LACER INDUSTRIAL PARTS AND SERVICES CORPORATION

Corner Royal Valley, Bangkal, Davao City

STATEMENT OF FINANCIAL CONDITION

As of December 31, 2018 and 2017

A S S E T S

Notes 2018 2017

Current Assets

Cash & Cash Equivalents 5 48,827 149,388

Trade Receivables 6 37,165 46,340
Inventories 7 60,748 44,616
Other Current Assets 8 19,684 20,520
Total Current Assets 166,424 260,864

Non-Current Assets
Property & Equipment 9 148,866 208,333

Total Non-Current Assets 148,866 208,333

TOTAL ASSETS 315,290 469,197

LIABILITIES & SHAREHOLDERS' EQUITY

Current Liabilities
Trade & Other Payables 10 638,733 684,091

Total Liabilities 638,733 684,091

Shareholders' Equity (323,443) (214,895)

TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 315,290 469,197

See accompanying Notes to Financial Statements

1|Page
 LACER INDUSTRIAL PARTS AND SERVICES CORPORATION
Corner Royal Valley, Bangkal, Davao City

STATEMENT OF FINANCIAL OPERATIONS

For the Year Ended December 31, 2018 and 2017
Notes 2018 2017

REVENUES

SALES 12 603,176 597,948

COST OF SALES 13 367,037 390,648

GROSS PROFIT 236,138 207,300

OPERATING EXPENSES 14 339,964 408,818

NET PROFIT FROM OPERATIONS (103,825) (201,518)

OTHER INCOME (CHARGES)

INTEREST INCOME - 110

NET INCOME BEFORE INCOME TAX (103,825) (201,408)

INCOME TAX EXPENSE 11 4,723 4,146

NET PROFIT FOR THE PERIOD (108,548) (205,554)

See accompanying Notes to Financial Statements

2|Page
 LACER INDUSTRIAL PARTS AND SERVICES CORPORATION
Corner Royal Valley, Bangkal, Davao City

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the Year Ended December 31, 2018 and 2017
Notes 2018 2017
SHARE CAPITAL
Capital Stock - P100 Par Value
Authorized - 10,000 shares

Subscribed and Paid - 2,500 shares 15 250,000 250,000

Retained Earnings (Deficit) - Beginning (464,895) (259,341)

Net (Loss) Profit for the Period (108,548) (205,554)

Retained Earnings (Deficit) - Ending (573,443) (464,895)

TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (323,443) (214,895)

See accompanying Notes to Financial Statements

3|Page
 LACER INDUSTRIAL PARTS AND SERVICES CORPORATION
Corner Royal Valley, Bangkal, Davao City

STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2018 and 2017
Notes 2018 2017

Cash Flows from Operating Activities

Net Profit for the period (108,548) (205,554)
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 9 59,467 63,634
(Increase) Decrease in Current Assets
Trade Receivables 9,175 66,494
Inventories (16,132) 32,010
Other Current Assets 836 274
Increase (Decrease) in Current Liabilities
Trade & Other Payables (45,359) 105,109

Net Cash Provided (Used) in Operating Activities (100,561) 61,967

Cash Flows from Investing Activities

(Increase) Decrease in Non-Current Assets
Property & Equipment -

Net Cash Provided (Used) in Investing Activities -

Cash Flows from Financing Activities
Increase (Decrease) in:

Net Cash Provided (Used) in Financing Activities - -

Net Increase in Cash Balance (100,561) 61,967

Add: Cash Balance Beginning 149,388 87,421

Cash & Cash Equivalents, December 31 48,827 149,388

See accompanying Notes to Financial Statements

4|Page
LACER INDUSTRIAL PARTS AND SERVICES CORPORATION
Corner Royal Valley, Bangkal, Davao City

NOTES TO FINANCIAL STATEMENTS

December 31, 2018 and 2017

NOTE 1. GENERAL INFORMATION

LACER INDUSTRIAL PARTS AND SERVICES CORPORATION is a domestic corporation organized

under the laws of the Republic of the Philippines and is engaged in the business of calibration
services and trading of automotive parts and accessories. The registered office address of the
Company is Corner Royal Valley, Bangkal, Davao City. The Company was incorporated on
September 6, 2010.

The Company’s financial statements were authorized for issue by the Board of Directors on
April 01, 2019.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

The financial statements of the Company have been prepared on the historical cost basis. The
financial statements are presented in Philippine Peso, the Company’s functional currency.

Statement of Compliance

The accompanying financial statements have been prepared in compliance with the Philippine
Financial Reporting Standards (PFRS) for Small and Medium-sized Entities (SMEs). PFRS includes
PFRS, Philippine Accounting Standards (PAS) and Philippine Interpretations from International
Financial Reporting Interpretations Committee (IFRIC), issued by the Philippine Financial
Reporting Standards Council (FRSC).

Cash and Cash Equivalents

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

Trade and Other Receivables

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 accounts receivables is established when there is objective evidence that the
school will not be able to collect all amounts due according to the payment terms of the
receivables.

Inventories

Inventories are stated at the lower of cost and estimated selling price less cost to complete and
sell. Cost is determined using the first-in, first-out method. At such reporting date, inventories are
assessed for impairment. If inventory is impaired, the carrying amount is reduced to it selling
price less cost to complete and sell. The impairment loss is recognized immediately in profit and
loss.

5|Page
Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization.
The initial cost of property and equipment consists of its purchase price and any directly
attributable costs of bringing the asset to its working condition and location for its intended use.
Expenditures incurred after the property and equipment have been put into operation, such as
maintenance and repairs, are normally charged against income in the period in which the costs
are incurred. In situation where it can be clearly demonstrated that the use of an item of
property and equipment beyond its originally assessed standard of performance, the
expenditures are capitalized as an additional cost of property and equipment.

Depreciation and amortization is computed on a straight-line basis over the estimated useful
lives of the assets ranging from 3 to 10 years.

The useful life and the depreciation and amortization method are reviewed periodically to
ensure that the period and the method of depreciation and amortization are consistent with
the expected pattern of economic benefits from items of property and equipment.

When assets are sold or retired, their cost, accumulated depreciation and amortization and any
impairment in value are eliminated from the accounts and any gain or loss resulting from their
disposal is included in the statement of comprehensive income.

Impairment of Assets

At each reporting date, PPE and intangible assets are reviewed to determine whether there is
any indication that those 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 CV. If estimated recoverable amount is lower, the CV is
reduced to its estimated recoverable amount, and an impairment loss is recognised
immediately in P&L. Similarly, at each reporting date, inventories are assessed for impairment
by comparing the CV of each item of inventory with its selling price less costs to complete and
sell. If an item of inventory is impaired, its CV is reduced to selling price less costs to complete
and sell, and an impairment loss is recognised immediately in P&L.

If an impairment loss subsequently reverses, the carrying amount of the asset 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 recognised for the asset in prior years. A reversal
of an impairment loss is recognised immediately in profit or loss.

Investments

HTM investments are quoted non-derivative financial assets with fixed or determinable
payments and fixed maturities which the Company’s management has the positive intention
and ability to hold to maturity. Where the Company sells other than an insignificant amount of
HTM investments before their maturity, the entire category would be tainted and reclassified as
AFS investments. Once tainted, the Company is not permitted to classify any of its financial
assets as HTM investments for the next two fiscal years after the year of reclassification. In 2013,
following the provision of PAS 39, Financial Instruments: Recognition and Measurement, the
Company classified a certain investment under the HTM category.

After initial measurement, these investments are subsequently measured at amortized cost
using the effective interest method, less any impairment in value. Amortized cost is calculated
by taking into account any discount or premium on acquisition and fees that are an integral
part of the effective interest rate (EIR). Gains and losses are recognized in profit or loss in the
consolidated statement of comprehensive income when the HTM investments are
derecognized and impaired, as well as through the amortization process. The effects of
restatement of foreign currency denominated HTM investments are recognized in profit or loss
in the consolidated statement of comprehensive income.

6|Page
Provision for Employee Benefits

The Company has no defined benefit plan but complies what is in accordance with RA 7641.
The liability recognized in the statement of financial position. At present the company does not
accrue but pays the actual retirement benefit obligation accruing to all qualified employees
as of the reporting date.

The Company did not engage the services of the actuary during the year because
management believes that the amount of provision for employee benefits will not materially
affect the fair presentation of the financial statements considering that there are only few
employees.

Trae and Other Payables

Trade and other payables are liabilities to pay for goods or services that have been received or
supplied and have been invoiced or formally agreed with the supplier. These are non-interest
bearing and are stated at their normal value. Trade and other payables are measured initially
at their nominal values and are subsequently recognized at amortized costs less settlement
payments.

Revenue

Revenue is recognized to the extent that it is probable that the economic benefits will flow to
the Organization and the revenue can be reliably measured. Revenue is measured at the fair
value of the consideration received, excluding discounts, rebates and sales taxes. The
Organization has concluded that it is acting as principal in all of its revenue arrangements.

Expense recognition

Expenses are recognized when it is probable that a decrease in future economic benefits
related to a decrease in asset or increase in liability has occurred and that the decrease in
economic benefits can be measured reliably. Expenses that may arise in the course of ordinary
regular activities of the Foundation include, among others, the operating expenses on the
Organization’s operations. Expenses are recognized when incurred.

Income Taxes

Income taxes represent the corporate income tax, deferred income tax and final tax.

Provisions

Provisions are recognized when the Foundation has: (a) 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 can be made of the amount of the obligation. Where the Organization expects a
provision to be reimbursed, the reimbursement is recognized as a separate asset but only when
the reimbursement is virtually certain. 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 assessments 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. Provisions are reviewed at each statement
of financial position date and adjusted to reflect the current best estimate.

7|Page
Contingent Liabilities and Contingent Assets

Contingent liabilities are not recognized but are disclosed in the financial statements unless the
possibility of an outflow of assets embodying economic benefits is remote. Contingent assets
are not recognized but are disclosed in the financial statements when an inflow of economic
benefits is probable.

Related Party Transactions

A related party transaction is a transfer of resources, services or obligations between a reporting

entity and a related party, regardless of whether a price is charged.

Contingencies

Contingent liabilities are not recognized in the financial statements. These are disclosed unless
the possibility of an outflow or resource embodying economic benefit is remote. A contingent
asset is not recognized in the financial statements but disclosed when an inflow of economic
benefits is probable.

Subsequent Events

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. Significant post
year-end events that are not adjusting events are disclosed in the notes to financial statements
when material.

NOTE 3. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

The preparation of the financial statements in accordance with PFRS for SMEs requires
management to make judgments and estimates that affect reported amounts of assets,
liabilities, income and expenses and disclosure of contingent assets and contingent liabilities at
the reporting date. Future events may occur which will cause the judgments and assumptions
used in arriving at the estimates to change. The effects of any change in judgments and
estimates are reflected in the financial statements as they become reasonably determinable.
In preparing the financial statements, management has made its best judgments and estimates
of certain amounts, giving due consideration to materiality.

The judgments and estimates used in the financial statements are based upon management’s
evaluation of relevant facts and circumstances as of the date of the financial statements.
Actual
results may differ from such estimates.

Judgments

a. Going concern

The management has made an assessment of its ability to continue as a going concern and is
satisfied that it has the resources to continue in business for the foreseeable future.
Furthermore, management is not aware of any material uncertainties that may cast significant
doubt upon the Foundation’s ability to continue as a going concern. Therefore, the financial
statements continue to be prepared on the going concern basis.

b. Financial assets not quoted in an active market

The Organization classifies financial assets by evaluating, among others, whether the asset is

8|Page
quoted or not in an active market. Included in the evaluation on whether a financial asset is
quoted in an active market is the determination on whether quoted prices are readily and
regularly available, and whether those prices represent actual and regularly occurring market
transactions on an arm’s length basis.

Estimates

Impairment of financial assets

Receivables

The Organization assesses its receivable portfolio to assess for impairment at least at each
reporting date. In determining whether an additional credit loss should be recorded in the
statement of excess of revenues over expenses, the Company makes judgments as to whether
there is any observable data indicating that there is a measurable decrease in the estimated
future cash flows from its receivables. This evidence may include observable data indicating
that there has been an adverse change in the payment status of its debtors.

4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Company’s principal financial instruments pertain to accounts from trade customers. It
has other financial assets and liabilities such as accrued expenses and income and
withholding taxes payable, which arise directly from its operations.

The main risks arising from the Company’s financial instrument are interest rate risk, credit risk,
and liquidity risk.

The BOD reviews and approves the Company’s risk management objectives and policies
which are summarized below:

a. Interest Rate Risk

Interest Rate Risk arises from the possibility that changes in interest rates will affect future
cash flows or the fair values of financial instruments. The Company is not exposed into this
kind of risk since it has no loans from any financial institutions. The principal financial
instruments of the Company pertaining to the borrowings from members are non-interest
bearing.

b. Credit Risk

Credit Risk is the risk that the Company will incur a loss because its customer or
counterparties failed to discharge their contractual obligation. The Company trades only
with its clients after verification procedures and upon presentation of proper identification.
The Company manages this risk by carefully choosing their customers and closely
monitoring its pledge loans receivables.

c. Liquidity Risk

Liquidity Risk is the risk that the Company will be unable to meet its payment obligations
when they fall due under normal and stress circumstances. The Company’s policy is to
maintain sufficient cash or have available funding through an adequate amount of credit
facilities to meet its commitments.

The Company monitors its risk to a shortage of funds by considering the maturity of both
its financial instruments and financial assets and projected cash flows from operations.

9|Page
 NOTE 5. CASH AND CASH EQUIVALENTS

2018 2017

Cash in Bank 46,827 147,388

Petty Cash Fund 2,000 2,000
TOTAL 48,827 149,388

This item includes cash in bank that earns interest, highly liquid investment that are readily
convertible to known amounts of cash and with original maturities of three months or less
and that are subject to an insignificant risk of change in value.

NOTE 6. TRADE AND OTHER RECEIVABLES

This account consists of the following as of December 31, 2018 and 2017.

2018 2017

Accounts Receivable - Trade 37,165 46,340

TOTAL 37,165 46,340

NOTE 7. INVENTORIES

This Company’s inventory available for sale as of December 31, 2018 and 2017 are as follows:

2018 2017

Merchandise Inventory 60,748 44,616

NET REALIZABLE VALUE 60,748 44,616

NOTE 8. OTHER CURRENT ASSET

This account consists of the following as of December 31, 2018 and 2017.

2018 2017
Unused Office Supplies 1,684 2,520
Prepaid Rent 18,000 18,000
TOTAL 19,684 20,520

10 | P a g e
 NOTE 9. PROPERTY & EQUIPMENT

This account is consist of the following as of December 31, 2018 and 2017.

2018
Furniture & Shop Tools & Leasehold
Office Equipment Total
Fixtures Equipment Improvements
Costs:
Beginning Balance 112,450 21,890 650,434 74,721 859,495
Additions - - - -
Disposals - - - -
Ending Balance 112,450 21,890 650,434 74,721 859,495
Accumulated Depreciation:
Beginning Balance 112,450 21,890 442,101 74,722 651,163
Depreciation - 59,467 59,467
Reversal/Adjustments - - - -
Ending Balance 112,450 21,890 501,568 74,722 710,630
NET BOOK VALUE - 0 148,866 (0) 148,866

2017
Furniture & Shop Tools & Leasehold
Office Equipment Total
Fixtures Equipment Improvements
Costs:
Beginning Balance 112,450 21,890 650,434 74,721 859,495
Additions - - - -
Disposals - - - -
Ending Balance 112,450 21,890 650,434 74,721 859,495
Accumulated Depreciation:
Beginning Balance 112,450 17,723 382,634 74,721 587,529
Depreciation - 4,167 59,467 0 63,634
Reversal/Adjustments - - - -
Ending Balance 112,450 21,890 442,101 74,722 651,163
NET BOOK VALUE - 0 208,333 (0) 208,333

NOTE 10. TRADE & OTHER PAYABLES

This account is consist of the following as of December 31, 2018 and 2017.

2018 2017
Accounts payable - trade 133,879 165,207
Accounts payable - others 488,341 508,629
Income Tax Payable - Note 11 - 3,938
SSS, PHIC & HDMF 1,667 3,645
Withholding Taxes & VAT 14,846 2,673
TOTAL 638,733 684,091

11 | P a g e
 NOTE 11. INCOME TAX PAYABLE

2018 2017
Income before Income Tax (103,825) (201,518)

Income Tax at Statutory Rate- 30% - -

Minimum Corporate Income Tax - 2% 4,723 4,146

Tax Due (whichever is higher) 4,723 4,146

Total Income Tax Paid (Prev ious Qtrs & Withheld) 4,967 208
Income Tax Still Due and Payable (244) 3,938

NOTE 12. REVENUE

2018 2017

Sales 603,176 597,948

TOTAL 603,176 597,948

NOTE 13. COST OF SALES/SERVICES

2018 2017
Merchandise Inv entory, beginning 44,616 76,626
Add: Purchases 314,284 287,789
Total Goods Av ailable for Sale 358,900 364,415
Less: Merchandise Inv entory, end 60,748 44,616
Total Cost of Goods Sold 298,152 319,799
Add: Cost of Services
Depreciation - Note 9 59,467 59,467
Shop Supllies 9,418 11,382
TOTAL COST OF SALES 367,037 390,648

NOTE 14. OPERATING EXPENSES

2018 2017
Adv ertisement and Promotions 2,925 6,280
Communication Expense 10,592 12,736
Depreciation Expense - 4,167
Fuel, Oil and Lubricants 15,841 18,268
Light and Water 26,187 30,310
Miscellaneous Expenses 3,850 4,905
Office Supplies 3,933 3,557
Rentals 72,000 72,000
Repairs and Maintenance - 10,089
Representation and Entertainment - 2,145
Salaries and Wages 160,000 206,225
SSS, Philhealth & HDMF Contributions 20,152 18,943
Taxes and Permits - Note 16 19,899 14,427
Transportation and Meals 4,585 4,766
TOTAL 339,964 408,818

12 | P a g e
 NOTE 15. SHARE CAPITAL

2018 2017
Authorized Capital Shares 10,000 10,000
Par Value 100 100
Total Authorized Capital 1,000,000 1,000,000

Subcribed Capital 2,500 2,500

Par Value 100 100
Total Subscribed Capital 250,000 250,000

Paid-Up Capital 2,500 2,500

Par Value 100 100
Paid-Up Capital 250,000 250,000

NOTE 15. SUPPLEMENTARY INFORMATION REQUIRED BY REVENUE REGULATION NO. 15-2010

On December 28, 2010, Revenue Regulation(RR) No. 15-2010 became effective and
amended certain provisions 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 license fees paid or accrued during the year.

a The Company has no transactions subject to custom duties and excise tax.

b The Company taxes and licenses shown as part of the operating expenses account in the
Statement of financial Operations in 2018 and 2017 are as follows:
2018 2017
BIR Registration 1,000 1,000
Business Permit & Cedula 18,899 13,427

TOTAL 19,899 14,427

c The Company paid a total of 16,853.11 and 15,650.26 VAT in 2018 and 2017, respectively.

d The Company is not involved in any tax case under final tax assessment with the BIR as of
December 31,2018. Likewise, the entity has no other pending tax cases outside the
administration of the BIR as at December 31, 2018 and 2017.

13 | P a g e