EXHIBIT 99

 

Vargas Graf y Cía., S.C.

C o n t a d o r e s  P ú b l i c o s  y  C o n s u l t o r e s

 

 

 

 

 

 

 

FLEXO UNIVERSAL, S. DE R.L. DE C.V.

 

INDEPENDENT AUDITOR’S REPORT

AS OF DECEMBER 31 2017 AND 2016

 

 

 

 

 

 

 

 

 

 

 

Santa Rita Nº1110 Col. Chapalita Oriente, Zapopan Jalisco, México C.P. 45040

Teléfonos: +3647-2715, 3647-2732, 36472752 Facsímile: +3647-2728 E-mail vghlbgdl@vinet.com.mx

HLB Vargas Graf y Cía., S.C. is a member of HLB International. A world-wide organization of accounting firms and business advisers

 

 

FLEXO UNIVERSAL, S. DE R.L. DE C.V.

 

 

I N D E X

 

 

 

 

1.-	Independent Auditors’ Report.

 

 

2.-	Balance Sheet.

 

 

3.-	Statement of (Loss) Income.

 

 

4.-	Statements of Changes in Stockholders’ Equity.

 

 

5.-	Statement of Cash Flow.

 

 

6.-	Notes to the financial statements.

 

 

 

Vargas Graf y Cía., S.C.

C o n t a d o r e s  P ú b l i c o s  y  C o n s u l t o r e s

 

 

Report of Independent Registered Public Accounting Firm

 

 

To the Stockholders and Board of Directors of

Flexo Universal, S. de R.L de C.V.

 

We have audited the accompanying balance sheets of Flexo Universal, S de R.L. de C.V. as of December 31 2017 and 2016, and the related statement of operations, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

 

We draw attention to Note 2 of the financial statements, which describes the basis of accounting. The financial statements are prepared according to Financial Reporting Standards Applicable Mexico (FRS), which is a basis of accounting other than accounting principles generally accepted in the United States of America. Our opinions are not modified with respect to this matter.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Flexo Universal, S. de R.L. de C.V., as of December 31 2017 and 2016 and the results of their operations and their cash flows for the years then ended, in conformity with the basis of accounting described above.

 

HLB Vargas Graf y Cía., S.C

Zapopan, Jalisco, México C. Cp, 45040

 

 

C.P.C. Antonio Vargas Aceves

Certified Public Accountant

Partner

 

March 10, 2018

 

 

Santa Rita Nº1110 Col. Chapalita Oriente, Zapopan Jalisco, México C.P. 45040

Teléfonos: +3647-2715, 3647-2732, 36472752 Facsímile: +3647-2728 E-mail vghlbgdl@vinet.com.mx

HLB Vargas Graf y Cía., S.C. is a member of HLB International. A world-wide organization of accounting firms and business advisers

 

 

FLEXO UNIVERSAL, S. DE R.L. DE C.V.

BALANCE SHEET AS OF DECEMBER 31, 2017 AND 2016

( In Mexican pesos )

(Notes 1 & 2)

 

		2017				2016
CURRENT ASSETS:
Cash and cash equivalents		$	2,003,060			$	2,547,910
Accounts receivables			54,676,979				50,151,684
Other accounts receivables (Note 3)			14,217,622				7,342,727
Related parties (Note 4)			8,449,815				24,194,424
Inventories (Note 5)			91,057,607				81,369,237
Total current assets			170,405,083				165,605,982
NON CURRENT ASSETS:
Machinery and equipment (Note 6)			8,720,226				5,177,005
Warranty deposits			5,606,407				7,553,011
Other assets			603,854				1,427,526
Deferred income tax (Note 14)			240,032				370,828
Other deferred assets (Note 10 )			4,724,583				6,679,583
Total non current assets			19,895,102				21,207,953
TOTAL ASSETS		$	190,300,185			$	186,813,935
CURRENT LIABILITIES
Accounts payable to suppliers, accrued expenses and other accounts payable (Note 7)		$	47,737,049			$	47,588,267
ISR payable			759,831				636,463
PTU reserve			-				62,641
Current portion of long term liabilities to related parties (Note 8)			12,350,881				12,609,416
Total current liabilities			60,847,761				60,896,787
LONG TERM LIABILITIES
Long term liabilities to related parties (Note 8)			801,461				969,916
Total long term liabilities			801,461				969,916
DEFERRED LIABILITIES
Deferred Sales (Note 10 )			8,333,333				11,781,609
TOTAL LIABILITIES			69,982,555				73,648,312
STOCKHOLDERS' EQUITY
Capital stock (Note 11 )			47,410,945				47,410,945
Legal Reserve			3,469,959				3,070,607
Accumulated results			62,284,719				54,697,026
Period's net (loss) profit			7,152,007				7,987,045
TOTAL STOCKHOLDERS' EQUITY			120,317,630				113,165,623
Contingencies (Note 13)			-				-
TOTAL LIABILITIES AND STOCKHOLDERS' EQUTIY		$	190,300,185			$	186,813,935

 

The enclosed notes are an integral part of these financial statements

 

 

FLEXO UNIVERSAL, S. DE R.L. DE C.V.

STATEMENT OF OPERATIONS FOR THE YEARS ENDED

DECEMBER 31, 2017 AND 2016

( In Mexican pesos )

 

		2017				2016
Net sales		$	194,580,035			$	171,958,227
Cost of products sold			(158,759,837	)			(136,572,984	)
GROSS PROFIT			35,820,198				35,385,243
Operating expenses
Administration and sales expenses			(23,792,888	)			(21,625,400	)
Other income, (expenses) - net			432,950				(162,252	)
			(23,359,938	)			(21,787,652	)
OPERATION NET PROFIT			12,460,260				13,597,591
INTEGRAL FINANCING RESULTS
Exchange rate fluctuations - net			(517	)			2,294,504
interest - net			(2,032,237	)			(1,446,363	)
			(2,032,754	)			848,141
PROFIT BEFORE INCOME TAXES AND EPS			10,427,506				14,445,732
Income tax			(3,144,703	)			(6,062,120	)
Deferred income tax			(130,796	)			(396,567	)
			(3,275,499	)			(6,458,687	)
NET PROFIT		$	7,152,007			$	7,987,045

 

The accompanying notes are an integral part of these financial statements

 

 

FLEXO UNIVERSAL, S. DE R.L. DE C.V.

STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

( In Mexican pesos )

 

		2017				2016
CAPITAL STOCK
Initial and final period balance			47,410,945				47,410,945
LEGAL RESERVE
Initial period balance			3,070,607				2,199,375
Transfer from accumulated results (Note 12)			399,352				871,232
Final period balance			3,469,959				3,070,607
ACCUMULATED RESULTS
Initial period balance			54,697,026				38,143,641
Transfer from net profit (loss)			7,987,045				17,424,617
Transfer of 5% over profit period 2012, to legal reserve			(399,352	)			(871,232	)
Final period balance			62,284,719				54,697,026
NET PROFIT (LOSS)
Initial period balance			7,987,045				17,424,615
Transfer to accumulated results			(7,987,045	)			(17,424,615	)
Net profit			7,152,007				7,987,045
Final period balance			7,152,007				7,987,045
TOTAL		$	120,317,630			$	113,165,623

 

The accompanying notes are an integral part of these financial statements

 

 

FLEXO UNIVERSAL, S. DE R.L. DE C.V.

CASH FLOW STATEMENT

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

( In Mexican pesos )

 

		2017				2016
OPERATING ACTIVITIES:
Net profit		$	7,152,007			$	7,987,045
Items related with investment activities
Depreciation			1,672,849				1,685,901
Items related with financing activities
Interest			2,032,237				1,446,363
			10,857,093				11,119,309
Trade debtors and other receivables (increase) decrease			4,344,419				1,895,469
Inventories increase			(9,688,370	)			(23,261,657	)
Other assets (increase) decrease			4,856,072				(10,803,331	)
Assets, Liabilities to related parties increase (decrease)			(258,535	)			565,134
Suppliers and other liabilities (decrease) increase			86,141				10,759,659
Deferred Sales			(3,448,276	)			11,781,609
Taxes paid			123,366				3,136
Net cash flow from financial activities			6,871,910				2,059,328
INVESTING ACTIVITIES:
Machinery and equipment acquisition (net)			(5,216,070	)			(287,950	)
			(5,216,070	)			(287,950	)
FINANCING ACTIVITIES:
Long term liabilities to related parties			(168,455	)			(149,865	)
Paid interest			(2,032,237	)			(1,446,363	)
			(2,200,692	)			(1,596,228	)
INCREASE IN CASH AND CASH EQUIVALENTS		$	(544,852	)		$	175,150
Cash and cash equivalents at beginning of year		$	2,547,910			$	2,372,760
Cash and cash equivalents at end of year		$	2,003,058			$	2,547,910

 

The accompanying notes are an integral part of these financial statements

 

 

NOTES TO FINACIAL STATEMENTS

FLEXO UNIVERSAL, S. DE R.L. DE C.V.

As of December 31^st, 2017 and 2016

In Mexican pesos.

 

NOTE 1 – COMPANY DESCRIPTION:

 

Flexo Universal S. de R.L. de C.V., (FLEXO) was constituted on 2002. Subsidiary of CTI Industries INC, a North American company that owns 99.8269% of its capital stock.

 

Its main activity is the production of latex and mylar balloons; this operation is performed under the shelter of its parent company that finances its operations.

 

On August 28, 2015 by unanimous vote of shareholders, Flexo Universal was transformed to a Limited Liability Company with Variable Capital (S de RL de CV).

 

NOTE 2 – MAIN ACCOUNTING POLICIES

 

a.

Basis for presentation

 

The significant accounting policies adopted by the company are in accordance with the Financial Reporting Standards in Mexico (FRS) and Interpretations to the Financial Reporting Standards (IFRS).

 

Those Standards (FRS), may differ from accounting principles generally accepted in the United States of America (US GAAP). However, under an analysis of similarities, convergences and important differences between the two standards with respect to the operations recorded that generate the financial information of the Company, we can conclude that there are no differences that could lead to material adjustments and alter that information

 

b.

Estimates and assumptions

 

The preparation of financial statements in accordance with Mexican financial reporting standards requires the company's management to make certain estimates and provisions that may affect the value of some assets and liabilities at the date of the balance sheet, as well as the value and measurement of revenues, costs and expenses during the reported period. Even if the final result of these estimates and provisions may differ from the calculated, management believes that those were appropriate used to the circumstances.

 

c.

Monetary unit

 

Per Mexican laws, Financial Statements are prepared in Mexican pesos ($).

 

d.

Cash and equivalents

 

Mainly represented by deposits in bank accounts.

 

e.

Accounts receivable and estimation for allowance for doubtful accounts

 

Represent collection right originated from inventory sales. Accounts in foreign currency are valuated at the year closing exchange rate.

 

Estimates for doubtful collection accounts represent the inherent probable loss of all receivables due to the behaviour of historic tendencies of the accounts receivable. Since 2009 the company has issued a provision to absorb the uncollectible accounts.

 

 

f.

Inventories

 

Inventories of finished goods, production in process and raw materials, are recorded at its historic acquisition and production cost using the absorbing cost system. The acquisition cost includes all associated expenses to get the inventories ready to be sold. Inventories are valued at the average cost method net from the estimates which does not exceed their realization value.

 

g.

Machinery and equipment

 

Fixed Assets acquired from the fusion, were recorded at the historic cost of the absorbed company, adding the difference from the valuation determined by an independent appraiser on 17^th, 1996. Fixed assets acquisitions after the fusion are recorded at its acquisition cost.

 

Acquisition costs include all associated expenses to get the fixed assets ready to be used.

 

Depreciation is computed by the straight-line method, beginning the year in which assets are used, and according to the following rates:

 

		Rates %
Leasehold improvements			10.00
Molds			20.00
Computer equipment			30.00
Machinery and office equipment			10.00
Tools and medical equipment			35.00
Transport equipment			25.00
Forklift			25.00

 

 

h.

Long lived assets evaluation

 

Impairment of long term assets – As of January 1°, 2004 The C-15 Bulletin “Impairment in the value of long lasting assets and its disposal” became effective. This bulletin requires that companies evaluate the effect of impairment in long lasting assets in use. In opinion of the Company’s management, there are no traces of impairment that could have an effect in the results, in accordance with the Bulletin.

 

i.

Income tax

 

The current income tax is determined according to current tax legislation. The deferred income tax is recorded in accordance with the asset and liability method, which compares its accounting and tax values of them. Deferred tax are recognized (assets and liabilities) for future tax consequences attributable to temporary differences between the values reflected in the financial statements of existing assets and liabilities and their respective tax bases, and for tax loss carry forwards and tax credits not used. The assets and liabilities of deferred tax are calculated using the rates established in the law that will be applied to taxable income in years when it is estimated that the temporary differences will reverse. The effect of changes in tax rates on deferred taxes is recognized in the results of the period in which those changes are approved. The deferred tax asset is recorded only when there is a high probability of recovery. As of January 1°, 2008 this FRS was modified. The main changes are:

 

●

Caused and deferred Employee Profit Sharing (PTU).- This is now considered an ordinary expense based on the benefits to employees. That is the reason why it is now classified in the results statement in other income and expenses.

 

 

●

Cumulative Effect of Income Tax -- The previous bulletin stated that this component will be presented separately in equity. The change consists to reclassify this concept to cumulative results.

 

j.

Liabilities

 

The Company applies the dispositions of FRS C-9 “Liabilities, provisions, contingent assets and liabilities and commitments”. Bulletin C-9 establishes the valuation, presentation and disclosure, general rules of liabilities provisions, contingent assets and liabilities.

 

k.

Labor liabilities

 

As of February 2014, the Company’s management decided to outsource payroll services through the figure "Outsourcing".

 

l.

Recognition of revenue

 

Revenue is recognized in the period in which the risks and benefits of inventory are transferred to customers who acquire them, which generally occurs when these inventories are delivered and the corresponding invoice is prepared

 

m.

Foreign currency operations

 

Foreign currency operations are accounted at the exchange rate of the day of their occurrence. Assets and liabilities in foreign currency are registered in Mexican pesos at the exchange rate published by the Central Bank (Banco de Mexico) at the date of the financial statements. Exchange rate differences in assets and liabilities in foreign currency are registered in the year’s result.

 

n.

Leasing

 

The company classifies as operating leases the operations where the use or possession of the leased assets is granted without assuming the risks or benefits of such assets. These rents are applied to the results in the period of the lease. Variable rents are applied to results as they are accrued.

 

o.

Income statement

 

Income statements are classified by its operative activities. According to the company’s opinion; this classification allows evaluating the result of its operations identifying the cost of goods sold and administrative and sales expenses.

 

p.

Integral Financial Result (RIF)

 

The RIF includes net accrued interests, exchange rate profit (loss), monetary position gain (loss) and derivate financial instruments profit (loss).

 

Exchange rate profit (loss) originated by transactions in foreign currency, is the result of exchange rates fluctuations at the date of the operation registry, at the date of realization or at the period end valuation.

 

 

NOTE 3 – OTHER ACCOUNTS RECEIVABLE

 

As of December 31^st, 2017 and 2016, the other accounts receivable are integrated as follows:

 

		2017				2016
Sundry debtors		$	-			$	728,913
Other Collective taxes			5,016,275				1,067,014
Creditable VAT			9,201,347				5,546,801
		$	14,217,622			$	7,342,728

 

NOTE 4 – RELATED PARTIES

 

Following a summary of the operations with related parties which originate the balances with related parties as of December 31^st, 2017 and 2016 is presented:

 

		2017				2016
Goods Sold:
CTI Industries Corporation		$	17,409,694			$	18,598,078
CtTI Balloons Limited			1,845,589				11,227,994
CTI Europe BMBH			442,895				289,646
Inventory Purchases:
CTI Industries Corporation		$	9,593,816			$	8,356,587
Interest paid
CTI Industries Corporation		$	269,287			$	268,012

 

Accounts receivable and (payable) to related parties are:

 

		Receivable- (Payable)
		Net balances
		2017				2016
CTI Industries Corporation		$	8,850,467			$	15,801,426
Pablo Gortazar de Oyarzabal			(102,946	)			258
CTI Balloons Limited			1,170,672				9,588,450
CTI Europe GMBH			-				353,360
Venture Leasing, S. de R.L. de C.V.			(1,468,378	)			(1,549,071	)
		$	8,449,815			$	24,194,424

 

For the year 2017 the company has with transfer pricing study for transactions with related parties where such operations must be comparable to those used in/or arm's-length transactions.

 

NOTE 5 – INVENTORIES

 

The balance of this account is integrated as follows:

 

		2017				2016
Finished goods		$	76,599,997			$	67,776,881
Packing material			4,480,841				2,974,084
Production in process			3,018,840				4,401,300
Raw materials			6,957,929				6,216,972
		$	91,057,607			$	81,369,237

 

 

NOTE 6 – MACHINERY AND EQUIPMENT

 

This item is analysed follows:

 

		2017				2016
Machinery		$	27,668,134			$	26,233,044
Leasehold improvements			3,003,934				3,003,934
Molds			5,678,140				5,678,140
Computer equipment and softwere			1,016,014				896,000
Transport equipment			297,273				297,273
Furniture and office equipment			547,984				547,984
			3,686,573				-
			41,898,052				36,656,375
Depreciations and amortizations			(33,177,826	)			(31,479,370	)
Total Machinery and equipment		$	8,720,226			$	5,177,005

 

The depreciation and amortization methods and the annual rates are stated in note 2g. The charge to results amounted $1’672,849. and $1,685,901. for the periods ended on December 31^st, 2017 and 2016 respectively.

 

Leasehold agreement

 

The company celebrated a leasehold agreement with Cuauhtemoc Inmobiliaria S.A. de C.V., for the building and facilities where it is located, both plant and administrative offices. This agreement establishes that the term of the leasehold is of mandatory 5 years. This agreement takes place since March 1st, 2017 and ends on February 28th, 2022.

 

The charge to results amounted $5’544,473. and $5,037,536. for the years ended on December 31^st, 2017 and 2016 respectively.

 

 

NOTE 7 – OTHER ACCOUNTS PAYABLE

 

 

Some items presented in the Balance Sheet are analysed as follows, as of December 31^st.

 

		2017				2016
Accounts payable to suppliers, accrued expenses and other accounts payable:
Suppliers		$	39,519,686			$	42,733,682
Sundry creditors			7,240,759				4,253,689
Rated reserves			940,631				539,862
Taxes payable			35,973				61,033
		$	47,737,049			$	47,588,267

 

 

NOTE 8 – LONG TERM LIABILITIES TO RELATED PARTIES

 

		2017				2016
CTI Industries
Term promissory note
The note issued in favor of CTI Industries Corporation that redocuments the amounts that Flexo Universal, S. de R.L., of C.V., owed on December 31, 2013 to CTI Industries Corporation, which includes $ 68,669. US dollars for principal and interest accrued $ 502,545. as of December 31, 2013 and $ 516,827 as of December 31, 2014. Such document will be payable as of March 31, 2014 and subsequently on the first day of each calendar quarter until the debt is fully settled. The stipulated interest rate is 2.5% per annum, in case of default, a rate of 8% per annum will be established at the creditor's discretion.			12,401,139				12,661,926
Current portion of long term liabilities			(12,401,139	)			(12,661,926	)
Loans current account 2014
Undocumented loans current account totaling $ 55.817 US dollars, without interest and agreed term			1,101,571				1,150,913
Current portion of long term liabilities			(1,101,571	)			(1,150,913	)
Loans current account 2015
Undocumented loans current account totaling $ 39,000. US dollars, without interest and agreed term			769,681				804,157
Current portion of long term liabilities			(769,681	)			(804,157	)
Loans current account 2016
Undocumented loans current account totaling $ 97,363. US dollars, without interest and agreed term			(1,921,510	)			(2,007,579	)
Current portion of long term liabilities			1,921,510				2,007,579
Pablo Gortazar
Loan made by PABLO GORTAZAR to liquidate CTF INTERNATIONAL's financing amounted $980,704 Mexican Pesos.			801,461				969,916
Loan made by PABLO GORTAZAR to liquidate CREDIT UNION's fiancincing amounted $776,070 Mexican pesos, with an interest annual rate LIBOR +.25 points
			13,152,342				13,579,333
Total long term liabilities to related parties			(12,350,881	)			(12,609,417	)
Total current portion of long term liabilities		$	801,461			$	969,916

 

 

NOTE 9 – POSITION AND TRANSACTION IN FOREING CURRENCY

 

As of December 31^st, 2017 and 2016, the company had rights and (obligations) in foreign currency as follows:

		US Dollars
		2017				2016
Assets		$	1,492,747			$	2,094,585
Liabilities			(1,807,644	)			(1,785,669	)
Excess of assets over (liabilities), assets in foreign currency		$	(314,897	)		$	308,916

 

 

Assets where translated and adjusted using the exchange rate $ 19.7354 and $ 20.6194 pesos per US dollar, as of December 31^st, 2017 and 2016 respectively. As of march 08 the exchange rate is $18.7922 pesos per dollar.

 

 

NOTE 10 – DEFERRED ASSETS AND LIABILITIES

 

In June 3rd, 2016 Flexo Universal, S. de R.L. de C.V., sold a latex machine to Unifin Financiera SAB de CV SOFOM de ENR in $13´793,103.45 MXN pesos plus VAT. It is cost of sales was $7,500,000.00 MXN pesos.

 

Unifin leases the same machine to Flexo. The term of the leasing agreement is 4 years, becoming effective on July, 2016 and concluding on June, 2020.

 

The profit generated in this transaction was deferred according to the terms of the leasing agreement in 48 months since June, 2016. Monthly amounts are:

 

Income		$	287,356.32
Cost of sale		$	156,250.00
Profit		$	131,106.32

 

During fiscal year 2017 and 2016, twelve and seven months were recognized respectively in the results of those years, with the following balances as of December 31, 2017 to be applied to income and future costs:

 

 

		Income deferred				Cost deferred				Profit deferred
Initial balance			13,793,103.45				- 7,500,000.00				6,293,103.45
Applied in 2016			- 2,011,494.25				1,093,750.00				- 917,744.25
Applied in 2017			- 3,448,275.84				1,875,000.00				- 1,573,275.84
Final balance			8,333,333.36				- 4,531,250.00				3,802,083.36

 

 

NOTE 11 – CONTRIBUTED CAPITAL

 

The company’s capital stock integrated as follows as of December 31^st, 2017 and 2016:

 

		2017				2016
Fixed capital stock		$	50,000			$	50,000
Variable capital stock			47,360,945				47,360,945
Total capital stock		$	47,410,945			$	47,410,945

 

The company’s capital stock is variable, with a fixed minimum of $50,000 without the possibility of retirement. The variable part has not limit.

 

 

Until August 31, 2015, the share capital was represented by common, nominative shares since the transformation of society in a Limited Liability Company with Variable Capital (1 September 2015). The capital is represented by Social Parties integrated and valued as follows:

 

Social Parties
Class I							Class II
Number of parts			Value				Number of parts				Value
1			$	49,999				1			$	47,278,870
1				1				1				61,154
								1				20,921
2			$	50,000				3			$	47,360,945

 

NOTE 12 – EARNED (LOSS) SURPLUS:

 

Legal reserve

 

According to the General Law of Mercantile Societies, 5% of the fiscal year’s net profits should be kept to form the legal reserve until it     reaches 20% of the capital stock. The legal reserve may be capitalized but not distributed unless the society is dissolved, and must be replenished when it decreases for any reason.

 

 

NOTE 13 – CONTINGENCIES:

 

Transfer pricing. - For related party transactions, tax differences could arise if the tax authority when reviewing such operations considers that the prices and amounts used by the company are not comparable to those used with or between independent parties in comparable operations.

 

Review by the tax authorities.- According to current tax legislation, the authorities are entitled to examine up to five fiscal years prior to the last income tax return submitted.

 

 

NOTE 14- INCOME TAX (IT), CORPORATE FLAT TAX RATE :

 

Cost (benefit) of the tax applied to result is integrated as follows:

 

		2017				2016
ISR payable		$	3,144,703			$	6,062,120
Deferred ISR			130,796				396,567
Net		$	3,275,499			$	6,458,687

 

 

a.

IT.-The main differences between the accounting profit and the tax result are:

 

		2017				2016
Net (Loss) profit		$	7,152,007			$	6,191,227
Plus (minus)
Excess of accounting depreciation net over the fiscal depreciation			263,217				584,886
Excess of accounting deductions net over the fiscal deductions			3,067,118				13,430,955
Fiscal (loss) profit			10,482,342				20,207,068
Minus employee profit sharing (PTU) paid in 2015 and 2014			-				-
Tax basis to IT			10,482,342				20,207,068
Rate			0.30				0.30
IT payable (ISR)		$	3,144,703			$	6,062,120

 

As December 31^st, 2017 and 2016 temporary differences and fiscal losses carry forward recognized by the company on the deferred IT calculations are:

 

		2017				2016
Year effect calculation:
Deferred expenses		$	4,475,836			$	7,863,805
Guarranty deposits			2,586,210				3,620,690
Net machinary and equipment			471,182				(876,337	)
Deferred liabilities			(8,333,334	)			(11,781,609	)
Liabilities			-				(62,641	)
Base			(800,106	)			(1,236,092	)
Tax Rate			0.30				0.30
			(240,032	)			(370,828	)
Recognized			(370,828	)			(767,395	)
Complement		$	130,796				396,567

 

NOTE 15 - NEW ACCOUNTING PRONOUNCEMENTS.

 

The Mexican Council for Research and Development of Financial Reporting Standards (CINIF), an independent body in charge of the development of the Mexican Accounting Standards, has made public the submission of the following FRS (Financial Reporting Standards) listed below:

 

Standards and Interpretation of Standards 2018

 

●

Improvements to FRS 2018

●

Clarifications to FRS D-1, Revenues from contracts with Clients

●

Clarifications to FRS D-2, Costs from contracts with Clients

 

The clarifications will be effective as of January 1, 2018, as part of the indicated standards.

 

Standards on following years

 

●

D-5, Leasings

 

This FRS, will become effective on January 1°, 2019, allowing its advanced application in the terms established in each FRS.

 

Is important to note that the use of FRS increases the quality of the financial information contained in the financial statements, thus ensuring their greater acceptance, not only nationally, but also internationally.

 

 

NOTE 16 -.APPROVAL OF THE ISSUANCE OF THE FINANCIAL STATEMENTS.

 

The financial statements were authorized for issue, by Pablo Gortazar de Oyarzabal, General Manager and Legal Representative, and subject to the approval of the general assembly of partners of the Company who may decide its modification in accordance with the provisions of the General Law of Commercial Societies.

 

 

The accompanying explanatory notes are an integral part of the financial statements.

 

 

 

Flexo Universal, S. de R.L. de C.V.

 

 

 

_____________________________

Lic. Pablo Gortazar de Oyarzabal

Legal Representative

 

 

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