SEAFRONTRESOURCESCORPORATION NOTESTOFINANCIALSTATEMENTS
1. CorporateInformation
Seafront Resources Corporation (the Company or SRC) was registered with the Securities and Exchange Commission (SEC) on April 16, 1970 as an oil exploration and production company. On October 18, 1996,theCompanyamendeditsArticlesofIncorporationwhichprovidesfortherevision of its primary purpose from engagingin the business of oil exploration and production into a holding companyandtoincludeoilexplorationandproductionbusinessasoneofitssecondarypurposes.The Company’ssharesofstockwerelistedonMay7,1974andarecurrentlytradedatthePhilippineStock Exchange.
The registered office address of the Company is 7th Floor, JMT Building, ADB Avenue, OrtigasCenter,PasigCity.
The accompanying financial statements were approved and authorized for issue by the Board of Directors(BOD).
2. BasisofPreparation BasisofPreparation
The accompanying financial statements of the Company have been prepared under the historical cost basis,exceptforthefinancialassetsatfairvaluethroughprofitorloss(FVTPL)andfinancialassetsat fairvaluethroughothercomprehensiveincome(FVOCI),whichhavebeenmeasuredatfairvalue. The Company’s financial statements are presented in Philippine Peso (P=), which is also the Company’s functionalandpresentationcurrency.
The Company has investment in trust funds. The transactions and balances of the Company’s trust funds(seeNote7)areconsolidatedonalinebylinebasiswiththeCompany.Thetrustfundreportsare prepared for the same reporting year as the Company, using consistent accounting policies in accordancewithPhilippineFinancialReportingStandards(PFRSs).
StatementofCompliance
The financial statements of the Company have been prepared in accordance with PFRSs. The term PFRSs, in general, include all applicable PFRSs, Philippine Accounting Standards (PASs) and Interpretations issued by the Standing Interpretations Committee, the Philippine Interpretations Committee(PIC) andtheInternationalFinancialReportingInterpretationsCommittee(IFRIC),which havebeenapprovedbythe PhilippineFinancial Reporting StandardsCouncil (FRSC) and adopted by thePhilippineSEC.
3. ChangesinAccountingPoliciesandDisclosures
Theaccountingpoliciesadoptedareconsistentwiththoseofthepreviousfinancialyear,exceptthatthe Companyadoptedthefollowingnewstandardseffectivein 2022 Theadoptionofthesenewstandards didnothaveanimpactonthefinancialstatementsoftheCompany.
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AmendmentstoPFRS3, Reference to the Conceptual Framework
AmendmentstoPAS16, Plant and Equipment: Proceeds before Intended Use
AmendmentstoPAS37, Onerous Contracts - Costs of Fulfilling a Contract
Annual Improvements to PFRSs 2018-2020Cycle
• Amendments to PFRS 1, First-time Adoption of Philippines Financial Reporting Standards, Subsidiary as a First-time Adopter
• Amendments to PFRS 9, Financial Instruments, Fees in the ‘10 per cent’ Test for Derecognition of Financial Liabilities
• AmendmentstoPAS41, Agriculture, Taxation in Fair Value Measurements
StandardsIssuedbutnotyetEffective
Pronouncements issued but not yet effective are listed below. The Company does not expect that the future adoption of the said pronouncements will have a significant impact on its financial statements. The Company intends to adopt the following pronouncements when they become effective.
Effective beginning on or after January 1, 2023
AmendmentstoPAS12, Deferred Tax related to Assets and Liabilities arising from a Single Transaction
AmendmentstoPAS8, Definition of Accounting Estimates
AmendmentstoPAS1andPFRSPracticeStatement2, Disclosure of Accounting Policies
Effective beginning on or after January 1, 2024
AmendmentstoPAS1, Classification of Liabilities as Current or Non-current
Effective beginning on or after January 1, 2025
PFRS17, Insurance Contracts
Deferred effectivity
AmendmentstoPFRS10, Consolidated Financial Statements, and PAS 28, Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
4. SummaryofSignificantAccountingPolicies
CashandCashEquivalents
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 (3) months or lessandthataresubject toaninsignificantriskofchangesinvalue.
FinancialInstruments
Initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liabilityor equityinstrumentofanotherentity.
Financial assets - Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortized cost; FVOCI;andFVTPL.
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Company’s business model for managing them. The Company
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initiallymeasuresafinancialassetatitsfairvalueplus,inthecaseofafinancialassetnotatfairvalue throughprofitorloss,transactioncosts.
InorderforafinancialassettobeclassifiedandmeasuredatamortizedcostorfairvaluethroughOCI, it needs to give rise to cash flow that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrumentlevel.
The Company’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flowswill result fromcollectingcontractualcashflows,sellingthefinancialassets,orboth.
Subsequent measurement
Forpurposesofsubsequent measurement,financialassetsareclassifiedinfourcategories:
Financialassetsatamortizedcost(debtinstruments)
FinancialassetsatFVOCIwithrecyclingofcumulativegainsandlosses(debtinstruments)
Financial assets designated at FVOCI with no recycling of cumulative gains and losses upon derecognition(equityinstruments)
FinancialassetsatFVTPL
Financial assets at amortized cost (debt instruments)
TheCompanymeasuresfinancialassetsatamortizedcostifbothofthefollowingconditionsaremet:
The financial asset is held within a business model with the objective to hold financial assets in ordertocollectcontractualcashflows;and
Thecontractualtermsofthefinancialassetgiveriseonspecifieddatestocashflowsthataresolely paymentsofprincipalandinterestontheprincipalamountoutstanding.
Financialassetsatamortizedcostaresubsequentlymeasuredusingtheeffectiveinterest(EIR)method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized,modifiedorimpaired.
TheCompany’sfinancialassetsatamortizedcostincludescashand cashequivalentsandreceivables.
Financial assets at FVTPL
Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to bemeasured at fair value. Financial assets are classified as held for tradingif they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effectivehedginginstruments.Financialassetswithcashflowsthatarenotsolelypaymentsofprincipal andinterestareclassifiedandmeasuredatfairvaluethroughprofitorloss,irrespectiveofthebusiness model. Notwithstanding the criteria for debt instruments to be classified at amortized cost or at fair value through OCI, as described above, debt instruments may be designated as at FVTPL on initial recognitionifdoingsoeliminates,orsignificantlyreduces,anaccountingmismatch.
FinancialassetsatFVTPLarecarriedinthestatementoffinancialpositionatfairvaluewithnetchanges infairvaluerecognizedinprofitorloss.
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This categoryincludes derivativeinstruments and quoted equity investments which the Companyhad not irrevocably elected to classify at fair value through OCI. Dividends on quoted equity investments arealsorecognizedasotherincomeinprofitorlosswhentherightofpaymenthasbeenestablished.
TheCompany’s financial assets at FVTPLconsistsof investmentsinquoted equitysecurities held for trading.
Financial assets designated at FVOCI (equity instruments)
Uponinitialrecognition,theCompanycanelecttoclassifyirrevocablyitsequityinvestmentsasequity instruments designated at FVOCI when they meet the definition of equity under PAS 32 and are not heldfortrading. Theclassificationisdeterminedonaninstrument-by-instrumentbasis.
Gainsandlossesonthesefinancialassetsareneverrecycledtoprofitorloss.Dividendsarerecognized as other income in profit or loss when the right of payment has been established, except when the Company benefitsfromsuchproceedsasarecoveryof partofthecostof thefinancialasset,in which case, such gains are recorded in OCI. Equity instruments designated at FVOCI are not subject to impairmentassessment.
The Company’s financial assets at FVOCI include quoted and unquoted equity securities and quoted governmentsecurities.
Impairment of financial assets
The Company recognizes an allowance for ECLs for all debt instruments not held at FVTPL. ECLs arebasedonthedifferencebetweenthecontractualcashflowsdueinaccordancewiththecontractand all thecash flowsthattheCompanyexpectsto receive,discounted atan approximationoftheoriginal effectiveinterestrate. Theexpectedcashflowswillincludecashflowsfromthesaleofcollateralheld orothercredit enhancementsthatareintegraltothecontractualterms.
ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposuresfor which therehas been a significant increase in credit risk since initial recognition, a loss allowanceisrequiredforcreditlossesexpectedovertheremaininglifeoftheexposure,irrespectiveof thetimingofthedefault(alifetimeECL).
The Company may consider a financial asset to be in default when internal or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in full before takingintoaccountanycreditenhancementsheldbytheCompany.Afinancialassetiswrittenoffwhen thereisnoreasonableexpectationofrecoveringthecontractualcashflows.
Financial liabilities - Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings andpayables,netofdirectlyattributabletransactioncosts.
Subsequent measurement
Themeasurementoffinancialliabilitiesdependsontheirclassification,asdescribedbelow:
FinancialliabilitiesatFVTPL
Loansandborrowings
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Loans and borrowings
After initial recognition, interest-bearing financial liabilities are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognizedaswellasthroughtheEIRamortizationprocess.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statementofcomprehensiveincome.
TheCompany’sfinancialliabilitiesatamortizedcostincludesaccountspayableandaccruedexpenses, excludingstatutoryliabilities.
Derecognition of financial assets and financial liabilities
Financial assets
Afinancialasset(or whereapplicable,apart of afinancialassetor partof agroupof similarfinancial assets)isderecognizedwhen:
therightstoreceivecashflowsfromtheassethaveexpired;
theCompanyretainstherightstoreceivecashflowsfromtheasset,buthasassumedanobligation topaytheminfullwithoutmaterial delaytoathirdpartyundera“pass-through”arrangement; or
the Company has transferred its right to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retainedsubstantiallyalltherisksandrewardsoftheasset,buthastransferredcontroloftheasset.
When the Company has transferred its rights to receive cash flows from an asset and has neither transferrednorretainedsubstantiallyalltherisksandrewardsoftheassetnortransferredcontrolofthe asset, the asset is recognized to the extent of the Company’s continuing involvement in the asset. Continuinginvolvementthattakestheformofaguaranteeoverthetransferredassetismeasuredatthe lower of the original carrying amount of the asset and the maximum amount of consideration that the Companycouldberequiredtorepay.
Financial liabilities
Afinancialliabilityisderecognizedwhen theobligationundertheliabilityisdischarged, cancelledor hasexpired.
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modificationistreatedasaderecognitionoftheoriginalliabilityandtherecognitionofanewliability, andthedifferenceintherespectivecarryingamountsisrecognizedinprofitorloss.
Offsetting of Financial Instruments
Financial assets and financial liabilities are set off and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognized amounts and thereisanintentiontosettleonanetbasis,ortorealizetheassetandsettletheliabilitysimultaneously.
FairValueMeasurement
Fairvalueisthepricethat wouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderly transactionbetweenmarketparticipantsatthemeasurementdate. Thefairvaluemeasurementisbased onthepresumptionthatthetransactiontoselltheassetortransfertheliabilitytakesplaceeither:
Intheprincipalmarketfortheassetorliability,or
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Intheabsenceofaprincipalmarket,inthemostadvantageousmarketfortheassetorliability.
Theprincipalorthemostadvantageousmarket must beaccessibletobytheCompany. Thefair value of an asset or a liability is measured using the assumptions that market participants would use when pricingtheassetorliability,assumingthatmarketparticipantsactintheireconomicbestinterest.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs andminimizingtheuseofunobservableinputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorizedwithinthefairvaluehierarchy,describedasfollows,basedonthelowestlevelinputthatis significanttothefairvaluemeasurementasawhole:
Level1-Quoted(unadjusted)marketpricesinactivemarketsforidenticalassetsorliabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair valuemeasurementisdirectlyorindirectlyobservable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair valuemeasurementisunobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis, the CompanydetermineswhethertransfershaveoccurredbetweenLevelsinthehierarchybyre-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole)attheendofeachreportingperiod.
CapitalStock
Capital stock is measured at par value for all shares issued. Incremental costs incurred directly attributabletotheissuanceofnewsharesareshowninequityasadeductionfromproceeds,netoftax. WhentheCompanypurchasesitsowncapitalstock(treasuryshares),theconsiderationpaid,including any attributable incremental costs, is deducted from equity until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of anydirectlyattributableincrementaltransactioncostsandtherelatedtaxeffectsisincludedinequity.
RetainedEarnings
Retained earnings represent accumulated earnings of the Company less dividends declared and with consideration of any changes in accounting policies and other adjustments applied retroactively. The retainedearningsoftheCompanyareavailablefordividendsonlyuponapprovalanddeclarationofthe BOD.
EarningsPerShare(EPS)
Basic earnings per share are computed on the basis of the weighted average number of shares outstandingduringtheyearaftergivingretroactiveeffectforanystockdividendsdeclaredinthecurrent year.
Diluted earningspershare, if applicable, iscomputed onthebasis of theweighted averagenumber of sharesoutstandingduringtheyearplustheweightedaveragenumberofordinarysharesthatwouldbe issuedontheconversionofallthedilutivepotentialordinarysharesintoordinaryshares.Thereareno dilutive potential common sharesthat would requiredisclosureof diluted earningsper common share inthefinancialstatements.
RevenueRecognition
Revenuefromcontractswithcustomersisrecognizedwhencontroloftheservicesistransferredtothe customer at an amount that reflects the consideration to which the Company expects to be entitled in
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exchange for those goods. The Company has concluded that it is the principal in its revenue arrangementsinceitistheprimaryobligorinallrevenuearrangements,haspricinglatitudeandisalso exposedtocreditrisk.
Dividend income
DividendincomeisrecognizedwhentheCompany’srighttoreceivethepaymentisestablished,which isgenerallywhentheBODapprovesthedividenddeclaration.
Interest income
Interestincomeisrecognizedastheinterestaccruestakingintoaccounttheeffectiveyieldontheasset.
Service income
TheCompanyrecognizesrevenuefromservicesovertime,usinganinputmethodtomeasureprogress towards complete satisfaction of the service, because the customer simultaneously receives and consumesthebenefitsprovidedbytheCompany.
Rental income
Rental incomeunder non-cancellableleasesis recognized intheon a straight-linebasis over the lease terms,asprovidedunderthetermsoftheleasecontract.
GeneralandAdministrativeExpenses
Expenses are recorded when incurred. General and administrative expenses constitute costs of administeringthebusiness.
IncomeTax
Current tax
Currenttaxassetsandliabilitiesforthecurrentandpriorperiodsaremeasuredattheamountexpected toberecoveredfromorpaidtothetaxationauthorities. Thetaxratesandtaxlawsusedtocomputethe amountarethosethatareenactedorsubstantiallyenactedbythereportingdate.
Deferred tax
Deferred tax is provided on all temporary differences at the reporting date between the tax bases of assetsandliabilitiesandtheircarryingamountsforfinancialreportingpurposes.
Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits from excess minimum corporate income tax (MCIT) over regular corporate income tax and unused net operating loss carryover (NOLCO), to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits from excess MCITandunexpiredNOLCOcanbeutilized.
Thecarryingamountofdeferredtaxassetsisreviewedateachreportingdateandreducedtotheextent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferredtaxassettobeutilized. Unrecognizeddeferredtaxassetsarereassessedateachreportingdate and are recognized to the extent that it has become probable that future taxable profit will allow the deferredtaxassettoberecovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enactedorsubstantiallyenactedatthereportingdate.
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ProvisionsandContingencies
ProvisionsarerecognizedwhentheCompanyhasapresentobligation(legalorconstructive)asaresult ofapastevent,itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequired tosettletheobligationandareliableestimatecanbemadeoftheamountoftheobligation. Wherethe Companyexpectsaprovisiontobereimbursed,thereimbursementisrecognizedasaseparateassetbut onlywhenthereimbursement is virtuallycertain. If theeffect ofthe time value of moneyis material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects currentmarketassessmentsofthetimevalueofmoneyand,whereappropriate,therisksspecifictothe liability. Where discounting is used, the increase in the provision due to the passage of time is recognizedasaninterestexpense. Provisionsarereviewedateachreportingdateandadjustedtoreflect thecurrentbestestimate.
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. Contingent assets are not recognized in the financial statements but are disclosed when an inflow of economic benefits is probable. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefitswillarise,theassetandtherelatedincomearerecognizedinthefinancialstatements.
EventsAftertheReportingDate
Post year-end events up to the date of auditors’ report that provide additional information about the Company’ssituationatthereportingdate(adjustingevents)arereflectedinthefinancialstatements,if any. Postyear-endeventsthat arenotadjustingeventsaredisclosedinthenoteswhenmaterial.
5. SignificantAccountingJudgments,EstimatesandAssumptions
The preparation of the accompanying financial statements requires management to make judgments, estimates and assumptions that affect amounts reported in the financial statements and related notes. The judgments, estimates and assumptions used in the financial statements are based upon management’sevaluationofrelevantfactsandcircumstancesasofthedateoftheCompany’sfinancial statements. Actualresultscoulddifferfromsuchestimates.
Judgments and estimates are contractually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Judgments
In the process of applying the Company’s accounting policies, management has made the following judgments,apartfromthoseinvolvingestimations,whichhasthemostsignificanteffectontheamounts recognizedinthefinancialstatements:
Recognition of deferred tax assets
TheCompany’s deferredtax assets pertain to the carryforward benefits of NOLCOand excess MCIT overRCIT.Judgmentisrequiredtodeterminetheamountofdeferredtaxassetsthatcanberecognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies.
The Company did not recognize deferred tax assets amounting to P =2.01 million as of December 31, 2021 and March 31, 2022. Management believes that it may not be probable that sufficient taxable incomewillbeavailableagainstwhichtheincometaxbenefitscanberealizedpriortotheirexpiration.
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EstimatesandAssumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the statementsoffinancialpositiondate,thathaveasignificantriskofcausingamaterialadjustmenttothe carryingamountsofassetsandliabilitieswithinthenextfinancialyeararediscussedbelow.
Estimation of fair value of unquoted equity securities classified as financial assets at FVOCI
The Company uses its judgment to select the most appropriate valuation methodology to value its unquotedequityinvestmentsandmakeassumptionsthataremainlybasedonmarketconditionsexisting at each reporting period. As of March 31, 2022 and December 31, 2021, the Company valued the unquoted equity securities classifiedasfinancial assets at FVOCI using the adjusted net asset method which is a combination of the market and income approaches. It involves directly measuring the fair value of the assets and liabilities of the investee company. Assets of the investee company consist mainlyofparcelsoflandforsalewhichisadjustedtoitsfairvalue. Thefairvalueadjustmentsarising fromchangesinfairvalueofunquotedequitysecuritiesarefullydisclosedinNote8.
6. CashandCashEquivalents
Cash in banks earn interest at the prevailing bank deposit rates. Cash equivalents are short-term investmentsthataremadeforvaryingperiodsof uptothreemonthsdependingontheimmediatecash requirementsoftheCompanyandearninterest attheprevailingshort-termplacementrates.
Interest income earned on cash in banks and cash equivalents amounted to P =0.15 million for the 1st quarter2022and2021,andP =0.62asofDecember31,2021,respectively.
7. InvestmentinTrustFunds
The Company established trust funds (the Trust) which are being administered by a local bank under two trust agreements. The details of the trust funds based on the financial statements issued by the trusteebankasfollows:
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31-Mar-22 31-Dec-21 (Unaudited) (Audited) Cashinbanks P =12,695,825 P =3,609,358 Cashequivalents 87,087,242 96,683,227 P =99,783,067 P =100,292,585
31-Mar-22 31-Dec-21 (Unaudited) (Audited) Assets Cashandcashequivalents P=3,002,991 P =6,969,560 FinancialassetsatFVTPL 7,034,288 14,636,101 FinancialassetsatFVOCI-governmentsecurities 17,346,490 3,034,787 Receivables 22,043 11,132 27,405,812 24,651,580 Liability Accountspayableandaccruedexpenses (43,911) (2,384) P=27,361,902 P =24,649,196 Equity Principalfund P=28,056,417 P =28,006,730
The assets, liabilities and performance of the fund are consolidated in the applicable accounts of the Companyforfinancialstatementpresentationpurposes.
8. FinancialAssets
TheCompany’sfinancialassetsaresummarizedbymeasurementcategoriesasfollows:
FinancialAssetsatFVTPL
DetailsoffinancialassetsatFVTPLconsistingofquotedequitysecuritiesfollow:
ThenetgainonfairvaluechangesonfinancialassetsatFVTPLamountedtoP =3.26millionforthe1st quarter2022,whilethenetlossonfairvaluechangesonfinancialassetsatFVTPL amountedtoP =2.24 millionandP =2.29millionforthe1stquarter2021andyearendedDecember31,2021,respectively.
ThemovementsinfinancialassetsatFVTPLfor the1stquarterendedMarch31,2022andyearended December31,2021follow:
FinancialAssetsatFVOCI
FinancialassetsatFVOCIconsistofquotedandunquotedsharesofstockheldforlong-terminvestment purposesandarecarriedatfairvalue. Thecarryingvaluesoftheseinvestmentsareasfollows:
(Audited)
17 31-Mar-22 31-Dec-21 (Unaudited) (Audited) Accumulatedtrustfundlossat beginningofyear (3,398,745) (4,413,591) Trustfundincome(loss)for theyear 2,704,231 1,056,057 Accumulatedtrustfundlossatendofyear (694,514) (3,357,535) P=27,361,902 P =24,649,196
31-Mar-22 31-Dec-21 (Unaudited) (Audited) Cashandcashequivalents P=99,783,067 P =100,292,585 Receivables 370,309 329,802 FinancialassetsatFVTPL 39,370,995 36,112,297 FinancialassetsatFVOCI 441,299,106 435,610,104 P =580,823,477 P =572,344,788
31-Mar-22 31-Dec-21 (Unaudited) (Audited) Fairvalue P =39,370,995 P =36,112,297 Acquisitioncost 48,100,916 48,100,916
31-Mar-22
Balanceatbeginningofyear P=36,112,297 P =38,399,292 Fairvaluegain(loss)recognizedduringtheyear 3,258,698 (2,286,995) Balanceatendofyear P=39,370,995 P =36,112,297
31-Dec-21 (Unaudited) (Audited)
Quotedequitysecurities: PetroEnergyResourcesCorporation(PERC) P=18,485,589 P =15,404,657
31-Mar-22 31-Dec-21 (Unaudited)
ThemovementsinfinancialassetsatFVOCIforthe1stquarterendedMarch31,2022andyearended December31,2021follow:
MovementsinthenetunrealizedgainsonfinancialassetsatFVOCIinequityareasfollows:
Dividend income earned on its investments amounted to P =4.53 million for the 1st quarter of 2021, nil forthe1st quarterof2022andP =31.71millionfor theyearended2021. Investment in
On January 31, 1997, the Company entered into a Project Shareholders’ Agreement with five other companies led by Investment and Capital Corporation of the Philippines (ICCP) and Penta Capital Investment Corporation(PCIC) to develop 500to600hectaresof rawland in Hermosa, Bataan into a new township consisting of industrial estates, residential communities, a golf and country club and a commercialcenter.
Thefair valueof investmentinHEDCisdeterminedusingtheadjustednetasset valuemethod wherein the assets of HEDC consisting mainly of parcels of land are adjusted from cost to its fair value. The valuation of the parcels of land was performed by a SEC-accredited independent appraiser as at December31,2021. Thismeasurementfallsunder Level3inthefairvaluehierarchy.
FrominceptiontoMarch31,2021,HEDCsoldatotalof1,002,227sqm.
Fairvaluemeasurementdisclosuresforthedeterminationoffairvalueofunquotedequitysecuritiesare providedinNote14.
18 31-Mar-22 31-Dec-21 (Unaudited) (Audited) BenguetCorporation 15,396,689 12,788,780 33,882,278 28,193,437 Unquotedequitysecurity: HermosaEcozoneDevelopmentCorporation(HEDC) 404,381,880 404,381,880 404,381,880 404,381,880 Investmentsingovernmentsecurities 3,034,948 3,034,787 P=441,299,106 P =435,610,104
31-Mar-22 31-Dec-21 (Unaudited) (Audited) Balanceatbeginningofyear P=435,610,104 P =467,049,955 Fairvaluegain(loss)recognized duringtheyear 5,689,002 (30,435,641) PaymentofsubscriptionpayabletoHEDC ‒ ‒Movementofgovernmentsecurities ‒ (1,004,210) Balanceatendofyear P=441,299,106 P =435,610,104
31-Mar-22 31-Dec-21 (Unaudited) (Audited) Balanceatbeginningofyear P =273,064,232 P =298,044,651 Netunrealizedfairvaluechangesoffinancialassetsat FVOCI 5,689,002 (24,980,419) Balanceatendofyear P=278,753,235 P =273,064,232
HEDC
9. Receivables
10. OtherIncome
Serviceincomepertainsto accounting,legalandadministrative servicesrenderedbytheCompanyto HEDC.
Rental incomepertainsto rentalsearnedfromthetwo(2)parkingslotsownedbytheCompanywhich are classified as investment property. As of March 31, 2022 and December 31, 2021, the cost of the fullydepreciatedparkingslotsamountedtoP =207,598.
The fair value of the investment property ranges from P =800,000 to P =1,000,000 per slot as of March 31, 2022 and December 31, 2021. This has been determined on the basis of recent sales of similar properties in the same area as the investment property and taking into account the economic conditions prevailingatthetime the valuation was made. Thereareno related costsfor theoperation oftheinvestmentproperty.
11. RelatedPartyTransactions
Relatedpartyrelationshipexistswhenonepartyhastheabilitytocontrol,directly,orindirectlythrough one or more intermediaries, the other party or exercise significant influence over the other party in makingfinancialandoperatingdecisions. Suchrelationshipalsoexistsbetweenand/oramongentities, which are under common control with the reporting enterprises and its key management personnel, directors,oritsshareholders. Inconsideringeachrelatedpartyrelationship,attentionisdirectedtothe substanceoftherelationship,andnotmerelythelegalform.
TheCompanyinitsregularconductofbusinesshasenteredintothefollowingtransactionswithrelated partiesconsistingofreimbursementofexpensesandmanagementandaccountingservicesagreements.
The Company’s financial statements include the following amounts resulting from transactions with relatedparties:
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31-Mar-22 31-Dec-21 (Unaudited) (Audited) Dividendsreceivable P=238,609 P =238,609 Accruedinterest receivable 40,355 37,795 Rentreceivable 34,425 34,425 ReceivablefromHEDC 56,920 18,973 P=370,309 P =329,802
31-Mar-22 31-Dec-21 31-Dec-20 (Unaudited) (Audited) (Audited) Serviceincome P=66,964 P =267,857 P =267,857 Rentalincome 18,000 72,000 69,000 P=84,964 P =339,857 P =336,857
* included as part of accounts payable and accrued expenses
31-Mar-22 (Unaudited)
31-Dec-21 (Audited)
* included as part of accounts payable and accrued expenses
TheCompanyhasnoemployee.PERCprovidesadministrativesupporttotheCompany.Therefore, nocompensationandshort-termbenefitsforkeymanagementpersonnel werechargedinprofitor lossforthequarterendedMarch31,2022andyearendedDecember 31,2021.
Terms and conditions of transactions with related parties
Outstandingbalancesatyear-end aretobesettledincash. Therehavebeennoguaranteesprovidedor receivedforanyrelatedpartyreceivablesorpayables.
12. FinancialInstruments
CategoriesandFairValuesofFinancialInstruments
The methods and assumptions used by the Company in estimating the fair values of the financial instrumentsare:
Cash and cash equivalents and receivables
Due to the short-term nature of the instruments, carrying amounts approximate fair values as of the reportingdate.
Government securities
Fairvaluesaregenerallybasedonquotedmarketpricesatreportingdate. ThisisunderLevel1category ofthefairvaluehierarchy.
Equity securities
For quoted equity securities, fair values are based on published quoted prices. This is under Level1categoryofthefairvaluehierarchy.
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Natureoftransaction Amount/ Volume Receivables/ (Accounts payable) Terms Conditions Affiliate: PERC Reimbursements P =8,046 (P=56,262)* Noninterestbearing; dueanddemandable Unsecured HEDC Accountingservices 66,964 66,964 -doUnsecured, noimpairment P=75,010
Natureoftransaction Amount/ Volume Receivables/ (Accounts payable) Terms Conditions Affiliate: PERC Reimbursements P =45,404 (P=48,215)* Noninterestbearing; dueanddemandable Unsecured HEDC Accountingservices 267,858 18,973 -doUnsecured,no impairment P =313,262
For unquoted equity securities, fair values are determined using the adjusted net asset value method which involves directly measuring the fair value of the assets and liabilities of the investee company. ThismeasurementfallsunderLevel3inthefairvaluehierarchy.
Accounts payable and accrued expenses
Carryingvaluesapproximatefairvaluesduetotheirshort-termnature.
Descriptionofsignificantunobservableinputstovaluation: Thesignificant unobservableinputsused in the fair value measurement categorized within Level 3 of the fair value hierarchy together with a quantitative sensitivity analysis as at March 31, 2022 and December31,2021areshownbelow:
Valuation
The appraised value of the land was determined using the market approach which is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable assets. Net adjustment factors arising from external and internal factors (i.e. location, size/shape/terrain, and development) affecting the subject properties as compared to the marketlistingofcomparablepropertiesrangesfrom-5% to -10%.Significantfavorable(unfavorable) adjustments to the aforementioned factors based on the professional judgment of the independent appraisers would increase (decrease) the fair value of land, in return the fair value of the unquoted financialasset.
FinancialRiskManagementObjectivesandPolicies
TheCompany’sfinancialinstrumentscomprisecashandcashequivalents,receivables,financialassets andaccountspayableandaccruedexpenses. Themainpurposeofthesefinancialinstrumentsistofund its own operations and capital expenditures. The BOD reviews and approves policies for managing these risks. Also, the Audit Committee of the BOD meets regularly and exercises oversight role in managingtheserisks.
Financial Risks
The main financial risks arising from the Company’s financial instruments are liquidity risk, market riskandcreditrisk.
Liquidity risk
Liquidity risk is the risk that the Company is unable to meet its financial obligation when due. The Company has substantial investments in shares of stock which are not listed in the Philippine Stock Exchangeandmaynotbereadilyconvertibletoliquidassetsnecessarytomeetanypotentialadditional liquidityrequirementsoftheCompany.Investmentsinunquotedequitysecuritiesclassifiedasfinancial assets at FVOCI amounted to P =404.38 million as of March 31, 2022 and December 31, 2021, respectively.
The Company monitors its cash position and overall liquidity position in assessing its exposure to liquidityrisk. TheCompanymaintainsalevelofcashandcashequivalentsdeemedsufficienttofinance operationsandtomitigatetheeffectsoffluctuationincashflows.
TheCompany’saccountspayableandaccruedexpensesareallsettledonamonthlybasis.
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Range Unquotedequity sharesat FVOCI Adjustednetasset valuemethod Pricepersquaremeter P =490-P =5,900
technique Significant unobservableinputs
ThetablesbelowsummarizethematurityprofileoftheCompany’sfinancialassetsandliabilitiesas ofMarch31,2022andDecember31,2021basedoncontractualundiscountedpayments.
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31-Mar-22 (Unaudited) Ondemand Withinone year Morethan oneyear Total Financialassets FinancialassetsatFVTPL: Equitysecurities P =39,370,995 P =‒ P =‒ P =39,370,995 Financialassetsatamortizedcost: Cashandcashequivalents 99,783,067 ‒ ‒ 99,783,067 Receivables: ReceivablefromHEDC 56,920 ‒ ‒ 56,920 Rentreceivable 34,425 ‒ ‒ 34,425 Accruedinterestreceivable 40,355 ‒ ‒ 40,355 Dividendsreceivable ‒ 238,609 238,609 FinancialassetsatFVOCI: Quotedequitysecurities: PERC ‒ ‒ 18,485,589 18,485,589 BenguetCorporation ‒ ‒ 15,396,689 15,396,689 Unquotedequitysecurity: HEDC ‒ ‒404,381,880 404,381,880 Governmentsecurities ‒ ‒ 3,034,948 3,034,948 139,285,762 238,609441,299,106 580,823,477 Financialliabilitiesatamortizedcost: Accountspayableandaccrued expenses 388,092 ‒‒388,092 388,092 ‒ ‒ 388,092 Netfinancialassets P=138,897,670 P=238,609P=441,299,106P=580,435,385
Marketriskistheriskoflossonfutureearnings,onfairvaluesoronfuturecashflowsthatmayresult fromchangesin marketprices. The valueof afinancial instrumentmaychangeasaresult ofchanges in interest rates, foreign currency exchanges rates, commodity prices, equity prices and other market changes. TheCompany’smarketriskemanatesfromitsholdingsindebtandequitysecurities.
The Company closely monitors the prices of its debt and equity securities as well as macroeconomic and entity-specificfactorswhichcould directlyor indirectlyaffect theprices of these instruments. In caseof an expected declineinitsportfolio of equitysecurities,theCompanyreadilydisposesortrades thesecuritiesforreplacementwithmoreviableandlessriskyinvestments.
Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. With respect to credit risk arising from cash and cash equivalents, receivables, financial assets at FVTPL and financial assets at FVOCI, the Company’s exposure to credit risk is equal to the carrying amount of these instruments. The Company limits its creditriskontheseassetsbydealingonlywithreputablecounterparties.
For cash and cash equivalents and quoted government securities, the Company applies the low credit risksimplificationwheretheCompanymeasurestheECLsona12-monthbasisbasedontheprobability of default and loss given default which are publicly available. The Companyalso evaluates the credit rating of the bank and other financial institutions to determine whether the debt instrument has significantlyincreasedincredit riskandtoestimateECLs.
TheCompanyconsidersitscashand cash equivalentsand quotedgovernmentsecuritiesashighgrade since these are placed in financial institutions of high credit standing. Accordingly, ECLs relating to thesedebtinstrumentsroundstonil.
23 31-Dec-21 (Audited) Ondemand Withinone year Morethan oneyear Total Financialassets FinancialassetsatFVTPL: Equitysecurities P =36,112,297 P =‒ P =‒ P =36,112,297 Financialassetsatamortizedcost: Cashandcashequivalents 100,292,585 ‒ ‒ 100,292,585 Receivables: ReceivablefromHEDC 18,973 ‒ ‒ 18,973 Rentreceivable 34,425 ‒ ‒ 34,425 Accruedinterestreceivable 37,795 ‒ ‒ 37,795 Dividendsreceivable ‒ 238,609 238,609 FinancialassetsatFVOCI: Quotedequitysecurities: PERC ‒ ‒ 15,404,657 15,404,657 BenguetCorporation ‒ ‒ 12,788,780 12,788,780 Unquotedequitysecurity: HEDC ‒ ‒404,381,880 404,381,880 Investmentsingovernmentsecurities ‒ ‒ 3,034,785 3,034,785 136,496,075 238,609435,610,102 572,344,786 Financialliabilitiesatamortizedcost: Accountspayableandaccruedexpenses 634,228 ‒ ‒ 634,228 634,228 ‒ ‒ 634,228 Netfinancialassets P=135,861,847 P=238,609P=435,610,102P=571,710,558
risk
Market
The Company’s receivables are aged current as of March 31, 2022 and December 31, 2021. No receivablesareconsideredcredit-impaired.
As of March 31, 2022 and December 31, 2021, the carrying values of the Company’s financial instrumentsrepresentmaximumexposureasofreportingdate.
Thetablebelowshowsthecomparativesummaryofmaximumcreditriskexposuresonfinancial instrumentsasofMarch31,2022andDecember31,2021:
The following tables show financial instruments recognized at fair value as of March 31, 2022 and December31,2021,analyzedbetweenthosewhosefairvaluesarebasedon:
1. quotedpricesinactivemarketsforidenticalassetsorliabilities(Level 1);
2. thoseinvolvinginputsotherthanquotedpricesincludedinLevel1thatareobservablefortheasset orliability,eitherdirectlyorindirectly(Level2);and
3. those with inputs for the asset or liability that are not based on observable market data (unobservableinputs)(Level3).
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31-Mar-22 (Unaudited) 31-Dec-21 (Audited) FinancialassetsatFVTPL: Equitysecurities P=39,370,995 P =36,112,297 Financialassetsatamortizedcost: Cashandcashequivalents 99,783,067 100,292,585 ReceivablefromHEDC 56,920 18,973 Rentreceivable 34,425 34,425 Accruedinterest receivable 40,355 37,795 Dividendreceivable 238,609 238,609 FinancialassetsatFVOCI: Quotedequitysecurities: PERC 18,485,589 15,404,657 BenguetCorporation 15,396,689 12,788,780 Unquotedequitysecurity: HEDC 404,381,880 404,381,880 Investmentsingovernmentsecurities 3,034,948 3,034,785 P=580,823,477 P =572,344,786
31-Mar-22 (Unaudited) Level1 Level2 Level3 FairValue Financialassets: FinancialassetsatFVTPL: Equitysecurities P=39,370,995 P=‒ P=‒ P=39,370,995 FinancialassetsatFVOCI: PERC 18,485,589 ‒ ‒ 18,485,589 BenguetCorporation 15,396,689 ‒ ‒ 15,396,689 HEDC ‒ ‒ 404,381,880 404,381,880 Investmentsingovernment securities 3,034,948 ‒ ‒ 3,034,948 P=76,288,221 P=‒ P=404,381,880 P=480,670,101
TherewerenotransfersbetweenLevel1andLevel2fairvaluemeasurementsandnotransfersintoand outofLevel3fair valuemeasurementsinMarch31,2022andDecember31,2021.
13. CapitalManagement
The primary objective of the Company’s capital management is to ensure that it maintains a strong creditratingandhealthycapitalratiosinordertosupportitsbusinessandmaximizeshareholders’value.
TheCompanymanagesitscapitalstructureandmakesadjustmentstoit,inlightofchangesineconomic conditions. Tomaintainoradjustthecapitalstructure,theCompanymayadjustthedividendpayment toshareholdersorissuenewshares.
TheCompanymonitorscapitalusingadebt-to-equityratio,whichistotaldebtdividedbytotalequity. TheCompanyincludeswithintotaldebtthefollowing:accountspayableandaccruedexpenses. Total equityincludescapitalstock,netunrealizedgainsonfinancialassetsatFVOCIandretainedearnings.
TheCompanyhasnoexternallyimposedcapitalrequirementsasofMarch31,2022andDecember31, 2021.
The table below demonstrates the debt-to-equity ratios of the Company as of March 31, 2022 and December31,2021:
Therewere no changesin theobjectives, policies or processesfor the1st quarter2022 and yearended December31,2021.
TheCompanyhasretainedearningsavailablefordividenddeclarationamountingtoP =93.40millionas ofMarch31,2022.
25 31-Dec-21 (Audited) Level1 Level2 Level3 FairValue Financialassets: FinancialassetsatFVTPL: Equitysecurities P =36,112,297 P =– P =– P =36,112,297 FinancialassetsatFVOCI: PERC 15,404,657 – – 15,404,657 BenguetCorporation 12,788,780 – – 12,788,780 HEDC – – 404,381,880 404,381,880 Investmentsingovernment securities 3,034,785 – – 3,034,785 P =67,340,519 P =‒ P =404,381,880 P =471,722,399
31-Mar-22 (Unaudited) 31-Dec-21 (Audited) Totalliabilities: Accountspayableandaccruedexpenses P=388,092 P =634,228 Totalequity: Capitalstock P=163,000,000 P =163,000,000 NetunrealizedgainsonfinancialassetsatFVOCI 278,753,235 273,064,232 Retainedearnings 94,372,223 91,275,372 536,125,458 P =527,339,604 Debt-to-equityratio 0.0007:1 0.0012:1
TheCompany’strackrecordofcapitalstockisasfollows:
14. BasicandDilutedEarningsPerShare
ThecomputationsoftheCompany’sbasicearningspershareareasfollows:
The Company has no potentially dilutive common stock as of March 31, 2022, March 31, 2021, and December31,2021
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Numberof sharesregistered Issue/ offerprice DateofSEC approval Numberof holdersas ofyear-end Listingdate-May7,1974 10,000,000,000P=0.01/shareNovember5,1973 Add(deduct): 50%stockdividend 5,000,000,0000.01/shareNovember27,1981 60%stockdividend 9,000,000,0000.01/shareOctober31,1990 1:2.400stockrightsoffering 10,000,000,0000.01/shareSeptember28,1992 1:2.125stockrightsoffering 16,000,000,0000.01/shareFebruary8,1994 15%stockdividend 7,500,000,0000.01/shareJanuary20,1997 Changeinparvaluefrom P =0.01/sharetoP=1.00/share(56,925,000,000) August14,1997 Quasi-reorganization (412,000,000) 1/shareOctober5,1998 December31,2010 163,000,000 4,941 Add(deduct):Movement − − − (38) December31,2011 163,000,000 4,903 Add(deduct):Movement − − − (156) December31,2012 163,000,000 4,747 Add(deduct):Movement − − − 71 December31,2013 163,000,000 4,818 Add(deduct):Movement − − − (32) December31,2014 163,000,000 4,786 Add(deduct):Movement − − − (28) December31,2015 163,000,000 4,758 Add(deduct):Movement December31,2016 163,000,000 − − 4,758 Add(deduct):Movement − − − (41) December31,2017 163,000,000 4,717 Add(deduct):Movement − − − (11) December31,2018 163,000,000 − − 4,706 Add(deduct):Movement − − − (14) December31,2019 163,000,000 − − 4,692 Add(deduct):Movement ‒ − − (3) December31,2020 163,000,000 − − 4,689 Add(deduct):Movement ‒ ‒ ‒ (5) December31,2021 163,000,000 ‒ ‒ 4,684 Add(deduct):Movement ‒ ‒ ‒ ‒March31,2022 163,000,000 ‒ ‒ 4,684
31-Mar-22 (Unaudited) 31-Mar-21 (Unaudited) 31-Dec-20 (Audited) Netincome(loss) P=3,096,851 P =1,135,863 P =20,131,459 Weightedaveragenumberofshares 163,000,000 163,000,000 163,000,000 Basic/Dilutedearnings(loss)pershare P =0.019 P =0.007 P =0.124
15. Others
a) The Interim Financial Report as of March 31, 2022 is in compliance with generally accepted accountingprinciples(alleffectivestandardsandinterpretationsunderPFRS).
b) The same policies and methods of computation were followed in the preparation of the interim financialreportcomparedtotheDecember31,2021AuditedFinancialStatements.
c) Therearenounusualitemoritemsthataffectedtheassets,liabilities,equityand cashflowsofthe March31,2022FinancialStatements.
d) Thereare no material events happened subsequent to the end of March 31, 2022 that might affect theresultofsaidfinancialstatements.
e) Earnings per share is presented in the face of the unaudited statements of income for the period endedMarch31,2022andMarch31,2021.
f) No significant events happened during the quarter that will affect the March 31, 2022 Unaudited FinancialStatements.
g) There are no seasonal aspects that had a material effect on the financial condition or results of operationoftheCompany.
h) There is no foreseeable event that will trigger direct or contingent financial obligation that is materialtotheCompany,includinganydefaultofacceleratedobligation.
i) There are no material off-balance sheet transactions, arrangements, obligations and other relationshipoftheCompanywithotherentitiesorpersonsthatwerecreatedduringtheperiod.
j) Therearenochangesinestimatesofamountsreportedinpriorperiodsofthecurrentfinancialyear orchangesinestimatesofamountsreportedinpriorfinancialyearsthatcouldhavematerialeffect inthecurrentperiod.
k) Therearenoissuances,repurchases,repayments,repaymentsofdebtandequitysecurities.
l) We are not required to disclose segment information in our financial statements because we only haveonesourceofrevenue.
m) Therearenochangesinthecompositionoftheissuerduringtheinterimperiod,includingbusiness combinations, acquisition or disposalof subsidiariesand long term investments, restructuringand discountingoperationsduringtheperiod.
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ITEM2. MANAGEMENTDISCUSSIONANDANALYSISOFFINANCIALCONDITIONAND RESULTSOFOPERATIONS
1.FinancialCondition(AsofMarch31,2022andMarch31,2021)
TotalassetsamountedtoP582.163millionandP583.913millionasofMarch31,2022andMarch31,2021, respectively.
TheCompany’scashandcashequivalentsamountedtoP99.783millionasofMarch31,2022andP79.326 millionasofMarch31,2021.The25.79%netincreasewasduetocashdividendsreceivedfromHEDCnet ofpaymentforworkingcapitalrequirementsduringtheperiod.
FinancialassetsatfairvaluethroughprofitorlossamountedtoP39.371millionandP36.159millionasof March 31, 2022 and as of March 31, 2021, respectively. The 8.88% increase is mainly due to positive movementofmarketvaluesofinvestmentsinstockstradedatPSE.
Receivables account as of March 31, 2022 amounted to P0.370 million compared to P4.900 million as of March31,2021.ThebulkofthedecreasepertainstodividendpaymentfromHEDC.
Other current assets consist of prepayments, prepaid taxes and input tax carry-overs. This amounted to P1.339millionandP1.231millionasofMarch31,2022andMarch31,2021,respectively.The8.75%net increasemainlyrepresentsadditionalinputtaxesrecordedduringtheperiod.
FinancialassetsatFVOCIasofMarch31,2022amountedtoP441.299millionandP462.297millionasof March31,2021. The4.54%netdecreaseisduetotherevaluationoftheinvestmentinHEDCinDecember 2021.
Accounts payable and accrued expenses amounted to P0.388 million and P1.234 million as of March 31, 2022andMarch31,2021,respectively.Bulkoftheamountforthe1st quarterof2021accountsforthesetupofCompany’sshareintheplugandabandonmentofTaraSouthWell1,thiswasfullysettledin2021.
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%%to 31-Mar-2231-Mar-21ChangeAsset ASSETS Cash&cashequivalents P99,783,067P79,326,02325.79%17.14% FinancialassetsatFVTPL 39,370,99536,159,4688.88%6.76% Receivables 370,3094,899,930-92.44%0.06% Othercurrentassets 1,339,2011,231,4788.75%0.23% FinancialassetsatFVOCI 441,299,106462,296,542-4.54%75.80% TOTALASSETS 582,162,678583,913,441-0.30%100.00%
Accountspayableandaccruedexpenses388,0921,233,865-68.55%0.07% DeferredTaxLiability 45,649,12851,104,350-10.67%7.84% TOTALLIABILITIES 46,037,22052,338,215-12.04%7.91% EQUITY 536,125,458531,575,2260.86%92.09% TOTALLIABILITIESANDEQUITYP582,162,678P583,913,441-0.30%100.00%
LIABILITIESANDEQUITY
TotalStockholders’EquityasofasofMarch31,2022amountedtoP536.125millionorP3.289bookvalue pershareandP531.575millionorP3.261bookvaluepershareasofMarch31,2021.
The Company posted a net income of P3.097 million or 0.019 earnings per share as of March 31, 2022 comparedtonetincomeofP1.136millionasof March 31,2021.
The Company’s net gain on fair value changes on financial assets at FVTPL amounted to P3.259 million asofMarch31,2022,whilenetlossonfairvaluechangesonfinancialassetsatFVTPLamountedtoP2.240 million as of March 31, 2021, respectively. The net increase pertains to the upward movement of investmentsinstocksduringtheperiod.
InterestincomeamountedtoP0.154millionandP0.149millionasofMarch31,2022andMarch31,2021, respectively. There is a 3.39% increase due to the higher interest rate per annum of money market placements.
Other incomeamountedto P0.085 million asof March 31, 2022and March 31, 2021. This pertains to the rental income from the Company’s owned parking space in Tektite and accounting services rendered to HEDC.
GeneralandadministrativeexpensesamountedtoP0.400millionandP1.387millionasofMarch31,2022 andMarch31,2021,respectively.Bulkoftheamountforthe1st quarterof2021accountsfortheCompany’s share in the plug and abandonment of Tara South Well 1. As a brief history, the Company was registered with SEC in 1970 as an oil exploration and production company. The Company invested in various oil explorationprojects,includingtheTaraSouthWell1.TheTaraSouthWell1operated,generatedrevenues and was permanentlyplugged and abandoned. As stated in the service contract of Tara South Well 1, the Company,beingamember of theconsortiumisliableforitsshareinitsplugandabandonment.
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%Change 2022vs.2021 REVENUES Netgainonfairvaluechangesonfinancial assetsatfairvaluethroughprofitorlossP3,258,698P0-100.00%93.17% Interestincome 153,824148,7763.39%4.40% Dividendincome -4,530,011100.00%0.00% Otherincome-net 84,96484,9640.00%2.43% ForeighExchangegain-net 335TOTALREVENUES/(LOSS) 3,497,8214,763,751-26.57%100.01% EXPENSES General&administrative 400,1201,386,648-71.14%11.44% Netlossonfairvaluechangesonfinancial assetsatfairvaluethroughprofitorloss -2,239,824-100.00%0.00% TOTALEXPENSES 400,1203,626,472-88.97%11.44% Income/(Loss)beforeincometax 3,097,7011,137,279172.38%88.57% Provisionforincometax 8501,416-40.00%0.02% NETINCOME/(LOSS) 3,096,8511,135,863172.64%88.55% %inTotal Revenue 31-Mar-2231-Mar-21
2.ResultsofOperations(FortheQuarterendedMarch31,2022andMarch31,2021)
Provision for income tax as of March 31, 2022 and 2021 pertains to the MinimumCorporate Income Tax (MCIT)set-up.TheCompanyset-upMCITratherthanthe30%regulartaxbecausemostofitsincomeare fromunrealizedmarketchangesofinvestmentsandpassiveincomesubjecttofinaltax.
LIABILITIESANDEQUITY
Total assets amounted to P582.163 million as of March 31, 2022 compared to P573.623 million as of December31,2021.
TheCompany’scashandcashequivalentsamountedtoP99.783millionasofMarch31,2022comparedto P100.293 million as of December 31, 2021. The 0.51% decrease pertains to the payment of general and administrativeexpensesduringtheperiod.
FinancialassetsatFVTPLaccountasofMarch31,2022amountedtoP39.371millioncomparedtoP36.112 millionasofDecember31,2021. The9.02%increasepertainstopositivemovementsofmarketvaluesof investmentsinstockstradedatPSEduringtheperiod.
Receivables account as of March 31, 2022 amounted to P0.370 million compared to P0.330 million as of December 31, 2021. The 12.28% increase pertains to receivable from HEDC for the accounting services fee.
Other current assets as of March 31, 2022 amounted to P1.339 million compared to P1.278 million as of December 31, 2021. The increase is due to additional input taxes and other assets recorded during the period.
Increase of 1.31% in financial asset at FVOCI pertains to the increase in market value of Benguet Corp. andPERC.
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31-Mar-2231-Dec-21%Change%Asset ASSETS Cash&cashequivalents P99,783,067P100,292,585-0.51%17.14% FinancialassetsatFVTPL 39,370,99536,112,2979.02%6.76% Receivables 370,309329,80212.28%0.06% Othercurrentassets 1,339,2011,278,1724.77%0.23% FinancialassetsatFVOCI 441,299,106435,610,1041.31%75.80% TOTALASSETS 582,162,678573,622,9601.49%100.00%
3.FinancialConditions(AsofMarch31,2022andDecember31,2021)
Accountspayableandaccruedexpenses388,092634,228-38.81%0.07% DeferredTaxLiability 45,649,12845,649,1280.00%7.84% TOTALLIABILITIES 46,037,22046,283,356-0.53%7.91% EQUITY 536,125,458527,339,6041.67%92.09% TOTALLIABILITIESAND EQUITYP582,162,678P573,622,9601.49%100.00%
Accounts payable and accrued expenses amounted to P0.388 million and P0.634 million as of March 31, 2022andDecember31,2021,respectively.The38.81%netdecreaseaccountsforthesettlementofgeneral andadministrativeexpensesparticularlyprofessionalfeesandotherservicesaccruedlastyear.
TotalStockholders’ EquityasofMarch 31,2022amounted toP536.125millionorP3.289 bookvalueper sharecomparedtoP527.340millionorP3.235bookvalueasofDecember31,2021.
Exceptforitemsdiscussedabove,therearenomorechangesinthefinancialstatementsthatwillreachthe materialitythresholdof5%.
KEYPERFORMANCEINDICATORS(KPI):
The following liquidity and profitability ratios indicate acceptable levels of financial condition and performanceofthecompany:
Thereis an increase in the Company’s current ratioas of March 31, 2022 ascompared to March31, 2021 mainlyduetotheincreaseincurrentassetsanddecreaseincurrentliabilities.
ThereisadecreaseintheCompany’sdebt-equityratioasofMarch31,2022comparedtoMarch31,2021 duetodecreaseinliabilitiesduringtheperiod.
Asset turnover for the 1st quarter 2021 is higher compared to the 1st quarter 2022 due to dividend income fromHEDC.
Please refer to Financial Soundness Indicators for additional KPIs
DiscussionofindicatorsoftheCompany’slevelofperformance
ReceivableManagement
TheCompany’sreceivablesreportedintheStatementsofFinancialPositionincludethefollowing:
1. CashDividendsfromvariousstockinvestments.
2. AccruedInterestReceivablefromtheCompany’sshort terminvestmentsasof March31,2022of whichtheCompanywill receiveuponmaturity.
Furthermore, the Company manages its receivables by monitoring on a regular basis to ensure timely executionofnecessaryinterventionsefforts.
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UnauditedUnauditedAudited 31-Mar-2231-Mar-2131-Dec-21Formula Currentratio 362.964:198.566:1217.608:1TotalCurrentAssets/TotalCurrent Liabilities Debt-equityratio0.0007:10.0023:10.0012:1Liabilities/TotalStockholders'Equity Netprofitmargin 0.885%23.84%61.61%NetIncome/TotalRevenue Assetturnover 0.006:10.0082:10.057:1Revenue/TotalAssets Earnings/(loss)pershare0.0190.0070.124NetIncome(Loss)/Issued&Outstanding Shares
LiquidityManagement
The Company has substantial investments in shares of stock which are not listed in the Philippine Stock Exchange and may not be readily convertible to liquid assets necessary to meet any potential additional liquidity requirements of the Company. Investment in unquoted securities included in financial assets at FVOCIamountedtoP404.382millionasofMarch31,2022andDecember31,2021.
Management of liquidity requiresa flow andstock perspective. Constraint such aspolitical environment, taxation,foreignexchange,interestratesandotherenvironmentalfactorscanimposesignificantrestrictions onfirmsinmanagementoftheirfinancialliquidity.
Seafront has considered the above factors and paid special attention to its cash flow management. The Companyidentifiesallitscashrequirementsforacertainperiodandinvestsunrestrictedfundstomaximize interest earnings,i.e.moneymarketplacements.
RateofReturnofEachStockholder
TheCompanyhasnoexistingdividend policy. However, theCompanyintendstodeclaredividendsinthe futureoutofitsunrestrictedretainedearningsinaccordancewiththeCorporationCodeofthePhilippines.
CostReductionEffort
In order to minimize expenses, the Company has engaged the services of PetroEnergy Resources Corporationtohandleitslegal,administrative,accountingandtreasuryfunctions.
Financialdisclosuresinviewofthecurrentfinancialcondition
The Company is still on wait-and-see attitude with respect to investing in other businesses. It has no intentionofincreasingitscapitalstock. Thecurrentmarketdoesnotwarrantanaggressivestancetowards investments. The Company is generating its funds from interest earnings on money market placements.
Therearenoknowntrends,demands,commitments,eventsoruncertaintiesthat willhave material impact ontheCompany’sliquidity.
ThePhilippineeconomyisstillaffectedbyeconomiccrisis,resultinginfluctuatingforeignexchangerates and increase stock market uncertainties. Uncertainties including the impact of the COVID 19 pandemic remainastowhetherthecountrywillcontinuetobeaffectedbyregionaltrendsinthecomingmonths. The financial statements do not include any adjustments that might result from these uncertainties. Related effectswillbereportedinthefinancial statements, astheybecomeknownandestimable.
Assess the financial risks exposures of the Company particularly on currency, interest credit, and market and liquidity risks. If any change thereof would materially affect the financial condition and results of operation of the Company, provide a discussion in the report on quantitative impact or such risks and includeadescriptionofenhancementinthecompany’sriskmanagementpoliciestoaddressthesame.
TheCompany’sprincipal financialinstrumentsinclude cashand cash equivalents, trading and investment securities (financial assets at FVTPL) and receivables. Themain purpose of these financial instruments is tofundtheCompany’sworkingcapitalrequirements.
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FinancialRiskManagementObjectivesandPolicies
PleaserefertoNote12
PlanofOperations
A. InvestmentinFinancialassetsatFVOCInottradedinthemarket(InvestmentinHEDC)
As of March 31, 2022 and March 31, 2021, the Company holds 11.33% interest in its investment in HermosaDevelopmentCorporation(HEDC).
The Management of HEDC is taking all efforts to sell portion of its saleable property, proceeds of which willbeusedtofinancethedevelopmentoftheundevelopedportionsoftheproperty.
B. InvestmentinFinancialAssetsatFVTPLandFVOCItradedinthemarket
The Company will continue to closely monitorthe prices of its securities as well asthose specific factors which could directly or indirectly affect the prices of these instruments. Because such investments are subject to price risk due tochanges in market values, an expected decline in the portfolio will prompt the Company to disposeortradethe securitiesfor replacement with moreviableand lessriskyinvestmentsin thefuture.
WiththeCompany’scurrentcashposition,itcansustainitsneedsforoperatingexpenses.Theonlypossible materialcommitmentisacashcallfromHEDC,ofwhichisnotexpectedtocallinthenexttwelvemonths. Thus,itdoesnotintendtoraiseadditionalfunds.
Aside from the Company’s investments stated above, there are no other researches or development plans, andpurchaseorsaleof significantequipmentthattheCompanyexpectsperform.
PARTII-OtherInformation
The Company has no other information that need to be disclosed other than disclosures made under SEC Form17-C(ifany).
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SEAFRONTRESOURCESCORPORATION
SUPPLEMENTARYINFORMATIONANDDISCLOSURESREQUIREDONSRC RULE68ASAMENDED MARCH31,2022
Philippine Securities and Exchange Commission (SEC) issued the amended Securities Regulation Code RuleSRCRule68whichconsolidatesthetwoseparaterulesandlabeledintheamendmentas“PartI”and “PartII”,respectively. Italsoprescribed theadditional information andschedulerequirementsfor issuers ofsecuritiestothepublic.
BelowaretheadditionalinformationandschedulesrequiredbySRCRule68,asAmended(2011)thatare relevant to the Company. This information is presented for purposes of filing with the SEC and is not requiredpartofthebasicfinancialstatements.
ScheduleA.FinancialAssets
BelowisthedetailedscheduleoftheCompany’sfinancialassetsasofMarch31,2022:
Thefairvalueforfinancialinstrumentstradedinactivemarketsatthereportingdateisbasedontheirquoted market price without any deduction for transaction costs. For securities in which current bid and asking
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EachIssue Numberof Sharesor Principal Amountof BondsandNotes AmountShown inthe Statementof Financial Position Income Receivedand Accrued FinancialassetsatFVPL EquitySecurities: PetroEnergyResourcesCorporation 3,613,852 P =17,346,490 P =− HouseofInvestments,Inc. 2,484,000 8,942,400 − AranetaProp. 3,756,788 4,170,035 − AyalaLand,Inc. 128,193 4,614,948 − EEICorporation 372,500 2,086,000 − Others 2,211,122 − P =39,370,995 P =− NameofIssuingEntityandAssociationof EachIssue Numberof Sharesor Principal Amountof Bondsand Notes AmountShown inthe Statementof Financial Position Income Receivedand Accrued FinancialassetsatFVOCI Debtequities PhilippineGovernment − P =3,034,948 P =− Quoted: BenguetCorporation 2,507,604 15,396,689 PetroEnergyResourcesCorporation 3,851,164 18,485,589 − 33,882,278 − Unquoted: HermosaEcozoneDevelopment Corporation 404,381,880 −P=441,299,106 P =−
NameofIssuingEntityandAssociationof
pricesarenotavailable,thepriceofthemostrecenttransactionprovidesevidenceofthecurrentfairvalue as long as there has not been a significant change in economic circumstances since the time of the transaction.
For unquoted financial securities, the most recent sales transaction was used as the basis for determining thefairvalueasofMarch31,2022andDecember31,2021.
Schedule B. Amounts Receivable from Directors, Officers, Employees, Related Parties and Principal Stockholders(OtherthanRelatedParties)
The Company has no outstanding receivables from its directors, officers, employees, related parties and principalstockholdersasof March31,2022andDecember31,2021.
Schedule C. Amounts Receivable from/Payable to Related Parties which are Eliminated during the ConsolidationofFinancialStatements
Notapplicable.
ScheduleD.IntangibleAsset
TheCompanyhasnointangibleassetsasofMarch31,2022andDecember31,2021.
ScheduleE.Long-termDebt
TheCompanyhasnooutstandinglong-termdebtasofMarch31,2022andDecember31,2021.
ScheduleF.IndebtednesstoRelatedParties(LongTermLoansfromRelatedCompanies)
The Company has no long-term indebtedness to related parties as of March 31, 2022 and December 31, 2021.
ScheduleG.Guaranteesof SecuritiesofOtherIssuers
TheCompany doesnot haveguaranteesofsecuritiesof otherissuers asof March 31, 2022andDecember 31,2021.
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