EX-99.1 2 nascent_8ka1-ex9901.txt 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. -17- 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. -18-