0 P0
Additions - P0
Balance at December 31, 2009 - -
Balance at January 1, 2009 - -
Amortization during the year - -
Balance at December 31, 2009 - -
Net carrying amount at
December 31, 2009 P 0 P 0

Intangible assets are measured at cost less accumulated amortization and

any accumulated impairment losses.

Impairment tests performed indicates that there are no intangible assets

found impaired.

There are no intangible assets used as a collateral to any indebtedness.

There are no contractual commitments for the acquisition of intangible
assets.
REYMUNDO CORPORATION
NOTES TO FINANCIAL STATEMENTS
As of December 31, 2009 and for the year ended December 31, 2008

NOTE 1. CORPORATE INFORMATION

Quality Container Corporation (the Company) is a domestic corporation registered with the Securities and
Exchange Commission (SEC) on January 7, 1964. QCC was organize to engage in the business of
manufacturing, selling and distributing wholesale of boxes and containers for use in commerce, made of wood,
paper, metal sheets or other materials, silk screen process, metal lithograph and manufacturing, selling and
distributing on wholesale basis of tin cans of every kind and character for use in the transporting and
preservation of goods in commerce.

The Company's registered address is located at 37 Eulogia Drive, Bo. Kangkong, Quezon City

The financial statements of the Company as of December 31, 2009 were authorized for issue by the Board of
Directors (BOD) on February 23, 2010.

NOTE 2. BASIS OF PREPARATION

The significant accounting policies that have been used in the preparation of these financial statements are
summarized below. The policies have been consistently applied to all years presented, unless otherwise stated.

Basis of Preparation

The company financial statements have been prepared using the measurement basis specified by PFRS for
each type of asset, liability, income and expense. These financial statements have been prepared on the
historical cost basis, except for the revaluation of certain financial assets. The measurement bases are more
fully described in the accounting policies that follow.These financial statements have been prepared on the
historical basis except for the revaluation of certain financial assets. The measurement bases are more fully
described in the accounting policies that follow.

The accompanying financial statements have been prepared on a going concern basis, which contemplate the
realization of assets and settlement of liabilities in the normal course of business.

Functional and Presentation Currency

The financial statements are presented in Philippine peso, which is the functional and presentation currency
under the Philippine Financial Reporting Standards [PFRS]. All values are rounded to the nearest peso, except
when otherwise indicated.The accompanying financial statements have been prepared on a going concern
basis, which contemplate the realization of assets and settlement of liabilities in the normal course of business.

Statement of Compliance
The financial statements of have been prepared in accordance with Philippines Financial Reporting Standards
(PFRSs). PFRSs are adopted by the Financial Reporting Standards Council (FRSC), formerly the Accounting
Standards Council (ASC), from the pronouncements issued by the International Accounting Standards Board
(IASB).

◙ PFRSs - corresponding to International Financial Reporting Standards (IFRSs); and,

◙ Philippine Accounting Standards (PASs) - corresponding to International Accounting Standards (IASs);

and,
◙ International to existing standards - representing interpretations issued by the International Financial
Reporting Interpretations Committee (IFRIC), formerly the Standing Interpretations Committee (SIC), of
the IASB which are adopted by the FRSC.

Adoption of Amended Philippine Accounting Standards (PAS), PFRS and New Philippine
Interpretation International Financial Reporting Interpretations Committee (IFRIC) Interpretation

The Company has adopted the following new and amended PFRS and Philippine Interpretation during the
year. Adoption of these revised standards and interpretation did not have any effect on financial statements of
the Company but give rise to additional disclosures in the financial statements:

a. Amendments to PAS 39 - Financial Instruments: Recognition and Measurement

b. Amendments to PFRS 7 - Financial Instruments: Disclosures
c. IFRIC 11, IFRS 2 - Group and Treasury Share Transactions
c. IFRIC 12 - Service Concession Arrangements
c. IFRIC 13 - Customer
The Limit Loyalty Programmes
on a Defined Benefit Asset, Minimum
d. IFRIC 14, PAS 19 - Funding Requirment and Their Interaction.

The principal effects of these changes, if any, are as follows:

Amendments to PAS 39, Financial Instruments: Recognition and Measurement, and PFRS 7, Financial
Intruments: Disclosures, permits an entity to reclassify non-derivative financial assets, other than those
designated at fair value through profit or loss upon initial recognition, out of the trading category in certain
circumstances. The amendments also permit an entity to transfer from the available-for-sale category to the
loans and receivables category a financial asset that otherwise would have met the definition of loans and
receivables, if the entity has the intention and ability to hold that financial asset for the foreseeable future. The
amendments to PAS 39 are effective from July 1, 2008.
PFRS 7 introduces new disclosures to improve the information about financial instruments. It requires the
disclosure of qualitative and quantitative information about exposure to risk arising from financial instruments,
including specified minimum disclosures about risk, liquidity risk and market risk, It replaces PAS 30,
Disclosures in Financial Statements of Banks and Similar Financial Institutions, and the disclosure
requirements in PAS 32, Financial Instruments: and Presentation. It is applicable to all entities that report
under PFRS.The amendment to PAS 1 introduces disclosures about the impact of PFRS 7 and the amendment
of PAS 1 and expects that the main additional disclosures about the level of an entity's capital and how it
manage capital. The Company is currently assessing the impact of PFRS 7 and the amendment of PAS 1 and
expects that the main additional disclosures will be the sensitivity analysis to market risk and capital disclosure
required bye PFRS 7 and the amendment to PAS 1.

In December 2007, the Financial Reporting Standards Council has approved an amendment to the transistion
provisions of PFRS 7 that gives transitional relief with respect to the presentation of the comparative
information for the new disclosures about the nature and extent of risk arising form financial isntruments under
paragraph 31 to 42 of PFRS 7, unless the disclosure was previously required under PAS 30 and PAS 32. The
Company opted to adopt the transitional relief and presented comparative information. The required new
disclosures are reflected in the financial statements of the Company, where applicable.

Amendment to PAS 1, Presentation of Financial Statements, introduces disclosures about the level of an entity’s capital
and how it manages capital. It requires the following additional disclosures: (a) an entity’s objectives, policies and
processes for managing capital; (b) quantitative data about what the entity regards as capital; (c) whether the entity has
complied with any capital requirements; and (d) if it has not complied, the consequences of such non-compliance. The
information on capital management policies and procedures of the Company is disclosed in Note 6 to the financial
statements.

Philippine Interpretation IFRIC 12, Service Concession Arrangements - The interpretation covers contractual
arrangements arising from private entities providing public services and is not relevant to the Company's
current operations.

Philippine Interpretation IFRIC 13, Customer Loyalty Programmes - The interpretation covers guidelines on
the recognition of loyalty awards credit granted to customers and is not relevant to the Company's current
operations.

Philippine Interpretation IFRIC 14, The Limit on a Defined Benefit Asset, Minimum Funding Requirments and
Their Interaction - The interpretation provideds guidelines on how to assess the limit on the amount of surplus
in a defined benefit scheme that can be recognized as an asset under PAS 19, Employee Benefits. This
interpretation has no impact on the Company's financial statements.
Future Changes in Accounting Policies

The Company has not adopted the following PFRS amendments to existing PAS and Philippine Interpretations
IFRIC which will be effective subsequent to December 31, 2008:

PFRS 8, Operating Segments, (effective January 1, 2009) requires an entity to report financial and
descriptive information about its reportable segments, which are operating segments or aggregations of
operating segments that meet specified criteria. Operating segments are components of an entity about
which separate financial information is available that is evaluated regularly by the chief operating
decision makerin deciding how to allocate resources and in assessing performance. PFRS 8 also
introduces a requirement to disclose information about transactions with major borrowers. If revenues
from transactions with a single external borrower amount to 10% or more of the entity's revenues, the
total amount of revenue from such a borrower and the segment or segments in which those revenues are
reported must be disclosed.

◙
PAS 1 (Revised), Presentation of Financial Statements, (effective January 1, 2009) introduces many
textual changes, including changes to the titles of individual financial statements. The most significant
impacts of the amendments to the Standard are as follows:

a) a new requirement has been introduced to include a balance sheet as at the beginning or the
earliest comparative period whenever an entity restrospectively applies an accounting policy, or
make a retrospective restatement of the items in its financial statements, or when it reclasifies an
item in its financial statements.

b) all items of income and expense (including those accounted for directly in equity) must in future
be presented as either in a single statement (a statement of comprehensive income) or in two
statements (a separate "income statement" and "statement of comprehensive income").

c) entities are no longer permitted to present items of "other comprehensive income" seperately in
the statement of changes in equity. Such non-owner movements must be presented in a statement of
comprehensive income and the total carried to the statement of changes in equity.

d) entities are no longer permitted to present transactions with owners in their capacity as owners in
the notes - the statement of changes in equity must be presented as a separate financial statements;
and

e) new detailed requirements have been introduced regarding the presentation of items of other
comprehensive income.
 ◙
PAS 23 (Revised), Borrowing Costs, (effective January 1, 2009) eliminates the option available under the
previous version of the standard to recognize all borrowing costs immediately as an expense. To the
extent that borrowing costs relate to the acquisition, construction or production of a qualifying asset, the
revised standard requires that they be capitalized as part of the cost of the asset. All other borrowings
costs should be expensed as incurred.

Improvements to Philippine Financial Reporting Standards 2008 discusses 35 amendments and is

divided into two parts: (a) Part I includes 24 amendments that result in accounting changes for
presentation, recognition or measurement purposes; and (b) Part II includes 11 terminology or editorial
amendments that the IASB expects to have either no or only minimal effects on accounting . These
amendments are generally effective for annual periods beginning on or after January 1, 2009

◙
Revised PAS 1, IFRIC 13 and Improvement to Philippine Financial Reporting Standards 2008 will be
effective for financial years beginning January 1, 2009. These revised standard and interpretation are not
expected to have any material effect on the financial statements.

The Company will apply the relevant new accounting standards in 2009 in accordance with the transitional
provisions applicable to the Company. It is currently evaluating the impact of these standards on the financial
statements, and has initially determined that the abovementioned standards and amendments will not
materially affect the financial statements for 2009, as well as for the future periods.

Financial Assets

Financial assets include cash and financial instruments. Financial assets, other than hedging instruments, are
classified into the following categories: financial assets at fair value through profit or loss, loans and
receivables, held-to-maturity investments and available-for-sale financial assets. Financial assets are assigned
to the different categories by management on initial recognition, depending on the purpose of which the
investments were acquired. Except for financial amounts at fair value through profit or loss, the designation of
financial assets is re-evaluated at every reporting date at which date a choice of classification or accounting
treatment is available, subject to compliance with specific provisions of applicable accounting standards.

Cash comprise of cash on hand and non-restricted deposit balances with banks.There are no short term
investment during the year.

Trade and other receivables are stated initially at their nominal value and subsequently measured at amortised
cost as reduced by appropriate allowances for estimated irrevocable amounts. Provision is made when there is
objective evidence that the Company will not be able to collect the debts. Bad debts are written off when
identified.
The allowance for impairment loss is the estimated amount of probable losses arising from non-collection
based on past collection experience and management's review of the current status of the long-outstanding
receivables.

Inventories are assets that are held for sale in the ordinary course of business, in the process of production of
such sales; or in the form of material or supplies to be consumed in the production process.

Inventories shall be measured at lower of cost or net realizable value. The cost of inventories shall comprise all
costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present
location and condition.

The Company uses two methods of accounting for inventory. The first-in, first-out (FIFO) method is used in
accouting its raw materials while the weighted average method is used to account its inventory put into process
and those which are already completed.

Chemical Ink and Supplies are valued at the lower of cost or net realizable value. Cost is determined using the
first-in, first-out method. Net realizable value is the current replacement cost.

All financial assets that are not classified as at fair value through profit or loss are initially recognized at fair
value, plus transaction costs.

The foregoing categories of financial instruments are more fully described below.

◙ Available-for-sale (AFS) financial assets

This includes non-derivative financial assets that are either designated to this category or do not qualify
for inclusion in any of the other categories of financial assets.

All financial assets within this category are subsequently measured at fair value, unless otherwise
disclosed, with changes in value recognized in capital funds, not of any effects arising from income taxes.
Gains and losses arising from securities classified as AFS are recognized in the income statement when
these are sold or when the investment is impaired.

In case of impairment, any loss previously recognized in capital funds is transferred to the income
statement. Losses recognized in the income statement on equity instruments are not reversed through the
income statement. Losses recognized in prior period income statement resulting from the impairment of
debt instruments are reversed through the income statement, when there is recovery in the amount of
previously recognized impairment losses.

The Company has available for sale financial assets

The fair value of quoted investments in active markets are based on current bid prices. If the market for a
financial asset is not active (and for unlisted securities), the Company establishes the fair value by using
valuation techniques, which include the use of recent arm's length transactions, discounted cash flow analysis,
option pricing models and other valuation techniques commonly used by market participants.

Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss
category are included in Trading Gain account in the income statement in the period in which they arise.
Gains or losses arising from changes in fair value of AFS financial assets are recognized directly in capital
funds, until the financial asset is derecognized or impaired at which time the cumulative gain or loss previously
recognized in capital funds shall be recognized in profit or loss. However, interest calculated using the
effective interest method is recognized in the income statement. Dividends on AFS equity instruments are
recognized in the income statement when the entity's right to receive payment is established.

Non-compounding interest and other cash flows resulting from holding impaired financial assets are
recognized in profit or loss when received, regardless of how the related carrying amount of financial assets is
measured.

Derecognition of financial assets occurs when the right to receive cash flows from the financial instruments
expire or are transferred and substantially all of the risks and rewards of ownership have been transferred.

Impairment of Financial Assets

An assessment is made at each balance sheet date to determine whether there is objective evidence that a
financial asset may be impaired. If such evidence exists, any impairment loss is recognized in the income
statement. Impairment is determined as follows:

◙ Assets carried at amortized cost

For assets carried at amortized cost, as the difference between the carrying amounts and the present value
of the estimated future cash flows discounted at the instrument's original effective interest rate.

◙ Assets carried at cost

Financial assets assessed for impairment on a collective basis are grouped based on characteristics relevant to
the determination of the historical loss experience and the estimation of future cash flows for groups of such
assets that is indicative of the debtor's ability to pay all amounts due according to the contractual terms of the
assets being evaluated.
Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current
conditions that did not effect the period on which the historical loss experience is based and to remove the
effects of conditions in the historical period that do not exist currently.

Estimates of changes in future cash flows for groups of assets should reflect and be directionally consistent
with changes in related observable date from period to period. The methodologies and assumptions used for
estimating future cash flows are reviewed regularly by the Company to reduce any differences between loss
estimates and actual loss experience.

The carrying amount of the asset is reduced through use of an allowance account and the amount of the loss is
recognized in the income statement. When a loan or a receivable is uncollectible, it is written off against the
related allowance for impairment and credit losses. A loan or a receivable written off after all necessary
procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of
amounts previously written off reduce the amount of 'Provision for impairment and credit losses' presented in
the income statement. If, in a subsequent year, the amount of the impairment and credit loss decreases and the
decrease can be related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment and credit loss is reduced by adjusting the allowance account. The amount of the
reversal is recognized in the income statement.

Financial Liabilities

Financial liabilities of the Company include accrued taxes and other expenses.

Financial liabilities are recognized when the Company becomes a party to the contractual agreements of the
instrument. All interest related charges are recognized as an expense in the income statement.

Financial liabilites are recognized initially at fair value. Directly attributable transaction costs, if any, are
included in the initial measurement of financial liabilities, except for any financial instruments measured at
FVPL.

Derecognition of Financial Instruments

Financial Asset

A financial asset (or, where applicable a part of a financial asset or part of a group of financial assets) is
determined when:

◙ The rights to receive cash flows from the asset have expired;

◙ The Company retains the right to receive cash flows from the asset, but has assumed as obligation to pay
them in full without material delay to a third party under a “pass-through” arrangement; or
 ◙ The Company has transferred its rights to receive cash flows from the asset and either (a) has transferred
substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained the risk and
rewards of the asset but has transferred the control of the asset.

Where the Company has transferred its right to receive cash flows from an asset and has entered into a pass-
through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the
asset nor transferred control of the asset, the asset is recognized to the extent of the Company's continuing
involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset
is measured at the lower of the original carrying amount of the asset and the maximum amount of
consideration that the Company could be required to repay.

Financial Liability

A financial liability is derecognized when the obligation under the liability is discharges or cancelled or
expired. Where an existing financial liability is replaced by another from the same lender or substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and the recognition of a new liability, and the
difference in the respective carrying amounts is recognized in profit or loss.

Offsetting Financial Instruments

Financial assets and financial liabilities are offset and the net amount reported in the balance sheet if, and only
if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle
on a net basis, or to realize the asset and settle the liability simultaneously.

Properties and Equipment

Properties and equipment are carried at acquisition cost less accumulated depreciation and amortization and
any impairment in value.

The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to
working condition and location for its intended use. Expenditures for additions, major improvements and
renewals are capitalized; expenditures for repairs and maintenance are charged to expense as incurred. When
assets are sold, retired or otherwise disposed of, their cost and related accumulated depreciation and
amortization and any impairment in value are removed from the accounts and any resulting gain or loss is
reflected in the income statement for the period.

Depreciation is computed on the straight-line method over the estimated useful lives of the depreciable assets
as follows:
Years
Buildings and improvements 25
Machineries and equipment 10
Electronics equipment 10
Factory and fixtures 10
Transportation equipment 10
 Office equipment 10
Office furniture and fixtures 02
Leasehold rights and improvements are amortized over the terms of the leases or the estimated useful lives of
the improvements, whichever is shorter.

The residual values and estimated useful lives of properties and equipment are reviewed, and adjusted if
appropriate, at each balance sheet date.

An item of properties and equipment is derecognized upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the item) is
included in the income statement in the period the item is derecognized.

Impairment of Non-Financial Assets

At each balance sheet date, the Company assesses whether there is any indication that its nonfinancial assets
may be impaired. When an indicator of impairment exists or when an annual impairment testing for an asset is
required, the Company makes a formal estimate of recoverable amount. Recoverable amounts is the higher of
an asset's (or cash-generating unit's) fair value less costs to sell and its value in use and is determined for an
individual asset, unless the asset does not generate cash inflows that are largely independent of those from
other assets or groups of assets, in which case the recoverable amount is assessed as part of the cash generating
unit to which it belongs. Where the carrying amount of an asset (or cash-generating unit) exceeds its
recoverable amount, the asset (or cash-generating unit) is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset (or cash-generating unit).

An impairment loss is charged to operations in the year in which it arises, unless the asset is carried at a
revalued amount, in which case the impairment loss is charged to the revaluation increment of the said asset.

For nonfinancial assets, an assessment is made at each balance sheet date as to whether there is any indication
that previously recognized impairment losses may no longer exist or may have decreased. If such indication
exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there
has been a change in the estimates used to determine the asset's recoverable amount since the last impairment
loss was recognized. That increased amount cannot exceed the carrying amount that would have determined,
net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is
recognized in the income statement unless the asset is carried at revalued amount, in which case the reversal is
treated as a revaluation increase. After such reversal, the depreciation expense is adjusted in future years to
allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining
life.

Provisions

Provisions are recognized when present obligations will probably lead to an outflow of economic resources
and these can be estimated reliably even if the timing or amount of the outflow may still be uncertain. A
present obligation arises from the presence of a legal or constructive commitment that has resulted from past
events, for example, legal disputes or onerous contracts.
Provisions are recognized when present obligations will probably lead to an outflow of economic resources
and these can be estimated reliably even if the timing or amount of the outflow may still be uncertain. A
present obligation arises from the presence of a legal or constructive commitment that has resulted from past
events, for example, legal disputes or onerous contracts.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the
most reliable evidence available at the balance sheet date, including risks and uncertainties associated with the
present obligation. Any reimbursement expected to be received in the course of settlement of the present
obligation is recognized, if virtually certain as a separate asset, not exceeding the amount of the related
provision. Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. In addition, long-term provisions
are discounted to their present values, where time value of money is material.

Provisions are reviewed at balance sheet date and adjusted to reflect the current best evidence.

In those cases where there is possible outflow of economic resource as a result of present obligations is
considered improbable or remote, or the amount to be provided for cannot be measured reliably, no liability is
recognized in the financial statements.

Probable inflows of economic benefits that do not yet meet the recognition criteria of an asset are considered
contingent assets, hence, are not recognized in the financial statements.

Trade and Other Payables

Trade and other payables are liabilities to pay for goods or services that have been received or supplied but
have not been paid, invoiced or formally agreed with the supplier, including amounts due to employees. It is
necessary to estimate the amount or timing of accruals, however, the uncertainty is generally much less than
for provisions.

Interest-Bearing Loans and Borrowings

Interest bearing loans and borrowings are bank loans raised for support of long-term funding of operations.
They are recognized at proceeds received, net of direct issue costs. Finance costs, including premiums payable
on settlement or redemption and direct issue costs, are charged to profit or loss on an accrual basis using the
effective interest method and are added to the carrying amount of the instrument to the extent that they are not
settled in the period in which they arise.

After initial measurement, notes payable and similar financial liabilities not qualified as and not designated as
FVPL, are subsequently measured at amortized cost using the effective interest rate method. Amortized cost is
calculated by taking into account any discount or premium on the issue and fees that are integral part of the
effective interest rate.

Borrowing costs are recognized as expenses in the period in which they are incurred.
Share Capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction form the proceeds, net of tax. The costs of acquiring Company’s
own shares are shown as a deduction from equity attributable to the Company’s equity holders until the shares
are cancelled or reissued. When such shares are subsequently sold or reissued, any consideration received, net
of directly attributable incremental transaction costs and the related income tax effects, is included in equity
attributable to the Company’s equity holders.

Revenue and Cost Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and
the revenue can reliably measured. Revenu is measured at the fair value of the consideration received,
excluding discounts, rebates, and other sales taxes or duties.The following specific recognition criteria of
income and expenses must also be met before revenue is recognized:

Sales is recognized upon delivery, shipment and transfer of ownership of the products to the
customers.The price to be paid by the customer is fixed or determinable and the recoverability is
reasonably assured. Generally, there are no formal customer acceptance requirements or future
obligations related to manufacturing services. If such requirement exist, then revenue is recognized at the
time such provisions or requirements are completed and obligations are already filled.

Interest income is recognized as the interest accrues taking into account the effective yield on the asset.

Employees Benefits

◙ Short-term Benefits

The Company recognizes a liability net of amounts already paid and an expense for services rendered by
employees during the accounting period. Short-term benefits given by the Company to its employees
include salaries and wages, social security contributions, short-term compensated absences, profit sharing
and bonuses, non-monetary benefits.

◙ Termination benefits

Termination benefits are payable when employment is terminated by the Company before the normal
retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits.
The Company recognizes termination benefits when it is demonstrably committed to either: (a)
terminating the employment of current employees according to a detailed formal plan without possibility
of withdrawal; or (b) providing termination benefits as a result of an offer made to encourage voluntary
redundancy. Benefits falling due more than 12 months after the balance sheet date are discounted to
present value.
 ◙ Bonus and benefit plans
The Company recognizes a liability and an expense for bonuses and other benefits on the Company's
bonus and benefits policy. The Company recognizes a provision where it is contractually obliged to pay
the benefits.

◙ Compensated absences

Compensated absences are recognized for the number of paid leave days (including holiday entitlement)
remaining at the balance sheet date. These are included in Accrued Interest and Other Expenses account
at the undiscounted amount that the Company expects to pay as a result of the unused entitlement.

Income Taxes

Current tax assets and liabilities comprise those claims from, or obligations to, fiscal authorities relating to the
current or prior reporting period, that are uncollected or unpaid at the balance sheet date. They are calculated
according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable
profit for the period. All changes to current tax assets or liabilities are recognized as a component of tax
expense in the income statement.

Deferred tax is provided, using the balance sheet liability method, on all temporary differences at the tax base
of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all temporary differences for all taxable temporary differences.
Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits
from excess minimum corporate income tax (MCIT) over regular corporate income tax (RCIT) and unused net
operating loss carry over (NOLCO), to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences and carry forward of unused MCIT and unused NOLCO can be
utilized.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that
it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be
utilized. Unrecognized deferred tax assets are reassessed at each balance sheet date and are recognized to the
extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when
the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or
substantively enacted at the balance sheet date.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current
tax assets against current tax liabilities and deferred taxes related to the same taxable entity and the same
taxation authority.
Value-Added Tax

Revenues, expenses and assets are recognized net of the amount of value-added tax except:

◙ Where the value-added tax incurred on a purchase of assets or services is not recoverable from the
taxation authority, in which case the value-added tax is recognized as part of the cost of acquisition
of the asset or as part of the expense item as applicable, and

◙ receivables and payables that are stated with the amount of valued-added tax included.

The net amount of value-added tax recoverable from, or payable to, the taxation authority is included as part of
other current assets or payables in the balance sheets,

Related Parties

Parties are considered related if one party has control, joint control, significant influence over the other party in
making financial and operating decisions. The key management personnel of the Company and post-
employment benefit plans for the benefit of Company’s employees are also considered to be related parties.

Transactions between related parties are accounted for at arm’s-length prices or on terms similar to those
offered to non-related entities in an economically compatible market.

Earnings Per Share (EPS)

Basic earnings per ordinary share is determined by dividing net income by the weighted average number of
ordinary shares subscribed and issued during the period, after retroactive adjustment for any stock dividend
declared in the current period.

Diluted earnings per ordinary share is also computed by dividing net income by the weighted average number
of ordinary shares subscribed and issued during the period. However, net income attributable to ordinary
shares and the weighted number of ordinary shares outstanding are adjusted to reflect the effects of potentially
dilutive convertible loan and stock option plan granted by the Company to the qualified officers. Convertible
loan is deemed to have been converted into ordinary shares at the start of the conversion period. The stock
option plan is deemed to have been converted into ordinary share in the year the stock option plan is granted.

Subsequent Events

The Company identifies subsequent events as events that occurred after the balance sheet date but before the
date when the financial statements were authorized for issue. Any subsequent events that provide additional
information about the Company’s financial position at the balance sheet date are reflected in the financial
statements.
NOTE 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Critical Accounting Estimates and Assumptions

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual returns. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below.

◙ Fair value of financial assets and liabilities

Where the fair values of financial assets and liabilities recorded on the balance sheet cannot derive from
active markets, they are determined using a variety of valuation techniques that include the use of
mathematical models. The input to these models is taken from observable markets where possible, but
where this is not feasible, a degree of judgment is required in establishing fair values.

◙ Fair value measurement

The methods used by the Company in estimating the fair value of the financial instruments are:

(a) Cash
The carrying amounts of cash on hand and in banks are assumed to approximate their fair values.
This assumption is applied to liquid assets and the short-term elements of all other financial assets.

(b) Trade and other receivables

Trade and other receivables are net of provisions for impairment. The estimated fair value of trade
and other receivables represents the discounted amount of estimated future cash flows expected to
be received. Expected cash flows are discounted at current market rates to determine fair value.

(c) Trade and other payables / Accrued expenses/Advances from stockholders

Current liabilities are stated at amounts reasonably expected to be paid within the next twelve
months or within the Company's operating cycle. In the case of Advances from stockholders, the
fair value approximates the carrying amount.

(d) Interest-bearing loans and borrowings

The fair value of fixed interest bearing loans is based on the discounted value of future cash flows
using applicable rates for similar types of loans ( see note 13 ).
 The following table summarizes the carrying amounts and fair values of those financial assets and
liabilities in 2009 and 2008.

2009 2008
Carrying Value Fair Value Carrying Value Fair Value
Financial Assets:
Cash P 4,289,266 P 4,289,266 P 4,195,786 P 4,195,786
Trade and other receivables 49,158,368 49,158,368 66,954,012 66,954,012
Financial Liabilities:
Trade and other payables 45,160,534 45,160,534 16,672,870 16,672,870
Interest-bearing loans and
borrowings 38,609,900 38,609,900 90,000,000 90,000,000

◙ Useful life of property, plant and equipment

The Company estimates the useful lives of properties and equipment based on the period over which the
asset are expected to be available for use. The estimated useful lives of properties and equipment are
reviewed periodically and are updated if expectations differ from previous estimates due to physical wear
and tear, technical or commercial obsolescence and legal or other limits on the use of the assets.

In addition, estimation of the useful lives of properties and equipment is based on collective assessment
of industry practice, internal technical evaluation and experience with similar assets. It is possible,
however, that future results from operations could be materially affected by changes in estimates brought
about by changes in factors mentioned above. The amounts and timing or recorded expenses for any
period would be affected by changes in these factors and circumstances. A reduction in the estimated
useful lives of properties and equipment would increase recorded operating expenses and decrease non-
current assets.

Properties and equipment net of accumulated depreciation, amortization and impairment losses amounted
to P 27,912,006.00 and P 30,330,500.00 as of December 31, 2009 and 2008, respectively, in the financial
statements (Note 9).

Critical Accounting Judgments

In the process of applying the Company's accounting policies, management has made the following judgments,
apart from those involving estimation, which have the most significant effect on the amounts recognized in the
financial statements:
◙ Recognition of deferred tax asset

Significant estimates are required in determining the provision for income taxes. There are many
transactions and calculations for which the ultimate tax determination is uncertain during the ordinary
course of business. The Company recognized liabilities for anticipated tax audit issues based on
estimates of whether additional taxes will be due. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the income tax and
deferred tax provision in the year in which such determination is made. Accordingly, deferred tax asset
is reviewed at each balance sheet date to determine its recoverability. For this purpose, management
performs an assessment based on the projection of taxable profits and the reversal of temporary
differences. Any portion of deferred tax assets not covered by the future taxable profits is written down.

◙ Impairment of non-financial assets

The Company assesses impairment on assets whenever events or changes in circumstances indicate that
the carrying value of an asset may not be recoverable. The factors that the Company considers important
which could trigger an impairment review include the following:

> Significant underperformance relative to expected historical or projected future operating results;

> Significant changes in the manner of use of the acquired assets or the strategy for overall business;
and

> Significant negative industry to economic trends.

An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable
amount. The recoverable amounts is the value in use. Recoverable amount are estimated for individual
assets or, of it is not possible, for the cash-generating unit to which the asset belongs.

As of December 31, 2009 and 2008, no impairment loss on properties and equipment was recognized.

◙ Provisions and contingencies

Judgment is exercised by management to distinguish between provisions and contingencies. Policies on

recognition and disclosure of provision and disclosure of contingencies are discussed in Note 2.