UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ox
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JuneSeptember 30, 2009
  
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:
For the transition period from_______to_______from _______to_______
 
Commission File Number: 333-146182
International Surf Resorts, Inc.
(Exact name of registrant as specified in its charter)

Nevada20-5978559
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

1097 Country Coach Dr., Suite 705, Henderson, Nevada, 89002
(Address of principal executive offices)

(800) 315-0045
(Registrant’s Telephone Number)
  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. xYes  oNo

Indicated by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). oYes  oNo
 
Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer o
Accelerated filer o
 Non-accelerated filer  o (Do not check if a smaller reporting company)
Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). oYes  xNo

As of August 13,November 16, 2009, there were 3,769,800 shares of the issuer’s $.001 par value common stock issued and outstanding.
 

 
1
 

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements
 
 INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
 
 
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS



ASSETS

 June 30, 2009 (Unaudited)  December 31, 2008  September 30, 2009 (Unaudited)  
December 31, 2008
 
 
            
            
Current assets            
Cash $48,747  $74,588  $46,229  $74,588 
Prepaid expenses  4,968   548   3,767   548 
                
Total current assets  53,715   75,136   49,996   75,136 
                
Property and equipment, net of                
accumulated depreciation  5,764   732   5,680   732 
                
Investment in real property  61,335   61,335   61,335   61,335 
                
Total assets $120,814  $137,203  $117,011  $137,203 


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities            
Accounts payable and accrued expenses $49,510  $41,859  $52,115  $41,859 
                
Total current liabilities  49,510   41,859   52,115   41,859 
                
ISRI Stockholders’ equity                
Common stock, $.001 par value; 100,000,000
shares authorized, 3,769,800 shares issued and
outstanding as of June 30, 2009 and December 31, 2008
  3,770   3,770 
Common stock, $.001 par value; 100,000,000 shares authorized, 3,769,800 shares issued and outstanding as of September 30, 2009 and December 31, 2008  3,770   3,770 
Additional paid-in capital  208,330   207,430   208,780   207,430 
Deficit accumulated during the development stage  (139,022)  (114,487)  (145,153)  (114,487)
                
Total ISRI stockholders’ equity  73,078   96,713   67,397   96,713 
        
Noncontrolling interest  (1,774)  (1,369)  (2,501)  (1,369)
Total liabilities and stockholders’ equity $120,814  $137,203  $117,011  $137,203 



 See accompanying notes to unaudited consolidated financial statements
See accompanying notes to unaudited consolidated financial statements
2
 
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)


             Inception              Inception 
             (December 4,              (December 4, 
 Three Months Ended June 30,  Six Months Ended June 30,  2006) to  Three Months Ended September 30,  Nine Months Ended September 30,  2006) to 
 2009  2008  2009  2008  
June 30,
2009
  
2009
  2008  2009  2008  
September 30,
2009
 
                              
Net revenue $-  $-  $-  $-  $-  $-  $-  $-  $-  $- 
                                        
Operating expenses                                        
Legal and professional fees  6,061   7,906   21,674   28,086   114,911   3,715   8,078   25,388   36,164   118,626 
Dues and fees  364   618   1,177   1,355   10,010   -   537   1,177   1,892   10,010 
Rent  850   450   1,300   900   5,050   1,650   450   2,950   1,350   6,700 
Organization costs  -   -   -   -   2,140   -   -   -   -   2,140 
General and administrative  246   6,382   917   7,232   12,684   1,564   193   2,482   7,425   14,248 
                                        
Total operating expenses  7,521   15,356   25,068   37,573   144,795   6,929   9,258   31,997   46,831   151,724 
                                        
Other income (expense), net  65   824   128   1,570   3,999   71   392   199   1,963   4,070 
                                        
Net loss including
noncontrolling interest
  (7,456)  (14,532)  (24,940)  (36,003)  (140,796)  (6,858)  (8,866)  (31,798)  (44,868)  (147,654)
                                        
Less: Net loss attributable to
noncontrolling interest
  169   103   405   466   1,774   727   102   1,132   567   2,501 
                                        
Net income (loss)
attributable to ISRI
 $(7,287) $(14,429) $(24,535) $(35,537) $(139,022) $(6,131) $(8,764) $(30,666) $(44,301) $(145,153)
                                        
Net income (loss) per common share
– basic and diluted
 $-  $-  $(0.01) $(0.01) $(.04) $-  $-  $(0.01) $(0.01) $(.04)
                                        
Weighted average of common shares
– basic and diluted
  3,769,800   3,769,800   3,769,800   3,769,800   3,614,759   3,769,800   3,769,800   3,769,800   3,769,800   3,628,607 


See accompanying notes to unaudited consolidated financial statements
3
 
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE PERIOD FROM INCEPTION (DECEMBER 4, 2006)
THROUGH JUNESEPTEMBER 30, 2009
(UNAUDITED)



       Deficit          Deficit   
 Common Stock     Accumulated    Common Stock     Accumulated   
 
Number of
Shares
  
 
Amount
  
Additional
Paid-In
Capital
  
During
Development
Stage
 
Total
Stockholders’
Equity
  
Number of Shares
  
 
Amount
  
Additional Paid-In
Capital
  During Development Stage Total Stockholders’ Equity 
                              
Balance, December 4, 2006  -  $-  $-  $-  $-   -  $-  $-  $-  $- 
                                        
Issuance of common stock,
December 5, 2006
  3,000,000   3,000   12,000   -   15,000   3,000,000   3,000   12,000   -   15,000 
                                        
Additional paid-in capital in exchange for
facilities provided by related party
  -   -   150   -   150   -   -   150   -   150 
                                        
Net loss attributable to ISRI  -   -   -   (2,847)  (2,847)  -   -   -   (2,847)  (2,847)
                                        
Balance, December 31, 2006  3,000,000   3,000   12,150   (2,847)  12,303   3,000,000   3,000   12,150   (2,847)  12,303 
                                        
Notes payable conversion, May 3, 2007  240,000   240   59,760   -   60,000   240,000   240   59,760   -   60,000 
                                        
Issuance of common stock, June 30, 2007  529,800   530   131,920   -   132,450   529,800   530   131,920   -   132,450 
                                        
Additional paid-in capital in exchange for
facilities provided by related party
  -   -   1,800   -   1,800   -   -   1,800   -   1,800 
                    
                    
                
Net loss attributable to ISRI  -  $-  $-  $(58,723) $(58,723)
                     
Balance, December 31, 2007  3,769,800   3,770   205,630   (61,570)  147,830 
                     
Additional paid-in capital in exchange for facilities provided by related party  -   -   1,800   -   1,800 
                     
Net loss attributable to ISRI  -   -   -   (52,917)  (52,917)
                     
Balance, December 31, 2008  3,769,800   3,770   207,430   (114,487)  96,713 
                     
Additional paid-in capital in exchange for facilities provided by related party  -   -   1,350   -   1,350 
                     
Net loss attributable to ISRI  -   -   -   (30,666)  (30,666)
                     
Balance, September 30, 2009  3,769,800  $3,770  $208,780  $(145,153) $67,397 


See accompanying notes to unaudited consolidated financial statements
4
 
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE PERIOD FROM INCEPTION (DECEMBER 4, 2006)
THROUGH JUNE 30, 2009
(UNAUDITED)


        Deficit   
  Common Stock     Accumulated   
  
Number of
Shares
  
 
Amount
  
Additional
Paid-In
Capital
  
During
Development
Stage
 
Total
Stockholders’
Equity
 
                
Net loss attributable to ISRI  -  $-  $-  $(58,723) $(58,723)
                     
Balance, December 31, 2007  3,769,800   3,770   205,630   (61,570)  147,830 
                     
Additional paid-in capital in exchange
  for facilities provided by related party
  -   -   1,800   -   1,800 
                     
Net loss attributable to ISRI  -   -   -   (52,917)  (52,917)
                     
Balance, December 31, 2008  3,769,800   3,770   207,430   (114,487)  96,713 
                     
Additional paid-in capital in exchange
  for facilities provided by related party
  -   -   900   -   900 
                     
Net loss attributable to ISRI  -   -   -   (24,535)  (24,535)
                     
Balance, June 30, 2009  3,769,800  $3,770  $208,330  $(139,022) $73,078 

See accompanying notes to unaudited consolidated financial statements
5
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)



       Inception        Inception 
 Six Months Ended June 30,  (December 4,  
Nine Months Ended September 30,
  (December 4, 
 2006) to  2006) to 
 2009  2008  June 30, 2009  2009  2008  September 30, 2009 
                  
Cash flows from operating activities                  
Net loss including noncontrolling interest $(24,535) $(35,537) $(139,022) $(30,666) $(44,301) $(145,153)
Adjustments to reconcile net loss including
noncontrolling interest to net cash provided by
(used in) operating activities
                        
Additional paid-in capital in exchange
for facilities provided by related party
  900   900    4,650   1,350   1,350    5,100 
Depreciation  168   112   448   252   196   532 
Changes in operating assets and liabilities                        
Increase in prepaid expenses  (4,420)  (353)  (4,968)  (3,219)  (462)  (3,767)
Increase in accounts payable and accrued expenses   7,651   11,652   49,510    10,256   14,308   52,115 
                        
Net cash used in operating activities  (20,236)  (23,226)  (89,382)  (22,027)  (28,909)  (91,173)
                        
Cash flows from investing activities                        
Purchase of fixed assets  (5,200)  (1,012)  (6,212)  (5,200)  (1,012)  (6,212)
Investment in real property  -   -   (61,335)  -   -   (61,335)
Noncontrolling interest in subsidiary  (405)  (466)  (1,774)  (1,132)  (568)  (2,501)
                        
Net cash used in investing activities  (5,605)  (1,478)  (69,321)  (6,332)  (1,580)  (70,048)
                        
Cash flows from financing activities                        
Proceeds from issuance of common stock  -   -   147,450   -   -   147,450 
Net proceeds/(payments) from stockholder loans  -   -   60,000   -   -   60,000 
                        
Net cash provided by financing activities  -   -   207,450   -   -   207,450 
                        
Net (decrease) increase in cash  (25,841)  (24,704)  48,747   (28,359)  (30,489)  46,229 
                        
Cash, beginning of period  74,588   109,846   -   74,588   109,846   - 
                        
Cash, end of period
 $48,747  $85,142  $48,747  $46,229  $79,357  $46,229 
                        
            
            
            
            
            
            
Supplemental disclosure of cash flow information            
Income taxes paid
 $-  $-  $- 
Interest paid
 $-  $-  $- 
Conversion of notes payable into common stock
 $-  $-  $60,000 

See accompanying notes to unaudited consolidated financial statements
6
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

          
      Inception 
 Six Months Ended June 30, (December 4, 
 2006) to 
 2009 2008 June 30, 2009 
          
Supplemental disclosure of cash flow information         
 
Income taxes paid
 $-  $-  $- 
 
Interest paid
 $-  $-  $- 
 
Conversion of notes payable into common stock
 $-  $-  $60,000 
 

5
See accompanying notes to unaudited consolidated financial statements
7
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNESEPTEMBER 30, 2009
(UNAUDITED)



1.NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Organization and Nature of Operations

International Surf Resorts, Inc. (the Company) is currently a development stage company under the provisions of Statement of Financial Accounting Standards (SFAS) No. 7ASC 915 “Accounting and Reporting by Development Stage Enterprises”Entities”, and was incorporated under the laws of the State of Nevada on December 4, 2006.  From inception (December 4, 2006) through JuneSeptember 30, 2009, the Company has produced no revenues and will continue to report as a development stage company until significant revenues are produced.

The Company is an Internet based provider of international surf resorts, camps, and guided surf tours. The Company also intends to operate a surf camp in San Juanico, Baja California Sur, Mexico on 2.5 acres of land that it owns there.

On February 19, 2007, the Company formed ISR de Mexico, a Mexican corporation, for the purpose of acquiring real estate in Mexico.  At JuneSeptember 30, 2009, the Company owned 55% of ISR de Mexico.  The remaining 45% interest is owned by related parties.

The Company has evaluated subsequent events through November 16, 2009, the date these consolidated condensed financial statements were issued

Basis of Presentation

The unaudited financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Item 10 of Regulation S-X.  They do not include all information and notes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements included in the Company’s annual report on Form 10-K of International Surf Resorts, Inc. for the year ended December 31, 2008. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and sixnine months ended JuneSeptember 30, 2009, are not necessarily indicative of the results that may be expected for any other interim period or the entire year. For further information, these unaudited financial statements and the related notes should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2008, included in the Company’s annual report on Form 10-K.

8
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2009
(UNAUDITED)


1.
NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Continued)

Principles of Consolidation

The consolidated financial statements include the accounts of International Surf Resorts, Inc. and its 55% owned subsidiary, ISR de Mexico.  All inter-company accounts and transactions have been eliminated in consolidation and minority interests were accounted for in the consolidated statements of operations and the balance sheets.

Interest in Subsidiary

The Company’s percentage of controlling interest requires that operations be included in the consolidated financial statements. The percentage of equity interest that is not owned by the Company is shown as “Noncontrolling interest” in the consolidated balance sheets and consolidated statements of operations.
 
Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 amounts of revenues and expenses during the reported periods.  Actual results could materially differ from those estimates.

Long-Lived Assets

The Company accounts for its long-lived assets in accordance with SFAS No. 144,ASC 360, "Accounting for the Impairment or Disposal of Long-Lived Assets.Property, Plant, and Equipment." SFAS No. 144ASC 360 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value or disposable value. As of JuneSeptember 30, 2009, the Company did not deem any of its long-term assets to be impaired.


 
96
 
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNESEPTEMBER 30, 2009
(UNAUDITED)



1.
NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Continued)

Recent Accounting Pronouncements

In AprilJune 2009, the Financial Accounting Standards Board (FASB)(“FASB”) issued ASC No. 105,   the FASB Staff Position (FSP) Financial Accounting Standard (FAS) 157-4, Determining Fair Value WhenStandards Codification and the VolumeHierarchy of Generally Accepted Accounting Principles (ASC 105).  ASC 105 will become the single source authoritative nongovernmental U.S. generally accepted accounting principles (GAAP), superseding existing FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force, and Levelrelated accounting literature.  ASC 105 reorganized the thousands of ActivityGAAP pronouncements into roughly 90 accounting topics and displays them using a consistent structure.  Also included is relevant SEC guidance organized using the same topical structure in separate sections.  The Company adopted ASC 105 for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.  Based on the guidance, if an entity determines that the level of activity for an asset or liability has significantly decreased and that a transaction is not orderly, further analysis of transactions or quoted prices is needed, and a significant adjustment to the transaction or quoted prices may be necessary to estimate fair value in accordance with Statement of Financial Accounting Standards (SFAS) No. 157 Fair Value Measurements. This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15,financial statements ended September 30, 2009.  The company adopted this FSP for its quarter ending June 30, 2009. There was noadoption of ASC 105 did not have an impact on the Company’s financial statements.position or results of operations.
 
InOn April 1, 2009, the FASB issued FSP FAS 115-2Company adopted ASC 825-10-65, Financial Instruments – Overall – Transition and FAS 124-2, Recognition and Presentation of Other-Than-Temporary ImpairmentsOpen Effective Date Information (ASC 825-10-65). The guidance applies to investments in debt securities for which other-than-temporary impairments may be recorded. If an entity’s management asserts that it does not have the intent to sell a debt security and it is more likely than not that it will not have to sell the security before recovery of its cost basis, then an entity may separate other-than-temporary impairments into two components: 1) the amount related to credit losses (recorded in earnings), and 2) all other amounts (recorded in other comprehensive income). This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The company adopted this FSP for its quarter ending June 30, 2009. There was no impact on the Company’s financial statements.
In April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board (APB) 28-1, Interim Disclosures about Fair Value of Financial Instruments. The FSPASC 825-10-65 amends SFAS No. 107 “Disclosures about Fair Value of Financial Instruments”ASC 825-10 to require an entity to provide disclosures about fair value of financial instruments in interim financial information. This FSP isstatements as well as in annual financial statements and also amends ASC 270-10 to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The company included the requiredrequire those disclosures in its quarter ending June 30, 2009.
10
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2009
(UNAUDITED)
1.
NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Continued)

Recent Accounting Pronouncements (continued)

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, which became effective January 1, 2009 via prospective application to business combinations. This Statement requires that the acquisition method of accounting be applied to a broader set of business combinations, amends the definition of a business combination, provides a definition of a business, requires an acquirer to recognize an acquired business at its fair value at the acquisition date and requires the assets and liabilities assumed in a business combination to be measured and recognized at their fair values as of the acquisition date (with limited exceptions). The company adopted this Statement on January 1, 2009. There was no impact upon adoption, and its effects on future periods will depend on the nature and significance of business combinations subject to this statement.
In April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies. This FSP requires that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can be reasonably estimated. If fair value cannot be reasonably estimated, the asset or liability would generally be recognized in accordance with SFAS No. 5, “Accounting for Contingencies” and FASB Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss”. Further, the FASB removed the subsequent accounting guidance for assets and liabilities arising from contingencies from SFAS No. 141(R). The requirements of this FSP carry forward without significant revision the guidance on contingencies of SFAS No. 141, “Business Combinations”, which was superseded by SFAS No. 141(R) (see previous paragraph). The FSP also eliminates the requirement to disclose an estimate of the range of possible outcomes of recognized contingencies at the acquisition date. For unrecognized contingencies, the FASB requires that entities include only the disclosures required by SFAS No. 5. This FSP was adopted effective January 1, 2009. There was no impact upon adoption, and its effects on future periods will depend on the nature and significance of business combinations subject to this statement.

Effective January 1, 2009, International Surf Resorts, Inc. adopted Financial Accounting Standards Board’s (FASB) Statement No. 160 (FAS 160), “Noncontrolling Interests in Consolidated Financial Statement- an Amendment of ARB No. 51.”  FAS 160 changed the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity.  FAS 160 required retrospective adoption of the presentation and disclosure requirements for existing minority interests.  All other requirements of FAS 160 will be applied prospectively.all interim financial statements. The adoption of FAS 160ASC 825-10-65 did not have a material impact on the Company’s results of operations or financial statements.condition.
 
In MayOn April 1, 2009, the FASB issued SFAS No. 165, “SubsequentCompany adopted ASC 855, Subsequent Events” which requires entities to disclose the date through which they have evaluated subsequent events and whether the date corresponds with the release of their financial statements.  The statement established(ASC 855). ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date – that is, effective for interimwhether that date represents the date the financial statements were issued or annualwere available to be issued. This disclosure should alert all users of financial periods endingstatements that an entity has not evaluated subsequent events after June 15, 2009, and shall be applied prospectively.that date in the set of financial statements being presented. The adoption of SFAS No. 165ASC 855 did not have a material impact on the Company’s consolidatedresults of operations or financial statements.condition.
 
On July 1, 2009, the Company adopted ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820) (ASU 2009-05). ASU 2009-05 provided amendments to ASC 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain techniques. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The adoption of ASU 2009-05 did not have a material impact on the Company’s results of operations or financial condition.
In JuneOctober 2009, the FASB issued Statement No. 168.ASU 2009-13, Multiple-Deliverable Revenue Arrangements, (amendments to ASC 605, Revenue Recognition) (ASU 2009-13).  ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The FASB Accounting Standards Codificationamendments eliminate the residual method of revenue allocation and the Hierarchy of Generally Accepted Accounting Principles (“SFAS 168”).  SFAS 168 will become the single source authoritative nongovernmental U.S. generally accepted accounting principles (“GAAP), superseding existing FASB, American Institute of Certified Public Accounts (“AICPA”), Emerging Issues Task Force (“EITF), and related accounting literature.  SFAS 168 reorganized the thousands of GAAP pronouncements into roughly 90 accounting topics and displays them using a consistent structure.  Also included is relevant Securities and Exchange Commission guidance organizedrequire revenue to be allocated using the same topical structurerelative selling price method.  ASU 2009-13 should be applied on a prospective basis for revenue arrangements entered into or materially modified in separate sections.  SFAS 168 will be effective for financial statements issued for reporting periods that endfiscal years beginning on or after SeptemberJune 15, 2009.  We do2010, with early adoption permitted. The Company does not expect the adoption of the CodificationASU 2009-13 to have ana material impact on our financial position orthe Company’s results of operations.operations or financial condition.


2.           GOING CONCERN

As shown in the accompanying financial statements, the Company has incurred a net operating loss of $139,022$145,153 from inception (December 4, 2006) through JuneSeptember 30, 2009.

The Company is subject to those risks associated with development stage companies.  The Company has sustained losses since inception and additional debt or equity financing may be required by the Company to fund its development activities and to support operations.  However, there is no assurance that the Company will be able to obtain additional financing.  Furthermore, there is no assurance that rapid technological changes, changing customer needs and evolving industry standards will enable the Company to introduce new products on a continual and timely basis so that profitable operations can be attained.
 
 
11
 
7
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNESEPTEMBER 30, 2009
(UNAUDITED)



3.FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value Measurements

On January 1, 2008,Determination of Fair Value
At September 30, 2009, the Company adopted SFAS No. 157 (SFAS 157), Fair Value Measurements.  SFAS 157 relates to financial assets and financial liabilities. In February 2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis, until January 1, 2009 for calendar year-end entities.

SFAS 157 defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (GAAP), and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard is now the single source in GAAP for the definition of fair value, except forcalculated the fair value of leased property as defined in SFAS 13. SFAS 157its assets and liabilities for disclosure purposes only.
Valuation Hierarchy
ASC 820 establishes a three-level valuation hierarchy for the use of fair value hierarchy that distinguishes between (1) market participant assumptions developedmeasurements based on market data obtained from independent sources (observable inputs) and (2)upon the transparency of inputs to the valuation of an entity’s own assumptions, about market participant assumptions, that are developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assetsasset or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levelsliability as of the fair value hierarchy under SFAS 157 are described below:measurement date:
 
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.



12
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2009
(UNAUDITED)



3.
FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Fair Value Measurements (continued)

 
 •Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
 


Level 3 - Inputs that are both significant to the fair value measurement and unobservable. These inputs rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. (The unobservable inputs are developed based on the best information available in the circumstances and may include the Company's own data.)


The following table presents the Company's fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of JuneSeptember 30, 2009 and December 31, 2008:
                                                             
      June 30, 2009  December 31, 2008 
   Level  
Fair
Value
  
Carrying
Amount
  
Fair
Value
  
Carrying
Amount
 
 Assets               
   Cash  2  $48,747  $48,747  $74,588  $74,588 
   Prepaid expenses  3   4,968   4,968   548   548 
 Liabilities                    
   Accounts payable  3   49,510   49,510   41,859   41,859 

Fair Value Option
      September 30, 2009  December 31, 2008 
   Level  
Fair
Value
  
Carrying
Amount
  
Fair
Value
  
Carrying
Amount
 
 Assets               
   Cash  2  $46,229  $46,229  $74,588  $74,588 
   Prepaid expenses  3   3,767   3,767   548   548 
 Liabilities                    
   Accounts payable  3   52,115   52,115   41,859   41,859 

On January 1, 2008, the Company adopted SFAS No. 159 (SFAS 159),4.           The Fair Value Option for Financial Assets and Financial LiabilitiesPROPERTY AND EQUIPMENT.  SFAS 159 provides a fair value option election that allows entities to irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and liabilities. Changes in fair value are recognized in earnings as they occur for those assets and liabilities for which the election is made. The election is made on an instrument by instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. The adoption of SFAS 159 did not have a material impact on the Company’s financial statements as the Company did not elect the fair value option for any of its financial assets or liabilities.

Property and equipment at September 30, 2009 and December 31, 2008, consists of the following:

   September 30,  December 31, 
   2009  2008 
 Computer equipment  $1,012  $1,012 
 Building  $5,200  $- 
 
Less: accumulated depreciation 
 
  
6,212
(532
)  
1,012
 (280
)
 Total property and equipment  $5,680  $732 

Depreciation expense for the nine months ended September 30, 2009 and 2008 amounted to $252 and $196, respectively.
 
138
 
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNESEPTEMBER 30, 2009
(UNAUDITED)


4.PROPERTY AND EQUIPMENT

Property and equipment at June 30, 2009 and December 31, 2008, consists of the following:

   June 30,  December 31, 
   2009  2008 
 
 
Computer equipment
 $1,012  $1,012 
 
 
Building
 $5,200  $- 
    6,212    1,012  
 
 
 
Less: accumulated depreciation
  (448)  (280)
 
 
Total property and equipment
 $5,764  $732 


Depreciation expense for the six months ended June 30, 2009 and 2008 amounted to $168 and $112, respectively.

5.
5.           INVESTMENT IN REAL PROPERTY

In December 2006, the Company acquired real property in Mexico for $57,500 to develop and potentially operate as a surf camp.  During the year ended December 31, 2007, the Company incurred additional costs of $3,835 related to the transfer of the property to the Company’s 55% owned subsidiary, ISR de Mexico.

6.           COMMON STOCK
14
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2009
(UNAUDITED)

On December 5, 2006, the Company issued 3,000,000 shares of its common stock to its founders at $.005 per share for a total of $15,000.

On May 3, 2007, the Company issued 240,000 shares of its common stock for the conversion of notes payable in the amount of $60,000.

In June 2007, the Company performed a private placement and issued 529,800 shares of its common stock at $0.25 per share for a total of $132,450.

6.
COMMON STOCK (continued)

In September 2007, the Company submitted its Registration Statement on Form SB-2 for the registration of 489,800 shares of its outstanding common stock.  On October 4, 2007, the Company’s registration statement was declared effective by the Securities and Exchange Commission.

7.           PROVISION FOR INCOME TAXES
7.
PROVISION FOR INCOME TAXES

As of JuneSeptember 30, 2009, the Company reported an estimated federal net operating loss carryforward of approximately $137,000$143,000 which can be used to offset future federal income tax.  The federal net operating loss carryforward expires in 2029.  Deferred tax assets resulting from the net operating losses are reduced by a valuation allowance, when, in the opinion of management, utilization is not reasonably assured.

As of JuneSeptember 30, 2009, the Company had the following deferred tax assets that related to its net operating losses. A 100% valuation allowance has been established, as management believes it more likely than not that the deferred tax assets will not be realized:

 Federal loss carryforward (@ 25%) $34,300 
 Less: valuation allowance  (34,300)
      
 Net deferred tax asset $- 
Federal loss carryforward (@ 25%) $36,000 
Less: valuation allowance  (36,000)
Net deferred tax asset $- 


The Company’s valuation allowance increased by approximately $6,300$8,000 during the sixnine months ended JuneSeptember 30, 2009.

8.
8.           RELATED PARTY TRANSACTIONS

From the Company’s inception (December 4, 2006) through JuneSeptember 30, 2009, the Company utilized office space of a director of the Company at no charge.  The Company treated the usage of the office space as additional paid-in capital and charged the estimated fair value rent of $150 per month to operations.  The Company recorded total rent expense of $900$1,350 for each of the sixnine months ended JuneSeptember 30, 2009 and 2008.



 
159
 
 

Item 2.  Plan of Operation

This following information specifies certain forward-looking statements of management of the company. Forward-looking statements are statements that estimate the happening of future events and are not based on historical fact. Forward-looking statements may be identified by the use of forward-looking terminology, such as “may”, “shall”, “could”, “expect”, “estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”, “continue”, or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.

The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. We cannot guaranty that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.

Critical Accounting Policies and Estimates. Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.

These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the financial statements included in our Quarterly Report on Form 10-Q for the period ended JuneSeptember 30, 2009.

Liquidity and Capital Resources. We had cash of $48,747$46,229 and prepaid expenses of $4,968$3,767 as of JuneSeptember 30, 2009.   Our total current assets were $53,715.$49,996.  As of JuneSeptember 30, 2009, our investment in real property was $61,335.  That,, which along with $5,764$5,680 in property and equipment, net of accumulated depreciation, equaled our total assets of $120,814.$117,011.  We expect that we will incur expenses related to professional fees to determine feasibility of potential uses of our property located in San Juanico, Baja California, Mexico.  As of JuneSeptember 30, 2009, our total liabilities were $49,510,$52,115, all of which was represented by accounts payable.  We had no long term liabilities, commitments or contingencies.

During 2009, we anticipate that we will continue to incur significant accounting costs associated with the audit and review of our financial statements. We also expect that the legal and accounting costs of being a public company will continue to impact our liquidity and we may need to obtain funds to pay those expenses. Other than the anticipated increases in legal and accounting costs due to the reporting requirements of being a reporting company and those anticipated costs related to our real property as specified above, we are not aware of any other known trends, events or uncertainties, which may affect our future liquidity.

16
For the three months ended JuneSeptember 30, 2009 as compared to the three months ended JuneSeptember 30, 2008.

Results of Operations.

Revenues.  We had no revenue for the three months ended JuneSeptember 30, 2009 as compared to the three months ended JuneSeptember 30, 2008, during which we also had no revenue.

Operating Expenses and Net Loss. We had total operating expenses of $7,521$6,929 for the three months ended JuneSeptember 30, 2009, as compared to total operating expenses of $15,356$9,258 for the three months ended JuneSeptember 30, 2008. The decrease in total operating expenses between the comparable periods is primarily due to a decrease in generallegal and administrative expenses.professional fees.  Specifically, generallegal and administrative expensesprofessional fees decreased from $6,382$8,078 for the three months ended JuneSeptember 30, 2008, to $246$3,715 for the three months ended JuneSeptember 30, 2009.

Net Loss. For the three months ended JuneSeptember 30, 2009, our net loss was $7,287,$6,131, as compared to a net loss of $14,429$8,764 for the three months ended JuneSeptember 30, 2008. The decrease in the net loss was due to the decrease in generallegal and administrative expensesprofessional fees for the three months ended JuneSeptember 30, 2009.  We expect to continue to incur net losses for the foreseeable future.

10
For the sixnine months ended JuneSeptember 30, 2009 as compared to the sixnine months ended JuneSeptember 30, 2008.

Results of Operations.

Revenues.  We had no revenue for the sixnine months ended JuneSeptember 30, 2009 as compared to the sixnine months ended JuneSeptember 30, 2008, during which we also had no revenue.

Operating Expenses and Net Loss. We had total operating expenses of $25,068$31,997 for the sixnine months ended JuneSeptember 30, 2009, as compared to total operating expenses of $37,573$46,831 for the sixnine months ended JuneSeptember 30, 2008. The decrease in total operating expenses between the comparable periods is primarily due to decreases in certain of our operating expenses.  Specifically, legal and professional fees decreased from $28,086$36,164 for the sixnine months ended JuneSeptember 30, 2008, to $21,674$25,388 for the sixnine months ended JuneSeptember 30, 2009.  Our general and administrative expenses decreased from $7,232$7,425 for the sixnine months ended JuneSeptember 30, 2008, to $917$2,482 for the sixnine months ended JuneSeptember 30, 2009. Our legal and professional fees and general and administrative expenses were higher for the comparable period in 2008 due to the costs associated with becoming a public company.

Net Loss. For the sixnine months ended JuneSeptember 30, 2009, our net loss was $24,535,$30,666, as compared to a net loss of $35,537$44,301 for the sixnine months ended JuneSeptember 30, 2008. The decrease in the net loss was due to the decreases in legal and professional fees and general and administrative expenses for the sixnine months ended JuneSeptember 30, 2009.  We expect to continue to incur net losses for the foreseeable future.

Our Plan of Operations for the Next Twelve Months.  To effectuate our business plan during the next twelve months, we must determine the feasibility of building surf casas, or vacation rentals, for our property located in San Juanico, Baja California, Mexico.  We are currently assessing the feasibility of building surf casas and also the feasibility of sub-dividing our parcel into smaller parcels and selling them as we believe that we can sell the smaller lots at a significant gain on our cost. We also may build on the subdivided lots and offer the surf casas for sale as a finished product. In order to properly determine the feasibility of those projects, our president Eduardo Biancardi intends to travel to the property and live in San Juanico for a period of time. We also intend to look for opportunities to work with other companies that will assist us in our development of the property. In addition, during the next twelve months, we must continue to develop our website and begin to attract customers.

During the next three to six months, our primary objective is to complete our assessment of the opportunities for the property located in San Juanico, Baja California, Mexico, and complete development of our website. During the next six to twelve months, we hope to raise additional funds so that we can expand our product offerings and begin generating revenues. We believe that we will need to spend approximately $5,000 to complete the development of website. In order to market and promote our services and develop our property in San Juanico, Baja California, Mexico, we will need to raise additional capital. Our failure to market and promote our services will hinder our ability to increase the size of our operations and generate revenues. If we are not able to generate additional revenues that cover our estimated operating costs, our business may ultimately fail.

In June 2009, we launched a pilot program to determine the feasibility of operating a small surf resort in Bali. As part of the program, we purchased a wood house in Bali for $5,200 and leased the land where the house is located for $400 per month. The land is located very close to a beach which has a very good surf break.  Our president is currently living in Bali and is responsible to sanding and re-finishing the house to make it suitable for living. Our president believes that we can purchase several wood houses at prices comparable to the price we paid for the initial house. During the next twelve months, we plan to assess the feasibility of leasing a large plot of land near the break which would be suitable for multiple houses. In order to purchase those additional houses and operate a small surf resort in this area, we will need to raise additional capital.

To date, we have experienced significant difficulties in raising additional capital.  We believe our inability to raise significant additional capital through debt or equity financings is due to various factors, including, but not limited to, a tightening in the equity and credit markets. We had hoped to expand our operations during the last six months. However, our ability to commence and expand operations has been negatively affected by our inability to raise significant capital and our inability to generate significant revenues.

We had cash of $62,071$46,229 as of JuneSeptember 30, 2009. In the opinion of management, available funds will not satisfy our working capital requirements for the next twelve months. Our forecast for the period for which our financial resources will be adequate to support our operations involves risks and uncertainties and actual results could fail as a result of a number of factors.  We intend to pursue capital through public or private financing as well as borrowings and other sources, such as our officers, director and principal shareholders. We cannot guaranty that additional funding will be available on favorable terms, if at all. If adequate funds are not available, we hope that our officers, director and principal shareholders will contribute funds to pay for our expenses to achieve our objectives over the next twelve months. However, our officers, director and principal shareholders are not committed to contribute funds to pay for our expenses.

We are not currently conducting any research and development activities other than the development of our website which we expect the total cost to be approximately $1,500. We do not anticipate that we will purchase or sell any significant equipment. In the event that we generate significant revenues and expand our operations, then we may need to hire additional employees or independent contractors as well as purchase or lease additional equipment.
 
Off-Balance Sheet Arrangements. We have no off-balance sheet arrangements.

17
Item 3. Quantitative and Qualitative Disclosures about Market Risk
 
Not applicable.
 
Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures. We maintain controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed as of JuneSeptember 30, 2009, the date of this report, our chief executive officer and the principal financial officer concluded that our disclosure controls and procedures were effective.

Changes in internal controls. In our Form 10-K for the fiscal year ended December 31, 2008, management reported thatThere were no changes in our internal controlscontrol over financial reporting was not effective due to a lack of proper segregation of functions, duties and responsibilities with respect to our cash and control overthat occurred during the disbursements related thereto due to our very limited staff, including our accounting personnel.

In response to this conclusion, we have applied compensating procedures and processes as necessary to ensure the reliability of our financial reporting. Accordingly, management believes, based on its knowledge, that (1) this report does not contain any untrue statement of a material fact or omit to state a material face necessary to make the statements made not misleading with respect to the periodfiscal quarter covered by this report and (2) thethat have materially affected, or are reasonably likely to materially affect, our internal control over financial statements, and other financial information included in this report, fairly present in all material respects our financial condition, results of operations and cash flows for the years and periods then ended.reporting.




1811
PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Submission of Matters to Vote of Security Holders

None.

Item 5.  Other Information

None.

Item 6.  Exhibits
 
31   Certification of Principal Executive and Financial Officer, pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934
32    Certification of Principal Executive and Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


 
1912
 

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
International Surf Resorts, Inc.,
a Nevada corporation
 
    
August 14,November 16, 2009   By:/s/ Eduardo Biancardi 
  
Eduardo Biancardi
Chief Executive Officer, Chief Financial Officer,
Secretary, Director
(Principal, Executive, Financial and Accounting Officer)
 
 

13
 
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