

STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended December 31, 2016, 2015 and 2014


NOTES //////////2016 /////2015 ///2014

REVENUES 22 - 11,131,226 78,686,833

COST OF SALES AND SERVICES 23 - 8,816,081 39,619,257

GROSS PROFIT 6 - 2,315,145 39,067,576

OTHER INCOME 24 353,564 881,128 7,863,639

353,564 3,196,273 46,931,215

OPERATING EXPENSES 25 1,533,675 7,984,512 26,852,236

FINANCE COST - - 159,412

FOREIGN EXCHANGE LOSS 6 - 19,863 596,401

PROFIT (LOSS) BEFORE TAX (1,180,111) (4,808,102) 19,323,166

INCOME TAX EXPENSE (BENEFIT) 28 1,335,551 (1,274,487) 6,041,824

PROFIT (LOSS) (2,515,662) (3,533,615) 13,281,342

OTHER COMPREHENSIVE GAIN (LOSS)

ITEM THAT WILL NOT BE RECLASSIFIED

SUBSEQUENTLY TO PROFIT OR LOSS:

REMEASUREMENTS — net of related tax 26 - 558,289 (300,609)

TOTAL COMPREHENSIVE INCOME (LOSS) (2,515,662) (2,975,326) 12,980,733

EARNINGS PER SHARE

Basic Earnings (Loss) per Share 30 (0.040) (0.057) 0.213




STATEMENTS OF CHANGES IN EQUITY



Notes Capital Stock

//Additional

//Paid-In Capital

Retained

Earnings

(Deficit)

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 21 (27,712,847) (27,712,847)

Other comprehensive loss 26 (300,609) (300,609)

Reclassification adjustment 86,535 86,535

Balance, January 1, 2015 19 15,569,015 13,928,475 2,564,876 (558,289) - 31,504,077

Loss (3,533,615) (3,533,615)

Other comprehensive income 26 558,289 558,289

Balance, December 31, 2015 15,569,015 13,928,475 (968,739) - - 28,528,751

Loss (2,515,662) (2,515,662)

Balance, December 31, 2016 15,569,015 13,928,475 (3,484,401) - - 26,013,089




STATEMENTS OF CASH FLOWS



NOTES /////////////2016 //////2015 ////2014

CASH FLOWS FROM OPERATING ACTIVITIES

Profit (Loss) before tax (1,180,111) (4,808,102) 19,323,166

Adjustments for:

Finance income 7,8,24 (353,564) (123,564) (176,822)

Depreciation 15,25 - 505,574 3,645,418

Retirement benefit 25 - - 198,796

Finance cost 6 - - 159,412

Reclassification adjustment - - 86,535

Loss on sale of available-for-sale financial asset 25 - - 62,781

Impairment loss 25 - - 6,018

Unrealized foreign exchange loss 6 - - 596,401

Operating cash flows before changes in working capital (1,533,675) (4,426,092) 23,901,705

Decrease (Increase) in operating assets:

Receivables - 6,947,766 (5,668,271)

Inventories - 421,039 (1,730,307)

Other current assets (108,945) (285,671) (2,245,726)

Decrease (Increase) in payables (317,614) (6,200,136) 2,634

Cash generated from (used in) operations (1,960,234) (3,543,094) 14,260,035

Income taxes paid - (3,187,779) (1,999,574)

Net cash from (used in) operating activities (1,960,234) (6,730,873) 12,260,461

CASH FLOWS FROM INVESTING ACTIVITIES

Finance income received 7,8,24 17,458 246,807 14,429

Proceeds from disposal of assets and assumption of liabilities 1 - 26,079,236 -

Finance lease receivable granted 12 - (670,251) (1,925,982)

Proceeds from sale of available-for-sale financial asset - - 4,818,434

Collection of finance lease receivables - - 453,038

Additions to property and equipment - - (1,411,963)

Net cash from investing activities 17,458 25,655,792 1,947,956

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from deposit for future stock subscription 20 125,000,000 - -

Proceeds from redemption of financial assets at FVTPL 8 24,455,900 - -

Advances made to a related party 18 (3,477,308) - -

Availment of finance lease obligations - - 981,372

Finance cost paid - - (15,275)

Payment of finance lease obligations - - (94,023)

Payment of dividends 21 - (26,155,945) (1,556,902)

Acquisition of financial assets at FVTPL 8 - (24,000,000) -

Net cash from (used in) financing activities 145,978,592 (50,155,945) (684,828)

EFFECTS OF FOREIGN EXCHANGE RATE CHANGES ON CASH - - 3,726

NET INCREASE (DECREASE) IN CASH 144,035,816 (31,231,026) 13,527,315

CASH AT BEGINNING OF YEAR 4,487,718 35,718,744 22,191,429

CASH AT END OF YEAR 148,523,534 4,487,718 35,718,744


1


(Formerly: iRipple, Inc.) NOTES TO FINANCIAL STATEMENTS

December 31, 2016 and 2015

1. CORPORATE INFORMATION

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 sale, 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 (SRC) 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 19.

At the special meeting of the Board of Directors (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 19.

In 2015, 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 in

2015:

A. On March 5, 2015, the Company, the “Seller”, entered into a “Deed of sale of

assets with assumption of liabilities” with Movmento, Inc., “Buyer”. 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. The “Buyer” has offered to acquire the assets and assume its

related liabilities. The Seller accepted the said offer for the consideration and

under the terms and conditions set forth.

2

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

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

3

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.

B. On March 5, 2015, the Company, “Seller”, entered into a “Deed of absolute sale

of equipment, furniture and fixtures” with Movmento, Inc., “Buyer”.

The Seller is the owner of certain equipment and furniture and fixtures and has

offered to sell the same to the Buyer. 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.

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.

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

C. On March 5, 2015, the Company, “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

D. 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 Assignor 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 Assignor’s investment with Auto Top-Up Ventures, Inc. (ATVI)

was also assigned with Assignee for a total consideration of P126,000.

The Assignor unconditionally and irrevocably assigns, transfers and conveys, all

its rights, interests and obligations in and obligations in and to its investment.

E. On March 6, 2015, the Company “Assignor” entered into an “Assignment of

Application for registration of trademark/tradename” with Movmento, Inc.

“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.

The Company entered into several sale and purchase agreements with various entities

in 2015. The following are the material transactions that transpired in 2015:

A. 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 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, a 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.

B. 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 sale,

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

5

conveyance, all in accordance with the Corporation Code, the SRC 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.

In 2016, the Company entered into several sale and purchase agreements with various

entities and other transactions. The following are the material transactions that

transpired in 2016:

A. On August 12, 2016, a group of Company’s shareholders “Sellers” entered into a

Share Purchase Agreement with Genomics, Inc. and Mr. Hector Thomas A.

Navasero “Buyers” for the sale of Two Hundred Eight Million Six Hundred Thirty

Five Thousand Eight Hundred One (208,635,801) common shares of stock of the

Company representing approximately 67% of the issued outstanding capital stock

of the Company. The sale shall effectively transfer control of the Company to

the Buyers, subject to the completion of a mandatory tender offer pursuant to the

SRC and its implementing rules and regulations and other closing conditions.

On October 11, 2016, the Sellers and Buyers completed the Share Purchase

Agreement and the shares were transferred to the Buyers via special block sale.

B. On September 14, 2016, the Board approved the amendment of the Company’s

amended AOI, as follows:

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) to

up to Two Billion Pesos (P2,000,000,000).

On October 20, 2016, stockholders representing at least 2/3 of the outstanding

capital stock approved the abovementioned amendments to the Company’s AOI.

On December 12, 2016, the SEC approved the amendments on items b, c, d and

e stated above.

C. On October 20, 2016, during the respective meetings of the Company’s Board of

Directors and shareholders owning/holding at least 2/3 of the outstanding capital

stock, the Company obtained approval to acquire up to 361,390 shares of stock

of Philab Industries, Inc. “Philab” a corporation organized and existing under the

laws of the Philippines, representing approximately 100% of its issued and

outstanding capital stock at the aggregate price of Five Hundred Million Pesos

(P500,000,000).

6

D. On a special meeting of the board of directors on December 15, 2016, it was

resolved and approved by the majority of members of the Board that the

Company shall be authorized to acquire Three Hundred Fifty One Thousand Seven

Hundred Forty (351,740) shares, representing 93.48% of the total outstanding

capital stock of Philab Industries Inc. at the price of P2,445 per share or the

aggregate price of Eight Hundred Sixty Million Pesos (P860,000,000).

The ownership of Philab to the Company is yet to be transferred as of

December 31, 2016.

E. It was also resolved and approved on the special meeting of the board of

directors on December 15, 2016 that the Company to enter into subscription

agreements to issue the increase in capital stock equivalent to 7,937,723,940

shares or P1,984,430,985. Subscribers include some of the selling shareholders

of Philab, as well as non-related or affiliated subscribers.

The increase in the capital stock of the Company is still 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 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.

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.

7

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

January 1, 2016 and must be applied retrospectively. Earlier application is

permitted.

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.

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.

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.

8

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 income (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.

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.

PAS 16, Property, Plant and Equipment and PAS 41, Agriculture – Bearer Plants

The amendments include bearer plants, which are living plants that are used in the

production or supply of agricultural produce over a several periods and has a

remote likelihood of being sold as agricultural produce, to be within the scope of

PAS 16 instead of PAS 41 and consequently be accounted for in the same way as

property, plant and equipment. However, the produce growing on bearer plants

will remain within the scope of PAS 41. The amendments are applicable for

annual periods beginning on or after January 1, 2016. Earlier application is

permitted.

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.

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.

9

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.

This is effective beginning on or after January 1, 2016, with earlier application

permitted.

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.

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.

The effective date of the amendments is included in the Q&As affected.

PIC Guidance on Financial Reporting

This guidance is issued to help preparers of financial statements identify and

address some of the common pitfalls and difficult interpretative issues arising from

application of PAS 7, Statement of Cash Flows.

10

2.02 New and Revised PFRSs in Issue but Not Yet Effective

The Group will adopt the following standards and interpretations enumerated below

when they become effective. Except as otherwise indicated, the Group 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)

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.

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.

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.

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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.

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.

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.

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

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.

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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.

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 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 lower of cost or net

realizable value.

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.

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.

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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.

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 were the basis on which the Company reports its primary

segment information.

As of December 31, 2016, 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 assets include cash, due from a related party and financial

assets at FVTPL.

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 for debt instruments other than

those financial assets classified as FVTPL.

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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

Cash include cash on hand and cash in banks. Cash in banks include 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.

4.02.04 Financial Assets at FVTPL

Unit investment trust fund (UITF) refers to an investment in an investment company

(known as Unit Investment Trust) that offers a fixed portfolio, generally of stocks and

bonds, as redeemable units to investors for a specific period of time. It is designed to

provide capital appreciation and/or dividend income. The Company measures the

investment initially and at each reporting period at fair value with changes in fair value

recognized in profit or loss. Fair value is determined based on described in Note 4.02.

If a reliable measure of fair value is no longer available, the asset’s carrying amount at

the last date the asset was reliably measurable becomes its new cost. Subsequently,

the Company measures the asset at this cost amount less impairment until a reliable

measure of fair value becomes available.

4.02.05 Loans and Receivables

Trade receivables, loans and other receivables Accounts that have fixed or

determinable payments that are not quoted in an active market are classified as loans

and receivables. Loans and 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.

4.02.06 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:

significant financial difficulty of the issuer or counterparty; or

default or delinquency in interest or principal payments; or

it becoming probable that the borrower will enter bankruptcy or financial

re-organisation; or

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

the disappearance of an active market for that financial asset because of financial

difficulties; or

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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.

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.

For financial assets carried at cost, the amount of the impairment loss is measured as

the difference between the carrying amount of the financial asset and the present

value of estimated future cash flows discounted at the current market rate of return for

a similar financial asset. Such impairment losses shall not be reversed.

4.02.07 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.

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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.

4.04 Investments in an Associate

An associate is an entity over which Company has significant influence and that is

neither a subsidiary nor an interest in a joint venture. Significant influence is the

power to participate in the financial and operating policy decisions of the investee but

is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these financial

statements using the equity method of accounting, 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 an associate 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 in an associate exceeds the Company’s interest in that

associate (which includes any long-term interests that, in substance, form part of the

Company’s net investment in the associate), 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 associate.

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 associate 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.

The Company accounts the investment 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 or reduction of investment.

The requirements of PAS 39, Financial Instruments: Recognition and Measurement are

applied to determine whether it is necessary to recognize any impairment loss with

respect to the Company’s investment in an associate. 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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In 2016, the Company does not have any existing investment in an associate.

4.05 Investments 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 a subsidiary 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.

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.

In 2016, the Company does not have any existing investment in a subsidiary.

4.06 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.

In 2016, the Company does not have any existing inventories.

4.07 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.

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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.

In 2016, the Company does not have any existing property and equipment.

4.08 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.

4.09 Borrowing Costs

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

incurred.

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4.10 Financial Liabilities and Equity Instruments

4.10.01 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.

4.10.02 Financial Liabilities

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

financial liabilities’.

The Company’s financial liability pertains to payables (except payable to government

agencies) and deposit for future stock subscription.

4.10.03 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.

4.10.04 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.

4.10.05 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.

4.10.06 Deposit for Future Stock Subscription

Deposit for future stock subscription is defined as a subscription agreement which,

among other things, states that the Company is not contractually obliged to return the

consideration received and that the Company is obliged to deliver fixed number of own

shares of stock for a fixed amount of cash or property paid or to be paid by the

contracting party.

Deposit for future stock subscription is classified as equity if all the conditions required

for such recognition have been met as of the end of the reporting period otherwise, if

not, classified as liability.

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Deposit for future stock subscription is classified as equity when all of the following

conditions are met as of the end of the reporting date:

the unissued authorized capital stock of the entity is insufficient to cover the

amount of shares indicated in the contract; and

There is Board of Directors’ approval on the proposed increase in authorized

capital stock (for which a deposit was received by the corporation); and

There is stockholders’ approval of said proposed increase; and

The application for the approval of the proposed increase has been filed with

the Commission.

4.11 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.

4.12 Employee Benefits

4.12.01 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.

4.12.02 Post-employment Benefits

The Company had an unfunded, 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

statement of financial position.

Actuarial gains and losses arising from experience adjustments and changes in

actuarial assumptions are charged or credited to equity in other comprehensive income

in the period in which they arise.

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

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The liability recognized in the statements 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 less the fair value of plan assets. The defined benefit obligation

is calculated 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.

4.13 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.

4.14 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.

4.14.01 Sale of Goods

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

satisfied:

the Company has transferred to the buyer the significant risks and rewards of

ownership of the goods;

the Company retains neither continuing managerial involvement to the degree

usually associated with ownership nor effective control over the goods sold;

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the transaction will flow

to the Company; and

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.

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4.14.02 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:

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the transaction will flow

to the Company;

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

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.

4.14.03 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.

4.15 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.

4.16 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.

4.16.01 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.

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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.

4.17 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:

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).

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

Both entities are joint ventures of the same third party.

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

the third entity.

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.

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

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).

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.

4.18 Taxation

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

4.18.01 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.

24

4.18.02 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.

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.

4.18.03 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.

4.19 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.

25

4.20 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 JUDGMENTS 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 Judgments 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.

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, the above investment was assigned to Movmento, Inc., as disclosed in

Note 1.

26

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 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 any investment in a subsidiary nor an 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 December 31, 2016 and 2015, the Company does not have any operating

segments.

5.01.03 Classification of Lease

The Company determines whether a lease qualifies as a finance lease. In making its

judgments, the Company considers whether the risk and reward of the leased property

will be transferred to the lessee. A lease is classified as a finance lease if it transfers

substantially all the risks and rewards incidental to ownership. A lease is classified as

an operating lease if it does not transfer substantially all the risks and rewards

incidental to ownership. Whether a lease is a finance lease or an operating lease

depends on the substance of the transaction rather than the form of the contract.

27

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 Reviewing Residual Values, Useful Lives and Depreciation Method of Property

and Equipment

The residual values, useful lives and depreciation method of the Company’s property

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

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 2015, the Company’s property and equipment was sold, as disclosed in Note 1.

As of December 31, 2016 and 2015, the Company does not have any property and

equipment.

5.02.02 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.

In 2015, the Company’s inventories were sold, as disclosed in Note 1.

As of December 31, 2016 and 2015, the Company does not have any inventory.

28

5.02.03 Asset Impairment

The Company performs an impairment review when certain impairment indicators are

present. Determining the fair value of property and equipment, investment in an

associate and investment in a subsidiary, which require 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.

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 2015, the Company sold its property and equipment and assigned its investment in

an associate and investment in a subsidiary, as disclosed in Note 1.


equipment, investment in an associate and investment in a subsidiary.

5.02.04 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.

As of December 31, 2016, Management believes that it is not probable that future

taxable profits will be available to allow all or part of its deferred tax assets to be

utilized prior to expiration. As a result, the Company derecognized deferred tax assets

from NOLCO and excess MCIT amounting to P1,274,487 and P61,064, respectively,

as disclosed in Note 29. Moreover, DTA from NOLCO amounting to P454,175 was

not recognized as disclosed in Note 28.

5.02.05 Estimating Allowances for Doubtful Accounts

The Company estimates the allowance for doubtful accounts related to its 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 reserves for customers against amounts

due to reduce the expected collectible amounts. These specific reserves are 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 2015, the Company sold its receivables, as disclosed in Note 1.

Management believes that the collectability of due from a related party is certain,

hence, the Company did not recognize provisions for impairment losses. As of

December 31, 2016 and 2015, the carrying amounts of due from a related party

amounted to P6,002,866 and nil as disclosed in Notes 18.

29

5.02.06 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.

In 2015, the retirement benefit obligation of the Company was transferred and

assumed by a certain entity, as disclosed in Note 1.

As of December 31, 2016 and 2015, the Company does not have any retirement

benefit obligation.

5.02.07 Contingencies

In 2016, the Company received Letter of Authority (LOA-43A-2014-00000572) from

the Bureau of Internal Revenue (BIR) for the period covered January 1, 2013 to

December 31, 2013. The LOA pertains to the assessed deficiency on tax declaration

and payment for income tax, value-added tax (VAT), expanded withholding tax and

compromise penalty for non-submission of various schedule, returns and books of

accounts.

Based on the contract of sale and assignment of assets and assumption of liabilities

entered by the Company in 2015, assessments arising before the date of the contract

will be paid by the previous shareholders.

As of December 31, 2016, Management believes that the outcome of this assessment

is not yet certain and the recognition of expense is not yet virtually certain; hence, no

liability was recognized. A letter of protest through a request for reinvestigation for

the final assessment notice was filed to the BIR as disclosed in Note 34.

6. SEGMENT INFORMATION

6.01 Products and Services from which Reportable Segments Derive their Revenues

In prior years, 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.

30

As of December 31, 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

Segment

Revenue

Segment

Cost

Segment

Profit

Retail Solutions P 6,422,842 P 5,153,229 P 1,269,613

Third Party Transactions 3,840,884 2,829,502 1,011,382

Special Projects 867,500 833,350 34,150

Total P 11,131,226 P 8,816,081 P 2,315,145

2014

Segment

Revenue

Segment

Cost

Segment

Profit

Retail Solutions P 45,628,029 P 13,319,838 P 32,308,191

Third Party Transactions 24,039,031 21,588,772 2,450,259

Special Projects 9,019,773 4,710,647 4,309,126

Total P 78,686,833 P 39,619,257 P 39,067,576

The Segments’ profit and the Company’s profit are reconciled as follow:

2016 2015 2014

Retail Solutions P - P 1,269,613 P 32,308,191

Third Party Transactions - 1,011,382 2,450,259

Special Projects - 34,150 4,309,126

Total for continuing operations - 2,315,145 39,067,576

Other income 353,564 881,128 7,863,639

Operating expenses (1,533,675) (7,984,512) (26,852,236)

Finance cost - - (159,412)

Income tax benefit (expense) (1,335,551) 1,274,487 (6,041,824)

Foreign exchange loss - (19,863) (596,401)

Profit (Loss) P (2,515,662) P (3,533,615) P 13,281,342

Revenue reported above represents revenue generated from external customers.

There were no inter-segment sales in 2016, 2015 and 2014.

31

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 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.

6.03 Segment Assets and Liabilities

2016 2015 2014

Segment Assets


Third Party Transactions - 4,100,390 10,228,335

Special Projects - 119,795 7,003,166

Total segment assets - 28,607,513 78,065,169

Unallocated 152,559,584 1,785,347 112,494

Total assets P 152,559,584 P 30,392,860 P 78,177,663

Segment Liabilities


Third Party Transactions - 267,165 3,365,951

Special Projects - 7,805 473,013

Total segment liabilities - 1,863,948 18,959,208

Unallocated 126,546,495 161 27,714,378

Total liabilities P 126,546,495 P 1,864,109 P 46,673,586

For the purpose of monitoring segment performance and allocating resources between

segments:

All assets are allocated to reportable segments other than deferred tax assets,

advances to officers and employees, SSS claims and tax credits; and

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.

In 2016, all assets and liabilities are unallocated, since there are no existing reportable

segments.

32

6.04 Other Segment Information

Details about other segment information are as follows:

2016 2015 2014

Cost of Sales:

Third Party Transactions P - P 2,829,502 P 21,588,772

Cost of Services:

Retail Solutions

Salaries, wages and benefits P - P 3,031,670 P 9,700,573

Barter License Cost - 1,126,630 315,847

Rent - 474,412 726,772

Transportation - 276,865 1,457,736

Meals - 107,026 465,303

Other outsourced services - 44,643 226,761

Communication - 29,395 127,636

Others - 62,588 299,210

Special Projects:

Professional fees - 833,350 4,710,647

P - P 5,986,579 P 18,030,485

6.05 Revenue from Major Products and Services

Listed below are the revenues earned from each major products and services:

2016 2015 2014

Third Party Hardware/ Software

Sales P - P 3,840,884 P 24,039,031

Retail Solutions - 6,422,842 45,628,029

Special Project - 867,500 9,019,773

P - P 11,131,226 P 78,686,833

6.06 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 P58.4M 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.

33

7. CASH

For the purpose of the statements of cash flows, cash include cash on hand and

cash in banks.

Cash 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

Cash on hand P 10,000 P 10,000

Cash in banks 148,513,534 4,477,718

P 148,523,534 P 4,487,718

Cash in banks include savings accounts with interest rates ranging from 0.25% to

0.56% per annum. Finance income earned from cash in banks amounted to P17,458,

P3,769 and P176,822 in 2016, 2015 and 2014, respectively, as disclosed in Note 24.

8. FINANCIAL ASSETS AT FVTPL

In 2014, the Company purchased 15,643,064 units under the Unit Investment Trust

Fund (UITF) from Metrobank Trust Banking Corporation (MBTC) amounting to

P24,000,000.

This investment is measured at fair value at each reporting period derived from fair

value measurements as disclosed in Note 4.02.

Finance income earned from the investment amounted to P336,106, P119,795 and nil

in 2016, 2015 and 2014, respectively, as disclosed in Note 24.

In 2016, the Company redeemed the outstanding UITF for P24,455,900. As of

December 31, 2016 and 2015, the Company’s financial assets at FVTPL amounted to

nil and P24,119,795, respectively.

9. RECEIVABLES — net

In 2014, the Company recognized impairment loss on receivables amounting to P6,018

as disclosed in Note 25.

In 2015, trade and other receivables net of the related allowance for doubtful accounts

amounting to P26,161,486 were part of the total assets sold, as disclosed in Note 1.

As of December 31, 2016 and 2015, the Company does not have any outstanding

receivables.

10. INVENTORIES

In 2015, inventories amounting to P1,418,174 were part of the total assets sold, as

disclosed in Note 1.

The cost of inventories recognized as expense amounted to nil, P2,829,502 and

P21,588,772 in 2016, 2015 and 2014, respectively, as disclosed in Note 23.

As of December 31, 2016 and 2015, the Company does not have any inventories.

34

11. OTHER CURRENT ASSETS

The details of the Company’s other current assets are shown below:

2016 2015

Excess tax credit P 387,568 P 387,568

Input VAT 171,174 62,228

P 558,742 P 449,796

In 2015, other current assets amounting to P1,802,495 were part of the total assets

sold, as disclosed in Note 1.

12. FINANCE LEASE RECEIVABLES

In 2015, finance lease receivable granted amounted to P670,251. Moreover, in 2015,

finance lease receivables amounting to P2,143,195 were part of the total assets sold,

as disclosed in Note 1.

In 2016 and 2015, finance income from finance lease receivables amounted to nil and

P19,489, respectively, as disclosed in Note 24.


finance lease receivable.

13. INVESTMENT IN AN ASSOCIATE

In 2015, the Company’s investment with ATVI was for a total consideration of

P126,000. The Parent Company unconditionally and irrevocably assigns, transfers and

conveys, all its rights, interests and obligations in its investment, as disclosed in

Note 1.

As of December 31, 2016 and 2015, the Company does not have any investment in

an associate.

14. INVESTMENT IN A SUBSIDIARY

On March 5, 2015, the Company entered into a “Deed of assignment of subscription”

for a consideration of P13,488. The Company unconditionally and irrevocably assigns,

transfers and conveys, all its rights, interests and obligations 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, as disclosed in Note 1.

As of December 31, 2016 and 2015, the Company does not have any investment in a

subsidiary.

35

15. PROPERTY AND EQUIPMENT — net

On March 5, 2015, the entered into a “Deed of absolute sale of equipment, furniture

and fixtures”, as disclosed in Note 1. The Company is the owner of certain equipment

and furniture and fixtures and has offered to sell the same. 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.

On March 5, 2015, the Company (the “Seller”) entered into a “Deed of sale of motor

vehicles” for a total consideration of P1,184,217, as disclosed in Note 1. The buyer

agreed to purchase the motor vehicles clear of all liens and encumbrances subject to

the terms and conditions of the deed.

The amount of depreciation expense recognized by the Company amounted to nil,

P505,574 and P3,645,418, in 2016, 2015 and 2014, respectively, as disclosed in

Note 25.


equipment.

16. PAYABLES

The components of payables are as follows:

2016 2015

Accrued expenses P 1,540,544 P 1,861,782

Payable to government agencies 5,951 2,327

P 1,546,495 P 1,864,109

Accrued expenses pertain to accrual of legal, compiling and audit fees incurred.

Payable to government agencies pertain to withholding tax payable and output VAT.

In previous years, the Company recorded over accrual of subcontractor and

professional fee amounting to P5,580,283. In 2014, the Company has written-off the

liability and recognized it as other income, as disclosed in Note 24.

36

In 2015, trade and other payables amounting to P6,606,429 were part of the total

liabilities assumed per “Deed of sale of assets with assumption of liabilities” entered by

the Company, as disclosed in Note 1.

17. FINANCE LEASE OBLIGATIONS

In 2015, finance lease obligations amounting to P887,349 were part of the total

liabilities assumed per “Deed of sale of assets with assumption of liabilities” entered by

the Parent Company, as disclosed in Note 1.


finance lease obligations.

18. RELATED PARTY TRANSACTIONS

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

Related Party Nature of Relationship

Philab Industries, Inc. Under Common Control

Officers Member of the Key Management Personnel

Balances and transactions between the Company and its related parties are disclosed

below:

18.01 Due from a Related Party

Balance of due from a related party as shown in the statements of financial position is

summarized as follows:

18.01.01 Under Common Control

Transaction with entity under common control is detailed as follows:

December 31, 2016 December 31, 2015

Amount/

Volume

Outstanding

Balance

Amount/

Volume

Outstanding

Balance

Advances P 3,477,308 P 3,477,308 P - P -

The advances pertain to amounts extended by the Company to an entity under

common control mainly for working capital requirements.

The amounts outstanding are non-interest bearing, unsecured, due and receivable on

demand and will be settled in cash. No guarantees have been received. No provisions

have been made for doubtful debts in respect of the amounts owed by related parties.

18.02 Remuneration of Key Management Personnel

The Company did not provide remuneration to its directors and other members of key

management personnel in both years.

37

19. CAPITAL STOCK

The capital stock of the Company is as follows:

2016 2015

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: P0.25 par value per share 80,000,000 P 20,000,000

Subscribed and outstanding:

P0.25 par value per share 62,276,060 P 15,569,015

2015

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.

On September 14, 2016, the Board approved the amendment of the Company’s

amended AOI to increase the par value from P0.05 per share to P0.25 per share

resulting in the decrease in the number of its shares from 311,380,300 shares to

62,569,015 shares and to increase authorized capital stock from Twenty Million Pesos

(P20,000,000) to up to Two Billion Pesos (P2,000,000,000). This was approved by

the stockholders representing at least 2/3 of the outstanding capital stock on

October 20, 2016. On December 12, 2016, the SEC approved the amendments

related to the increase in par value from P0.05 per share to P0.25 per share.

However, the increase in the capital stock of the Company is still in process with the

SEC, as disclosed in Note 1.

38

19.01 History of Registration of Securities

On March 31, 2009, the Company filed a registration statement with SEC in

accordance with the SRC 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 further product enhancement

as well as 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.

As of December 31, 2016 and 2015, the Company has a total number of twenty (20)

and seven (7) stockholders, respectively, holding the above registered securities.

20. DEPOSIT FOR FUTURE STOCK SUBSCRIPTION

On December 16, 2016, the Company received cash as deposit for future stock

subscription from its existing stockholder for an aggregate amount of P125,000,000.

As of December 31, 2016, the Company has submitted its application for capital

increase with the SEC.

The application for the capital increase was subsequently approved by the SEC on

January 20, 2017, as disclosed in Note 34.

21. 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.

No dividends were declared nor paid in 2016.

39

22. REVENUES

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

2016 2015 2014

Sale of goods P - P 3,840,884 P 54,647,802

Rendering of services - 7,290,342 24,039,031

P - P 11,131,226 P 78,686,833

23. COST OF SALES AND SERVICES

The following is an analysis of the Company‘s cost of sales and services:

2016 2015 2014

Salaries, wages, and benefits

(Note 26) P - P 3,031,670 P 9,700,573

Barter license - 1,126,630 315,847

Professional fees - 833,350 4,710,647

Rentals (Note 27) - 474,412 726,772

Transportation and travel - 276,865 1,457,736

Meals - 107,026 465,303

Other outsourced services - 44,643 226,761

Communication - 29,395 127,636

Others - 62,588 299,210

Total cost of services - 5,986,579 18,030,485

Add: Cost of sales - 2,829,502 21,588,772

Total cost of sales and services P - P 8,816,081 P 39,619,257

Details of cost of sales are as follows:

2016 2015 2014

Inventory, January 1 P - P 1,839,213 P 108,905

Purchases - 990,289 23,319,080

Cost of goods available for sale - 2,829,502 23,427,985

Inventory, December 31 - - (1,839,213)

P - P 2,829,502 P 21,588,772

40

24. OTHER INCOME

Components of other income are as follows:

2016 2015 2014

Finance income from FVTPL

(Note 8) P 336,106 P 119,795 P -

Finance income from bank

deposits (Note 7) 17,458 3,769 176,822

Finance income – lease

(Note 12) - 19,489 188,050

Written-off accrued expenses

(Note 16) - - 5,580,283

Rebates - - 706,113

Outside services - - 339,286

Others - 738,075 873,085

P 353,564 P 881,128 P 7,863,639

Others pertain to income derived from short-term occupancy of office space.

41

25. OPERATING EXPENSES

The account is composed of the following expenses:

2016 2015 2014

General and administrative:

Professional fees P 898,300 P 2,438,342 P 3,840,542

Taxes and licenses 371,432 458,996 443,611

PSE listing fee 105,133 161,881 289,431

Office supplies 75,819 51,939 353,485

Deficiency taxes 14,400 643,937 -

Other outside services 9,900 14,800 185,689

Representation and

entertainment 5,357 69,850 1,291,961

Bank charges 952 25,155 3,716

Salaries, wages and benefits

(Note 26) - 1,740,109 6,365,338

Depreciation (Note 15) - 505,574 3,645,418

Rentals (Note 27) - 341,499 1,870,581

Communication - 135,038 1,014,438

Transportation and travel - 128,882 1,772,728

Association dues - 98,775 388,515

Power, light and water - 93,804 596,596

Meals - 86,761 422,287

Repairs and maintenance - 63,233 326,694

Donation - 58,929 69,643

Director’s fee - 22,222 88,889

Insurance - 11,912 188,424

Janitorial services - 11,577 -

Retirement benefit (Note 26) - - 198,796

Trainings - - 29,232

Impairment loss on trade

receivable (Note 9) - - 6,018

Others 52,382 816,137 2,545,144

1,533,675 7,979,352 25,937,176

Selling and marketing:

Advertising and promotions - 5,160 388,692

Commission - - 377,052

- 5,160 765,744

Other operating expenses:


Loss on sale of AFS Financial

Assets - - 62,781

- - 149,316

P 1,533,675 P 7,984,512 P 26,852,236

Others pertain to freight and courier, storage fee and accommodation expenses.

42

26. EMPLOYEE BENEFITS

Aggregate employee benefits expense comprised of:

2016 2015 2014

Short-term benefits

(Notes 23 and 25) P - P 4,771,779 P 16,065,911

Post-employment benefits (Note 25) - - 198,796

P - P 4,771,779 P 16,264,707

26.01 Short-term Employee Benefits

Short-term employee benefits include salaries and wages, social security contributions,

short-term compensated absences, incentives and bonuses, and non-monetary

benefits.

The Company’s short-term employee benefits consist of the following:

2016 2015 2014

Salaries and allowances P - P 3,031,670 P 13,592,816

Other short-term benefits - 1,740,109 2,473,095

P - P 4,771,779 P 16,065,911

These short-term employee benefits are presented in the statements of comprehensive

income as follows:

2016 2015 2014

Cost of sales and services (Note 23) P - P 3,031,670 P 9,700,573

Operating expenses (Note 25) - 1,740,109 6,365,338

P - P 4,771,779 P 16,065,911

26.02 Retirement Employee Benefits

The Company had a single retirement plan under the regulatory framework of the

Philippines. Under R.A. 7641 the Company is legally obliged to provide a minimum

retirement pay for qualified employees upon retirement. The framework, however,

does not have a minimum funding requirement. The Company’s benefit plan is aligned

with this framework.

The Company has unfunded defined benefit plans for qualifying employees. Under the

plans, the employees are entitled to retirement benefits varying between 85% of final

monthly salary per year of service on attainment of the retirement age of sixty (60).

The payments for the defined benefits are borne by the Company as it falls due.

In 2015, retirement benefit obligation amounting to P1,562,495 formed part of the

total liabilities assumed per “Deed of sale of assets with assumption of liabilities”

entered by the Company, as disclosed in Note 1.

In 2016, the Company does not have employees covered under Under R.A. 7641.

43

Reconciliation of remeasurements recognized in other comprehensive income is as follows:

Change on

Demographic

Assumption

Change on

Financial

Assumption

Experience

Adjustment

Re-

measurements

Deferred

Tax Asset

Remeasurement

Gain (Loss) – net

Deferred Tax Asset

Gain (loss) Balance at

January 1, 2014 P (15,427) P (176,185) P (176,503) P (368,115) P 110,435 P (257,680)

Amount recognized during

the year - (127,274) (302,167) (429,441) 128,832 (300,609)


December 31, 2014 (15,427) (303,459) (478,670) (797,556) 239,267 (558,289)


the year 15,427 303,459 478,670 797,556 (239,267) 558,289


December 31, 2015 - - - - - -


the year - - - - - -


December 31, 2016 P - P - P - P - P - P -

44

27. OPERATING LEASE AGREEMENTS

27.01 The Company as a Lessee

Operating leases relate to leases of office and parking spaces with lease terms

between one (1) to two (2) 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.

27.01.01 Lease Contract with Solar Resources, Inc.

The Company entered into a Contract of Lease with Solar Resources, Inc. for the lease

of the Parent Company’s office premises located at 2202 C & D East Tower, Philippine

Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City for three (3) years

commencing on December 31, 2004 to November 30, 2007, renewable upon mutual

agreement of both parties.

On November 9, 2013, the Parent Company renewed its contract with the Solar

Resources, Inc. for another two (2) years commencing on December 1, 2013 to

December 1, 2015 with monthly rental of P75,736 and P79,523 on the first and

second year, respectively. The monthly rental is inclusive of 12% VAT, to be paid on

or before the 15th day of each and every month, plus 5% surcharge per month for

payment of rentals made after the 5th day of the month due. No security deposit paid

for the rental.

27.01.02 Lease Contract with Imaghine, Inc.

On October 3, 2012, the Parent Company entered into a Contract of Lease with

Imaghine, Inc. for the lease of one (1) office space located at Unit E-2305B, East

Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City,

and two (2) parking spaces identified as slot numbers P-531 and P-532, situated at

Basement 5 of the East Tower. The term of the lease shall be for a period of two (2)

years commencing on September 17, 2012 and ending on September 16, 2014 with

monthly rental of P85,360 inclusive of VAT and net of withholding tax, renewable

upon mutual agreement of both parties. The rent expense recognized in 2016 and

2015 pertaining to this lease contract amounted to nil and P267,178, part of the total

rent expense, as disclosed in Note 25. In 2014, the Parent Company renewed its

contract of lease for another term.

The distribution of rent expense is as follows:

2016 2015 2014

Cost of services (Note 23) P - P 474,412 P 726,772

Operating expenses (Note 25) - 341,499 1,870,581

P - P 815,911 P 2,597,353

In 2016, the Company did not renew any lease contract previously entered.

45

28. INCOME TAXES

28.01 Income Tax Recognized in Profit or Loss

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

2016 2015 2014

Current tax expense P - P 61,064 P 5,874,645

Deferred tax expense (benefit)

(Note 29) 1,335,551 (1,335,551) 167,179

P 1,335,551 P (1,274,487) P 6,041,824

A numerical reconciliation between tax expense (benefit) and the product of

accounting profit (loss) multiplied by the tax rate in 2016, 2015 and 2014 are as

follows:

2016 2015 2014

Accounting profit (loss) P (1,180,111) P (4,808,102) P 19,323,166

Tax expense (benefit) at 30% (354,033) (1,442,431) 5,796,950

Tax effect of:

Derecognition of DTA on

NOLCO 1,274,487 - -

Non-recognition of DTA on

NOLCO 454,175 - -

Derecognition of DTA on

excess MCIT 61,064 - -

Non-deductible deficiency

taxes 4,320 193,181 -

Unallowable representation

and entertainment 1,607 - 233,179

Finance income subject to

final tax (106,069) (37,069) (53,047)

Unallowable donation - 17,679 -

Finance income – finance

lease - (5,847) (56,415)

Other unallowable

deductions - - 54,480


Finance cost - - 21,882

Loss on sale of AFS

Financial asset - - 18,834

P 1,335,551 P (1,274,487) P 6,041,824

46

Details of NOLCO are as follows:

Year

Incurred Amount

Applied

Current Year Expired Unapplied

Expiry

Date

2015 P 4,248,289 P - P - P 4,248,289 2018

2016 1,513,957 - - 1,513,957 2019

P 5,762,246 P - P - P 5,762,246

In 2015, the Company incurred MCIT amounting to P61,064 which will expire in

2018.

47

29. DEFERRED TAX ASSETS

The components of the Company’s deferred tax assets and their respective movements are as follows:

At January 1,

2015

Derecognition

due to disposal

Charge to

profit or loss

for the year

At

December 31,

2015

Charge to

profit or loss

for the year

At

December

31, 2016

Tax effects of:

NOLCO P - P - P 1,274,487 P 1,274,487 P (1,274,487) P -

Excess MCIT over RCIT - - 61,064 61,064 - (61,064) -

Unrealized foreign exchange loss 1,117 (1,117) - - - - - -

Accrued retirement 468,749 (468,749) - - - - - -

Accrued rent expense 5,840 (5,840) - - - - - -

Provision for doubtful accounts 211,605 (211,605) - - - - - -

P 687,311 P (687,311) P 1,335,551 P 1,335,551 P (1,335,551) P -

48

30. EARNINGS PER SHARE

The Company’s basic earnings (loss) per share is (P0.040), (P0.057) and P0.213 as of

December 31, 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 2014

Earnings (loss) used in the

calculation of total basic

earnings per share P (2,515,662) P (3,533,615) P 13,281,342

Weighted average number

of ordinary shares for the

purposes of basic

earnings per share 62,276,060 62,276,060 62,276,060

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:

Number of

Ordinary Shares

Proportion

to Period

Weighted

Average

Outstanding shares at the

beginning and end of the

period 62,276,060 12/12 62,276,060

The Company does not have any potential dilutive instruments as of

December 31, 2016, 2015 and 2014.

31. FAIR VALUE MEASUREMENTS

31.01 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 December 31, 2016 and 2015 are presented below:

2016 2015

Carrying

Amount Fair Value

Carrying

Amount Fair Value

Financial Assets:

Cash P 148,523,534 P 148,523,534 P 4,487,718 P 4,487,718

Due from a related party 3,477,308 3,477,308 - -

Financial assets at FVTPL - - 24,119,795 24,119,795

P 152,000,842 P 152,000,842 P 28,607,513 P 28,607,513

Financial Liabilities:

Payables P 1,540,544 P 1,540,544 P 1,861,782 P 1,861,782

Deposit for future stock

subscription 125,000,000 125,000,000 - -

P 126,540,544 P 126,540,544 P 28,607,513 P 28,607,513

49

The fair value of Company’s financial assets at FVTPL is derived from quoted prices in

active markets for identical assets.

Due to the short-term nature of Company’s payables (except payable to government

agencies) and deposit for future stock subscription, their carrying amounts

approximate their fair values.

31.02 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:

Level 1, fair value measurements are those derived from quoted prices

(unadjusted) in active markets for identical assets or liabilities;

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

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).

As of December 31, 2016 and 2015, the fair value of the Company’s financial assets

at FVTPL amounted to nil and P24,119,795, respectively, which are derived from

quoted prices in active markets, Level 1.

There were no transfers between Level 1 and 2 during the period.

31.03 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:

Level 1, inputs are quoted prices (unadjusted) in active markets for identical

assets or liabilities that can be accessed at the measurement date;

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

Level 3, inputs are unobservable inputs for the asset or liability.

32. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES

The Company’s Management function provides services to the business, monitor 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, interest rate risk, credit risk and liquidity risk.

The Management reports quarterly to the Company’s risk management committee, an

independent body that monitors risks and policies implemented to mitigate risk

exposures.

50

32.01 Market Risk Management

32.01.01 Interest Rate Risk Management

The Company’s exposure to interest rate risk arises from its cash deposits in banks

and financial assets at FVTPL which are subject to variable interest rates. The risk

arising is managed by close monitoring of the Management.

Profits for the year ended December 31, 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 and financial assets at FVTPL, which are subject to variable rates,

are very immaterial.

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 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 Company does not have significant credit risk exposure to any single counterparty

or any group of counterparties having similar characteristics. The Company defines

counterparties as having similar characteristics if they are related entities. There was

no concentration of credit risk related to the large customer at any time during the

year. The Company mitigates the risk by looking for new customers, accepting new

engagements from new clients and monitoring collections from largest customers.

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


Cash in banks 148,513,534 4,477,718

Due from a related party 3,477,308 -

Financial assets at FVTPL - 24,119,795

P 152,000,842 P 28,607,513

The Company does not hold any collateral or other credit enhancements to cover this

credit risk.

51

The table below shows the financial assets of the Company are classified as high

grade in terms of credit quality as neither past due nor impaired:

2016 2015


Cash in banks 148,513,534 4,477,718

Due from a related party 3,477,308 -

Financial assets at FVTPL - 24,119,795

P 152,000,842 P 28,607,513

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

Financial assets at FVTPL

High grade – Companies that are consistently profitable, have strong fundamentals

and pays out dividends and interest.

Medium grade – Companies that recently turned profitable and have the potential

of becoming a high grade company. These companies have sound fundamentals.

Low grade – Companies that are not yet profitable, speculative in nature but have

the potential to turn around fundamentally.

32.03 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.

Weighted

Average Effective

Interest Rate

Within 1

Year

1 – 5

Years Total

December 31, 2016

Payables - P 1,540,544 - P 1,540,544

Deposit for future stock

subscription - 125,000,000 - 125,000,000

P 126,540,544 - P 126,540,544

December 31, 2015

Payables - P 1,861,782 - P 1,861,782

52

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

On Demand

Within one (1)

Year

December 31, 2016

Cash on hand n/a P 10,000 P -

Cash in banks 0.25% to 0.56% 148,513,534 -

Due from a related party n/a 3,477,308 -

P 152,000,842 P -

December 31, 2015

Cash on hand n/a P 10,000 P -

Cash in banks 0.25% to 0.56% 4,477,718 -

Financial assets at FVTPL 0.49% - 24,119,795

P 4,487,718 P 24,119,795

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.

33. 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 (payables and deposit for

future stock subscription as detailed in Notes 16 and 20 offset by cash balances as

detailed in Note 7) and equity of the Company (comprising capital stock, additional

paid-in capital and deficit, as disclosed in Note 19).

The Company’s board of directors and management 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 Company has a

target debt to equity ratio of at least 1:1.

53

The debt to equity ratio at end of the reporting period is as follows:

2016 2015

Debt P 126,546,495 P 1,864,109

Equity 26,013,089 28,528,751

Debt to equity ratio 4.86:1 0.07:1

Debt is defined as total liabilities, as disclosed in Notes 16 and 20 while equity

includes all capital and reserves of the Company that are managed as capital.

34. EVENTS AFTER THE REPORTING PERIOD

The following material transactions occurred after the reporting period:

A. On January 19, 2017, the Company secured a Four Hundred Million

(P400,000,000) loan from Altus Corporation to be repaid within thirty (30) months

with interest rate of 15% per annum. The purpose of the loan is, among others, to

fund the working capital requirements and additional investments into the

Company’s and its affiliate’s business.

B. On January 20, 2017, SEC approved the following amendments to the Company’s

Articles of Incorporation:

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

b. Increase authorized capital stock from Twenty Million Pesos (P20,000,000)

to up to Two Billion Pesos (P2,000,000,000).

C. On January 20, 2017, the SEC approved the application of the Company to

change its stock symbol from ALT to DNA. This was reflected on the PSE trading

system February 16, 2017.

D. On February 7, 2017, the previous shareholders of the Company filed a letter of

protest, through a request for reinvestigation, in relation to the final assessment

notice of the BIR for the taxable year 2013. These pertains to assessment on

deficiency on tax declaration and payment for income tax, value-added tax (VAT),

expanded withholding tax and compromise penalty for non-submission of various

schedule, returns and books of accounts.

35. RECLASSIFICATIONS OF COMPARATIVE AMOUNTS

Certain amount in the comparative financial statements and note disclosure has been

reclassified to conform to the current year’s presentation. Details are as follows:

Current Year Classification Previous Year Classification Amount

Financial Assets at FVTPL Cash and cash equivalents

Financial Assets at FVTPL Cash Equivalents P 24,000,000

Financial Assets at FVTPL Receivables

Financial Assets at FVTPL Receivables 119,795

Management believes that the above reclassifications resulted to a better presentation

of accounts and did not have any impact on prior year’s profit or loss.

54

36. APPROVAL OF FINANCIAL STATEMENTS

These financial statements were approved and authorized for issuance by the Board of

Directors on April 6, 2017.

37. SUPPLEMENTARY INFORMATION UNDER REVENUE REGULATIONS NO.15–2010

The Bureau of Internal Revenue (BIR) released a new revenue regulation dated

November 25, 2010 amending Revenue Regulations No. 21-2002 setting forth

additional disclosures on Notes to Financial Statements. Below are the disclosures

required by the said regulation:

37.01 Taxes and Licenses Paid or Accrued

The details of the Company’s taxes and licenses fees paid or accrued in 2016 are as

follows:

37.01.01 Output VAT

The Company is VAT-registered with output VAT declaration of nil for the taxable year

based on the amount reflected in the revenue.

37.01.02 Input VAT

An analysis of the Company’s input VAT claimed during the taxable year is as follows:

Balance, January 1 P 62,228

Current year’s domestic purchases/payments for:

Services lodged under other accounts 111,112

Total available input VAT 173,340

Claims for tax credit/refund and other adjustments 2,166

Balance, December 31 P 171,174

37.01.03 Other Taxes and Licenses

An analysis on the Company’s other taxes and licenses and permit fees paid or

accrued during the year is as follows:

Business taxes P 198,362

Permits 162,570

Community tax certificate 10,500

P 371,432

37.01.04 Withholding Taxes

The Company’s withholding tax – expanded paid or accrued during the year amounted

to P30,123 income payments to prime contractors/sub-contractors and amounts paid

to business and bookkeeping agents.

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37.01.05 Deficiency Tax Assessments and Tax Cases

In 2016, the Company received Letter of Authority (LOA-43A-2014-00000572) from

the Bureau of Internal Revenue (BIR) for the period covered January 1, 2013 to

December 31, 2013. The LOA pertains to the assessed deficiency on tax declaration

and payment for income tax, value-added tax (VAT), expanded withholding tax and

compromise penalty for non-submission of various schedule, returns and books of

accounts.

38. SUPPLEMENTARY INFORMATION UNDER REVENUE REGULATIONS NO. 19–2011

Pursuant to Section 244 in relation to Section 6(H) of the National Internal Revenue

Code of 1997 (Tax Code), as amended, these Regulations are prescribed to revise BIR

Form 1702 setting forth the following schedules. Below are the disclosures required

by the said regulation:

38.01 Itemized Deductions

The following is an analysis of the Company‘s itemized deductions for the taxable

year:

Professional fees P 898,300

Taxes and licenses 371,432

PSE listing fee 105,133

Office supplies 75,819

Other outside services 9,900

Bank charges 952

Others 52,382

P 1,513,918

alterra capital partners, inc. (formerly:...

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