Sun Pharma Philippines Inc

Punongbayan & Araullo
20th Floor, Tower 1

The Enterprise Center
6766 Ayala Avenue
1200 Makati City
Report of Independent Auditors Philippines
T +63 2 8988 2288
The Board of Directors a

Sun Pharma Philippines, Inc.
(A Wholly Owned Subsidiary of Sun Pharma Global FZE)
Unit 604, Liberty Center Building
104 H.V. Dela Costa Street
Salcedo Village, Makati City
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Sun Pharma Philippines, Inc. (the Company), which
comprise the statements of financial position as at March 31, 2021 and 2020, and the statements of
comprehensive income, statements of changes in capital deficiency and statements of cash flows
for the years then ended, and notes to the financial statements, including a summary of significant
accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects,
the financial position of the Company as at March 31, 2021 and 2020, and its financial
performance and its cash flows for the years then ended in accordance with Philippine
Financial Reporting Standards (PFRS).
Basis for Opinion
We conducted our audits in accordance with Philippine Standards on Auditing (PSA). Our
responsibilities under those standards are further described in the Auditors’ Responsibilities for
the Audit of the Financial Statements section of our report. We are independent of the
Company in accordance with the Code of Ethics for Professional Accountants in the Philippines
(Code of Ethics) together with the ethical requirements that are relevant to our audit of the
financial statements in the Philippines, and we have fulfilled our other ethical responsibilities in
accordance with these requirements and the Code of Ethics. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Certified Public Accountants

grantthornton.com.ph
Punongbayan & Araullo (P&A) is the Philippine member firm of Grant Thornton International Ltd.
Offices in Cavite, Cebu, Davao

BOA/ PRC Cert of Reg. No. 0002
SEC Accreditation No. 0002
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Material Uncertainty Related to Going Concern
We draw attention to Note 1 to the financial statements, which indicates that the Company has
substantial capital deficiency of P330.6 million and P368.1 million as at March 31, 2021 and
2020, respectively. As stated in Note 1, this condition indicates the existence of a material
uncertainty that may cast significant doubt on the Company’s ability to continue as a going
concern entity. In response to this matter, the Company’s management has already launched
new products by the end of 2021 and plans to enter new business segments and explore local
tie-ups or joint venture options to continuously grow the business in the coming years. Aside
from that, the Company’s management continues to strengthen the strategy to expand its
market in order for the Company to increase its sales and continuously generate profit by
continuous intensive marketing of its products. Management is confident that the Company will
be able to recover from losses in the next succeeding years. In 2021 and 2020, the Company
generated net profit amounting to P38.0 million and P16.5 million, respectively. The
Company’s ultimate parent company has also committed to provide the Company with financial
assistance to maintain it as going concern and enable it to meet its liabilities as and when they
fall due until the next reporting period. Accordingly, the accompanying Company’s financial
statements have been prepared assuming that the Company will continue as a going concern
which contemplates the realization of assets and the settlement of liabilities in the normal
course of business. In connection with our audit,
we have performed audit procedures to evaluate management’s assumptions as to the
Company’s ability to continue as a going concern. Our opinion is not modified in respect of this
matter.
Responsibilities of Management and Those Charged with Governance for the

Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements
in accordance with PFRS, 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.
In preparing the financial statements, management is responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to
liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial
reporting process.

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Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with PSA will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with PSA, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditors’ report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditors’ report.
However, future events or conditions may cause the Company to cease to continue as a
going concern.
• Evaluate the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.

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Report on Other Legal and Regulatory Requirements
Our audits were conducted for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplementary information for the year ended March 31,
2021 required by the Bureau of Internal Revenue as disclosed in Note 23 to the financial
statements is presented for purposes of additional analysis and is not a required part of the
basic financial statements prepared in accordance with PFRS. Such supplementary information
is the responsibility of management. The supplementary information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial statements taken as a whole.
PUNONGBAYAN & ARAULLO
By: Jerald M. Sanchez

Partner
CPA Reg. No. 0121830

TIN 307-367-174
PTR No. 8533241, January 4, 2021, Makati City
SEC Group A Accreditation
Partner - No. 121830-SEC (until Dec. 31, 2023)
Firm - No. 0002 (until Dec. 31, 2024)
BIR AN 08-002511-041-2019 (until Dec. 15, 2022)
Firm’s BOA/PRC Cert. of Reg. No. 0002 (until Jul. 24, 2021)
May 14, 2021

SUN PHARMA PHILIPPINES, INC.
STATEMENTS OF FINANCIAL POSITION
MARCH 31, 2021 AND 2020
(Amounts in Philippine Pesos)
Notes 2021 2020
ASSETS
CURRENT ASSETS
Cash 4 P 30,061,172 P 50,793,227
Trade and other receivables - net 5 117,199,235 105,703,421
Inventories - net 6 86,618,359 80,880,212
Other current assets 7 5,078,952 1,655,075
Total Current Assets 238,957,718 239,031,935
NON-CURRENT ASSETS
Property and equipment - net 8 18,404,015 16,052,754
Right-of-use asset - net 9 2,133,310 -
Other non-current assets - net 7 2,383,195 2,466,177
Total Non-current Assets 22,920,520 18,518,931
TOTAL ASSETS P 261,878,238 P 257,550,866
LIABILITIES AND CAPITAL DEFICIENCY
CURRENT LIABILITIES
Trade and other payables 10 P 258,709,273 P 272,894,331
Advances from parent company 16 328,259,868 350,825,043
Lease liability 9 1,179,261 -
Total Current Liabilities 588,148,402 623,719,374
NON-CURRENT LIABILITIES
Retirement benefit obligation 14 3,351,177 1,890,145
Lease liability 9 981,839 -
Total Non-current Liabilities 4,333,016 1,890,145
Total Liabilities 592,481,418 625,609,519
CAPITAL DEFICIENCY
Capital stock 17 8,653,400 8,653,400
Revaluation reserve 14 ( 545,486 ) -
Deficit 2 ( 338,711,094 ) ( 376,712,053 )
Capital Deficiency ( 330,603,180 ) ( 368,058,653 )
TOTAL LIABILITIES AND CAPITAL DEFICIENCY P 261,878,238 P 257,550,866
See Notes to Financial Statements.

STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED MARCH 31, 2021 AND 2020
Notes 2021 2020
REVENUES - Net 11 P 368,744,541 P 342,331,996
COST OF GOODS SOLD 12 198,843,510 179,642,482
GROSS PROFIT 169,901,031 162,689,514
SELLING AND ADMINISTRATIVE EXPENSES 12 162,991,693 161,952,883

SELLING AND ADMINISTRATIVE
OPERATING INCOME 6,909,338 736,631
OTHER INCOME - Net 13 31,103,745 19,062,751
PROFIT BEFORE TAX 38,013,083 19,799,382
TAX EXPENSE 15 12,124 3,284,425
NET PROFIT 38,000,959 16,514,957
OTHER COMPREHENSIVE LOSS 14 545,486 -
TOTAL COMPREHENSIVE INCOME P 37,455,473 P 16,514,957

STATEMENTS OF CHANGES IN CAPITAL DEFICIENCY
Revaluation
Capital Stock Reserve Deficit
(see Note 17) (see Note 14) (see Note 2) Total
Balance at April 1, 2020 P 8,653,400 P - ( P 376,712,053 ) ( P 368,058,653 )

Total comprehensive income (loss) - ( 545,486 ) 38,000,959 37,455,473
Balance at March 31, 2021 P 8,653,400 (P 545,486 ) (P 338,711,094 ) (P 330,603,180 )
Balance at April 1, 2019 P 8,653,400 P - (P 393,227,010 ) (P 384,573,610 )

Total comprehensive income - - 16,514,957 16,514,957
Balance at March 31, 2020 P 8,653,400 P - (P 376,712,053 ) (P 368,058,653 )

STATEMENTS OF CASH FLOWS
Notes 2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax P 38,013,083 P 19,799,382
Adjustments for:
Net unrealized gain on foreign exchange transactions 16 ( 19,009,819 ) ( 15,975,926 )
Depreciation and amortization 7, 8, 9 5,305,721 4,819,460
Loss on inventory obsolescence 6 4,141,921 3,557,474
Impairment loss (reversal of impairment loss) on trade and
other receivables 5 ( 1,762,903 ) 2,112,606
Gain on disposals of assets 8 ( 205,845 ) ( 1,119,559 )
Interest income 4, 5 ( 166,680 ) ( 225,299 )
Interest expense on lease liability 9 46,923 -
Operating profit before working capital changes 26,362,401 12,968,138
Increase in trade and other receivables ( 9,732,911 ) ( 15,160,355 )
Increase in inventories ( 9,880,068 ) ( 12,480,192 )
Decrease (increase) in other current assets ( 86,988 ) 2,000,311
Decrease (increase) in other non-current assets 82,982 ( 636,680 )
Increase (decrease) in trade and other payables ( 12,881,414 ) 59,339,010
Increase in retirement benefit obligation 915,546 1,034,575
Cash generated from (used in) operations ( 5,220,452 ) 47,064,807
Interest received 4, 5 166,680 225,299
Cash paid for taxes ( 3,431,995 ) ( 3,693,545 )
Net Cash From (Used in) Operating Activities ( 8,485,767 ) 43,596,561
CASH FLOWS FROM INVESTING ACTIVITIES

Acquisitions of property and equipment 8 ( 7,269,242 ) ( 10,097,506 )
Proceeds from sale of property and equipment 8 205,845 1,119,559
Additions to intangible asset 7 - ( 160,000 )
Net Cash Used in Investing Activities ( 7,063,397 ) ( 9,137,947 )
CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of advances from parent company 16 ( 4,859,000 ) -
Payment of lease liability 9 ( 323,891 ) -
Cash Used in Financing Activities ( 5,182,891 ) -
NET INCREASE (DECREASE) IN CASH ( 20,732,055 ) 34,458,614
CASH AT BEGINNING OF YEAR 50,793,227 16,334,613
CASH AT END OF YEAR P 30,061,172 P 50,793,227
Supplemental Information on Non-cash Investing and Financing Activities –
In 2021, the Company recognized right-of-use asset and lease liability amounting to P2,438,068 each (see Note 9).

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021 AND 2020
1. GENERAL INFORMATION
1.1 Corporate Information
Sun Pharma Philippines, Inc. (the Company) was incorporated and registered with the
Philippine Securities and Exchange Commission on December 8, 2011 primarily to
engage in the business of marketing and distribution on wholesale of pharmaceutical,
cosmetics and chemical products.
The Company is a wholly owned subsidiary of Sun Pharma Global FZE (the parent
company), a free zone limited liability establishment incorporated in Sharjah Airport
International Free Zone, Sharjah, United Arab Emirates (U.A.E.) pursuant to Emiri
Decree No. 2 of 1995 and in accordance with the implementation procedures of the free
zone establishment that is engaged in sourcing pharmaceutical formulations and active
pharmaceutical ingredients mainly manufactured by Sun Pharmaceutical Industries
Limited – India (the ultimate parent company) and supplying to the overseas related
parties. The ultimate parent company is involved with manufacturing operations that are
focused on producing generics, branded generics, speciality, over-the-counter products,
anti-retrovirals, active pharmaceutical ingredients and intermediates in the full range of
dosage forms, including tablets, capsules, injectables, ointments, creams and liquids.
The registered office address of the Company, which is also its principal place of business, is
located at Unit 604, Liberty Center Building, 104 H.V. Dela Costa Street, Salcedo Village,
Makati City. The registered office address of the parent company is located at Executive Suite
Y-43, P.O. Box 122304, Sharjah, U.A.E., while the ultimate parent company is located at Sun
House CTS No. 201 B/1, Western Express Highway, Goregaon, Mumbai 400063, India.
1.2 Status of Operations
The Company has reported substantial capital deficiency of P330.6 million and P368.1 million
as at March 31, 2021 and 2020, respectively. This condition indicates the existence of a
material uncertainty that may cast significant doubt on the Company’s ability to continue as a
going concern entity. In response to this matter, the Company’s management has already
launched new products by the end of 2021 and plans to enter new business segments and
explore local tie-ups or joint venture options to continuously grow the business in the coming
years. Aside from that, the Company’s management continues to strengthen the strategy to
expand its market in order for the Company to increase its sales and continuously generate
profit by continuous intensive marketing of its products. Management is confident that the
Company will be able to recover from losses in the next succeeding years. In 2021 and 2020,
the Company generated net profit amounting to P38.0 million and P16.5 million, respectively.
The Company’s ultimate parent company has also committed to provide the Company with
financial assistance to maintain it as going concern and enable it to meet its liabilities as and
when they fall due until the next reporting period. Accordingly, the financial statements
have been prepared assuming that the Company will continue as a going concern. The
financial statements do not include any adjustments to reflect possible future effects on the
recoverability and classification of assets or the amount and classification of liabilities that
might result from the outcome of this uncertainty.
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1.3 Impact of COVID-19 Pandemic on Company’s Business

The COVID-19 pandemic started to become widespread in the Philippines in early
March 2020. The measures taken by the government to contain the virus have affected
economic conditions and the Company’s business operations.
The COVID-19 pandemic did not negatively impact the Company’s financial condition
and operation, in fact, the total revenues for the current year have increased by 8% in
comparison to the previous year’s balance. Regardless, the Company has implemented
cost-saving strategies during the pandemic. The following are the impact of the
COVID-19 pandemic to the Company’s business:
• limited flights and high airfreight cost, affected movements and distribution of
products, affecting the targeted sales;
• from the onset of community quarantine in 2020, office operations were interrupted,
introducing the work-from-home (WFH) arrangements;
• postponed, cancelled or program changed in marketing and sales activities; and,
• additional office maintenance and employee-related expenses were incurred to ensure

health and safety of the Company’s employees and customers such as the frequent
disinfection of facilities and COVID-19 testing for its employees, as the work
requires.
In response to this matter, the Company has taken the following actions:
• shifted from airfreight to sea freight mode of shipment to avoid high cost via air, and
shipped in bulk to compensate with longer transit time; and,
• subscribed to 24/7 cloud-based accounting program to enable accounting system

accessible during WFH.
1.4 Approval of Financial Statements
The financial statements of the Company as at and for the year ended March 31, 2021
(including the comparative financial statements as at and for the year ended
March 31, 2020) were authorized for issue by the Company’s Board of Directors (BOD)
on May 14, 2021.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies that have been used in the preparation of these
financial statements are summarized below. These policies have been consistently
applied to all the years presented, unless otherwise stated.
2.1 Basis of Preparation of Financial Statements
(a) Statement of Compliance with Philippine Financial Reporting Standards
The financial statements of the Company have been prepared in accordance
with Philippine Financial Reporting Standards (PFRS). PFRS are adopted by the
Financial Reporting Standards Council (FRSC) from the pronouncements issued
by the International Accounting Standards Board, and approved by the Philippine
Board of Accountancy.
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The financial statements have been prepared using the measurement bases specified
by PFRS for each type of asset, liability, income and expense. The measurement
bases are more fully described in the accounting policies that follow.
(b) Presentation of Financial Statements
The financial statements are presented in accordance with Philippine Accounting

Standard (PAS) 1, Presentation of Financial Statements. The Company presents all
items of income and expense and other comprehensive income or loss in a single
statement of comprehensive income.
The Company presents a third statement of financial position as at the beginning of

the preceding period when it applies an accounting policy retrospectively, or makes
a retrospective restatement or reclassification of items that has a material effect
on the information in the statement of financial position at the beginning of the
preceding period. The related notes to the third statement of financial position are
not required to be disclosed.
(c) Functional and Presentation Currency
These financial statements are presented in Philippine pesos, the Company’s

functional and presentation currency, and all values represent absolute amounts
except when otherwise indicated.
Items included in the financial statements of the Company are measured using its
functional currency, the currency of the primary economic environment in which
the Company operates.
2.2 Adoption of New and Amended PFRS
(a) Effective in Fiscal Year 2021 that are Relevant to the Company
The Company adopted for the first time the following revised conceptual
framework and amendments to existing standards, which are mandatorily
effective for annual periods beginning on or after January 1, 2020:
Conceptual Framework : Revised Conceptual Framework for

Financial Reporting
PAS 1 and PAS 8
(Amendments) : Presentation of Financials Statements and
Accounting Policies, Changes in
Accounting Estimates and Errors –
Definition of Material
PFRS 7 and PFRS 9
(Amendments) : Financial Instruments: Disclosures and
Financial Instruments – Interest Rate
Benchmark Reform
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Discussed below are the relevant information about these pronouncements.
(i) Revised Conceptual Framework for Financial Reporting. The revised conceptual
framework will be used in standard-setting decisions with immediate effect.
Key changes include (a) increasing the prominence of stewardship in the
objective of financial reporting, (b) reinstating prudence as a component of
neutrality, (c) defining a reporting entity, which may be a legal entity, or a
portion of an entity, (d) revising the definitions of an asset and a liability,
(e) removing the probability threshold for recognition and adding guidance
on derecognition, (f) adding guidance on different measurement basis, and,
(g) stating that profit or loss is the primary performance indicator and that,
in principle, income and expenses in other comprehensive income should be
recycled where this enhances the relevance or faithful representation of the
financial statements. The application of the revised conceptual framework
had no significant impact on the Company’s financial statements.
(ii) PAS 1 (Amendments), Presentation of Financial Statements, and PAS 8

(Amendments), Accounting Policies, Changes in Accounting Estimates and
Errors – Definition of Material. The amendments provide a clearer definition
of ‘material’ in PAS 1 by including the concept of ‘obscuring’ material
information with immaterial information as part of the new definition, and
clarifying the assessment threshold (i.e., misstatement of information is
material if it could reasonably be expected to influence decisions made by
primary users, which consider the characteristic of those users as well as the
entity’s own circumstances). The definition of material in PAS 8 has been
accordingly replaced by reference to the new definition in PAS 1. In addition,
amendment has also been made in other standards that contain definition of
material or refer to the term ‘material’ to ensure consistency. The application
of these amendments had no significant impact on the Company’s financial
statements.
(iii) PFRS 7 (Amendments), Financial Instruments: Disclosures, and PFRS

9(Amendments), Financial Instruments – Interest Rate Benchmark Reform. The
amendments clarify that an entity would continue to apply certain hedge
accounting requirements assuming that the interest rate benchmark on which
the hedged cash flows and cash flows from the hedging instrument are based
will not be altered as a result of interest rate benchmark reform. The
application of these amendments had no significant impact on the Company’s
financial statements.
(b) Effective in Fiscal Year 2021 that is not Relevant to the Company
The only amendments to existing standards that are mandatorily effective for
annual periods beginning on or after January 1, 2020 but are not relevant to the
Company’s financial statements pertains to PFRS 3, (Amendments), Business
Combinations – Definition of a Business.
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(c) Effective Subsequent to Fiscal Year 2021 but not Adopted Early
There are amendments to existing standards effective for annual periods

subsequent to fiscal year 2021, which are adopted by the FRSC. Management will
adopt the following relevant pronouncements in accordance with their transitional
provisions; and, unless otherwise stated, none of these are expected to have
significant impact on the Company’s financial statements.
(i) PFRS 16 (Amendments), Leases – COVID-19-Related Rent Concessions

(effective from June 30, 2020). The amendments permit lessees, as a
practical expedient, not to assess whether particular rent concessions
occurring as a direct consequence of the COVID-19 pandemic are lease
modifications and instead to account for those rent concessions as if they
are not lease modifications.
(ii) PAS 16 (Amendments), Property, Plant and Equipment – Proceeds Before Intended
Use (effective from January 1, 2022). The amendments prohibit deducting
from the cost of an item of property, plant and equipment any proceeds
from selling items produced while bringing that asset to the location and
condition necessary for it to be capable of operating in the manner intended
by management. Instead, an entity recognizes the proceeds from selling
such items, and the cost of producing those items, in profit or loss.
(iii) PAS 37 (Amendments), Provisions, Contingent Liabilities and Contingent

Assets – Onerous Contracts – Cost of Fulfilling a Contract (effective January 1,
2022). The amendments specify that the ‘cost of fulfilling’ a contract
comprises the ‘costs that relate directly to the contract’. Costs that relate
directly to a contract can either be incremental costs of fulfilling that contract
(examples would be direct labor, materials) or an allocation of other costs that
relate directly to fulfilling contracts (an example would be the allocation of the
depreciation charge for an item of property, plant and equipment used in
fulfilling the contract).
(iv) Annual Improvements to PFRS 2018-2020 Cycle. Among the

improvements, the following amendments, which are effective from
January 1, 2022, are relevant to the Company:
• PFRS 9 (Amendments), Financial Instruments – Fees in the ’10 per cent’ Test
for Derecognition of Liabilities. The improvements clarify the fees that a
company includes when assessing whether the terms of a new or
modified financial liability are substantially different from the terms of
the original financial liability.
• Illustrative Examples Accompanying PFRS 16, Leases – Lease Incentives.

The improvement merely removes potential for confusion regarding
lease incentives.
(v) PAS 1 (Amendments), Presentation of Financial Statements – Classification of

Liabilities as Current or Non-current (effective January 1, 2023). The
amendments aim to promote consistency in applying the requirements by
helping companies determine whether, in the statement of financial position,
debt and other liabilities with an uncertain settlement date should be
classified as current (due or potentially due to be settled within one year) or
non-current.
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2.3 Financial Assets

Financial assets are recognized when the Company becomes a party to the contractual
terms of the financial instrument. For purposes of classifying financial assets, an
instrument is considered as an equity instrument if it is non-derivative and meets the
definition of equity for the issuer in accordance with the criteria of PAS 32, Financial
Instruments: Disclosure and Presentation. All other non-derivative financial instruments are
treated as debt instruments.
(a) Classification and Measurement of Financial Assets
The classification and measurement of financial assets is driven by the entity’s

business model for managing the financial assets and the contractual cash flow
characteristics of the financial assets. Currently, all of the Company’s financial
assets are classified and measured at amortized cost.
Financial assets are measured at amortized cost if both of the following

conditions are met:
• the asset is held within the Company’s business model whose objective
is to hold financial assets in order to collect contractual cash flows
(“hold to collect”); and,
• the contractual terms of the instrument give rise, on specified dates, to

cash flows that are solely payment of principal and interest on the principal
amount outstanding.
Except for trade receivables that do not contain a significant financing component
and are measured at the transaction price in accordance with PFRS 15, Revenue from
Contracts with Customers, all financial assets meeting these criteria are measured
initially at fair value plus transaction costs. These are subsequently measured at
amortized cost using the effective interest method, less allowance for expected
credit loss (ECL).
The Company’s financial assets at amortized cost are presented as Cash, Trade and
Other Receivables (except for advances to suppliers, and advances to employees
that are subject for liquidation) and Refundable deposits (presented as part of Other
Assets) in the statement of financial position.
Financial assets measured at amortized cost are included in current assets, except
for those with maturities greater than 12 months after the end of reporting period,
which are classified as non-current assets.
For purposes of cash flows reporting and presentation, cash include cash on hand
and demand deposits maintained in banks that are unrestricted and readily available
for use in the operations of the Company.
Interest income is calculated by applying the effective interest rate to the gross
carrying amount of the financial assets except for those that are subsequently
identified as credit-impaired. For credit-impaired financial assets at amortized cost,
the effective interest rate is applied to the net carrying amount of the financial
assets (after deduction of the loss allowance). The interest earned is recognized in
the statement of comprehensive income as part of Other Income.
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(b) Impairment of Financial Assets
At the end of the reporting period, the Company assesses and recognizes
allowance for ECL on its financial assets measured at amortized cost. The
measurement of ECL involves consideration of broader range of information that
is available without undue cost or effort at the reporting date about past events,
current conditions, and reasonable and supportable forecasts of future economic
conditions (i.e., forward-looking information) that may affect the collectability
of the future cash flows of the financial assets. Measurement of the ECL is
determined by a probability-weighted estimate of credit losses over the expected
life of the financial instruments evaluated based on a range of possible outcome.
The Company applies the simplified approach in measuring ECL, which uses a
lifetime expected loss allowance for all trade and other receivables. These are the
expected shortfalls in contractual cash flows, considering the potential for default at
any point during the life of the financial assets. To calculate the ECL, the Company
uses its historical experience, external indicators and forward-looking information
to calculate the ECL using a provision matrix. The Company also assesses
impairment of trade receivables on a collective basis as they possess shared credit
risk characteristics, and have been grouped based on the days past due.
The key elements used in the calculation of ECL are as follows:
• Probability of default – It is an estimate of likelihood of a counterparty defaulting at

its financial obligation over a given time horizon, either over the next
12 months or the remaining lifetime of the obligation.
• Loss given default – It is an estimate of loss arising in case where a default occurs
at a given time. It is based on the difference between the contractual cash flows
of a financial instrument due from a counterparty and those that the Company
would expect to receive, including the realization of any collateral or effect of
any credit enhancement.
• Exposure at default – It represents the gross carrying amount of the financial

instruments in the event of default which pertains to its amortized cost.
The Company recognizes an impairment loss in profit or loss for all financial
instruments subjected to impairment assessment with a corresponding adjustment
to their carrying amount through a loss allowance account.
(c) Derecognition of Financial Assets
The financial assets (or where applicable, a part of a financial asset or part of a
group of financial assets) are derecognized when the contractual rights to receive
cash flows from the financial instruments expire, or when the financial assets and
all substantial risks and rewards of ownership have been transferred to another
party. If the Company neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred asset, the Company
recognizes its retained interest in the asset and an associated liability for amounts it
may have to pay. If the Company retains substantially all the risks and rewards of
ownership of a transferred financial asset, the Company continues to recognize the
financial asset and also recognizes a collateralized borrowing for the proceeds
received.
-8-
2.4 Inventories
Inventories are valued at the lower of cost and net realizable value. Cost is determined
using the first-in, first-out method. The costs of inventories include all costs directly
attributable to acquisitions, such as the purchase price, import duties and other taxes
that are not subsequently recoverable from taxing authorities. Net realizable value is
the estimated selling price in the ordinary course of business, less the estimated costs of
completion and the estimated costs necessary to make the sale. Net realizable value of
raw materials is the current replacement cost.
2.5 Intangible Asset
Intangible asset pertains to computer software, which is presented as part of Other

Non-current Assets account in the statement of financial position. Acquired computer
software is capitalized on the basis of the costs incurred to acquire and install the specific
software. These costs are amortized on a straight-line basis over the expected useful life
of three to seven years. Costs associated with maintaining computer software are
expensed as incurred.
When an intangible asset is disposed of, the gain or loss on disposal is determined as the
difference between the proceeds and the carrying amount of the asset and is recognized
in profit or loss.
2.6 Other Assets
Other assets pertain to other resources controlled by the Company as a result of past
events. They are recognized in the financial statements when it is probable that the
future economic benefits will flow to the Company and the asset has a cost or value that
can be measured reliably.
Other recognized assets of similar nature, where future economic benefits are expected to
flow to the Company beyond one year after the end of the reporting period or in the
normal operating cycle of the business, if longer, are classified as non-current assets.
2.7 Property and Equipment
All property and equipment are stated at cost less accumulated depreciation, and
impairment in value, if any.
The cost of an asset comprises its purchase price and directly attributable costs of
bringing the asset to working condition for its intended use. Expenditures for additions,
major improvements and renewals are capitalized while expenditures for repairs and
maintenance are charged to expense as incurred.
Depreciation is computed on the straight-line basis over the estimated useful lives of the
assets as follows:
Furniture and fixtures 5 - 10 years

Vehicles 3 - 5 years
Office equipment 3 - 5 years
-9-
The residual values, estimated useful lives and method of depreciation of property and
equipment are reviewed, and adjusted if appropriate, at the end of each reporting period.
Fully depreciated and amortized assets are retained in the accounts until these are no
longer in use and no further charge for depreciation and amortization is made in respect
of those assets.
An asset’s carrying amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater than its estimated recoverable amount (see Note 2.14).
An item of property and equipment, including the related accumulated depreciation,

and any impairment losses, is derecognized upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss
arising on derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the item) is included in profit or loss in the year the
item is derecognized.
2.8 Financial Liabilities
Financial liabilities, which include trade and other payables (except for return liability and
tax-related liabilities), advances from parent company and lease liabilities (see Note 2.12),
are recognized when the Company becomes a party to the contractual terms of the
instrument.
Trade and other payables are recognized initially at their fair value and subsequently
measured at amortized cost, using effective interest method for maturities beyond one
year, less settlement payments.
Advances from parent company are availed to finance working capital requirements
during the start of the Company’s operations.
Financial liabilities are classified as current liabilities if payment is due to be settled within
one year or less after the end of the reporting period (or in the normal operating cycle of
the business, if longer), or the Company does not have an unconditional right to defer
settlement of the liability for at least 12 months after the end of the reporting period.
Otherwise, these are presented as non-current liabilities.
Financial liabilities are derecognized from the statement of financial position only when
the obligations are extinguished either through discharge, cancellation or expiration. The
difference between the carrying amount of the financial liability derecognized and the
consideration paid or payable is recognized in profit or loss.
2.9 Offsetting Financial Instruments
Financial assets and financial liabilities are offset and the resulting net amount, considered
as a single financial asset or financial liability, is reported in the statement of financial
position when the Company currently has legally enforceable right to set-off the
recognized amounts and there is an intention to settle on a net basis, or realize the asset
and settle the liability simultaneously. The right of set-off must be available at the end
of the reporting period, that is, it is not contingent on future event. It must also be
enforceable in the normal course of business, in the event of default, and in the event
of insolvency or bankruptcy; and, must be legally enforceable for both entity and all
counterparties to the financial instruments.
- 10 -
2.10 Provisions and Contingencies
Provisions are recognized when present obligations will probably lead to an outflow of
economic resources and they can be estimated reliably even if the timing or amount of
the outflow may still be uncertain. A present obligation arises from the presence of a
legal or constructive commitment that has resulted from past events.
Provisions are measured at the estimated expenditure required to settle the present
obligation, based on the most reliable evidence available at the end of the reporting period,
including the risks and uncertainties associated with the present obligation. Where there
are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. When time
value of money is material, long-term provisions are discounted to their present values
using a pretax rate that reflects market assessments and the risks specific to the obligation.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the
current best estimate.
In those cases where the possible outflow of economic resource as a result of present
obligations is considered improbable or remote, or the amount to be provided for cannot
be measured reliably, no liability is recognized in the financial statements. Similarly,
possible inflows of economic benefits to the Company that do not yet meet the
recognition criteria of an asset are considered contingent assets, hence, are not recognized
in the financial statements. On the other hand, any reimbursement that the Company can
be virtually certain to collect from a third party with respect to the obligation is recognized
as a separate asset not exceeding the amount of the related provision.
2.11 Revenue and Expense Recognition
Revenue comprises revenue from sale of pharmaceutical products.
To determine whether to recognize revenue, the Company follows a five-step process:
(a) identifying the contract with a customer;

(b) identifying the performance obligation;
(c) determining the transaction price;
(d) allocating the transaction price to the performance obligations; and,
(e) recognizing revenue when/as performance obligations are satisfied.
The Company determines whether a contract with customer exists by evaluating

whether the following gating criteria are present:
(i) the parties to the contract have approved the contract either in writing, orally or in
accordance with other customary business practices;
(ii) each party’s rights regarding the goods or services to be transferred or performed
can be identified;
(iii) the payment terms for the goods or services to be transferred or performed can be
identified;
(iv) the contract has commercial substance (i.e., the risk, timing or amount of the future
cash flows is expected to change as a result of the contract); and,
(v) collection of the consideration in exchange of the goods and services is probable.
Revenue is recognized only when (or as) the Company satisfies a performance
obligation by transferring control of the promised goods or services to a customer. The
transfer of control can occur over time or at a point in time.
- 11 -
A performance obligation is satisfied at a point in time unless it meets one of the

following criteria, in which case it is satisfied over time:
• the customer simultaneously receives and consumes the benefits provided by the
Company’s performance as the Company performs;
• the Company’s performance creates or enhances an asset that the customer
controls as the asset is created or enhanced; and,
• the Company’s performance does not create an asset with an alternative use to the
Company and the entity has an enforceable right to payment for performance
completed to date.
Revenue from sale of goods is recognized when the control over the goods has been
transferred at a point in time to the customer, i.e., generally when the customer has
acknowledged delivery of goods. Invoices for goods transferred are due upon receipt
by the customer. The significant judgments in determining the timing of satisfaction of
the performance obligation is disclosed in Note 3.1(a).
Costs and expenses are recognized in profit or loss upon utilization of goods or services
or at the date they are incurred.
2.12 Leases
For any new contracts entered into, the Company considers whether a contract is, or
contains, a lease. A lease is defined as a contract, or part of a contract, that conveys
the right to use an asset (the underlying asset) for a period of time in exchange for
consideration. To apply this definition, the Company assesses whether the contract
meets three key evaluations which are whether:
• the contract contains an identified asset, which is either explicitly identified in the
contract or implicitly specified by being identified at the time the asset is made
available to the Company;
• the Company has the right to obtain substantially all of the economic benefits from
use of the identified asset throughout the period of use, considering its rights within
the defined scope of the contract; and,
• the Company has the right to direct the use of the identified asset throughout the
period of use. The Company assess whether it has the right to direct ‘how and for
what purpose’ the asset is used throughout the period of use.
At lease commencement date, the Company recognizes a right-of-use asset and a lease
liability in the statement of financial position. The right-of-use asset is measured at cost,
which is made up of the initial measurement of the lease liability. Subsequently, the
Company depreciates the right-of-use asset on a straight-line basis from the lease
commencement date to the earlier of the end of the useful life of the right-of-use asset or
the end of the lease term. The Company also assesses the right-of-use asset for impairment
when such indicators exist (see Note 2.14). On the other hand, the Company measures the
lease liability at the present value of the lease payments unpaid at the commencement date,
discounted using the interest rate implicit in the lease if that rate is readily available or the
Company’s incremental borrowing rate. Lease payments include fixed payments less lease
incentives receivable, if any.
- 12 -
Subsequent to initial measurement, the liability will be reduced for payments made and
increased for interest. It is remeasured to reflect any reassessment or modification, or if
there are changes in in-substance fixed payments. When the lease liability is remeasured,
the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the
right-of-use asset is already reduced to zero.
The Company has elected to account for short-term leases using the practical expedients.
Instead of recognizing a right-of-use asset and lease liability, the payments in relation to
these are recognized as an expense in profit or loss on a straight-line basis over the lease
term.
On the statement of financial position, right-of-use asset and lease liability have been
presented separately from all other assets and liabilities, respectively.
2.13 Foreign Currency Transactions and Translation
The accounting records of the Company are maintained in Philippine pesos. Foreign
currency transactions during the year are translated into the functional currency at
exchange rates which approximate those prevailing on transaction dates.
Foreign currency gains and losses resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognized in profit or loss.
2.14 Impairment of Non-financial Assets

The Company’s property and equipment, intangible assets, right-of-use asset, and other
non-financial assets are subject to impairment testing. All individual assets are tested for
impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable.
For purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash-generating units). As a result, some
assets are tested for impairment either individually or at the cash-generating unit level.
Impairment loss is recognized for the amount by which the asset’s or cash-generating
unit’s carrying amount exceeds its recoverable amounts which is the higher of its fair
value less costs to sell and its value in use. In determining value in use, management
estimates the expected future cash flows from each cash-generating unit and determines
the suitable interest rate in order to calculate the present value of those cash flows. The
data used for impairment testing procedures are directly linked to the Company’s latest
approved budget, adjusted as necessary to exclude the effects of asset enhancements.
Discount factors are determined individually for each cash-generating unit and reflect
management’s assessment of respective risk profiles, such as market and asset-specific
risk factors.
All assets are subsequently reassessed for indications that an impairment loss previously
recognized may no longer exist. An impairment loss is reversed if the asset’s or
cash-generating unit’s recoverable amount exceeds its carrying amount.
- 13 -
2.15 Employee Benefits
The Company provides post-employment benefits to employees through contribution

plans and defined benefit, and other employee benefits which are discussed below.
(a) Post-employment Defined Benefit Plan
A defined benefit plan is a post-employment plan that defines an amount of

post-employment benefit that an employee will receive on retirement, usually
dependent on one or more factors such as age, years of service and salary. The legal
obligation for any benefits from this kind of post-employment plan remains with the
Company, even if plan assets for funding the defined benefit plan have been acquired.
Plan assets may include assets specifically designated to a long-term benefit fund, as
well as qualifying insurance policies. The Company’s post-employment defined
benefit plan covers all regular full-time employees.
The liability recognized in the statement of financial position for a defined benefit
plan is the present value of the defined benefit obligation at the end of the
reporting period less the fair value of plan assets. The defined benefit obligation is
calculated annually by independent actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the
estimated future cash outflows arising from expected benefit payments using a
discount rate derived from the interest rates of a zero coupon government bond
[using the reference rates published by Bloomberg using its valuation technology,
Bloomberg Valuation (BVAL)], that are denominated in the currency in which the
benefits will be paid and that have terms to maturity approximating to the terms of
the related post-employment liability. BVAL provides evaluated prices that are
based on market observations from contributed sources.
Remeasurements, comprising of actuarial gains and losses arising from experience

adjustments and other changes in actuarial assumptions and the actual return on
plan assets (excluding amount included in net interest) are reflected immediately in
the statement of financial position with a charge or credit recognized in other
comprehensive income in the period in which they arise.
Net interest is calculated by applying the discount rate at the beginning of the
period, taking account of any changes in the net defined benefit liability or asset
during the period as a result of contributions and benefit payments. Net interest is
reported as part of Others under Selling and Administrative Expense account in the
statement of comprehensive income.
Past-service costs are recognized immediately in profit or loss in the period of a

plan amendment and curtailment.
In 2021 and 2020, the Company did not have a formal retirement benefit plan yet;
however, it already started to compute and accrue retirement benefit obligation
based on the provisions of Republic Act (R.A.) No. 7641, The Retirement Pay Law,
which covers all qualified employees.
- 14 -
(b) Defined Contribution Plan
A defined contribution plan is a post-employment plan under which the Company

pays fixed contributions into an independent entity (i.e., Social Security System).
The Company has no legal or constructive obligations to pay further contributions
after payment of the fixed contribution. The contributions recognized in respect of
defined contribution plans are expensed as they fall due. Liabilities and assets may
be recognized if underpayment or prepayment has occurred and are included in
current liabilities or current assets as they are normally of a short-term nature.
2.16 Income Taxes
Tax expense recognized in profit or loss comprises the sum of current tax and deferred
tax not recognized in other comprehensive income or directly in equity, if any.
Current tax assets or current tax liabilities comprise those claims from, or obligations to,
fiscal authorities relating to the current or prior reporting period, that are uncollected or
unpaid at the end of the reporting period. They are calculated according to the tax rates
and tax laws applicable to the fiscal periods to which they relate, based on the taxable
profit for the year. All changes to current tax assets or liabilities are recognized as a
component of tax expense in profit or loss.
Deferred tax is accounted for using the liability method on temporary differences at the
end of the reporting period between the tax base of assets and liabilities and their carrying
amounts for financial reporting purposes. Under the liability method, with certain
exceptions, deferred tax liabilities are recognized for all taxable temporary differences
and deferred tax assets are recognized for all deductible temporary differences and the
carryforward of unused tax losses and unused tax credits to the extent that it is probable
that taxable profit will be available against which the deductible temporary differences can
be utilized. Unrecognized deferred tax assets are reassessed at the end of each reporting
period and are recognized to the extent that it has become probable that future taxable
profit will be available to allow such deferred tax assets to be recovered.
Deferred tax assets and deferred tax liabilities are measured at the tax rates that are
expected to apply to the period when the asset is realized or the liability is settled
provided such tax rates have been enacted or substantively enacted at the end of the
reporting period.
The carrying amount of deferred tax assets is reviewed at the end of each reporting
period and reduced to the extent that it is probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be utilized.
The measurement of deferred tax assets and deferred tax liabilities reflects the tax
consequences that would follow from the manner in which the Company expects, at the
end of the reporting period, to recover or settle the carrying amount of its assets and
liabilities.
Most changes in deferred tax assets or deferred tax liabilities are recognized as a
component of tax expense in profit or loss, except to the extent that it relates to items
recognized in other comprehensive income or directly in equity. In this case, the tax is
also recognized in other comprehensive income or directly in equity, respectively.
Deferred tax assets and deferred tax liabilities are offset if the Company has a legally
enforceable right to set-off current tax assets against current tax liabilities and the
deferred taxes relate to the same entity and the same taxation authority.
- 15 -
2.17 Related Party Transactions and Relationships

Related party transactions are transfer of resources, services or obligations between the
Company and its related parties, regardless whether a price is charged.
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. These parties include: (a) individuals owning, directly or indirectly through one
or more intermediaries, control or are controlled by, or under common control with the
Company; and, (b) individuals owning, directly or indirectly, an interest in the voting
power of the Company that gives them significant influence over the Company and close
members of the family of any such individual.
In considering each possible related party relationship, attention is directed to the

substance of the relationship and not merely on the legal form.
2.18 Capital Deficiency

Capital stock represents the nominal value of shares that have been issued.
Revaluation reserve comprise actuarial remeasurement of retirement benefit obligation.
Deficit represent all current and prior period results of operations as reported in the
profit or loss section of statement of comprehensive income.
2.19 Events After the End of the Reporting Period
Any post-year-end event that provides additional information about the Company’s
financial position at the end of the reporting period (adjusting event) is reflected in the
financial statements. Post-year-end events that are not adjusting events, if any, are
disclosed when material to the financial statements.
3. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES
The Company’s financial statements prepared in accordance with PFRS require

management to make judgments and estimates that affect amounts reported in the
financial statements and related notes. Judgments and estimates are continually evaluated
and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under circumstances. Actual results may
ultimately differ from these estimates.
3.1 Critical Management Judgments in Applying Accounting Policies
In the process of applying the Company’s accounting policies, management has made the
following judgments, apart from those involving estimation, which have the most
significant effect on the amounts recognized in the financial statements:
(a) Determination of Timing of Satisfaction of Performance Obligations
The Company determines that its revenue from sale of goods shall be recognized at
a point in time when the control of the goods has been transferred to the customer,
i.e., generally when the customer has acknowledged delivery of the goods.
- 16 -
(b) Determination of ECL on Trade and Other Receivables
The Company uses a provision matrix to calculate ECL for trade and other
receivables. The provision rates are based on days past due for groupings of
various customer segments that have similar loss patterns.
The provision matrix is based on the Company’s historical observed default rates.
The Company’s management intends to regularly calibrate (i.e., on an annual basis)
the matrix to consider the historical credit loss experience with forward-looking
information (i.e., forecast economic conditions). Details about the ECL on the
Company’s trade and other receivables are disclosed in Note 19.3(b).
(c) Recognition of Provisions and Contingencies
Judgment is exercised by management to distinguish between provisions and

contingencies. Policies on recognition of provisions and contingencies are
discussed in Note 2.10 and disclosures on relevant provisions and contingencies
are presented in Note 18.
3.2 Key Sources of Estimation Uncertainty
Discussed below are the key assumptions concerning the future and other key sources of
estimation uncertainty at the end of the reporting period that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the
next reporting period.
(a) Estimation of Allowance for ECL
The measurement of the allowance for ECL on financial assets at amortized cost is
an area that requires the use of significant assumptions about the future economic
conditions and credit behavior (e.g., likelihood of customers defaulting and the
resulting losses). Explanation of the inputs, assumptions and estimation used in
measuring ECL is further detailed in Note 19.3.
(b) Estimation of Amounts Involving Right of Return
The Company’s contract of sale has variable consideration which is the right of
return given to the customers within a specified period. Given the large number
of contracts of the same characteristics, the Company considered the expected
value method under the provisions of PFRS 15 which better predicts the amounts
of consideration it will be required to return and receive involving the customer’s
right of return.
The carrying amount of the return liabilities as at March 31, 2021 and 2020 is
presented as part of Trade and Other Payables account in the statements of
financial position (see Note 10).
- 17 -
(c) Determination of Net Realizable Value of Inventories
In determining the net realizable value of inventories, management takes into account
past experience and other factors affecting the net realizable value of inventory items.
Future realization of the carrying amounts of inventories as presented in Note 6 is
evaluated on a continuous basis throughout the year. Both aspects are considered key
sources of estimation uncertainty and may cause significant adjustments to the
Company’s inventories within the next reporting period.
(d) Determination of Realizable Amount of Deferred Tax Assets
The Company reviews its deferred tax assets at the end of each reporting period and
reduces the carrying amount to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred tax asset to be
utilized. Management assessed that the deferred tax assets as at March 31, 2021 and
2020 may not be fully utilized in the subsequent reporting periods. Accordingly,
deferred tax assets were not recognized. The carrying value of deferred tax assets is
disclosed in Note 15.
(e) Impairment of Non-financial Assets
In assessing impairment, management estimates the recoverable amount of each asset

or a cash-generating unit based on expected future cash flows and uses an interest rate
to calculate the present value of those cash flows. Estimation uncertainty relates to
assumptions about future operating results and the determination of a suitable
discount rate (see Note 2.14). Though management believes that the assumptions
used in the estimation of fair values reflected in the financial statements are
appropriate and reasonable, significant changes in these assumptions may materially
affect the assessment of recoverable values and any resulting impairment loss could
have a material adverse effect on the results of operations.
No impairment losses are necessary to be recognized in 2021 and 2020 on the

Company’s property and equipment, right-of-use asset, intangible assets and other
non-financial assets based on the management’s assessment (see Notes 7, 8 and 9.1).
(f) Estimation of Useful Lives of Intangible Asset, Property and Equipment, and Right-of-use Asset
The Company estimates the useful lives of intangible asset, property and
equipment, and right-of-use asset, based on the period over which the assets are
expected to be available for use. The estimated useful lives of intangible assets,
property and equipment, and right-of-use asset are reviewed periodically and are
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
the assets.
The carrying amounts of intangible assets, property and equipment, and

right-of-use asset are presented in Notes 7, 8 and 9.1, respectively. Based on
management’s assessment as at March 31, 2021 and 2020, there is no change in
estimated useful lives of those assets during those years. Actual results, however,
may vary due to changes in estimates brought about by changes in factors
mentioned above.
- 18 -
(g) Valuation of Post-employment Benefit
The determination of the Company’s obligation and cost of post-employment

defined benefit is dependent on the selection of certain assumptions used by
actuaries in calculating such amounts. Those assumptions include, among others,
discount rates and salary rate increase.
A significant change in any of these actuarial assumptions may generally affect the
recognized expense, other comprehensive income or losses and the carrying
amount of the post-employment benefit obligation in the next reporting period.
The amounts of post-employment benefit obligation and expense and an analysis of

the movements in the estimated present value of retirement benefit obligation, as well
as the significant assumptions used in estimating such obligation, are presented in
Note 14.2.
4. CASH
This account includes the following:
2021 2020
Cash in banks P 30,031,172 P 50,758,227

Cash on hand 30,000 35,000
P 30,061,172 P 50,793,227
Cash in banks generally earn interest based on daily bank deposit rates. Interest
earned from cash in bank is reported as part of Interest income under Other Income
account in the statements of comprehensive income (see Note 13).
5. TRADE AND OTHER RECEIVABLES
This account is composed of the following:
2021 2020
Trade receivables P 114,348,205 P 107,713,567

Advances to employees 2,137,747 553,383
Advances to suppliers 1,636,084 304,464
Others 361,261 178,972
118,483,297 108,750,386
Allowance for impairment ( 1,284,062) ( 3,046,965)
P 117,199,235 P 105,703,421
Advances to employees includes salary advances given to certain employees subject to

annual interest rate of 12%. Interest income earned from salary advances is recognized as
part of Interest income under Other Income account in the statements of comprehensive
income (see Note 13).
- 19 -
All of the Company’s trade and other receivables have been reviewed for impairment
[see Note 19.3(b)]. Certain trade receivables were found to be impaired; hence, adequate
amount of allowance for impairment has been recognized. The net carrying value of
trade and other receivables is considered a reasonable approximation of fair value. Trade
receivables have contractual terms of 30 days and do not bear any interest.
A reconciliation of the allowance for impairment at the beginning and end of 2021 and
2020 is shown below.
Notes 2021 2020
Balance at beginning of year P 3,046,965 P 934,359

Reversal of impairment loss 13 ( 1,762,903) -
Impairment loss 12 - 2,112,606
Balance at end of year P 1,284,062 P 3,046,965
6. INVENTORIES
The details of inventories as at March 31 are as follows:
2021 2020
Finished goods:
At cost P 86,567,489 P 80,829,342
At net realizable value:
Cost 11,188,545 8,798,759
Allowance for impairment ( 11,137,675) ( 8,747,889 )
50,870 50,870
P 86,618,359 P 80,880,212
Movements in allowance for inventory obsolescence consist of:
Note 2021 2020
Balance at beginning of year P 8,747,889 P 8,516,828

Loss on inventory
obsolescence 12 4,141,921 3,557,474
Write-off ( 1,752,135) ( 3,326,413 )

- 20 -
7. OTHER ASSETS
This account is composed of the following:
2021 2020
Current:
Creditable withholding tax P 3,828,991 P 409,120
Refundable deposits 768,883 578,687
Deferred input value-added
tax (VAT) 374,565 458,913
Prepaid expenses 106,513 208,355
5,078,952 1,655,075
Non-current:
Deferred input VAT 1,300,613 1,110,417
Refundable deposits 874,576 1,064,772
Computer software - net 208,006 290,988
2,383,195 2,466,177
P 7,462,147 P 4,121,252
Refundable deposits classified as current pertains to deposit for leases entered by the
Company while those classified as non-current mainly include deposits for fleet cards and
deposits to doctors.
Prepaid expenses include prepayments for advertising, insurance, and supplies availed of
by the Company.
Movements of computer software as at March 31, 2021 and 2020 are shown below.
Note 2021 2020
Beginning balance, net of

accumulated amortization P 290,988 P 189,970
Additions - 160,000
Amortization charges for the year 12 ( 82,982) ( 58,982 )
Ending balance, net of

accumulated amortization P 208,006 P 290,988
8. PROPERTY AND EQUIPMENT
The gross carrying amounts and the accumulated depreciation of property and equipment
at the beginning and end of 2021 and 2020 are shown below.
Furniture and Office

Vehicles Fixtures Equipment Total
March 31, 2021

Cost P 28,733,235 P 2,426,795 P 3,127,149 P 34,287,179
Accumulated depreciation ( 11,545,279 ) ( 2,230,248 ) ( 2,107,637 ) ( 15,883,164 )
Net carrying amount P 17,187,956 P 196,547 P 1,019,512 P 18,404,015

- 21 -

March 31, 2020

Cost P 23,794,574 P 2,426,795 P 2,858,175 P 29,079,544
Net carrying amount P 14,781,281 P 283,709 P 987,764 P 16,052,754
April 1, 2019
Cost P 20,961,664 P 2,337,913 P 2,829,782 P 26,129,359
Net carrying amount P 9,242,511 P 293,613 P 1,179,602 P 10,715,726
A reconciliation of the carrying amounts of property and equipment at the beginning and
end of 2021 and 2020 is shown below.
Balance at April 1, 2020

net of accumulated
depreciation P 14,781,281 P 283,709 P 987,764 P 16,052,754
Additions 6,955,626 - 313,616 7,269,242
Depreciation charges
for the year ( 4,548,951 ) ( 87,162 ) ( 281,868 ) ( 4,917,981 )
Balance at March 31, 2021

net of accumulated
depreciation P 17,187,956 P 196,547 P 1,019,512 P 18,404,015
Balance at April 1, 2019

net of accumulated
depreciation P 9,242,511 P 293,613 P 1,179,602 P 10,715,726
Additions 9,939,160 88,882 69,464 10,097,506
Depreciation charges
for the year ( 4,400,390 ) ( 98,786 ) ( 261,302 ) ( 4,760,478 )
Balance at March 31, 2020

net of accumulated
depreciation P 14,781,281 P 283,709 P 987,764 P 16,052,754
The amount of depreciation charges in 2021 and 2020 is presented as part of

Depreciation and amortization under Selling and Administrative Expenses in the
statements of comprehensive income (see Note 12).
The Company recognized gain on disposals of various fully depreciated property and
equipment totaling P0.2 million and P1.1 million in 2021 and 2020, respectively, which is
presented as Gain on disposals of assets under Other Income account in the statements
of comprehensive income (see Note 13).
As at March 31, 2021 and 2020, the gross carrying amount of the Company’s fully
depreciated property and equipment that are still used in operation amounted to
P3.2 million and P4.4 million, respectively.
- 22 -
9. LEASES
The Company has leases for certain office spaces. In 2021, the Company entered into a
new lease agreement renewing the term of one of its leases for another two years. As a
result, such lease is reflected on the 2021 statement of financial position as a right-of-use
asset and a lease liability.
The lease generally imposes a restriction that, unless there is a contractual right for the
Company to sub-lease the asset to another party, the right-of-use asset can only be used
by the Company. The lease is either non-cancellable or may only be cancelled by
incurring a substantive termination fee. The Company is prohibited from selling or
pledging the underlying leased assets as security and they must keep those properties in a
good state of repair and return the properties in their original condition at the end of the
lease. Further, the Company must insure the leased assets and incur maintenance fees on
such items in accordance with the lease contracts.
The Company has only one right-of-use asset recognized in the 2021 statement in
financial position (nil in 2020) with a remaining term of 2 years. Such lease has both
extension and termination option.
9.1 Right-of-use Asset
The carrying amount of the Company’s right-of-use asset as at March 31, 2021 (nil as at
March 31, 2020) and the movements during the year are shown below.
Balance at beginning of year P -

Addition 2,438,068
Depreciation for the year ( 304,758 )
Balance at end of year P 2,133,310
Depreciation charges in 2021 is recognized as part of Depreciation and amortization

under Selling and Administrative Expenses account in the 2021 statement of
comprehensive income (see Note 12).
9.2 Lease Liability
Lease liability is presented in the statement of financial position as at March 31, 2021 (nil
as at March 31, 2020) as follows:
Current P 1,179,261
Non-current 981,839
P 2,161,100
A reconciliation of the carrying amount of the Company’s lease liability at the beginning
and end of 2021 is shown below.

Addition 2,438,068
Payments ( 323,891 )
Amortization of interest 46,923
Balance at end of year P 2,161,100

Amortization of interest is recognized as part of Others under Selling and Administrative
Expense account in the 2021 statement of comprehensive income (see Note 12).
- 23 -
The lease liability is secured by the related underlying asset (see Note 9.1). The
undiscounted maturity analysis of lease liability as at March 31, 2021 is as follows:
Within 1 year 1 to 2 years Total
Lease payment P 1,309,959 P 1,014,857 P 2,324,816

Interest ( 130,698 ) ( 33,018 ) ( 163,716 )
Total P 1,179,261 P 981,839 P 2,161,100
9.3 Lease Payments Not Recognized as Liabilities
The Company has elected not to recognize a lease liability for short-term leases.
Payments made under such leases are expensed on a straight-line basis.
In 2021 and 2020, expenses relating to these leases amounted to P2.4 million and P2.6
million, and is presented as Rentals under Selling and Administrative Expense account in
the statements of comprehensive income (see Note 12). As at March 31, 2021 and 2020
the Company is committed to short-term leases, and the total commitment at these dates
is P0.2 million and P0.6 million, respectively.
10. TRADE AND OTHER PAYABLES
This account consists of:
Note 2021 2020
Trade payables 16.1 P 230,750,672 P 252,784,418

Output VAT 2,495,108 271,972
Return liabilities 1,061,044 1,432,540
Salaries and wages payable 777,203 647,001
Withholding tax 955,989 635,490
Others 22,669,257 17,122,910
P 258,709,273 P 272,894,331
11. REVENUES
The breakdown of revenues is presented below.
2021 2020
Sales P 376,030,662 P 347,990,507

Sales returns and allowances ( 7,254,435) ( 4,860,012 )
Sales discounts ( 31,686) ( 798,499)
P 368,744,541 P 342,331,996
- 24 -
A summary of additional disaggregation from the revenues are shown below.
2021 2020
Central nervous system drugs P 228,735,596 P 223,883,407

Oncology drugs 143,673,057 124,107,100
Antibiotic 3,622,009 -
P 376,030,662 P 347,990,507
12. OPERATING EXPENSES BY NATURE

The Company’s operating expenses are as follows:
Notes 2021 2020
Net purchases 16.1 P 204,581,657 P 188,565,200

Selling and distribution 75,090,745 84,971,242
Salaries and employee benefits 14, 16.3 46,829,479 41,131,121
Professional fees 8,166,102 3,411,742
Change in inventories ( 5,738,147) ( 8,922,718 )
Depreciation and amortization 7, 8, 9.1 5,305,721 4,819,460
Insurance 4,863,889 3,926,819
Loss on inventory
obsolescence 6 4,141,921 3,557,474
Transportation and travel 3,964,415 7,727,185
Taxes and licenses 3,202,612 2,473,177
Communications 3,020,893 2,106,238
Penalties 3,000,000 3,375
Rentals 9.3 2,386,857 2,630,362
Repairs and maintenance 1,121,810 928,897
Utilities 386,427 410,504
Office supplies 218,989 411,406
Impairment loss on trade and
other receivables 5 - 2,112,606
Others 9.2, 14.2 1,291,833 1,331,275
P 361,835,203 P 341,595,365
Others include bank charges, registration fees, interest expense from lease liability and
retirement benefit obligation, and other miscellaneous expenses.
These expenses are classified in the statements of comprehensive income as follows:
2021 2020
Cost of goods sold P 198,843,510 P 179,642,482

Selling and administrative expenses 162,991,693 161,952,883
P 361,835,203 P 341,595,365
- 25 -
13. OTHER INCOME

This account consists of:
Notes 2021 2020
Foreign exchange gain - net 16.1, 16.2 P 28,892,890 P 17,698,040

Reversal of impairment loss 5 1,762,903 -
Gain on disposals of assets 8 205,845 1,119,559
Interest income 4, 5 166,680 225,299
Others 75,427 19,853
P 31,103,745 P 19,062,751
14. EMPLOYEE BENEFITS
14.1 Salaries and Employee Benefits Expense
Expenses recognized for salaries and employee benefits are presented below.
Notes 2021 2020
Short-term employee benefits P 46,010,263 P 40,145,383

Post-employment defined
benefits 14.2 819,216 985,738
12, 16.3 P 46,829,479 P 41,131,121
14.2 Post-employment Defined Benefit

(a) Characteristics of the Defined Benefit Plan
The Company does not have an established retirement benefit plan and only
conforms to the minimum regulatory benefit under the R.A. No. 7641, which is
of the final salary defined benefit type and provides retirement benefit equal to
22.5 day pay for every year of credited service. The regulatory benefit is paid in a
lump sum upon retirement.
In accordance with the provisions of the Labor Code, the Company is required to
pay eligible employees at least the minimum regulatory benefit upon retirement,
subject to age and service requirements. Since the Company does not have any
formal, trusteed retirement plan, there are no Trustees yet. Moreover, there are no
unusual or significant risk to which the retirement obligation exposes the Company.
However, it should be noted that in the event a benefit claim arises under the
retirement obligation, the benefit shall immediately be due and payable from the
Company.
In 2021, the Company engaged an independent actuary to determine the valuation
of its retirement obligation. In 2020, the Company did not engage an actuary to
determine the post-employment benefit obligation since the management assessed
at that time that the amount accrued using R.A. No. 7641 is not materially different
if actuarially determined.
- 26 -
(b) Explanation of Amounts Presented in the Financial Statements
All amounts presented below are based on the actuarial valuation report obtained
from an independent actuary in 2021.
The movements in the present value of the post-employment benefit obligation

recognized in the books are as follows:
2021 2020
Balance at beginning of year P 1,890,145 P 855,570

Current service cost 819,216 985,738
Interest expense 96,330 48,837
Remeasurements –
Actuarial losses arising from –
Experience adjustments 545,486 -

The components of amounts recognized in profit or loss and in other
comprehensive loss in respect of the defined benefit post-employment plan are as
follows:
2021 2020
Reported in profit or loss:

Current service cost P 819,216 P 985,738
Interest expense 96,330 48,837
P 915,546 P 1,034,575
Reported in other comprehensive loss –

Actuarial losses arising from –
Experience adjustments P 545,486 P -
Current service cost is presented as part of Salaries and employee benefits, while the
interest expense is recognized as part of Others both under Selling and Administrative
Expense account in the statements of comprehensive income (see Note 12).
Amounts recognized in other comprehensive loss are considered as items that will
not be reclassified subsequently to profit or loss.
In determining the amounts of the post-employment defined benefit obligation, the

actuary used 4.93% and 5.00% as discount rate and expected salary rate,
respectively, in 2021.
Assumptions regarding future mortality experience are based on published statistics

and mortality tables. The average remaining working lives of an individual retiring
at the age of 60 is 22.8 years for both males and females. These assumptions were
developed by management with the assistance of an independent actuary. Discount
factors are determined close to the end of each reporting period by reference to
the interest rates of a zero coupon government bond with terms to maturity
approximating to the terms of the post-employment benefit obligation. Other
assumptions are based on current actuarial benchmarks and management’s
historical experience.
- 27 -
(c) Risk associated with the Retirement Plan
The plan exposes the Company to actuarial risks such as interest rate risk, longevity
risk and salary risk.
(i) Interest Rate Risk
The present value of the defined benefit obligation is calculated using a discount
rate determined by reference to market yields of government bonds. Generally, a
decrease in the interest rate of a reference government bonds will increase the
retirement obligation.
(ii) Longevity and Salary Risks
The present value of the defined benefit obligation is calculated by reference to

the best estimate of the mortality of the plan participants during their
employment, and to their future salaries. Consequently, increases in the life
expectancy and salary of the plan participants will result in an increase in the plan
obligation.
(d) Other Information
The information on the sensitivity analysis for certain significant actuarial

assumptions, and the timing and uncertainty of future cash flows related to the
retirement plan is presented below.
(i) Sensitivity Analysis
The following table summarizes the effects of changes in the significant actuarial
assumptions used in the determination of the defined benefit obligation as of
March 31, 2021:
Impact on Post-employment Benefit Obligation
Change in Increase in Decrease in
Assumption Assumption Assumption
Discount rate +/-1.00% (P 447,742 ) P 548,981

Salary increase rate +/-1.00% 542,848 ( 451,355 )
(ii) Funding Arrangements and Expected Contributions
The plan is currently unfunded based on the latest actuarial valuation. While
there are no minimum funding requirement in the country, the size of the
underfunding may pose a cash flow risk in about 10 years time when a significant
number of employees is expected to retire.
The undiscounted expected benefit payments amounting to P1.0 million from
the plan is expected to be realized within one year to five years.
The weighted average duration of the defined benefit obligation at the end of the
reporting period is 14.8 years.
- 28 -
15. TAXES
The components of tax expense as reported in profit or loss follow:
2021 2020
Current tax expense:

Regular corporate income
tax (RCIT) at an average of 26.25% P 5,525,538 P -
Application of minimum corporate
income tax (MCIT) ( 5,525,538) -
Final tax at 20% and 15% 12,124 11,157
MCIT at 2% - 3,273,268
P 12,124 P 3,284,425
A reconciliation of tax on pretax income computed at the applicable statutory tax rates
to tax expense reported in profit or loss follows:
2021 2020
Tax on pretax income at an average

of 26.25% and at 30% P 9,978,434 P 5,939,815
Adjustment for income
subjected to final tax ( 3,825) ( 5,755)
Tax effects of:
Application of MCIT ( 5,525,538 ) -
Application of net operating
loss carry-over (NOLCO) ( 4,152,602 ) -
Unrecognized deferred tax assets ( 1,071,845 ) ( 2,650,648)
Non-deductible expenses 787,500 1,013
P 12,124 P 3,284,425
Presented below are the total unrecognized net deferred tax assets as at March 31, 2021
and 2020.
Tax Base Tax Effect

2021 2020 2021 2020
Unrealized foreign exchange gain ( P 19,009,819) (P 15,975,926) ( P 4,752,455) (P 4,792,778 )

Allowance for inventory obsolescence 11,137,675 8,747,889 2,784,419 2,624,367
Retirement benefit obligation 3,351,177 1,890,145 974,166 567,043
Lease liability 2,161,100 - 540,275 -
Right-of-use asset ( 2,133,310) - ( 533,328 ) -
Excess MCIT 1,932,501 7,458,039 1,932,501 7,458,039
Allowance for impairment loss 1,284,062 3,046,965 321,016 914,090
Inventory written-off 1,078,360 3,326,413 269,590 997,924
Return liability 1,061,044 1,432,540 265,261 429,762
NOLCO - 15,819,438 - 4,745,831
P 862,790 P 25,745,503 P 1,801,445 P 12,944,278

- 29 -
The Company is subject to the MCIT which is computed at an average of 1.23% in 2021
and 2% in 2020 of gross income, as defined under the tax regulations or RCIT, whichever
is higher. The MCIT may be claimed as tax credit against the Company’s future income
tax payable within three years from the year it was incurred. In 2021, the Company
reported RCIT as it is higher than MCIT, while in 2020, the Company reported MCIT as
it is higher than the RCIT.
Details of the Company’s excess MCIT which can be applied as a deduction against
future taxable income are as follows:
Year Valid
Incurred Amount Applied Balance Until
2020 P 1,810,623 P - P 1,810,623 2023

2019 2,841,378 ( 2,719,500 ) 121,878 2022
2018 2,806,038 ( 2,806,038 ) -
P 7,458,039 (P 5,525,538) P 1,932,501
Details of the NOLCO of the Company, which can be claimed as deductions from future
taxable income within three years from the year NOLCO was incurred, are as follows:
Year Valid
Incurred Amount Applied Balance Until
2019 P 10,693,360 ( P 10,693,360 ) P - 2022

2018 5,126,078 ( 5,126,078 ) -
P 15,819,438 (P 15,819,438) P -
On March 26, 2021, R.A. No. 11534, Corporate Recovery and Tax Incentives for Enterprises
(CREATE) Act, amending certain provisions of the National Internal Revenue Code
(NIRC) of 1997, as amended, was signed into law and shall be effective beginning
July 1, 2020. The following are the major changes brought about by the CREATE Act
that are relevant to the Company:
a. RCIT rate is decreased from 30% to 25% starting July 1, 2020;
b. MCIT rate is decreased from 2% to 1% starting July 1, 2020 until June 30, 2023;
c. the imposition of 10% tax on improperly accumulated retained earnings is repealed;

and,
d. the allowable deduction for interest expense is reduced to 20% (from 33%) of the
interest income subjected to final tax.
In 2021 and 2020, the Company opted to continue claiming itemized deductions.
- 30 -
16. RELATED PARTY TRANSACTIONS
The Company’s related parties include the ultimate parent company, parent company, and
the Company’s key management personnel.
The summary of the Company’s transactions and outstanding balances with its related
parties are as follows:
2021 2020
Amount of Outstanding Amount of Outstanding
Related Party Note Transaction Balance Transaction Balance
Ultimate parent company –

Purchase of inventories 16.1 (P 204,581,657 ) (P230,484,546) (P 188,565,200) (P246,695,755)
Parent company –
Advances 16.2 ( 22,565,175) ( 328,259,868) ( 11,931,515) ( 350,825,043)
Key management personnel –

Compensation 16.3 ( 8,554,307) - ( 7,674,662) ( 461,170)
16.1 Purchase of Inventories
The Company purchases from its ultimate parent company inventories sold to its
distributors and product samples distributed to sales representatives as part of the
Company’s marketing and promotional activities (see Note 12). The related outstanding
payables are presented as part of Trade payables under Trade and Other Payables account
in the statements of financial position (see Note 10). The payables are generally
unsecured, noninterest-bearing, and payable in cash within three months.
In 2021 and 2020, the Company recognized unrealized gain amounting to P1.3 million and
P4.0 million, respectively, related to outstanding trade payable from these transactions,
which is presented as part of Foreign exchange gain under Other Income in the statements
of comprehensive income (see Note 13).
16.2 Advances from Parent Company
The Company obtains advances from parent company that are unsecured,
noninterest-bearing and payable on demand or through offsetting arrangements. The
advances were used as working capital requirements of the Company.
The analysis of advances from parent company, presented as Advances from Parent
Company in the statements of financial position, is shown below.
Note 2021 2020
Balance at beginning of year P 350,825,043 P 362,756,558

Payments during the year ( 4,859,000) -
Cash flows from a
non-cash financing activity –
Unrealized foreign
exchange gain 13 ( 17,706,175) ( 11,931,515 )
- 31 -
16.3 Key Management Personnel Compensation

The details of the compensation of key management personnel are summarized below
(see Notes 12 and 14).
2021 2020
Short-term employee benefits P 8,554,307 P 7,213,492

Post-employment defined
benefits - 461,170
P 8,554,307 P 7,674,662
17. CAPITAL STOCK

The Company’s authorized capital stock is P10.0 million divided into 100,000 shares at
P100 par value per share. The Company’s subscribed and outstanding capital stock as
at March 31, 2021 and 2020 amounted to P8.7 million divided into 86,534 shares at
P100 par value per share.
As at March 31, 2021 and 2020, the Company has only one stockholder owning 100 or
more shares of the Company’s capital stock.
18. COMMITMENTS AND CONTINGENCIES
There are other commitments and contingent liabilities that arise in the normal
course of the Company’s operations which are not reflected in the financial statements.
Management believes that losses, if any, that may arise from these contingencies will not
have any material effect on the financial statements.
19. RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company is exposed to a variety of financial risks in relation to financial instruments.

The main types of risks are interest rate risk, credit risk and liquidity risk.
The Company’s risk management is coordinated with its parent company, in close
cooperation with the Company’s BOD, and focuses on securing the Company’s short to
medium-term cash flows by minimizing the exposure to financial markets.
The Company does not engage in the trading of financial assets for speculative purposes
nor does it write options. The relevant financial risks to which the Company is exposed
to are described below.
19.1 Interest Rate Risk
As at March 31, 2021 and 2020, the Company has limited exposure to changes in
market interest rates through its cash in bank. This financial instrument has shown
small or measured changes in interest rates. Advances to employees have fixed rate.
19.2 Foreign Currency Risk
Most of the Company’s transactions are carried out in Philippine pesos, its functional
currency. Exposures to currency exchange rates arise from the Company’s overseas
advances and purchases, which are primarily denominated in United States (U.S.)
dollars.
- 32 -
To mitigate the Company’s exposure to foreign currency risk, non-Philippine peso

cash flows are monitored.
Foreign currency-denominated financial liabilities, translated from U.S. dollars into

Philippine pesos at the closing rate follow:
2021 2020
Short-term exposure:
Trade and other payables P 230,750,672 P 252,784,418
Advances from parent company 328,259,868 350,825,043
P 559,010,540 P 603,609,461
The table below illustrates the sensitivity of the Company’s income before tax with
respect to changes in Philippine peso against U.S. exchange rate. The percentage
changes in rates have been determined based on the average market volatility in
exchange rates, using standard deviation, in the previous 12 months at a 99%
confidence level.
2021 2020
Effect in Effect in
Reasonably Effect in capital Reasonably Effect in capital
possible change income before deficiency possible change income before deficiency
in rate tax before tax in rate tax before tax
PhP - USD +6.23% (P 34,826,357) P 25,684,438 +12.32% (P 74,364,686) P 52,055,280

PhP - USD -6.23% 34,826,357 ( 25,684,438) -12.32% 74,364,686 ( 52,055,280 )
Exposures to foreign exchange rates vary during the year depending on the volume of
foreign currency denominated transactions. Nonetheless, the analysis above is
considered to be representative of the Company’s currency risk.
19.3 Credit Risk
Credit risk is the risk that a counterparty may fail to discharge an obligation to the
Company. The Company is exposed to this risk for various financial instruments arising
from selling goods and services to customers including related parties and placing
deposits with banks.
The maximum credit risk exposure of financial assets is the carrying amount of the
financial assets as shown on the face of the statement of financial position (or in the
detailed analysis provided in the notes to the financial statements), as summarized below.
Notes 2021 2020
Cash 4 P 30,061,172 P 50,793,227

Trade and other receivables - net 5 116,071,572 105,324,448
Refundable deposits 7 1,643,459 1,643,459
P 147,776,203 P 157,761,134
The Company continuously monitors defaults of customers identified individually and

incorporate this information into its credit risk controls. The Company’s policy is to deal
only with creditworthy counterparties.
- 33 -
(a) Cash
The credit risk for cash is considered negligible since the counterparty is
reputable bank with high quality external credit rating. Cash in banks are
insured by the Philippine Deposit Insurance Corporation up to a maximum
coverage of P0.5 million for every depositor per banking institution.
(b) Trade and Other Receivables

The Company applies the simplified approach in measuring ECL, which uses a
lifetime expected credit loss allowance for all trade and other receivables.
To measure the ECL, trade and other receivables have been grouped based on
shared credit risk characteristics and the days past due (age buckets). The other
receivables relate to receivables from both third and related parties other than
trade receivables and have substantially the same risk characteristics as the trade
receivables. The Company has therefore concluded that the expected loss rates for
trade receivables are a reasonable approximation of the loss rates for the other
assets.
The expected loss rates are based on the provision matrix as determined by
management. The loss rates are adjusted to reflect current and forward-looking
information on macroeconomic factors affecting the ability of the customers to
settle the receivables. In 2021 and 2020, the Company has identified inflation in the
Philippines to be the most relevant factor, and accordingly adjusts the historical loss
rates based on expected changes in this factor.
On that basis, the loss allowance as at March 31, 2021 and 2020 was determined
based on days past due, as follows for both trade and other receivables:
Not more than 181 to 360 Over 360
180 days days days Total
March 31, 2021

Expected loss rate 0% 43% 100%
Gross carrying amount:
Trade receivables P 112,597,353 P 812,211 P 938,641 P 114,348,205
Other receivables 3,007,429 - - 3,007,429
Loss allowance - 345,421 938,641 1,284,062
March 31, 2020

Expected loss rate 0% 52% 99%
Gross carrying amount:
Trade receivables P 103,934,022 P 1,491,905 P 2,287,640 P 107,713,567
Other receivables 657,846 - - 657,846
Loss allowance - 772,098 2,274,867 3,046,965
(c) Refundable Deposits
In respect of refundable deposits, the Company is not exposed to any significant

credit risk exposure to any single counterparty or any group of counterparties
having similar characteristics. Based on historical information, management
consider the credit quality of refundable deposit to be good.
None of the financial assets are secured by collateral or other credit enhancements aside
from cash in banks.
- 34 -
19.4 Liquidity Risk
The Company manages its liquidity needs by carefully monitoring cash outflows due in a
day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day
and week-to-week basis, as well as on the basis of a rolling 30-day projection. Long-term
liquidity needs for a six-month and one-year period are identified monthly.
The Company maintains cash to meet its liquidity requirements for up to 45-day period.
The analyses of the Company’s financial liabilities based on the expected interest realization
or recognition are as follows:
Due Within Due Beyond
One Year One Year Total
March 31, 2021

Trade and other payables P 254,197,132 P - P 254,197,132
Advances from the
parent company 328,259,868 - 328,259,868
Lease liability 1,309,959 1,014,857 2,324,816
Total P 583,766,959 P 1,014,857 P 584,781,816
March 31, 2020

Trade and other payables P 270,554,329 P - P 270,554,329
Advances from the
parent company 350,825,043 - 350,825,043
Total P 621,379,372 P - P 621,379,372
20. CATEGORIES AND FAIR VALUES OF FINANCIAL ASSETS AND

FINANCIAL LIABILITIES
20.1 Carrying Amounts and Fair Values by Category

The carrying amounts and fair values of the categories of financial assets and financial
liabilities presented in the statements of financial position are shown below.
2021 2020
Notes Carrying Values Fair Values Carrying Values Fair Values
Financial Assets
At amortized cost:
Cash 4 P 30,061,172 P 30,061,172 P 50,793,227 P 50,793,227
Trade and other receivables - net 5 116,071,572 116,071,572 105,324,448 105,324,448
Refundable deposits 7 1,643,459 1,643,459 1,643,459 1,643,459
P 147,776,203 P 147,776,203 P 157,761,134 P 157,761,134
Financial Liabilities
At amortized cost:
Trade and other payables 10 P 254,197,132 P 254,197,132 P 270,554,329 P 270,554,329
Advances from parent company 16.2 328,259,868 328,259,868 350,825,043 350,825,043
Lease liability 9.2 2,161,100 2,161,100 - -
P 584,618,100 P 584,618,100 P 621,379,372 P 621,379,372

- 35 -
See Note 2.3 and 2.8 for a description of the accounting policies for each category of
financial instruments including the determination of fair values. A description of the
Company’s risk management objectives and policies for financial instruments is provided
in Note 19.
20.2 Offsetting of Financial Assets and Financial Liabilities
The Company has not set-off financial instruments in 2021 and 2020 and does not have
relevant offsetting arrangements. Currently, financial assets and financial liabilities are
settled on a gross basis.
21. FAIR VALUE MEASUREMENT AND DISCLOSURES
21.1 Fair Value Hierarchy
In accordance with PFRS 13, Fair Value Measurement, the fair value of financial assets and
financial liabilities and non-financial assets which are measured at fair value on a recurring
or non-recurring basis and those assets and liabilities not measured at fair value but for
which fair value is disclosed in accordance with other relevant PFRS, are categorized into
three levels based on the significance of inputs used to measure the fair value.
The fair value hierarchy has the following levels:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or

liabilities that an entity can access at the measurement date;
• Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e., as prices) or indirectly
(i.e., derived from prices); and,
• Level 3: inputs for the asset or liability that are not based on observable market
data (unobservable inputs).
The level within which the asset or liability is classified is determined based on the lowest
level of significant input to the fair value measurement.
For purposes of determining the market value at Level 1, a market is regarded as active
if quoted prices are readily and regularly available from an exchange, dealer, broker,
industry group, pricing service, or regulatory agency, and those prices represent actual and
regularly occurring market transactions on an arm’s length basis.
For investments which do not have quoted market price, the fair value is determined by
using generally acceptable pricing models and valuation techniques or by reference to the
current market of another instrument which is substantially the same after taking into
account the related credit risk of counterparties, or is calculated based on the expected
cash flows of the underlying net asset base of the instrument.
When the Company uses valuation technique, it maximizes the use of observable market
data where it is available and relies as little as possible on entity specific estimates. If all
significant inputs required to determine the fair value of an instrument are observable, the
instrument is included in Level 2. Otherwise, it is included in Level 3.
- 36 -
21.2 Financial Instruments Measurement at Amortized Cost for which Fair

Value is Disclosed
The carrying values of the Company’s financial assets and financial liabilities approximate
their fair values as at the end of the reporting period (see Note 21.1). Among the financial
assets and financial liabilities of the Company, only cash is classified as Level 1 under fair
value hierarchy, while the rest are Level 3.
22. CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES
The Company’s capital management objectives are to ensure the Company’s ability to
continue as a going concern and to provide an adequate return to shareholders by
pricing products and services commensurate with the level of risk.
The Company monitors capital on the basis of the carrying amount of equity as presented
on the face of the statement of financial position.
The Company sets the amount of capital in proportion to its overall financing structure,
i.e., equity and liabilities. The Company manages the capital structure and makes
adjustments to it in the light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or adjust the capital
structure, the Company may adjust the amount of dividends paid to shareholders, issue
new shares or sell assets to reduce debt.
The Company’s total capital deficiency as at March 31, 2021 and 2020 amounted to
P330.6 million and P368.1 million, respectively.
23. SUPPLEMENTARY INFORMATION REQUIRED BY THE BUREAU OF

INTERNAL REVENUE
23.1 Requirements Under Revenue Regulations (RR) No. 15-2010
Presented below is the supplementary information which is required by the Bureau of

Internal Revenue (BIR) RR No. 15-2010 to disclosed as part of the notes to financial
statements. This supplementary information is not a required disclosure under PFRS.
The information on taxes, duties and license fees paid or accrued during the taxable year
required under RR No. 15-2010 are presented below.
(a) Output VAT

In 2021, the Company declared output VAT as follows:
Output
Tax Base VAT
Sale of goods:
Taxable revenues P 368,373,045 P 44,204,765
Exempt revenues - -
Other income 205,845 24,701
Total P 368,578,890 P 44,229,466

- 37 -
Pursuant to Section 108(B), Zero-rated VAT on Sale of Service, and Section 109,
VAT Exempt Transactions, of the NIRC, as amended, the Company had no
zero-rated and VAT exempt sales/receipt for 2021.
In 2021, the Company’s output VAT was settled through application of available
input VAT and through cash payment amounting to P41.2 million. Accordingly, the
Company has P2.5 million outstanding output VAT payable, which is recognized as
part of Trade and Other Payables in the 2021 statement of financial position.
(b) Input VAT
The movements in input VAT for the fiscal year ended March 31, 2021 are
summarized below.

Importation of goods 21,208,761
Purchase of services 3,513,429
Purchase of capital goods 1,202,625
Domestic purchase of goods
other than capital goods 887,561
Applied against output VAT ( 26,812,376)
P -
The total deferred input VAT amounted to P1.7 million as at March 31, 2021, and
is presented as part of Other Assets account in the 2021 statement of financial
position.
(c) Customs Duties
The Company paid for customs duties amounting to P3.7 million for the
importation of goods for the fiscal year ended March 31, 2021.
(d) Excise Tax
The Company does not have any transaction which is subject to excise tax.
(e) Documentary Stamp Tax (DST)
The Company did not pay any DST for the fiscal year ended March 31, 2021.
(f) Taxes and Licenses
The summary of Taxes and licenses, reported under Selling and Administrative
Expenses in the 2021 statement of comprehensive income is broken down as
follows:
Municipal licenses and permits P 3,124,353

Others 78,259
P 3,202,612
- 38 -
(g) Withholding Taxes
The details of total withholding taxes for the year ended March 31, 2021 follow:
Compensation and benefits P 7,519,223

Expanded 1,813,397
P 9,332,620
In 2021, the Company has no final tax paid since it does not have any transactions
subject to final tax.
(h) Deficiency Tax Assessment and Tax Cases
As at March 31, 2021, the Company does not have any final deficiency tax
assessment from the BIR nor does it have cases outstanding or pending in courts or
bodies outside of the BIR in any of the open taxable year.
23.2 Requirements Under RR No. 34-2020
RR No. 34-2020 prescribes the guidelines and procedures on the submission of BIR Form
No. 1709, transfer pricing documentation and other supporting documents for related
party transactions. The Company is not covered by these requirements as the Company
did not fall in any of the categories identified under Section 2 of RR No. 34-2020.

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Punongbayan & Araullo

20th Floor, Tower 1

Report of Independent Auditors Philippines

T +63 2 8988 2288

The Board of Directors a

Report on the Audit of the Financial Statements

Basis for Opinion

Certified Public Accountants

Offices in Cavite, Cebu, Davao

Material Uncertainty Related to Going Concern

Responsibilities of Management and Those Charged with Governance for the

Certified Public Accountants

Auditors’ Responsibilities for the Audit of the Financial Statements

Certified Public Accountants

Report on Other Legal and Regulatory Requirements

PUNONGBAYAN & ARAULLO

By: Jerald M. Sanchez

CPA Reg. No. 0121830

May 14, 2021

Certified Public Accountants

Notes 2021 2020

Total Current Assets 238,957,718 239,031,935

Total Non-current Assets 22,920,520 18,518,931

TOTAL ASSETS P 261,878,238 P 257,550,866

LIABILITIES AND CAPITAL DEFICIENCY

Total Current Liabilities 588,148,402 623,719,374

Total Non-current Liabilities 4,333,016 1,890,145

Total Liabilities 592,481,418 625,609,519

Capital Deficiency ( 330,603,180 ) ( 368,058,653 )

TOTAL LIABILITIES AND CAPITAL DEFICIENCY P 261,878,238 P 257,550,866

See Notes to Financial Statements.

Notes 2021 2020

REVENUES - Net 11 P 368,744,541 P 342,331,996

COST OF GOODS SOLD 12 198,843,510 179,642,482

GROSS PROFIT 169,901,031 162,689,514

SELLING AND ADMINISTRATIVE EXPENSES 12 162,991,693 161,952,883

OTHER INCOME - Net 13 31,103,745 19,062,751

PROFIT BEFORE TAX 38,013,083 19,799,382

TAX EXPENSE 15 12,124 3,284,425

NET PROFIT 38,000,959 16,514,957

OTHER COMPREHENSIVE LOSS 14 545,486 -

TOTAL COMPREHENSIVE INCOME P 37,455,473 P 16,514,957

See Notes to Financial Statements.

Balance at April 1, 2020 P 8,653,400 P - ( P 376,712,053 ) ( P 368,058,653 )

Balance at March 31, 2021 P 8,653,400 (P 545,486 ) (P 338,711,094 ) (P 330,603,180 )

Balance at April 1, 2019 P 8,653,400 P - (P 393,227,010 ) (P 384,573,610 )

Balance at March 31, 2020 P 8,653,400 P - (P 376,712,053 ) (P 368,058,653 )

See Notes to Financial Statements.

Notes 2021 2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net Cash From (Used in) Operating Activities ( 8,485,767 ) 43,596,561

CASH FLOWS FROM INVESTING ACTIVITIES

Net Cash Used in Investing Activities ( 7,063,397 ) ( 9,137,947 )

CASH FLOWS FROM FINANCING ACTIVITIES

Cash Used in Financing Activities ( 5,182,891 ) -

NET INCREASE (DECREASE) IN CASH ( 20,732,055 ) 34,458,614

CASH AT BEGINNING OF YEAR 50,793,227 16,334,613

CASH AT END OF YEAR P 30,061,172 P 50,793,227