EXHIBIT 99.1
(i)
AL CONSEJO DE ADMINISTRACION Y
A LOS ACCIONISTAS DE
GRUPO SUR PROMOCIONES DE MEXICO, S.A. DE C.V.
HE EXAMINADO EL ESTADO DE POSICION FINANCIERA DE GRUPO SUR PROMOCIONES DE
MEXICO, S. A. DE C.V. AL 31 DE DICIEMBRE DEL 2006 Y DE 2005 Y LOS ESTADOS DE
RESULTADOS DE VIARIACIONES EN EL CAPITAL CONTABLE Y DE CAMBIOS EN LA SITUACION
FINANCIERA EN BASE A EFECTIVO QUE LE SON RELATIVOS POR EL ANO TERMINADO EN ESA
FECHA.
MI EXAMEN SE EFECTUO DE ACUERDO CON LAS NORMAS DE AUDITORIA GENERALMENTE
ACEPTADAS Y EN CONSECUENCIA INCLUYO PRUEBAS DE LOS LIBROS Y DOCUMENTOS DE
CONTABILIDAD Y OTROS PROCEDIMIENTOS DE AUDITORIA QUE CONSIDERE NECESARIOS EN LAS
CIRCUNSTANCIAS.
LA COMPANIA OMITIO REVELAR LOS EFECTOS DE LA INFLACION Y LOS ESTADOS FINANCIEROS
POR EL EJERCICIO TERMINADO EL 31 DE DICIEMBRE DEL 2006 Y DE 2005 EN CONSECUENCIA
NO INCLUYEN COMO LO REQUIEREN LOS PRINCIPIOS DE CONTABILIDAD GENERALMENTE
ACEPTADOS EL RECONOCIMIENTO DE LOS EFECTOS DE LA INFLACION EN INVENTARIOS, COSTO
DE VENTAS, PROPIEDADES Y EQUIPO, DEPRECIACION ACUMULADA Y DEL EJERCICIO, CAPITAL
CONTABLE Y POSICION MONETARIA, NI LA DETERMINACION DEL RESULTADO POR TENENCIA DE
ACTIVOS NO MONETARIOS.
EN MI OPINION EXCEPTO POR LA FALTA DE RECONOCIMIENTO DE LOS EFECTOS DE LA
INFLACION EN LA INFORMACION FINANCIERA SEGUN SE EXPLICA EN EL PARRAFO ANTERIOR,
LOS ESTADOS FINANCIEROS ADJUNTOS PRESENTAN RAZONABLEMENTE LA SITUACION
FINANCIERA DE GRUPO SUR PROMOCIONES DE MEXICO, S. A. DE C. V., AL 31 DE
DICIEMBRE DEL 2006 Y DE 2005, LOS RESULTADOS DE SUS OPERACIONES, LAS VARIACIONES
EN SU CAPITAL CONTABLE Y LOS CAMBIOS EN LA SITUACION FINANCIERA EN BASE A
EFECTIVO POR EL EJERCICIO TERMINADO EN ESA FECHA, DE CONFORMIDAD CON PRINCIPIOS
DE CONTABILIDAD GENERALMENTE ACEPTADOS Y APLICADOS CONSISTENTEMENTE.
C. P. VLADIMIR ROBLES GARCIA NO. DE REGISTRO DE LA DIRECCION GENERAL DE
FISCALIZACION 11171
MEXICO, D. F. 9 DE JUNIO DEL 2006.
-1-
GRUPO SUR PROMOCIONES DE MEXICO S.A. DE C.V.
ESTADO DE POSICION FINANCIERA
AL 31 DE DICIEMBRE DE 2006 Y DE 2005
(CIFRAS EN PESOS)
2006 2005
----------- -----------
ACTIVO
EFECTIVO EN CAJA Y BANCOS 218,816 235,456
VALORES DE IMMEDATA REALIZACION 9,217 509,207
----------- -----------
TOTAL DE EFECTIVEO E INVERSIONES
TEMPORALES 228,033 744,663
CUENTAS A COBRAR 12,256,685 7,666,733
PAGOS ANTICIPADOS 478,810 532,597
----------- -----------
TOTAL DE ACTIVO CIRCULANTE 12,963,528 8,943,993
ACTIVO FIJO
INMUEBLES, MAQUINARIA Y EQUIPO 3,990,437 3,674,265
DEPRECIACIONES 2,654,635 2,057,471
----------- -----------
INMUEBLES, MAQUINARIA Y EQUIPO (NETO) 1,335,802 1,616,794
----------- -----------
TOTAL DE ACTIVO 14,299,330 10,560,787
=========== ===========
PASIVIO
DOCUMENTOS POR PAGAR -- 17,973
ACREEDORES DIVERSOS 3,062,594 2,482,644
PROVEEDORES 4,004,786 40,306
IMPUESTOS POR PAGAR 1,545,644 1,031,007
----------- -----------
TOTAL DEL PASIVO A CORTO PLAZO 8,613,024 3,571,930
CAPITAL CONTABLE
CAPITAL SOCIAL PROVENIENTE DE
APORTACIONES 100,000 100,000
UTILIDADES RETENIDAS DE EJERCICIOS
ANTERIORES 6,617,008 8,106,674
RESULTADO EJERCICIO 2007 (1,030,702) (1,217,817)
----------- -----------
TOTAL DEL CAPITAL CONTABLE 5,686,306 6,988,857
----------- -----------
TOTAL DEL PASIVO Y CAPITAL CONTABLE 14,299,330 10,560,787
=========== ===========
LAS NOTAS ADJUNTAS SON PARTE INTEGRANTE DE ESTE ESTADO FINANCIERO
-2-
GRUPO SUR PROMOCIONES DE MEXICO S.A. DE C.V.
ESTADO DE RESULTADOS
POR LOS EJERCICIOS COMPRENDIDOS DEL 1 DE ENERO AL
31 DE DICIEMBRE DE 2006 Y DE 2005
(CIFRAS EN PESOS)
2006 2005
------------ ------------
INGRESOS POR SERVICIOS 211,239,437 146,982,025
GASTOS POR SERVICIOS 194,339,706 130,958,443
------------ ------------
UTILIDAD DE OPERACION 16,899,731 16,023,582
GASTOS DE ADMINISTRACION 18,018,552 17,316,909
------------ ------------
PERDIDAS ANTES DE OTROS INGRESOS Y GASTOS: (1,118,821) (1,293,327)
OTROS INGRESOS Y (GASTOS):
INGRESO INTEGRAL DE FINANCIAMIENTO 88,119 75,510
------------ ------------
PERDIDAS ANTES DE IMPUESTOS (1,030,702) (1,217,817)
PROVISIONES PARA IMPUESTOS -- --
------------ ------------
PERDIDA NETA (1,030,702) (1,217,817)
============ ============
LAS NOTAS ADJUNTAS SON PARTE INTEGRANTE DE ESTE ESTADO FINANCIERO
-3-
GRUPO SUR PROMOCIONES DE MEXICO S.A. DE C.V.
ESTADO DE VARIACIONES EN EL CAPITAL CONTABLE
POR LOS EJERCICIOS TERMINADOS AL 31 DE DICIEMBRE DE 2006 Y DE 2005
(CIFRAS EN PESOS)
CAPITAL TOTAL DE
SOCIAL UTILIDADES CAPITAL
NOMINAL RETENIDOS CONTABLE
----------- ----------- -----------
SALDO AL 31 DE DICIEMBRE 2004 100,000 11,222,472 11,322,472
PERDIDA DE EJERCICIO 2005 -- (1,217,817) (1,217,817)
APLICACION DE IMPUESTOS -- (3,115,798) (3,115,798)
----------- ----------- -----------
SALDO AL 31 DE DICIEMBRE 2005 100,000 6,888,857 6,988,857
PERDIDA DE EJERCICIO 2006 -- (1,030,702) (1,030,702)
APLICACION DE IMPUESTOS -- (271,849) (271,849)
----------- ----------- -----------
SALDO AL 31 DE DICIEMBRE 2006 100,000 5,586,306 5,686,306
=========== =========== ===========
LAS NOTAS ADJUNTAS SON PARTE INTEGRANTE DE ESTE ESTADO FINANCIERO
-4-
GRUPO SUR PROMOCIONES DE MEXICO S.A. DE C.V.
ESTADO DE CAMBIOS EN LA SITUACION FINANCIERA
POR LOS EJERCICIOS TERMINADOS AL 31 DE DICIEMBRE DE 2006 Y DE 2005
(CIFRAS EN PESOS)
2006 2005
---------- ----------
OPERACIONES
PERDIDA DEL ANO (1,030,702) (1,217,817)
DEPRECIACIONES 597,164 532,090
AUMENTO O DIDMINUCION EN
CUENTAS A COBRAR (3,589,321 (1,040,842)
PAGOS ANTICIPADOS (946,845) 2,695,950
IMPUESTOS A PAGAR (271,848) (3,115,798)
PROVEEDORES Y OTROS PASIVOS 5,041,093 238,034
---------- ----------
RECURSOS UTILIZADOS POR LA OPERACION (200,459) (1,767,883)
RECURSOS UTILIZADO POR INVERSION
ACTIVO FIJO (316,172) (397,777)
DISMINUCION EN EFECTIVO E INVERSIONES TEMPORALES (516,631) (2,165,660)
EFECTIVO Y INVERSIONES TEMPORALES AL PRINCIPIO DEL
EJERCICIO 744,663 2,910,324
---------- ----------
EFECTIVO Y INVERSIONES TEMPORALES AL FINAL DEL PERIODO 228,033 744,664
========== ==========
LAS NOTAS ADJUNTAS SON PARTE INTEGRANTE DE ESTE ESTADO FINANCIERO
-5-
GRUPO SUR PROMOCIONES DE MEXICO S.A. DE C.V.
NOTAS A LOS ESTADOS FINANCIEROS
POR LOS EJERCICIOS TERMINADOS AL 31 DE DICIEMBRE DE 2006 Y DE 2005
(CIFRAS EN PESOS)
NOTA NO. 1 OPERACIONES
EL GIRO DE LA EMPRESA ES LA PRESTACION DE TODA CLASE DE SERVICIOS EN LOS RAMOS
DE MERCADOTECNIA, LA PUBLICIDAD, LA PROMOCION DE VENTAS, ADMINISTRACION DE
VENTAS Y RELACIONES INDUSTRIALES.
NOTA NO. 2 RESUMEN DE LAS POLITICAS CONTABLES SIGNIFICATIVAS.
A CONTINUACION SE PRESENTA UN RESUMEN DE LAS POLITICAS CONTABLES MAS
SIGNIFICATIVAS UTILIZADAS EN LA PREPARACION DE LOS ESTADOS FINANCIEROS.
A) PROPIEDADES Y EQUIPOS.
LAS PROPIEDADES Y EQUIPOS SE REGISTRAN A SU COSTO DE ADQUISICION. LAS
MODIFICACIONES Y MEJORAS DE IMPORTANCIA SON CAPITALIZADAS MIENTRAS QUE LOS
REEPLAZOS, REPARACIONES Y MANTENIMIENTO QUE NO PROLONGAN LA VIDA UTIL DE LOS
ACTIVOS SON CARGADOS A LOS GASTOS DE EJERCICIO EN QUE SE EFECTUAN.
B) DEPRECIACION
PARA EL CACULO DE LA DEPRECIACION SE SIGUE EL METODO DE LINEA RECTA TANTO PARA
EFECTOS FINANCIEROS COMA PARE EFECOTS FISCALES DE ACUERDO A LAS SIGUIENTES TASAS
ANUALES.
MOBILIARIO Y EQUIPO 10%
EQUIPO DE COMPUTO 30%
EQUIPO DE TRANSPORTE 25%
EL COSTO DE ADQUISICION, LA DEPRECIACION ACUMULADA Y EL VALOR EN LIBROS DE LAS
PROPIEDADES Y EQUIPOS AL 31 DE DICIEMBRE DEL 2006 Y 2005 SE INTEGRAN COM SIGUE:
PARA 31 DE DICIEMBRE DE 2006
--------------------------------------------------
CONCEPTO VALOR DE DEPRECIACION VALOR DE
ADQUISICION ACUMULADA LIBROS
------------ ------------ ------------
MOBIARIO Y EQUIPO 1,045,502 526,361 519,141
EQUIPO DE COMPUTO 1,539,251 1,030,674 508,577
EQUIPO DE TRANSPORTE 1,405,684 1,097,600 308,084
------------ ------------ ------------
TOTALES 3,990,437 2,654,635 1,335,802
============ ============ ============
PARA 31 DE DICIEMBRE DE 2005
--------------------------------------------------
CONCEPTO VALOR DE DEPRECIACION VALOR DE
ADQUISICION ACUMULADA LIBROS
------------ ------------ ------------
MOBIARIO Y EQUIPO 1,030,220 422,906 607,314
EQUIPO DE COMPUTO 1,238,361 819,441 418,920
EQUIPO DE TRANSPORTE 1,405,684 815,124 590,560
------------ ------------ ------------
TOTALES 3,674,265 2,057,471 1,616,794
============ ============ ============
C) INDEMNIZACIONES Y PAGOS DE PRIMAS DE ANIQUEDAD
LAS COMPENSACIONES ACUMULADAS A FAVOR DE LOS TRABAJADORES DE ACUERDO CON SU
ANTIGUEDAD ESTIPULADAS EN LA LEY FEDERAL DEL TRABAJO SE REGISTRAN CUANDO SUCEDEN
LOS RETIROS O LAS RENUNCIAS DEL PERSONAL, COMO GASTOS DEL EJERCICIO EN QUE SE
CUBREN INCLUYENDO LAS PRIMAS DE ANTIGUEDAD
-6-
NOTA NO. 3 CAPITAL SOCIAL
EL CAPITAL SOCIAL ES DE CIEN MIL PESOS REPRESENTADO POR 100 ACCIONES NOMINATIVAS
LIBERADAS CON UN VALOR NOMINAL DE UN MIL PESOS CADA UNA.
NOTA NO. 4 RESTRICCIONES A LAS UTILIDADES ACUMULADAS
A) RESPECTO A LAS UILIDADES ACUMULADAS NO SE EFECTUARA RRETENCION ALGUNA
DE IMPUESTO SOBRE LA RENTA EN PAGO DE DIVIDENDOS, CUANDO LAS UTILIDADES
QUE SE DISTRIBUYAN PROVENGAN DEL SALDO DE LA CUENTA DE "UTILIDAD FISCAL
NETA" SENALADA EN EL ARTICULO 88 DE LA LEY DEL I.S.R. EN CASO DE QUE NO
PROVENGAN DEL SALDO DE ESA CUENTA, EL IMPUSTO A RETENER SERA DEL 29%
SOBRE LA BASE DE MULTIPLICAR EL IMPORTE DE LA DISTRIBUCION POR EL
FACTOR DE 1.38989 DE ACUERDO CON LO ESTABLECIDO EN EL ART. 11 EL
IMPORTE QUE SE DISTRIBUYA COMO DIVIDENDOS NO DEBE EXCEDER LAS
UNILIDIDES CONTABLES REPARTIBLES.
B) LA UTILIDAD NETA DEL ANO ESTA SUJETA A LA DISPOSICION LEGAL QUE
REQUIERA QUE EL 5% DE LAS UTILIDADES DE CADA ANO SEA TRASPASADA A LA
RESERVA LEGAL HASTA QUE ESTA SEA IGUAL AL 20% DEL CAPITAL SOCIAL, ESTA
RESERVA NO ESTA SUJETA A DISTRIBUCION A LOS ACCIONISTAS DURANTE LA
EXISTENCIA DE LA COMPANIA EXCEPTO SI ES RREPARTIDA COMO DIVIDENDOS EN
ACCIONES.
NOTA NO. 5 PASIVO CONTIGENTE
DE CONFORMIDAD CON LA LEY FEDERAL DEL TRABAJO, LA COMPANIA TIENE UN PASIVO
CONTINGENTE POR EL PAGO DE RETIROS, INDEMINZACIONES A EMPLEADOS Y TRAJADORES QUE
SEAN DESPEDIDOS BAJO CIERTAS CIRCUNSTANCIAS COMO SE SENALA EN LA NOTA NO. 2
ANTERIOR. NO ES POLITICA DE LA COMPANIA REGISTRAR PASIVO ALGUNO POR ESTA
CONTINGENCIA.
ESTAS NOTAS SON PARTE INTERGRANTE DE LOS ESTADOS FINANCIEROS.
-7-
(ii) TRANSLATION OF (i) INTO ENGLISH AND UNITED STATES DOLLARS To the Board of
Directors and Stockholders Grupo Sur Promociones de Mexico S.A. de C.V.
I have audited the accompanying Balance Sheets of Grupo Sur Promociones de
Mexico S.A. de C.V. as of December 31, 2006 and 2005, and the related Statements
of Operations, Stockholders Equity , and Cash Flows for the periods then ended.
I conducted my audits in accordance with generally accepted auditing standards
that include tests of the accounting records and other auditing procedures that
I considered necessary under the circumstances.
The Company has omitted recording the effects of inflation at December 31, 2006
and 2005. Therefore, they have not complied with the generally accounting
principle to record inflation effecting inventory, cost of sales, property and
equipment , accumulated depreciation and cash flow.
In my opinion, except for non recogonition of inflation as explained in the
above paragraph, the financial statements referred to above present fairly, in
all material respects, the financial position of Grupo Sur Promociones de Mexico
S.A. de C.V. as of December 31, 2006 and 2005, and the results of its
operations, stockholder's equity and its cash in conformity with generally
accepted accounting principles.
-8-
GRUPO SUR PROMOCIONES DE MEXICO S.A. DE C.V.
BALANCE SHEETS
(TRANSLATED FROM MEXICAN PESOS TO U.S. DOLLARS-UNAUDITED IN U.S. DOLLARS)
December 31, DECEMBER 31,
2006 2005
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 20,968 $ 69,524
Accounts receivable 1,127,000 715,788
Prepaid and deposits 44,026 49,724
----------- -----------
TOTAL CURRENT ASSETS 1,191,994 835,036
Property and equipment 366,920 343,040
Depreciation (244,093) (192,091)
----------- -----------
Property and equipment (net) 122,827 150,949
----------- -----------
TOTAL ASSETS $ 1,314,821 $ 985,985
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable $ -- $ 1,678
Accounts payable 368,239 3,763
Accrued expenses 281,605 231,787
Accrued taxes 142,122 96,258
----------- -----------
TOTAL CURRENT LIABILITIES 791,966 333,486
Stockholders' equity:
Paid-in capital 9,336 9,336
Accumulated other comprehensive loss (36,612) (1,735)
Retained earnings 644,899 756,862
Current year deficit (94,768) (111,964)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 522,855 652,499
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,314,821 $ 985,985
=========== ===========
The accompanying notes are an integral part of these financial statements.
-9-
GRUPO SUR PROMOCIONES DE MEXICO S.A. DE C.V.
STATEMENTS OF OPERATIONS
(TRANSLATED FROM MEXICAN PESOS TO U.S. DOLLARS-UNAUDITED IN U.S. DOLLARS)
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
----------------- -----------------
REVENUES FROM SERVICES $ 19,422,351 $ 13,513,227
COST OF SERVICES 17,868,510 12,040,052
------------ ------------
GROSS PROFIT 1,553,841 1,473,175
OPERATING EXPENSES
General and administrative expenses 1,656,711 1,592,081
------------ ------------
TOTAL OPERATING EXPENSES 1,656,711 1,592,081
LOSS FROM OPERATIONS (102,870) (118,906)
OTHER INCOME AND (EXPENSE)
Interest income 8,102 6,942
Provision for income taxes -- --
------------ ------------
NET LOSS $ (94,768) $ (111,964)
============ ============
The accompanying notes are an integral part of these financial statements.
-10-
GRUPO SUR PROMOCIONES DE MEXICO S.A. DE C.V.
STATEMENTS OF STOCKHOLDERS' EQUITY
(TRANSLATED FROM MEXICAN PESOS TO U.S. DOLLARS-UNAUDITED IN U.S. DOLLARS)
TOTAL
PAID IN RETAINED COMPREHENSIVE STOCKHOLDERS'
CAPITAL EARNINGS INCOME EQUITY
----------- ----------- ----------- -----------
BALANCE DECEMBER 31, 2004 $ 9,336 $ 1,047,763 $ -- $ 1,057,098
NET LOSS FOR THE YEAR -- (111,964) -- (111,964)
LOSS ON TRANSLATION -- -- (1,735) (1,735)
-----------
COMPREHENSIVE LOSS -- -- -- (113,699
PRIOR YEAR ADJUSTMENT FOR TAXES -- (290,900) -- (290,900)
----------- ----------- ----------- -----------
BALANCE DECEMBER 31, 2005 9,336 644,899 (1,735) 652,500
NET LOSS FOR THE YEAR -- (94,768) -- (94,768)
LOSS ON TRANSLATION -- -- (34,877) (34,877)
-----------
COMPREHENSIVE LOSS -- -- -- (129,645)
----------- ----------- ----------- -----------
BALANCE DECEMBER 31, 2006 $ 9,336 $ 550,131 $ (36,612) $ 522,855
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
-11-
GRUPO SUR PROMOCIONES DE MEXICO S.A. DE C.V.
STATEMENTS OF CASH FLOWS
(TRANSLATED FROM MEXICAN PESOS TO U.S. DOLLARS-UNAUDITED IN U.S. DOLLARS)
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
2006 2005
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (94,768) $(111,758)
Adjustment to reconcile net loss to net cash
used for operating activities:
Depreciation 54,906 48,829
Changes in operating assets and liabilities:
Increase in accounts receivable (330,019) (95,517)
Increase (decrease) in deposits (87,057) 247,405
Decrease in taxes (24,995) (285,933)
Increase in accounts payable and other
liabilities 463,502 21,844
--------- ---------
NET CASH USED FOR OPERATING ACTIVITIES (18,431) (175,131)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (29,070) (36,504)
--------- ---------
NET CASH USED FOR INVESTING ACTIVITIES (29,070) (36,504)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,055) 14,080
--------- ---------
NET DECREASE IN CASH (48,556) (197,554)
Cash - Beginning 69,524 267,078
--------- ---------
CASH - Ending $ 20,968 $ 69,524
========= =========
The accompanying notes are an integral part of these financial statements.
-12-
GRUPO SUR PROMOCIONES DE MEXICO S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
(TRANSLATED FROM MEXICAN PESOS TO U.S. DOLLARS-UNAUDITED IN U.S. DOLLARS)
NOTE NO. 1 OPERATIONS
THE COMPANY'S BUSINESS IS THE OFFERING OF ALL TYPES OF SERVICES IN THE BRANCHES
OF MARKETING, PUBLICITY, PROMOTION OF SALES, ADMINISTRATION OF SALES AND
INDUSTRIAL RELATIONS.
NOTE NO. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE CONTINUATION IS A SUMMARY OF SIGNIFICANT ACCOUNTING UTILIZED IN THE
PREPARATION OF THE FINANCIAL STATEMENTS.
A) PROPERTY AND EQUIPMENT.
THE PROPERTY AND EQUIPMENT ARE RECORDED AT COST. THE MODIFICATIONS AND
IMPROVEMENTS OF IMPORTANCE ARE CAPITALIZED WHILE THE REPLACEMENTS, REPAIRS AND
MAINTENANCE THAT DO NOT PROLONG THE LIFE OF THE ASSETS ARE EXPENSED.
B) DEPRECIATION
DEPRECIATION IS CALCULATED USING THE STRAIGHT LINE METHOD USING THEE FOLLOWING
ANNUAL RATES.
FURNITURE AND FIXTURES 10%
COMPUTERS 30%
TRUCKS AND AUTOS 25%
THE COST OF ADQUISITION, THE DEPRECIATION ACCUMULATED AND THE BOOK VALUE OF THE
PROPERTY AND EQUIPMENT TO DECEMBER 31, 2006 AND 2005 ARE AS FOLLOWS:
December 31, 2006
--------------------------------------------
Accumulated
Cost Depreciation Net
---------- ------------ ----------
Furniture and fixtures 96,134 48,399 47,735
Computers 141,534 94,770 46,764
Trucks and autos 129,252 100,924 28,328
---------- ---------- ----------
TOTAL 366,920 244,093 122,827
========== ========== ==========
December 31, 2005
--------------------------------------------
Accumulated
Cost Depreciation Net
---------- ------------ ----------
Furniture and fixtures 96,184 39,484 56,701
Computers 115,617 76,505 39,112
Trucks and autos 131,239 76,102 55,136
---------- ---------- ----------
TOTAL 343,040 192,091 150,949
========== ========== ==========
B) COMPENSATIONS AND PAYMENTS TO RETIREES
WORKERS ARE ENTITLED BY LAW TO COMPENSATION WHEN THEY LEAVE THE COMPANY IN
ACCORDANCE WITH HOW LONG THEY HAVE BEEN WITH THE COMPANY. THE COMPANY RECORDS
THE EXPENSE IN THE PERIOD IN WHICH THEY PAY THE WORKERS.
-13-
NOTE NO. 3 CAPITAL STOCK
THE CAPITAL STOCK IS A HUNDRED THOUSAND PESOS REPRESENTED BY 100 NOMINATIVE
SHARES WITH A FACE VALUE OF A THOUSAND PESOS PER SHARE.
NOTES NO. 4 RESTRICTIONS ON RETAINED EARNINGS
A) THERE IS NO TAX ON DIVIDENDS PAID OUT OF "FISCAL EARNINGS NET" IF IN
COMPLIANCE WITH ARTICLE 88 OF THE TAX LAW.. IN THE EVENT THAT PAYMENT DOES NOT
COME FROM THE BALANCE OF THAT ACCOUNT, THE RETAINED TAX OF 29% WILL BE WITHHELD.
DIVIDENDS CANNOT EXCEED THE RETAINED EARNINGS.
B) 5% OF NET INCOME EACH YEAR SHOULD BE PUT INTO A LEGAL RESERVE UNTIL THE LEGAL
RESERVE EQUALS 20% OF CAPITAL. THIS RESERVE CANNOT BE PAID OUT EXCEPT AS STOCK
DIVIDEND.
NOTE NO. 5 CONTINGENT LIABILITIES
ACCORDING TO THE FEDERAL LABOR LAW , THE COMPANY HAS A CONTINGENT LIABILITY FOR
PAYMENTS OF EATS, INDEMINFICATIONS TO EMPLOYEES AND WORKERS WHO LEAVE UNDER
CERTAIN CIRCUMSTANCES AS NOTED IN THE NOTE NO. 2 ABOVE. THE COMPANY DOES NOT
RECORD ANY LIABILITY FOR SUCH PAYMENT TO BE MADE.
-14-
(iii)
GRUPO SUR PROMOCIONES DE MEXICO S.A. DE C.V.
BALANCE SHEETS
(TRANSLATED FROM MEXICAN PESOS TO U.S. DOLLARS-UNAUDITED IN U.S. DOLLARS)
June 30, December 31,
2007 2006
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 14,613 $ 20,968
Accounts receivable 2,026,500 1,127,000
Prepaid and deposits 17,219 44,026
Investments 298,390 --
----------- -----------
TOTAL CURRENT ASSETS 2,356,722 1,191,994
Property and equipment 404,374 366,920
Depreciation (246,025) (244,093)
----------- -----------
Property and equipment (net) 158,349 122,827
----------- -----------
TOTAL ASSETS $ 2,515,071 $ 1,314,821
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 251,361 $ 368,239
Accrued expenses 258,186 281,605
Accrued taxes 996,284 142,122
----------- -----------
TOTAL CURRENT LIABILITIES 1,505,831 791,966
Stockholders' equity:
Paid-in capital 9,336 9,336
Accumulated other comprehensive loss (55,453) (36,612)
Retained earnings 550,131 644,899
Current year income (loss) 505,226 (94,768)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,009,240 522,855
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,515,071 $ 1,314,821
=========== ===========
The accompanying notes are an integral part of these financial statements.
-15-
GRUPO SUR PROMOCIONES DE MEXICO S.A. DE C.V.
STATEMENTS OF OPERATIONS
(TRANSLATED FROM MEXICAN PESOS TO U.S. DOLLARS-UNAUDITED IN U.S. DOLLARS)
FOR THE SIX
MONTHS
ENDED
JUNE 30, 2007
-------------
REVENUES FROM SERVICES $12,636,039
COST OF SERVICES 11,035,034
-----------
GROSS PROFIT 1,601,005
OPERATING EXPENSES
General and administrative expenses 1,099,650
-----------
TOTAL OPERATING EXPENSES 1,099,650
NET PROFIT FROM OPERATIONS 501,355
OTHER INCOME AND (EXPENSE)
Interest income 3,871
Provision for income taxes --
-----------
NET PROFIT $ 505,226
===========
The accompanying notes are an integral part of these financial statements.
-16-
GRUPO SUR PROMOCIONES DE MEXICO S.A. DE C.V.
STATEMENTS OF CASH FLOWS
(TRANSLATED FROM MEXICAN PESOS TO U.S. DOLLARS-UNAUDITED IN U.S. DOLLARS)
FOR THE SIX
MONTHS
ENDED
JUNE 30, 2007
-------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 505,226
Adjustment to reconcile net loss to net cash
used for operating activities:
Depreciation 1,932
Changes in operating assets and liabilities:
Increase in accounts receivable (899,500)
Decrease in deposits 26,807
Increase in taxes 854,162
Decrease in accounts payable and other
liabilities (140,297)
---------
NET CASH USED FOR OPERATING ACTIVITIES 348,330
CASH FLOWS FROM INVESTING ACTIVITIES
Investments (298,390)
Purchase of fixed assets (37,454)
---------
NET CASH USED FOR INVESTING ACTIVITIES (335,844)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (18,841)
---------
NET DECREASE IN CASH (6,355)
Cash - Beginning 20,968
---------
CASH - Ending $ 14,613
=========
The accompanying notes are an integral part of these financial statements.
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GRUPO SUR PROMOCIONES DE MEXICO S.A. DE C.V.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2007
(TRANSLATED FROM MEXICAN PESOS TO U.S. DOLLARS-UNAUDITED IN U.S. DOLLARS)
NOTE NO. 1 OPERATIONS
THE COMPANY'S BUSINESS IS THE OFFERING OF ALL TYPES OF SERVICES IN THE BRANCHES
OF MARKETING, PUBLICITY, PROMOTION OF SALES, ADMINISTRATION OF SALES AND
INDUSTRIAL RELATIONS.
NOTE NO. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE CONTINUACION IS A SUMMARY OF SIGNIFICANT ACCOUNTING UTILIZED IN THE
PREPARATION OF THE FINANCIAL STATEMENTS.
C) PROPERTY AND EQUIPMENT.
THE PROPERTY AND EQUIPMENT ARE RECORDED AT COST. THE MODIFICATIONS AND
IMPROVEMENTS OF IMPORTANCE ARE CAPITALIZED WHILE THE REPLACEMENTS, REPAIRS AND
MAINTENANCE THAT DO NOT PROLONG THE LIFE OF THE ASSETS ARE EXPENSED.
B) DEPRECIATION
DEPRECIATION IS CALCULATED USING THE STRAIGHT LINE METHOD USING THEE FOLLOWING
ANNUAL RATES.
FURNITURE AND FIXTURES 10%
COMPUTERS 30%
TRUCKS AND AUTOS 25%
C) COMPENSATIONS AND PAYMENTS TO RETIREES
WORKERS ARE ENTITLED BY LAW TO COMPENSATION WHEN THEY LEAVE THE COMPANY IN
ACCORDANCE WITH HOW LONG THEY HAVE BEEN WITH THE COMPANY. THE COMPANY RECORDS
THE EXPENSE IN THE PERIOD IN WHICH THEY PAY THE WORKERS.
NOTE NO. 3 CAPITAL STOCK
THE CAPITAL STOCK IS A HUNDRED THOUSAND PESOS REPRESENTED BY 100 NOMINATIVE
SHARES WITH A FACE VALUE OF A THOUSAND PESOS PER SHARE.
NOTES NO. 4 RESTRICTIONS ON RETAINED EARNINGS
A) THERE IS NO TAX ON DIVIDENDS PAID OUT OF "FISCAL EARNINGS NET" IF IN
COMPLIANCE WITH ARTICLE 88 OF THE TAX LAW.. IN THE EVENT THAT PAYMENT DOES NOT
COME FROM THE BALANCE OF THAT ACCOUNT, THE RETAINED TAX OF 29% WILL BE WITHHELD.
DIVIDENDS CANNOT EXCEED THE RETAINED EARNINGS.
B) 5% OF NET INCOME EACH YEAR SHOULD BE PUT INTO A LEGAL RESERVE UNTIL THE LEGAL
RESERVE EQUALS 20% OF CAPITAL. THIS RESERVE CANNOT BE PAID OUT EXCEPT AS STOCK
DIVIDEND.
NOTE NO. 5 CONTINGENT LIABILITIES
ACCORDING TO THE FEDERAL LABOR LAW , THE COMPANY HAS A CONTINGENT LIABILITY FOR
PAYMENTS OF EATS, INDEMINFICATIONS TO EMPLOYEES AND WORKERS WHO LEAVE UNDER
CERTAIN CIRCUMSTANCES AS NOTED IN THE NOTE NO. 2 ABOVE. THE COMPANY DOES NOT
RECORD ANY LIABILITY FOR SUCH PAYMENT TO BE MADE.
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