MODEL CORPORATION

Statements of Income and Retained Earnings

As of December 31, 2009 and 2008 Notes Revenue Cost of sales Gross profit Other income Distribution cost Administrative expenses Finance cost Profit before tax Income tax expense Profit for the year Retained Earnings at the start of the year Dividends Retained Earnings at the end of the year 2009 7,693,400 (2,449,200) 5,244,200 28,300 (2,320,800) (1,188,700) (604,700) 1,158,300 (346,785) 811,515 616,211 1,427,726 2008 7,534,400 (2,835,300) 4,699,100 20,400 (2,240,300) (1,055,900) (543,200) 880,100 (263,889) 616,211 616,211

See Notes to Financial Statements.

MODEL CORPORATION

STATEMENT OF FINANCIAL POSITION

As of December 31, 2009 and 2008 Notes ASSETS Current Assets Cash and cash equivalents Trade and Other Receivables Inventories Other current assets Total current assets Noncurrent Assets Property, plant, and equipment Intangible assets Deferred tax assets Refundable Deposit Total non-current assets TOTAL ASSETS LIABILITIES AND EQUITY Current Liabilities Trade and other payables Current tax liability Total current liabilities Noncurrent Liabilities Loans payable Total non-current liabilities Equity Share Capital Share Premium Retained Earnings Total stockholders equity TOTAL LIABILITIES AND EQUITY
See Notes to Financial Statements.

2009

2008

401,521 594,300 1,057,400 42,000 2,095,221 7,700,000 90,000 19,950 20,000 7,829,950 9,925,171

111,000 381,600 879,300 39,000 1,410,900 6,550,000 120,000 7,590 20,000 6,697,590 8,108,490

713,606 283,839 997,445 5,000,000 5,000,000 2,000,000 500,000 1,427,726 3,927,726 9,925,171

370,800 121,479 492,279 4,500,000 4,500,000 2,000,000 500,000 616,211 3,116,211 8,108,490

MODEL CORPORATION
STATEMENTS OF CASH FLOWS

As of December 31, 2009 and 2008 Notes Income (loss) before income tax Adjustments for non-cash income and expenses: Depreciation Amortization Interest expense Interest income Operating income before working capital changes Decrease (increase) in: Trade and other receivables Inventories Other current assets Increase (decrease) in: Trade and other payables Cash generated from operations Interest paid Interest received Income taxes paid Net cash provided by (used in) operating activities Cash flows from investing activities Acquisition of property and equipment Acquisition of intangible assets Payment for refundable deposit Net cash provided by (used in) investing activities Cash flows from financing activities Proceeds of loans Proceeds from share issuance Net cash provided by (used in) financing activities Net Increase (decrease) in cash and cash equivalents Cash at the beginning of the year Cash at the end of the year 2009 1,158,300 550,000 30,000 604,700 (4,000) 2,339,000 (212,700) (178,100) (3,000) 322,806 2,268,006 (584,700) 4,000 (196,785) 1,490,521 2008 880,100 450,000 30,000 543,200 (800) 1,902,500 (381,600) (879,300) (39,000) 190,800 793,400 (363,200) 800 (150,000) 281,000

(1,700,000) (1,700,000)

(7,000,000) (150,000) (20,000) (7,170,000)

500,000 500,000 290,521 111,000 401,521

4,500,000 2,500,000 7,000,000 111,000 111,000

MODEL CORPORATION
Notes to the financial statements For the years ended December 31, 2009 and December 31, 2008

1. COMPANY INFORMATION
MODEL Corporation (the Company) is a domestic corporation that was registered with Philippine Securities and Exchange Commission (PSEC) on ______________ under registration number__________________. Its primary purpose is to manufacture and sell electronic parts both local and abroad. The Companys registered office which is also its principal place of business is at Unit 804-A AIC Burgundy Empire Tower, corner Sapphire and Garnet Roads, ADB Avenue, Ortigas Center, Pasig City.

2. BASIS OF PREPARATION Statement of Compliance

The financial statements have been prepared in compliance with Philippine Financial Reporting Standards (PFRS) for Small and Medium-sized Entities issued by Philippine Financial Reporting Standards Council.

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

Functional and Presentation Currency

The financial statements are presented in Philippines peso, which is the Companys functional currency.

Use of Judgements and Estimates

The preparation of the financial statements in Philippine Financial Reporting Standards for SMEs requires the management of the Company to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Future events may occur which will cause the assumption used in arriving at the estimates to change. The effects of changes in estimates will be reflected in the financial statements as they become reasonably determinable.

3. SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition

Revenue is recognized to the extent that it is probable that economic benefits will flow to the Company and revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, and other sales taxes or duty. The following specific recognition criteria must also be met before revenue is recognized:

Sale of Goods Revenue is recognized when risks and rewards of ownership of goods have passed to the buyer that is upon delivered of goods to customer. Interest Revenue is recognized as the interest accrues on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Cash and Cash Equivalents

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 and are subject to insignificant risk of changes in value.

Trade and other receivables

Most sales are made on the basis of normal credit terms, and the receivables do not bear interest. Where credit is extended beyond normal credit terms, receivables are measured at amortized cost using the effective interest method. At the end of each reporting period, the carrying amounts of trade and other receivables are reviewed to determine whether there is any objective evidence that the amounts are not recoverable. If so, an impairment loss is recognized immediately in profit or loss

Inventories
Inventories are stated at the lower of cost and selling price less cost to complete and sell. Cost is calculated using first-in, first-out (FIFO) method.

Property, plant and equipment

Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is charged so as to allocate the cost of assets less their residual values over their estimated useful lives, using straight-line method. The following estimated lives are used for depreciation of property, plant and equipment: Buildings Tools and equipment Furniture and fixtures Vehicles Useful Life 20 years 5 years 5 years 5 years

If there is an indication that there has been a significant change in useful life or residual value of an asset, the depreciation of that asset is revised prospectively to reflect the new expectations

Intangible Assets

Intangible assets are purchased computer software that is stated at cost less accumulated amortization and any accumulated impairment losses. It is amortized over its estimated life of five years using the straight-line method. If there is an indication that there has been a significant change in amortization rate, useful life or residual value of an intangible asset, the amortization is revised prospectively to reflect the new expectations.

Impairment of Assets
Property, plant and equipment, and intangible assets are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If there is an indication of possible impairment, the recoverable amount of any affected asset is estimated and compared with its carrying amount is reduced to its estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognized immediately in profit or loss.

Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the leased asset to the Company All other leases are classified as operating leases. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease unless the payment is structured to increase in line with general inflation.

Trade and other payables

Trade and other payables are obligations on the basis of normal credit terms and do not bear interest.

Borrowing cost
All borrowing costs are recognized in profit or loss in the period in which they are incurred using the effective interest method.

Income Taxes
Income tax expense represents the sum of the current tax and deferred tax. The current tax is based on taxable profit for the year. Deferred tax is recognized for all temporary differences that are expected to affect taxable profit in the future, and any unused tax losses or unused tax credits. The net carrying amount of deferred tax assets is reviewed at each reporting date and is adjusted to reflect the current assessment of future taxable profits. Any adjustments are recognized is profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to the taxable profit (tax loss) of the periods in which it expects the deferred tax assets to be realized or then deferred tax liability to be settled, on the basis of tax rates that have been enacted or substantively enacted by the end of the reporting period.

4. CASH AND CASH EQUIVALENTS

2009 Cash on hand and in banks Short-term placements 351,521 50,000 401,521

2008 50,000 61,000 111,000

Cash in banks earns interest at respective bank deposit rates. Short-term placements are made for varying periods of up to three months depending on the immediate cash requirements of the Company, and earn interest at respective short-term placement rates.

5. TRADE AND OTHER RECEIVABLES

2009 630,200 30,600 66,500 594,300 2008 369,500 37,400 25,300 381,600

Trade receivables from third parties Trade receivables from related parties Other receivables Less allowance for impairment of receivables

6. INVENTORIES
2009 Finished goods Goods in process Materials and supplies 539,600 298,400 219,400 1,057,400 2008 410,700 246,700 221,900 879,300

The net realizable value of all inventories was higher than its cost therefore no inventory write-down was recognized in either 2009 or 2008. 7. OTHER CURRENT ASSETS
2009 Prepaid Rental Prepaid Insurance 30,000 12,000 42,000 2008 30,000 9,000 39,000

8. PROPERTY, PLANT, AND EQUIPMENT

The movements within each class of property and equipment are as follows:
For the Year Ended December 31, 2009 Furniture Tools and and Equipment Fixtures

Land Gross carrying amount: December 31, 2008 Additions December 31, 2009 Accumulated depreciation: December 31, 2008 Depreciation December 31, 2009 Carrying amount: December 31, 2008 December 31, 2009 1,750,000 2,950,000 1,750,000 1,200,000 2,950,000

Buildings

Vehicles

Total

4,000,000 4,000,000

600,000 -

250,000 250,000

400,000 500,000 900,000

7,000,000 1,700,000 8,700,000

200,000 200,000 400,000

120,000 120,000 440,000

50,000 50,000

80,000 180,000 260,000

450,000 550,000 1,000,000

3,800,000 3,600,000

480,000 360,000

200,000 150,000

320,000 640,000

6,550,000 7,700,000

9. INTANGIBLE ASSETS
Software Gross carrying amount: December 31, 2008 Additions December 31, 2009 Accumulated amortization: December 31, 2008 Amortization December 31, 2009 Carrying amount: December 31, 2008 December 31, 2009 P120,000 P90,000 P150,000 P150,000 P30,000 30,000 P60,000

10. REFUNDABLE DEPOSIT

This represents rental deposit which is refundable at the end of the lease term. 11. TRADE AND OTHER PAYABLES
2009 Trade payables Other non-trade payables Accrued expenses Interest payable 142,580 55,300 315,726 200,000 713,606 2008 29,200 19,000 142,600 180,000 270,800

12. LOANS PAYABLE The Company obtained a 5-year loan from Squatters Group Company, Inc. Amounting to PhP4,500,000 and PhP500,000 on January 1, 2008 and 2009, respectively. Outstanding loan availed shall be subject to 12% interest per annum and shall be payable on May 1, September 1, and January 1 of each year. Total interest incurred on this loan amounted to P600,000 and P540,000 in 2009 and 2008 respectively. 13. COMMITMENTS UNDER OPERATING LEASE
The Company rents its sales office under operating leases. The lease is for a period of five years, with monthly fixed rental of PhP10,000 and an escalation rate of 10% per annum. The Company started to occupy the premises on January 2008. 2009 Minimum lease payments under operating leases recognized as an expense during the year 132,000 132,000 2008 120,000 120,000

At year end, the Company has outstanding commitment under non-cancellable operating leases that fall due as follows: 2009 Within one year Later than one year but within five years 145,200 335,412 480,612 2008 132,000 480,612 612,612

14. SHARE CAPITAL

The total authorised number of ordinary shares is twenty thousand (20,000) common shares with a par value of one hundred pesos (PhP100.00) per share. As of December 31, 2009 and 2008 the authorized number of shares were fully subscribed and fully paid. 2009 Shares Authorized - P100 par value per share Less: Unissued Capital Stock Issued Capital Stock Subscribed capital stock Less: Subscription receivable Total 20,000 20,000 20,000 Amount 2,000,000 2,000,000 2,000,000 Shares 20,000 20,000 20,000 2008 Amount 2,000,000 2,000,000 2,000,000

15. REVENUE
2009 Export Sales Local Sales Less: Returns, Allowances and Discounts 350,000 7,359,700 (16,300) 7,693,400 2008 240,000 7,316,600 (22,200) 7,534,400

16. COST OF GOOD SOLD Cost of inventory recognized as expense follows:

2009 612,400 2,500 815,000 787,400 78,500 42,400 18,400 11,400 1,800 140,000 120,000 (51,700) 2008 915,000 (221,900) 973,500 942,900 549,900 36,500 19,800 14,500 2,500 140,000 120,000 246,700

Purchases of materials (Increase)/ decrease in raw materials Direct Labor Indirect Labor Utilities- Factory Fuel and Oil- Machineries Repairs and maintenance Factory supplies Other factory overhead Depreciation- Factory Building Depreciation - Tools and Equipment (Increase) in work in process

(Increase) in finished goods

(128,900) 2,449,200

410,700 2,835,30 0

17. DISTRIBUTION COST

2009
Salaries and Wages- Marketing Personnel Depreciation Vehicle Rent - Sales Office Utilities- Sales office Freight-out Fuel and oil- Vehicle Supplies Representation Repairs and maintenance-Vehicle

1,847,000 180,000 132,000 38,600 37,900 31,500 21,300 17,600 14,900 2,320,800

2008 1,929,70 0 80,000 120,000 19,700 21,700 21,800 17,100 18,700 11,600 2,240,30 0

18. ADMINISTRATIVE EXPENSES

2009 814,200 60,000 60,000 50,000 41,300 30,000 28,400 24,100 21,600 18,700 17,100 12,000 11,300 1,188,700 2008 715,800 60,000 60,000 50,000 29,600 30,000 23,900 13,700 22,900 16,900 11,600 12,000 9,500 1,055,90 0

Salaries and Wages- Key management personnel Professional fees Depreciation- Office Building Depreciation- Furniture and Fixtures Communication Amortization-Software Taxes and licenses Provision for inventory obsolescence Repairs& Maintenance- Office Building Transportation and travel Provision for impairment of receivables Insurance Office supplies

19. FINANCE COST

2009 2008

Interest Expense Other finance charges

600,00 0 4,700 604,70 0

540,00 0 3,200 543,200

20. OTHER INCOME

2009 24,30 0 4,000 28,30 0 2008 19,60 0 800 20,40 0

Scrap sales Interest income

21. INCOME TAXES

Provision for income tax for the years ended December 31 consists of: Current Deferred 2009 346,785 12,360 359,145 2008 263,889 7,590 271,479

The components of the Companys deferred tax assets at December 31 follow: Allowance for Bad debts Deferred tax assets January 1, 2008 Credit- originating difference December 31, 2008 Credit- originating difference December 31, 2009 7,590 (7,590) 12,360 (19,950)

22. KEY MANAGEMENT COMPENSATION Total salaries and other benefits of key management personnel amounted to P814,200 and P715,800 in 2009 and 2008 respectively.

23. APPROVAL OF FINANCIAL STATEMENTS

The accompanying financial statements were approved and authorized for issuance by the Board of Directors on April 14, 2010.