ALTERRA CAPITAL PARTNERS, INC. (Formerly: iRipple, Inc.) AND SUBSIDIARYPRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITIONSeptember 30, 2016(In Philippine Peso)

NOTES

Philab Industries,

Inc.

Alterra Capital

Partners, Inc.

Total Before Pro Forma

AdjustmentsPro Forma

Adjustments Pro Forma

Consolidated

A S S E T S

Current AssetsCash and cash equivalents 9 159,343,124 27,358,719 186,701,843 (22,900,000) 163,801,843 Trade and other receivables 10 844,825,517 - 844,825,517 - 844,825,517 Inventories 11 141,714,780 - 141,714,780 - 141,714,780 Prepayments and other current assets 12 85,556,341 524,080 86,080,421 - 86,080,421

1,231,439,762 27,882,799 1,259,322,561 (22,900,000) 1,236,422,561

Non-current AssetsProperty, plant and equipment – net 14 67,198,716 - 67,198,716 - 67,198,716 Investment in joint venture 13,19 42,130,924 - 42,130,924 - 42,130,924 Deferred tax asset 30 610,055 1,668,062 2,278,117 - 2,278,117 Goodwill - 675,272,687 675,272,687 Other non-current assets 15 8,516,500 - 8,516,500 - 8,516,500

118,456,195 1,668,062 120,124,257 675,272,687 795,396,944

TOTAL ASSETS 1,349,895,957 29,550,861 1,379,446,818 652,372,687 2,031,819,505

Current LiabilitiesTrade and other payables 16 738,774,067 1,549,605 740,323,672 - 740,323,672 Due to a related party 19 3,849,402 - 3,849,402 - 3,849,402 Income tax payable 53,466,130 - 53,466,130 - 53,466,130

796,089,599 1,549,605 797,639,204 - 797,639,204

Non-current LiabilitiesLoans payable 17 337,644,539 - 337,644,539 837,100,000 1,174,744,539 Retirement benefit obligation 27 10,815,828 - 10,815,828 - 10,815,828 Deferred tax liability – net 30 410,338 - 410,338 - 410,338 Other non-current liability 18 7,324,064 - 7,324,064 - 7,324,064

356,194,769 - 356,194,769 837,100,000 1,193,294,769

TOTAL LIABILITIES 1,152,284,368 1,549,605 1,153,833,973 837,100,000 1,990,933,973

Capital Stock 20 37,639,100 15,569,015 53,208,115 (37,639,100) 15,569,015

Share Premium 20 37,399,000 13,928,475 51,327,475 (37,399,000) 13,928,475

Unappropriated Retained Earnings 71,616,034 (1,496,234) 70,119,800 (71,616,034) (1,496,234)

Appropriated Retained Earnings 21 50,000,000 - 50,000,000 (50,000,000) -

Remeasurements 27 957,455 - 957,455 (957,455) -

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY 197,611,589 28,001,256 225,612,845 (197,611,589) 28,001,256

Noncontrolling interest - - - 12,884,276 12,884,276

TOTAL STOCKHOLDERS' EQUITY 197,611,589 28,001,256 225,612,845 (184,727,313) 40,885,532

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 1,349,895,957 29,550,861 1,379,446,818 652,372,687 2,031,819,505

(See Notes to Pro Forma Consolidated Financial Statements)

LIABILITIES AND STOCKHOLDERS' EQUITY

L I A B I L I T I E S

S T O C K H O L D E R S ' E Q U I T Y

ALTERRA CAPITAL PARTNERS, INC. (Formerly: iRipple, Inc.) AND SUBSIDIARYPRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the Perido Ended September 30, 2016(In Philippine Peso)

NOTES Philab

Industries, Inc.

Alterra Capital

Partners, Inc.

Total Before Pro Forma

AdjustmentsPro Forma

Adjustments Pro Forma

Consolidated

REVENUE 22 637,754,652 - 637,754,652 - 637,754,652

COST OF SALES 23 414,116,240 - 414,116,240 - 414,116,240

GROSS PROFIT 223,638,412 - 223,638,412 - 223,638,412

OTHER INCOME 24 782,044 268,121 1,050,165 - 1,050,165

224,420,456 268,121 224,688,577 - 224,688,577

OPERATING EXPENSES 25 100,815,612 1,128,127 101,943,739 - 101,943,739

OTHER EXPENSES 26 16,406,794 - 16,406,794 - 16,406,794

PROFIT (LOSS) BEFORE TAX 107,198,050 (860,006) 106,338,044 - 106,338,044

INCOME TAX EXPENSE (BENEFIT) 29 36,994,770 (332,511) 36,662,259 - 36,662,259

PROFIT 70,203,280 (527,495) 69,675,785 - 69,675,785

(See Notes to Pro Forma Consolidated Financial Statements)

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ALTERRA CAPITAL PARTNERS, INC. (Formerly: iRipple, Inc.) AND SUBSIDIARY

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS September 30, 2016

1. CORPORATE INFORMATION

Alterra Capital Partners, Inc. (the “ACPI“ or “Company”) is a service and trading corporation incorporated and registered with the Philippine Securities and Exchange Commission (SEC) on November 21, 2000. The Company’s primary purpose is to engage in the business of a holding company by buying and holding shares of other companies, whether common, preferred, treasury, founders or other kinds of shares, either by subscribing to the unissued shares of the capital stock in public or private offering or by purchasing the shares of other stockholders by way of assignment in private sale; to invest in the stock or equity of other companies; to acquire rights in the stock of other companies by way of sake, pledge, chattel mortgage or assignment; to sell, dispose, assign, pledge or convey any or all or its shareholdings in other companies in favor of qualified persons by way of private sale, assignment or other form of private conveyance, all in accordance with the Corporation Code, the Securities Regulation Code and other applicable laws and regulations; to vote its shareholdings in other companies and exercise all the rights of a shareholder under the Corporation Code and applicable laws provided that it will not act as stockbroker or dealer of securities.

The Company started its commercial operations in January 2002. The Company is substantially owned by Filipino individuals and the control rests with the members of the Board.

The Company’s registered office address is located at 8th floor, 1128 38th Avenue, Fort Bonifacio Global City, Taguig City, Metro Manila.

1.01 Status of Operations

On August 25, 2009, the Company completed its Initial Public Offering (IPO) of 4,579,122 new ordinary shares (approximately 29.41% of the total outstanding ordinary shares) at an offer price of P4.37 per share for a total gross proceeds of P19,987,444.

At the special meeting of the Board of Directors (BOD) on May 28, 2015, the following amendments on the Articles of Incorporation (AOI) were unanimously approved:

a. The name of the Corporation shall be Alterra Capital Partners, Inc.

b. The primary purpose of the Corporation is to engage in the business of a holding company by buying and holding shares of other companies, whether common, preferred, treasury, founders or other kinds of shares, either by subscribing to the unissued shares of the capital stock in public or private offering or by purchasing the shares of other stockholders by way of assignment in private sale; to invest in the stock or equity of other companies; to acquire rights in the stock of other companies by way of sake, pledge, chattel mortgage or assignment; to sell, dispose, assign, pledge or convey any or all or its shareholdings in other companies in favor of qualified persons by way of private sale, assignment or other form of private conveyance, all in accordance with the Corporation Code, the Securities Regulation Code and other applicable laws and regulations; to vote its shareholdings in other companies and exercise all the rights of a shareholder

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under the Corporation Code and applicable laws provided that it will not act as stockbroker or dealer of securities.

c. The principal office of the Corporation is to be established at 2286 Pasong Tamo Extension, Makati City.

At the special meeting of the BOD held on June 22, 2015, the BOD authorized to reduce the par value of its shares from one peso per share (P1/sh) to five centavos per share (P0.05/sh), resulting in the increase in the number of its shares from 20,000,000 shares to 400,000,000 shares.

The Company entered into various sale and assignment of assets and assumption of liabilities with Movmento, Inc., a corporation organized and existing under the laws of the Philippines. The following are the transactions that transpired during the year:

1. On March 5, 2015, the Company entered into a “Deed of sale of assets with assumption of liabilities”. The Company, the “Seller” is the owner of various assets and likewise the obligor for various accounts payable, accrued expenses and other liabilities incurred in relation to the use of the said assets. Movmento, Ins., the “Buyer” has offered to acquire the assets and assume its related liabilities. The Company accepted the said offer for the consideration and under the terms and conditions set forth.

Therefore, for and in consideration of the foregoing premises and the covenants contained, the parties agreed as follows:

a. For and in consideration of the total sum of P21,052,143, purchase price, broken down into cash in the amount of P30,181,618 and the acceptance and assumption by the buyer of the assumed liabilities in the total amount of P9,129,475, receipt of which is acknowledged by the seller and the assumption of which liabilities is confirmed by the buyer, the seller absolutely and unconditionally assigns, cedes, conveys and transfers to the buyer, and the buyer purchases, acquires and accepts from the seller, any and all of the seller’s rights, title, interest and obligations of the seller in and to the assets and assumed liabilities.

The carrying amounts of the assets sold are as follows:

Trade and other receivables: Trade P 15,407,554 Less: Allowance for doubtful accounts (705,347) Due from a related party 5,098,769 Accrued revenue 3,072,095 Advances to officers and employees 1,497,181 Reimbursable from clients 947,598 Accrued interest 41,564 Others 802,072 P 26,161,486

Finance lease receivables 2,143,195 2,143,195 Inventories: Merchandise inventory 1,165,531 Leased asset inventory 252,643 1,418,174

Other current assets: Prepaid rent 1,552,817 Security deposits 239,328 SSS claims 10,350 1,802,495

Deferred tax assets 987,330 987,330

P 32,512,680 P 32,512,680

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The carrying amounts of the liabilities assumed are as follows:

Trade and other payables: Accounts payable P 1,389,593 P Customer's deposit 4,355,543 Accrued expenses 492,478 Interest payable 144,137 Payable to employees 77,493 Other payable 147,185 6,606,429

Finance lease obligations 887,349 887,349 Retirement benefit obligation 1,562,495 1,562,495

Deferred tax liability 73,202 73,202

P 9,129,475 P 9,129,475

b. The buyer expressly acknowledges that it is aware of the value, nature, status and condition of the assets which it hereby accepts “as-is/where-is”. It is therefore, expressly understood that the seller makes no representation or warranty of any kind with respect to the assets.

c. The purchase price stated above is exclusive of the applicable of twelve percent (12%) value-added tax (VAT), which shall be borne by the buyer.

d. The seller represents and warrants unto the buyer that it is the owner of the subject property; it has full and legal capacity to execute this deed and to transfer in full to the buyer, all of its rights, title and interest in and to the subject property, and that the subject property is free from any liens and encumbrances.

2. On March 5, 2015, the Company “Seller” entered into a “Deed of absolute sale of equipment, furniture and fixtures” with Movmento, Inc., “Buyer”. The Company is the owner of certain equipment and furniture and fixtures and has offered to sell the same to Movmento, Inc. The buyer agreed to purchase the equipment and furniture and fixtures and clear of all liens and encumbrances subject to the terms and conditions of the deed.

Therefore, for and in consideration of the foregoing premises and the covenants contained, the parties hereby agree as follows:

a. For and in consideration of the amount of P1,537,004 (inclusive of VAT), receipt and sufficiency of which are acknowledged by the seller. The seller shall sell, assign and transfer to the buyer all its rights, title and interests in the equipment and furniture and fixtures free and clear of all liens and encumbrances.

b. Seller shall cooperate with purchaser in providing necessary information and on performing promptly any and all acts as may be necessary in order to effectuate the transfer of the equipment and furniture and fixtures to buyer.

c. Any VAT, income tax and capital gains tax which may be due on the sale of the machinery and equipment shall be for the account of the buyer. Any documentary stamp tax which may be due on the sale of the equipment and furniture and fixtures shall be for the account of the buyer.

4

The carrying amounts of the equipment and furniture and fixtures sold are as follows:

Computer P 714,054 Office equipment 280,997 Leasehold improvement 207,911 Furniture and fixtures 169,363

P 1,372,325

3. On March 5, 2015, the Company (the “Seller”) entered into a “Deed of sale of motor vehicles” with Movmento, Inc. “Buyer” for a total consideration of P1,184,217. The buyer agreed to purchase the motor vehicles clear of all liens and encumbrances subject to the terms and conditions of the deed.

4. On March 5, 2015, the Company “Assignor” entered into a “Deed of assignment of subscription” with Movmento, Inc. “Assignee” for a consideration of P13,488. The Company unconditionally and irrevocably assigns, transfers and conveys, all its rights, interests and obligations in and obligations in and to its entire subscription consisting of 1,000 shares (“Assigned Shares”), with par value of one (1) Malaysian Ringgit per share in iRipple Sdn Bhd, a corporation duly organized and existing under and by virtue of the laws in Malaysia.

Moreover, the Company’s investment with Auto Top-Up Ventures, Inc. (ATVI) was also assigned with Movmento, Inc. for a total consideration of P126,000. The Company unconditionally and irrevocably assigns, transfers and conveys, all its rights, interests and obligations in and obligations in and to its investment.

5. On March 6, 2015, the Company “Assignor” entered into an “Assignment of Application for registration of trademark/tradename” with Movmento “Assignee”. The assignor owns the trademarks of “Ripple and Logo” and “Barter” which are registered before the Intellectual Property Office of the Philippines. The assignee acquires all the rights, title and interest in and to the trademarks for the amount of P1 receipt.

As of March 12, 2015, the Bidder agreed to purchase all the rights, title and interest of certain majority shareholders of the Company (collectively, the “Private Shareholder”) representing 89.49% of the Company issued and outstanding capital stock.

The Bidder proposes to acquire, under the same terms, through a mandatory tender offer (the “Tender Offer”) in accordance with Section 19 of the Securities Regulation Code (“SRC”) and applicable rules and regulations the remaining 10.50% of the Company’s issued and outstanding common stock held by the public.

After the acquisition, the Bidder intends to amend the Articles of Incorporation of the Company to change its corporate name and to change its primary purpose to allow it to acquire, hold, encumber or dispose of properties, real and personal. The Bidder is contemplating investing, through the Company, in various industries.

The Bidder has no plans of causing any class of equity securities of the Company, which is listed on the PSE to be delisted. The tender offer is being conducted in order to comply with SRC rule 19 and other applicable laws and with the intention of retaining the status of the Company as a PSE listed Company.

The bidder has no intention to cause the Company to no longer be subject to the reporting requirements of SRC Rule 17.

5

Under a Sale and Purchase Agreement dated August 12, 2016 executed by and among Conrado Rafael C. Alcantara, Alfonso S. Anggala and Start Alliance Securities Corp. (the “selling shareholders”), on one hand, and Genomics, Inc. and Hector Thomas A. Navasero (the “buyers”), on the other, the selling shareholders agreed to sell, assign, transfer and convey to the buyers, and the buyers agreed to purchase, acquire and accept from the selling shareholders, all of the rights, title and interest of the selling shareholders in and to Two Hundred Eight Million Six Hundred Twenty-Four Thousand and Eight Hundred and One (208,624,801) common shares representing approximately 67% of the outstanding capital stock of the Company. This agreement to sell and purchase the Company’s shares was made subject to the completion of certain conditions precedent, including the completion of a mandatory tender offer for all of the remaining shares of the Company, the price at which the selling shareholders agreed to sell, and the buyers agreed to purchase, the Company shares is the aggregate amount of Three Hundred Sixty-Two Million Three Hundred Twenty-Four Thousand Nine Hundred Sixty One and 21/100 Pesos (P362,324,961.21) or One and 74/100 (P1.74) per share.

On October 11, 2016, following the completion of the mandatory tender offer by the buyers and to all shareholders of the Company, a total of Two Hundred Eight Thousand Six Hundred Thirty Five Eight Hundred One (208,635,801) common shares of the Company (inclusive of the common shares that were tendered) were acquired by Hector Thomas A. Navasero and Genomics, Inc. As a result of the said acquisition, the buyers acquired approximately 67% of the outstanding capital stock of the Company, as disclosed in Note 34.

In consonance with such change in control, during the meeting of the BOD on September 14, 2016, as well as the annual stockholders meeting on October 20, 2016, the BOD and stockholders representing atleast 2/3 of the outstanding capital stock approved the following resolutions, as disclosed in Note 34:

a. acquisition by the Company of up to 361,390 outstanding shares of Philab Industries, Inc. (“PII”), representing approximately 100% of Philab’s outstanding shares,

b. issuance of shares of the Company to existing shareholders or new investors, either out of its unissued capital or increase in capital, and

c. delegation of authority to amend/repeal the Amended By-Laws or adopt new By-Laws to the BOD

Also, the following amendments on the AOI were approved by the stockholders on October 20, 2016, as disclosed in Note 34:

a. The name of the Corporation shall be Philab Holdings Corp.

b. The secondary purpose of the Corporation to include the power to guarantee the obligation of any person, firm or entity in which the Corporation may have lawful interest.

c. Transfer Company’s principal office address to 8th floor, 1128 38th Avenue, Fort Bonifacio Global City, Taguig City, Metro Manila.

d. Increase par value from P0.05 per share to P0.25 per share.

e. To include new provision as the Eleventh (11th) Article pertaining to the denial of pre-emptive rights of the stockholders.

f. Increase authorized capital stock from Twenty Million Pesos (P20,000,000.00) to up to Two Billion Pesos (P2,000,000,000.00).

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Items b, c, d and e from the above were certified by the SEC on December 12, 2016, as disclosed in Note 34.

The above resolutions and amendments on the AOI, taken together, if and when fully implemented, will result in the backdoor listing of Philab Industries.

On December 19, 2016, the Company acquired Three Hundred Fifty One Thousand Seven Hundred Forty (351,740) shares, representing 93.43% of the total outstanding capital stock of Philab at the price of P2,445 per share or the aggregate price of Eight Hundred Sixty Million Pesos (P860,000,000.00), as disclosed in Note 34.

As further disclosed in Note 34, on December 19, 2016, the Company entered into subscription agreements with certain subscribers who subscribed to its increase in capital stock. Such subscribers include some of the selling shareholders of Philab, as well as non-related or affiliated subscribers to ensure continued compliance with the minimum public ownership requirement. The increase in capital stock of the Company is still currently in process with the SEC.

2. PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS ASSUMPTIONS

2.01 Objective of the Pro Forma Consolidated Financial Statements

The objectives of this pro forma financial information is to show what the significant effects of the historical financial information might have been had the pooled economic business components been combined on September 30, 2016. However, the pro forma financial information is not necessarily indicative of the results of operations or related effects in the financial position that would have been attained had the above mentioned transaction actually occurred earlier.

The pro forma consolidated financial information reflects the pro forma adjustments to present the significant effects of the following historical transactions based on the assumption that the foregoing occurred prior to September 30, 2016.

2.01.01 Omnibus Loan and Security Agreement with Altus Capital Corporation

In the special meeting of the BOD of the Company held on December 15, 2016, the BOD approved and authorized the Company (as borrower) to enter into an omnibus loan and security agreement with Altus Capital Corporation for the amount of P400,000,000.00 to be repaid within 30 months with interest at a rate of 15% per annum. The purpose of the loan is, among others, for working capital requirements.

The pro forma consolidated financial information presents the related effects of the above loan on September 30, 2016.

2.01.02 Loan Agreement with Various Non-Bank Entities

On January 2017, the Company entered into a loan agreement with various non-bank entities, for an aggregate amount of P437,100,000.00 maturing on August 15, 2017 with interest at a rate of 5% per annum plus 10% term premium. The purpose of the loan is, among others, for working capital requirements.

The pro forma consolidated financial information presents the related effects of the above loan on September 30, 2016.

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2.01.03 ACPI’s Acquisition of PII’s certain outstanding shares

On December 19, 2016, the Company acquired Three Hundred Fifty One Thousand Seven Hundred Forty (351,740) shares, representing 93.48% of the total outstanding capital stock of Philab at the price of P2,445 per share or the aggregate price of Eight Hundred Sixty Million Pesos (P860,000,000.00), as disclosed in Note 32.

The pro forma consolidated financial information presents the related effects of the above acquisition on September 30, 2016.

The pro forma consolidated financial information also gives effect to the elimination of intercompany transactions and balances of the entity acquired included in the pro forma consolidation as of September 30, 2016.

2.02 Management Assumptions in Developing Pro Forma Adjustments

The Management assumes that the following transactions which have occurred or were planned to occur and recognized subsequent to September 30, 2016, have instead occurred on September 30, 2016 as these transactions have considerable impact on the assumed assets of the Company and its subsidiary.

x the Company have already received proceeds from the availed loans on September 30, 2016; and

x The Company acquired ownership interest in PII on September 30, 2016.

2.03 Pro Forma Adjustments

Proforma adjustments were made to the September 30, 2016 historical consolidated financial information of the Company and its acquired subsidiary, which include the following:

x recognition of the proceeds received from the availed loans;

x recognition of identified assets and liabilities of PII and the related operations as well as the accumulated retained earnings as of September 30, 2016. The difference between the balances of the asset acquired and liabilities assumed was recognized in retained earnings;

x elimination of intercompany and inter-business transactions and account balances

3. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

The Philippine Financial Reporting Standards Council (FRSC) approved the issuance of new and revised Philippine Financial Reporting Standards (PFRS). The term “PFRS” in general includes all applicable PFRS, Philippine Accounting Standards (PAS), and Interpretations issued by the Philippine Interpretations Committee (PIC), Standing Interpretations Committee (SIC) and International Financial Reporting Interpretations Committee (IFRIC) which have been approved by the FRSC and adopted by SEC.

These new and revised PFRS prescribe new accounting recognition, measurement and disclosure requirements applicable to the Company. When applicable, the adoption of the new standards was made in accordance with their transitional provisions, otherwise the adoption is accounted for as change in accounting policy under PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.

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3.01 New and Revised PFRSs Applied with No Material Effect on the Financial Statements

The following new and revised PFRSs have also been adopted in these financial statements. The application of these new and revised PFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements.

x Amendments to PFRS 10, PFRS 12 and PAS, 28 Investment Entities: Applying the Consolidation Exception

The amendments confirm that the exemption from preparing consolidated financial statements for an intermediate parent entity is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all of its subsidiaries at fair value.

In addition, it clarifies that a subsidiary that provides services related to the parent's investment activities should not be consolidated if the subsidiary itself is an investment entity.

Moreover, it clarifies that when applying the equity method to an associate or a joint venture, a non-investment entity investor in an investment entity may retain the fair value measurement applied by the associate or joint venture to its interests in subsidiaries.

And, an investment entity measuring all of its subsidiaries at fair value shall provide the disclosures relating to investment entities as required by PFRS 12.

The amendments are effective for annual periods beginning on or after 1 January 2016 and must be applied retrospectively. Earlier application is permitted.

x PFRS 11, Joint Arrangements – Accounting for Acquisitions of Interests in Joint Operations

Amendments in PFRS 11 require an acquirer of an interest in a joint operation in which the activity constitutes a business to apply the accounting principles and disclosure requirements in PFRS 3 and other PFRS for business combinations. This is applicable in initial acquisition and acquisition of initial interest in a joint operation. This is applicable prospectively to annual periods beginning January 1, 2016.

x PFRS 14, Regulatory Deferral Accounts

PFRS 14 issued on January 30, 2014, provides temporary guidance for first-time adopters of PFRS on accounting for regulatory deferral account balances. Regulatory deferral account balances are describe as amounts of expense or income that would not be recognized as assets or liabilities in accordance with other Standards, but that qualify to be deferred because the amount is included, or is expected to be included, by the rate regulator in establishing the price(s) that an entity can charge to customers for rate-regulated goods or services.

PFRS 14 permits an entity that adopts PFRS to continue to use, in its first and subsequent PFRS financial statements, its previous generally accepted accounting principles (GAAP) accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances without specifically considering the requirements of paragraph 11 of PAS 8. PFRS 14 requires entities to present regulatory deferral account balances as separate line items in the statement of financial position and to present movements in those account

9

balances as separate line items in the statement of profit or loss and other comprehensive income. PFRS 14 also requires specific disclosures to identify the nature of, and risks associated with, the rate regulation that has resulted in the recognition of regulatory deferral account balances in accordance with this Standard.

PFRS 14 is effective for a period beginning on or after January 1, 2016. Earlier application is permitted.

x Amendments to PAS 1, Disclosure Initiative

The amendments clarify that information should not be obscured by aggregating or by providing immaterial information. Materiality considerations shall apply to all parts of the financial statements even if when a standard requires a specific disclosure.

In addition, the amendments introduce a clarification that the list of line items to be presented in the statement of financial position and statement of comprehensive income can be disaggregated and aggregated as relevant. Also, it clarifies that an entity's share of other comprehensive (OCI) of equity-accounted associates and joint ventures should be presented in aggregate as single line items based on whether or not it will subsequently be reclassified to profit or loss.

Further, the amendments add additional examples of possible ways of ordering the notes to clarify that understandability and comparability should be considered when determining the order of the notes. The IASB also removed guidance and examples with regard to the identification of significant accounting policies that were perceived as being potentially unhelpful.

x PAS 16, Property, Plant and Equipment and PAS 38, Intangible Assets – Clarification of Acceptable Methods of Depreciation and Amortization

The amendments clarify that revenue-based depreciation is not appropriate for property, plant and equipment. Revenue-based amortization is allowed only when the intangible assets are expressed as a measure of revenue or when it can be demonstrated that revenue and the consumption of economic benefits of the intangible asset are highly correlated. This is effective prospectively from January 1, 2016. Earlier application is permitted.

x PAS 27, Separate Financial Statements – Equity Method in Separate Financial Statements

The amendments in PAS 27 permit an entity to account its investments in subsidiaries, joint ventures and associates using the equity method as described in PAS 28 in its separate financial statements. The amendments shall be applied for annual periods beginning January 1, 2016 retrospectively. Earlier application is permitted.

x Improvements to PFRS (2014) – Effective for annual periods beginning on or after January 1, 2016. Earlier application is permitted.

PFRS 5, Non-current Assets Held for Sale and Discontinued Operations – The amendments require that an asset reclassified directly from being held sale to being held for distribution, or directly from being held for distribution to being held for sale, the requirements for classification, presentation and measurement shall continue to be applied in accordance with this standard

10

PFRS 7, Financial Instruments: Disclosure – The amendments clarify that the right to service a financial asset transferred may be retained for a fee that is included in the servicing contract. The right to earn a fee for servicing the financial asset is generally continuing involvement for the purpose of applying the disclosure requirements. The service contract must be assessed to determine whether there is a continuing involvement in the financial asset transferred.

Further, the additional disclosure required by amendments to PFRS 7, Disclosure –Offsetting Financial Assets and Financial Liabilities is not specifically required for all interim periods. For condensed financial interim financial statements, the disclosure requirements are required to be given if the financial statements are prepared in accordance with PAS 34, Interim Financial Reporting when the inclusion would be required by the standard.

PAS 19, Employee Benefits – It clarifies that the high quality corporate bonds used to estimate the discount rate for post-employment benefit obligations should be denominated in the same currency as the liability and that the depth of the market for high quality corporate bonds should be assessed at the currency level.

PAS 34, Interim Financial Reporting – It clarifies that information shall be disclosed either in the notes to the interim financial statements or elsewhere in the interim financial report, by incorporating cross-reference from the interim financial statements to the other part of the interim financial report which is available to users on the same terms as the interim financial statements and at the same time.

x PIC Q&A No. 2015-01 Conforming Changes in PIC Q&As – Cycle 2015

This Q&A No. 2015-01 sets out the amendments to certain PIC Q&As. These changes are made as a consequence of the issuance of new Philippine Financial Reporting Standards (PFRS) and amendments to certain existing PFRS that are effective as of January 1, 2013.

3.02 New and Revised PFRSs in Issue but Not Yet Effective

The Company will adopt the following standards and interpretations enumerated below when they become effective. Except as otherwise indicated, the Company does not expect the adoption of these new and amended PFRS, to have significant impact on the financial statements.

3.02.01 Standard Adopted by FRSC and Approved by the Board of Accountancy (BOA)

x PFRS 9, Financial Instruments – Hedge Accounting and Amendments to PFRS 9, PFRS 7 and PAS 39 (2013)

PFRS 9 (2013) includes the new hedge accounting requirements that align hedge accounting more closely with risk management, establish a more principle-based approach to hedge accounting and address inconsistencies and weaknesses in the hedge accounting model in PAS 39. One of the significant changes is that inclusion of non-financial items into the type of transactions eligible for hedge accounting, provided that the risk component is separately identifiable and reliably measurable. Entities were given an accounting policy choice between applying the hedge accounting requirements of PFRS 9 and continuing to apply the hedge accounting requirements in PAS 39. Also, the disclosure on hedge accounting and risk management disclosures were improved.

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PFRS 9 (2013) does not have a mandatory effective date, early application is permitted.

x PFRS 9, Financial Instruments (2014)

PFRS 9, amended on July 24, 2014, made limited amendments to the requirements for classification and measurement of financial assets and requirements for impairment.

The amendments introduce a ‘fair value through other comprehensive income’ measurement category for particular simple debt instruments. Also it introduced impairment requirements relating to the accounting for an entity’s expected credit losses on its financial assets and commitments to extend credit. These requirements eliminate the threshold that was in PAS 39 for the recognition of credit losses. Under the impairment approach in PFRS 9 it is no longer necessary for a credit event to have occurred before credit losses are recognized. Instead, an entity always accounts for expected credit losses, and changes in those expected credit losses. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition and, consequently, more timely information is provided about expected credit losses.

PFRS 9 supersedes PFRS 9 (2009), PFRS 9 (2010) and PFRS 9 (2013) and is effective retrospectively for annual periods beginning on or after January 1, 2018, with earlier application permitted.

x PFRS 10, Consolidated Financial Statements and PAS 28, Investments in Associates and Joint Ventures – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The amendments clarify the treatment of the sale or contribution of assets between an investor and its associate and joint venture. This requires an investor in its financial statements to recognize in full the gains and losses arising from the sale or contribution of assets that constitute a business while recognize partial gains and losses if the assets do not constitute a business (i.e. up to the extent only of unrelated investor share).

On January 13, 2016, the FRSC decided to postpone the original effective date of January 1, 2016 of the said amendments until the IASB has completed its broader review of the research project on equity accounting that may result in the simplification of accounting for such transactions and of other aspects of accounting for associates and joint ventures.

x PFRS 16, Leases

Introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.

On the other hand, it substantially carries forward the lessor accounting requirements in PAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.

Effective for annual periods beginning on or after January 1, 2019, however, earlier application is not permitted until the FRSC has adopted the new revenue recognition standard.

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x IFRIC 15, Agreements for the Construction of Real Estate

The Interpretation addresses how entities should determine whether an agreement for the construction of real estate is within the scope of PAS 11, Construction Contracts, or PAS 18, Revenue, and when revenue from the construction of real estate should be recognized. The requirements have not affected the accounting for the Company’s construction activities.

Effectivity of this interpretation has been deferred until the final Revenue standard is issued by International Accounting Standards Board (IASB), and an evaluation of the requirements of the final Revenue standard against the practices of the Philippine real estate industry is completed.

x Amendments to PAS 7, Disclosure Initiative

The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash charges.

Effective for annual periods beginning on or after January 1, 2017 and shall be applied prospectively, with earlier application permitted.

x Amendments to PAS 12, Recognition of Deferred Tax Assets for Unrealized Losses

The amendments clarify that unrealized losses on debt instruments measured at fair value in the financial statements but at cost for tax purposes can give rise to deductible temporary differences.

In addition, these clarify that the carrying amount of an asset does not limit the estimation of probable future taxable profits and that when comparing deductible temporary differences with future taxable profits, the future taxable profits excludes tax deductions resulting from the reversal of those deductible temporary differences.

Effective for annual periods beginning on or after January 1, 2017 and shall be applied retrospectively, with earlier application permitted.

3.02.02 Standard Adopted by FRSC but pending for Approval of the BOA

x Amendments to PFRS 2, Classification and Measurement of Share-based Payment Transactions

The amendments clarify the accounting for the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and modification to the terms and conditions of share-based payment transactions that will result to change in classification from cash-settled to equity-settled.

The amendments are effective for annual periods beginning on or after January 1, 2018. Retrospective application is permitted if elected for all of the aforementioned amendments and other criteria are met.

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x PIC Q&A No. 2016-02 PAS 32 and PAS 38 – Accounting Treatment of Club Shares Held by an Entity

A proprietary club share entitles the shareholder to a residual interest in the net assets upon liquidation which justifies that such instrument is an equity instrument and thereby qualifies as a financial asset to be accounted for under PAS 39, Financial Instruments: Recognition and Measurement.

A non-proprietary club share, though an equity instrument in its legal form, is not an equity instrument in the context of PAS 32. Furthermore, it does not entitle the holder to a contractual right to receive cash or another financial asset from the issuing corporation. The holder of the share, in substance, only paid for the privilege to enjoy the club facilities and services but not for ownership of the club. In such case, the holder must account for the share as an intangible asset under PAS 38.

4. BASIS FOR THE PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS

4.01 Statement of Compliance

The consolidated pro forma financial statements of the Company and its subsidiary (the “Group”) have been prepared in conformity with Philippine Financial Reporting Standards (PFRS) and are under the historical cost convention, except for certain financial instruments that are carried either at fair value or at amortized cost, and inventories carried at net realizable value.

4.02 Functional and Presentation Currency

Items included in the financial statements of the Group are measured using Philippine Peso (P), the currency of the primary economic environment in which the Group operates (the “functional currency”).

The Group chose to present its financial statements using its functional currency.

5. BASIS OF CONSOLIDATION AND COMPOSITION OF THE GROUP

5.01 Basis of Consolidation

The pro forma consolidated financial statements incorporate the financial statements of the Company and the acquired subsidiary. Control is achieved when the Company has power over the investee, is expose, or has rights, to variable returns from its involvement with the investee, and has the ability to use its power to affect its returns.

The Company reassess whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of these three elements of control. When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally.

The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give power, including:

x the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of other vote holders;

x potential voting rights held by the Company, other vote holders or other parties;

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x rights arising from other contractual arrangements; and

x any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time the decisions need to be made, including voting patterns from previous shareholders’ meetings.

5.02 Composition of the Group

Details of the Company’s subsidiary as of September 30, 2016 are as follows:

The significant financial information on the financial statements of the subsidiary of the Company as of and for the period ended September 30, 2016 are shown below. The Summarized financial information below represents amounts before intra group eliminations.

5.02.01 Philab Industries, Inc. (PII)

PII was incorporated and registered with the Philippine Securities and Exchange Commission (SEC) on February 19, 1980 under SEC Registration Number 91302.

The principal activities of the Company are to manufacture, sell, export, import and otherwise deal in all kinds and classes of scientific, medical, educational, electronics, laboratory, research, testing and measuring machineries, equipment, apparatus, furniture and fixtures, including their accessories, attachments and spare parts, as well as in any and all articles, goods, wares and merchandise or kindred nature.

The PII’s registered office address is located at 7487 Bagtikan Street, San Antonio Village, Makati City.

The significant information on the reviewed financial statements of PII as of and for the period ended September 30, 2016 are as follows:

2016

Financial Position: Current Assets P 1,231,439,762 Non-current Assets 118,456,195 Total assets 1,349,895,957

Current Liabilities 796,089,599 Non-current Assets 356,194,769

Total liabilities 1,152,284,368 Equity 197,611,589

Results of operations:: Revenue 637,754,652 Cost and expenses 467,517,804 Profit 70,203,280

6. SIGNIFICANT ACCOUNTING POLICIES

Principal accounting and financial reporting policies applied by the Group in the preparation of its financial statements are enumerated below and are consistently applied to all the years presented, unless otherwise stated.

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6.01 Financial Assets

Financial assets are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.

Financial assets that are subsequently measured at cost or at amortized cost, and where the purchase or sale are under a contract whose terms require delivery of such within the timeframe established by the market concerned are initially recognized on the trade date.

Financial assets are classified into the following specified categories: financial assets at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

The Group’s financial assets include cash and cash equivalents, trade and other receivables, performance bond and refundable deposits presented under prepayments and other current assets and hold-out deposit presented other non-current assets.

6.01.01 Effective Interest Method

The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating finance income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts, through the expected life of the debt instrument, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.

6.01.02 Amortized Cost

Amortized cost is computed using the effective interest method less any allowance for impairment and principal repayment or reduction. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of effective interest rate.

6.01.03 Cash and cash equivalents

Cash includes cash on hand measured at face value and cash deposits held at call with bank that are subject to insignificant risk of change in value. This shall be measured at undiscounted amount of the cash or other consideration expected to be paid or received.

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with maturities of three (3) months or less from the date of acquisition and that are subject to an insignificant risk of change in value.

6.01.04 Trade and Other Receivables

Trade and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and other receivables are measured at amortized cost using the effective interest method, less any impairment. Finance income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

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6.01.05 Impairment of Financial Assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

Objective evidence of impairment could include:

x significant financial difficulty of the issuer or counterparty; or

x default or delinquency in interest or principal payments; or

x it becoming probable that the borrower will enter bankruptcy or financial re-organization; or

x the lender, for economic or legal reasons relating to the borrower’s financial difficulty, grants the borrower a concession that the lender would not otherwise consider; or

x the disappearance of an active market for that financial asset because of financial difficulties; or

x observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group, including (i) adverse changes in the payment status of borrowers in the group (e.g. an increased number of delayed payments or an increased number of credit card borrowers who have reached their credit limit and are paying the minimum monthly amount); or (ii) national or local economic conditions that correlate with defaults on the assets in the group (e.g. an increase in the unemployment rate in the geographical area of the borrowers, a decrease in property prices for mortgages in the relevant area, a decrease in oil prices for loan assets to oil producers, or adverse changes in industry conditions that affect the borrowers in the group).

Other factors may also be evidence of impairment, including significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the issuer operates.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of thirty (30) to sixty (60) days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.

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If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

6.01.06 Derecognition of Financial Assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.

6.02 Prepayments and Other Current Assets

Prepayments and other current assets represent expenses not yet incurred but already paid in cash. These are initially recorded as assets and measured at the amount of cash paid. Subsequently, these are charged to profit or loss as they are consumed in operations or expire with the passage of time.

Prepayments and other current assets are classified in the statement of financial position as current assets when the expenses related to these are expected to be incurred within one year or the Group’s normal operating cycle whichever is longer. Otherwise, these are classified as non-current assets. This account consists of advances to suppliers, input VAT, performance bond, creditable VAT withholding, refundable deposits, prepaid rent, deferred input tax, excess tax credit and others alike.

6.03 Interests in Joint Arrangement

A joint arrangement is a contractual arrangement whereby the Group and other parties have agreed sharing of control of an arrangement, which exist only when decisions about relevant activities require the unanimous consent of the parties sharing. The sharing of control is also known as joint control. A joint arrangement can either be a joint venture or a joint operation.

6.03.01 Joint Venture

A joint venture is a joint arrangement whereby the Group and other parties that have joint control of the arrangement have rights to the net assets of the arrangement. The Group reports its interests in a joint venture using equity method, except when the investment is classified as held for sale, in which case it is accounted for in accordance with PFRS 5, Non-current Assets Held for Sale and Discontinued Operations.

Under the equity method, an investment in joint venture is initially recognized in the statement of financial position at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate. When the Group’s share of losses of a joint venture exceeds the Group’s interest in that joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint venture), the Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the

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Group has incurred legal or constructive obligations or made payments on behalf of the joint venture.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the joint venture recognized at the date of acquisition is recognized as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

Where the Group transacts with its jointly controlled entities, unrealized profits and losses are eliminated to the extent of the Group’s interest in the joint venture.

When the equity method is discontinued Group recognizes its retained interest at fair value. The difference between the carrying amount of the investment at the time the equity method was discontinued and the fair value of retained interest plus any proceeds from disposing of a part of interest is recognized in profit or loss. Amounts that were previously recognized in other comprehensive income in relation to the investment are accounted on the basis as would have been required if the investee had directly disposed of the related assets or liabilities.

The requirements of PAS 39 are applied to determine whether it is necessary to recognize any impairment loss with respect to the Group’s investment in joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with PAS 36, Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with PAS 36 to the extent that the recoverable amount of the investment subsequently increases.

6.04 Inventories

Inventories are stated at the lower of cost or net realizable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are determined using the first-in, first-out (FIFO) method. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

When the net realizable value of the inventories is lower than the cost, the Group provides for an allowance for the decline in the value of the inventory and recognizes the write-down as an expense in the statement of comprehensive income. The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, is recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs.

When inventories are sold, the carrying amount of those inventories is recognized as an expense in the period in which the related revenue is recognized.

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6.05 Property, Plant and Equipment

Property, plant and equipment are initially measured at cost. The cost of an asset consists of its purchase price and costs directly attributable to bringing the asset to its working condition for its intended use. Subsequent to initial recognition property, plant and equipment are carried at cost less accumulated depreciation and accumulated impairment losses.

Subsequent expenditures relating to an item of property, plant and equipment that have already been recognized are added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Group. All other subsequent expenditures are recognized as expenses in the period in which those are incurred.

Major spare parts and stand-by equipment qualify as property, plant and equipment; when the Group expects to use them during more than one period. Similarly, if the spare parts and servicing equipment can be used only in connection with an item of property, plant and equipment, they are accounted for as property, plant and equipment.

Depreciation is computed on the straight-line method based on the estimated useful lives of the assets as follows:

Factory warehouse 20 years Building and improvements 15 years Transportation equipment 5 years Machines, tools and equipment 5 years

Stand-by equipment is depreciated from the date it is made available for use over the shorter of the life of the stand-by equipment or the life of the asset the stand-by equipment is part of while major spare parts are depreciated over the period starting when it is brought into service, continuing over the lesser of its useful life and the remaining expected useful life of the asset to which it relates.

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, if there is an indication of a significant change since the last reporting date.

An item of property, plant and equipment is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of a property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in profit or loss.

6.06 Impairment of Assets

At each reporting date, the Group assesses whether there is any indication that any assets other than inventories and financial assets that are within the scope of PAS 39, Financial Instruments: Recognition and Measurement may have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

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Recoverable amount is the higher of fair value less costs to sell and value in use. 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 for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognized as an expense.

When an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized as an income.

6.07 Borrowing Costs

All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

6.08 Financial Liabilities and Equity Instruments

6.08.01 Classification as Debt or Equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements.

6.08.02 Financial Liabilities

Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.

The Group’s financial liabilities include trade and other payables (except for due to government agencies), due to a related party, loans payable, other non-current liability.

6.08.03 Other Financial Liabilities

Other financial liabilities are initially measured at fair value inclusive of directly attributable transaction costs.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with finance cost recognized on an effective yield basis.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating finance cost over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

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6.08.04 Derecognition of Financial Liabilities

The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or expired. When an existing liability is replaced by another from the same lender on 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. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

6.08.05 Equity Instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs.

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 from the proceeds, net of tax.

6.09 Employee Benefits

6.09.01 Short-term Benefits

The Group 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 Group to its employees include salaries and wages, SSS, PhilHealth, and Pag-ibig contributions and other employee benefits.

6.09.02 Post-employment Benefits

The Group has an unfunded and non-contributory defined benefit retirement plan. This benefit defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The cost of providing benefits is determined using the Projected Unit Credit Method which reflects services rendered by employees to the date of valuation and incorporates assumptions concerning employees’ projected salaries. Post-employment expenses include current service cost, past service cost, and net interest on defined benefit asset/liability. Remeasurements which include cumulative actuarial gains and losses, return on plan assets, and changes in the effects of asset ceiling are recognized directly in other comprehensive income and is also presented under equity in the separate statement of financial position.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in OCI in the period in which they arise.

Past-service costs are recognized immediately in profit or loss.

The liability recognized in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period. The defined benefit obligation is calculated annually by an independent actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government securities, equity securities and other securities that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.

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6.10 Provisions and Contingencies

Provisions are recognized when the Group has a present obligation, whether legal or constructive, as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

6.11 Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

The gross inflows of economic benefits include amounts collected on behalf of the principal and which do not result in increases in equity for the Group. The amounts collected on behalf of the principal are not revenue. Instead, revenue is the amount of commission.

6.11.01 Sale of Goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

x the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

x the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

x the amount of revenue can be measured reliably;

x it is probable that the economic benefits associated with the transaction will flow to the Group; and

x the costs incurred or to be incurred in respect of the transaction can be measured reliably.

ACPI derives its revenue from sale of goods encompasses sale of hardware and point-of-sale (POS) software.

PII derives its revenue from sale of goods pertains to sale of manufactured and purchased classes of scientific, medical, educational, electronics, laboratory, research, testing and measuring machineries, equipment, apparatus, furniture and fixtures, including their accessories, attachments and spare parts, as well as in any and all articles, goods, wares and merchandise.

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6.11.02 Rendering of Services

Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract. Revenue from rendering of services is recognized when all the following conditions are satisfied:

x the amount of revenue can be measured reliably;

x it is probable that the economic benefits associated with the transaction will flow to the Group;

x the stage of completion of the transaction can be measured reliably; and

x the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

ACPI derives its revenue from service pertains to installation, check-ups and repairs and maintenance of machineries, equipment and apparatus sold.

PII derives its revenue from rendering of services encompasses sale of licenses, implementation and the maintenance fees of Barter™ MMS, and sale of customized POS software for a specified customer.

6.11.03 Finance Income

Finance income is recognized when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Finance income is accrued on a time proportion basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

6.12 Expense Recognition

Expense encompasses losses as well as those expenses that arise in the course of the ordinary activities of the Group.

The Group recognizes expenses in the statement of comprehensive income when a decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably.

6.13 Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

6.13.01 The Group as a Lessee

Assets held under finance leases are initially recognized as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statements of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss.

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Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

6.14 Foreign Currency Transactions and Translation

In preparing the financial statements of the Group, transactions in currencies other than the Group’s functional currency, i.e. foreign currencies, are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date.

Exchange differences are recognized in profit or loss in the period in which they arise.

6.15 Related Parties and Related Party Transactions

A related party is a person or entity that is related to the Group that is preparing its financial statements. A person or a close member of that person’s family is related to Group if that person has control or joint control over the Group, has significant influence over the Group, or is a member of the key management personnel of the Group or of a parent of the Group.

An entity is related to the Group if any of the following conditions applies:

x The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

x One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

x Both entities are joint ventures of the same third party.

x One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

x The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group. If the Group is itself such a plan, the sponsoring employers are also related to the Group.

x The entity is controlled or jointly controlled by a person identified above.

x A person identified above has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

x Management entity providing key management personnel services to a reporting entity.

Close members of the family of a person are those family members, who may be expected to influence, or be influenced by, that person in their dealings with the Group and include that person’s children and spouse or domestic partner; children of that person’s spouse or domestic partner; and dependents of that person or that person’s spouse or domestic partner.

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A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged.

6.16 Taxation

Income tax expense represents the sum of current and deferred tax.

6.16.01 Current Tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

6.16.02 Deferred Tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally 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 Carryover (NOLCO), to the extent that it is probable that taxable profits will be available against which those deductible temporary differences and carry forward of unused MCIT and unused NOLCO can be utilized. Deferred income tax, however, is not recognized when it arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction that affects neither the accounting profit nor taxable profit or loss.

Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets arising from deductible temporary differences are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

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6.16.03 Current and Deferred Tax for the Period

Current and deferred tax are recognized as an expense or income in profit or loss, except when they relate to items that are recognized outside profit or loss, whether in other comprehensive income or directly in equity, in which case the tax is also recognized outside profit or loss.

6.17 Events after the Reporting Period

The Group identifies subsequent events as events that occurred after the reporting period but before the date when the financial statements were authorized for issue. Any subsequent events that provide additional information about the Group’s position at the reporting period, adjusting events, are reflected in the financial statements, while subsequent events that do not require adjustments, non-adjusting events, are disclosed in the notes to financial statements when material.

7. CRITICAL ACCOUNTING JUDGMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTIES

In the application of the Group’s accounting policies, which are described in Note 4, Management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

7.01 Critical Judgment in Applying Accounting Policy

The following is the critical judgment, apart from those involving estimations that Management has made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognized in financial statements.

7.01.01 Assessment of Principal-Agency Arrangement

Commission income includes only the gross inflows of economic benefits received and receivable by the entity on its own account. Amounts collected on behalf of third parties such as sales taxes, goods and services taxes and value added taxes are not economic benefits which flow to the entity and do not result in increases in equity. Therefore, they are excluded from commission income. The Group is in an agency relationship where the gross inflows of economic benefits include amounts collected on behalf of the principal and which do not result in increases in equity for the entity. The amounts collected on behalf of the principal are not revenue. Instead, revenue is the amount of commission income.

In 2016, the Group assessed that it is acting as an agent in some of its transactions with clients recognizing indent commission amounting to P677,790, as disclosed in Note 24.

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7.02 Key Sources of Estimation Uncertainties

The following are the key assumptions concerning the future, and other key sources of estimation uncertainties at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

7.02.01 Estimating Inventories at Net Realizable Values

Net realizable values of inventories are assessed regularly based on the prevailing selling prices of inventories less estimated costs to sell. The Group recognizes expense and provides allowance for decline in value of inventories whenever net realizable value of inventories becomes lower than cost due to damage, physical deterioration, obsolescence, changes on price levels or other causes. Inventory items identified to be obsolete and unusable is written off and charged against allowance account. Increase in the net realizable values will increase the carrying amount through reduction of allowance for decline but only to the extent of original acquisition cost.

The net realizable values of the inventories approximate their carrying amounts; thus, no impairment losses were recognized for the period. As of September 30, 2016, the carrying amount of inventories amounted to P141,714,780, as disclosed in Note 11.

7.02.02 Reviewing Residual Values, Useful Lives and Depreciation Method of Property, Plant and Equipment

The residual values, useful lives and depreciation method of the Group’s property, plant and equipment are reviewed at least annually, and adjusted prospectively if appropriate, if there is an indication of a significant change in, how an asset is used; significant unexpected wear and tear; technological advancement; and changes in market prices since the most recent annual reporting date. The useful lives of the Group’s assets are estimated based on the period over which the assets are expected to be available for use. In determining the useful life of an asset, the Group considers the expected usage, expected physical wear and tear, technical or commercial obsolescence arising from changes or improvements in production, or from a change in the market demand for the product or service output and legal or other limits on the use of the Group’s assets. In addition, the estimation of the useful lives is based on Group’s collective assessment of industry practice, internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of property and equipment would increase the recognized operating expenses and decrease non-current assets. The Group uses a depreciation method that reflects the pattern in which it expects to consume the asset’s future economic benefits. If there is an indication that there has been a significant change in the pattern used by which the Group expects to consume an asset’s future economic benefits, the Group shall review its present depreciation method and, if current expectations differ, it shall change the depreciation method to reflect the new pattern.

In 2016, Management assessed that there were no changes from the previous estimates. As of September 30, 2016 the carrying amount of property, plant and equipment amounted to P67,198,716, as disclosed in Note 14.

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7.02.03 Asset Impairment

The Group performs an impairment review when certain impairment indicators are present. In determining the fair values of property, plant and equipment which requires the determination of future cash flows expected to be generated from the continued use and ultimate disposition of such assets requires the Group to make estimates and assumptions that can materially affect the financial statements. Future events could cause the Group to conclude that property and equipment and intangible asset are impaired. Any resulting impairment loss could have a material adverse impact on the financial condition and results of operations.

The preparation of the estimated future cash flows involves significant judgment and estimations. While the Group believes that its assumptions are appropriate and reasonable, significant changes in the assumptions may materially affect the assessment of recoverable values and may lead to future additional impairment charges under PFRS.

In 2016, the Group assessed there was no indicator of impairment existed on its property, plant and equipment. As of September 30, 2016, the carrying amount of property, plant and equipment amounted to P67,198,716, respectively, as disclosed in Note 14.

7.02.04 Estimating Allowance for Doubtful Accounts

Allowance for doubtful accounts is maintained at a level considered adequate to provide for potential uncollectible receivables. The Group estimates the allowance for doubtful accounts related to its trade and other receivables and due from related parties receivables based on assessment of specific accounts where the Group has information that certain customers and related parties are unable to meet their financial obligations. In these cases, judgment used was based on the best available facts and circumstances including but not limited to, the length of relationship with the customer and related parties, the age of the receivables and the current credit status based on third party credit reports and known market factors. The Group used judgment to record specific allowance for customers and related parties against amounts due to reduce the expected collectible amounts. This specific allowance is re-evaluated and adjusted as additional information received impacts the amounts estimated.

The amounts and timing of recorded expenses for any period would differ if different judgments were made or different estimates were utilized. An increase in the allowance for doubtful accounts would increase the recognized operating expenses and decrease current assets.

In both years, Management believes that the recoverability of its receivables was certain; thus, no allowance for doubtful accounts was recognized. As of September 30, 2016, the carrying amount of trade and other receivables amounted to P844,825,517, as disclosed in Note 10.

7.02.05 Post-employment Benefits

The determination of the retirement obligation and cost and other retirement benefits is dependent on the selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions include among others, discount rates, mortality of plan members and rates of compensation increase. In accordance with PFRS, actual results that differ from the assumptions and the effects of changes in actuarial assumptions are recognized directly as remeasurements in other comprehensive income. While the Group believes that the assumptions are reasonable and

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appropriate, significant differences in the actual experience or significant changes in the assumptions may materially affect the pension and other retirement obligations.

As of September 30, 2016, the carrying amount of the Group’s recognized retirement benefit obligation amounted to P10,815,828 as disclosed in Note 27. Retirement benefit expense recognized in 2016 amounted to P2,033,518 as disclosed in Notes 25 and 27. Remeasurement gain recognized in OCI amounted to nil in 2016, as disclosed in Note 27.

8. SEGMENT INFORMATION

In prior periods, segment information reported externally was analyzed on the basis of the types of goods supplied and services provided by the Group’s operating divisions. However, information reported to the Group’s chief operating decision maker for the purposes of resource allocation and assessment of segment performance is more specifically focused on the types of products and services delivered or provided. The Group’s reportable segments under PFRS 8 are as follows:

8.01 ACPI

8.01.01 Products and Services from which Reportable Segments Derive their Revenues

Retail Solutions Sale of licenses, implementation and the maintenance fees of Barter™ MMS the ACPI’s packaged software solution.

Third Party Transactions Sale of hardware and (Point of Sale) POS software. Special Projects Sale of customized POS Software for a specified

customer and such cannot be sold or offered to other clients

8.01.02 Segment Revenue and Results

In 2016, the ACPI has no revenue earned in all its reportable segments.

The Segments’ loss and the ACPI’s loss are reconciled as follows:

2016

Retail Solutions P - Third Party Transactions - Special Projects - Total for continuing operations - Other income 268,121 Operating expenses (1,128,127) Income tax benefit 332,511

Loss P (527,495)

The accounting policies of the reportable segments are the same as the Group‘s accounting policies disclosed in Note 4. Segment profit represents the profit earned by each segment without allocation of other income, operating expenses, and income tax benefit. This is the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

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8.01.03 Segment Assets and Liabilities

2016 Segment Assets Retail Solutions P 27,358,719 Third Party Transactions - Special Projects -

Total segment assets - Unallocated 2,192,142

Total assets P 29,550,861

Segment Liabilities Retail Solutions P - Third Party Transactions - Special Projects -

Total segment liabilities - Unallocated 1,549,605

Total liabilities P 1,549,605

For the purpose of monitoring segment performance and allocating resources between segments:

x All assets are allocated to reportable segments other than deferred tax assets, advances to officers and employees, SSS claims and tax credits; and

x All liabilities are allocated to reportable segments other than accrued expenses, due to government institutions, retirement benefit obligation, deferred tax liability, income tax payable, dividends payable and other payables.

8.01.04 Other Segment Information

In 2016, ACPI did not incur cost of sales and services.

8.02 PII

8.02.01 Products and Services from which Reportable Segments Derive their Revenues

Tools and equipment Tools used for educational purpose including other equipment.

Diagnostics Tools used for health care. Genomics DNA sequencing and genetic mapping related to certain

diseases.

The following are information regarding PII‘s reportable segments.

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8.02.02 Segment Revenue and Results

The following is an analysis of the PII‘s revenue and results from continuing operations by reportable segment:

2016

Segment Revenue Segment Cost Segment Profit

Tools and equipment P 558,631,438 P 369,600,401 P 189,031,037 Diagnostics 79,123,214 44,515,839 34,607,375 Genomics - - -

Total P 637,754,652 P 414,116,240 P 223,638,412

The Segments’ profit and the PII’s profit are reconciled as follows:

2016

Tools and equipment P 189,031,037 Diagnostics 34,607,375 Genomics -

Total for continuing operations 223,638,412 Other income 782,044 Operating expenses 100,815,612 Other expenses 16,406,794 Income tax expense 36,994,770

Profit P 70,203,280

Revenue reported above represents revenue generated from external customers. There were no inter-segment sales in 2016.

The accounting policies of the reportable segments are the same as the Group’s accounting policies disclosed in Note 6. Segment profit represents the profit earned by each segment without allocation of other income, operating expenses, other expenses and income tax expense. This is the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

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8.02.03 Segment Assets and Liabilities

2016 Segment Assets Tools and equipment P 1,309,874,679 Diagnostics - Genomics 40,021,278

Total segment assets 1,349,895,957 Unallocated -

Total assets P 1,349,895,957

Segment Liabilities Tools and equipment P 1,152,284,368 Diagnostics - Genomics -

Total segment liabilities 1,152,284,368 Unallocated -

Total liabilities P 1,152,284,368

8.02.04 Other Segment Information

Details about other segment information are as follows:

2016 Cost of Sales: Tools and equipment P 365,698,576 Diagnostics 44,515,839 Genomics -

410,214,415

Cost of Services: Tools and equipment 2,418,915 Diagnostics - Genomics -

P 2,418,915

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9. CASH AND CASH EQUIVALENTS

For the purpose of the pro forma consolidated financial statements, cash and cash equivalents include cash on hand, in banks and short-term deposits.

Cash and cash equivalents at the end of each reporting period as shown in the consolidated statements of cash flows can be reconciled to the related items in the consolidated statements of financial position as follows:

2016 Cash on hand P 281,205 Cash in banks 134,079,792 Cash equivalents 29,440,846

P 163,801,843

The effective interest rates on bank deposits range 0.25% to 0.56% per annum in 2016. Cash equivalents include short-term placements with effective interest rate ranging from 1% to 1.60% in 2016. The short-term placements pertain to special deposit accounts in various banks with maturity dates of thirty-six (36) days or less.

Aggregate finance income earned from cash in banks and cash equivalents amounted to P355,527 in 2016, as disclosed in Note 24.

In 2015, the Group has a restricted cash balance amounting to P8,516,500 in one of its local banks as disclosed in Note 15.

10. TRADE AND OTHER RECEIVABLES

The Group’s trade and other receivables consist of:

2016 Trade receivables P 842,135,434 Advances to officers and employees 2,616,483 Others 73,600

P 844,825,517

Trade receivables represent the amounts owed to the Group from the sale of goods and services particularly life sciences and diagnostics.

Advances to officers and employees pertain to money advanced to officers and employees in connection with their official functions.

The average credit period on sales of goods and services is thirty (30) to sixty (60) days. No interest is charged on trade receivables. Allowance for doubtful accounts is recognized against trade receivables which the Group assesses to be long outstanding and based on estimated irrecoverable amounts determined by reference to past default experience of the counterparty and an analysis of the counterparty’s current financial position. The Group has not recognized allowance for doubtful receivables because there has not been a significant change in credit quality and the amounts are still considered highly recoverable.

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Trade receivables disclosed include amounts which are past due at the end of the reporting period but against which the Group has not recognized an allowance for doubtful receivables because there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral or other credit enhancements over these balances nor does it have a legal right of offset against any amounts owed by the Group to the counterparty.

Ageing of accounts that are past due but not impaired is as follows:

2016

1 – 30 days P 71,032,117 31 – 60 days 1,955,732 61 – 90 days 24,069,017 over 90 days 39,185,970

P 136,242,836

In determining the recoverability of trade and other receivable, the Group considers any change in the credit quality of its trade and other receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, Management believes that there is no credit provision is required in excess of the allowance for doubtful accounts to be recognized in both years.

11. INVENTORIES

Details of the Group’s inventories, as disclosed in Note 23 are as follows:

2016

Raw materials P 9,579,884 Work-in-process 24,339,789 Finished goods 22,523,644

56,443,317 Retail goods 85,271,463

P 141,714,780

The cost of inventories recognized as an expense amounted to P411,697,325 in 2016, as disclosed in Note 23.

All inventories are expected to be realized within twelve (12) months from the end of each reporting period.

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12. PREPAYMENTS AND OTHER CURRENT ASSETS

The details of the Group’s prepayments and other current assets are shown below:

2016

Advances to suppliers P 46,424,268 Input VAT 23,607,674 Performance bond 4,430,950 Creditable VAT withholding 3,735,867 Refundable deposits 3,472,220 Prepaid rent (Note 28) 3,267,600 Excess tax credit 387,567 Others 754,275

P 86,080,421

Advances to suppliers pertain to down payments or advance payments for the purchases made during the period.

On April 26, 2016, the Company received the Notice of Award for the result of the Competitive Bidding for the Procurement of Dengue Rapid Test with the Department of Health under IB No. 2016 - 037 with a contract price of P88,618,000, inclusive of local taxes. The contract requires the payment of performance bond equivalent to 5% of the contract price or P4,430,950.

Refundable deposits pertain to amount given by the Company in relation to the lease and container deposits. Out of the total balance of refundable deposits in 2016, P1,945,000 pertains to security deposits, as disclosed in Note 28.

13. INVESTMENTS IN JOINT VENTURES

13.01 Consortium of BF and Philab Industries Inc

The Group entered to an investment in joint venture in Consortium of BF and Philab Industries Inc. (the “Joint Venture”). The Joint Venture was incorporated and registered with the Philippine Securities and Exchange Commission (SEC) on June 27, 2016 under SEC Registration Number CS201613542.

The principal activities of the Joint Venture are to engage in general construction and other allied business including constructing, site preparation, enlarging, repairing, servicing, developing or otherwise engaging in any work on buildings, roads, highways, manufacturing plants, steel fabrications and other structures.

The Joint Venture’s registered office is located at 85 J.P. Rizal Street, Barangay Calumpang, Marikina City.

The term of the said Joint Venture shall be ten (10) years from and after the date of incorporation.

As of September 30, 2016, the Group has forty percent (40%) interest in Consortium of BF and Philab Industries Inc., a joint venture that is accounted under method incorporated and will be operating under real estate industry.

As of September 30, 2016, the Joint Venture has not yet started its commercial operations.

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The movements of Group’s investment in joint venture are shown below:

2016

Balance, Beginning P - Contribution (Note 19) 2,109,646

Balance, Ending P 2,109,646

13.02 Genomic Institute of Asia Inc.

On March 18, 2013, the Group entered into an agreement with Genomic Institute of Asia Inc. (GIA), a corporation organized and existing under the laws of the Philippines. GIA is primarily engaged in providing and supporting genomic research, genomic sequencing and bioinformatics and other services related to natural science (collectively referred as “genomic services).

The Group and GIA mutually agreed that GIA shall provide its genomics services exclusively to the Company within the Philippine territory. GIA undertakes not to provide, sell, market, distribute, and/or deliver the genomic services, directly or indirectly, within the Philippine territory, through any other company, distributor or entity, other than the Company.

In consideration for the genomic services, the Company shall provide all necessary manpower, office space, equipment, utilities and supplies to GIA without any costs.

Ownership over all equipment shall be retained by the Group, however, in its discretion, the Group may subsequently transfer ownership of any equipment to GIA.

All other expenses and fees for the operation of GIA in relation to the genomic services herein described shall be for the account of the Company.

As of September 30, 2016, the Joint Venture has not yet started its commercial operations.

The movements of Group’s investment in joint venture are shown below:

2016

Balance, Beginning P 39,102,921 Contribution (Note 19) 918,357

Balance, Ending P 40,021,278

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14. PROPERTY, PLANT AND EQUIPMENT – net

The carrying amounts of the Group’s property, plant and equipment as of September 30, 2016 is as follows:

Land

Transportation Equipment (as restated)

Factory Warehouse (as restated)

Building and Improvements (as restated)

Machines, Tools and Equipment

(as restated) Total

January 1, 2016 Cost P 47,199,000 P 9,759,106 P 7,960,000 P 11,510,294 P 6,179,973 P 82,608,373 Accumulated depreciation - (6,507,447) (1,592,000) (2,119,165) (2,744,896) (12,963,508)

Carrying amount 47,199,000 3,251,659 6,368,000 9,391,129 3,435,077 69,644,865

Movements during 2016 Balance, January 1, 2016 47,199,000 3,251,659 6,368,000 9,391,129 3,435,077 69,644,865 Additions - - - - 264,331 264,331 Depreciation (Note 25) - (1,053,133) (298,500) (411,464) (947,383) (2,710,480)

Balance, September 30, 2016 47,199,000 2,198,526 6,069,500 8,979,665 2,752,025 67,198,716

September 30, 2016 Cost 47,199,000 9,759,106 7,960,000 11,510,294 6,444,304 82,872,704 Accumulated depreciation - (7,560,580) (1,890,500) (2,530,629) (3,692,279) (15,673,988)

Carrying amount P 47,199,000 P 2,198,526 P 6,069,500 P 8,979,665 P 2,752,025 P 67,198,716

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As of September 30, 2016, the Group is still in the process of transferring the title of ownership of certain land under its name amounting to P47,199,000. The amount presented in the financial statement is the amount per latest land appraisal report dated October 21, 2016.

As of September 30, 2016 and December 31, 2015, transportation equipment with an aggregate carrying value of P2,183,646 and P3,248,455, respectively, was financed through auto loans with various banks. These transportation equipment served as the collateral for the said loans, as disclosed in Note 17.

In 2016 and 2015, the Group determined that there is no indication that any impairment has occurred on its property and equipment.

15. OTHER NON-CURRENT ASSETS

The Group’s non-current assets pertain to hold-out deposits on various loans with the Land Bank of the Philippines restricted for use amounting to P8,516,500 as of September 30, 2016, as disclosed in Note 9.

16. TRADE AND OTHER PAYABLES

The components of the Group’s trade and other payables account are as follows:

2016

Trade P 386,063,997 Advances from customers 254,977,226 Due to government agencies 70,549,946 Accrued expenses 28,357,305 Others 375,198

P 740,323,672

The average credit period on purchases of certain goods from suppliers is thirty (30) days. No interest is charged on the trade payables. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

Advances from customers pertain to amounts paid to the Group upon delivery of minimum required percentage of total goods to its customers.

Due to government agencies pertains to deferred output tax, fringe benefit tax, withholding taxes, SSS, PhilHealth and HDMF contributions as of year-end.

Accrued expenses pertain to accrual of delivery and freight charges and professional fees.

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17. BORROWINGS

Shown below are the movements of the Group’s secured and unsecured loans payable:

2016 Balance, Beginning P 158,939,828 Availments 1,209,979,553 Payments made (194,174,842)

Balance, Ending P 1,174,744,539

Shown below are the details of the Group’s long-term loans payable:

2016 Land Bank of the Philippines P 190,683,976 UnionBank of the Philippines 18,750,000 Auto Loans 1,210,563 Non-bank institutions 937,100,000

Secured – at amortized cost 1,147,744,539 Unsecured – at amortized cost: Security Bank 27,000,000

Total 1,174,744,539

17.01 Summary of Loan Arrangements

17.01.01 Land Bank of the Philippines (LBP)

The analysis of the loans from LBP is as follows:

2016 Balance, Beginning P 100,000,000 Availments 272,879,553 Payments made (182,195,577)

Balance, Ending P 190,683,976

In 2016, the Group entered into several short-term loan agreements with LBP bearing annual interest rates ranging from 6% to 7%. The loans are secured through assignment of Group’s assets, inventories and receivables. The principal loan amount is to be paid in lump sum upon maturity and finance cost is to be paid monthly and quarterly in arrears.

Moreover, on July 22, 2016, the Group entered into several short-term loan agreements with LBP with an aggregate amount of P60,000,000 payable on January 18, 2017, bearing an interest rate of 7% per annum. These loans require compensating balances restricted for immediate disposal for an aggregate amount of P8,516,500 as of September 30, 2016, as disclosed in Notes 9 and 15.

In 2016, the Company made arrangements with the bank to settle the outstanding balance of the loans by the end of 2017.

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17.01.02 Security Bank (SB)

An analysis of the loan payable to SB is shown below:

2016 Balance, Beginning P 30,000,000 Availments - Payments made (3,000,000)

Balance, Ending P 27,000,000

On April 22, 2015, the Group entered into a short-term loan agreement with SB to finance the inventory build-up of raw materials and manufacturing operations. The loan acquired amounted to P30,000,000 payable on July 21, 2015. The loan bears an annual interest rate of 9%. As of September 30, 2016, the Group paid P3,000,000 of the principal amount.

In 2016, the Company made arrangements with the bank to settle the outstanding balance of the loans by the end of 2017.

17.01.03 UnionBank of the Philippines (UnionBank)

An analysis of the loan payable to UnionBank is shown below:

2016 Balance, Beginning P 25,000,000 Availments - Payments made (6,250,000)

Balance, Ending P 18,750,000

On September 9, 2014, the Group entered into a short-term loan agreement with UnionBank to finance the Group’s various on-going projects. The loan acquired amounted to P30,000,000 payable on September 4, 2015. The loan bears an annual interest rate of 7%. As of September 30, 2016, the Group paid P6,250,000 of the principal amount.

In 2016, the Company made arrangements with the bank to settle the outstanding balance of the loans by the end of 2017.

17.01.04 Auto Loans

An analysis of the loan payable to non-bank entities is shown below:

2016 Balance, Beginning P 2,253,552 Availments - Payments made (1,042,989)

Balance, Ending P 1,210,563

The Group entered into several short and long term auto loan agreements with various banks bearing annual interest rates ranging from 10.62% to 21.69%. The loans are secured by chattel mortgage. The principal loan amount and its related interest are to be repaid monthly in arrears.

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As of September 30, 2016 and December 31, 2015, the aggregate carrying value of transportation equipment secured under chattel mortgage amounted to P2,183,646 and P3,248,455, respectively, as disclosed in Note 14.

In 2016, the Company made arrangements with the bank to settle the outstanding balance of the loans by the end of 2017.

17.01.05 Planters Bank (PB)

An analysis of the loan payable to PB is shown below:

2016 Balance, Beginning P 1,686,276 Availments - Payments made (1,686,276)

Balance, Ending P -

In 2016, the Company incurred an aggregate amount of finance cost from its loans amounting to P16,054,165, as disclosed in Note 26.

17.01.06 Non-bank Entities

In 2016, the Company obtained long-term loans from non-bank entries with an aggregate amount of P937,100,000. The purpose of these loans is for the working capital requirements of the Company.

On September 30, 2016, finance cost incurred on loans obtained amounted to P16,054,165, as disclosed in Note 26.

18. OTHER NON-CURRENT LIABILITY

Other non-current liability pertains to on-going audit review and assessment by the Bureau of Internal Revenue (BIR) covering the years 2011 to 2014. Based on the review, the Group has provided provision for the assessments that may eventually arise. As of September 30, 2016 and December 31, 2015, other non-current liability amounted to P7,324,064.

19. RELATED PARTY TRANSACTIONS

Nature of relationship of the Group and its related parties are disclosed below:

Related Parties Nature of Relationship

Philab Industries, Inc. (PII) Subsidiary Genomic Institute of Asia, Inc. (GIA) Under common key management personnel Consortium of BF and Philab

Industries, Inc. (CBPI) Under common key management personnel Officers Key management personnel

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Balances and transactions between the Group and its related parties are disclosed below:

19.01 Due from Related Parties

Balances of due from related parties as shown in the statement of financial position are summarized per category as follows:

19.01.01 Under Common Key Management Personnel

Transactions with related parties under common key management personnel are detailed as follows:

September 30, 2016 Amount/

Volume Outstanding

Balances CBPI

Contributions (Note 13) P 2,109,646 P 2,109,646 GIA

Contributions (Note 13) 918,357 40,021,278

P 3,028,003 P 42,130,924

Contributions pertain to amounts provided to GIA and CBPI to finance their working capital requirements.

19.02 Due to a Related Party

Balance of due to related party as shown in the statement of financial position is summarized per category as follows:

19.02.01 Under Key Management Personnel

Transaction with a related party under key management personnel is detailed as follows:

September 30, 2016 Amount/

Volume Outstanding

Balance

Officers Advances P 3,849,402 P 3,849,402

Advances from officers pertain to amount owed by the Company to finance its working capital requirements.

These related party transactions are unsecured, non-interest bearing, collectible on demand and will be settled in cash. No guarantees have been given related to the said advances.

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19.03 Significant Contract Agreement

19.03.01 Joint Venture Agreement

On August 11, 2015, the Group entered into a consortium agreement with BF Corporation, a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines with principal address at Km 17, Ortigas Avenue Extension, Cainta, Rizal. Whereas, the Department of Budget and Management-Procurement Service (DBMPS), has advertised for public bidding the Design and Build of the National Institute of Health Building. Both parties are desirous for and participating in the bidding of the stated project. Moreover, they believe that they can be best maximized their chances of prequalifying for the said public bidding and can satisfactorily execute the project should they win and be awarded the contract by the Bids and Award Committee for the civil works of DBMPS if they pool their financial, equipment and technical resources necessary for the stated purpose under the consortium agreement.

Therefore, for and consideration of the foregoing promises and mutual covenants for the exclusive purpose of qualifying for and participating in the aforesaid public bidding of the project and actually undertaking the construction work thereof should they successfully win and eventually be awarded the contract, subject to the following significant terms and conditions:

a. For all the intents and proposes, the Consortium entity established shall be known as Consortium of BF and Philab Industries, Inc.

b. For communication purposes, all communication/letters shall be addressed at the Consortium business address at Km 17, Ortigas Avenue extension, Cainta, Rizal and 7487 Bagtikan Street, Antonio Village, Makati City.

c. Mr. Reynaldo Dela Cruz shall be named, appointed and constituted as the Authorized Managing Officer (AMO) and as such, is the sole representative for and behalf of the Consortium and all bids, contracts and other documents whatsoever pertinent to said project, shall be signed by him.

d. The participation of the parties shall be as follows:

i. BF Corporation – To do all general construction works, to construct the physical structures and to provide equipment necessary to carry out construction.

ii. PII – To supply the equipment and material supplies.

e. The capital contribution of the parties shall be as follows:

i. BF Corporation – 60%

ii. PII – 40%

f. The net profit or losses of the Consortium shall likewise be divided between the parties on a 60% and 40%, respectively.

g. The parties shall be jointly and severally liable for any and all obligation which the consortium may incur.

19.04 Remuneration of Key Management Personnel

In 2016, the remuneration of the directors and other members of key management personnel of the Group pertains to short-term benefits with an aggregate amount of P14,700,000.

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20. CAPITAL STOCK

The capital stock of the Group is as follows:

2016

Share capital P 15,569,015 Share premium 13,928,475

P 29,497,490

The details of the Group’s share capital are as follows:

The capital stock is of ACPI is composed of ordinary shares. Shown below are the details on the movements of ordinary shares.

2016 Shares Amount

Authorized: P0.05 par value per share 400,000,000 P 20,000,000

Subscribed and outstanding: P0.05 par value per share 311,380,300 P 15,569,015

Shown below are the details on the movements of PII’s ordinary shares.

2016

Shares Amount

Authorized: P100 par value per share 1,000,000 P 100,000,000

Issued and fully paid:: P100 par value per share Balance, Beginning 50,490 5,049,000 Issuances 325,901 32,590,100

Balance, Ending 376,391 37,639,100

Partly paid: P100 par value per share Balance, Beginning 310,900 31,090,000 Issuances (310,900) (31,090,000) Balance, Ending - - Less: Subscription receivable - -

- -

376,391 P 37,639,100

Ordinary shares carry one (1) vote per share and a right to dividends.

21. APPROPRIATED RETAINED EARNINGS

As of September 30, 2016, the Group’s appropriated retained earnings amounted to P50,000,000. The purposes of the appropriation are for the Group’s future expansion finance the purchase of additional equipment and factory improvements to meet the demand of continuously increasing number of customers.

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22. REVENUES – net

An analysis of the Group’s revenues is as follows:

2016

Revenue from sale of goods P 634,392,205 Sales returns (5,350)

634,386,855 Revenue from rendering of services 3,367,797

P 637,754,652

23. COST OF SALES

The following is an analysis of the Group‘s cost of goods sold and services:

2016

Cost of goods sold (Note 11) P 411,697,325 Cost of services 2,418,915

P 414,116,240

23.01 Cost of Goods Sold

Details of cost of goods sold are as follows:

2016 Raw materials, January 1 P 9,523,175 Add: Purchases 500,598,221 Less: Raw materials, December 31 (Note 11) 9,579,884

Cost of materials used 500,541,512 Direct labor 5,344,483 Overhead 12,431,736 Total manufacturing costs 518,317,731 Add: Work-in-process, January 1 9,962,884 Cost of goods put into process 528,280,615 Less: Work-in-process, December 31 (Note 11) 24,339,789 Cost of goods manufactured 503,940,826 Add: Finished goods, January 1 15,551,606 Cost of goods available for sale 519,492,432 Less: Finished goods manufactured, December 31 (Note 11) 22,523,644 Less: Finished goods retail, December 31 (Note 11) 85,271,463

P 411,697,325

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23.02 Cost of Services

Cost of services pertains to salaries, wages and other benefits incurred on installation, check-ups, repairs and maintenance of machineries, equipment and apparatus previously sold.

24. OTHER INCOME

Components of other income are as follows:

2016 Indent commission P 677,790 Finance income (Note 9) 355,527 Miscellaneous 16,848

P 1,050,165

Indent commission income includes only the gross inflows of economic benefits received and receivable by the Group on its own account.

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25. OPERATING EXPENSES

The account is composed of the following:

2016

Salaries, wages and other benefits (Note 27) P 39,527,386 Bad debts expense 15,000,000 Freight-out 10,396,864 Professional fees 6,378,772 Taxes and licenses 6,175,789 Rent 3,597,630 Travel and transportation 2,820,526 Depreciation expense (Note 14) 2,710,480 Performance bond 2,104,086 Retirement expense (Note 27) 2,033,518 Penalties and charges 1,183,603 Utilities and maintenance 1,121,575 Communication, light and water 1,035,140 Liquidated damages 992,238 Loss on forfeiture 990,813 Advertising and promotions 969,462 Bank charges 653,802 Representation and entertainment 587,467 Office supplies and stationeries 432,576 Registration fees 419,011 Bidding 368,148 Retainers fee 327,778 Repairs and maintenance 309,092 Security and messenger services 280,219 Insurance 109,164 PSE listing fee 105,133 Meetings, seminars and conferences 58,617 Membership dues and subscription 48,256 Donations and contributions 20,000 Miscellaneous 1,186,593

P 101,943,738

26. OTHER EXPENSES

Details of cost of other expenses are as follows:

2016 Finance cost (Note 17) P 16,054,165 Foreign exchange loss 352,629

P 16,406,794

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27. EMPLOYEE BENEFITS

Aggregate employee benefits expense comprised:

2016

Short-term benefits (Note 25) P 39,527,386 Post-employment benefits (Note 25) 2,033,518

P 41,560,904

27.01 Short-term Employee Benefits

Details of short-term employee benefits as disclosed in Note 23 are as follows:

2016 Salaries, wages and allowances P 35,698,002 SSS, PhilHealth, and Pag-ibig contributions 1,019,924 Other employee benefits 2,809,460

P 39,527,386

Other employee benefits pertain to medical, dental benefits, accrued 13th month pay and fringe benefit expenses.

27.02 Retirement Employee Benefits

The Group has defined benefit plans for qualifying employees. The Group does not have an established retirement plan and only conforms to the minimum regulatory benefit under the Retirement Pay Law Under R.A. 7641. The framework, however, does not have a minimum funding requirement. The Group’s benefit plan is aligned with this framework.

The Group’s unfunded defined benefit plans for qualifying employees are entitled to retirement benefits which is equal to 22.5 days’ pay for every year of credited services on attainment of a retirement age of sixty (60) and are not adjusted for inflationary increases once in payment. The payments for the unfunded benefits are borne by the Group as it falls due.

The most recent actuarial valuation of the defined benefit obligation was carried out on October 14, 2015 by E.M. Zalamea Actuarial Services, Inc. The present value of the defined benefit obligation, and the related current and past service costs, were measured using the Projected Unit Credit Method.

As of September 30, 2016, there was no actuarial report available for 2016. In providing the amount of retirement expense in 2016, the values and data of the previous report was used.

The principal assumptions used for the purposes of the actuarial valuations were as follows:

2016

Discount rate 5.76% Expected rate of salary increase 5.00%

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Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience. These assumptions translate into an average life expectancy in years for a pensioner retiring at age sixty (60).

2016

Retiring 20 years after the reporting period Male 85 Female 34

Impact on Defined Benefit Obligation

Change in

Assumption Increase in

Assumption Decrease in Assumption

September 30, 2016 Discount rate 100 bps Decrease by 8.2% Increase by 9.7% Salary increase rate 100 bps Increase by 8.7% Decrease by 7.6%

The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognized within the statement of financial position.

Assumed life expectancy is not applicable because under the Group’s Retirement Plan, benefits are paid in full in a lump sum upon retirement or separation of an employee.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous year.

Amounts recognized in profit or loss in respect of these defined benefit plans are as follows:

2016

Current service cost P 2,033,518 Interest on obligation -

P 2,033,518

Reconciliation of remeasurements recognized in OCI are as follows:

Change on financial

assumption

Change on demographic assumption Total

Loss (gain) Balance at January 1, 2016 P (874,382) P (493,411) P (1,367,793) Amount recognized during the year – net

of tax 262,315 148,023 410,338

Loss (gain) Balance at September 30, 2016 P (612,067) P (345,388) P (957,455)

As of September 30, 2016, the amounts included in the consolidated statement of financial position arising from the Group’s obligation in respect of its defined benefit plan amounted to P10,815,828.

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The Group operates an unfunded defined benefit plan wherein benefit payments are borne by the Group. The Group maintains appropriate level of liquidity to meet currently maturing defined benefit obligations and has established a level of solvency ratio aimed to pay for long term defined benefit obligations.

Plan Amendments, Curtailments, or Settlements

The Group has no plan amendment, curtailment or settlement recognized as of September 30, 2016.

Asset-liability Matching Strategies to Manage Risks

The Group does not have a formal retirement plan and therefore has no plan assets to match against the liabilities under the retirement obligation.

Funding Arrangements

The Group does not have a formal retirement plan, benefit claims under the Retirement Obligation are paid directly by the Group when they become due. There is no expected future benefit contribution.

The Group is exposed to a number of risks through its defined benefit plan. The most significant risks are detailed below:

Volatility Risk

The plan liabilities are calculated using a discount rate from government bonds to create virtual zero coupon bonds as of the valuation dates. The government bonds represent investments in the Philippine government securities only. However, the Group believes that due to the long-term nature of the plan liabilities and the strength of the supporting group, a level of continuing equity investment is an appropriate element of the group’s long term strategy to manage the plans efficiently.

Inflation Risk

Impact on the risk of inflation pertains to the discount rate used to determine the present value of the defined benefit obligation.

The Group does not have plan asset, hence, do not have an exposure to inflation risk.

28. OPERATING LEASE AGREEMENTS

28.01 The Group as a Lessee

Operating leases relate to leases of office and parking spaces with lease terms between one (1) to five (5) years. Operating lease payments represent rentals payable by the Group for office and parking spaces. Leases are negotiated for an average term of two (2) years and renewable based on mutual agreement of both parties.

28.01.01 Lease Contract with Primo Terra Proprietario, Inc.

On January 1, 2015, the Group entered into an operating lease agreement with Primo Terra Proprietario, Inc., for the lease of office space at #7487 Bagtikan Street, SAV, Makati City.

The lease term shall be for a period of two (2) years commencing on January 1, 2015 and expiring on December 31, 2015, renewable upon mutual agreement of both parties. Monthly rental payment shall be P119,790, exclusive of VAT.

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Upon signing of the contract, two (2) months of refundable rent deposit was paid amounting to P239,580. Moreover, security deposit equivalent to two (2) months of rent was paid amounting to P263,538.

On January 1, 2016, the contract was renewed substantially with the same terms and conditions as the original lease contract, however, the lease contract was dated July 1, 2016.

28.01.02 Lease Contract with BNM7210 Group Corp.

On April 1, 2015, the Company entered into an operating lease agreement with BNM7210 Group Corp., for the lease of a commercial/office located at Unit No. 508 Krizia Building, Gorordo Avenue, Kamputhaw, Cebu City.

The lease term shall be for a period of one (1) year commencing on April 1, 2015 and expiring on March 31, 2016. Payment terms shall be P22,407 of basic rent exclusive of VAT.

Upon signing of the contract, two (2) months of refundable rent deposit was paid amounting to P44,814.

On March 31, 2016, the lease contract expired and was not renewed subsequently.

28.01.03 Lease Contract with Philippine Red Cross

On May 7, 2015, the Group entered into an operating lease agreement with Philippine Red Cross, for the lease of one (1) 48.85 square meter unit of commercial space of the Red Cross Millennium Building located at the second floor Door 2-A.

The lease term shall be for a period of two (2) years commencing on May 1, 2015 and expiring on April 30, 2017. Payment terms shall be P12,213 of basic rent plus 10% common usage area (CUSA) amounting to P1,221 for a total of P13,434 exclusive of VAT subject to annual escalation rate 10%.

Upon signing of the contract, two (2) months of refundable rent deposit inclusive of CUSA was paid amounting to P26,868.

On September 30, 2016, the lease contract was terminated upon mutual agreement of the parties.

28.01.04 Lease Contract with DMC Urban Property Developers, Inc.

On June 27, 2016, the Group entered into an operating lease agreement with DMC Urban Property Developers, Inc., for the lease of an office space and parking lot in HHIC Building situated along 1128 University Parkway, North Bonifacio, Global City, Taguig City, Metro Manila.

The lease term shall be for a period of sixty-two (62) months commencing on June 27, 2016 and expiring on August 26, 2021 renewable upon mutual agreement of both parties. Monthly rental payment shall be P972,500, exclusive of VAT.

Upon signing of the contract, three (3) months of refundable rent deposit was paid amounting to P3,267,600, as disclosed in Note 12. Moreover, security deposit equivalent to two (2) months of rent was paid amounting to P1,945,000, as disclosed in Note 12.

The rent expense is distributed between operating expense and overhead cost under cost of sales.

As of September 31, 2016, total security deposits from operating lease amounted to P1,945,000.

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At each reporting date, the Group had outstanding commitments for future minimum lease payments under non-cancelable operating leases, which fall due as follows:

2016

Not later than one year P 11,688,855 Later than one year but not later than five years 47,056,452

P 58,745,307

29. INCOME TAXES

29.01 Income Tax Recognized in Profit or Loss

Components of income tax expense (benefit) are as follows:

2016 Current tax expense P 37,604,825 Deferred tax expense (942,566)

P 36,662,259

A numerical reconciliation between tax expense and the product of accounting profit multiplied by the tax rate in 2016 is as follows:

2016 Accounting profit P 106,338,044

Tax expense (benefit) at 30% 31,901,413 Tax effects of:

Non-deductible bad debts expense 4,500,000 Non-deductible penalties 355,081 Non-deductible finance cost 10,817 Representation expense limitation 1,606 Finance income subjected to final tax (106,658)

P 36,662,259

30. DEFERRED TAXES

The breakdown of deferred taxes as presented in the statement of financial position is as follows:

2016

Deferred tax assets P 2,278,118 Deferred tax liability 410,338

Deferred tax liability – net P 1,867,780

30.01 Deferred Tax Asset

In 2016, the Group recognized deferred tax asset from NOLCO and retirement obligation amounting to P1,668,063 and P610,055, respectively.

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30.02 Deferred Tax Liability

In 2016, the Group recognized deferred tax liability remeasurement amounting to P410,338.

31. FAIR VALUE MEASUREMENTS

31.01 Fair Value of Financial Assets and Liabilities

The carrying amounts and estimated fair values of the Group’s financial assets and financial liabilities as of September 30, 2016 are presented below:

2016

Carrying Amount Fair Value

Financial Assets: Trade and other receivables P 844,825,517 P 844,825,517 Performance bond 4,430,950 4,430,950 Refundable deposits 3,472,220 3,472,220 Other non-current assets 8,516,500 8,516,500

P 861,245,187 P 861,245,187

Financial Liabilities: Trade and other payables P 669,773,727 P 669,773,727 Due to related parties 3,849,402 3,849,402 Loans payable 1,174,744,539 1,174,744,539 Other non-current liability 7,324,064 7,324,064

P 1,855,691,732 P 1,855,691,732

x The carrying amounts of trade and other receivables, performance bond and refundable deposits presented under prepayments and other current assets, which mature within twelve (12) months or within its normal operating cycle, are assumed to approximate their fair values. This assumption is applied to liquid assets and short-term elements of financial assets.

x The carrying amount of hold-out deposits on various loans presented under non-currents assets is interest bearing and approximate their fair values.

x The carrying amounts of trade and other payables (except due to government agencies) and due to related parties, approximate their fair values due to either the demand feature or relatively short-term nature of payables.

x The carrying amount of loans payable presented under non-current liabilities is interest bearing. This will mature more than twelve (12) months and approximate their fair values.

x The carrying amount of other non-current liability is non-interest bearing. This will mature more than twelve (12) months and is based on the estimated present value of all future cash flows

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32. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES

The Group is exposed in a degree and magnitude of risks. These risks include market risk, including interest rate risk and foreign currency risk, credit risk and liquidity risk. The Group’s Board of Directors reviews and approves the policies for managing each of these risks. There is a regular evaluation of projected and actual cash flow information and continuous assessment of the conditions in the financial markets for opportunities to pursue for fund-raising initiatives. These initiatives may include debt capital and equity market issues.

32.01 Market Risk Management

32.01.01 Foreign Currency Risk Management

The Group undertakes transactions denominated in foreign currencies; consequently exposures to exchange rate fluctuations arise. Exchange rate expenses are managed within approved policy parameters by monitoring its US Dollar cash flows.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of each reporting period are as follows:

Assets Liabilities

2016 2016

Cash in banks P 7,286 P - Trade and other payables - 3,125,320

P 7,286 P 3,125,320

The Group is mainly exposed to the US Dollar.

The following table details the Group’s sensitivity to be less than 5.09% increase and decrease in the US dollar against the relevant foreign currencies. The sensitivity rate of 5.09% is used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for 5.09% change in foreign currency rates. For 5.09% weakening of the US dollar against the relevant currency, there would be a comparable impact on the profit, and the balances below would be negative.

US Dollars

2016

Profit P 5,123,230

32.01.02 Interest Rate Risk Management

The Group’s exposure to interest rate risk arises from its cash deposits in banks which are subject to variable interest rates and cash equivalents subject to fixed rate.

The interest rate risk arising from deposits with banks is managed by means of effective investment planning analysis and maximizing investment opportunities in various local banks and financial institutions.

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Profit for the period ended September 30, 2016 would have been unaffected since the Group has no borrowings at variable rates and interest rate risk exposure for its cash in bank, which is subject to variable rate, is very immaterial.

The Group’s sensitivity to interest rates has not changed significantly from the prior year. In Management’s opinion, the sensitivity analysis is unrepresentative of the inherent interest rate risk as the year-end exposure does not reflect the exposure during the period.

32.02 Credit Risk Management

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group only transacts with entities that are rated the equivalent of investment grade and above. The Group uses other publicly available financial information and its own trading records to rate its major customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee annually.

Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where appropriate, credit guarantee insurance cover is purchased.

The Group does not have significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics.

The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings.

The carrying amount of financial assets recognized in the financial statements, which is net of impairment losses, represents the Group’s maximum exposure to credit risk.

2016

Cash in banks P 134,079,792 Cash equivalents 29,440,846 Trade and other receivables 844,825,517 Performance bond 4,430,950 Refundable deposits 3,472,220 Other non-current assets 8,516,500

P 1,024,765,825

The Group does not hold any collateral or other credit enhancements to cover this credit risk.

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The table below shows the credit quality by class of financial assets of the Group:

Neither Past Due nor Impaired High Grade

September 30, 2016 Cash in banks P 134,079,792 Cash equivalents 29,440,846 Trade and other receivables 708,582,681 Performance bond 4,430,950 Refundable deposits 3,472,220 Other non-current assets 8,516,500

P 888,522,989

The credit quality of the financial assets was determined as follows:

Loans and receivables

x High grade – These are receivables from counterparties with no default in payment.

x Medium grade – These are receivables from counterparties with up to three defaults in payment.

x Low grade – These are receivables from counterparties with more than three defaults in payment.

32.03 Liquidity Risk Management

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Group may be required to pay.

Weighted Average Effective

Interest Rate Within 1 Year

Beyond 1 Year

Total

September 30, 2016 Trade and other payables - P 669,773,727 P - P 669,773,727 Due to related parties - 3,849,402 - 3,849,402 Loans payable 3% to 21% - 1,174,744,539 1,174,744,539 Other non-current liability - - 7,324,064 7,324,064

P 673,623,129 P 1,182,068,603 P 1,855,691,732

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The following table details the Group’s expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Group’s liquidity risk management as the liquidity is managed on a net asset and liability basis.

Weighted Average

Effective Interest Rate Within 1 Year

September 30, 2016 Cash on hand - P 281,204 Cash in banks 0.25% to 0.56% 134,079,792 Cash equivalents 1% to 1.60% 29,440,846 Trade and other receivables - 844,825,517 Performance bond - 4,430,950 Refundable deposits - 3,472,220 Other non-current assets 8,516,500

P 1,025,047,029

The amounts included in the analysis are for variable interest rate instruments for both non-derivative financial assets and liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of each reporting period.

33. CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES

The Group manages its capital to ensure that the Group will be able to continue as going concern while maximizing the return to stakeholders through the optimization of the debt and equity balance.

Pursuant to Section 43 of the Corporation Code of the Philippines, stock corporations are prohibited from retaining surplus plus profits in excess of 100% of their paid-in capital stock, except: 1) when justified by definite corporate expansion projects or programs approved by the board of directors; or 2) when the corporation is prohibited under any loan agreement with any financial institution or creditor, whether local or foreign, from declaring dividends without its/his consent, and such consent has not yet been secured; or 3) when it can be clearly shown that such retention is necessary under special circumstances obtaining in the corporation, such as when there is a need for special reserve for probable contingencies.

The Group is in compliance with the above requirement.

The capital structure of the Group consists of net debt (total liabilities offset by cash and cash equivalents and equity of the Group (comprising capital stock, retained earnings and remeasurements).

The Group monitors the adequacy of its capital to ensure that the financial resources of the Group are available to absorb unforeseen or unanticipated losses. The Group’s capital is its buffer against insolvency.

To maintain or adjust the capital structure, the Group may adjust the dividend payments to shareholders, pay-off existing debts, return capital to shareholders or issue new shares. The Group defines capital as paid-in capital stock, retained earnings, both appropriated and unappropriated.

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The Board of Directors has overall responsibility for monitoring capital in proportion to risk. Profiles for capital ratios are set in the light of changes in the Group’s external environment and the risks underlying the Group’s business, operation and industry.

The gearing ratio at end of each reporting period is as follows:

2016 Debt P 1,990,933,973 Cash and cash equivalents 163,801,843 Net debt 1,827,132,130 Equity 40,885,532

Net debt to equity ratio 44.69:1

34. EVENTS AFTER THE REPORTING PERIOD

34.01 ACPI

On October 11, 2016, following the completion of the mandatory tender offer by the buyers and to all shareholders of the Company, a total of Two Hundred Eight Thousand Six Hundred Thirty Five Eight Hundred One (208,635,801) common shares of the Company (inclusive of the common shares that were tendered) were acquired by Hector Thomas A. Navasero and Genomics, Inc. As a result of the said acquisition, the buyers acquired approximately 67% of the outstanding capital stock of the Company.

In consonance with such change in control, during the meeting of the BOD on September 14, 2016, as well as the annual stockholders meeting on October 20, 2016, the BOD and stockholders representing atleast 2/3 of the outstanding capital stock approved the following resolutions:

a. acquisition by the Company of up to 361,390 outstanding shares of Philab Industries, Inc. (“Philab”), representing approximately 100% of Philab’s outstanding shares,.

b. issuance of shares of the Company to existing shareholders or new investors, either out of its unissued capital or increase in capital

c. delegation of authority to amend/repeal the Amended By-Laws or adopt new By-Laws to the BOD

Also, the following amendments on the AOI were approved by the stockholders on October 20, 2016:

a. The name of the Corporation shall be Philab Holdings Corp.

b. The secondary purpose of the Corporation to include the power to guarantee the obligation of any person, firm or entity in which the Corporation may have lawful interest.

c. Transfer Company’s principal office address to 8th floor, 1128 38th Avenue, Fort Bonifacio Global City, Taguig City, Metro Manila.

d. Increase par value from P0.05 per share to P0.25 per share.

e. To include new provision as the Eleventh (11th) Article pertaining to the denial of pre-emptive rights of the stockholders.

f. Increase authorized capital stock from Twenty Million Pesos (P20,000,000.00) to up to Two Billion Pesos (P2,000,000,000.00).

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Items b, c, d and e from the above were certified by the SEC on December 12, 2016.

On December 19, 2016, the Company acquired Three Hundred Fifty One Thousand Seven Hundred Forty (351,740) shares, representing 93.48% of the total outstanding capital stock of Philab at the price of P2,445 per share or the aggregate price of Eight Hundred Sixty Million Pesos (P860,000,000.00).

Also, on December 19, 2016, the Company entered into subscription agreements with certain subscribers who subscribed to its increase in capital stock. Such subscribers include some of the selling shareholders of Philab, as well as non-related or affiliated subscribers to ensure continued compliance with the minimum public ownership requirement. The increase in capital stock of the Company is still currently in process with the SEC.

35. APPROVAL OF FINANCIAL STATEMENTS

These financial statements were approved and authorized for issuance by the BOD on January 12, 2017.

PHILAB INDUSTRIES, INC.STATEMENT OF FINANCIAL POSITIONSeptember 30, 2016(With Comparative Figures For December 31 and September 30, 2015)(In Philippine Peso)

NOTES 2016

December 31, 2015

(as restated)

September 30, 2015

(For the nine months ended

2015)

A S S E T S

Current AssetsCash and cash equivalents 6 159,343,124 8,065,725 2,276,570 Trade and other receivables 7 844,825,517 271,087,454 236,083,139Inventories 8 141,714,780 35,037,665 53,403,173 Prepayments and other current assets 9 85,556,341 79,967,764 43,140,330

1,231,439,762 394,158,608 334,903,212

Non-current AssetsProperty, plant and equipment – net 11 67,198,716 69,644,865 114,636,822 Investment in real estate - - 30,670,465 Investments in joint ventures 10 42,130,924 - - Deferred tax asset 28 610,055 - - Other non-current assets 12 8,516,500 - -

118,456,195 69,644,865 145,307,287

TOTAL ASSETS 1,349,895,957 463,803,473 480,210,499

Current LiabilitiesTrade and other payables 13 738,774,067 147,515,266 44,146,875 Accrued liabilities 14 - 28,608,181 28,608,181Due to a related party 17 3,849,402 - - Loans payable 15 - 2,695,832 2,695,832 Income tax payable 53,466,130 17,836,587 1,770,390

796,089,599 196,655,866 77,221,278

Non-current LiabilitiesLoans payable – net of current portion 15 337,644,539 156,243,996 156,243,996 Retirement benefit obligation 25 10,815,828 - - Deferred tax liability 28 410,338 - - Other non-current liabilities 16 7,324,064 7,324,064 110,692,455

356,194,769 163,568,060 266,936,451

TOTAL LIABILITIES 1,152,284,368 360,223,926 344,157,729

Capital Stock 18 37,639,100 13,400,000 13,400,000

Share Premium 18 37,399,000 37,399,000 97,250,000

Unappropriated Retained Earnings 71,616,034 1,412,754 13,400,000

Appropriated Retained Earnings 19 50,000,000 50,000,000 12,002,770

Remeasurements – net 25 957,455 1,367,793 -

TOTAL STOCKHOLDERS' EQUITY 197,611,589 103,579,547 136,052,770

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 1,349,895,957 463,803,473 480,210,499

(See Notes to Financial Statements)

LIABILITIES AND STOCKHOLDERS' EQUITY

L I A B I L I T I E S

S T O C K H O L D E R S ' E Q U I T Y

PHILAB INDUSTRIES, INC.STATEMENT OF COMPREHENSIVE INCOMESeptember 30, 2016

Ended September 30, 2015)(In Philippine Peso)

NOTES 20162015

(as restated)

September 30, 2015

(For the niine months ended

2015)

REVENUES – net 20 637,754,652 231,932,101 136,875,612

COST OF SALES 21 414,116,240 96,017,014 56,102,437

GROSS PROFIT 223,638,412 135,915,087 80,773,175

OTHER INCOME 22 782,044 11,397,941 10,753,418

224,420,456 147,313,028 91,526,593

OPERATING EXPENSES 23 100,815,612 89,571,215 80,026,351

OTHER EXPENSES 24 16,406,794 8,045,635 5,598,943

PROFIT BEFORE TAX 107,198,050 49,696,178 5,901,299

INCOME TAX EXPENSE 27 36,994,770 19,108,822 1,770,390

PROFIT 70,203,280 30,587,356 4,130,909

OTHER COMPREHENSIVE INCOME ITEMTHAT WILL NOT BE RECLASSIFIEDSUBSEQUENTLY TO PROFIT OR LOSS:Remeasurements – net 25 - 1,367,793 -

TOTAL COMPREHENSIVE INCOME 70,203,280 31,955,149 4,130,909

(See Notes to Financial Statements)

(With Comparative Figures For Year Ended December 31 and For the Nine Months period

PHILAB INDUSTRIES, INC.STATEMENT OF CHANGES IN EQUITYFor the Period Ended September 30, 2016(With Comparative Figures For Year Ended December 31, 2015)(In Philippine Peso)

Notes Capital StockShare

Premium

Unappropriated Retained earnings

Appropriated Retained Earnings

Remeasurements – net Total

Balance, January 1, 2015 12,500,000 97,250,000 12,500,000 8,771,860 - 131,021,860 Prior period error 33 (59,851,000) 6,432,752 (53,418,248)

Balance, January 1, 2015 (as restated) 18 12,500,000 37,399,000 18,932,752 8,771,860 - 77,603,612 Issuance of shares 18 900,000 900,000 Appropriation of retained earnings 19 (41,228,140) 41,228,140 - Deficiency tax paid (6,879,214) (6,879,214) Profit as restated 30,587,356 30,587,356 Other comprehensive income 1,367,793 1,367,793

Balance, December 31, 2015 13,400,000 37,399,000 1,412,754 50,000,000 1,367,793 103,579,547 Profit 70,203,280 70,203,280 Payment of subscription receivable 18 24,239,100 24,239,100 Other comprehensive income 25 (410,338) (410,338)

Balance, September 30, 2016 37,639,100 37,399,000 71,616,034 50,000,000 957,455 197,611,589

(See Notes to Financial Statements)

PHILAB INDUSTRIES, INC.STATEMENT OF CASH FLOWSFor the Period Ended September 30, 2016(With Comparative Figures For Year Ended December 31, 2015)(In Philippine Peso)

NOTES 20162015

(As restated)

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax 107,198,050 49,696,178 Adjustments for:

Impairment lossFinance cost 15,24 16,054,165 8,045,635 Bad debts expense 7,23 15,000,000 - Depreciation 11,23 2,710,480 10,749,228 Retirement benefit 23,25 10,815,828 8,782,310 Finance income 6,22 (87,406) (22,412) Deficiency tax paid - (6,879,214) Loss on disposal 11,23 - 4,033,331

Operating cash flows before changes in working capital 151,691,117 74,405,056 Decrease (Increase) in operating assets:

Trade and other receivables (588,738,063) (240,699,368) Inventories (106,677,115) (13,975,767) Prepayments and other current assets (7,563,859) 13,322,208 Other non-current assets (8,516,500) -

Increase (Decrease) in operating liabilities:Trade and other payables 562,650,620 156,516,759 Other non-current liabilities - (13,559,815)

Cash generated from operations 2,846,200 (23,990,927) Income taxes paid - (1,272,235)

Net cash from (used in) operating activities 2,846,200 (25,263,162)

CASH FLOWS FROM INVESTING ACTIVITIES

Finance income received 6,22 87,406 22,412 Additions to property and equipment 11 (264,331) (20,274,135) Investment in joint venture 10 (42,130,924) 39,102,921

Net cash from (used in) investing activities (42,307,849) 18,851,198

CASH FLOWS FROM FINANCING ACTIVITIES

Availment of loans 15 372,879,553 158,510,302 Advances from related parties 17 3,849,402 - Payment of subscription receivable 18 24,239,100 - Finance cost paid 15,24 (16,054,165) (8,045,635) Payments of loans 15 (194,174,842) (29,147,745) Payment of deposit for subscription - (145,828,313) Proceeds from issuance of shares 18 - 900,000

Net cash from (used in) financing activities 190,739,048 (23,611,391)

NET INCREASE (DECREASE) IN CASHAND CASH EQUIVALENTS 151,277,399 (30,023,355)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,065,725 38,089,080

CASH AND CASH EQUIVALENTS AT END OF PERIOD 159,343,124 8,065,725

(See Notes to Financial Statements)

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PHILAB INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS September 30, 2016 (With Comparative Figures for 2015)

1. CORPORATE INFORMATION

Philab Industries, Inc. (the “Company”) was incorporated and registered with the Philippine Securities and Exchange Commission (SEC) on February 19, 1980 under SEC Registration Number 91302.

The principal activities of the Company are to manufacture, sell, export, import and otherwise deal in all kinds and classes of scientific, medical, educational, electronics, laboratory, research, testing and measuring machineries, equipment, apparatus, furniture and fixtures, including their accessories, attachments and spare parts, as well as in any and all articles, goods, wares and merchandise or kindred nature.

The Company’s registered office address is located at 7487 Bagtikan Street, San Antonio Village, Makati City.

2. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

The Philippine Financial Reporting Standards Council (FRSC) approved the issuance of new and revised Philippine Financial Reporting Standards (PFRS). The term “PFRS” in general includes all applicable PFRS, Philippine Accounting Standards (PAS), and Interpretations issued by the Philippine Interpretations Committee (PIC), Standing Interpretations Committee (SIC) and International Financial Reporting Interpretations Committee (IFRIC) which have been approved by the FRSC and adopted by SEC.

These new and revised PFRS prescribe new accounting recognition, measurement and disclosure requirements applicable to the Company. When applicable, the adoption of the new standards was made in accordance with their transitional provisions, otherwise the adoption is accounted for as change in accounting policy under PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.

2.01 New and Revised PFRSs Applied with No Material Effect on the Financial Statements

The following new and revised PFRSs have also been adopted in these financial statements. The application of these new and revised PFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements.

x Amendments to PFRS 10, PFRS 12 and PAS 28, Investment Entities: Applying the Consolidation Exception

The amendments confirm that the exemption from preparing consolidated financial statements for an intermediate parent entity is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all of its subsidiaries at fair value.

In addition, it clarifies that a subsidiary that provides services related to the parent's investment activities should not be consolidated if the subsidiary itself is an investment entity.

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Moreover, it clarifies that when applying the equity method to an associate or a joint venture, a non-investment entity investor in an investment entity may retain the fair value measurement applied by the associate or joint venture to its interests in subsidiaries.

And, an investment entity measuring all of its subsidiaries at fair value shall provide the disclosures relating to investment entities as required by PFRS 12.

The amendments are effective for annual periods beginning on or after 1 January 2016 and must be applied retrospectively. Earlier application is permitted.

x PFRS 11, Joint Arrangements – Accounting for Acquisitions of Interests in Joint Operations

Amendments in PFRS 11 require an acquirer of an interest in a joint operation in which the activity constitutes a business to apply the accounting principles and disclosure requirements in PFRS 3 and other PFRS for business combinations. This is applicable in initial acquisition and acquisition of initial interest in a joint operation. This is applicable prospectively to annual periods beginning January 1, 2016.

x PFRS 14, Regulatory Deferral Accounts

PFRS 14 issued on January 30, 2014, provides temporary guidance for first-time adopters of PFRS on accounting for regulatory deferral account balances. Regulatory deferral account balances are describe as amounts of expense or income that would not be recognized as assets or liabilities in accordance with other Standards, but that qualify to be deferred because the amount is included, or is expected to be included, by the rate regulator in establishing the price(s) that an entity can charge to customers for rate-regulated goods or services.

PFRS 14 permits an entity that adopts PFRS to continue to use, in its first and subsequent PFRS financial statements, its previous generally accepted accounting principles (GAAP) accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances without specifically considering the requirements of paragraph 11 of PAS 8. PFRS 14 requires entities to present regulatory deferral account balances as separate line items in the statement of financial position and to present movements in those account balances as separate line items in the statement of profit or loss and other comprehensive income. PFRS 14 also requires specific disclosures to identify the nature of, and risks associated with, the rate regulation that has resulted in the recognition of regulatory deferral account balances in accordance with this Standard.

PFRS 14 is effective for a period beginning on or after January 1, 2016. Earlier application is permitted.

x Amendments to PAS 1, Disclosure Initiative

The amendments clarify that information should not be obscured by aggregating or by providing immaterial information. Materiality considerations shall apply to all parts of the financial statements even if when a standard requires a specific disclosure.

In addition, the amendments introduce a clarification that the list of line items to be presented in the statement of financial position and statement of comprehensive income can be disaggregated and aggregated as relevant. Also, it clarifies that an entity's share of other comprehensive (OCI) of equity-accounted associates and

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joint ventures should be presented in aggregate as single line items based on whether or not it will subsequently be reclassified to profit or loss.

Further, the amendments add additional examples of possible ways of ordering the notes to clarify that understandability and comparability should be considered when determining the order of the notes. The IASB also removed guidance and examples with regard to the identification of significant accounting policies that were perceived as being potentially unhelpful.

x PAS 16, Property, Plant and Equipment and PAS 38, Intangible Assets – Clarification of Acceptable Methods of Depreciation and Amortization

The amendments clarify that revenue-based depreciation is not appropriate for property, plant and equipment. Revenue-based amortization is allowed only when the intangible assets are expressed as a measure of revenue or when it can be demonstrated that revenue and the consumption of economic benefits of the intangible asset are highly correlated. This is effective prospectively from January 1, 2016. Earlier application is permitted.

x PAS 27, Separate Financial Statements – Equity Method in Separate Financial Statements

The amendments in PAS 27 permit an entity to account its investments in subsidiaries, joint ventures and associates using the equity method as described in PAS 28 in its separate financial statements. The amendments shall be applied for annual periods beginning January 1, 2016 retrospectively. Earlier application is permitted.

x Improvements to PFRS (2014) – Effective for annual periods beginning on or after January 1, 2016. Earlier application is permitted.

PFRS 5, Non-current Assets Held for Sale and Discontinued Operations – The amendments require that an asset reclassified directly from being held sale to being held for distribution, or directly from being held for distribution to being held for sale, the requirements for classification, presentation and measurement shall continue to be applied in accordance with this standard

PFRS 7, Financial Instruments: Disclosure – The amendments clarify that the right to service a financial asset transferred may be retained for a fee that is included in the servicing contract. The right to earn a fee for servicing the financial asset is generally continuing involvement for the purpose of applying the disclosure requirements. The service contract must be assessed to determine whether there is a continuing involvement in the financial asset transferred.

Further, the additional disclosure required by amendments to PFRS 7, Disclosure –Offsetting Financial Assets and Financial Liabilities is not specifically required for all interim periods. For condensed financial interim financial statements, the disclosure requirements are required to be given if the financial statements are prepared in accordance with PAS 34, Interim Financial Reporting when the inclusion would be required by the standard.

PAS 19, Employee Benefits – It clarifies that the high quality corporate bonds used to estimate the discount rate for post-employment benefit obligations should be denominated in the same currency as the liability and that the depth of the market for high quality corporate bonds should be assessed at the currency level.

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PAS 34, Interim Financial Reporting – It clarifies that information shall be disclosed either in the notes to the interim financial statements or elsewhere in the interim financial report, by incorporating cross-reference from the interim financial statements to the other part of the interim financial report which is available to users on the same terms as the interim financial statements and at the same time.

x PIC Q&A No. 2015-01 Conforming Changes in PIC Q&As – Cycle 2015

This Q&A No. 2015-01 sets out the amendments to certain PIC Q&As. These changes are made as a consequence of the issuance of new Philippine Financial Reporting Standards (PFRS) and amendments to certain existing PFRS that are effective as of January 1, 2013.

2.02 New and Revised PFRSs in Issue but Not Yet Effective

The Company will adopt the following standards and interpretations enumerated below when they become effective. Except as otherwise indicated, the Company does not expect the adoption of these new and amended PFRS, to have significant impact on the financial statements.

2.02.01 Standard Adopted by FRSC and Approved by the Board of Accountancy (BOA)

x PFRS 9, Financial Instruments – Hedge Accounting and Amendments to PFRS 9, PFRS 7 and PAS 39 (2013)

PFRS 9 (2013) includes the new hedge accounting requirements that align hedge accounting more closely with risk management, establish a more principle-based approach to hedge accounting and address inconsistencies and weaknesses in the hedge accounting model in PAS 39. One of the significant changes is that inclusion of non-financial items into the type of transactions eligible for hedge accounting, provided that the risk component is separately identifiable and reliably measurable. Entities were given an accounting policy choice between applying the hedge accounting requirements of PFRS 9 and continuing to apply the hedge accounting requirements in PAS 39. Also, the disclosure on hedge accounting and risk management disclosures were improved.

PFRS 9 (2013) does not have a mandatory effective date, early application is permitted.

x PFRS 9, Financial Instruments (2014)

PFRS 9, amended on July 24, 2014, made limited amendments to the requirements for classification and measurement of financial assets and requirements for impairment.

The amendments introduce a ‘fair value through other comprehensive income’ measurement category for particular simple debt instruments. Also it introduced impairment requirements relating to the accounting for an entity’s expected credit losses on its financial assets and commitments to extend credit. These requirements eliminate the threshold that was in PAS 39 for the recognition of credit losses. Under the impairment approach in PFRS 9 it is no longer necessary for a credit event to have occurred before credit losses are recognized. Instead, an entity always accounts for expected credit losses, and changes in those expected credit losses. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition and, consequently, more timely information is provided about expected credit losses.

5

PFRS 9 supersedes PFRS 9 (2009), PFRS 9 (2010) and PFRS 9 (2013) and is effective retrospectively for annual periods beginning on or after January 1, 2018, with earlier application permitted.

x PFRS 10, Consolidated Financial Statements and PAS 28, Investments in Associates and Joint Ventures – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The amendments clarify the treatment of the sale or contribution of assets between an investor and its associate and joint venture. This requires an investor in its financial statements to recognize in full the gains and losses arising from the sale or contribution of assets that constitute a business while recognize partial gains and losses if the assets do not constitute a business (i.e. up to the extent only of unrelated investor share).

On January 13, 2016, the FRSC decided to postpone the original effective date of January 1, 2016 of the said amendments until the IASB has completed its broader review of the research project on equity accounting that may result in the simplification of accounting for such transactions and of other aspects of accounting for associates and joint ventures.

x PFRS 16, Leases

Introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.

On the other hand, it substantially carries forward the lessor accounting requirements in PAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.

Effective for annual periods beginning on or after January 1, 2019, however, earlier application is not permitted until the FRSC has adopted the new revenue recognition standard.

x IFRIC 15, Agreements for the Construction of Real Estate

The Interpretation addresses how entities should determine whether an agreement for the construction of real estate is within the scope of PAS 11, Construction Contracts, or PAS 18, Revenue, and when revenue from the construction of real estate should be recognized. The requirements have not affected the accounting for the Company’s construction activities.

Effectivity of this interpretation has been deferred until the final Revenue standard is issued by International Accounting Standards Board (IASB), and an evaluation of the requirements of the final Revenue standard against the practices of the Philippine real estate industry is completed.

x Amendments to PAS 7, Disclosure Initiative

The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash charges.

Effective for annual periods beginning on or after January 1, 2017 and shall be applied prospectively, with earlier application permitted.

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x Amendments to PAS 12, Recognition of Deferred Tax Assets for Unrealized Losses

The amendments clarify that unrealized losses on debt instruments measured at fair value in the financial statements but at cost for tax purposes can give rise to deductible temporary differences.

In addition, these clarify that the carrying amount of an asset does not limit the estimation of probable future taxable profits and that when comparing deductible temporary differences with future taxable profits, the future taxable profits excludes tax deductions resulting from the reversal of those deductible temporary differences.

Effective for annual periods beginning on or after January 1, 2017 and shall be applied retrospectively, with earlier application permitted.

2.02.02 Standard Adopted by FRSC but pending for Approval of the BOA

x Amendments to PFRS 2, Classification and Measurement of Share-based Payment Transactions

The amendments clarify the accounting for the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and modification to the terms and conditions of share-based payment transactions that will result to change in classification from cash-settled to equity-settled.

The amendments are effective for annual periods beginning on or after January 1, 2018. Retrospective application is permitted if elected for all of the aforementioned amendments and other criteria are met.

x PIC Q&A No. 2016-02 PAS 32 and PAS 38 – Accounting Treatment of Club Shares Held by an Entity

A proprietary club share entitles the shareholder to a residual interest in the net assets upon liquidation which justifies that such instrument is an equity instrument and thereby qualifies as a financial asset to be accounted for under PAS 39, Financial Instruments: Recognition and Measurement.

A non-proprietary club share, though an equity instrument in its legal form, is not an equity instrument in the context of PAS 32. Furthermore, it does not entitle the holder to a contractual right to receive cash or another financial asset from the issuing corporation. The holder of the share, in substance, only paid for the privilege to enjoy the club facilities and services but not for ownership of the club. In such case, the holder must account for the share as an intangible asset under PAS 38.

3. BASIS FOR THE PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS

3.01 Statement of Compliance

The financial statements have been prepared in conformity with Philippine Financial Reporting Standards (PFRS) and are under the historical cost convention, except for certain financial instruments that are carried either at fair value or at amortized cost, and inventories carried at net realizable value.

The Company is not subject to seasonal fluctuations.

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3.02 Functional and Presentation Currency

Items included in the financial statements of the Company are measured using Philippine Peso (P), the currency of the primary economic environment in which the Company operates (the “functional currency”).

The Company chose to present its financial statements using its functional currency.

3.03 Basis of Preparation

The reporting period of the financial statements of the Company is December 31. However, the Company opted to prepare its financial statements as of September 30, 2016 and 2015.

In view of this, Management decided to prepare the complete set of financial statements as of September 30, 2016 and 2015 for internal management purpose only.

4. SIGNIFICANT ACCOUNTING POLICIES

Principal accounting and financial reporting policies applied by the Company in the preparation of its financial statements are enumerated below and are consistently applied to all the periods presented, unless otherwise stated.

4.01 Financial Assets

Financial assets are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.

Financial assets that are subsequently measured at cost or at amortized cost, and where the purchase or sale are under a contract whose terms require delivery of such within the timeframe established by the market concerned are initially recognized on the trade date.

Financial assets are classified into the following specified categories: financial assets‘ at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ (HTM) investments, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

The Company’s financial assets include cash and cash equivalents, trade and other receivables, performance bond and refundable deposits presented under prepayments and other current assets.

4.01.01 Effective Interest Method

The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating finance income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts, through the expected life of the debt instrument, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.

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4.01.02 Amortized Cost

Amortized cost is computed using the effective interest method less any allowance for impairment and principal repayment or reduction. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of effective interest rate.

4.01.03 Cash and Cash Equivalents

Cash includes cash on hand measured at face value and cash deposits held at call with bank that are subject to insignificant risk of change in value. This shall be measured at undiscounted amount of the cash or other consideration expected to be paid or received.

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with maturities of three months or less from the date of acquisition and that are subject to an insignificant risk of change in value.

4.01.04 Trade and Other Receivables

Trade and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and other receivables are measured at amortized cost using the effective interest method, less any impairment. Finance income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

4.01.05 Impairment of Financial Assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

Objective evidence of impairment could include:

x significant financial difficulty of the issuer or counterparty; or

x default or delinquency in interest or principal payments; or

x it becoming probable that the borrower will enter bankruptcy or financial re-organization; or

x the lender, for economic or legal reasons relating to the borrower’s financial difficulty, grants the borrower a concession that the lender would not otherwise consider; or

x the disappearance of an active market for that financial asset because of financial difficulties; or

x observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group, including (i) adverse changes in the payment status of borrowers in the group (e.g. an increased number of delayed payments or an increased number of credit card borrowers who have reached their credit limit and are paying the minimum monthly amount); or (ii) national or local economic conditions that correlate with defaults on the assets in the group (e.g. an increase in the unemployment rate in the geographical area of the borrowers, a decrease in property prices for mortgages in the relevant area, a decrease in oil prices for loan

9

assets to oil producers, or adverse changes in industry conditions that affect the borrowers in the group).

Other factors may also be evidence of impairment, including significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the issuer operates.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of thirty (30) to sixty (60) days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

4.01.06 Derecognition of Financial Assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.

4.02 Prepayments and Other Current Assets

Prepayments and other current assets represent expenses not yet incurred but already paid in cash. These are initially recorded as assets and measured at the amount of cash paid. Subsequently, these are charged to profit or loss as they are consumed in operations or expire with the passage of time.

Prepayments and other current assets are classified in the statement of financial position as current assets when the expenses related to these are expected to be incurred within one year or the Company’s normal operating cycle whichever is longer. Otherwise, these are classified as non-current assets.

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4.03 Interests in Joint Arrangement

A joint arrangement is a contractual arrangement whereby the Company and other parties have agreed sharing of control of an arrangement, which exist only when decisions about relevant activities require the unanimous consent of the parties sharing. The sharing of control is also known as joint control. A joint arrangement can either be a joint venture or a joint operation.

4.03.01 Joint Venture

A joint venture is a joint arrangement whereby the Company and other parties that have joint control of the arrangement have rights to the net assets of the arrangement. The Company reports its interests in a joint venture using equity method, except when the investment is classified as held for sale, in which case it is accounted for in accordance with PFRS 5, Non-current Assets Held for Sale and Discontinued Operations.

Under the equity method, an investment in joint venture is initially recognized in the statement of financial position at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the associate. When the Company’s share of losses of a joint venture exceeds the Company’s interest in that joint venture (which includes any long-term interests that, in substance, form part of the Company’s net investment in the joint venture), the Company discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the joint venture.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the joint venture recognized at the date of acquisition is recognized as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

Where the Company transacts with its jointly controlled entities, unrealized profits and losses are eliminated to the extent of the Company’s interest in the joint venture.

When the equity method is discontinued Company recognizes its retained interest at fair value. The difference between the carrying amount of the investment at the time the equity method was discontinued and the fair value of retained interest plus any proceeds from disposing of a part of interest is recognized in profit or loss. Amounts that were previously recognized in other comprehensive income in relation to the investment are accounted on the basis as would have been required if the investee had directly disposed of the related assets or liabilities.

The requirements of PAS 39 are applied to determine whether it is necessary to recognize any impairment loss with respect to the Company’s investment in joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with PAS 36, Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with PAS 36 to the extent that the recoverable amount of the investment subsequently increases.

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4.04 Inventories

Inventories are stated at the lower of cost or net realizable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are determined using the first-in, first-out (FIFO) method. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

When the net realizable value of the inventories is lower than the cost, the Company provides for an allowance for the decline in the value of the inventory and recognizes the write-down as an expense in the statement of comprehensive income. The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, is recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs.

When inventories are sold, the carrying amount of those inventories is recognized as an expense in the period in which the related revenue is recognized.

4.05 Property, Plant and Equipment

Property, plant and equipment are initially measured at cost. The cost of an asset consists of its purchase price and costs directly attributable to bringing the asset to its working condition for its intended use. Subsequent to initial recognition property, plant and equipment are carried at cost less accumulated depreciation and accumulated impairment losses.

Subsequent expenditures relating to an item of property, plant and equipment that have already been recognized are added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Company. All other subsequent expenditures are recognized as expenses in the period in which those are incurred.

Depreciation is computed on the straight-line method based on the estimated useful lives of the assets as follows:

Factory warehouse 20 years Building and improvements 15 years Transportation equipment 5 years Machines, tools and equipment 5 years

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, if there is an indication of a significant change since the last reporting date.

An item of property, plant and equipment is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of a property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in profit or loss.

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4.06 Impairment of Assets

At each reporting date, the Company assesses whether there is any indication that any assets other than inventories and financial assets that are within the scope of PAS 39, Financial Instruments: Recognition and Measurement may have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use. 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 for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognized as an expense.

When an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized as income.

4.07 Borrowing Costs

All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

4.08 Financial Liabilities and Equity Instruments

4.08.01 Classification as Debt or Equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements.

4.08.02 Financial Liabilities

Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.

The Company’s financial liabilities include trade and other payables (except for due to government agencies and advances from customers), accrued interest payable presented under accrued liabilities, due to a related party, loans payable and other non-current liabilities.

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4.08.03 Other Financial Liabilities

Other financial liabilities are initially measured at fair value inclusive of directly attributable transaction costs.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with finance cost recognized on an effective yield basis.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating finance cost over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

4.08.04 Derecognition of Financial Liabilities

The Company derecognizes financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or expired. When an existing liability is replaced by another from the same lender on 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. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

4.08.05 Equity Instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.

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 from the proceeds, net of tax.

4.09 Employee Benefits

4.09.01 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, wages and allowances, SSS, PhilHealth, and Pag-ibig contributions and other employee benefits.

4.09.02 Post-employment Benefits

The Company has an unfunded and non-contributory defined benefit retirement plan. This benefit defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The cost of providing benefits is determined using the Projected Unit Credit Method which reflects services rendered by employees to the date of valuation and incorporates assumptions concerning employees’ projected salaries. Post-employment expenses include current service cost, past service cost, and net interest on defined benefit asset/liability. Remeasurements which include cumulative actuarial gains and losses, return on plan assets, and changes in the effects of asset ceiling are recognized directly in OCI and is also presented under equity in the statement of financial position.

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Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in OCI in the period in which they arise.

Past-service costs are recognized immediately in profit or loss.

The liability recognized in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period. The defined benefit obligation is calculated annually by an independent actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government securities, equity securities and other securities that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.

4.10 Provisions and Contingencies

Provisions are recognized when the Company has a present obligation, whether legal or constructive, as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

4.11 Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

The gross inflows of economic benefits include amounts collected on behalf of the principal and which do not result in increases in equity for the Company. The amounts collected on behalf of the principal are not revenue. Instead, revenue is the amount of commission.

4.11.01 Sale of Goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

x the Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

x the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

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x the amount of revenue can be measured reliably;

x it is probable that the economic benefits associated with the transaction will flow to the Company; and

x the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Revenue from sale of goods pertains to sale of manufactured and purchased classes of scientific, medical, educational, electronics, laboratory, research, testing and measuring machineries, equipment, apparatus, furniture and fixtures, including their accessories, attachments and spare parts, as well as in any and all articles, goods, wares and merchandise.

4.11.02 Rendering of Services

Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract. Revenue from rendering of services is recognized when all the following conditions are satisfied:

x the amount of revenue can be measured reliably;

x it is probable that the economic benefits associated with the transaction will flow to the Company;

x the stage of completion of the transaction can be measured reliably; and

x the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

Revenue from service pertains to installation, check-ups and repairs and maintenance of machineries, equipment and apparatus sold.

4.11.03 Finance Income

Finance income is recognized when it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured reliably. Finance income is accrued on a time proportion basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

4.12 Expense Recognition

Expense encompasses losses as well as those expenses that arise in the course of the ordinary activities of the Company.

The Company recognizes expenses in the statement of comprehensive income when a decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably.

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4.13 Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

4.13.01 The Company as a Lessee

Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

4.14 Foreign Currency Transactions and Translation

In preparing the financial statements of the Company, transactions in currencies other than the Company’s functional currency, i.e. foreign currencies, are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date.

Exchange differences are recognized in profit or loss in the period in which they arise.

4.15 Related Parties and Related Party Transactions

A related party is a person or entity that is related to the Company that is preparing its financial statements. A person or a close member of that person’s family is related to Company if that person has control or joint control over the Company, has significant influence over the Company, or is a member of the key management personnel of the Company or of a parent of the Company.

An entity is related to the Company if any of the following conditions applies:

x The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

x One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

x Both entities are joint ventures of the same third party.

x One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

x The entity is a post-employment benefit plan for the benefit of employees of either the Company or an entity related to the Company. If the Company is itself such a plan, the sponsoring employers are also related to the Company.

x The entity is controlled or jointly controlled by a person identified above.

x A person identified above has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

x Management entity providing key management personnel services to a reporting entity.

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Close members of the family of a person are those family members, who may be expected to influence, or be influenced by, that person in their dealings with the Company and include that person’s children and spouse or domestic partner; children of that person’s spouse or domestic partner; and dependents of that person or that person’s spouse or domestic partner.

A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged.

4.16 Taxation

Income tax expense represents the sum of current and deferred tax.

4.16.01 Current Tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

4.16.02 Deferred Tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally 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 Carryover (NOLCO), to the extent that it is probable that taxable profits will be available against which those deductible temporary differences and carry forward of unused MCIT and unused NOLCO can be utilized. Deferred income tax, however, is not recognized when it arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction that affects neither the accounting profit nor taxable profit or loss.

Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets arising from deductible temporary differences are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

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Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

4.16.03 Current and Deferred Tax for the Period

Current and deferred tax are recognized as an expense or income in profit or loss, except when they relate to items that are recognized outside profit or loss, whether in OCI or directly in equity, in which case the tax is also recognized outside profit or loss.

4.17 Events after the Reporting Period

The Company identifies subsequent events as events that occurred after the reporting period but before the date when the financial statements were authorized for issue. Any subsequent events that provide additional information about the Company’s position at the reporting period, adjusting events, are reflected in the financial statements, while subsequent events that do not require adjustments, non-adjusting events, are disclosed in the notes to financial statements when material.

4.18 Prior Period Errors

The Company corrects material prior period errors retrospectively in the first set of financial statements authorized for issue after their discovery by: (a) restating the comparative amounts for the prior period presented in which the error occurred; or (b) if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.

5. CRITICAL ACCOUNTING JUDGMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTIES

In the application of the Company’s accounting policies, which are described in Note 4, Management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

5.01 Critical Judgment in Applying Accounting Policy

The following is the critical judgment, apart from those involving estimations that Management has made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognized in financial statements.

5.01.01 Assessment of Principal-Agency Arrangement

Commission income includes only the gross inflows of economic benefits received and receivable by the entity on its own account. Amounts collected on behalf of third parties such as sales taxes, goods and services taxes and value added taxes are not economic benefits which flow to the entity and do not result in increases in equity.

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Therefore, they are excluded from commission income. The Company is in an agency relationship where the gross inflows of economic benefits include amounts collected on behalf of the principal and which do not result in increases in equity for the entity. The amounts collected on behalf of the principal are not revenue. Instead, revenue is the amount of commission income.

In 2016, 2015 and for the nine months ended September 30, 2015, the Company assessed that it is acting as an agent in some of its transactions with clients recognizing indent commission amounting to P677,790, P11,375,529 and P10,753,418, respectively, as disclosed in Note 22.

5.02 Key Sources of Estimation Uncertainties

The following are the key assumptions concerning the future, and other key sources of estimation uncertainties at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

5.02.01 Estimating Inventories at Net Realizable Values

Net realizable values of inventories are assessed regularly based on the prevailing selling prices of inventories less estimated costs to sell. The Company recognizes expense and provides allowance for decline in value of inventories whenever net realizable value of inventories becomes lower than cost due to damage, physical deterioration, obsolescence, changes on price levels or other causes. Inventory items identified to be obsolete and unusable is written off and charged against allowance account. Increase in the net realizable values will increase the carrying amount through reduction of allowance for decline but only to the extent of original acquisition cost.

The net realizable values of the inventories approximate their carrying amounts; thus, no impairment losses were recognized in both years. As of September 30, 2016, December 31 and September 30, 2015, the carrying amounts of inventories amounted to P141,714,780, P35,037,665 and P53,403,173, respectively, as disclosed in Note 8.

5.02.02 Reviewing Residual Values, Useful Lives and Depreciation Method of Property, Plant and Equipment

The residual values, useful lives and depreciation method of the Company’s property, plant and equipment are reviewed at least annually, and adjusted prospectively if appropriate, if there is an indication of a significant change in, how an asset is used; significant unexpected wear and tear; technological advancement; and changes in market prices since the most recent annual reporting date. The useful lives of the Company’s assets are estimated based on the period over which the assets are expected to be available for use. In determining the useful life of an asset, the Company considers the expected usage, expected physical wear and tear, technical or commercial obsolescence arising from changes or improvements in production, or from a change in the market demand for the product or service output and legal or other limits on the use of the Company’s assets. In addition, the estimation of the useful lives is based on Company’s collective assessment of industry practice, internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of property and equipment

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would increase the recognized operating expenses and decrease non-current assets. The Company uses a depreciation method that reflects the pattern in which it expects to consume the asset’s future economic benefits. If there is an indication that there has been a significant change in the pattern used by which the Company expects to consume an asset’s future economic benefits, the Company shall review its present depreciation method and, if current expectations differ, it shall change the depreciation method to reflect the new pattern.

In all the periods, Management assessed that there were no changes from the previous estimates. As of September 30, 2016, December 31 and September 30, 2015, the carrying amounts of property, plant and equipment amounted to P67,198,716, P69,644,865 and P114,636,822, respectively, as disclosed in Note 11.

5.02.03 Asset Impairment

The Company performs an impairment review when certain impairment indicators are present. In determining the fair values of property, plant and equipment which requires the determination of future cash flows expected to be generated from the continued use and ultimate disposition of such assets requires the Company to make estimates and assumptions that can materially affect the financial statements. Future events could cause the Company to conclude that property and equipment and intangible asset are impaired. Any resulting impairment loss could have a material adverse impact on the financial condition and results of operations.

The preparation of the estimated future cash flows involves significant judgment and estimations. While the Company believes that its assumptions are appropriate and reasonable, significant changes in the assumptions may materially affect the assessment of recoverable values and may lead to future additional impairment charges under PFRS.

In all the periods, the Company assessed there was no indicator of impairment existed on its property, plant and equipment. As of September 30, 2016, December 31 and September 30, 2015, the carrying amounts of property, plant and equipment amounted to P67,198,716 , P69,644,865 and P114,636,822, respectively, as disclosed in Note 11.

5.02.04 Estimating Allowance for Doubtful Accounts

The Company estimates the allowance for doubtful accounts related to its trade and other receivables and due from related party receivables based on assessment of specific accounts where the Company has information that certain customers and related parties are unable to meet their financial obligations. In these cases, judgment used was based on the best available facts and circumstances including but not limited to, the length of relationship with the customer and related parties, the age of the receivables and the current credit status based on third party credit reports and known market factors. The Company used judgment to record specific allowance for customers and related parties against amounts due to reduce the expected collectible amounts. This specific allowance is re-evaluated and adjusted as additional information received impacts the amounts estimated.

The amounts and timing of recorded expenses for any period would differ if different judgments were made or different estimates were utilized. An increase in the allowance for doubtful accounts would increase the recognized operating expenses and decrease current assets.

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In all the periods, Management believes that the recoverability of its receivables was certain; thus, no allowance for doubtful accounts was recognized. As of September 30, 2016, December 31 and September 30, 2015, the carrying amounts of trade and other receivables amounted to P844,825,517, P271,087,454 and P236,083,139, respectively, as disclosed in Note 7.

5.02.05 Post-employment Benefits

The determination of the retirement obligation and cost and other retirement benefits is dependent on the selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions include among others, discount rates, mortality of plan members and rates of compensation increase. In accordance with PFRS, actual results that differ from the assumptions and the effects of changes in actuarial assumptions are recognized directly as remeasurements in other comprehensive income. While the Company believes that the assumptions are reasonable and appropriate, significant differences in the actual experience or significant changes in the assumptions may materially affect the pension and other retirement obligations.

As of September 30, 2016, December 31 and September 30, 2015, the carrying amount of the Company’s recognized retirement benefit obligation amounted to P10,815,828, P8,782,310 and P8,782,310, respectively, as disclosed in Notes 14 and 25. Retirement benefit expense recognized in 2016 and 2015 amounted to P2,033,518 and P2,711,357, respectively, as disclosed in Notes 23 and 25. Remeasurement gain recognized in OCI amounted to P957,455 and P1,367,793 in 2016 and 2015, respectively, as disclosed in Note 25.

6. CASH AND CASH EQUIVALENTS

For the purpose of the statement of cash flows, cash includes cash on hand and in banks. Cash and cash equivalents at the end of each reporting period as shown in the statement of cash flows can be reconciled to the related item in the statement of financial position as follows:

2016 2015

For the nine months ended September 30,

2015

Cash on hand P 271,204 P 1,996,065 P - Petty cash fund - 50,783 50,783 Cash in banks 154,013,265 6,018,877 2,225,787 Cash equivalents 5,058,655 - -

P 159,343,124 P 8,065,725 P 2,276,570

In 2015, petty cash fund amounting to P50,783 should be reclassified and presented as part of cash on hand to conform with the current year’s presentation.

In 2016 and 2015, cash in banks earn interest at prevailing bank deposit rates. Cash equivalents include short-term placements with effective interest rate of 1% in 2016. The short-term placements pertain to deposit account in Land Bank of the Philippines with maturity dates of thirty-six (36) days or less.

Aggregate finance income earned from cash in banks and cash equivalents amounted to P87,406 and P22,412 in 2016 and 2015, respectively, as disclosed in Note 22.

In 2016, the Company has a restricted cash balance amounting to P8,516,500 in one of its local banks, as disclosed in Notes 12 and 15.

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7. TRADE AND OTHER RECEIVABLES

The Company’s trade and other receivables consist of:

2016 2015

For the nine months ended September 30,

2015

Trade P 842,135,434 P 243,225,509 P 208,221,194 Advances to employees 2,616,483 - - Non-trade receivables - 27,861,945 27,861,945 Others 73,600 - - -

P 844,825,517 P 271,087,454 236,083,139

In 2015, certain amounts of trade and other receivables account should be reclassified to conform with the current year’s presentation. The reclassifications include:

Previous Year’s Classification Current Year’s Classification Amount Trade and other receivables Trade and other receivables

Non-trade receivables Advances to employees P 2,221,930 Non-trade receivables Others 73,600 Advances to affiliates Trade 15,000,000

Trade receivables represent the amounts owed to the Company from the sale of goods and services particularly life sciences and diagnostics.

The average credit period on sales of goods and services is thirty (30) to sixty (60) days. No interest is charged on trade receivables. Allowance for doubtful accounts is recognized against trade receivables which the Company assesses to be long outstanding and based on estimated irrecoverable amounts determined by reference to past default experience of the counterparty and an analysis of the counterparty’s current financial position. The Company has not recognized allowance for doubtful receivables because there has not been a significant change in credit quality and the amounts are still considered highly recoverable.

Advances to officers and employees pertain to money advanced to officers and employees in connection with their official functions.

Trade receivables disclosed include amounts which are past due at the end of the reporting periods but against which the Company has not recognized an allowance for doubtful receivables because there has not been a significant change in credit quality and the amounts are still considered recoverable. The Company does not hold any collateral or other credit enhancements over these balances nor does it have a legal right of offset against any amounts owed by the Company to the counterparty.

Ageing of accounts that are past due but not impaired is as follows:

2016 2015 1 – 30 days P 71,032,117 P 14,182,461 31 – 60 days 1,955,732 17,283,891 61 – 90 days 24,069,017 10,906,088 over 90 days 39,185,970 5,222,299

P 136,242,836 P 47,594,739

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In determining the recoverability of trade and other receivable, the Company considers any change in the credit quality of its trade and other receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, Management believes that there is no credit provision required to be recognized in both periods.

In 2016, the Management wrote-off its trade receivables amounting to P15,000,000, as it was already deemed to be uncollectible, as disclosed in Note 23.

8. INVENTORIES

Details of the Company’s inventories, as disclosed in Note 21 are as follows:

2016

2015

For the nine months ended September 30,

2015

Raw materials P 9,579,884 P 9,523,175 P 14,514,886 Work-in-process 24,339,789 9,962,884 15,185,077 Finished goods 22,523,644 15,551,606 23,703,210

56,443,317 35,037,665 53,403,173 Retail goods 85,271,463 - -

P 141,714,780 P 35,037,665 P 53,403,173

In 2015, finished goods amounting to P14,852,296 should be reclassified and presented as retail goods to conform with the current year’s presentation.

The cost of inventories recognized as an expense amounted to P411,697,325, P96,017,014 and P56,102,437 in 2016 ,2015 and for the nine months ended September 30, 2015, respectively, as disclosed in Note 21.

All inventories are expected to be realized within twelve (12) months from the end of each reporting period.

9. PREPAYMENTS AND OTHER CURRENT ASSETS

The details of the Company’s prepayments and other current assets are shown below:

2016 2015

(as restated)

For the nine months ended September 30,

2015 Advances to suppliers P 46,424,268 P 40,529,623 P 3,702,189 Input VAT 23,471,161 - - Performance bond 4,430,950 - - Creditable VAT withholding 3,735,867 - - Refundable deposits 3,472,220 - - Prepaid rent (Note 26) 3,267,600 - - Investment in joint venture - 39,102,921 39,102,921 Prepaid assets - 335,220 335,220 Others 754,275 - -

P 85,556,341 P 79,967,764 P 43,140,330

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In 2015, certain amounts of prepaid and other current assets account should be reclassified to conform with the current year’s presentation. The reclassifications include:

Previous Year’s Classification Current Year’s Classification Amount

Prepayments and other current assets Investments in joint ventures Investment in joint venture Investments in joint ventures P 39,102,921

Prepayments and other current assets

Prepayments and other current assets

Prepaid assets Refundable security deposits 335,220

Advances to suppliers pertain to down payments or advance payments for the purchases made during the period.

On April 26, 2016, the Company received the Notice of Award for the result of the Competitive Bidding for the Procurement of Dengue Rapid Test with the Department of Health under IB No. 2016 - 037 with a contract price of P88,618,000, inclusive of local taxes. The contract requires the payment of performance bond equivalent to 5% of the contract price or P4,430,950.

Refundable deposits pertain to amount given by the Company in relation to the lease and container deposits. Out of the total balance of refundable deposits in 2016, P1,945,000 pertains to security deposits, as disclosed in Note 26.

10. INVESTMENTS IN JOINT VENTURES

10.01 Consortium of BF and Philab Industries Inc

The Company entered to an investment in joint venture in Consortium of BF and Philab Industries Inc. (the “Joint Venture”). The Joint Venture was incorporated and registered with the Philippine Securities and Exchange Commission (SEC) on June 27, 2016 under SEC Registration Number CS201613542.

The principal activities of the Joint Venture are to engage in general construction and other allied business including constructing, site preparation, enlarging, repairing, servicing, developing or otherwise engaging in any work on buildings, roads, highways, manufacturing plants, steel fabrications and other structures.

The Joint Venture’s registered office is located at 85 J.P. Rizal Street, Barangay Calumpang, Marikina City.

The term of the said Joint Venture shall be ten (10) years from and after the date of incorporation.

As of September 30, 2016 and December 31, 2015, the Company has forty percent (40%) interest in Consortium of BF and Philab Industries Inc., a joint venture that is accounted under method incorporated and will be operating under real estate industry.

As of September 30, 2016, the Joint Venture has not yet started its commercial operations.

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The movements of Company’s investment in joint venture are shown below:

2016 2015

Balance, Beginning P - P - Contribution (Note 17) 2,109,646 -

Balance, Ending P 2,109,646 P -

10.02 Genomic Institute of Asia Inc.

On March 18, 2013, the Company entered into an agreement with Genomic Institute of Asia Inc. (GIA), a corporation organized and existing under the laws of the Philippines. GIA is primarily engaged in providing and supporting genomic research, genomic sequencing and bioinformatics and other services related to natural science (collectively referred as “genomic services).

The Company and GIA mutually agreed that GIA shall provide its genomics services exclusively to the Company within the Philippine territory. GIA undertakes not to provide, sell, market, distribute, and/or deliver the genomic services, directly or indirectly, within the Philippine territory, through any other company, distributor or entity, other than the Company.

In consideration for the genomic services, the Company shall provide all necessary manpower, office space, equipment, utilities and supplies to GIA without any costs.

Ownership over all equipment shall be retained by the Company, however, in its discretion, the Company may subsequently transfer ownership of any equipment to GIA.

All other expenses and fees for the operation of GIA in relation to the genomic services herein described shall be for the account of the Company.

As of September 30, 2016, the Joint Venture has not yet started its commercial operations.

The movements of Company’s investment in joint venture are shown below:

2016 2015

Balance, Beginning P 39,102,921 P - Contribution (Note 17) 918,357 -

Balance, Ending P 40,021,278 P -

In 2015, investment in joint venture presented under prepayments and other current assets amounting to P39,102,921 should be reclassified and presented as a separate note item investment in joint venture to conform with the current year’s presentation, as disclosed in Note 9.

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11. PROPERTY, PLANT AND EQUIPMENT – net

The carrying amounts of the Company’s property, plant and equipment as of September 30, 2016 and December 31, 2015 are as follows:

Land

(as restated)

Transportation Equipment

(as restated)

Factory Warehouse (as restated)

Building and Improvements (as restated)

Machines, Tools and Equipment (as restated) Total

January 1, 2015 Cost, as restated P 47,199,000 P 5,020,634 P 7,960,000 P 11,510,294 P 5,563,544 P 77,253,472 Accumulated depreciation - (959,207) (1,194,000) (1,570,545) (1,575,431) (5,299,183)

Carrying amount 47,199,000 4,061,427 6,766,000 9,939,749 3,988,113 71,954,289

Movements during 2015 Balance, January 1, 2015 47,199,000 4,061,427 6,766,000 9,939,749 3,988,113 71,954,289 Additions - 11,856,706 - - 616,429 12,473,135 Disposal: Cost - (7,118,234) - - - (7,118,234) Accumulated depreciation - 3,084,903 - - - 3,084,903 Depreciation (Note 23) - (8,633,143) (398,000) (548,620) (1,169,465) (10,749,228)

Balance, December 31, 2015 47,199,000 3,251,659 6,368,000 9,391,129 3,435,077 69,644,865

December 31, 2015 Cost 47,199,000 9,759,106 7,960,000 11,510,294 6,179,973 82,608,373 Accumulated depreciation - (6,507,447) (1,592,000) (2,119,165) (2,744,896) (12,963,508)

Carrying amount 47,199,000 3,251,659 6,368,000 9,391,129 3,435,077 69,644,865

Movements during 2016 Balance, December 31, 2015 47,199,000 3,251,659 6,368,000 9,391,129 3,435,077 69,644,865 Additions - - - - 264,331 264,331 Depreciation (Note 23) - (1,053,133) (298,500) (411,464) (947,383) (2,710,480)

Balance, September 30, 2016 47,199,000 2,198,526 6,069,500 8,979,665 2,752,025 67,198,716

September 30, 2016 Cost 47,199,000 9,759,106 7,960,000 11,510,294 6,444,304 82,872,704 Accumulated depreciation - (7,560,580) (1,890,500) (2,530,629) (3,692,279) (15,673,988)

Carrying amount P 47,199,000 P 2,198,526 P 6,069,500 P 8,979,665 P 2,752,025 P 67,198,716

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As of September 30, 2016, the Company is still in the process of transferring the title of ownership of certain land under its name amounting to P47,199,000. The amount presented in the financial statement is the amount per latest land appraisal report dated October 21, 2016.

As of September 30, 2016 and December 31, 2015, transportation equipment with an aggregate carrying value of P2,183,646 and P3,248,455, respectively, was financed through auto loans with various banks. These transportation equipment served as the collateral for the said loans, as disclosed in Note 15.

In 2015, the Company incurred loss on disposal of transportation equipment amounting to P4,033,331, as disclosed in Note 23.

In 2016 and 2015, the Company determined that there is no indication that any impairment has occurred on its property, plant and equipment.

12. OTHER NON-CURRENT ASSETS

The Company’s non-current assets pertain to hold-out deposits on various loans with the Land Bank of the Philippines restricted for use amounting to P8,516,500 and nil as of September 30, 2016 and December 31, 2015, respectively, as disclosed in Notes 6 and 15.

13. TRADE AND OTHER PAYABLES

The components of trade and other payables account are as follows:

2016 2015

Trade P 386,063,997 P 147,515,266 Advances from customers 254,977,226 - Due to government agencies 70,549,946 - Accrued expenses 26,807,700 - Others 375,198 -

P 738,774,067 P 147,515,266

Certain amounts in the trade and other payables account have been reclassified to conform with the current year’s presentation. The reclassifications include:

Previous Year’s Classification Current Year’s Classification Amount Other long-term payables Trade and other payables

Other long-term payables Trade P 103,368,391 Accrued liabilities Trade and other payables

VAT payable Due to government agencies 9,097,452 Due to BIR Due to government agencies 6,879,214 SSS premium payable Due to government agencies 2,198,169 HDMF loan payable Due to government agencies 490,730 PhilHealth premium payable Due to government agencies 395,172 HDMF contributions payable Due to government agencies 282,684 SSS loan payable Due to government agencies 142,325 Withholding taxes payable Due to government agencies 60,357

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The average credit period on purchases of certain goods from suppliers is thirty (30) days. No interest is charged on the trade payables. The Company has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

Advances from customers pertain to amounts paid to the Company upon delivery of minimum required percentage of total goods to its customers.

Due to government agencies pertains to deferred output tax, fringe benefit tax, withholding taxes, SSS, PhilHealth and HDMF contributions as of year-end.

Accrued expenses pertain to accrual of delivery and freight charges.

The balance of trade and other payables as of September 30, 2015 amounting to P44,146,875 represent unpaid portion of the Company’s purchase of goods from its local and foreign suppliers. Management considers that the carrying amount of payables approximates their fair values. These payables do not earn interest and are expected to be settled within one year.

14. ACCRUED LIABILITIES

2016 2015

For the nine months ended September 30,

2015

VAT payable P - P 9,097,452 P 9,097,452 Accrued retirement payable - 8,782,310 8,782,310 Due to BIR - 6,879,214 6,879,214 SSS premium payable - 2,198,169 2,198,169 HDMF loan payable - 490,730 490,730 PhilHealth premium payable - 395,172 395,172 HDMF contributions payable - 282,684 282,684 Accrued interest payable - 279,768 279,768 SSS loan payable - 142,325 142,325 Withholding taxes payable - 60,357 60,357

P - P 28,608,181 P 28,608,181

In 2015, the accrued liabilities account should be reclassified to conform with the current year’s presentation. The reclassifications include:

Previous Classification Current Classification Amount Accrued liabilities Retirement benefit obligation

Accrued retirement payable Retirement benefit obligation P 8,782,310 Accrued liabilities Trade and other payables

VAT payable Due to government agencies 9,097,452 Due to BIR Due to government agencies 6,879,214 SSS premium payable Due to government agencies 2,198,169 HDMF loan payable Due to government agencies 490,730 PhilHealth premium payable Due to government agencies 395,172 HDMF contributions payable Due to government agencies 282,684 SSS loan payable Due to government agencies 142,325 Withholding taxes payable Due to government agencies 60,357 Accrued interest payable Others 279,768

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15. BORROWINGS

Shown below are the movements of the Company’s secured and unsecured loans payable:

2016 2015

For the nine months ended September 30,

2015 Balance, Beginning P 158,939,828 P 29,577,271 P 29,577,271 Availments 372,879,553 158,510,302 158,510,302 Payments made (194,174,842) (29,147,745) (29,147,745)

Balance, Ending P 337,644,539 P 158,939,828 P 158,939,828

Shown below are the details of the Company’s loans payable as of September 30, 2016 and December 31, 2015, respectively:

2016 2015

For the nine months ended September 30,

2015

Land Bank of the Philippines P 190,683,976 P 100,000,000 P 100,000,000 UnionBank of the Philippines 18,750,000 25,000,000 25,000,000 Auto Loans 1,210,563 2,253,552 2,253,552 Planters Bank - 1,686,276 1,686,276 Non-bank institution 100,000,000 - -

Secured – at amortized cost 310,644,539 128,939,828 128,939,828 Unsecured – at amortized

cost: Security Bank 27,000,000 30,000,000 30,000,000

Total 337,644,539 158,939,828 158,939,828 Less: Non-current portion of

loans payable 337,644,539 156,243,996 156,243,996

P - P 2,695,832 P 2,695,832

15.01 Summary of Loan Arrangements

15.01.01 Land Bank of the Philippines (LBP)

The analysis of the loans from LBP is as follows:

2016 2015 Balance, Beginning P 100,000,000 P - Availments 272,879,553 100,000,000 Payments made (182,195,577) -

Balance, Ending P 190,683,976 P 100,000,000

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In 2016, the Company entered into several short-term loan agreements with LBP bearing annual interest rates ranging from 6% to 7%. The loans are secured through assignment of Company’s assets, inventories and receivables. The principal loan amount is to be paid in lump sum upon maturity and finance cost is to be paid monthly and quarterly in arrears.

Moreover, on July 22, 2016, the Company entered into several short-term loan agreements with LBP with an aggregate amount of P60,000,000 payable on January 18, 2017, bearing an interest rate of 7% per annum. These loans require compensating balances restricted for immediate disposal for an aggregate amount of P8,516,500 as of September 30, 2016, as disclosed in Notes 6 and 12.

In 2016, the Company made arrangements with the bank to settle the outstanding balance of the loans by the end of 2017.

15.01.02 Security Bank (SB)

An analysis of the loan payable to SB is shown below:

2016 2015 Balance, Beginning P 30,000,000 P - Availments - 30,000,000 Payments made (3,000,000) -

Balance, Ending P 27,000,000 P 30,000,000

On April 22, 2015, the Company entered into a short-term loan agreement with SB to finance the inventory build-up of raw materials and manufacturing operations. The loan acquired amounted to P30,000,000 payable on July 21, 2015. The loan bears an annual interest rate of 9%. As of September 30, 2016, the Company paid P3,000,000 of the principal amount.

In 2016, the Company made arrangements with the bank to settle the outstanding balance of the loans by the end of 2017.

15.01.03 UnionBank of the Philippines (UnionBank)

An analysis of the loan payable to UnionBank is shown below:

2016 2015 Balance, Beginning P 25,000,000 P - Availments - 25,000,000 Payments made (6,250,000) -

Balance, Ending P 18,750,000 P 25,000,000

On September 9, 2014, the Company entered into a short-term loan agreement with UnionBank to finance the Company’s various on-going projects. The loan acquired amounted to P30,000,000 payable on September 4, 2015. The loan bears an annual interest rate of 7%. As of September 30, 2016, the Company paid P6,250,000 of the principal amount.

In 2016, the Company made arrangements with the bank to settle the outstanding balance of the loans by the end of 2017.

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15.01.04 Auto Loans

An analysis of the loan payable to non-bank entities is shown below:

2016 2015 Balance, Beginning P 2,253,552 P 429,526 Availments - 1,824,026 Payments made (1,042,989) -

Balance, Ending P 1,210,563 P 2,253,552

The Company entered into several short and long term auto loan agreements with various banks bearing annual interest rates ranging from 10.62% to 21.69%. The loans are secured by chattel mortgage. The principal loan amount and its related interest are to be repaid monthly in arrears.

As of September 30, 2016 and December 31, 2015, the aggregate carrying value of transportation equipment secured under chattel mortgage amounted to P2,183,646 and P3,248,455, respectively, as disclosed in Note 11.

In 2016, the Company made arrangements with the bank to settle the outstanding balance of the loans by the end of 2017.

15.01.05 Planters Bank (PB)

An analysis of the loan payable to PB is shown below:

2016 2015 Balance, Beginning P 1,686,276 P - Availments - 1,686,276 Payments made (1,686,276) -

Balance, Ending P - P 1,686,276

15.01.06 Non-bank Institution

In 2016, the Company obtained long-term loan from a non-bank institution amounting to P100,000,000. The purpose of these loans is for the working capital requirements of the Company.

In 2016, 2015 and for the nine months ended September 30, 2015, the Company incurred an aggregate amount of finance cost from its loans amounting to P16,054,165, P8,045,635 and P5,598,943, respectively, as disclosed in Note 24.

16. OTHER NON-CURRENT LIABILITIES

In 2016, estimated contingent liabilities amounting to P7,324,064 was reclassified and presented as other non-current liability.

Other non-current liability pertains to on-going audit review and assessment by the Bureau of Internal Revenue (BIR) covering the years 2011 to 2014. Based on the review, the Company has provided provision for the assessments that may eventually arise. As of September 30, 2016 and December 31 and September 30, 2015, the provision amounted to P7,324,064.

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Out of the total amount of other non-current liabilities as of September 31, 2015, P103,368,391 pertains to non-refundable deposits which should be reclassified as part of trade accounts under trade and other payables.

17. RELATED PARTY TRANSACTIONS

Nature of relationship of the Company and its related parties are disclosed below:

Related Parties Nature of Relationship

Genomic Institute of Asia, Inc. (GIA) Under common key management personnel Consortium of BF and Philab

Industries, Inc. (CBPI) Under common key management personnel Officers Key management personnel

Balances and transactions between the Company and its related parties are disclosed below:

17.01 Due from Related Parties

Balances of due from related parties as shown in the statement of financial position are summarized per category as follows:

17.01.01 Under Common Key Management Personnel

Transactions with related parties under common key management personnel are detailed as follows:

September 30, 2016 December 31, 2015 Amount/

Volume Outstanding

Balances Amount/

Volume Outstanding

Balances

CBPI Contributions (Note 10) P 2,109,646 P 2,109,646 P - P -

GIA Contributions (Note 10) 918,357 40,021,278 39,102,921 39,102,921

P 3,028,003 P 42,130,924 P 39,102,921 P 39,102,921

Contributions pertain to amounts provided to GIA and CBPI to finance their working capital requirements.

17.02 Due to a Related Party

Balance of due to a related party as shown in the statement of financial position is summarized per category as follows:

17.02.01 Under Key Management Personnel

Transaction with a related party under key management personnel is detailed as follows:

September 30, 2016 December 31, 2015 Amount/

Volume Outstanding

Balance Amount/

Volume Outstanding

Balance

Officers Advances P 3,849,402 P 3,849,402 P - P -

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Advances from officers pertain to amount owed by the Company to finance its working capital requirements.

These related party transactions are unsecured, non-interest bearing, collectible on demand and will be settled in cash. No guarantees have been given related to the said advances.

17.03 Significant Contract Agreement

17.03.01 Joint Venture Agreement

On August 11, 2015, the Company entered into a consortium agreement with BF Corporation, a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines with principal address at Km. 17, Ortigas Avenue Extension, Cainta, Rizal. Whereas, the Department of Budget and Management-Procurement Service (DBMPS), has advertised for public bidding the Design and Build of the National Institute of Health Building. Both parties are desirous for and participating in the bidding of the stated project. Moreover, they believe that they can be best maximized their chances of prequalifying for the said public bidding and can satisfactorily execute the project should they win and be awarded the contract by the Bids and Award Committee for the civil works of DBMPS if they pool their financial, equipment and technical resources necessary for the stated purpose under the consortium agreement.

Therefore, for and consideration of the foregoing promises and mutual covenants for the exclusive purpose of qualifying for and participating in the aforesaid public bidding of the project and actually undertaking the construction work thereof should they successfully win and eventually be awarded the contract, subject to the following significant terms and conditions:

a. For all the intents and proposes, the Consortium entity established shall be known as Consortium of BF and Philab Industries, Inc.

b. For communication purposes, all communication/letters shall be addressed at the Consortium business address at Km 17, Ortigas Avenue extension, Cainta, Rizal and 7487 Bagtikan Street, Antonio Village, Makati City.

c. Mr. Reynaldo Dela Cruz shall be named, appointed and constituted as the Authorized Managing Officer (AMO) and as such, is the sole representative for and behalf of the Consortium and all bids, contracts and other documents whatsoever pertinent to said project, shall be signed by him.

d. The participation of the parties shall be as follows:

i. BF Corporation – To do all general construction works, to construct the physical structures and to provide equipment necessary to carry out construction.

ii. Philab Industries, Inc. – To supply equipment and material supplies.

e. The capital contribution of the parties shall be as follows:

i. BF Corporation – 60%

ii. Philab Industries, Inc. – 40%

f. The net profit or losses of the Consortium shall likewise be divided between the parties on a 60% and 40%, respectively.

g. The parties shall be jointly and severally liable for any and all obligation which the consortium may incur.

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17.04 Remuneration of Key Management Personnel

The remuneration of the directors and other members of key management personnel of the Company are shown below in aggregate amount for each of the categories specified in PAS 24, Related Party Disclosures:

2016 2015 Short-term benefits P 14,700,000 P 3,495,865 Retirement benefits - 2,711,357

P 14,700,000 P 6,207,222

18. CAPITAL STOCK

The capital stock of the Company is as follows:

2016 2015

(as restated)

For the nine months ended September 30,

2015

Share capital P 37,639,100 P 13,400,000 P 13,400,000 Share premium 37,399,000 37,399,000 97,250,000

P 75,038,100 P 50,799,000 P 110,650,000

Shown below are the details on the movements of ordinary shares.

2016 2015

Shares Amount Shares Amount

Authorized: P100 par value per share 1,000,000 P 100,000,000 1,000,000 P 100,000,000

Issued and fully paid: P100 par value per share

Balance, Beginning 50,490 5,049,000 41,490 4,149,000 Issuances 325,901 32,590,100 9,000 900,000

Balance, Ending 376,391 37,639,100 50,490 5,049,000

Partly paid: P100 par value per share

Balance, Beginning 310,900 31,090,000 310,900 31,090,000 Issuances (310,900) (31,090,000) - -

Balance, Ending - - 310,900 31,090,000 Less: Subscription

receivable - - 227,390 22,739,000

- - 83,510 8,351,000

376,391 P 37,639,100 134,000 P 13,400,000

Ordinary shares carry one (1) vote per share and a right to dividends.

Out of the total issuances in 2016, P24,239,100 only pertains to amounts received as cash infusion by the Company from stockholders in 2016 and P8,351,000 pertains to amounts paid in previous years for the subscription of shares.

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19. APPROPRIATED RETAINED EARNINGS

The movements in the appropriated retained earnings are as follows:

2016 2015

Balance, Beginning P 50,000,000 P 8,771,860 Additional appropriation - 41,228,140

Balance, Ending P 50,000,000 P 50,000,000

In a special meeting held on December 11, 2015, the Board of Directors approved to appropriate the sum of P41,228,140 from the retained earnings of the Company. The purposes of the appropriation are for the Company’s future expansion and to finance the purchase of additional equipment and factory improvements to meet the demand of continuously increasing number of customers.

20. REVENUE – net

An analysis of the Company’s revenues is as follows:

2016 2015

For the nine months ended September 30,

2015

Revenue from sale of goods P 634,392,205 P 224,293,756 P 130,696,687 Sales returns (5,350) - -

634,386,855 224,293,756 P 130,696,687 Revenue from rendering of

services 3,367,797 7,638,345

6,178,925

P 637,754,652 P 231,932,101 136,875,612

21. COST OF SALES

The following is an analysis of the Company‘s cost of goods sold and services:

2016 2015

For the nine months ended September 30,

2015

Cost of goods sold (Note 8) P 411,697,325 P 96,017,014 P 56,102,437 Cost of services 2,418,915 - -

P 414,116,240 P 96,017,014 P 56,102,437

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21.01 Cost of Goods Sold

Details of cost of goods sold are as follows:

2016 2015

Raw materials, January 1 P 9,523,175 P - Add: Purchases 500,598,221 95,458,029 Less: Raw materials, December 31 (Note 8) 9,579,884 9,523,175

Cost of materials used 500,541,512 85,934,854 Direct labor 5,344,483 1,506,293 Overhead 12,431,736 13,028,459

Total manufacturing costs 518,317,731 100,469,606 Add: Work-in-process, January 1 9,962,884 -

Cost of goods put into process 528,280,615 100,469,606 Less: Work-in-process, December 31 (Note 8) 24,339,789 9,962,884

Cost of goods manufactured 503,940,826 90,506,722 Add: Finished goods, January 1 15,551,606 21,061,898

Cost of goods available for sale 519,492,432 111,568,620 Less: Finished goods manufactured,

December 31 (Note 8) 22,523,644 15,551,606 Less: Finished goods retail,

December 31 (Note 8) 85,271,463 -

P 411,697,325 P 96,017,014

21.02 Cost of Services

Cost of services pertains to salaries, wages and other benefits incurred on installation, check-ups, repairs and maintenance of machineries, equipment and apparatus previously sold.

22. OTHER INCOME

Components of other income are as follows:

2016 2015

For the nine months ended September 30,

2015 Indent commission P 677,790 P 11,375,529 P 10,753,418 Finance income (Note 6) 87,406 22,412 - Miscellaneous 16,848 - -

P 782,044 P 11,397,941 P 10,753,418

Indent commission income includes only the gross inflows of economic benefits received and receivable by the Company on its own account.

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23. OPERATING EXPENSES

The account is composed of the following:

2016

2015 (as restated)

Salaries, wages and other benefits (Note 25) P 39,527,386 P 44,018,069 Bad debts expense (Note 7) 15,000,000 - Freight-out 10,396,864 7,421,900 Professional fees 5,849,672 1,758,720 Taxes and licenses 5,804,357 2,403,629 Rent 3,597,630 1,518,920 Travel and transportation 2,820,526 4,964,668 Depreciation expense (Note 11) 2,710,480 10,749,228 Performance bond 2,104,086 - Retirement expense (Note 25) 2,033,518 2,711,357 Penalties and charges 1,169,203 869,426 Utilities and maintenance 1,121,575 - Communication, light and water 1,035,140 1,899,833 Liquidated damages 992,238 - Loss on forfeiture 990,813 - Advertising and promotions 969,462 203,041 Bank charges 653,200 404,665 Representation and entertainment 582,110 1,076,180 Registration fees 419,011 - Bidding 368,148 - Office supplies and stationeries 357,077 731,138 Retainers fee 327,778 - Repairs and maintenance 309,092 656,791 Security and messenger services 280,219 207,798 Insurance 109,164 146,256 Meetings, seminars and conferences 58,617 364,363 Membership dues and subscription 48,256 83,386 Donations and contributions 20,000 36,568 Loss on disposal (Note 11) - 4,033,331 Medical and dental - 1,060,622 Research and development - 846,554 Government contributions - 364,570 Miscellaneous 1,159,990 1,040,202

P 100,815,612 P 89,571,215

24. OTHER EXPENSES

Details of cost of other expenses are as follows:

2016 2015

For the nine months ended September 30,

2015

Finance cost (Note 15) P 16,054,165 P 8,045,635 P 5,598,943 Foreign exchange loss 352,629 - -

P 16,406,794 P 8,045,635 P 5,598,943

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25. EMPLOYEE BENEFITS

Aggregate employee benefits expense is comprised of the following:

2016 2015

Short-term benefits (Note 23) P 39,527,386 P 44,018,069 Post-employment benefits (Note 23) 2,033,518 2,711,357

P 41,560,904 P 46,729,426

25.01 Short-term Employee Benefits

Details of short-term employee benefits are as follows:

2016 2015 Salaries, wages and allowances P 35,698,002 P 42,592,877 SSS, PhilHealth, and Pag-ibig contributions 1,019,924 364,570 Other employee benefits 2,809,460 1,060,622

P 39,527,386 P 44,018,069

Other employee benefits pertain to medical, dental benefits, accrued 13th month pay and fringe benefit expenses.

25.02 Retirement Employee Benefits

The Company has defined benefit plans for qualifying employees. The Company does not have an established retirement plan and only conforms to the minimum regulatory benefit under the Retirement Pay Law Under R.A. 7641. The framework, however, does not have a minimum funding requirement. The Company’s benefit plan is aligned with this framework.

The Company’s unfunded defined benefit plans for qualifying employees are entitled to retirement benefits which is equal to 22.5 days’ pay for every year of credited services on attainment of a retirement age of sixty (60) and are not adjusted for inflationary increases once in payment. The payments for the unfunded benefits are borne by the Company as it falls due.

The most recent actuarial valuation of the defined benefit obligation was carried out on October 14, 2015 by E.M. Zalamea Actuarial Services, Inc. The present value of the defined benefit obligation, and the related current and past service costs, were measured using the Projected Unit Credit Method.

As of September 30, 2016, there was no actuarial report available for 2016. In providing the amount of retirement expense in 2016, the values and data of the previous report was used.

The principal assumptions used for the purposes of the actuarial valuations were as follows:

2016 2015

Discount rate 5.76% 5.76% Expected rate of salary increase 5.00% 5.00%

39

Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience. These assumptions translate into an average life expectancy in years for a pensioner retiring at age sixty (60).

2016 2015

Retiring 20 years after the reporting period Male 85 85 Female 34 34

Impact on Defined Benefit Obligation

Change in

Assumption Increase in

Assumption Decrease in Assumption

September 30, 2016 Discount rate 100 bps Decrease by 8.2% Increase by 9.7% Salary increase rate 100 bps Increase by 8.7% Decrease by 7.6% December 31, 2015 Discount rate 100 bps Decrease by 8.2% Increase by 9.7% Salary increase rate 100 bps Increase by 8.7% Decrease by 7.6%

The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognized within the statement of financial position.

Assumed life expectancy is not applicable because under the Company’s Retirement Plan, benefits are paid in full in a lump sum upon retirement or separation of an employee.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous year.

Amounts recognized in profit or loss in respect of these defined benefit plans as disclosed in Note 23 are as follows:

2016 2015

Current service cost P 2,033,518 P 1,510,877 Interest on obligation - 1,200,480

P 2,033,518 P 2,711,357

40

Reconciliation of remeasurements recognized in OCI are as follows:

Change on financial assumption

Change on demographic assumption Total

Loss (gain) Balance at January 1, 2015 P - P - P - Amount recognized during the year – net of tax (874,382) (493,411) (1,367,793)

Loss (gain) Balance at December 31, 2015 (874,382) (493,411) (1,367,793) Amount recognized during the year – net of tax 262,315 148,023 410,338

Loss (gain) Balance at September 30, 2016 P (612,067) P (345,388) P (957,455)

As of December 31, 2015, retirement benefit obligation amounting to P8,782,310 was presented as part of accrued liabilities, as disclosed in Note 14. As of September 30, 2016, the amount of P10,815,828 is already presented as retirement benefit obligation separately.

The Company operates an unfunded defined benefit plan wherein benefit payments are borne by the Company. The Company maintains appropriate level of liquidity to meet currently maturing defined benefit obligations and has established a level of solvency ratio aimed to pay for long term defined benefit obligations.

Plan Amendments, Curtailments, or Settlements

The Company has no plan amendment, curtailment or settlement recognized as of September 30, 2016 and 2015.

Asset-liability Matching Strategies to Manage Risks

The Company does not have a formal retirement plan and therefore has no plan assets to match against the liabilities under the retirement obligation.

Funding Arrangements

The Company does not have a formal retirement plan, benefit claims under the Retirement Obligation are paid directly by the Company when they become due. There is no expected future benefit contribution.

The Company is exposed to a number of risks through its defined benefit plan. The most significant risks are detailed below:

Volatility Risk

The plan liabilities are calculated using a discount rate from government bonds to create virtual zero coupon bonds as of the valuation dates. The government bonds represent investments in the Philippine government securities only. However, the Company believes that due to the long-term nature of the plan liabilities and the strength of the supporting group, a level of continuing equity investment is an appropriate element of the group’s long term strategy to manage the plans efficiently.

Inflation Risk

Impact on the risk of inflation pertains to the discount rate used to determine the present value of the defined benefit obligation.

The Company does not have plan asset, hence, do not have an exposure to inflation risk.

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26. OPERATING LEASE AGREEMENTS

26.01 The Company as a Lessee

Operating leases relate to leases of office and parking spaces with lease terms between one (1) to five (5) years. Operating lease payments represent rentals payable by the Company for office and parking spaces. Leases are negotiated for an average term of two (2) years and renewable based on mutual agreement of both parties.

26.01.01 Lease Contract with Primo Terra Proprietario, Inc.

On January 1, 2015, the Company entered into an operating lease agreement with Primo Terra Proprietario, Inc., for the lease of office space at 7487 Bagtikan Street, San Antonio Village, Makati City.

The lease term shall be for a period of one (1) year commencing on January 1, 2015 and expiring on December 31, 2015, renewable upon mutual agreement of both parties. Monthly rental payment shall be P119,790, exclusive of VAT.

Upon signing of the contract, two (2) months of refundable rent deposit was paid amounting to P239,580. Moreover, security deposit equivalent to two (2) months of rent was paid amounting to P263,538.

On January 1, 2016, the contract was renewed substantially with the same terms and conditions as the original lease contract, however, the lease contract was dated July 1, 2016.

26.01.02 Lease Contract with BNM7210 Group Corp.

On April 1, 2015, the Company entered into an operating lease agreement with BNM7210 Group Corp., for the lease of a commercial/office located at Unit No. 508 Krizia Building, Gorordo Avenue, Kamputhaw, Cebu City.

The lease term shall be for a period of one (1) year commencing on April 1, 2015 and expiring on March 31, 2016. Payment terms shall be P22,407 of basic rent exclusive of VAT.

Upon signing of the contract, two (2) months of refundable rent deposit was paid amounting to P44,814.

On March 31, 2016, the lease contract expired and was not renewed subsequently.

26.01.03 Lease Contract with Philippine Red Cross

On May 7, 2015, the Company entered into an operating lease agreement with Philippine Red Cross, for the lease of a commercial unit space located at the second floor Door 2-A Red Cross Millennium Building.

The lease term shall be for a period of two (2) years commencing on May 1, 2015 and expiring on April 30, 2017. Payment terms shall be P12,213 of basic rent plus 10% common usage area (CUSA) amounting to P1,221 for a total of P13,434 exclusive of VAT subject to annual escalation rate 10%.

Upon signing of the contract, two (2) months of refundable rent deposit inclusive of CUSA was paid amounting to P26,868.

On September 30, 2016, the lease contract was terminated upon mutual agreement of the parties.

42

26.01.04 Lease Contract with DMC Urban Property Developers, Inc.

On June 27, 2016, the Company entered into an operating lease agreement with DMC Urban Property Developers, Inc., for the lease of an office space and parking lot in HHIC Building situated along 1128 University Parkway, North Bonifacio, Global City, Taguig City, Metro Manila.

The lease term shall be for a period of sixty-two (62) months commencing on June 27, 2016 and expiring on August 26, 2021 renewable upon mutual agreement of both parties. Monthly rental payment shall be P972,500, exclusive of VAT.

Upon signing of the contract, three (3) months of prepaid rent applicable to the last three (3) months of the lease was paid amounting to P3,267,600, as disclosed in Note 9. Moreover, security deposit equivalent to two (2) months of rent was paid amounting to P1,945,000, as disclosed in Note 9.

The rent expense is distributed between operating expense and overhead cost under cost of sales.

As of December 31, 2016 and 2015, total security deposits from operating lease amounted to P1,945,000 and P335,220, respectively.

At each reporting date, the Group had outstanding commitments for future minimum lease payments under non-cancelable operating leases, which fall due as follows:

2016 2015 Not later than one year P 11,688,855 P 218,656 Later than one year but not later than five years 47,056,452 107,470

P 58,745,307 P 326,126

27. INCOME TAXES

27.01 Income Tax Recognized in Profit or Loss

Components of income tax expense (benefit) are as follows:

2016 2015

For the nine months ended September 30,

2015 Current tax expense P 37,604,825 P 19,108,822 P 1,770,390 Deferred tax (610,055) - -

P 36,994,770 P 19,108,822 P 1,770,390

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A numerical reconciliation between tax expense and the product of accounting profit multiplied by the tax rate in 2016 and 2015 is as follows:

2016 2015

For the nine months ended September 30,

2015

Accounting profit P 107,198,050 P 49,696,178 P 5,901,299 Tax expense at 30% 32,159,415 14,908,853 1,770,390 Tax effects of:

Non-deductible bad debts expense 4,500,000 - - Non-deductible penalties 350,761 260,828 - Non-deductible expense - 3,936,620 - Non-deductible finance cost 10,815 9,245 - Finance income

subjected to final tax (26,221) (6,724) -

P 36,994,770 P 19,108,822 P 1,770,390

28. DEFERRED TAXES

The breakdown of deferred taxes as presented in the statement of financial position is as follows:

28.01 Deferred Tax Asset

In 2016, the Company recognized deferred tax asset from retirement obligation amounting to P610,055.

28.02 Deferred Tax Liability

In 2016, tax from remeasurement gain presented as part of retained earnings amounting to P410,338 was reclassified and presented as deferred tax liability.

As of September 30, 2016 and December 31, 2015, deferred tax liability from remeasurement amounted to P410,338 and nil, respectively.

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29. FAIR VALUE MEASUREMENTS

29.01 Fair Value of Financial Assets and Liabilities

The carrying amounts and estimated fair values of the Company’s financial assets and financial liabilities as of September 30, 2016 and December 31, 2015 are presented below:

2016 2015

Carrying Amount Fair Value

Carrying Amount Fair Value

Financial Assets: Trade and other receivables P 844,825,517 P 844,825,517 P 271,087,454 P 271,087,454

Performance bond 4,430,950 4,430,950 - - Refundable deposits 3,472,220 3,472,220 - - Prepaid assets - - 335,220 335,220 Other non-current assets 8,516,500 8,516,500 - -

P 861,245,187 P 861,245,187 P 271,422,674 P 271,422,674

Financial Liabilities: Trade and other payables P 668,224,121 P 668,224,121 P 147,515,266 P 147,515,266 Accrued interest payable - - 279,768 279,768 Due to a related party 3,849,402 3,849,402 - - - Loans payable 337,644,539 337,644,539 158,939,828 158,939,828 Other non-current liability 7,324,064 7,324,064 7,324,064 7,324,064

P 1,017,042,126 P 1,017,042,126 P 314,058,927 P 314,058,927

x The carrying amounts of trade and other receivables, due from related parties, performance bond and refundable deposits and prepaid assets presented under prepayments and other current assets, which mature within twelve (12) months or within its normal operating cycle, are assumed to approximate their fair values. This assumption is applied to liquid assets and short-term elements of financial assets.

x The carrying amount of hold-out deposits on various loans presented under non-currents assets is interest bearing and approximate their fair values.

x The carrying amounts of trade and other payables (except due to government agencies), accrued interest payable presented under accrued liabilities, due to related parties and loans payable with maturity within twelve (12) months, approximate their fair values due to either the demand feature or relatively short-term nature of payables.

x The carrying amount of loans payable presented under non-current liabilities is interest bearing. This will mature more than twelve (12) months and approximate their fair values.

x The carrying amount of other non-current liability is non-interest bearing. This will mature more than twelve (12) months and is based on the estimated present value of all future cash flows.

45

30. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES

The Company is exposed in a degree and magnitude of risks. These risks include market risk, including interest rate risk and foreign currency risk, credit risk and liquidity risk. The Company’s Board of Directors reviews and approves the policies for managing each of these risks. There is a regular evaluation of projected and actual cash flow information and continuous assessment of the conditions in the financial markets for opportunities to pursue for fund-raising initiatives. These initiatives may include debt capital and equity market issues.

30.01 Market Risk Management

30.01.01 Foreign Currency Risk Management

The Company undertakes transactions denominated in foreign currencies; consequently exposures to exchange rate fluctuations arise. Exchange rate expenses are managed within approved policy parameters by monitoring its US Dollar cash flows.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of each reporting period are as follows:

Assets Liabilities

2016 2015 2016 2015

Cash in banks P 7,286 P 766 P - P - Trade and other payables - - 3,125,320 2,083,872

P 7,286 P 766 P 3,125,320 P 2,083,872

The Company is mainly exposed to the US Dollar.

The following table details the Company’s sensitivity to be less than 5.09% increase and decrease in the US dollar against the relevant foreign currencies. The sensitivity rate of 5.09% is used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for 5.09% change in foreign currency rates. For 5.09% weakening of the US dollar against the relevant currency, there would be a comparable impact on the profit, and the balances below would be negative.

US Dollars

2016 2015

Profit P 5,123,230 P 53,041

46

30.01.02 Interest Rate Risk Management

Fair value interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to change in the market interest rates. The Company’s exposure to interest rate risk arises from its cash deposits in banks which are subject to variable interest rates and cash equivalents subject to fixed rate.

The interest rate risk arising from deposits with banks is managed by means of effective investment planning analysis and maximizing investment opportunities in various local banks and financial institutions.

Profit for the periods ended September 30, 2016 and 2015 would have been unaffected since the Company has no borrowings at variable rates and interest rate risk exposure for its cash in bank, which is subject to variable rate, is very immaterial.

The Company’s sensitivity to interest rates has not changed significantly from the prior year. In Management’s opinion, the sensitivity analysis is unrepresentative of the inherent interest rate risk as the year-end exposure does not reflect the exposure during the year.

30.02 Credit Risk Management

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company only transacts with entities that are rated the equivalent of investment grade and above. The Company uses other publicly available financial information and its own trading records to rate its major customers. The Company’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee annually.

Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where appropriate, credit guarantee insurance cover is purchased.

The Company does not have significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics.

The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings.

The carrying amount of financial assets recognized in the financial statements, which is net of impairment losses, represents the Company’s maximum exposure to credit risk.

2016 2015 Cash in banks P 154,013,265 P 6,018,877 Cash equivalents 5,058,655 - Trade and other receivables 844,825,517 271,087,454 Performance bond 4,430,950 - Refundable deposits 3,472,220 - Prepaid assets - 335,220 Other non-current assets 8,516,500 -

P 1,020,317,107 P 277,441,551

The Company does not hold any collateral or other credit enhancements to cover this credit risk.

47

The table below shows the credit quality by class of financial assets of the Company:

Neither Past Due nor Impaired High Grade

September 30, 2016 Cash in banks P 154,013,265 Cash equivalents 5,058,655 Trade and other receivables 708,582,681 Performance bond 4,430,950 Refundable deposits 3,472,220 Other non-current assets 8,516,500

P 884,074,271

December 31, 2015 Cash in banks P 6,018,877 Trade and other receivables 271,087,454 Prepaid assets 335,220

P 277,441,551

The credit quality of the financial assets was determined as follows:

Loans and receivables

x High grade – These are receivables from counterparties with no default in payment.

x Medium grade – These are receivables from counterparties with up to three defaults in payment.

x Low grade – These are receivables from counterparties with more than three defaults in payment.

30.03 Liquidity Risk Management

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of the Company’s short, medium and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

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The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Company may be required to pay.

Weighted Average Effective

Interest Rate Within 1 Year

Beyond 1 Year

Total

September 30, 2016 Trade and other payables - P 668,224,121 P - P 668,224,121 Due to a related party - 3,849,402 - 3,849,402 Loans payable 3% to 21% - 337,644,539 337,644,539 Other non-current liability - - 7,324,064 7,324,064

P 672,073,523 P 344,968,603 P 1,017,042,126

December 31, 2015 Trade and other payables - P 147,515,267 P - P 147,515,267 Accrued interest payable - 279,768 - 279,768 Loans payable 6% to 21% 2,695,832 156,243,996 158,939,828 Other non-current liability - - 7,324,064 7,324,064

P 150,490,867 P 163,568,060 P 314,058,927

The following table details the Company’s expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Company’s liquidity risk management as the liquidity is managed on a net asset and liability basis.

Weighted Average Effective

Interest Rate Within 1 Year Beyond 1

Year

Total

September 30, 2016 Cash on hand - P 271,204 P - P 271,204 Cash in banks Prevailing rates 154,013,265 - 154,013,265 Cash equivalents 1% 5,058,655 - 5,058,655 Trade and other

receivables - 844,825,517 -

844,825,517 Performance bond - 4,430,950 - 4,430,950 Refundable deposits - 3,472,220 - 3,472,220 Other non-current assets - - 8,516,500 8,516,500

P 1,012,071,811 P 8,516,500 P 1,020,588,311

December 31, 2015 Cash on hand - P 1,996,065 P - P 1,996,065 Petty cash fund - 50,783 - 50,783 Cash in banks Prevailing rates 6,018,877 - 6,018,877 Trade and other

receivables - 271,087,454 -

271,087,454 Prepaid assets - 335,220 - 335,220

P 279,488,399 P - P 279,488,399

49

The amounts included in the analysis are for variable interest rate instruments for both non-derivative financial assets and liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of each reporting period.

31. CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES

The Company manages its capital to ensure that the Company will be able to continue as going concern while maximizing the return to stakeholders through the optimization of the debt and equity balance. The Company’s overall strategy remains unchanged from 2015.

Pursuant to Section 43 of the Corporation Code of the Philippines, stock corporations are prohibited from retaining surplus plus profits in excess of 100% of their paid-in capital stock, except: 1) when justified by definite corporate expansion projects or programs approved by the board of directors; or 2) when the corporation is prohibited under any loan agreement with any financial institution or creditor, whether local or foreign, from declaring dividends without its/his consent, and such consent has not yet been secured; or 3) when it can be clearly shown that such retention is necessary under special circumstances obtaining in the corporation, such as when there is a need for special reserve for probable contingencies.

The Company is in compliance with the above requirement.

The capital structure of the Company consists of net debt (total liabilities offset by cash and cash equivalents and equity of the Company (comprising capital stock, retained earnings and remeasurements).

The Company monitors the adequacy of its capital to ensure that the financial resources of the Company are available to absorb unforeseen or unanticipated losses. The Company’s capital is its buffer against insolvency.

To maintain or adjust the capital structure, the Company may adjust the dividend payments to shareholders, pay-off existing debts, return capital to shareholders or issue new shares. The Company defines capital as paid-in capital stock, retained earnings, both appropriated and unappropriated.

The Board of Directors has overall responsibility for monitoring capital in proportion to risk. Profiles for capital ratios are set in the light of changes in the Company’s external environment and the risks underlying the Company’s business, operation and industry.

The gearing ratio at end of each reporting period is as follows:

2016 2015

Debt P 1,152,284,368 P 360,223,926 Cash 159,343,124 8,065,725

Net debt 992,941,244 352,158,201 Equity 197,611,589 103,579,547

Net debt to equity ratio 5.02:1 3.40:1

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32. CORRECTION OF PRIOR PERIOD ERRORS

32.01 Summary of Adjustments

Summary of adjustments in the financial statements line items affected are as follows:

As Previously Presented

Effect of Prior Years

Error As

Restated

December 31, 2015

Statement of financial position

Prepayments and other current assets P 80,971,017 P (1,003,253) P 79,967,764

Property, plant and equipment 134,714,374 (65,069,509) 69,644,865 Statement of comprehensive

income Operating expenses 76,916,701 12,654,514 89,571,215

December 31, 2014 Statement of financial position

Property, plant and equipment 111,994,119 (53,418,248) 58,575,871

Management believes that the above restatements resulted to better presentation of accounts.

32.02 Details of Prior Period Errors

Details of prior period errors are as follows:

32.02.01 Prepayments and other current assets

The overstatement in prepayments and other current assets amounting to P1,003,253 was primarily due to the erroneous recognition of advances to suppliers for the acquisition of transportation and equipment and machines, tools and equipment.

33.02.02 Property, plant and equipment

The restatement of property, plant and equipment in 2015 retained earnings amounting to P65,069,509 was mainly due to the following:

x unrecorded disposal and double recording of transportation equipment;

x understatement of depreciation expense on factory warehouse and building and improvements; and

x erroneous recognition of transportation and equipment and machines, tools and equipment as prepayments and other current assets.

The understatement of the 2014 retained earnings was mainly due to the erroneous overstatement of depreciation expense of factory warehouse and building improvements and errors in recording the value of land and its improvements with an aggregate amount of P53,418,248.

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32.02.3 Operating expenses

The understatement of operating expenses amounting to P12,654,514 was due to costs unrecognized costs incurred on loss on disposal, and depreciation expenses.

33. APPROVAL OF FINANCIAL STATEMENTS

These financial statements were approved and authorized for issuance by the Board of Directors on January 12, 2017.

ALTERRA CAPITAL PARTNERS, INC.(Formerly: iRipple, Inc.)STATEMENTS OF FINANCIAL POSITIONSeptember 30, 2016(With Comparative Unaudited Figures for September 30, 2015)(In Philippine Peso)

NOTES 2016 2015

A S S E T SCurrent Assets

Cash and cash equivalents 7 27,358,719 29,121,041 Other current assets 8 524,080 504,976

27,882,799 29,626,017

Non-current AssetDeferred tax assets 1,668,062 -

TOTAL ASSETS 29,550,861 29,626,017

LIABILITY AND STOCKHOLDERS' EQUITY

L I A B I L I T Y

Current LiabilityTrade and other payables 9 1,549,605 2,284,106

S T O C K H O L D E R S ' E Q U I T Y

Capital Stock 11 15,569,015 15,569,015

Additional Paid-In Capital 11 13,928,475 13,928,475

Deficit (1,496,234) (2,155,579)

TOTAL STOCKHOLDERS' EQUITY 28,001,256 27,341,911

TOTAL LIABILITY AND STOCKHOLDERS' EQUITY 29,550,861 29,626,017

(See Notes to Financial Statements)

ALTERRA CAPITAL PARTNERS, INC.(Formerly: iRipple, Inc.)STATEMENTS OF COMPREHENSIVE INCOMEFor the Periods Ended September 30, 2016(With Comparative Unaudited Figures for the periods Ended

September 30, 2015 and 2014)(In Philippine Peso)

NOTES 2016 2015 2014

REVENUES 6,13 - 11,140,012 61,343,788

COST OF SALES AND SERVICES 6,14 - 8,850,535 31,990,596

GROSS PROFIT - 2,289,477 29,353,192

OTHER INCOME 6,15 268,121 228,890 857,191

268,121 2,518,367 30,210,383

OPERATING EXPENSES 16 1,128,127 7,205,156 20,153,291

OTHER EXPENSES 6 - 33,046 63,092

PROFIT (LOSS) BEFORE TAX (860,006) (4,719,835) 9,994,000

INCOME TAX EXPENSE (BENEFIT) (332,511) 617 2,524,955

PROFIT (LOSS) (527,495) (4,720,452) 7,469,045

EARNINGS PER SHAREBasic Earnings (Loss) per Share 18 (0.008) (0.076) 0.120

(See Notes to Financial Statements)

ALTERRA CAPITAL PARTNERS, INC.(Formerly: iRipple, Inc.)STATEMENTS OF CHANGES IN EQUITYFor the Periods Ended September 30, 2016, December 31, 2015 and 2014(In Philippine Peso)

NotesCapital Stock

Additional Paid-In Capital

Retained Earnings

Remeasurements − net

Fair Value Gain on Available-for-sale Financial Assets Total

Balance, January 1, 2014 15,569,015 13,928,475 16,996,381 (257,680) (86,535) 46,149,656 Profit 13,281,342 13,281,342 Cash dividends, as restated 12 (27,712,847) (27,712,847) Other comprehensive loss (300,609) (300,609) Reclassification adjustment 86,535 86,535

Balance, January 1, 2015 11 15,569,015 13,928,475 2,564,876 (558,289) - 31,504,077 Loss (3,533,615) (3,533,615) Other comprehensive income 558,289 558,289

Balance, December 31, 2015 11 15,569,015 13,928,475 (968,739) - - 28,528,751 Loss (527,495) (527,495)

Balance, September 30, 2016 11 15,569,015 13,928,475 (1,496,234) - - 28,001,256

(See Notes to Financial Statements)

ALTERRA CAPITAL PARTNERS, INC.(Formerly: iRipple, Inc.)STATEMENTS OF CASH FLOWSFor the Periods Ended September 30, 2016 and December 31, 2015(In Philippine Peso)

NOTES 2016 2015

CASH FLOWS FROM OPERATING ACTIVITIES

Loss before tax (860,006) (4,808,102) Adjustments for:

Depreciation 16 - 505,575 Finance income 7,15 (268,121) (123,564)

Operating cash flows before changes in working capital (1,128,127) (4,426,091) Decrease (Increase) in operating assets:

Receivables 119,795 6,947,766 Inventories - 421,039 Other current assets (74,285) (285,671)

Decrease in payables (314,503) (6,200,137)

Cash used in operations (1,397,120) (3,543,094) Income taxes paid - (3,187,779)

Net cash used in operating activities (1,397,120) (6,730,873)

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from disposal of net assets - 26,079,236 Finance income received 7,15 268,121 246,807 Finance lease receivable granted - (670,251)

Net cash from investing activities 268,121 25,655,792

CASH FLOWS FROM FINANCING ACTIVITY

Payment of dividends 12 - (26,155,945)

NET DECREASE IN CASH AND CASH EQUIVALENTS (1,128,999) (7,231,026)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,487,718 35,718,744

CASH AND CASH EQUIVALENTS AT END OF PERIOD 27,358,719 28,487,718

(See Notes to Financial Statements)

1

ALTERRA CAPITAL PARTNERS, INC. (Formerly: iRipple, Inc.) NOTES TO FINANCIAL STATEMENTS September 30, 2016 and 2015 (With Comparative Periods Ended September 31, 2015 and 2014)

1. CORPORATE INFORMATION AND STATUS OF OPERATIONS

Alterra Capital Partners, Inc. (the “Company”) is a service and trading corporation incorporated and registered with the Philippine Securities and Exchange Commission (SEC) on November 21, 2000. The Company’s primary purpose is to engage in the business of a holding company by buying and holding shares of other companies, whether common, preferred, treasury, founders or other kinds of shares, either by subscribing to the unissued shares of the capital stock in public or private offering or by purchasing the shares of other stockholders by way of assignment in private sale; to invest in the stock or equity of other companies; to acquire rights in the stock of other companies by way of sake, pledge, chattel mortgage or assignment; to sell, dispose, assign, pledge or convey any or all or its shareholdings in other companies in favor of qualified persons by way of private sale, assignment or other form of private conveyance, all in accordance with the Corporation Code, the Securities Regulation Code and other applicable laws and regulations; to vote its shareholdings in other companies and exercise all the rights of a shareholder under the Corporation Code and applicable laws provided that it will not act as stockbroker or dealer of securities.

The Company started its commercial operations in January 2002. The Company is substantially owned by Filipino individuals and the control rests with the members of the Board.

On August 25, 2009, the Company completed its Initial Public Offering (IPO) of 4,579,122 new ordinary shares (approximately 29.41% of the total outstanding ordinary shares) at an offer price of P4.37 per share for a total gross proceeds of P19,987,444, as disclosed in Note 11.

At the special meeting of the Board of Directors (BOD) on May 28, 2015, the following amendments on the Articles of Incorporation (AOI) were unanimously approved:

a. The name of the Corporation shall be Alterra Capital Partners, Inc.

b. The primary purpose of the Corporation is to engage in the business of a holding company by buying and holding shares of other companies, whether common, preferred, treasury, founders or other kinds of shares, either by subscribing to the unissued shares of the capital stock in public or private offering or by purchasing the shares of other stockholders by way of assignment in private sale; to invest in the stock or equity of other companies; to acquire rights in the stock of other companies by way of sake, pledge, chattel mortgage or assignment; to sell, dispose, assign, pledge or convey any or all or its shareholdings in other companies in favor of qualified persons by way of private sale, assignment or other form of private conveyance, all in accordance with the Corporation Code, the Securities Regulation Code and other applicable laws and regulations; to vote its shareholdings in other companies and exercise all the rights of a shareholder under the Corporation Code and applicable laws provided that it will not act as stockbroker or dealer of securities.

c. The principal office of the Corporation is to be established at 2286 Pasong Tamo Extension, Makati City.

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At the special meeting of the BOD held on June 22, 2015, the BOD authorized to reduce the par value of its shares from one peso per share (P1/sh) to five centavos per share (P0.05/sh), resulting in the increase in the number of its shares from 20,000,000 shares to 400,000,000 shares, as disclosed in Note 11.

The Company entered into various sale and assignment of assets and assumption of liabilities with Movmento, Inc., a corporation organized and existing under the laws of the Philippines. The following are the transactions that transpired during the year:

1. On March 5, 2015, the Company entered into a “Deed of sale of assets with assumption of liabilities”. The Company, the “Seller” is the owner of various assets and likewise the obligor for various accounts payable, accrued expenses and other liabilities incurred in relation to the use of the said assets. Movmento, Inc., the “Buyer” has offered to acquire the assets and assume its related liabilities. The Company accepted the said offer for the consideration and under the terms and conditions set forth.

Therefore, for and in consideration of the foregoing premises and the covenants contained, the parties agreed as follows:

a. For and in consideration of the total sum of P21,052,143, purchase price, broken down into cash in the amount of P30,181,618 and the acceptance and assumption by the buyer of the assumed liabilities in the total amount of P9,129,475, receipt of which is acknowledged by the seller and the assumption of which liabilities is confirmed by the buyer, the seller absolutely and unconditionally assigns, cedes, conveys and transfers to the buyer, and the buyer purchases, acquires and accepts from the seller, any and all of the seller’s rights, title, interest and obligations of the seller in and to the assets and assumed liabilities.

The carrying amounts of the assets sold are as follows:

Trade and other receivables: Trade P 15,407,554 Less: Allowance for doubtful accounts (705,347) Due from a related party 5,098,769 Accrued revenue 3,072,095 Advances to officers and employees 1,497,181 Reimbursable from clients 947,598 Accrued interest 41,564 Others 802,072 P 26,161,486 Finance lease receivables 2,143,195 2,143,195 Inventories: Merchandise inventory 1,165,531 Leased asset inventory 252,643 1,418,174 Other current assets: Prepaid rent 1,552,817 Security deposits 239,328 SSS claims 10,350 1,802,495 Deferred tax assets 987,330 987,330

P 32,512,680 P 32,512,680

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The carrying amounts of the liabilities assumed are as follows:

Trade and other payables: Accounts payable P 1,389,593 Customer's deposit 4,355,543 Accrued expenses 492,478 Interest payable 144,137 Payable to employees 77,493 Other payable 147,185 P 6,606,429

Finance lease obligations 887,349 887,349 Retirement benefit obligation 1,562,495 1,562,495

Deferred tax liability 73,202 73,202

P 9,129,475 P 9,129,475

b. The buyer expressly acknowledges that it is aware of the value, nature, status and condition of the assets which it hereby accepts “as-is/where-is”. It is therefore, expressly understood that the seller makes no representation or warranty of any kind with respect to the assets.

c. The purchase price stated above is exclusive of the applicable of twelve percent (12%) value-added tax (VAT), which shall be borne by the buyer.

d. The seller represents and warrants unto the buyer that it is the owner of the subject property; it has full and legal capacity to execute this deed and to transfer in full to the buyer, all of its rights, title and interest in and to the subject property, and that the subject property is free from any liens and encumbrances.

2. On March 5, 2015, the Company “Seller” entered into a “Deed of absolute sale of equipment, furniture and fixtures” with Movmento, Inc., “Buyer”. The Company is the owner of certain equipment and furniture and fixtures and has offered to sell the same to Movmento, Inc. The buyer agreed to purchase the equipment and furniture and fixtures and clear of all liens and encumbrances subject to the terms and conditions of the deed.

Therefore, for and in consideration of the foregoing premises and the covenants contained, the parties hereby agree as follows:

a. For and in consideration of the amount of P1,537,004 (inclusive of VAT), receipt and sufficiency of which are acknowledged by the seller. The seller shall sell, assign and transfer to the buyer all its rights, title and interests in the equipment and furniture and fixtures free and clear of all liens and encumbrances.

b. Seller shall cooperate with purchaser in providing necessary information and on performing promptly any and all acts as may be necessary in order to effectuate the transfer of the equipment and furniture and fixtures to buyer.

c. Any VAT, income tax and capital gains tax which may be due on the sale of the machinery and equipment shall be for the account of the buyer. Any documentary stamp tax which may be due on the sale of the equipment and furniture and fixtures shall be for the account of the buyer.

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The carrying amounts of the equipment and furniture and fixtures sold are as follows:

Computer P 714,054 Office equipment 280,997 Leasehold improvement 207,911 Furniture and fixtures 169,363

P 1,372,325

3. On March 5, 2015, the Company (the “Seller”) entered into a “Deed of sale of motor vehicles” with Movmento, Inc. “Buyer” for a total consideration of P1,184,217. The buyer agreed to purchase the motor vehicles clear of all liens and encumbrances subject to the terms and conditions of the deed.

4. On March 5, 2015, the Company “Assignor” entered into a “Deed of assignment of subscription” with Movmento, Inc. “Assignee” for a consideration of P13,488. The Company unconditionally and irrevocably assigns, transfers and conveys, all its rights, interests and obligations in and obligations in and to its entire subscription consisting of 1,000 shares (“Assigned Shares”), with par value of one (1) Malaysian Ringgit per share in iRipple Sdn Bhd, a corporation duly organized and existing under and by virtue of the laws in Malaysia.

Moreover, the Company’s investment with Auto Top-Up Ventures, Inc. (ATVI) was also assigned with Movmento, Inc. for a total consideration of P126,000. The Company unconditionally and irrevocably assigns, transfers and conveys, all its rights, interests and obligations in and obligations in and to its investment.

5. On March 6, 2015, the Company “Assignor” entered into an “Assignment of Application for registration of trademark/tradename” with Movmento “Assignee”. The assignor owns the trademarks of “Ripple and Logo” and “Barter” which are registered before the Intellectual Property Office of the Philippines. The assignee acquires all the rights, title and interest in and to the trademarks for the amount of P1 receipt.

As of March 12, 2015, the Bidder agreed to purchase all the rights, title and interest of certain majority shareholders of the Company (collectively, the “Private Shareholder”) representing 89.49% of the Company issued and outstanding capital stock.

The Bidder proposes to acquire, under the same terms, through a mandatory tender offer (the “Tender Offer”) in accordance with Section 19 of the Securities Regulation Code (“SRC”) and applicable rules and regulations the remaining 10.50% of the Company’s issued and outstanding common stock held by the public.

After the acquisition, the Bidder intends to amend the Articles of Incorporation of the Company to change its corporate name and to change its primary purpose to allow it to acquire, hold, encumber or dispose of properties, real and personal. The Bidder is contemplating investing, through the Company, in various industries.

The Bidder has no plans of causing any class of equity securities of the Company, which is listed on the PSE to be delisted. The tender offer is being conducted in order to comply with SRC rule 19 and other applicable laws and with the intention of retaining the status of the Company as a PSE listed Company.

The bidder has no intention to cause the Company to no longer be subject to the reporting requirements of SRC Rule 17.

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Under a Sale and Purchase Agreement dated August 12, 2016 executed by and among Conrado Rafael C. Alcantara, Alfonso S. Anggala and Start Alliance Securities Corp. (the “selling shareholders”), on one hand, and Genomics, Inc. and Hector Thomas A. Navasero (the “buyers”), on the other, the selling shareholders agreed to sell, assign, transfer and convey to the buyers, and the buyers agreed to purchase, acquire and accept from the selling shareholders, all of the rights, title and interest of the selling shareholders in and to Two Hundred Eight Million Six Hundred Twenty-Four Thousand and Eight Hundred and One (208,624,801) common shares representing approximately 67% of the outstanding capital stock of the Company. This agreement to sell and purchase the Company’s shares was made subject to the completion of certain conditions precedent, including the completion of a mandatory tender offer for all of the remaining shares of the Company, The price at which the selling shareholders agreed to sell, and the buyers agreed to purchase, the Company shares is the aggregate amount of Three Hundred Sixty-Two Million Three Hundred Twenty-Four Thousand Nine Hundred Sixty One and 21/100 Pesos (P362,324,961.21) or One and 74/100 (P1.74) per share.

On October 11, 2016, following the completion of the mandatory tender offer by the buyers and to all shareholders of the Company, a total of Two Hundred Eight Thousand Six Hundred Thirty Five Eight Hundred One (208,635,801) common shares of the Company (inclusive of the common shares that were tendered) were acquired by Hector Thomas A. Navasero and Genomics, Inc. As a result of the said acquisition, the buyers acquired approximately 67% of the outstanding capital stock of the Company, as disclosed in Note 22.

In consonance with such change in control, during the meeting of the BOD on September 14, 2016, as well as the annual stockholders meeting on October 20, 2016, the BOD and stockholders representing atleast 2/3 of the outstanding capital stock approved the following resolutions, as disclosed in Note 22:

a. acquisition by the Company of up to 361,390 outstanding shares of Philab Industries, Inc. (“Philab”), representing approximately 100% of Philab’s outstanding shares.

b. issuance of shares of the Company to existing shareholders or new investors, either out of its unissued capital or increase in capital.

c. delegation of authority to amend/repeal the Amended By-Laws or adopt new By-Laws to the BOD.

Also, the following amendments on the AOI were approved by the stockholders on October 20, 2016, as disclosed in Note 22:

a. The name of the Corporation shall be Philab Holdings Corp.

b. The secondary purpose of the Corporation to include the power to guarantee the obligation of any person, firm or entity in which the Corporation may have lawful interest.

c. Transfer Company’s principal office address to 8th floor, 1128 38th Avenue, Fort Bonifacio Global City, Taguig City, Metro Manila.

d. Increase par value from P0.05 per share to P0.25 per share.

e. To include new provision as the Eleventh (11th) Article pertaining to the denial of pre-emptive rights of the stockholders.

f. Increase authorized capital stock from Twenty Million Pesos (P20,000,000.00) to up to Two Billion Pesos (P2,000,000,000.00).

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Items b, c, d and e from the above were certified by the SEC on December 12, 2016, as disclosed in Note 22.

The above resolutions and amendments on the AOI, taken together, if and when fully implemented, will result in the backdoor listing of Philab Industries.

On December 19, 2016, the Company acquired Three Hundred Fifty One Thousand Seven Hundred Forty (351,740) shares, representing 93.43% of the total outstanding capital stock of Philab at the price of P2,445 per share or the aggregate price of Eight Hundred Sixty Million Pesos (P860,000,000.00), as disclosed in Note 22.

As further disclosed in Note 22, on December 19, 2016, the Company entered into subscription agreements with certain subscribers who subscribed to its increase in capital stock. Such subscribers include some of the selling shareholders of Philab, as well as non-related or affiliated subscribers to ensure continued compliance with the minimum public ownership requirement. The increase in capital stock of the Company is still currently in process with the SEC.

The Company’s registered office address is located at 8th floor, 1128 38th Avenue, Fort Bonifacio Global City, Taguig City, Metro Manila.

2. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

The Philippine Financial Reporting Standards Council (FRSC) approved the issuance of new and revised Philippine Financial Reporting Standards (PFRS). The term “PFRS” in general includes all applicable PFRS, Philippine Accounting Standards (PAS), and Interpretations issued by the Philippine Interpretations Committee (PIC), Standing Interpretations Committee (SIC) and International Financial Reporting Interpretations Committee (IFRIC) which have been approved by the FRSC and adopted by SEC.

These new and revised PFRS prescribe new accounting recognition, measurement and disclosure requirements applicable to the Company. When applicable, the adoption of the new standards was made in accordance with their transitional provisions, otherwise the adoption is accounted for as change in accounting policy under PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.

2.01 New and Revised PFRSs Applied with No Material Effect on the Financial Statements

The following new and revised PFRSs have also been adopted in these financial statements. The application of these new and revised PFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements.

x Amendments to PFRS 10, PFRS 12 and PAS, 28 Investment Entities: Applying the Consolidation Exception

The amendments confirm that the exemption from preparing consolidated financial statements for an intermediate parent entity is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all of its subsidiaries at fair value.

In addition, it clarifies that a subsidiary that provides services related to the parent's investment activities should not be consolidated if the subsidiary itself is an investment entity.

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Moreover, it clarifies that when applying the equity method to an associate or a joint venture, a non-investment entity investor in an investment entity may retain the fair value measurement applied by the associate or joint venture to its interests in subsidiaries.

And, an investment entity measuring all of its subsidiaries at fair value shall provide the disclosures relating to investment entities as required by PFRS 12.

The amendments are effective for annual periods beginning on or after 1 January 2016 and must be applied retrospectively. Earlier application is permitted.

x PFRS 11, Joint Arrangements – Accounting for Acquisitions of Interests in Joint Operations

Amendments in PFRS 11 require an acquirer of an interest in a joint operation in which the activity constitutes a business to apply the accounting principles and disclosure requirements in PFRS 3 and other PFRS for business combinations. This is applicable in initial acquisition and acquisition of initial interest in a joint operation. This is applicable prospectively to annual periods beginning January 1, 2016.

x PFRS 14, Regulatory Deferral Accounts

PFRS 14 issued on January 30, 2014, provides temporary guidance for first-time adopters of PFRS on accounting for regulatory deferral account balances. Regulatory deferral account balances are describe as amounts of expense or income that would not be recognized as assets or liabilities in accordance with other Standards, but that qualify to be deferred because the amount is included, or is expected to be included, by the rate regulator in establishing the price(s) that an entity can charge to customers for rate-regulated goods or services.

PFRS 14 permits an entity that adopts PFRS to continue to use, in its first and subsequent PFRS financial statements, its previous generally accepted accounting principles (GAAP) accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances without specifically considering the requirements of paragraph 11 of PAS 8. PFRS 14 requires entities to present regulatory deferral account balances as separate line items in the statement of financial position and to present movements in those account balances as separate line items in the statement of profit or loss and other comprehensive income. PFRS 14 also requires specific disclosures to identify the nature of, and risks associated with, the rate regulation that has resulted in the recognition of regulatory deferral account balances in accordance with this Standard.

PFRS 14 is effective for a period beginning on or after January 1, 2016. Earlier application is permitted.

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x Amendments to PAS 1, Disclosure Initiative

The amendments clarify that information should not be obscured by aggregating or by providing immaterial information. Materiality considerations shall apply to all parts of the financial statements even if when a standard requires a specific disclosure.

In addition, the amendments introduce a clarification that the list of line items to be presented in the statement of financial position and statement of comprehensive income can be disaggregated and aggregated as relevant. Also, it clarifies that an entity's share of other comprehensive (OCI) of equity-accounted associates and joint ventures should be presented in aggregate as single line items based on whether or not it will subsequently be reclassified to profit or loss.

Further, the amendments add additional examples of possible ways of ordering the notes to clarify that understandability and comparability should be considered when determining the order of the notes. The IASB also removed guidance and examples with regard to the identification of significant accounting policies that were perceived as being potentially unhelpful.

x PAS 16, Property, Plant and Equipment and PAS 38, Intangible Assets – Clarification of Acceptable Methods of Depreciation and Amortization

The amendments clarify that revenue-based depreciation is not appropriate for property, plant and equipment. Revenue-based amortization is allowed only when the intangible assets are expressed as a measure of revenue or when it can be demonstrated that revenue and the consumption of economic benefits of the intangible asset are highly correlated. This is effective prospectively from January 1, 2016. Earlier application is permitted.

x PAS 27, Separate Financial Statements – Equity Method in Separate Financial Statements

The amendments in PAS 27 permit an entity to account its investments in subsidiaries, joint ventures and associates using the equity method as described in PAS 28 in its separate financial statements. The amendments shall be applied for annual periods beginning January 1, 2016 retrospectively. Earlier application is permitted.

x Improvements to PFRS (2014) – Effective for annual periods beginning on or after January 1, 2016. Earlier application is permitted.

PFRS 5, Non-current Assets Held for Sale and Discontinued Operations – The amendments require that an asset reclassified directly from being held sale to being held for distribution, or directly from being held for distribution to being held for sale, the requirements for classification, presentation and measurement shall continue to be applied in accordance with this standard

PFRS 7, Financial Instruments: Disclosure – The amendments clarify that the right to service a financial asset transferred may be retained for a fee that is included in the servicing contract. The right to earn a fee for servicing the financial asset is generally continuing involvement for the purpose of applying the disclosure requirements. The service contract must be assessed to determine whether there is a continuing involvement in the financial asset transferred.

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Further, the additional disclosure required by amendments to PFRS 7, Disclosure –Offsetting Financial Assets and Financial Liabilities is not specifically required for all interim periods. For condensed financial interim financial statements, the disclosure requirements are required to be given if the financial statements are prepared in accordance with PAS 34, Interim Financial Reporting when the inclusion would be required by the standard.

PAS 19, Employee Benefits – It clarifies that the high quality corporate bonds used to estimate the discount rate for post-employment benefit obligations should be denominated in the same currency as the liability and that the depth of the market for high quality corporate bonds should be assessed at the currency level.

PAS 34, Interim Financial Reporting – It clarifies that information shall be disclosed either in the notes to the interim financial statements or elsewhere in the interim financial report, by incorporating cross-reference from the interim financial statements to the other part of the interim financial report which is available to users on the same terms as the interim financial statements and at the same time.

x PIC Q&A No. 2015-01 Conforming Changes in PIC Q&As – Cycle 2015

This Q&A No. 2015-01 sets out the amendments to certain PIC Q&As. These changes are made as a consequence of the issuance of new Philippine Financial Reporting Standards (PFRS) and amendments to certain existing PFRS that are effective as of January 1, 2013.

2.02 New and Revised PFRSs in Issue but Not Yet Effective

The Company will adopt the following standards and interpretations enumerated below when they become effective. Except as otherwise indicated, the Company does not expect the adoption of these new and amended PFRS, to have significant impact on the financial statements.

2.02.01 Standard Adopted by FRSC and Approved by the Board of Accountancy (BOA)

x PFRS 9, Financial Instruments – Hedge Accounting and Amendments to PFRS 9, PFRS 7 and PAS 39 (2013)

PFRS 9 (2013) includes the new hedge accounting requirements that align hedge accounting more closely with risk management, establish a more principle-based approach to hedge accounting and address inconsistencies and weaknesses in the hedge accounting model in PAS 39. One of the significant changes is that inclusion of non-financial items into the type of transactions eligible for hedge accounting, provided that the risk component is separately identifiable and reliably measurable. Entities were given an accounting policy choice between applying the hedge accounting requirements of PFRS 9 and continuing to apply the hedge accounting requirements in PAS 39. Also, the disclosure on hedge accounting and risk management disclosures were improved.

PFRS 9 (2013) does not have a mandatory effective date, early application is permitted.

x PFRS 9, Financial Instruments (2014)

PFRS 9, amended on July 24, 2014, made limited amendments to the requirements for classification and measurement of financial assets and requirements for impairment.

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The amendments introduce a ‘fair value through other comprehensive income’ measurement category for particular simple debt instruments. Also it introduced impairment requirements relating to the accounting for an entity’s expected credit losses on its financial assets and commitments to extend credit. These requirements eliminate the threshold that was in PAS 39 for the recognition of credit losses. Under the impairment approach in PFRS 9 it is no longer necessary for a credit event to have occurred before credit losses are recognized. Instead, an entity always accounts for expected credit losses, and changes in those expected credit losses. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition and, consequently, more timely information is provided about expected credit losses.

PFRS 9 supersedes PFRS 9 (2009), PFRS 9 (2010) and PFRS 9 (2013) and is effective retrospectively for annual periods beginning on or after January 1, 2018, with earlier application permitted.

x PFRS 10, Consolidated Financial Statements and PAS 28, Investments in Associates and Joint Ventures – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The amendments clarify the treatment of the sale or contribution of assets between an investor and its associate and joint venture. This requires an investor in its financial statements to recognize in full the gains and losses arising from the sale or contribution of assets that constitute a business while recognize partial gains and losses if the assets do not constitute a business (i.e. up to the extent only of unrelated investor share).

On January 13, 2016, the FRSC decided to postpone the original effective date of January 1, 2016 of the said amendments until the IASB has completed its broader review of the research project on equity accounting that may result in the simplification of accounting for such transactions and of other aspects of accounting for associates and joint ventures.

x PFRS 16, Leases

Introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.

On the other hand, it substantially carries forward the lessor accounting requirements in PAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.

Effective for annual periods beginning on or after January 1, 2019, however, earlier application is not permitted until the FRSC has adopted the new revenue recognition standard.

x IFRIC 15, Agreements for the Construction of Real Estate

The Interpretation addresses how entities should determine whether an agreement for the construction of real estate is within the scope of PAS 11, Construction Contracts, or PAS 18, Revenue, and when revenue from the construction of real estate should be recognized. The requirements have not affected the accounting for the Company’s construction activities.

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Effectivity of this interpretation has been deferred until the final Revenue standard is issued by International Accounting Standards Board (IASB), and an evaluation of the requirements of the final Revenue standard against the practices of the Philippine real estate industry is completed.

x Amendments to PAS 7, Disclosure Initiative

The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash charges.

Effective for annual periods beginning on or after January 1, 2017 and shall be applied prospectively, with earlier application permitted.

x Amendments to PAS 12, Recognition of Deferred Tax Assets for Unrealized Losses

The amendments clarify that unrealized losses on debt instruments measured at fair value in the financial statements but at cost for tax purposes can give rise to deductible temporary differences.

In addition, these clarify that the carrying amount of an asset does not limit the estimation of probable future taxable profits and that when comparing deductible temporary differences with future taxable profits, the future taxable profits excludes tax deductions resulting from the reversal of those deductible temporary differences.

Effective for annual periods beginning on or after January 1, 2017 and shall be applied retrospectively, with earlier application permitted.

2.02.02 Standard Adopted by FRSC but pending for Approval of the BOA

x Amendments to PFRS 2, Classification and Measurement of Share-based Payment Transactions

The amendments clarify the accounting for the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and modification to the terms and conditions of share-based payment transactions that will result to change in classification from cash-settled to equity-settled.

The amendments are effective for annual periods beginning on or after January 1, 2018. Retrospective application is permitted if elected for all of the aforementioned amendments and other criteria are met.

x PIC Q&A No. 2016-02 PAS 32 and PAS 38 – Accounting Treatment of Club Shares Held by an Entity

A proprietary club share entitles the shareholder to a residual interest in the net assets upon liquidation which justifies that such instrument is an equity instrument and thereby qualifies as a financial asset to be accounted for under PAS 39, Financial Instruments: Recognition and Measurement.

A non-proprietary club share, though an equity instrument in its legal form, is not an equity instrument in the context of PAS 32. Furthermore, it does not entitle the holder to a contractual right to receive cash or another financial asset from the issuing corporation. The holder of the share, in substance, only paid for the privilege to enjoy the club facilities and services but not for ownership of the club.

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In such case, the holder must account for the share as an intangible asset under PAS 38.

3. BASIS FOR THE PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS

3.01 Statement of Compliance

The financial statements have been prepared in conformity with PFRS and are under the historical cost convention, except for certain financial instruments that are carried either at amortized cost or at fair value and inventories carried at net realizable value.

The Company is not subject to seasonal fluctuations.

3.02 Functional and Presentation Currency

Items included in the financial statements of the Company are measured using Philippine Peso (P), the currency of the primary economic environment in which the Company operates (the “functional currency”).

The Company chose to present its financial statements using its functional currency.

3.03 Basis of Preparation

The reporting period of the financial statements of the Company is December 31. However, the Company opted to prepare its financial statements as of September 30, 2016 and 2015 in relation to the planned public offering of the Company.

In view of this, Management decided to prepare the complete set of financial statements as of September 30, 2016 and 2015 for internal and management purpose only.

4. SIGNIFICANT ACCOUNTING POLICIES

Principal accounting and financial reporting policies applied by the Company in the preparation of its financial statements are enumerated below and are consistently applied to all the years presented, unless otherwise stated.

4.01 Segment Information

An operating segment is a component of the Company: (a) that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses relating to transactions with other components of the Company; (b) whose operating results are regularly reviewed by the Company’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and (c) for which discrete financial information is available.

The Company reports separately, information about an operating segment that meets any of the following quantitative thresholds: (a) Its reported revenue, including both sales to external customers and inter-segment sales or transfers, is ten percent (10%) or more of the combined revenue, internal and external, of all operating segments, provided that; (b) The absolute amount of its reported profit or loss is 10% or more of the greater, in absolute amount, of the combined reported profit of all operating segments that did not report a loss and the combined reported loss of all operating segments that reported a loss; and (c) Its assets are ten percent (10%) or more of the combined assets of all operating segments.

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Operating segments that do not meet any of the quantitative thresholds may be considered reportable, and separately disclosed, if Management believes that information about the segment would be useful to users of the financial statements.

In prior periods, the Company was organized into three (3) business segments: Third Party Transactions, Retail Solutions and Special Projects. For Management purposes, these divisions are the basis on which the Company reports its primary segment information.

Currently, the Company does not have any existing operating segments.

4.02 Financial Assets

Financial assets are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.

Financial assets that are subsequently measured at amortized cost and where the purchase or sale are under a contract whose terms require delivery of such within the timeframe established by the market concerned are initially recognized on the trade date.

Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ (HTM) investments, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

The Company’s financial asset pertains only to cash and cash equivalents.

4.02.01 Effective Interest Method

The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating finance income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts, through the expected life of the debt instrument, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Income is recognized on an effective interest basis.

4.02.02 Amortized Cost

Amortized cost is computed using the effective interest rate method less any allowance for impairment and principal repayment or reduction. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of effective interest rate.

4.02.03 Cash and Cash Equivalents

Cash deposits held at call with bank that are subject to insignificant risk of change in value. This shall be measured at the undiscounted amount of the cash or other consideration expected to be paid or received.

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with maturities of three (3) months or less from the date of acquisition and that are subject to an insignificant risk of change in value.

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4.02.04 Receivables

Accounts that have fixed or determinable payments that are not quoted in an active market are classified as receivables. They are measured at amortized cost using the effective interest method, less any impairment. Finance income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

4.02.05 Impairment of Financial Assets

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For listed equity investments classified as AFS, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

Objective evidence of impairment could include:

x significant financial difficulty of the issuer or counterparty; or

x default or delinquency in interest or principal payments; or

x it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

x the lender, for economic or legal reasons relating to the borrower’s financial difficulty, grants the borrower a concession that the lender would not otherwise consider; or

x the disappearance of an active market for that financial asset because of financial difficulties; or

x observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group, including (i) adverse changes in the payment status of borrowers in the group (e.g. an increased number of delayed payments or an increased number of credit card borrowers who have reached their credit limit and are paying the minimum monthly amount); or (ii) national or local economic conditions that correlate with defaults on the assets in the group (e.g. an increase in the unemployment rate in the geographical area of the borrowers, a decrease in property prices for mortgages in the relevant area, a decrease in oil prices for loan assets to oil producers, or adverse changes in industry conditions that affect the borrowers in the group).

Other factors may also be evidence of impairment, including significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the issuer operates.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of thirty (30) days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

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For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

4.02.06 Derecognition of Financial Assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.

4.03 Other Current Assets

Other current assets represent expenses not yet incurred but already paid in cash. These are initially recorded as assets and measured at the amount of cash paid. Subsequently, these are charged to profit or loss as they are consumed in operations or expire with the passage of time.

Other current assets are classified in the statements of financial position as current assets when the expenses related to these assets are expected to be incurred within one year or the Company’s normal operating cycle whichever is longer. Otherwise, other current assets are classified as non-current assets. This account consists of excess tax credit and input VAT.

4.04 Investment in a Subsidiary

A subsidiary is an entity including an unincorporated entity such as a partnership that is controlled by another entity known as parent. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Investments in subsidiaries are accounted under the cost method. Under the cost method, the Company recognizes as income the dividends received that are distributed from net accumulated earnings of the investee since the date of acquisition by the investor. Dividends received that are in excess of the earnings subsequent to the date of acquisition are not income and therefore considered as return of or reduction in investment.

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If the Company loses control of a subsidiary, the Company recognizes any investment retained in the former subsidiary at its fair value at the date when control is lost or recognizes any resulting difference as a gain or loss in profit or loss attributable to the Company. Changes in a Company’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

4.05 Inventories

Inventories are stated at the lower of cost or net realizable value. Costs are determined using the specific identification method. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

When the net realizable value of the inventories is lower than the cost, the Company provides for an allowance for the decline in the value of the inventory and recognizes the write-down as an expense in the statements of comprehensive income. The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, is recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs.

When inventories are sold, the carrying amount of those inventories is recognized as an expense in the period in which the related revenue is recognized.

4.06 Property and Equipment

Property and equipment are initially measured at cost. The cost of an asset consists of its purchase price and costs directly attributable to bringing the asset to its working condition for its intended use. Subsequent to initial recognition property and equipment are carried at cost less accumulated depreciation and accumulated impairment losses.

Subsequent expenditures relating to an item of property and equipment that have already been recognized are added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Company. All other subsequent expenditures are recognized as expenses in the period in which those are incurred.

Depreciation is computed on the straight-line method based on the estimated useful lives of the assets as follows:

Vehicles 5 years Office equipment 2 to 3 years Furniture and fixtures 2 years

Leasehold improvements are depreciated over the shorter between the improvements’ useful life of two (2) years or the lease term.

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, if there is an indication of significant change since the last reporting date.

An item of property and equipment is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of a property and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in profit or loss.

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4.07 Impairment of Assets

At each reporting date, the Company assesses whether there is any indication that any assets other than inventories, deferred tax assets and financial assets that are within the scope of PAS 39, Financial Instruments: Recognition and Measurement, may have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use. 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 for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognized as an expense.

When an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized as an income.

4.08 Financial Liabilities and Equity Instruments

4.08.01 Classification as Debt or Equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

4.08.02 Financial Liabilities

Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.

The Company’s financial liability pertains only to trade and other payables, except for output VAT and expanded withholding tax payable.

4.08.03 Other Financial Liabilities

Other financial liabilities, including borrowings, are initially measured at fair value inclusive of directly attributable transaction costs.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with finance cost recognized on an effective yield basis.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating finance cost over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

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4.08.04 Derecognition of Financial Liabilities

The Company derecognizes financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

4.08.05 Equity Instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new shares are shown in equity as a deduction from the proceeds, net of tax.

4.09 Offsetting of Financial Instruments

Financial assets and liabilities are offset and the net amount is reported in the statements of financial position 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 assets and settle the liabilities simultaneously.

4.10 Employee Benefits

4.10.01 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, incentives and bonuses, and non-monetary benefits.

4.11 Provisions

Provisions are recognized when the Company has a present obligation, whether legal or constructive, as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

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4.12 Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business.

4.12.01 Sale of Goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

x the Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

x the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

x the amount of revenue can be measured reliably;

x it is probable that the economic benefits associated with the transaction will flow to the Company; and

x the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Revenue from sale of goods encompasses sale of hardware and point-of-sale (POS) software.

4.12.02 Rendering of Services

Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract. Revenue from rendering of services is recognized when all the following conditions are satisfied:

x the amount of revenue can be measured reliably;

x it is probable that the economic benefits associated with the transaction will flow to the Company;

x the stage of completion of the transaction can be measured reliably; and

x the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

Revenue from rendering of services encompasses sale of licenses, implementation and the maintenance fees of Barter™ MMS, and sale of customized POS software for a specified customer.

4.12.03 Finance Income

Finance income is recognized when it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured reliably. Finance income is accrued on a time proportion basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

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4.13 Expense Recognition

Expense encompasses losses as well as those expenses that arise in the course of the ordinary activities of the Company.

The Company recognizes expenses in the statements of comprehensive income when a decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably.

4.14 Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

4.14.01 The Company as a Lessee

Assets held under finance leases are initially recognized as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statements of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

4.15 Related Parties and Related Party Transactions

A related party is a person or entity that is related to the Company that is preparing its financial statements. A person or a close member of that person’s family is related to Company if that person has control or joint control over the Company, has significant influence over the Company, or is a member of the key management personnel of the Company or of a parent of the Company.

An entity is related to the Company if any of the following conditions applies:

x The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

x One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member); or

x Both entities are joint ventures of the same third party.

x One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

x The entity is a post-employment benefit plan for the benefit of employees of either the Company or an entity related to the Company. If the Company is itself such a plan, the sponsoring employers are also related to the Company.

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x The entity is controlled or jointly controlled by a person identified above.

x A person identified above has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

x Management entity providing key management personnel services to a reporting entity.

Close members of the family of a person are those family members, who may be expected to influence, or be influenced by, that person in their dealings with the Company and include that person’s children and spouse or domestic partner; children of that person’s spouse or domestic partner; and dependants of that person or that person’s spouse or domestic partner.

A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged.

4.16 Taxation

Income tax expense represents the sum of current and deferred taxes.

4.16.01 Current Tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statements of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

4.16.02 Deferred Tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally 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 Carryover (NOLCO), to the extent that it is probable that taxable profits will be available against which those deductible temporary differences and carry forward of unused MCIT and unused NOLCO can be utilized. Deferred income tax, however, is not recognized when it arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction that affects neither the accounting profit nor taxable profit or loss.

Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets arising from deductible temporary differences are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

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Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

4.16.03 Current and Deferred Tax for the Period

Current and deferred tax are recognized as an expense or income in profit or loss, except when they relate to items that are recognized outside profit or loss, whether in OCI or directly in equity, in which case the tax is also recognized outside profit or loss.

4.17 Earnings Per Share

The Company computes its basic earnings per share by dividing net income or loss attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the period.

4.18 Events after the Reporting Period

The Company identifies subsequent events as events that occurred after the reporting date but before the date when the financial statements were authorized for issue. Any subsequent events that provide additional information about the Company’s position at the reporting date, adjusting events, are reflected in the financial statements, while subsequent events that do not require adjustments, non-adjusting events, are disclosed in the notes to financial statements when material.

5. CRITICAL ACCOUNTING JUDGMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTIES

In the application of the Company’s accounting policies, which are disclosed in Note 4, Management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

5.01 Critical Judgment in Applying Accounting Policy

The following are the critical judgment, apart from those involving estimations that Management has made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognized in financial statements.

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5.01.01 Assessment of Control

The Company determines whether an entity qualifies as a subsidiary when it has control over an entity. The Company controls an entity when it has the three (3) elements of control, as disclosed in Note 4. In making its judgments, the Company considers all facts and circumstances when assessing control over an investee. A reassessment of control is conducted when there are changes to one (1) or more of the three (3) elements of control. Any changes from at least one (1) of the elements would result to lose or gain of control over an entity.

In 2014, the Company having 100% ownership and voting interest in IRipple Sdn Bhd assessed that it has control over its subsidiary since it has power over the subsidiary, exposure or rights to variable returns from its involvement and ability to use its power to affect the component of its returns. In 2015, said investment was assigned to Movmento, Inc., as disclosed in Note 1.

In 2012, the Company has a 51% voting rights over Auto Top-up Ventures, Inc. (ATVI). In 2014 and 2013, the Company transferred, assigned and conveyed absolutely and irrevocably, free from all liens and encumbrances portion of its investment in ATVI representing 2% and 24%, respectively, of the latter’s shares issued. This transaction resulted to a loss of control and decrease of voting interest from 51% in 2012 to 49% in 2013 and ultimately 25% in 2014. As a result of the said transfer and loss of Company’s control, ATVI became an associate. In 2014 and 2013, the Parent Company assessed that it does not have a control over ATVI but rather it has significant influence since it has only the power to participate in the financial and operating policy decisions over the investee.

In 2015, the Company assigns its remaining investment in ATVI to Movmento, Inc., as disclosed in Note 1.

In 2016, the Company does not have an investment in associate.

5.01.02 Aggregation of Operating Segments

In accordance with the provisions of PFRS 8, Operating Segments, the Company’s reporting segment is based on the management approach with regard to the segment identification, under which information regularly provided to the chief operating decision maker for decision-making purposes is considered as decisive. The segments are also evaluated under the management approach.

The Company reports its segment based on the types of goods supplied and services provided by the Company’s operating divisions. However, the information reported to the Company’s Chief operating decision maker for the purposes of resource allocation and assessment of segment performance is more specifically focused on the types of products and services delivered or provided. In the previous year, the Company has three (3) reportable segments: Retail Solutions, Third Party Transactions and Special Projects. The accounting policies of the reportable segments are the same as the Company’s accounting policies.

As of September 30, 2016, the Company does not have any operating segments.

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5.02 Key Sources of Estimation Uncertainties

The following are the key assumptions concerning the future, and other key sources of estimation uncertainties at the end of the reporting periods that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

5.02.01 Deferred Tax Assets

The Company reviews the carrying amounts at each reporting period and reduces deferred tax assets to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax assets to be utilized prior to expiration.

In both years, Management believes that the Company would be able to generate future taxable profit that would allow all of its deferred tax assets to be fully utilized prior to expiration. As of September 30, 2016 and 2015, the carrying amounts of deferred tax assets amounted to P1,668,062 and nil, respectively.

5.02.02 Estimating Allowances for Doubtful Accounts

Allowance for doubtful accounts is maintained at a level considered adequate to provide for potential uncollectible receivables. The Company estimates the allowance for doubtful accounts related to its trade receivables based on assessment of specific accounts where the Company has information that certain customers are unable to meet their financial obligations. In these cases, judgment used was based on the best available facts and circumstances including but not limited to, the length of relationship with the customer and the customer’s current credit status based on third party credit reports and known market factors. The Company used judgment to record specific allowances for customers against amounts due to reduce the expected collectible amounts. These specific allowances are re-evaluated and adjusted as additional information received impacts the amounts estimated.

A review of the age and status of receivables, designed to identify accounts to be provided with allowance, is made on a continuous basis. Doubtful accounts are written-off when determined. As of September 30, 2016 and 2015, the carrying values of receivables amounted to nil.

5.02.03 Revenue Recognition

Revenue is recognized when there is an evidence of an arrangement, collectability is reasonably assured, and the delivery of the product or rendering of service has occurred. The following specific recognition criteria must also be met before revenue is recognized:

Revenues from sale of goods are recognized upon delivery and billing to customers.

Sales of services are recognized in the accounting period in which the services are rendered by reference to completion of specific transactions assessed on the basis of the actual service provided as proportion of the total services to be provided.

Under certain arrangements where the above criteria are met, but there is uncertainty regarding the outcome of the transaction for which service was rendered, revenue is recognized only to the extent of expenses incurred for rendering the service, and such amount is determined to be recoverable.

In 2016, 2015 and 2014, the Company recognized total revenues amounting to nil, P11,140,012 and P61,343,788, respectively, as disclosed in Note 13.

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6. SEGMENT INFORMATION

6.01 Products and Services from which Reportable Segments Derive their Revenues

In prior periods, segment information reported externally was analyzed on the basis of the types of goods supplied and services provided by the Company’s operating divisions. However, information reported to the Company’s chief operating decision maker for the purposes of resource allocation and assessment of segment performance is more specifically focused on the types of products and services delivered or provided. The Company’s reportable segments in the prior years under PFRS 8 are as follows:

Retail Solutions Sale of licenses, implementation and the maintenance fees of Barter™ MMS the Company’s packaged software solution.

Third Party Transactions Sale of hardware and (Point of Sale) POS software. Special Projects Sale of customized POS Software for a specified

customer and such cannot be sold or offered to other clients

As of September 30, 2016, the Company does not have any existing operating segments.

The following are information regarding the Company‘s reportable segments.

6.02 Segment Revenue and Results

The following is an analysis of the Company‘s revenue and results from continuing operations by reportable segment:

2016

Segment Revenue

Segment Cost

Segment Profit

Retail Solutions P - P - P - Third Party Transactions - - - Special Projects - - -

Total P - P - P -

2015 (Unaudited)

Segment Revenue

Segment Cost

Segment Profit

Retail Solutions P 6,286,856 P 5,178,898 P 1,107,958 Third Party Transactions 3,850,020 2,838,287 1,011,733 Special Projects 1,003,136 833,350 169,786

Total P 11,140,012 P 8,850,535 P 2,289,477

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2014 (Unaudited)

Segment Revenue

Segment Cost

Segment Profit

Retail Solutions P 26,663,954 P 8,092,626 P 18,571,328 Third Party Transactions 13,452,826 12,122,229 1,330,597 Special Projects 6,903,769 3,201,116 3,702,653 Subsidiary 14,323,239 8,574,625 5,748,614

Total P 61,343,788 P 31,990,596 P 29,353,192

The Segments’ profit and the Company’s profit are reconciled as follow:

2016 2015

(Unaudited) 2014

(Unaudited) Retail Solutions P - P 1,107,958 P 18,571,328 Third Party Transactions - 1,011,733 1,330,597 Special Projects - 169,786 3,702,653

Total for continuing operations - 2,289,477 23,604,578 Subsidiary’s gross profit - - 5,748,614 Other income 268,121 228,890 857,191 Operating expenses (1,128,127) (7,205,156) (20,153,291) Other expenses - (33,046) (63,092) Income tax benefit (expense) 332,511 (617) (2,524,955)

Profit (Loss) P (527,495) P (4,720,452) P 7,469,045

Revenue reported above represents revenue generated from external customers. There were no inter-segment sales in 2016, 2015 and 2014.

The accounting policies of the reportable segments are the same as the Company‘s accounting policies disclosed in Note 4. Segment profit represents the profit earned by each segment without allocation of other income, operating expenses, finance cost, foreign exchange gain (loss) and income tax. This is the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

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6.03 Other Segment Information

Details about other segment information are as follows:

2016 2015

(Unaudited) 2014

(Unaudited)

Cost of Sales: Third Party Transactions P - P 2,838,287 P 12,122,229

Cost of Services: Retail Solutions Salaries, wages and benefits P - P 3,099,453 P 5,475,143 Transportation - 164,923 646,372 Other outsourced services - 44,643 22,321 Communication - 30,395 85,345 Others - 1,839,484 1,787,895 Special Projects Professional fees - 833,350 11,851,291

P - P 8,850,535 P 31,990,596

6.04 Revenue from Major Products and Services

Listed below are the revenues earned from each major products and services:

2016 2015

(Unaudited) 2014

(Unaudited) Third Party Hardware/ Software

Sales P - P 6,286,856 P 26,663,954 Retail Solutions - 3,850,020 13,452,826 Special Project - 1,003,136 6,903,769

P - P 11,140,012 P 47,020,549

6.05 Information about Major Customers

Included in revenues arising from retail solutions, special projects and third party transactions are sales of services and goods, approximately amounting to nil, P1.8M, and P44M in 2016, 2015 and 2014, respectively, which arose from sales to the Company‘s largest customers. No other single customer contributed ten percent (10%) or more to the Company's revenue in 2016, 2015 and 2014.

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7. CASH AND CASH EQUIVALENTS

For the purpose of the statements of cash flows, cash and cash equivalents include cash on hand, cash in banks and cash equivalents.

Cash and cash equivalents at the end of each reporting period as shown in the statements of cash flows can be reconciled to the related items in the statements of financial position as follows:

2016

2015 (Unaudited)

Cash on hand P 10,000 P 10,000 Cash in banks 2,966,527 5,111,041 Cash equivalents 24,382,192 24,000,000

P 27,358,719 P 29,121,041

Cash in banks include savings accounts with interest rates ranging from 0.25% to 0.56% per annum. Cash equivalents include short-term placements and a time deposit with effective interest rates ranges from 1.00% to 1.60% in 2016, 0.49% in 2015 and 0.90% to 1.20% in 2014. The short-term placements pertain to BSP Special Deposit Account entrusted to Metrobank with maturity dates of thirty (30) days or less.

Aggregate finance income earned from cash in banks and cash equivalents amounted to P268,121, P3,221 and P130,766 in 2016, 2015 and 2014, respectively, as disclosed in Note 15.

8. OTHER CURRENT ASSETS

The details of the Company’s other current assets are shown below:

2016

2015 (Unaudited)

Excess tax credit P 387,568 P 448,632 Input VAT 136,512 56,344

P 524,080 P 504,976

9. TRADE AND OTHER PAYABLES

The components of trade and other payables are as follows:

2016

2015 (Unaudited)

Trade P - P 2,135,541 Accrued expenses 1,549,605 75,180 Output VAT - 63,915 Expanded withholding tax payable - 9,470

P 1,549,605 P 2,284,106

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The average credit period on purchases on certain goods from suppliers is thirty (30) days. No interest is charged on the trade payables for the first seven (7), fifteen (15) or thirty (30) days from the date of the invoice depending on the terms of the purchase as agreed per supplier.

Accrued expenses pertain to accrual of legal, compiling and audit fees incurred.

10. RELATED PARTY TRANSACTIONS

10.01 Remuneration of Key Management Personnel

The Company did not provide remuneration to its directors and other members of key management personnel in both periods.

11. CAPITAL STOCK

The capital stock of the Company is as follows:

2016

2015 (Unaudited)

Capital stock P 15,569,015 P 15,569,015 Additional paid-in capital 13,928,475 13,928,475

P 29,497,490 P 29,497,490

The capital stock is composed of ordinary shares. Shown below are the details on the movements of ordinary shares.

2016

Shares Amount

Authorized: P0.05 par value per share 400,000,000 P 20,000,000

Subscribed and outstanding: P0.05 par value per share 311,380,300 P 15,569,015

2015 (Unaudited)

Shares Amount

Authorized: P0.05 par value per share 400,000,000 P 20,000,000

Subscribed and outstanding: P0.05 par value per share 311,380,300 P 15,569,015

At the special meeting of the BOD held on June 22, 2015, the BOD authorized to reduce the par value of its shares from one peso (P1) par value per share to five centavos (P0.05) par value per share, resulting in the increase in the number of its shares from 20,000,000 shares to 400,000,000 shares.

The increase in the capitalization is to enable the Company to have sufficient funding to engage in its new business as an investment holding Company. Through this investment vehicle, the BOD envisions to provide companies access to capital markets and to provide investors with an avenue to gain exposure to such private companies.

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11.01 History of Registration of Securities

On March 31, 2009, the Company filed a registration statement with SEC in accordance with the Securities Regulation Code for the registration of a total of 15,569,015 ordinary shares. A pre-effective clearance was issued by the SEC on July 9 and 23, 2009.

On April 7, 2009, the Company filed an application with the Philippine Stock Exchange (“PSE”) for the listing and trading of a total of 15,569,015 ordinary shares. The application for listing was approved by the Board of Directors of the PSE on August 12, 2009. The Company was listed in the Small and Medium Board of the PSE last September 3, 2009.

On August 25, 2009, the Company completed its IPO of 4,579,122 new ordinary shares at an offer price of P4.37 per share for a total gross proceeds of P19,987,444. The funds generated from this offering were invested for the further product enhancement as well as the development of related software products. Out of the net proceeds, the Company used P9,000,000 to finance the research and development cost of its product and the development of product extensions and P7,550,000 was used for market and research. The balance of the proceeds amounting to P1,845,597 was used to finance the general corporate purposes and working capital requirements of the Company. Direct costs incurred relative to the IPO amounting to P1,479,847 were charged against the additional paid-in capital of P15,408,322.

11.02 Sale of shares

On March 12, 2015, Messrs. Alsonso S. Anggala and Conrado Rafael Camus Alcantara agreed to purchase all of the rights, title and interest of certain majority shareholders of the Company in total of 13,932,990 shares, representing 89.49% of the Company’s issued and outstanding capital stock at the price of P21.93 per share.

Following the completion and the lapse of the Tender Offer Period from September 9, 2016 to October 10, 2016, a total of Eleven Thousand (11,000) shares of the shareholders of the Company were offered to the Genomics, Inc. and Mr. Hector Thomas A. Navasero (the “Buyers”) under the tender offer, all of which were accepted by the Buyers. As a result of the Tender Offer and pursuant to the Sale and Purchase Agreement, the Buyers acquired a total of Two Hundred Eight Thousand Six Hundred Thirty Five Eight Hundred One (208,635,801) common shares of the Company representing approximately 67% of the outstanding capital stock of the Company, as disclosed in Note 22.

As of September 30, 2016 and 2015, the Company has a total number of nine (9) and eleven (11) stockholders, respectively, holding the above registered securities.

12. DIVIDENDS DECLARED

On March 6, 2014, the BOD approved the declaration of cash dividend of P0.10 per share or for a total amount of P1,556,902 which was paid to stockholders on March 20, 2014.

On December 11, 2014, the BOD approved the declaration of cash dividend of P1.68 per share or for a total amount of P26,155,945 per record date on January 5, 2015, and was paid to stockholders on January 21, 2015.

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13. REVENUES

An analysis of the Company’s revenues is as follows:

2016

2015 (Unaudited)

2014 (Unaudited)

Revenue from sale of goods P - P 3,850,020 P 13,452,826 Revenue from rendering of

services - 7,289,992 47,890,962

P - P 11,140,012 P 61,343,788

The Company’s business of operating, developing, managing and providing software solution projects were transferred to Movmento Inc., as disclosed in Note 1.

In 2016, the Company did not earn revenues since the Company did not operate after the amended of its primary business activity to engage in the business of a holding company.

14. COST OF SALES AND SERVICES

The following is an analysis of the Company‘s cost of sales and services:

2016 2015

(Unaudited) 2014

(Unaudited) Salaries, wages, and benefits

(Note 17) P - P 3,099,453 P 5,475,143 Professional fees - 833,350 11,851,291 Transportation and travel - 164,923 646,372 Other outsourced services - 44,643 22,321 Communication - 30,395 85,345 Others - 1,839,484 1,787,895

Total cost of services - 6,012,248 19,868,367 Add: Cost of sales - 2,838,287 12,122,229

Total cost of sales and services P - P 8,850,535 P 31,990,596

15. OTHER INCOME

Components of other income are as follows:

2016

2015 (Unaudited)

2014 (Unaudited)

Finance income (Note 7) P 268,121 P 3,221 P 130,766 Rental Income - 225,669 726,425

P 268,121 P 228,890 P 857,191

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16. OPERATING EXPENSES

The account is composed of the following expenses:

2016 2015

(Unaudited) 2014

(Unaudited)

General and administrative: Professional fees P 529,100 P 2,442,960 P 3,687,149 Taxes and licenses 371,432 838,823 873,066 PSE listing fee 105,133 - - Office supplies 75,499 68,327 246,571 Penalties 14,400 - - Other outside services 6,780 - - Representation and entertainment 5,357 53,757 489,360 Bank charges 602 25,204 4,657 Salaries, wages and benefits

(Note 17) - 1,660,709 4,135,479 Depreciation - 505,575 2,710,707 Rentals - 337,581 1,503,837 Communication - 134,958 729,274 Transportation and travel - 133,135 1,425,986 Association dues - 98,775 289,740 Power, light and water - 93,804 463,142 Repairs and maintenance - 63,233 197,364 Insurance - 11,912 117,607 Trainings - - 10,989 Others 19,824 452,026 1,978,502

1,128,127 6,920,779 18,863,430

Selling and marketing: Salaries and wages - - 642,259 Advertising and promotions - 223,877 357,852 Representation and entertainment - - 48,257 Commission - - 41,634 Others - 60,500 199,859

- 284,377 1,289,861

P 1,128,127 P 7,205,156 P 20,153,291

17. EMPLOYEE BENEFITS

Aggregate employee benefits expense pertains to short-term employee benefits which comprised of:

2016 2015

(Unaudited) 2014

(Unaudited)

Cost of Services (Note 14) P - P 3,099,453 P 5,475,143 Operating Expense (Note 16): General and administrative - 1,660,709 4,135,479 Selling and marketing - - 642,259

P - P 4,760,162 P 10,252,881

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18. EARNINGS PER SHARE

The Company’s basic earnings (loss) per share is (P0.008), (P0.076) and P0.120 as of September 30, 2016, 2015 and 2014, respectively.

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

2016 2015

(Unaudited) 2014

(Unaudited) Earnings (loss) used in the

calculation of total basic earnings per share P (527,495) P (4,720,452) P 7,469,045

Weighted average number of ordinary shares for the purposes of basic earnings per share 62,276,060 62,276,060 62,276,060

At the annual stockholder’s meeting held on October 20, 2016, the stockholders approved to increase par value of the Company from P0.05 per share to P0.25 per share which was certified by the SEC on December 12, 2016, as disclosed in Note 22.

The weighted average number of ordinary shares for the periods 2016, 2015 and 2014 used for the purposes of basic earnings per share were computed as follows:

2016

Number of Ordinary Shares

Proportion to Period

Weighted Average

Outstanding shares at the beginning and end of the period 62,276,060 9/9 62,276,060

2015 (Unaudited)

Number of Ordinary Shares

Proportion to Period

Weighted Average

Outstanding shares at the beginning and end of the period 62,276,060 9/9 62,276,060

2014 (Unaudited)

Number of Ordinary Shares

Proportion to Period

Weighted Average

Outstanding shares at the beginning and end of the period 62,276,060 9/9 62,276,060

The Company does not have any potential dilutive instruments as of September 30, 2016, 2015 and 2014.

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19. FAIR VALUE MEASUREMENTS

19.01 Fair Value of Financial Assets and Liability

As of September 30, 2016 and 2015, the Company has no carrying amounts and estimated fair values for any financial asset. Moreover, the aggregate carrying amounts and estimated fair values of the Company’s financial liabilities pertaining to trade payables and accrued expenses amounted to P1,549,605 and P2,210,721 as of September 30, 2016 and 2015, respectively.

Due to the short-term nature of payables, their carrying amounts approximate their fair values.

19.02 Fair Value Measurements Recognized in the Statement of Financial Position

The following provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

x Level 1, fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

x Level 2, fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

x Level 3, fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

19.03 Fair Value Determinations of Assets and Liability

Below is an analysis of assets and liability that are measured at fair value on a recurring and non-recurring basis subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which inputs to valuation techniques are observable:

x Level 1, inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the measurement date;

x Level 2, inputs are inputs other than quoted prices included within the Level 1 that are observable for the asset or liability, either directly or indirectly; and

x Level 3, inputs are unobservable inputs for the asset or liability.

As of September 30, 2016 and 2015, the Company has no investments in financial instruments valued using the fair valuation method.

20. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES

The Company’s Management provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk, including currency risk, fair value interest rate risk, credit risk and liquidity risk.

The Management closely monitors risks and policies implemented to mitigate risk exposures.

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20.01 Market Risk Management

20.01.01 Interest Rate Risk Management

Fair value interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in the market interest rates.

The Company’s exposure to interest rate risk arises from its cash deposits in banks which are subject to variable interest rates.

The interest rate risk arising from deposits with banks is managed by means of effective investment planning and analysis and maximizing investment opportunities in various local banks and financial institutions.

The following sensitivity analysis has been determined based on the exposure to interest rates for non-derivative instruments at the end of the reporting period.

Profits (Loss) for the periods ended September 31, 2016, 2015 and 2014 would have been unaffected since the Company has no borrowings at variable rates and interest rate risk exposure for its cash in bank, which is subject to variable rate, is very immaterial.

20.02 Credit Risk Management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties transacts only with entities that are rated the equivalent of investment grade and above. It uses other publicly available financial information and its own trading records to rate its major customers. The Company’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the management annually.

The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings. The carrying amount of financial assets recognized in the financial statements, which is net of impairment losses, represents the Company’s maximum exposure to credit risk, without taking into account collateral or other credit enhancements held.

2016

2015 (Unaudited)

Cash in banks P 2,966,527 P 5,111,041 Cash equivalents 24,382,192 24,000,000

P 27,348,719 P 29,111,041

The Company does not hold any collateral or other credit enhancements to cover this credit risk.

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The table below shows the financial assets of the Company is classified as high grade in terms of credit quality as neither past due nor impaired:

2016

2015 (Unaudited)

Cash in banks P 2,966,527 P 5,111,041 Cash equivalents 24,382,192 24,000,000

P 27,348,719 P 29,111,041

The credit risk for cash and cash equivalents is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.

20.03 Liquidity Risk Management

Ultimate responsibility for liquidity risk management rests with the Management, which has established an appropriate liquidity risk management framework for the management of the Company’s short, medium and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Company may be required to pay.

As of September 30, 2016 and 2015, trade and other payables (except for output VAT and expanded withholding tax payable) due within one (1) year amounted to P1,549,605 and P2,210,721, respectively.

The following table details the Company’s expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Company’s liquidity risk management as the liquidity is managed on a net asset and liability basis.

Weighted Average Effective

Interest Rate Within one (1) Year

2016 Cash on hand n/a P 10,000 Cash in banks 0.25% to 0.56% 2,966,527 Cash equivalents 1.00% to 1.60% 24,382,192

P 27,358,719

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Weighted Average Effective

Interest Rate Within one (1) Year

2015 (Unaudited) Cash on hand n/a P 10,000 Cash in banks 0.25% to 0.56% 5,111,041 Cash equivalents 0.49% 24,000,000

P 29,121,041

The amounts included above for variable interest rate instruments for non-derivative financial assets is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.

21. CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES

The Company manages its capital to ensure that the Company will be able to continue as a going concern while maximizing the return to stakeholders through the optimization of the debt and equity balance. The Company’s overall strategy remains unchanged from 2015.

Pursuant to Section 43 of the Corporation Code of the Philippines, stock corporations are prohibited from retaining surplus plus profits in excess of 100% of their paid in capital stock, except: 1) when justified by definite corporate expansion projects or programs approved by the board of directors; or 2) when the corporation is prohibited under any loan agreement with any financial institution or creditor, whether local or foreign, from declaring dividends without its/his consent, and such consent has not yet been secured; or 3) when it can be clearly shown that such retention is necessary under special circumstances obtaining in the corporation, such as when there is a need for special reserve for probable contingencies. The Company is in compliance with the above requirements.

The capital structure of the Company consists of net debt (borrowings as detailed in Note 9) and equity of the Company (comprising issued capital and retained earnings, as disclosed in Note 11).

The Company’s board of directors reviews the capital structure of the Company on an annual basis. As part of this review, the committee considers the cost of capital and the risks associated with each class of capital.

The debt to equity ratio at end of the reporting period is as follows:

2016 2015

(Unaudited) Debt P 1,549,605 P 2,284,106 Equity 28,001,256 27,341,911

Debt to equity ratio 0.06:1 0.08:1

Debt is defined as long and short-term borrowings, while equity includes all capital and reserves of the Company that are managed as capital.

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22. EVENTS AFTER THE REPORTING PERIOD

On October 11, 2016, following the completion of the mandatory tender offer by the buyers and to all shareholders of the Company, a total of Two Hundred Eight Thousand Six Hundred Thirty Five Eight Hundred One (208,635,801) common shares of the Company (inclusive of the common shares that were tendered) were acquired by Hector Thomas A. Navasero and Genomics, Inc. As a result of the said acquisition, the buyers acquired approximately 67% of the outstanding capital stock of the Company.

In consonance with such change in control, during the meeting of the BOD on September 14, 2016, as well as the annual stockholders meeting on October 20, 2016, the BOD and stockholders representing atleast 2/3 of the outstanding capital stock approved the following resolutions:

a. acquisition by the Company of up to 361,390 outstanding shares of Philab Industries, Inc. (“Philab”), representing approximately 100% of Philab’s outstanding shares,.

b. issuance of shares of the Company to existing shareholders or new investors, either out of its unissued capital or increase in capital

c. delegation of authority to amend/repeal the Amended By-Laws or adopt new By-Laws to the BOD

Also, the following amendments on the AOI were approved by the stockholders on October 20, 2016:

a. The name of the Corporation shall be Philab Holdings Corp.

b. The secondary purpose of the Corporation to include the power to guarantee the obligation of any person, firm or entity in which the Corporation may have lawful interest.

c. Transfer Company’s principal office address to 8th floor, 1128 38th Avenue, Fort Bonifacio Global City, Taguig City, Metro Manila.

d. Increase par value from P0.05 per share to P0.25 per share.

e. To include new provision as the Eleventh (11th) Article pertaining to the denial of pre-emptive rights of the stockholders.

f. Increase authorized capital stock from Twenty Million Pesos (P20,000,000.00) to up to Two Billion Pesos (P2,000,000,000.00).

Items b, c, d and e from the above were certified by the SEC on December 12, 2016.

On December 19, 2016, the Company acquired Three Hundred Fifty One Thousand Seven Hundred Forty (351,740) shares, representing 93.43% of the total outstanding capital stock of Philab at the price of P2,445 per share or the aggregate price of Eight Hundred Sixty Million Pesos (P860,000,000.00).

Also, on December 19, 2016, the Company entered into subscription agreements with certain subscribers who subscribed to its increase in capital stock. Such subscribers include some of the selling shareholders of Philab, as well as non-related or affiliated subscribers to ensure continued compliance with the minimum public ownership requirement. The increase in capital stock of the Company is still currently in process with the SEC.

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23. APPROVAL OF FINANCIAL STATEMENTS

These financial statements were approved and authorized for issuance by the Board of Directors on January 12, 2017.