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PIE PUYAT, INC.

FINANCIAL STATEMENTS DECEMBER 31, 2007 AND 2006

AND REPORT OF INDEPENDENT AUDITORS

PHILIPPINE PESOS

CABAUATAN, LEE-ROSALES & CO. Certified Public Accountants


PIE PUYAT, INC. 5/F Manilabank Building, Ayala Avenue Makati City

STATEMENT OF MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS The Management of PIE PUYAT, INC. is responsible for all information and representations contained in the financial statements for the year ended December 31, 2008 and 2007. The financial statements have been prepared in conformity with generally accepted accounting principles and reflect amounts that are based on the best estimates and informed judgment of Management with an appropriate consideration to materiality. In this regard, Management maintains a system of accounting and reporting which provides for the necessary internal controls to ensure that transactions are properly authorized and recorded, assets are safeguarded against unauthorized use or disposition and liabilities are recognized. The Board of Directors reviews the financial statements before such statements are approved and submitted to the stockholders of the Company. CABAUATAN, LEE-ROSALES & CO., CPAs, the independent auditors appointed by the stockholders, has examined the financial statements of the company in accordance with generally accepted auditing standards and has expressed its opinion on the fairness of presentation upon completion of such examination, in its report to stockholders.

GONZALO PUYAT II Chairman PATRICIA PALANCA Chief Executive Officer INDIRA ANNE P. LUCHANGCO Chief Finance Officer


CABAUATAN, LEE-ROSALES & CO. Certified Public Accountants

PRC-BOA Registration No. 3354 SEC Accreditation No. 0148-F

REPORT OF INDEPENDENT AUDITORS

The Board of Directors PIE PUYAT, INC. 5/F Manilabank Building, Ayala Avenue Makati City We have audited the accompanying financial statements of PIE PUYAT, INC. which comprise the balance sheets as of December 31, 2008 and 2007, and the income statements, statements of changes in equity and statements of cash flows for the years then ended, and notes to financial statements comprising of a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain a reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

_________________________________________________________________________________________ Unit 209, 2/F PAGE 1 Building, 1215 Acacia Avenue, Madrigal Business Park, Ayala Alabang Muntinlupa City, 1780 Telefax 632 809-7103; 796-6284 email: nmsc888@yahoo.com


REPORT OF INDEPENDENT AUDITORS

___

___________________

____

Page - 2 -

Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of PIE PUYAT, INC. as of December 31, 2008 and 2007, and of its financial performance and its cash flows for the years then ended, in accordance with Philippine Financial Reporting Standards.

CABAUATAN, LEE-ROSALES & CO. By:

Nestor Mario S. Cabauatan Partner CPA Reg. No. 0067032 Tax Identification No. 107-352-231 PTR No. 0308833, January 6, 2009, Muntinlupa City SEC Accreditation No. 0719-A BIR AN 08-003713-1-2007 (Mar. 28, 2007 to 2010) February 15, 2009

City of Muntinlupa South Metro Manila Philippines

_________________________________________________________________________________________ Unit 209, 2/F PAGE 1 Building, 1215 Acacia Avenue, Madrigal Business Park, Ayala Alabang Muntinlupa City, 1780 Telefax 632 809-7103; 796-6284 email: nmsc888@yahoo.com


CABAUATAN, LEE-ROSALES & CO. Certified Public Accountants

PRC-BOA Registration No. 3354 SEC Accreditation No. 0148-F

SUPPLEMENTAL STATEMENT OF INDEPENDENT AUDITORS TO ACCOMPANY FINANCIAL STATEMENTS FOR FILING WITH THE SECURITIES AND EXCHANGE COMMISSION

The Board of Directors PIE PUYAT, INC. 5/F Manilabank Building, Ayala Avenue Makati City We have audited the accompanying financial statements of PIE PUYAT, INC. for the year ended December 31, 2008, on which we have rendered the attached report dated February 15, 2009. In compliance with SRC Rule 68, we are stating that the Company has THREE (3) stockholder owning 100 or more shares each as of December 31, 2008.

CABAUATAN, LEE-ROSALES & CO. By:

Nestor Mario S. Cabauatan Partner CPA Reg. No. 0067032 Tax Identification No. 107-352-231 PTR No. 0308833, January 6, 2009, Muntinlupa City SEC Accreditation No. 0719-A BIR AN 08-003713-1-2007 (Mar. 28, 2007 to 2010) February 15, 2009

City of Muntinlupa South Metro Manila Philippines

_________________________________________________________________________________________ Unit 209, 2/F PAGE 1 Building, 1215 Acacia Avenue, Madrigal Business Park, Ayala Alabang Muntinlupa City, 1780 Telefax 632 809-7103; 796-6284 email: nmsc888@yahoo.com


CABAUATAN, LEE-ROSALES & CO. Certified Public Accountants

PRC-BOA Registration No. 3354 SEC Accreditation No. 0148-F

REPORT OF INDEPENDENT AUDITORS TO ACCOMPANY FINANCIAL STATEMENTS FOR FILINGWITH THE BUREAU OF INTERNAL REVENUE The Board of Directors PIE PUYAT, INC. 5/F Manilabank Building, Ayala Avenue Makati City We have audited the accompanying financial statements of PIE PUYAT, INC. for the year ended December 31, 2008, on which we have rendered the attached report dated February 15, 2009. In compliance with Revenue Regulations V-20, we are stating the following: 1.

No partner of our Firm has any financial interest in the Company or any family relationships by consanguinity or affinity with its president, manager or principal stockholders of the Company

2. The taxes paid and accrued by the above Company for the year ended December 31, 2008 are shown in the Schedule of Taxes and Licenses attached to the income tax return.

CABAUATAN, LEE-ROSALES & CO. By:

Nestor Mario S. Cabauatan Partner CPA Reg. No. 0067032 Tax Identification No. 107-352-231 PTR No. 0308833, January 6, 2009, Muntinlupa City SEC Accreditation No. 0719-A BIR AN 08-003713-1-2007 (Mar. 28, 2007 to 2010) February 15, 2009

City of Muntinlupa South Metro Manila Philippines _________________________________________________________________________________________ Unit 209, 2/F PAGE 1 Building, 1215 Acacia Avenue, Madrigal Business Park, Ayala Alabang Muntinlupa City, 1780 Telefax 632 809-7103; 796-6284 email: nmsc888@yahoo.com


CABAUATAN, LEE-ROSALES & CO. Certified Public Accountants

PRC-BOA Registration No. 3354 SEC Accreditation No. C-015-F

STATEMENT OF REPRESENTATION TO THE SECURITIES AND EXCHANGE COMMISSION: In connection with our examination of the financial statements of PIE PUYAT, INC. which are to be submitted to the Commission, I hereby represent the following: 1.

That I am in the active practice of the accounting profession and duly registered with the Board of Accountancy (BOA)

2.

That said financial statements are presented in conformity with generally accepted accounting principles in the Philippines in all cases where I shall express an unqualified opinion; Except that in case of any departure from such principles; I shall indicate the nature of the departure, the effects thereof, and the reasons why compliance with the principles would result in a misleading statement, if such is a fact;

3.

That I shall fully meet the requirements of independence as provided under the Code of Professional Ethics for CPAs.

4.

That in the conduct of the audit, I shall comply with the generally accepted auditing standards promulgated by the Board of Accountancy; in case of any departure from such standards or any limitation in the scope of my examination, I shall indicate the nature of the departure and the extent of the limitation, the reasons therefore and the effects thereof on the expression of my opinion or which may necessitate the negation of the expression of an opinion;

5.

That I shall comply with the applicable rules and regulations of the Securities and Exchange Commission in the preparation and submission of financial statements; and

6.

That relative to the expression of my opinion on the said financial statements, I shall not commit any acts discreditable to the profession as provided under the Code of Professional Ethics for CPAs.

As a CPA engaged in public practice, I make these representations in my individual capacity and as partner in the Accounting Firm of CABAUATAN, LEE-ROSALES & CO., CPAs. CABAUATAN, LEE-ROSALES & CO. By:

Nestor Mario S. Cabauatan Partner CPA Reg. No. 0067032 Tax Identification No. 107-352-231 PTR No. 0308833, January 6, 2009, Muntinlupa City SEC Accreditation No. 0719-A BIR AN 08-003713-1-2007 (Mar. 28, 2007 to 2010) February 15, 2009 _________________________________________________________________________________________ Unit 207, 2/F PAGE 1 Building, 1215 Acacia Avenue, Madrigal Business Park, Ayala Alabang Muntinlupa City, 1780 Telefax 632 809-7103; 796-6284 email: nmsc888@yahoo.com


PIE PUYAT, INC. BALANCE SHEETS December 31, 2008 and 2007 (Amounts in Philippine Pesos) Notes

2008

2007

2.3 , 9

237,711 354,947 73,124 665,782

349,758 230,000 68,474 648,232

170,000 (151,111) 18,889

170,000 (94,445) 75,555

684,671

723,787

11 6

27,215 1,598 28,813

23,142 590 23,732

5

532,962 561,775

532,962 556,694

10,000 112,897 122,897

10,000 157,093 167,093

684,671

723,787

A S S E T S

Current Assets Cash Advances to Officers Other Current Assets Total Current Assets

2.3 , 10

Noncurrent Assets Office Furniture and Equipment Accumulated Depreciation Net

2.3 , 3

TOTAL ASSETS

LIABILITIES AND EQUITY

Current Liabilities Accrued Expense Payable Income Tax Payable Total Current Assets

Noncurrent Liability Advances from Stockholders Total Liabilities EQUITY Capital Stock Retained Earnings Total Equity

2.3

TOTAL LIABILITIES AND EQUITY

See accompanying Notes to Financial Statements.


PIE PUYAT, INC. INCOME STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Amounts in Philippine Pesos) Notes INCOME FROM SERVICES

2.5

2008

2007

83,036

32,634

3,150

3,150

79,886

29,484

OPERATING EXPENSES Depreciation Gas and Oil Professional Fees Office Supplies Taxes and Licenses Miscellaneous Total

56,666 42,570 15,000 2,800 500 4,949 122,485

56,667 28,000 19,530 16,062 22,050 142,309

OPERATING Loss

(42,599)

(112,825)

COST OF SERVICE GROSS INCOME

Add Interest Income

2.5

(LOSS) BEFORE INCOME TAX PROVISION FOR INCOME TAX-MCIT NET (LOSS)

See accompanying Notes to Financial Statements.

6

-

711

(42,599)

(112,114)

1,598 (44,197)

590 (112,704)


PIE PUYAT, INC. STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Amounts in Philippine Pesos) Notes CAPITAL STOCK - P1 par value Authorized - 160,000 shares Subscribed - 40,000 shares Subscription receivables Paid Up Capital

2.3

RETAINED EARNINGS Balance at Beginning of Year

2.3

2008

2007

40,000 (30,000) 10,000

40,000 (30,000) 10,000

157,093

269,797

Net (Loss) for the Year

(44,197)

(112,704)

Balance at End of Year

112,897

157,093

122,897

167,093

NET EQUITY

See accompanying Notes to Financial Statements.


PIE PUYAT, INC. CASH FLOW STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Amounts in Philippine Pesos) Notes CASH FLOWS FROM OPERATING ACTIVITIES (Loss) before Tax Adjustments for: Depreciation Interest Income Operating Income before working capital changes Decrease (Increase) in: Advances to Officers and Employees Other Current Assets (Decrease) Increase in: Accrued Expense Payable Increase in Income Tax Payable Cash (used) in Operations Cash paid for Income Tax

6

Net cash Used in Operations

2008

2007

(42,599)

(112,114)

56,666 14,067

56,667 (711) (56,158)

(124,947) (4,650)

(180,000) 6,850

4,073 1,008 (110,449) (1,598)

13,010 (9,486) (225,784) (590)

(112,047)

(226,374)

CASH FLOWS FROM INVESTING ACTIVITIES Interest received

-

711

Net Cash From Investing Activities

-

711

NET DECREASE IN CASH

(112,047)

(225,663)

CASH AT BEGINNING OF YEAR

349,758

575,421

237,711

349,758

CASH AT END OF YEAR

See accompanying Notes to Financial Statements.

9


PIE PUYAT, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2008 and 2007 (Amounts in Philippine Pesos) 1. CORPORATE INFORMATION

1.1 Incorporation and Nature of Business PIE PUYAT, INC. (Company) was registered with the Securities and Exchange Commission on June 6, 2003 under S.E.C. Reg. No. CS200312868. The Company was incorporated primarily to engage in the business of marketing, advertising, sales promotion, public relations, sales and marketing counsel, and to hire the services of experts, technicians, professionals, participants, agents, and other representatives to carry out its purpose. The registered office address of PIE PUYAT, INC., which is also its current principal place of business, is located at 5th Floor Manila Bank Building, Ayala Avenue, Makati City.

1.2 Approval of Financial statements The accompanying financial statements of the Company for the year ended December 31, 2008 were reviewed by and authorized for issuance by the Board of Directors on February 15, 2009. 2. SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES The significant accounting policies that have been used in the preparation of these financial statements are summarized below. The policies have been consistently applied to all presented, unless otherwise stated.

2.1 Basis of Preparation of Financial Statement (a) Basis of Preparation The financial statements of the Company have been prepared on the historical cost basis. The measurement bases are more fully described in the accounting policies that follow. (b) Statement of Compliance with Philippine Financial Reporting Standards The financial statements of the Company have been prepared in accordance with Philippine Financial Reporting Standards (PFRSs). PFRSs are adopted by the Financial Reporting Standards Council (FRSC), formerly the Accounting Standards Council, from the pronouncements issued by the International Accounting Standards Board (IASB). PFRSs consist of: (i)

PFRSs – corresponding to International Financial Reporting Standards;

(ii)

Philippine Accounting Standards (PASs) – corresponding to International Accounting Standards; and,

(iii)

Interpretations to existing standards – representing interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), formerly the Standing Interpretations Committee, of the IASB which are adopted by the FRSC.

In compliance with the pronouncements of the FRSC and the regulations of the Securities and Exchange Commission, the Company has adopted all the relevant PFRSs for the first time in its financial statements for the year ended December 31, 2007.


PIE PUYAT, INC. Notes to Financial Statements December 31, 2008 and 2007

Of the new FRSC pronouncement, the following are the standards adopted by the Company in its 2007 financial statements: PAS 1 PAS 8

: :

PAS 10 PAS 16

: :

Presentation of Financial Statements : Accounting Policies, Changes in Accounting Estimates and Errors Events after the Balance Sheet Date Property, Plant and Equipment

The requirements of these new standards have been applied in accordance with their specific transitional provisions, or retrospectively in accordance with PAS 8, in the absence of such specific transitional provisions. The financial statements are presented in Philippine pesos, the Company’s functional currency, and all values represent absolute amounts except when otherwise indicated. (see Note 2.3)

2.2 Impact of New Standards and Amendments and Interpretation to Existing Standards (a)

Effective in 2007 that are relevant to the Company In 2007, the Company adopted for the first time the following new and amended PFRS which are mandatory for accounting periods beginning on or after January 1, 2007. PAS 1 (Amended) PFRS 7

: Presentation of Financial Statements : Financial Instruments: Disclosures

PFRS 7, Financial Instruments: Disclosures and complementary amendment to PAS 1 (effective for annual periods beginning on or after January 1, 2007). PFRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure of risk arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk. It is applicable to all entities that report under PFRS. The amendment to PAS 1 introduces disclosures about the level of an entity’s capital and how it manages capital. The Company has assessed the impact of PFRS 7 and the amendment to PAS 1 and under the prevailing circumstances, the adoption of the above amendment in 2007 is not expected to have any material effect in the financial statement. (b) Effective in 2007 but not relevant to the Company PFRS 4 (Amendment) Philippine Interpretation IFRIC 7 Philippine Interpretation IFRIC 8 Philippine Interpretation IFRIC 9 Philippine Interpretation IFRIC 10

: Insurance Contracts : Applying the Restatement Approach Under PAS 29, Financial Reporting In Hyper Inflationary Economics : Scope of PFRS 2 : Re-assessment of Embedded Derivatives : Interim Financial Reporting and Impairments

Effective Subsequent to 2007 but not relevant to the Company

Page 2 of 8


PIE PUYAT, INC. Notes to Financial Statements December 31, 2008 and 2007

There are new and amended standards and Philippine Interpretation that are effective for periods subsequent to 2007: 2008:

2009:

Philippine Interpretation IFRIC 12 Philippine Interpretation IFRIC 13 Philippine Interpretation IFRIC 14

PAS 1 (Revised 2007) PAS 23 (Revised 2007) PFRS 8

: Service Concession Arrangements : Customer Loyalty Programmes : PAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction : Presentation of Financial Statements : Borrowing Costs : Operating Segments

Below is a discussion of the possible impact of these accounting standards: (i) PAS 1 (Revised 2007), Presentation of Financial Statements (effective from January 1, 2009). The amendment requires an entity to present all items of income and expense recognized in the period in a single statement of comprehensive income or in two statements: a separate income statement and a statement of comprehensive income. The income statement shall disclose income and expense recognized in profit and loss in the same way as the current version of PAS 1. The statement of comprehensive income shall disclose profit or loss for the period, plus each component of income and expense recognized outside of profit and loss classified by nature (e.g., gains or losses on available-for-sale assets or translation differences related to foreign operations). Changes in equity arising from transactions with owners are excluded from the statement of comprehensive income (e.g., dividends and capital increase). An entity would also be required to include in its set of financial statements a statement showing its financial position (or balance sheet) at the beginning of the previous period when the entity retrospectively applies an accounting policy or makes a retrospective restatement. The Company will apply PAS 1 (Revised 2007) in its 2009 financial statements. (ii) PAS 23 (Revised 2007), Borrowing Costs (effective from January 1, 2009). Under the revised PAS 23, all borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset shall be capitalized as part of the cost of that asset. The option of immediately expensing borrowing costs that qualify for asset recognition has been removed. The Company has initially determined that adoption of this new standard will not have significant effects on the financial statements for 2009, as well as for prior and future periods, as the Company’s current accounting policy is to capitalize all interest directly related to qualifying assets.

2.3 Financial Assets Financial assets include cash and other financial instruments. All financial assets are recognized on their trade date. All financial assets that are not classified as at fair value through profit or loss are initially recognized at fair value, plus transaction costs. Non-compounding interest and other cash flows resulting from holding financial assets are recognized in profit or loss when earned, regardless of how the related carrying amount of financial assets is measured.

Page 3 of 8


PIE PUYAT, INC. Notes to Financial Statements December 31, 2008 and 2007

Derecognition of financial assets occurs when the rights to receive cash flows from the financial instruments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred. Currently, the Company’s financial assets consist of Cash and Receivables Cash Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less from dates of acquisition and are subject to an insignificant risk of change in value. Receivables Receivables are stated at the face value less an allowance for any uncollectible amount. An estimated for doubtful accounts is made when collection of the full amount is no longer probable. Office Furniture and Equipment Office Furniture and Equipment are stated at cost less accumulated depreciation. 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, improvements and renewal are capitalized; expenditures for repairs and maintenance are charged to expense as incurred. When assets are sold, retired or otherwise disposed of, their cost and related accumulated depreciation and impairment losses are removed from the accounts and any resulting gain or loss is reflected in income for the period. Depreciation of Office Equipment, Furniture & Fixtures is computed using the straight-line method over the estimated useful lives of not over 5 years. Fully depreciated assets are retained in the accounts until these are no longer in use and no further charge for depreciation is made in respect of those assets. The carrying values of property and equipment are reviewed for impairment when changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exist and where the carrying values exceeds the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount and impairment losses are recognized in the statement of income. The residual values and estimated useful lives of property and equipment are reviewed, and adjusted if appropriate, at each balance sheet date. An item of property and equipment 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 the income statement in the year the item is derecognized. Equity Capital Stock is determined using the nominal value of shares that have been issued. Retained Earnings includes all current and prior period results of operations as disclosed in the income statements. Provisions Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of past event. It is probable that an outflow of resources embodying economic benefits

Page 4 of 8


PIE PUYAT, INC. Notes to Financial Statements December 31, 2008 and 2007

will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessment of the time value of money and, where appropriate, t he risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as an interest expense. Contingencies Contingent liabilities are not recognized in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognized in the financial statements but disclosed when an inflow of economic benefits is probable. Subsequent Events Post-year-end events that provide additional information about the Company’s financial position at the statements of assets, liabilities and fund balance date (adjusting events) are reflected in the financial statements. Post-year-end events that are not adjusting events are disclosed in the notes to financial statements when material.

2.4 Functional Currency and Foreign Currency Transactions (a) Functional and Presentation Currency Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The financial statements are presented in Philippine pesos, which is the Company’s functional and presentation currency. (b) Transactions and Balances The accounting records of the Company are maintained in Philippine pesos. Transactions during the year that are denominated in foreign currency are translated into Philippine pesos at exchange rates approximating those prevailing on transaction dates. Foreign currency monetary asset and liabilities, if any, at balance sheet date are translated into Philippine pesos at exchange rates approximating those prevailing on that date. Foreign exchange gains or losses arising from foreign currency transactions are credited or charged to operations.

2.5 Revenue and Expense Recognition Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow to the Company and the amount of the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized. (a) Sale of Goods - Revenue is recognized when the risks and rewards of ownership of goods have passed to the buyer. This is generally when the customer has taken undisputed delivery of goods. (b) Rendering of Services- Revenue is recognized by reference to the stage and status of completion. The stage of completion is measured by reference to the labor hours incurred to date. This is generally when the customer has approved the services that have been provided. (c) Interest - Revenue is recognized on a time proportion basis net of applicable final withholding tax.

Page 5 of 8


PIE PUYAT, INC. Notes to Financial Statements December 31, 2008 and 2007

3

SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES The preparation of the financial statements requires Management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in future period affected. The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: Useful Life of Office Furniture and Equipment The Company estimates the useful lives of the office furniture and equipment based on the period over which the assets are expected to be available for use. The estimated useful lives of property and equipment are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical and commercial obsolescence and legal or limits on the use of the assets. In addition, estimation of the useful lives of the property and equipment is based on collective assessment of industry practice, internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of property and equipment would increase recorded operating expenses and decrease noncurrent asset. Realizable Amount of Deferred Tax Assets The Company reviews its deferred income tax assets at each balance sheet date and reduces the carrying amount to the extent that it in no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax assets to be utilized. The Company reviews the expected timing and tax rates upon reversal of temporary differences and adjusts the impact of deferred tax accordingly. (see Note 6) There are no other areas where the Board of Directors exercises significant judgments and estimates.

4

RISK MANAGEMENT OBJECTIVES AND POLICIES The Company’s exposure to financial risk is limited since it has not embarked into commercial business operations. The Company’s risk management rest with the Board of Directors.

5

RELATED PARTY TRANSACTIONS The Company in the normal course of business enters into transactions with its related parties. These transactions are done in the normal conduct of operations and are recorded in the same manner as transactions entered into with third parties. These transactions in the form of advances are non-interest bearing and do not have specific repayment terms. The outstanding balance arising from the above transactions and recorded under Advances from Stockholders, amounted to Php532,962.00 as at December 31, 2008 and 2007:

Page 6 of 8


PIE PUYAT, INC. Notes to Financial Statements December 31, 2008 and 2007

6

INCOME TAXES The reconciliation of provision for income tax computed at statutory income tax rate to the provision for income tax shown in the statements of income follows:

(Loss) income before income tax Expected income tax at statutory rate Reduction in income tax resulting from the tax effects of: Interest income subjected to final tax Provision for MCIT Unrecognized deferred tax assets

2007 (42,599) 14,910

2007 (112,114) 39,240

1,598 (14,910) 1,598

260 590 (39,500) 590

The Company’s deferred income tax asset represent NOLCO which can be claimed as deduction against future taxable income within three years from the year the taxable loss was incurred is shown as follows:

Year 2007 2008

Original Amount 39,500 14,910 54,410

Applied/ Expired -

Balance 39,500 54,410

Valid Until 2010 2011

The Company however, did not recognize the deferred tax asset arising from NOLCO as of December 31, 2008, because it is not certain that sufficient taxable profit will be available in future years to allow all or part of the deferred tax asset to be utilized.

7

TAX REGULATIONS On May 24, 2005, Republic Act No. 9337 (“RA 9337”), amending certain sections of the National Internal Revenue Code of 1997, was signed into law and became effective beginning November 1, 2005. The following are the major changes brought about by RA 9337 that are relevant to the Company: a.

Regular corporate income tax rate is increased from 32% to 35% starting November 1, 2005 until December 31, 2008 and will be reduced to 30% beginning January 1, 2009;

b. 10% Value Added Tax (VAT) rate is increased to 12% effective on February 1, 2006; c. VAT rate is now imposed on certain goods and services that were previously zero-rated or subject to percentage tax; d. Input tax on capital goods shall be claimed on a staggered basis over 60 months or the useful life of the related assets, whichever is shorter; and e. Creditable input VAT is capped by a maximum of 70% of output VAT per quarter until the third quarter of 2006 (this cap was removed effective quarters ending December 31, 2006 and onwards).

Page 7 of 8


PIE PUYAT, INC. Notes to Financial Statements December 31, 2008 and 2007

8

COMMITMENTS AND CONTINGENCIES There are commitments and contingent liabilities that arise in the normal course of the Company’s operations which are not reflected in the accompanying financial statements. As of December 31, 2007, Management is of the opinion that losses, if any, from there events and conditions will not have a material effect on the Company’s financial statements.

9

CASH

This account consists of:

Cash in Bank Petty Cash Fund

2008 177,711 60,000 237,711

2007 289,758 60,000 349,758

2008 66,834 1,640 68,474

2007 66,834 1,640 68,474

2008 17,250 9,965 27,215

2007 17,250 5,437 455 23,142

10 OTHER CURRENT ASSETS This account consists of:

Accounts Receivable- Others Withholding Tax Receivable

11 ACCRUED EXPENSES PAYABLE This account consists of:

Accrued Expenses VAT Output Tax Withholding Tax Payable

Page 8 of 8


COVER SHEET C S 2 0 0 3 1 2 8 6 8 S.E.C. Registration Number

P I E

P U Y A T ,

I N C .

(Company's Full Name)

5 / F

M A N I L A B A N K

A Y A L A

A V E . ,

B U I L D I NG ,

M A K A T I

C I T Y

( Business Address : No. Street City / Town / Province )

INDIRA P. LUCHANGCO

8115519

Contact Person

Company Telephone Number

1 2

3 1

Month

Day

A A F S

0 3

FORM TYPE

Month

Fiscal Year

0 0 Day

Annual Meeting**

Secondary License Type, If Applicable

Dept. Requiring this Doc.

Amended Articles Number/Section

Total Amount of Borrowings 6 Domestic

Total No. of Stockholders

To be accomplished by SEC Personnel concerned

File Number

LCU

Document I.D.

Cashier

STAMPS

Remarks = pls. use black ink for scanning purposes

Foreign


2008 draft