COCP

Business Context and Reporting Period

Company: International Surf Resorts, Inc. (Note: Metadata listed "Cocrystal Pharma" is incorrect; filing is for International Surf Resorts, Inc.)
Reporting Period: Quarter and nine months ended September 30, 2009.
Status: Development Stage Company. The entity has generated no revenue since inception (December 4, 2006).
Operations: Internet-based provider of surf resorts and tours. Owns 55% of ISR de Mexico, holding 2.5 acres in San Juanico, Baja California Sur, Mexico, intended for a surf camp. Recently launched a pilot program in Bali involving a leased property.

Key Financial Metrics

Debt & Liquidity: No long-term debt. Current liabilities consist entirely of accounts payable and accrued expenses ($52,115). Working capital is negative ($2,119).

Material Changes vs. Prior Period

• Expense Reduction: Operating expenses decreased significantly compared to the prior year periods. For the nine months ended September 30, 2009, expenses were $31,997 versus $46,831 in the prior year. This was driven by a reduction in legal and professional fees ($25,388 vs. $36,164) and general and administrative expenses ($2,482 vs. $7,425).
• Net Loss Improvement: Net loss attributable to ISRI decreased to $(30,666) for the nine months ended September 30, 2009, compared to $(44,301) in the prior year.
• Asset Acquisition: Purchased a wood house in Bali for $5,200 as part of a pilot program. Property and equipment increased from $732 (Dec 31, 2008) to $5,680 (Sep 30, 2009).
• Cash Position: Cash decreased from $74,588 at year-end 2008 to $46,229 at September 30, 2009, due to operating cash outflows of $22,027 and investing outflows of $6,332.

Outlook, Risks, and Management Commentary

• Going Concern: Management explicitly states that available funds ($46,229) will not satisfy working capital requirements for the next twelve months. Additional financing is required to continue operations.
• Capital Needs: The company anticipates needing approximately $5,000 to complete website development and additional capital to market services and develop the Mexico property. They have experienced significant difficulties raising capital due to tightening credit markets.
• Strategic Plan: Focus is on assessing the feasibility of building "surf casas" or subdividing the Mexico property for sale. The Bali pilot program aims to determine the feasibility of a small resort there.
• Risks: Failure to raise additional capital or generate revenue could lead to business failure. There is no assurance that officers or shareholders will contribute funds to cover expenses.
• Tax Status: The company has a federal net operating loss carryforward of approximately $143,000 (expiring 2029), but a 100% valuation allowance has been established against the deferred tax asset.

Investor Verification Checklist

• Capital Adequacy: Verify if the company has secured the additional financing required to survive the next 12 months, as management admits current cash is insufficient.
• Revenue Generation: Confirm if the pilot programs in Mexico and Bali have progressed to a stage capable of generating revenue, as the company has had zero revenue since 2006.
• Related Party Transactions: Review the valuation of office space provided by a director at no charge, recorded as rent expense and additional paid-in capital.
• Asset Valuation: Assess the fair value and liquidity of the real property investment in Mexico ($61,335) and the Bali property ($5,200) given the lack of operating income.
• Shareholder Commitments: Determine if principal shareholders have made any formal commitments to fund future operations, as the filing states they are not currently committed.