CIRIACO P.

ADORNADO
2687 Crystal Clear, Dimadapuan Homes
Dimabili St., Mahabang Bato, Kakantakanta, Bukidnon
Tel No. 445-6574 BOA/PRC Registration No. 32-07 valid until December 31, 2017
________________________________________________________________________________________________________________________

INDEPENDENT AUDITORS’ REPORT

The Board of Directors

United Foods Corporation
G/F Mabantout Place, Sta Rita, Nueva Viscaya

I have audited the accompanying statement of net assets in liquidation of United Foods Corporation as at December 31, 2015 and the
statements of changes in net assets in liquidation for the year ended December 31, 2015, cash flows for the years ended December 31, 2015 and
2014, the statement of financial position as at December 31, 2014, the statement of comprehensive income for the years ended December 31,
2014, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine Financial
Reporting Standards for Small and Medium-sized Entities, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with Philippine
Standards on Auditing. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion

In my opinion, the financial referred to above present fairly, in all material respects, the net assets in liquidation of United Foods Corporation as
of December 31, 2015, and in its financial performance for the year ended December 31, 2015, its cash flows for the years ended December 31,
2015 and 2014, the statement of financial position as at December 31, 2014 and its financial performance and its statement of changes in
stockholders’ equity for the year ended December 31, 2014, in accordance with Philippine Financial Reporting Standards for Small and Medium-
sized Entities.

Matter of Emphasis

I draw attention to Note 1 to the financial statements which describe the change to the liquidation basis of accounting as a result of the
Corporation’s intent to liquidate and other notes to the financial statements that describe certain uncertainties and future changes that may result
from the intention to liquidate the Corporation. My opinion is not qualified in respect of this mailer.

Report on the Supplementary Information Required Under Revenue Regulations 15-2010

My audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole, The supplementary
information on taxes and license fees in Note 15 to the financial statements is presented for purposes of filing with the Bureau of Internal
Revenue and is not a required part of the basic financial statements. Such information is the responsibility of the management of United Foods
Corporation. The information has been subjected to the auditing procedures applied in my audit of the basic financial statements. In my opinion,
the information is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

CIRIACO P. ADORNADO
Certificate No. 106547
Tax Identification No. 160-178-555
PRC ID valid until November 1, 2018
BIR Accreditation No. 01-223347-2014,
November 28, 2014, Valid until November 27, 2017
SEC Accreditation No. 02-10, October 30, 2015
Valid until October 29, 2018
CDA CEA No. 3344, November 24, 2014, valid until November 23, 2017
PTR No. 445566, January 4, 2016, City of Pulupandan

February 4, 2016
Ciriaco P. Adornado
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UNITED FOODS CORPORATION
NOTES TO FINANCIAL STATEMENTS

1. Corporate Information

United Foods Corporation was incorporated on May 17, 2001 under the laws of the Republic of the Philippines.
The company is engaged to establish, operate, and maintain restaurants, coffee shops, refreshment parlors, make,
manufacture, cook, arrange, serve and cater foods, drinks, refreshments and other foods or commodities
commonly served in such establishments and to offer such other services to the public in connection with the
operation of restaurant and eatery enterprises and to do and perform such other sets and things necessary and
incidental to the accomplishment of the foregoing corporate business and objects insofar as may be allowed by
applicable laws and rules and regulations.

On October 3, 2014, the Board of Directors decided to seek shareholder approval to proceed with the winding-
up of United Foods Corporation, the distribution of its net assets, after providing for liabilities, contingencies and
costs, and ultimately its dissolution in the future (the “Liquidation”). The Liquidation of the Corporation is
subject to shareholder approval, approval of which was subsequently given.

The registered office address of the Corporation is at G/F Mabantout Place, Sta Rita, Nueva Viscaya

The accompanying financial statements of the Company were authorized for issue by the Board of Directors on
February 4, 2016

2. Summary of Significant Accounting and Financial Reporting Policies

Change in Basis of Preparation

In accordance with PAS 1 “Presentation of Financial Statements” and PAS 10 “Events after the Reporting
Period”, the Corporation changed the basis of preparing its financial statements from going concern to
liquidation, effective January 1, 2015. This change of basis was adopted as PAS 10 does not permit use of the
going concern basis of accounting if management intends to liquidate the entity either before or after year-end.
As a result, the financial statements as at December 31, 2015 and for the year ended have been prepared using
a liquidation basis of accounting. This basis of presentation differs from the presentation adopted in the
financial reports of the Corporation issued during in 2014. The adoption of a liquidation basis of presentation
on January 1, 2015 did not result in a change to net assets. Should United Foods Corporation subsequently not
proceed with the liquidation of its net assets, United Foods Corporation will revert to a going concern basis of
presentation.

Under the liquidation basis of accounting, the Corporation measures it assets based on their net realizable value
and its liabilities based on settlement amounts. As the Corporation’s assets and liabilities consist primarily of
financial instruments, the change in basis of accounting did not result in different measurements from those
under the going concern basis of accounting.

The financial statements as at December 31, 2015 and for the year then ended do not include costs to liquidate
the assets of the Corporation, settle any contingent liabilities or future administrative costs and professional
fees to wind-up the activities of the Corporation. These costs may be material and the amounts disclosed as net
assets in liquidation in total or on a per share basis will change. The actual amounts available for distribution to
shareholders will change and such changes may be material.

The financial statements as at December 31, 2014 and for the year then ended have been prepared on a going
concern basis. The going concern basis of presentation assumes continuity of operations, realization of assets
and satisfaction of liabilities in the ordinary course of business and does not purport to show, reflect or provide
for the consequences of the Corporation’s intention to liquidate.

Statement of Compliance

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The financial statements of the Company have been prepared in compliance with the Philippine Financial
Reporting Standards for Small and Medium-sized Entities (PFRS for SMEs),

Cash
Cash and cash equivalents include cash on hand, demand deposits and other short-term highly liquid
investments with original maturities of three months or less.

Financial Instruments - Initial Recognition and Subsequent Measurement

Date of Recognition. The Company recognizes a financial asset or a financial liability in the statement of
financial position when it becomes a party to the contractual provisions of the instrument. In the case of a regular
way purchase or sale of financial assets, recognition and derecognition, as applicable, is done using settlement
date accounting. Regular way purchases or sales are purchases or sales of financial assets that require delivery of
assets within the period generally established by regulation or convention in the marketplace.

Initial Recognition. Financial instruments are recognized initially at fair value, which is the fair value of the
consideration given (in case of an asset) or received (in case of a liability). The initial measurement of financial
instruments is fair value with changes in fair value recognized in profit or loss. This covers investments in non-
convertible and non-puttable preference shares and non-puttable ordinary shares that are publicly trade or whose
fair value can otherwise be measured reliably.

Determination of Fair Value. The fair value of financial instruments traded in active markets at the reporting
date is based on their quoted market price or dealer price quotations (bid price for long positions and ask price
for short positions), without any deduction for transaction costs. When current bid and asking prices are not
available, the price of the most recent transaction provides evidence of the current fair value as long as there has
not been a significant change in economic circumstances since the time of the transaction.

For all other financial instruments not listed in an active market, the fair value is determined by using appropriate
valuation techniques. Valuation techniques include net present value techniques, comparison to similar
instruments for which market observable prices exist, option pricing models, and other relevant valuation
models.

Classification of Financial Instruments. Subsequent to initial recognition, the Company classifies its financial
instruments in either of the following categories: 1) amortized cost or cost less impairment or 2) fair value with
changes in fair value recognized in profit or loss. The category depends on the purpose for which the instruments
are acquired and whether they are quoted in an active market. Management determines the category of its
financial instruments at initial recognition and, where allowed and appropriate, re-evaluates such designation at
each financial year-end.

Financial Assets and Liabilities at FVPL. Financial assets and liabilities at FVPL include financial assets and
liabilities held for trading, derivative financial instruments and those designated upon initial recognition as at
FVPL.

Financial assets and liabilities are classified as held for trading if they are acquired for the purpose of selling or
repurchasing in the near term. Derivative instruments are also classified under this category unless they are
designated as effective hedges under hedge accounting.

Financial assets and liabilities may be designated by management at initial recognition as at FVPL when any of
the following criteria is met:

• the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from
measuring the assets and liabilities or recognizing gains or losses on a different basis; or

• the assets or liabilities are part of a group of financial assets, financial liabilities or both which are managed
and their performance are evaluated on a fair value basis, in accordance with a documented risk
management or investment strategy; or

• the financial instrument contains an embedded derivative, unless the embedded derivative does not
significantly modify the cash flows or it is clear, with little or no analysis, that it would not be separately
recorded.

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Financial assets and liabilities at FVPL are recorded in the statement of financial position at fair value. Changes
in fair value are included in the statement of comprehensive income. Interest earned or incurred is recorded as
interest income or expense, respectively.

Derivatives embedded in host contracts are accounted for as separate derivatives when their risks and
characteristics are not closely related to those of the host contracts and the host contracts are not carried at fair
value. These embedded derivatives are measured at fair value with gains or losses arising from changes in fair
value recognized in the statement of comprehensive income. Reassessment only occurs if there is a change in the
terms of the contract that significantly modifies the cash flows that would otherwise be required.

Loans and Receivables. Loans and receivables are nonderivative financial assets with fixed or determinable
payments that are not quoted in an active market. After initial measurement, loans and receivables are
subsequently carried at amortized cost using the effective interest method less any allowance for impairment.
Gains and losses are recognized in the statement of comprehensive income when the loans and receivables are
derecognized or impaired, as well as through the amortization process. Loans and receivables are included in
current assets if maturity is within 12 months from the reporting date. Otherwise, these are classified as
noncurrent assets.

Other Financial Liabilities. This category pertains to financial liabilities that are not held for trading upon the
inception of the liability and contain contractual obligations to deliver cash or another financial asset to the
holder or to settle the obligation other than by the exchange of a fixed amount of cash or another financial asset
for a fixed number of own equity shares.

These financial liabilities are recognized initially at fair value and are subsequently carried at amortized cost,
taking into account the impact of applying the effective interest method of amortization (or accretion) for any
related premium, discount and any directly attributable transaction costs. Gains and losses are recognized in the
statement of comprehensive income when the liabilities are derecognized as well as through the amortization
process.

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

Impairment of Financial Assets

The Company assesses at each reporting date whether a financial asset or group of financial assets is impaired. A
financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence
of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an
incurred “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the
financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may
include indications that the borrower or a group of borrowers is experiencing significant financial difficulty,
default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other
financial reorganization and where observable data indicate that there is measurable decrease in the estimated
future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial Assets Carried at Amortized Cost. The Company first assesses whether objective evidence of
impairment exists individually for financial assets that are individually significant, and collectively for financial
assets that are not individually significant. If it is determined that no objective evidence of impairment exists for
an individually assessed financial asset, whether significant or not, the asset is included in a group of financial
assets with similar credit risk characteristics and that group of financial assets is collectively assessed for
impairment based on historical loss experience. Assets that are individually assessed for impairment and for
which an impairment loss is or continues to be recognized are not included in a collective assessment of
impairment.

If there is objective evidence that an impairment loss on financial assets carried at amortized cost has been
incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the
present value of estimated future cash flows (excluding future credit losses that have not been incurred)

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discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at
initial recognition). If a loan has a variable interest rate, the discount rate for measuring any impairment loss is
the current effective interest rate.

The carrying amount of the asset shall be reduced either directly or through use of an allowance account and the
amount of the loss shall be recognized in the statement of comprehensive income. Interest income continues to
be accrued on the reduced carrying amount based on the original effective interest rate of the asset. Loans,
together with associated allowance, are written off when there is no realistic prospect of future recovery and all
collateral has been realized or has been transferred to the Company.

If, in a subsequent period, the amount of the impairment loss increases or decreases because of an event
occurring after the impairment was recognized, the previously recognized impairment loss is increased or
reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is recognized in
the statement of comprehensive income. Any subsequent reversal of an impairment loss is recognized in the
statement of comprehensive income, to the extent that the carrying value of the asset does not exceed its
amortized cost at the reversal date.

Assets Carried at Cost. If there is objective evidence that an impairment loss on an unquoted equity instrument
that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is
linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the loss is
measured as the difference between the asset’s carrying amount and the present value of estimated future cash
flows discounted at the current market rate of return for a similar financial asset.

Derecognition of Financial Assets and Liabilities

Financial Assets. A financial asset (or, where applicable a part of a financial asset or part of a group of similar
financial assets) is derecognized when:

a. the rights to receive cash flows from the asset have expired; or

b. the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay
them in full without material delay to a third party under a “pass-through” arrangement; or

c. the Company has transferred its rights to receive cash flows from the asset and either (a) has transferred
substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset.

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

When continuing involvement takes the form of a written and/or purchased option (including a cash-settled
option or similar provision) on the transferred asset, the extent of the Company’s continuing involvement is the
amount of the transferred asset that the Company may repurchase, except that in the case of a written put option
(including a cash-settled option or similar provision) on an asset measured at fair value, the extent of the
Company’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option
exercise price.

Financial Liabilities. A financial liability is derecognized when the obligation under the liability is discharged,
cancelled or has expired.

When an existing financial liability is replaced by another from the same lender on substantially different terms,
or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a
derecognition of the original liability and the recognition of a new liability, and the difference in the respective
carrying amounts is recognized in the statement of comprehensive income.

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Classification of Financial Instruments between Debt and Equity
Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual
arrangement.

A financial instrument is classified as debt if it provides for a contractual obligation to:

a. deliver cash or another financial asset to another entity; or

b. exchange financial assets or financial liabilities with another entity under conditions that are potentially
unfavorable to the Company; or

c. satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for
a fixed number of own equity shares.

If the Company does not have an unconditional right to avoid delivering cash or another financial asset to settle
its contractual obligation, the obligation meets the definition of a financial liability.

Interest, dividends, gains and losses relating to a financial instrument or a component that is a financial liability
are reported as expense or income. Distributions to holders of financial instruments classified as equity are
charged directly to equity, net of any related income tax benefits.

Offsetting Financial Instruments

Financial assets and liabilities are offset and the net amount is reported in the statement 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 asset and settle the liability simultaneously.

Trade Receivables

Trade receivables are recognized initially at the transaction price. They are subsequently measured at
amortized cost using the effective interest method, less provision for impairment. A provision for impairment
of trade receivables is established when there is objective evidence that the company will not be able to collect
all amounts due according to the original terms of the receivables.

Inventories
Materials and supplies are stated at the lower of cost or net realizable value. Costs of acquiring materials and
supplies including costs incurred in bringing each item to their present location and condition are accounted
using the moving average cost method. Net realizable value is the estimated selling price in the ordinary course
of business less the estimated cost to sell or the current replacement cost of the asset.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and any impairment in value.

The initial cost of property and equipment comprises its purchase price, and other directly attributable costs of
bringing the asset to its working condition and location for its intended use. Manufacturers’ credits that reduce
the price of property are recorded upon delivery of the property. Such credits are applied as a reduction from
the cost of the property and equipment (including those under finance lease).

Expenditures incurred after the property and equipment have been put into operation, such as repairs and
maintenance costs, are normally charged to income in the period in which the costs are incurred. In situations
where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic
benefits expected to be obtained from the use of an item of property and equipment beyond its originally
assessed standard of performance, the expenditures are capitalized as additional cost of property and
equipment.

Depreciation, which commences when the asset is available for use, is computed on a straight-line basis over
the following estimated useful lives of the assets:

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    No of Years
Leasehold improvement 10-15 years
Store and office, furniture and fixture 3-7 years
Store and office equipment 4-7 years
Transportation equipment 5-7years

The estimated useful lives, depreciation method and residual values are reviewed periodically to ensure that
the periods and method of depreciation and residual values are consistent with the expected pattern of
economic benefits from items of property and equipment. Any changes in estimate arising from the review are
accounted for prospectively.

When assets are sold or retired, their costs, accumulated depreciation and any impairment in value and related
revaluation increment are eliminated from the accounts. Any gain or loss resulting from their disposal is
recognized as income and included in the statement of comprehensive income.

Impairment of non-financial asset other than inventories

At each reporting date, property and equipment are reviewed to determine whether there is any indication
that assets have suffered an impairment loss. If there is an indication of possible impairment, the recoverable
amount of any affected asset (or group of related assets) is estimated and compared with its carrying amount.
If estimated recoverable amounts is lower, the carrying amount is reduced to its estimated recoverable
amount, and an impairment loss is recognized immediately in profit or loss.

If an impairment loss subsequently reverses, the carrying amount of the asset (or group of related assets) is
increased to the revised estimate of its recoverable amount, but not in excess of the amount that would have
been determined had no impairment loss been recognized for the asset (or group of related assets) in prior
year. A reversal of an impairment loss is recognized immediately in profit or loss.

Prepayments
Prepayments are initially measured at the amounts paid and subsequently recognized as expense over the
period on which the prepayments apply.

Accounts payable and accrued expenses

Accounts payable and accrued expenses are obligations on the basis of normal credit terms and do not bear
interest. These are recognized initially at the transaction price and subsequently measured at amortized cost
using the effective interest method.

Related party relationships and transactions

Related party relationship exists when one party has the ability to control, directly or indirectly through one or
more intermediaries, the other party or exercise significant influence over the other party in making financial
and operating decisions. Such relationship also exists between and/or among entities which are under common
control with the reporting enterprise, or between and/or among the reporting enterprises and their key
management personnel, directors or its shareholders. In considering each possible related party relationship,
attention is directed to the substance of the relationship and not merely the legal form.

Advances to affiliates are based on nominal credit term and do not bear interest. They are recognized in the
period in which the money, goods or services are received. It is recognized initially at the transaction price
(transaction cost is zero) unless the arrangement constitutes a financing transaction.

A financing transaction takes place in connection with the sale of goods or services. (e.g. payment beyond
normal business terms or is financed at a rate of interest that is not a market rate. Under this arrangement,

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the company shall measure the financial asset or financial liability at the present value of the future payments
discounted at a market rate of interest for a similar debt instrument.

Liabilities
Advances from related parties, accrued expenses and other liabilities, which are based on normal credit terms
and do not bear interest, are recognized in the period in which the related money, goods or services are
received when a legally enforceable claim against the Company is established.

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
compensation, social security contributions, short-term compensated absences, bonuses and other non-monetary
benefits.

Capital Stock
Capital stock represents the portion of the paid-in capital representing the total par value of the shares issued.

Retained Earnings
Retained earnings represents the cumulative balance of net income or loss, net of any dividend declaration.

Revenue
Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow to
the Company and the amount of the revenue can be reliably measured. Revenue is measured at the fair value of
the consideration received. The Company assesses its revenue arrangements against specific criteria in order to
determine if it is acting as principal or agent. The Company has concluded that it is a principal in all of its
revenue arrangements. The following specific recognition criteria must also be met before revenue is recognized:

Sale of goods. Sales of goods are recognized when the company has delivered products to the customers.
Delivery does not occur until the products have been shipped to the specified location, the risks of obsolescence
and loss have been transferred to the customer, and either the customer has accepted the products in accordance
with the sales contract, the acceptance provision have lapsed, or the company has objective evidence that all
criteria for acceptance have been satisfied.

Rental Income. Revenue (included as part of “Others” account in the statement of comprehensive income)
arising from investment properties is recorded as income on a straightline basis over the lease term.

Interest Income. Revenue is recognized as the interest accrues, taking into account the effective yield on the
assets.

Dividend Income. Revenue is recognized when the Company’s right to receive the payment is established.

Cost and Expenses

Cost and expenses are decreases in economic benefits during the accounting period in the form of outflows or
decreases of assets or incurrence of liabilities that results in decrease in equity. Costs and expenses are
recognized in the Expenses are recognized when incurred and measured at the fair value of the consideration
paid or payable,

Costs of purchase
The costs of purchase of inventories comprise the purchase price, import duties and other taxes (other than
those subsequently recoverable by the entity from the taxing authorities), and transport, handling and other
costs directly attributable to the acquisition of finished goods, materials and services. Trade discounts, rebates
and other similar items are deducted in determining the costs of purchase.

An entity may purchase inventories on deferred settlement terms. In some cases, the arrangement effectively
contains an unstated financing element, for example, a difference between the purchase price for normal credit

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terms and the deferred settlement amount. In these cases, the difference is recognised as interest expense over
the period of the financing and is not added to the cost of the inventories.

Costs of conversion
The costs of conversion of inventories include costs directly related to the units of production, such as direct
labour. They also include a systematic allocation of fixed and variable production overheads that are incurred in
converting materials into finished goods. Fixed production overheads are those indirect costs of production that
remain relatively constant regardless of the volume of production, such as depreciation and maintenance of
factory buildings and equipment, and the cost of factory management and administration. Variable production
overheads are those indirect costs of production that vary directly, or nearly directly, with the volume of
production, such as indirect materials and indirect labour.

Allocation of production overheads

An entity shall allocate fixed production overheads to the costs of conversion on the basis of the normal
capacity of the production facilities. Normal capacity is the production expected to be achieved on average over
a number of periods or seasons under normal circumstances, taking into account the loss of capacity resulting
from planned maintenance. The actual level of production may be used if it approximates normal capacity. The
amount of fixed overhead allocated to each unit of production is not increased as a consequence of low
production or idle plant. Unallocated overheads are recognised as an expense in the period in which they are
incurred. In periods of abnormally high production, the amount of fixed overhead allocated to each unit of
production is decreased so that inventories are not measured above cost. Variable production overheads are
allocated to each unit of production on the basis of the actual use of the production facilities.

Impairment of inventories
At the end of each reporting period whether any inventories are impaired, ie the carrying amount is not fully
recoverable (e.g. because of damage, obsolescence or declining selling prices). If an item (or group of items) of
inventory is impaired, the company measures the inventory at its selling price less costs to complete and sell,
and to recognise an impairment loss. Those paragraphs also require a reversal of a prior impairment in some
circumstances.

Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement
at the inception date of whether the fulfillment of the arrangement is dependent on the use of a specific asset or
assets or the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease
only if one of the following applies:

a. there is a change in contractual terms, other than a renewal or extension of the agreement;

b. a renewal option is exercised or extension granted, unless the term of the renewal or extension was initially
included in the lease term;

c. there is a change in the determination of whether the fulfillment is dependent on a specified asset; or

d. there is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when the change in
circumstances gave rise to the reassessment for scenarios a, c or d and the date of renewal or extension period for
scenario b.

Company as a Lessee. Leases where the lessor retains substantially all the risks and benefits of ownership of the
assets are classified as operating leases. Operating lease payments are recognized as an expense in the statement
of comprehensive income on a straight-line basis over the lease term.

Company as a Lessor. Leases where the Company does not transfer substantially all the risks and reward of
ownership of the asset are classified as operating leases. Lease payments received are recognized as an income in

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the statement of comprehensive income on a straight-line basis over the lease term. Initial direct costs incurred
in negotiating an operating lease are added to the carrying amount of the leased assets and recognized over the
lease term on the same basis as rental income.

Income 'Taxes
Current income tax

Current income tax assets and liabilities are measured at the amounts expected to be recovered from or paid to
the taxation authorities, The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted at the end of the reporting period.

Deferred income tax

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

Deferred income tax assets are recognized for all deductible temporary differences and carryforward benefits
of unused net operating loss carryover (NOLCO). The amount of deferred income tax assets are measured to
the extent that it is probable that future taxable profits will be available against which the deductible
temporary differences and the carryforward benefits of unused tax losses can be utilized through an allowance
account, Deferred income tax liabilities are recognized for all taxable temporary differences.
A valuation allowance is recognized against deferred income tax assets so that the net carrying amount equals
the highest amount that is more likely than not to be recovered based on current or future taxable profit. The
carrying amount of deferred income tax asset is reviewed at each balance sheet date and the valuation
allowance is adjusted to reflect the current assessment of future taxable profits. Such adjustment is recognized
in profit or loss.

Deferred income tax assets and deferred income tax liabilities are measured at the tax rates that are expected
to apply to the year when the asset is realized or the liability is settled, based on tax rates and tax laws that
have been enacted or substantively enacted at the end of the reporting period.
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to
set off current income taxes and the deferred income taxes relate to the same taxable entity and the same
taxation authority.

Foreign Currency Transactions

The functional and presentation currency of the company is the Philippine Peso. It determines its own
functional currency and items included in the financial statements and are measured using that functional
currency. Transactions in foreign currencies are initially recorded in the functional currency rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at
the functional currency rate of exchange ruling at the reporting date. All differences are taken to the statement
of income. Tax charges and credits attributable to exchange differences on borrowings are also dealt with in
equity. Nonmonetary items that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate as at the date of initial transaction. Nonmonetary items measured at fair value in a
foreign currency are translated using the exchange rate at the date when the fair value was determined.

Provisions
Provisions are recognized under the following conditions: (a) the Company has a present obligation (legal or
constructive) as a result of a past event; (b) it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; and (c) a reliable estimate of the amount of the obligation can
be made.

Contingencies
Contingent liabilities are not recognized in the financial statements. They are disclosed in the notes to financial
statements unless the possibility of an outflow of resources embodying economic benefits is remote.

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Contingent assets are not recognized in the financial statements but disclosed in the notes to financial
statements when an inflow of economic benefits is probable.

Events After End of the Reporting Period

Post year-end events that provide additional information about the Company's position at the balance sheet
date (adjusting events) are reflected in the financial statements, Post year-end events that are not adjusting
events are disclosed in the notes to financial statements when material.

3. Significant Accounting Judgments

The preparation of the Company's financial statements in conformity with PFRS for SMEs requires management
to make judgments that affect the amounts reported in the financial statements and accompanying notes. The
judgments used in the financial statements are based upon management's evaluation of the relevant facts and
circumstances that are believed to be reasonable as of the date of the financial statements. Actual results could
differ from these estimates. The effect of any change in estimates is reflected in the financial statements as it
becomes reasonably determinable.

Judgments
In the process of applying the Company's accounting policies, management has made the following judgments
which have the most significant effect on the amounts recognized in the financial Statements:

Determination of functional currency

The Company, based on relevant economic substance of the underlying circumstances, has determined its
functional currency to be the Peso. It is the primary economic environment in which the Company operates.

Revenue. The Organization assesses its revenue arrangements against specific criteria in order to determine if it
is acting as principal or agent. The Organization has concluded that it is acting as principal in all of its revenue
arrangements.

Operating Lease Commitment – Company as Lessee. The Company has entered into a lease agreement as a
lessee. The Company has determined that it does not retain all the significant risks and rewards of ownership
of the property which are leased out in an operating lease agreement.

Classification of financial instruments

The Company classifies a financial instrument, or its component parts, on initial recognition, either as a financial
asset, a financial liability or an equity instrument in accordance with the substance of the contractual
arrangement and the definitions of a financial asset, a financial liability or an equity instrument, The substance
of a financial instrument, rather than its legal form, governs its classification in the statement of financial
position.

Financial assets and financial liabilities measured at amortized cost are presented in Note 12.

Recognition of valuation allowance against deferred income tax assets

The management reviews the carrying amounts of deferred income tax assets at each financial reporting date
and the valuation allowance is adjusted to reflect the current assessment of future taxable profits.

Estimates and Assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting
date, that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below. The Company based its assumptions and estimates on
parameters available when the financial statements were prepared. Existing circumstances and assumptions

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about future developments however, may change due to market changes or circumstances arising beyond the
control of the Company. Such changes are reflected in the assumptions when they occur.

Useful Lives of Property and Equipment. The Company estimates the useful lives of property and equipment
based on the period over which the assets are expected to be available for use. The estimated useful lives of
these assets are reviewed at each financial year-end and updated if expectations differ from previous estimates
due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of
these assets. In addition, the estimation of the useful lives of these assets are based on the 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 the 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.

Impairment of Property and Equipment. The Company’s management conducts an impairment review of its
property and equipment when certain impairment indicators are present. This requires the Company’s
management to make estimates and assumptions of the future cash flows expected to be generated from the
continued use and ultimate disposition of such assets and the appropriate discount rate to determine the
recoverable value of the assets. Future events could cause the Company to conclude that these assets are
impaired. Any resulting impairment loss could have a material adverse impact on the Company’s financial
condition and results of operations.

4. Cash and Cash Equivalents

2015 2014

Cash P 1,444,079 P 4,426,774

Cash in banks earns interest at the respective bank deposit rates.

5. Receivables

    2015   2014
Trade P - P 35,014
Others - 202,259
Total P - 237,273

Impairment assessment

The main considerations for impairment assessment include whether any payments are overdue or if there are
any known difficulties in the cash flows of the counterparties. The Company assesses impairment into two
areas: individually assessed allowances and collectively assessed allowances.

The Company determines allowance for each significant receivable on an individual basis. Among the items that
the Company considers in assessing impairment is the inability to collect from the counterparty based on the
contractual terms of the receivables. Receivables included in the specific assessment are the accounts that have
been endorsed to the legal department, nonmoving account receivables, accounts of defaulted agents and
accounts from closed stations.

For collective assessment, allowances are assessed for receivables that are not individually significant and for
individually significant receivables where there is not yet objective evidence of individual impairment.
Impairment losses are estimated by taking into consideration the age of the receivables, past collection
experience and other factors that may affect collectibility.

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6. Property and Equipment

  2015
Store Store and
Office
Leasehold and Office furniture and
    Improvement   Equipment   fixtures   Total
Cost
At beginning of year 4,904,245 8,031,995 395,995 13,332,235
P P P P
Additions -
Disposal/retirement - - - -
At end of year   4,904,245   8,031,995   395,995   13,332,235

Accumulated Depreciation,
Amortization and Impairment Loss
At beginning of year 4,904,245 7,829,316 395,995 13,129,556
Depreciation and amortization - 49,962 49,962
Disposals/retirement - 152,717 - 152,717
Impairment Loss - - - -
At end of year   4,904,245   8,031,995   395,995   13,332,235

Net Book Value at cost - - - -

P P P P

  2014
Store Store and
Office
Leasehold and Office furniture and
    Improvement   Equipment   fixtures   Total
Cost
At beginning of year 4,904,245 7,966,562 395,995 13,266,802
P P P P
Additions - 65,433 - 65,433
Disposal/retirement - - - -
At end of year   4,904,245   8,031,995   395,995   13,332,235

Accumulated Depreciation,
Amortization and Impairment Loss
At beginning of year 4,904,245 7,679,431 395,995 12,979,671
Depreciation and amortization - 149,885 - 149,885
Disposals/retirement - - - -
Impairment Loss - - - -
At end of year   4,904,245   7,829,316   395,995   13,129,556

Net Book Value at cost - 202,679 - 202,679

P P P P

7. Accounts Payable and Accrued Expenses

    2015   2014
Trade payables P - P 904,293
Accrued expenses   10,921   29,125

  P 10,921 P 933,418

These represent the various open accounts with various suppliers, under terms usually pertaining to
operational activities.

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8. Income Taxes

In accordance with PAS 12, Income Taxes, a deferred tax asset or liability is recognized related to temporary
differences arising from changes in exchange rate due to measurement of the Company’s nonmonetary assets
and liabilities in its functional currency, which is different from the currency used in determining the Company’s
taxable income or loss.

a. The Company’s did not recognize deferred tax assets for 2015 and 2014.

9. Related Party Transactions

    2014   2013

 Advances from stockholders P - P 2,400,000

The Company, in the normal course of business, has transactions with its stockholders, associated companies
and related parties pertaining to funding advances.

The company’s stockholder extends funding advances for the company’s operation without interest to the
company.

10. Capital Disclosures

The capital managed by the Corporation is as follows:

    2015   2014
Net asset in liquidation P 1,478,807 P -
Stockholders' equity - 1,567,298
  P 1,478,807 P 1,567,298

As at December 31, 2015, the Corporation’s capital amounted to P1,478,807, a decrease of P88,491 during 2015
mainly driven by the gain on sale of property and equipment of P49,962, administrative and other expenses
amounting to P140,571 and interest income amounting of P2,118.

The corporation’s strategy, to maximize shareholder value and to return capital to its shareholders, has influenced its
capital management objectives. During the year the corporation begun the disposal of its assets and payment of its
liabilities. As a result, the corporation’s net asset was increased by about P52,080 in interest and gain on sale of
property and equipment but was reduced by the administrative and other expenses amounting to P140,571.

As described in Note 1, on October 3, 2014, the Board of Directors decided to seek shareholder approval, which was
subsequently given, to proceed with the winding-up of the Corporation, the distribution of its net assets, after
providing for liabilities, contingencies and costs, and ultimately its dissolution in the future. The Liquidation of the
Corporation is subject to shareholder approval. The corporation’s strategy will be to maximize the amount available
for distribution to its shareholders and wind-up the Corporation’s activities in an orderly fashion. The Corporation
expects to incur ongoing administrative costs and professional fees until the Corporation’s activities are wound up.

11. Financial Assets and Financial Liabilities

The Company's financial assets and financial liabilities measured at amortized costs as of December 31, 2015
and 2014 are as follows:
2015 2014
  Carrying Value Fair Value   Carrying Value Fair Value

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Financial Assets        
Cash P 1,444,079 P 1,444,079 P 4,426,774 P 4,426,774
Receivables
Others - - 202,259 202,259
Refundable deposits    -    - 45,649 43,261
   P 1,444,079 P  1,444,079 P 4,674,682 P 4,672,294

Financial Liabilities
Financial liabilities carried at amortized costs:
Accounts payable P 10,921 10,921 P 933,418 P 933,418
Income tax 999 999 11,659 11,659
Advances from stockholders   -   - 2,400,000 2,400,000
  P 11,920  P 11,920 P 3,345,077 P 3,345,077

12. Net Income/Total Comprehensive Income

The Company's net loss and total comprehensive loss for the year ended December 31, 2014 are the same since
the Company does not have other comprehensive loss.

13. Cost of Goods Sold

    2015   2014
Cost of food, packaging and novelty items P - P 11,615,360
Salaries , allowances and bonuses - 4,443,286
Communication , light and water - 2,505,134
Royalty - 2,187,449
Operation supplies expense - 1,134,345
Rent and lease facilities - 1,096,728
System ads - 729,150
Repair and maintenance - 348,420
Depreciation and amortization - 149,880
  P - P 24,211,772

14. Operating expenses

  2015 2014
       
GENERAL AND ADMINISTRATION
Salaries and wages P 82,001 P 516,638
Depreciation (Notes 2 and 4) 49,962 -
Transportation and travel 6,608 60,552
Repairs and maintenance 1,500
Taxes and licenses 500 488,588
Communication, light and water - 75,252
Insurance - 10,364
Office supplies - 69,088
Professional fees - 22,000
Advertising - 140,404
Representation - 108,630
Miscellaneous   -   416,329
Total General and Administration Expenses P 140,571 P 1,907,845

15. Supplementary Information Required Under Revenue Regulations (RR) 15-2010

The Bureau of Internal Revenue has issued Revenue Regulation (RR) No. 15-2010 which requires certain tax
information to be disclosed in the notes to the financial statements. The additional required disclosures are
discussed below.

The Company reported and/or paid the following types of taxes in 2015:

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Value Added Tax (VAT)

The Company's sales are subject to output value added tax (VAT) while its importations and purchases from
other VAT-registered individuals or corporations are subject to input VAT. The VAT rate is 12%.

Other taxes and licenses:

Included in operating expenses:

License and permits fees P 500

  P 500

Withholding taxes

The amount of withholding taxes paid/accrued for the year amounted to:

Withholding taxes on compensation and benefits P 202,090

Final withholding taxes 437,490
Creditable withholding taxes P 363,380
1,002,960

Tax Assessments and Cases

The Company has no ongoing tax assessments and cases as of December 31, 2015.

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