Notes to Interim Consolidated Financial Statements
December 31, 2007
1.
Organization
Deltron, Inc. (the “Company”) is a Nevada corporation incorporated
on September 14, 2005. It is based in San Jose, Costa Rica. The
Company incorporated a wholly owned subsidiary, Deltron Holdings Corporation
S.A., in San Jose, Costa Rica on November 17, 2005.
The
Company is a development stage company that intends to engage principally in the
acquisition and development of rental housing properties in the district of San
Isidro de Heredia, Costa Rica. To date, the Company’s activities have been
limited to its formation, the raising of equity capital and the acquisition and
development of property
(Note 4)
.
Going Concern and Liquidity Considerations
The
accompanying unaudited consolidated financial statements have been prepared
assuming that the Company will continue as a going concern, which contemplates,
among other things, the realization of assets and satisfaction of liabilities in
the normal course of business. As at December 31, 2007, the Company had a
working capital deficiency of $11,130 and an accumulated deficit of $63,859.
The Company intends to fund operations through equity financing
arrangements, which may be insufficient to fund its capital expenditures,
working capital and other cash requirements for the year ending September 30,
2008.
The
ability of the Company to emerge from the development stage is dependent upon,
among other things, obtaining additional financing to continue operations, and
development of its business plan.
In
response to these problems, management intends to raise additional funds through
public or private placement offerings.
These factors, among others, raise substantial doubt about the
Company’s ability to continue as a going concern. The accompanying audited
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
2.
Significant
Accounting Policies
Basis of Consolidation
These consolidated financial statements presented are those of the
Company and its wholly-owned subsidiary, Deltron Holdings Corporation S.A.
All intercompany balances and transactions have been eliminated.
Basis of Presentation
The accounting
and reporting policies of the Company conform to U.S. generally accepted
accounting principles (US GAAP) applicable to development stage companies.
8
Deltron, Inc.
(A Development Stage
Company)
Notes to Interim Consolidated Financial Statements
December 31, 2007
2.
Significant
Accounting Policies
- Continued
Use of Estimates
The
preparation of financial statements in conformity with United States generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates. The
Company’s periodic filings with the Securities and Exchange Commission include,
where applicable, disclosures of estimates, assumptions, uncertainties and
markets that could affect the financial statements and future operations of the
Company.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, money market
funds, and certificates of term deposits with maturities of less than three
months from date of purchase, which are readily convertible to known amounts of
cash and which, in the opinion of management, are subject to an insignificant
risk of loss in value.
Asset Retirement Obligations
The
Company has adopted Statement of Financial Accounting Standards (“SFAS”) No.
143,
"Accounting for Asset Retirement Obligations"
. SFAS No. 143
requires entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is a cost by increasing the
carrying amount of the related long-lived asset.
Over time, the liability is accreted to its present value, and the
capitalized cost is depreciated over the useful life of the related obligation
for its recorded amount or incurs a gain or loss upon settlement.
Fair Value of Financial Instruments and Derivative Financial
Instruments
The
Company has adopted Statement of Financial Accounting Standards (“SFAS”) Number
119,
“Disclosure About Derivative Financial Instruments and Fair Value of
Financial Instruments”.
The carrying amounts of cash and cash
equivalents, accounts payable and amount due to related party approximate their
fair values because of the short maturity of these items. Certain fair
value estimates may be subject to and involve, uncertainties and matters of
significant judgment, and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect these estimates.
The Company does not hold or issue financial instruments for trading
purposes, nor does it utilize derivative instruments in the management of its
foreign exchange, commodity price or interest rate market risks.
Segment Reporting
SFAS Number 131,
“Disclosure About Segments of an Enterprise
and Related Information”
, changed the way public companies report
information about segments of their business in their quarterly reports issued
to shareholders. It also requires entity-wide disclosures about the
products and services an entity provides, the material countries in which it
holds assets and reports revenues and its major customers. The Company
presently operates only in Costa Rica.
9
Deltron, Inc.
(A Development Stage
Company)
Notes to Interim Consolidated Financial Statements
December 31, 2007
2.
Significant Accounting Policies
– Continued
Income Taxes
Deferred income taxes are reported for timing differences between
items of income or expense reported in the financial statements and those
reported for income tax purposes in accordance with SFAS Number 109,
“Accounting for Income Taxes”
, which requires the use of the
asset/liability method of accounting for income taxes. Deferred income
taxes and tax benefits are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and for tax loss
and credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
The Company provides for deferred taxes for the estimated future tax
effects attributable to temporary differences and carryforwards when realization
is more likely than not.
Earnings (Loss) per Share
The
Company has adopted Financial Accounting Standards Board (“FASB”) Statement
Number 128,
“Earnings per Share,”
(“EPS”) which requires presentation of
basic and diluted EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. In the accompanying financial statements, basic
loss per common share is computed by dividing net loss by the weighted average
number of shares of common stock outstanding during the period.
Risks and Uncertainties
The
Company operates in the real estate development and property rental industry
that is subject to significant risks and uncertainties, including financial,
operational, technological and other risks associated with operating a real
estate development and property rental business, including the potential risk of
business failure.
Comprehensive Income (Loss)
SFAS No. 130, “Reporting Comprehensive Income”, establishes
standards for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. From inception
(September 14, 2005) to December 31, 2007, the Company had no items of other
comprehensive income. Therefore, net loss equals comprehensive loss from
inception (September 14, 2005) to December 31, 2007.
10
Deltron, Inc.
(A Development Stage
Company)
Notes to Interim Consolidated Financial Statements
December 31, 2007
2.
Significant
Accounting Policies
- Continued
Foreign Currency Translations
The
Company’s functional currency is the Costa Rican Colone. The Company’s reporting
currency is the U.S. dollar. All transactions initiated in Costa Rican
Colones are translated into U.S. dollars in accordance with SFAS No. 52 "Foreign
Currency Translation" as follows:
i)
Monetary assets and liabilities at the rate of exchange in effect
at the balance sheet date;
ii)
Equity at historical rates; and
iii)
Revenue and expense items at the average rate of exchange
prevailing during the period.
Adjustments arising from such translations are deferred until
realization and are included as a separate component of stockholders’ equity
(deficit) as a component of comprehensive income or (loss). Therefore,
translation adjustments are not included in determining net income (loss) but
reported as other comprehensive income (loss).
For foreign currency transactions, the Company translates these
amounts to the Company’s functional currency at the exchange rate effective on
the invoice date. If the exchange rate changes between the time of
purchase and the time actual payment is made, a foreign exchange transaction
gain or loss results which is included in determining net income (loss) for the
period. No significant realized exchange gains or losses were recorded since
September 14, 2005 (inception) to December 31, 2007.
Revenue Recognition
The
Company recognizes revenue from the sale of products and services in accordance
with the Securities and Exchange Commission Staff Accounting Bulletin No. 104
(“SAB 104”),
“Revenue Recognition in Financial Statements.”
Revenue
will consist of rental income and will be recognized only when all of the
following criteria have been met:
i)
Persuasive evidence for an agreement exists;
ii)
Delivery has occurred;
iii)
The
fee is fixed or determinable; and
iv)
Revenue is reasonably assured.
New Accounting Pronouncements
Recent accounting pronouncements that are listed below did and/or
are not currently expected to have a material effect on the Company’s financial
statements.
FASB Statements:
In December 2007,
FASB issued Financial Accounting Standards No. 160,
“Noncontrolling Interests
in Consolidated Financial Statements – an amendment of ARB No. 51.”
This
statement amends ARB No. 51 to improve the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements by establishing accounting and reporting
standards of the portion of equity in a subsidiary not attributable, directly or
indirectly, to a parent. SFAS 160 is effective for fiscal years, and
interim periods with those fiscal years, beginning on or after December 15, 2008
(that is, January 1, 2009, for entities with calendar year-ends).
11
Deltron, Inc.
(A Development Stage
Company)
Notes to Interim Consolidated Financial Statements
December 31, 2007
2.
Significant
Accounting Policies
- Continued
New Accounting
Pronouncements
- Continued
In December 2007,
FASB issued a revision to Financial Accounting Standards No. 141 (revised 2007),
“Business Combinations.”
The objective of this Statement is to
improve the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial reports about a
business combination and its effects. This Statement applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008.
In
February 2007, FASB issued Financial Accounting Standards No. 159, “
The Fair
Value Option for Financial Assets and Financial Liabilities—Including an
amendment of FASB Statement No. 115.”
This Statement permits entities
to choose to measure many financial instruments and certain other items at fair
value. The objective is to improve financial reporting by providing entities
with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. This Statement is expected to expand the
use of fair value measurement, which is consistent with the Board’s long-term
measurement objectives for accounting for financial instruments. SFAS 159
is effective as of the beginning of an entity’s first fiscal year that begins
after November 15, 2007.
In
September 2006, FASB issued Financial Accounting Standards No. 157, “Fair Value
Measurements.” This Statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. This Statement
applies under other accounting pronouncements that require or permit fair value
measurements, the Board having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this Statement does not require any new fair value measurements.
However, for some entities, the application of this Statement will change
current practice. SFAS 157 is effective in the first fiscal year that
begins after November 15, 2007.
3.
Capital Stock
Authorized Stock
The
Company has authorized 100,000,000 common shares with a par value of $0.001 per
share. Each common share entitles the holder to one vote, in person or
proxy, on any matter on which action of the stockholder of the corporation is
sought.
Share Issuances
From inception of the Company (September 14, 2005) to December 31,
2007, the Company has issued 500,000 common shares at $0.01 per share and
5,045,000 common shares at $0.02 per share, resulting in total proceeds of
$105,900 and 5,545,000 common shares issued and outstanding at December 31,
2007. Of these shares, 400,000 were issued to a director of the Company,
400,000 were issued to a former director and officer, 1,000,000 were issued to
the spouse of a director and officer of the Company, and 3,745,000 were issued
to independent investors.
12
Deltron, Inc.
(A Development Stage
Company)
Notes to Interim Consolidated Financial Statements
December 31, 2007
4.
Development in Progress
On
March 29, 2006, through the wholly-owned subsidiary Deltron Holdings Corporation
S.A., a property was purchased for $40,657. The funds to purchase the property
were loaned to Deltron Holdings Corporation S.A., by the President of the
Company.
As
at December 31, 2007, the Company has incurred development costs of $12,514,
relating primarily to architecture and construction permit fees.
5.
Related Party Balances and Transactions
Related party transactions not disclosed elsewhere in these
financial statements are as follows.
As
at December 31, 2007, the Company owed an individual, who is a director and
officer of the Company $42,265. This balance is non-interest bearing and
is due on demand.
These transactions are in the normal course of operations and are
measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties.
6.
Income Taxes
The
Company recognizes deferred tax assets and liabilities for temporary differences
between the financial reporting and tax bases of its assets and liabilities.
At December 31, 2007, the Company had an estimated net operating loss
carryforward for federal tax purposes of $63,859, which, if unused to offset
future taxable income, will begin to expire in 2025 and continue through 2027.
The potential future tax benefits of these losses have not been recognized
in these financial statements due to uncertainty of their realization. A
100% valuation allowance has been recognized to offset the entire related
deferred tax asset due to the uncertainty of realizing the benefit.
13
ITEM 2. PLAN OF
OPERATION
This report includes a number of
forward-looking statements that reflect our current views with respect to future
events and financial performance. Forward-looking statements are often
identified by words such as: believe, expect, estimate, anticipate,
intend, project and similar expressions, or words which, by their nature, refer
to future events. You should not place undue certainty on these
forward-looking statements, which apply only as of the date of this quarterly.
These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from our
predictions.
Results of Operations
We are a
development stage corporation. We have generated no revenues from our
business operations since inception and have incurred $63,859 in expenses
through December 31, 2007.
The
following table provides selected financial data about our company for the
period ended December 31, 2007.
Balance
Sheet Data
December 31,
2007
Cash
and cash equivalents
$
32,668
Total
assets
$
85,839
Total
liabilities
$
43,798
Shareholders’
equity
$
42,041
Our cash in
the bank at December 31, 2007 was $32,668. Net cash provided by financing
activities since inception through December 31, 2007 was $148,165, consisting of
$105,900 raised from the sale of our common stock and $42,265 advanced from an
officer and director.
Plan
of Operation
We are a start-up, development stage
corporation and have not yet generated or realized any revenues from our
business operations. Our plan is to build housing in Costa Rica and market
the units for rent to local residents via classified newspaper advertising and
word of mouth.
In its
report on our September 30, 2007, audited financial statements, our auditors
expressed an opinion that there is substantial doubt about our availability to
continue as a going concern. See Note 1. Our financial statements do
not include any adjustments that may result from the outcome of this
uncertainty. We have been in the development stage and have had no
revenues since inception. For the period from September 14, 2005
(inception) to December 31, 2007, we recorded a net loss of $63,859. Our
continuation as a going concern is dependent on future events, including our
ability to raise additional capital and to general positive cash flows.
Accordingly,
we must raise sufficient capital from sources other than from the rental sales.
Our only other source for cash at this time is investments by others. We must
raise cash to implement our project and stay in business. We raised $74,900 from
our public offering. Under this offering we sold 3,745,000 common shares at
$0.02 per share to independent shareholders, thus we have a total of 5,545,000
shares issued and outstanding. As of December 31, 2007, we had cash on hand of
$32,668. This probably will not enable us to fund operations for the next twelve
months, and we will have to rely on additional loans from our directors, a
second public offering, or a private placement of securities.
We have used
the above-mentioned funds to start to develop our property located in San Jose,
Costa Rica by hiring an architect who has completed the architectural plans for
the two units that we intend to build on our property and eventually rent to the
public.
However, at
this time, Deltron, Inc and its wholly owned subsidiary, Deltron Holding
Corporation SA, has cancelled its contract with the architects, Tropical Design
Group, and suspended negotiations with the construction firm, Trim Studios SA,
in March of 2007 because of the increase in the cost of building materials and
our lack of funds.
14
As such, the
construction phase of our plan has been placed on hold until we are able to
raise additional funds in order to complete construction. If we are
unable to complete the construction phase of our plan because of lack of
funding, we will cease operations until we raise more money. If we cannot or do
not raise more money, we will be forced to cease operations entirely.
We have no
plans or expectations to acquire or sell any plant or significant equipment
during the next 12 months of operations, and do not intend to hire any employees
at this time.
The
development target for Deltron, Inc is to construct two rental units on our
property in San Isidro de Heredia within the next nine months of operations, and
to start generating revenues in the last three months of 2008. However, our
success depends on being able to finance the construction of the units, which
will require us to raise more funds in order to complete.
Management
has discussed the possibility of raising additional funds via additional loans
from our directors, or the sale of additional securities in order to complete
construction, but at this time no firm decision or commitments have been
made.
When and if we build the apartments,
we will advertise them for rent by way of classified newspaper advertising, word
of mouth, and a large billboard sign that we will erect on the front of the
property. We feel that the location of the property, combined with
classified newspaper advertising and a billboard sign
placed on the front of the lot will be an important part to the success
of our business development, acting as an effective way to introduce Deltron and
its product to the public. Our advertising will focus on reasonably priced
rental housing in a desirable area. Special emphasis will be placed on the
“modern” features that come with each apartment including hot water, cable
access, internet, and telephone access.
In order for us to sustain our cash
flow requirements over the next twelve months, we will most likely require
additional outside funding, like a second public offering, a private placement
of securities, or loans from our officers or others. Equity financing
could result in additional dilution to existing shareholders.
If we are unable to meet our needs
for cash, then we may be unable to continue, develop, or expand our
operations.
The
development program for 2006 and 2007 consisted of purchasing a property for the
construction of our rental units and hiring an architect to design two
apartments. The architectural designs have been completed and have been
approved by the College of Architects and Engineers of Costa Rica (a requirement
before plans can be submitted to the city engineering department for approval
and issuance of the construction permits) and we have received the construction
permits from the city of San Isidro de Heredia. However, these
construction permits were never used and they expired in December of 2007.
As such, if we are able to raise enough funds to proceed with the
construction phase of our business plan, we will need to apply once again to the
city of San Isidro de Heredia for the construction permits.
If we are
unable to complete any phase of construction because we do not have enough
money, we will cease operations until we raise more money. If we cannot or do
not raise more money, we will be forced to cease operations. If we cease
operations, we do not know what we will do and we do not have any plans to do
anything.
Any construction done on the property over the course of the next
12 months would be conducted by unaffiliated independent contractors that would
be hired by Deltron Holding Corporation S.A. and/or Deltron, Inc. The
independent contractors will be responsible for the construction, contracting
tradesmen and sub-contractors, as well as the hiring and supervision of the
labor required for the construction.
Limited
Operating History; Need for Additional Capital
There is no historical financial
information about us upon which to base an evaluation of our performance. We are
a development stage corporation and have not generated any revenues from
operations. We cannot guarantee we will be successful in our business
operations. Our business is subject to risks
15
inherent in the establishment of a
new business enterprise, including limited capital resources, possible delays in
the development of our property, and possible cost overruns due to price and
cost increases in services and supplies.
To become profitable and competitive,
we will need to complete the construction of the apartments and find tenants to
rent our units and generate revenues from rental income. We believe that
the funds raised from our public offering may not be sufficient enough for us to
operate for the next 12 months, and that we will need to raise more funds in
order to continue our business.
We have no assurance that future
financing will be available to us on acceptable terms. If financing is not
available on satisfactory terms, we may be unable to continue, develop or expand
our operations. Equity financing could result in additional dilution to existing
shareholders. Currently, we have no financing plans.
Liquidity and Capital
Resources
To meet our need for cash, we raised
$74,900 from our public offering. It now appears that we have not raised
enough money through the public offering in order to stay in business. However,
there is a high probability that we will run out of money before the
construction of the two rental units we intend to build is complete. If
that is the case, we will attempt to raise additional money by way of loans from
officers of the company, and/or sale of additional securities. Additional
equity financing would result in additional dilution to our existing
shareholders.
We have discussed this matter with
our officers and directors, and Mr. Phillips has agreed to advance funds as
needed. However, there is no written agreement with Mr. Phillips to this affect.
The agreement is entirely oral. Mr. Phillips has advanced $42,265 to date. At
the present time, we have not made any arrangements to raise additional cash. If
we need additional cash and cannot raise it, we will either have to suspend
operations until we do raise the cash, or cease operations entirely. The funds
raised in our public offering, together with the loans advanced, will probably
not allow the company to operate for the next 12 months. Other than as described
in this paragraph, we have no other financing plans.
Since inception of the Company on
September 14, 2005, to December 31, 2007, the Company has issued 5,545,000
common shares at $0.01 and $0.02 per share for total proceeds of $105,900. This
was accounted for as an acquisition of shares.
We received a $42,265 loan from Mr.
Phillips, our President. This amount owed to Mr. Phillips is non-interest
bearing, unsecured, and due on demand.
As of the date of this filing, we
have yet to begin operations and therefore have not generated any revenues.
As of December 31, 2007, our total
assets were $85,839 and our total liabilities were $43,798.
Off-Balance Sheet
Arrangements
We have no off-balance sheet
arrangements.
Summary of Significant
Accounting Policies
Going Concern and
Liquidity Considerations
The accompanying
audited consolidated financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates, among other
things, the realization of assets and satisfaction of liabilities in the normal
course of business. As at December 31, 2007, the Company had a working
capital deficiency of $1,130 and an accumulated deficit of $63,859. The
Company intends to fund operations through equity financing arrangements, which
may be insufficient to fund its capital expenditures, working capital and other
cash requirements for the year ending September 30, 2008.
16
The ability of the
Company to emerge from the development stage is dependent upon, among other
things, obtaining additional financing to continue operations, and development
of its business plan.
In response to these
problems, management intends to raise additional funds through public or private
placement offerings.
These factors, among
others, raise substantial doubt about the Company’s ability to continue as a
going concern. The accompanying audited consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Basis of
Consolidation
These consolidated
financial statements presented are those of the Company and its wholly-owned
subsidiary, Deltron Holdings Corporation S.A. All intercompany balances
and transactions have been eliminated.
Basis of
Presentation
The accounting and reporting policies
of the Company conform to U.S. generally accepted accounting principles (US
GAAP) applicable to development stage companies.
Use of
Estimates
The preparation of
financial statements in conformity with United States generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The Company’s
periodic filings with the Securities and Exchange Commission include, where
applicable, disclosures of estimates, assumptions, uncertainties and markets
that could affect the financial statements and future operations of the
Company.
Cash and Cash
Equivalents
Cash and cash
equivalents include cash in banks, money market funds, and certificates of term
deposits with maturities of less than three months from date of purchase, which
are readily convertible to known amounts of cash and which, in the opinion of
management, are subject to an insignificant risk of loss in value.
Asset Retirement
Obligations
The Company has adopted
Statement of Financial Accounting Standards (“SFAS”) No. 143,
"Accounting for
Asset Retirement Obligations"
. SFAS No. 143 requires entities to
record the fair value of a liability for an asset retirement obligation in the
period in which it is a cost by increasing the carrying amount of the related
long-lived asset.
Over time, the
liability is accreted to its present value, and the capitalized cost is
depreciated over the useful life of the related obligation for its recorded
amount or incurs a gain or loss upon settlement.
Fair Value of
Financial Instruments and Derivative Financial Instruments
The Company has adopted
Statement of Financial Accounting Standards (“SFAS”) Number 119,
“Disclosure
About Derivative Financial Instruments and Fair Value of Financial
Instruments”.
The carrying amounts of cash and cash equivalents,
accounts payable and amount due to related party approximate their fair values
because of the short maturity of these items. Certain fair value estimates
may be subject to and involve, uncertainties and matters of significant
judgment, and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect these estimates. The Company does
not hold or issue financial instruments for trading purposes, nor does it
utilize derivative instruments in the management of its foreign exchange,
commodity price or interest rate market risks.
Segment
Reporting
SFAS Number 131,
“Disclosure About Segments of an Enterprise and Related Information”
,
changed the way public companies report information about segments of their
business in their quarterly reports
17
issued to shareholders.
It also requires entity-wide disclosures about the products and services
an entity provides, the material countries in which it holds assets and reports
revenues and its major customers. The Company presently operates only in
Costa Rica.
Income Taxes
Deferred income taxes
are reported for timing differences between items of income or expense reported
in the financial statements and those reported for income tax purposes in
accordance with SFAS Number 109,
“Accounting for Income Taxes”
, which
requires the use of the asset/liability method of accounting for income taxes.
Deferred income taxes and tax benefits are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, and for tax loss and credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The Company provides for deferred taxes for the
estimated future tax effects attributable to temporary differences and
carryforwards when realization is more likely than not.
Earnings (Loss) per
Share
The Company has adopted
Financial Accounting Standards Board (“FASB”) Statement Number 128,
“Earnings
per Share,”
(“EPS”) which requires presentation of basic and diluted EPS on
the face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted EPS
computation. In the accompanying financial statements, basic loss per
common share is computed by dividing net loss by the weighted average number of
shares of common stock outstanding during the period.
Risks and
Uncertainties
The Company operates in
the real estate development and property rental industry that is subject to
significant risks and uncertainties, including financial, operational,
technological and other risks associated with operating a real estate
development and property rental business, including the potential risk of
business failure.
Comprehensive Income
(Loss)
SFAS No. 130,
“Reporting Comprehensive Income”, establishes standards for reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. From inception (September 14, 2005)
to December 31, 2007, the Company had no items of other comprehensive income.
Therefore, net loss equals comprehensive loss from inception (September
14, 2005) to December 31, 2007.
Foreign Currency
Translations
The Company’s
functional currency is the Costa Rican Colone. The Company’s reporting currency
is the U.S. dollar. All transactions initiated in Costa Rican Colones are
translated into U.S. dollars in accordance with SFAS No. 52 "Foreign Currency
Translation" as follows:
i)
Monetary assets and liabilities at the rate of exchange in effect
at the balance sheet date;
ii)
Equity at historical rates; and
iii)
Revenue and expense items at the average rate of exchange
prevailing during the period.
Adjustments arising
from such translations are deferred until realization and are included as a
separate component of stockholders’ equity (deficit) as a component of
comprehensive income or (loss). Therefore, translation adjustments are not
included in determining net income (loss) but reported as other comprehensive
income (loss).
For foreign currency transactions, the Company translates these
amounts to the Company’s functional currency at the exchange rate effective on
the invoice date. If the exchange rate changes between the time of
purchase and the time actual payment is made, a foreign exchange transaction
gain or loss
18
results which is included in determining net income (loss) for the
period. No significant realized exchange gains or losses were recorded since
September 14, 2005 (inception) to December 31, 2007.
Revenue
Recognition
The Company recognizes
revenue from the sale of products and services in accordance with the Securities
and Exchange Commission Staff Accounting Bulletin No. 104 (“SAB 104”),
“Revenue Recognition in Financial Statements.”
Revenue will consist
of rental income and will be recognized only when all of the following criteria
have been met:
i)
Persuasive evidence for an agreement exists;
ii)
Delivery has occurred;
iii)
The
fee is fixed or determinable; and
iv)
Revenue is reasonably assured.