UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2010
   
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:
For the transition period from _______to_______
 
Commission File Number: 333-146182
International Surf Resorts, Inc.
(Exact name of registrant as specified in its charter)

Nevada
20-5978559
(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 May 14, 2010, 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



ASSETS

   
March 31, 2010 (Unaudited)
    
December 31, 2009
  
             
             
Current assets
            
Cash
   $ 36,486     $ 43,055  
   Prepaid expenses
     1,368       2,568  
                 
Total current assets
     37,854       45,623  
                 
Property and equipment, net of
                
    accumulated depreciation
     5,512       5,596  
                 
Investment in real property
     61,335       61,335  
                 
Total assets
   $ 104,701     $ 112,554  


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities
            
Accounts payable and accrued expenses
   $ 53,310     $ 58,014  
                 
Total current liabilities
     53,310       58,014  
                 
Stockholders’ equity
                
Common stock, $.001 par value; 100,000,000 shares
authorized, 3,769,800 shares issued and outstanding
 as of March 31, 2010 and December 31, 2009, respectively
     3,770       3,770  
Additional paid-in capital
     209,680       209,230  
Deficit accumulated during the development stage
     (159,220 )     (155,857 )
                 
Total stockholders’ equity
     54,230       57,143  
                 
Noncontrolling interest
     (2,839 )     (2,603 )
                 
Total liabilities and stockholders’ equity
   $ 104,701     $ 112,554  

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
  
               
(December 4,
  
   
Three Months Ended March 31,
    
2006) to
  
   
2010
    
2009
    
March 31, 2010
  
                   
Net revenue
   $ -     $ -     $ -  
                         
Operating expenses
                        
Legal and professional fees
     1,322       15,613       128,702  
Dues and fees
     -       813       10,270  
Rent
     1,650       450       10,000  
General and administrative
     662       671       17,237  
                         
Total operating expenses
     3,634       17,547       166,209  
                         
Other income (expense), net
     35       63       4,150  
                         
Net loss including noncontrolling interest
     (3,599 )     (17,484 )     (162,059 )
                         
Less: Net loss attributable to noncontrolling interest
     236       236       2,839  
                         
Net income (loss) attributable to ISRI
   $ (3,363 )   $ (17,248 )   $ (159,220 )
                         
Net income (loss) per common share – basic and diluted
   $ (0.00 )   $ (0.00 )   $ (.04 )
                         
Weighted average of common shares – basic and diluted
     3,769,800       3,769,800       3,649,809  


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 MARCH 31, 2010
(UNAUDITED)



               
Deficit
      
   
Common Stock
          
Accumulated
      
   
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  
                                         
Additional paid-in capital in exchange for facilities provided by related party
     -       -       150       -       150  
                                         
Net loss attributable to ISRI
     -       -       -       (2,847 )     (2,847 )
                                         
Balance, December 31, 2006
     3,000,000       3,000       12,150       (2,847 )     12,303  
                                         
Notes payable conversion, May 3, 2007
     240,000       240       59,760       -       60,000  
                                         
Issuance of common stock, June 30, 2007
     529,800       530       131,920       -       132,450  
                                         
Additional paid-in capital in exchange for facilities provided by related party
     -       r-       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  
                                         
                                         


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 MARCH 31, 2010
(UNAUDITED)





               
Deficit
      
   
Common Stock
          
Accumulated
      
   
Number of
Shares
    
 
Amount
    
Additional
Paid-In
Capital
    
During
Development
Stage
  
Total
Stockholders’
Equity
  
                               
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
     -       -       1,800       -       1,800  
                                         
Net loss attributable to ISRI
     -       -       -       (41,370 )     (41,370 )
                                         
Balance, December 31, 2009
     3,769,800       3,770       209,230       (155,857 )     57,143  
                                         
Additional paid-in capital in exchange for facilities provided by related party
     -       -       450       -       450  
                                         
Net loss attributable to ISRI
     -       -       -       (3,363 )     (3,363 )
                                         
Balance, March 31, 2010
     3,769,800     $ 3,770     $ 209,680     $ (159,220 )   $ 54,230  


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
  
   
Three Months Ended March 31,
    
(December 4,
  
   
2006) to
  
   
2010
    
2009
    
March 31, 2010
  
                   
Cash flows from operating activities
                  
Net loss including noncontrolling interest
   $ (3,363 )   $ (17,248 )   $ (159,220 )
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
     450       450       6,000  
   Depreciation
     84       84       700  
Changes in operating assets and liabilities
                        
(Increase) decrease in prepaid expenses
     1,200       (18 )     (1,368 )
Increase (decrease) in accounts payable and accrued expenses
     (4,704 )     4,451       53,310  
                         
Net cash used in operating activities
     (6,333 )     (12,281 )     (100,578 )
                         
Cash flows from investing activities
                        
Purchase of fixed assets
     -       -       (6,212 )
Investment in real property
     -       -       (61,335 )
    Noncontrolling interest in subsidiary
     (236 )     (236 )     (2,839 )
                         
Net cash used in investing activities
     (236 )     (236 )     (70,386 )
                         
Cash flows from financing activities
                        
    Proceeds from issuance of common stock
     -       -       147,450  
    Net proceeds/(payments) from stockholder loans
     -       -       60,000  
                         
Net cash provided by financing activities
     -       -       207,450  
                         
Net (decrease) increase in cash
     (6,569 )     (12,517 )     36,486  
                         
Cash, beginning of period
     43,055       74,588       -  
                         
Cash, end of period
   $ 36,486     $ 62,071     $ 36,486  
                         
 

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
  
 
Three Months Ended March 31,
  
(December 4,
  
 
2006) to
  
 
2010
  
2009
  
March 31, 2010
  
                   
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 
 
7
 
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2010
(UNAUDITED)



1.
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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. 7 “Accounting and Reporting by Development Stage Enterprises”, and was incorporated under the laws of the State of Nevada on December 4, 2006.  From inception (December 4, 2006) through December 31, 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 December 31, 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 May 14, 2010, the date these consolidated condensed financial statements were issued.

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.
 
 
 
 
8
 
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2010
(UNAUDITED)



 
1.
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 Article 8 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 annual report on Form 10-K of International Surf Resorts, Inc. for the period ended December 31, 2009. 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 ended March 31, 2010 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 period ended December 31, 2009 included in the Company’s annual report on Form 10-K.

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, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 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
 
 
 
9
 
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2010
(UNAUDITED)



 
1.
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Long Lived Assets (continued)

fair value or disposable value. As of March 31, 2010, the Company did not deem any of its long-term assets to be impaired.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued ASC Statement No. 105, the “FASB Accounting Standards Codification and the Hierarchy 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 related accounting literature.  ASC 105 reorganized the thousands of GAAP 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 financial statements during the year ended December 31, 2009.  The adoption of ASC 105 did not have an impact on the Company’s financial position or results of operations.

On April 1, 2009, the Company adopted ASC 825-10-65, “Financial Instruments – Overall – Transition and Open Effective Date Information” (ASC 825-10-65). ASC 825-10-65 amends ASC 825-10 to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements and also amends ASC 270-10 to require those disclosures in all interim financial statements. The adoption of ASC 825-10-65 did not have a material impact on the Company’s results of operations or financial condition.

 On April 1, 2009, the Company adopted ASC 855, “Subsequent Events” (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. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date – that is, whether that date represents the date the financial statements were issued or were available to be issued. This disclosure should alert all users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being
 
 
 
10
 
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2010
(UNAUDITED)



1.
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 

Recent Accounting Pronouncements (continued)

presented. The adoption of ASC 855 did not have a material impact on the Company’s results of operations or financial 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.
 
2.           GOING CONCERN

As shown in the accompanying financial statements, the Company has incurred a net operating loss of $159,220 from inception (December 4, 2006) through March 31, 2010.

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
 
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2010
(UNAUDITED)





3.
FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value Measurements

 Determination of Fair Value
 
At March 31, 2010, the Company calculated the fair value of its assets and liabilities for disclosure purposes only.
 
Pursuant to ASC No. 825, “Financial Instruments”, the Company is required to estimate the fair value of all financial instruments included on its balance sheet.  The carrying value of cash, prepaid expenses and accounts payable approximate their fair value due to the short period to maturity of these instruments.
 
Valuation Hierarchy
 
ASC 820 establishes a three-level valuation hierarchy for the use of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date:
 
 
•
  
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 
 
•
  
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.)
 
 
 
12
 
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2010
(UNAUDITED)



3.
FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Fair Value Measurements (continued)

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 March 31, 2010 and December 31, 2009:
                                                             
           
March 31, 2010
    
December 31, 2009
  
     
Level
    
Fair
Value
    
Carrying
Amount
    
Fair
Value
    
Carrying
Amount
  
 
Assets
                              
 
  Cash
    
1
    
$
36,486
    
$
36,486
    
$
43,055
    
$
43,055
  
 
  Prepaid expenses
    
3
      
1,368
      
1,368
      
2,568
      
2,568
  
 
Liabilities
                                        
 
  Accounts payable
    
3
      
53,310
      
53,310
      
58,014
      
58,014
  



4.           PROPERTY AND EQUIPMENT

Property and equipment at March 31, 2010 and December 31, 2009, consists of the following:

     
March 31,
    
December 31,
  
     
2010
    
2009
  
 
Computer equipment
   $ 1,012     $ 1,012  
 
Building
     5,200       5,200  
 
 
Less: accumulated depreciation
    
6,212
(700
 )    
6,212
(616
 )
 
Total property and equipment
   $ 5,512     $ 5,596  


Depreciation expense for the three months ended March 31, 2010 and 2009 amounted to $84 and $84, respectively.


 
 
13
 
INTERNATIONAL SURF RESORTS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2010
(UNAUDITED)



 
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

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.

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

As of March 31, 2010, the Company reported an estimated federal net operating loss carryforward of approximately $156,000 which can be used to offset future federal income tax.  The federal net operating loss carryforward expires in 2030.  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 March 31, 2010, 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%)
   $ 39,000  
 
Less: valuation allowance
     (39,000 )
 
Net deferred tax asset
   $ -  
 
The Company’s valuation allowance increased by approximately $1,000 during the three months ended March 31, 2010.
 
8.           RELATED PARTY TRANSACTIONS

From the Company’s inception (December 4, 2006) through March 31, 2010, 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 $450 for each of the three months ended March 31, 2010 and 2009.



 
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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 March 31, 2010.

Liquidity and Capital Resources. We had cash of $36,468 and prepaid expenses of $1,368 as of March 31, 2010, which together comprises our total current assets of $37,854.  As of March 31, 2010, our investment in real property was $61,335, which along with $5,512 in property and equipment, net of accumulated depreciation, equaled our total assets of $104,701.  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 March 31, 2010, our total liabilities were $53,310, all of which was represented by accounts payable.  We had no long term liabilities, commitments or contingencies.
 
 
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During 2010, 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.

For the three months ended March 31, 2010 as compared to the three months ended March 31, 2009.

Results of Operations.

Revenues.  We had no revenue for the three months ended March 31, 2010 as compared to the three months ended March 31, 2009, during which we also had no revenue.

Operating Expenses and Net Loss. We had total operating expenses of $3,634 for the three months ended March 31, 2010, as compared to total operating expenses of $17,547 for the three months ended March 31, 2009. The decrease in total operating expenses between the comparable periods is primarily due to a decrease in legal and professional fees.  Specifically, legal and professional fees decreased from $15,613 for the three months ended March 31, 2009, to $1,322 for the three months ended March 31, 2010.

Net Loss. For the three months ended March 31, 2010, our net loss was $3,599 as compared to a net loss of $17,248 for the three months ended March 31, 2009. The decrease in the net loss was due to the decrease in legal and professional fees for the three months ended March 31, 2010.  We expect to continue to incur net losses for the foreseeable future.

Our Plan of Operation 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 visit the property 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.
 
 
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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 $36,486 as of March 31, 2010. In the opinion of management, available funds may 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.  In the event that we experience a shortfall in our capital, 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 $5,000. 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.

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 March 31, 2010, the date of this report, our chief executive officer and the principal financial officer concluded that our disclosure controls and procedures were effective.

Item 4(T). Controls and Procedures.

Changes in internal controls. In our Form 10-K for the fiscal year ended December 31, 2009, management reported that our internal controls 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 over 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 period covered by this report, and (2) the 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.
 
 
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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


 
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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
  
       
May 17, 2010   
By:
/s/ Eduardo Biancardi
  
   
Eduardo Biancardi
Chief Executive Officer,
Chief Financial Officer,
Secretary, Director
(Principal, Executive, Financial and Accounting Officer)
 
  
 
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