KOLIN MARKETING, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2013

Corporate Information

Kolin Marketing, Inc. was incorporated and registered in the Philippines with the Securities and Exchange Commission (SEC) on May 14, 1996. The registration number is CS1996-004967.

The primary purpose of the Company is to engage in, conducting, and carrying on the business of selling, dealing in, purchasing and delivering of goods, wares, merchandise and other products.

The registered principal address of the Company is located at Kolin Building, EDSA cor. Magallanes Avenue, Magallanes Village, Makati City.

The financial statements of the Company for the year ended December 31, 2013 were authorized for issue by the Board of Directors on March 17, 2014. The Board of Directors is still empowered to make amendments even after the date of issue.

Basic of Preparation

Statement of Compliance

The accompanying financial statements have been prepared in accordance with Philippine Financial Reporting Standards for Small and Medium Sized Enterprise (PFRS for SMEs). The financial statements have been prepared using the measurement bases specified by PFRS for SMEs for each type of assets, liabilities, and income and expense. The measurement bases are more fully described in the accounting policies in the succeeding pages.

The preparation of financial statements in accordance with PFRS for SMEs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. Areas involving a degree of judgment or complexity, or areas where assumptions and estimations are significant to the financial statements are disclosed in (Note 3).

Basis of Measurement

The financial statements have been prepared on historical cost basis of accounting.

Presentation of Statements of Income and Statements of Changes in Equity

The Company opted to present a separate statements of income and a separate statements of changes in equity even when the changes to equity during the years presented arise only from profit or loss.

Functional and Presentation Currency

The financial statements are presented in Philippine Peso, which is the Company’s functional currency. All financial information expressed in Philippine Peso has been rounded off to the nearest peso.

Use of Estimates and Judgments

The preparation of the financial statements in conformity with PFRS for SMEs requires management to make judgments, estimates and assumption that effect the application of accounting policies and the amounts reported in the financial statements. The estimates and assumption used in the financial statements are based on management’s evaluation of relevant facts and circumstances as of the date of the financial statements. Actual results may differ from such estimates.

Judgments are made by management on the development, selection and disclosure of the Company’s critical accounting policies and estimates and the application of these policies and estimates.

Estimates and underlying assumptions are reviewed on a ongoing basis and are based on historical experience and factors, including expectations of future events that are believed to be reasonable under circumstances. Revisions to accounting estimates are recognized in the period in which the estimate is revised and any periods affected.

In particular, the following are the information about significant areas of estimates, uncertainty and critical judgment in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements:

Functional Currency

Based on the economic substance of the underlying circumstances relevant to the Company, the functional currency has been determined to be the Philippine Peso. It is the currency that mainly influence the price of the services and the cost of providing the services.

Estimated Allowance for Impairment Losses on Receivables

The Company maintains an allowance for impairment losses on receivables at a level considered adequate to provide for potential uncollectible receivables. The level of this allowance is evaluated by management on the basis of factors that affect the collectability of the accounts. These factors include, but are not limited to, the length of the Company’s relationship with customer’s payment behavior and known market factors. The Company reviews the age and status of receivables, and identifies accounts that are to provided with allowances on a regular basis.

As per management evaluation, the Company set-up allowance for doubtful account amounted to 198,335 for uncollectible amount for more than 5 years and management believes that amount can’t be collected. Receivables amounted to P 5,359,802 and P 2,894,848 as of December 31, 2013 and 2012 respectively (See Note 5 )

Summary of Significant Accounting Policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

Financial Assets

Cash

Cash are stated at face value. Cash consist of cash in bank on savings account which earn interest at the bank deposit rates and these are deposits held at call with the bank.

Trade and other receivables

Trade and other receivables are initially measured at transaction price and are subsequently presented at undiscounted amount. Where credit is extended beyond normal credit terms, receivables are measured at amortized cost using the effective interest method. At the end of each reporting date, the carrying amounts of trade and other receivables are reviewed to determine whether there is any objective evidence that the amounts are not recoverable. If such evidence is identified, an impairment loss is recognized immediately in profit or loss.

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 where;

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

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

The Company has transferred its rights to receive cash flows from the asset and either (a) has transferred nor retained substantially all the risk and rewards of the assets, 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 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.

Impairment of Financial Assets

The Company assesses at the end of each reporting date whether a financial asset or group of financial assets is impaired.

If there is objective evidence that an impairment loss on 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 (excluding future expected credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss shall be recognized in statements of income.

If, an subsequent period, the amount of the impairment loss decreases and the decreases can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date. Any subsequent reversal of an impairment loss is recognized in the statements of income.

In relation to trade receivables, a provision for impairment is made when there is an objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Company will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired receivables are derecognized when they are assessed as uncollectible.

Offsetting 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 asset and settle the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented gross in the statements of financial position.

Impairment of Non-financial Assets

At each reporting date, property and equipment are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If these 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 amount 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 increase 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(group of related assets) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

Trade and other Payables

Trade and other payables are recognized initially at the transaction price and subsequently measured at amortized cost using the effective interest method.

Trade and other payables are derecognized from the statement of financial position only when the obligations are extinguished either through discharge, cancellation or expiration.

Borrowing Costs

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

Provisions

Provisions are recognized when the Company has: (a) present obligation (legal or constructive) as a result of a past event; (b.) it is probable (i.e., more likely than not) that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessment of the time value of money and where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as interest expense. Where the Company expects a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the receipt of the reimbursement is virtually certain. Provision are reviewed at each reporting date and adjusted to reflect the current best estimate.

Equity

Capital stock is recognized based on the par value of shares issued, net of related cost of issuance.

Retained earnings include all current and prior period results of operations as reported in profit or loss.

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 reliably measured.

Revenue is recognized when the risk and rewards of ownership of the goods have passed to the buyer. This is generally when the customer has taken undisputed delivery of goods.

Other income, including interest which is presented net of applicable tax withheld is recognized when earned.

Cost and Expense Recognition

The financial statements are prepared on the accrual basis of accounting. Under this basis, expenses are recognized when they are occur and reported in the financial statements in the periods to which they relate.

Income Tax

Income tax on the profit or loss for the year comprise of current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current Tax – Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authority. Tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the end of the reporting date.

Deferred Tax – Deferred tax is provided using the ability method on temporary differences at the end of the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences, carryforward benefits of unused excess minimum corporate income tax (MCIT) over the regular corporate income tax and unused net operating loss carry over (NOLCO), to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward benefits of unused MCIT and unused NOLCO can be utilized. Excess MCIT can be used within three taxable years from the date of payment and NOLCO can be charged against income of the next three taxable years.

Deferred tax assets and liabilities are measured at the 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 date.

A valuation allowance against deferred tax assets is recognized 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 net carrying amount of a deferred tax asset is reviewed at each reporting date and such valuation allowance is adjusted to reflect the current assessment of future taxable profits.

Deferred tax assets and liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax relate to the same taxable entity and the same taxation authority.

Value-Added Tax

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

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

Receivables and payables are stated with the amount of value-added tax included.

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

Related Party Transactions

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. It includes companies in which one or more of the directors and/or controlling shareholder of the Company either have a beneficial controlling interest or are in a position to exercise significant influence therein.

Cash and cash equivalent

This account consists of:

Cash in banks generally earn interest at rates based on daily bank deposit rate and unrestricted as to withdrawal and can be used by the Company in its operations.

Trade receivables and other receivables

No interest is charged on these receivables even if it exceeds credit period.

Trade and Other Payables

This account consists of:

Trade and other current liabilities are payable to supplier Kolin Philippines International, Inc. and are normally paid within 30 to 120 days from the receipt of billing statement.

Other current liabilities

This account consists of:

Related party relationship exists when one party has 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 enterprises, or between and / or among the reporting enterprises and their key management personnel, directors, or its stockholders.

The Company has no receivables and payables to related party as at December 31, 2013

B. There were no renumeration paid to key management personnel as of December 31, 2013

Share capital

The authorized share capital is ₱10,000 divided into 2,500 shares at ₱100 par value of which the 2,500 shares are issued and outstanding as of December 31, 2012 for a total capital stock of P 250,000.

The Board of Directors and Stockholders approved and agreed capital adjustments and declaration of stock dividends for the next taxable year in view of excess of retained earnings over paid up capital.

The share capital of the Company consists only of common stock. All shares are equally eligible to receive dividends and repayment of capital and each share is entitled to one vote at the shareholders’ meeting of the Company.

Cumulative Earnings

This account consists of:

Revenues

This account consists of:

Revenue is recognized when the risk and rewards of ownership of the goods have passed to the buyer. This is generally when the customer has taken undisputed delivery of goods.

Cost of goods and services

This account consists of:

The Company cost of services for the years 2013 and 2012 amounted to P 23,370,112 and P 19,385,199 respectively. This account consists of purchasing of goods, wares and merchandize to Kolin Philippines International, Inc.

Administrative expenses

This account consists of:

Income tax payable

This account consists of:

14. Supplementary information required by Revenue Regulation No. 15-2010

On December 28, 2010, RR No. 15-2010 became effective and amended certain provision of RR No. 21-2002 prescribing the manner of compliance with any documentary and /or procedural requirements in connection with the preparation and submission of financial statements and income tax returns. Section 2 of RR No. 21-2002 was further amended to include in the Notes to Financial Statements information on taxes, duties and licenses fees paid or accrued during the year in addition to what is mandated by PFRS.s

Below is the additional information required by RR. No. 15-2010. This information is presented for purposes of filing with the BIR and is not a required part of the basic financial statements.

A. Output Value-Added Tax (VAT)

Output tax declared for the year ended December 31, 2012 and the revenues upon which the same was based consist of:

Pursuant to Section 106-A, Vat on Sales of Goods or Properties, and Section 109, Vat Exempt Transactions, of the National Internal Revenue Code of 1997, the Company has sales –exempt amounting to P 166,573 for the taxable year.

B. Input Taxes

C. Taxes and Licenses

The Company taxes and licenses paid for the year is amounted to Four Hundred Twelve Thousand Four Hundred Eighty Pesos (P 412,480).

D. Withholding Taxes

The Company withholding tax –compensation deduct and remitted for the year 2013 amounted to P 21,242 and withholding tax – expanded deducted/remitted for the year 2013 amounted to P 237,152.02.

E. Deficiency Tax Assessment and Tax cases

The Company does not have final deficiency tax assessment with the BIR or tax cases outstanding or pending in courts or bodies outside the BIR in any open years

II. Requirements under Revenue Regulation (RR) 19-2011

RR 19-2011 requires schedules of taxable revenues and other non-operating income, costs of sales and services, itemized deductions and other significant tax information, to be disclosed in the notes to financial instruments

The amounts of taxable revenues and income, and deductible costs and expenses presented below are based on relevant tax regulations issued by the BIR hence, may not be the same, as the amounts reflected in the 2013 statement of income.

Taxable Revenues

The Company’s taxable revenues subject to regular tax rate for the year ended December 31, 2013 amounted to (P25,343,801).

Deductible Cost of Services

The Company cost of services amounted to P 23,370,112 and P 19,385,199 for the years 2013 and 2012 respectively. This account consists of purchasing of goods, wares, cctv cameras and merchandize to Kolin Philippines International, Inc and Laview Security Phils, Inc.

Taxable Non-operating and Other Income

The Company has no taxable non-operating and other income in 2013 which are subject to regular tax rate during the year.

Itemized Deductions

The amounts of itemized deductions for the year ended December 31, 2013 are as follows;

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MOZCOM, INC

celia

2014-03-31

SYSTEM ADMIN

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