Business Context and Reporting Period
Company: International Surf Resorts, Inc. (Note: Metadata listed "Cocrystal Pharma" is incorrect; the filing is for International Surf Resorts, Inc.)
Reporting Period: Quarter and six months ended June 30, 2009.
Status: Development Stage Company.
Operations: The Company is an internet-based provider of international surf resorts and tours. It owns 55% of ISR de Mexico, which holds 2.5 acres of land in San Juanico, Baja California Sur, Mexico, intended for a surf camp. The Company has generated no revenue since inception (December 4, 2006).
Key Financial Metrics
| Metric | Six Months Ended June 30, 2009 | Six Months Ended June 30, 2008 |
|---|---|---|
| Net Revenue | $0 | $0 |
| Total Operating Expenses | $25,068 | $37,573 |
| Net Loss (Attributable to ISRI) | $(24,535) | $(35,537) |
| Net Loss Per Share (Basic/Diluted) | $(0.01) | $(0.01) |
| Cash and Cash Equivalents (End of Period) | $48,747 | $85,142 |
| Total Assets | $120,814 | $137,203 |
| Total Liabilities | $49,510 | $41,859 |
| Stockholders' Equity | $73,078 | $96,713 |
Liquidity: Cash decreased by approximately $25,841 during the six-month period. The Company has no long-term debt but carries accounts payable of $49,510.
Material Changes vs. Prior Period
- Expense Reduction: Total operating expenses decreased by $12,505 (33%) compared to the prior six-month period. This was driven primarily by a reduction in legal and professional fees (down $6,412) and general and administrative expenses (down $6,315), attributed to lower costs associated with becoming a public company in 2008.
- Net Loss Improvement: Net loss attributable to ISRI decreased by $11,002 compared to the prior period due to the reduction in operating expenses.
- Asset Acquisition: The Company purchased a wood house in Bali for $5,200 as part of a pilot program to assess the feasibility of a surf resort there. This is reflected in the increase in property and equipment.
- Cash Position: Cash on hand declined from $74,588 at year-end 2008 to $48,747 at June 30, 2009, due to operating cash outflows and investing activities.
Outlook, Risks, and Management Commentary
- Going Concern: Management explicitly states that available funds will not satisfy working capital requirements for the next twelve months. The Company has incurred a cumulative net loss of $139,022 since inception and requires additional debt or equity financing to continue operations.
- Capital Needs: The Company estimates it needs approximately $5,000 to complete website development and additional capital to market services and develop the Mexico property. It has experienced significant difficulties raising capital due to tightening credit markets.
- Strategic Plan:
- Mexico: Assessing feasibility of building "surf casas" (vacation rentals) or subdividing the land for sale.
- Bali: Launched a pilot program in June 2009; purchased a house for $5,200 and leased land for $400/month. Planning to assess leasing a larger plot for multiple houses.
- Website: Continuing development to attract customers.
- Risks: Failure to generate revenue or secure additional funding could lead to business failure. There is no assurance that officers or shareholders will contribute funds to cover expenses.
- Internal Controls: While management concluded disclosure controls were effective as of June 30, 2009, they previously reported ineffective internal controls over financial reporting due to a lack of segregation of duties. Compensating procedures have been applied.
Investor Verification Checklist
- Capital Adequacy: Verify the Company's ability to secure the necessary financing to survive the next 12 months, given the explicit "Going Concern" warning.
- Asset Valuation: Confirm the status and valuation of the real property in Mexico ($61,335) and the Bali pilot property ($5,200), as these represent the majority of assets with no current revenue generation.
- Related Party Transactions: Review the $900 rent expense recorded for office space provided by a director at no charge, ensuring fair value estimates are reasonable.
- Revenue Timeline: Assess the realistic timeline for generating revenue from the Mexico and Bali projects, as the Company has had zero revenue since 2006.
- Shareholder Commitments: Determine if there are any binding commitments from officers or directors to fund future operations, as the filing states they are not currently committed.