UNITED PARAGON MINING CORPORATION

STATEMENTS OF FINANCIAL POSITION

December 31

2016 2015

ASSETS
Current Assets
Cash (Note 5) P513,875 P10,719,641
Materials and supplies (Note 7) 17,355,792 17,363,312
Other current assets (Note 6) 16,413,891 16,624,007
Total Current Assets 34,283,558 44,706,960

Noncurrent Assets
Property, plant and equipment (note 8) 995,340,363 996,455,474
Deferred exploration costs (note 9) 81,370,657 76,890,657
Other noncurrent assets 3,140,625 2,885,072
Total Noncurrent Assets 1,079,851,645 1,076,231,203

TOTAL ASSETS P1,114,135,203 P1,120,938,163

_____________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________

LIABILITIES AND EQUITY

Current Liabilities
Accounts payable and other current liabilities (note 10) P737,708,468 P695,045,223
Due to related parties (note 11) 235,878,988 107,698,988
Redeemable preferred shares (note 12) 26,100,000 26,100,000
Income tax payable (note 19) 131 7,951
Total Current Liabilities 999,687,587 828,852,162

Noncurrent Liabilities
Pension liabilities (note 13) 1,029,233 763,395
Due to related parties (note 11) - 120,000,000
Total Noncurrent Liabilities 1,029,223 120,765,395
Total liabilities 1,000,716,810 949,617,557

Equity
Capital stock-P0.01 par value
Authorized-397,325,000,000 shares
Issued-261,314,797,080 shares 2,613,147,971 2,613,147,971
Additional paid-in capital 19,449,376 19,449,376
Actuarial gains on retirement benefits obligation (note 13) 924,942 1,032,723
Deficit (note 2) (2,520,103,896) (2,462.309,464)
Total equity 113,418,393 171,320,606

TOTAL LIABILITIES AND EQUITY P1,14,135,203 P1,120,938,163

 STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31

2016 2015 2014

GENERAL AND ADMINISTRATIVE EXOENSES (NOTE 16) P14,724,792 P14,060,161 P15,140,061

OTHER EXPENSES (INCOME)

Finance expense (note 17) 37,951,410 33,886,312 52,115,353
Foreign exchange loss (gain)-net 5,132,340 4,942,324 393,602
Finance income (7,670) (12,305) (4,778)
Other income-net (note 18) (6,571) (397,535) (361,989)
43,069,509 38,418,796 52,142,188

LOSS BEFORE INCOME TAX 57,794,301 52,486,908 67,289,789

PROVISION FOR CURRENT INCOME TAX (NOTE 19) 131 7,951 7,540

NET LOSS 57,794,432 52,486,908 67,289,789

OTHER COMPREHENSIVE LOSS (INCOME)

Item that will not be reclassified to profit or loss:
Actuarial loss (gain) on retirement benefits obligation 107,781 46,957 (182,048)

TOTAL COMPREHENSIVE LOSS P57,902,213 P52,533,865 P67,107,741

Basis and Diluted Loss Per Share (note 20) P0,0002 P0,0002 P0,0003
UNITED PARAGON MINING CORPORATION
STATEMENT OF CASH FLOWS

Year Ended December 31

2016 2015 2014
____________________________________________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before income tax (P57, 794,301) (P52,478,957) (P67,282,249)
Adjustments for:
Finance expense (Note 17) 37,914,671 33,857,671 52,082,325
Unrealized foreign exchange losses 5,132,340 4,942,324 393,602
Depreciation (Note 8 and Note 16) 1,115,111 1,324,360 1,358,648
Interest income (Note 5) (7,650) (12,305) (4,778)
Gain on sale of materials and supplies (Note 18) (6,571) (397,535) (204,487)
Provision for impairment loss on receivables - 912,358 -
Loss on write-off of materials and supplies - 20,072 4,515
Gain on disposal of property and equipment (Note 8) - - (175,502)
Expired prepaid tax (Note 18) - - 15,000
Operating loss before working capital changes (13,646,420) (11,832,012) (13,809,926)
Decrease (increase) in:
Prepaid expense and other current assets 210,116 12,331,150 289,643
Materials and supplies 14,091 426,316 325,432
Increase in Pension liability (Note 13) 156,047 133,929 225,119
_____________________________________________________________________________________________________________________
Net cash generated from (used) in operations (13,266,166) 1,059,383 (12,969,732)
Interest received 7,670 12,305 4,778
Income taxes paid (7,951) (7,540) (64,638)
Net cash flows (used in) operating activities 13,266,447 1,064,148 (13,029,592)

CASH FLOWS FROM INVESTING ACTIVITIES

Addition in:
Deferred exploration cost (Note 9) (4,480,000) - -
Property and equipment (note 8) - (36,533) (37,073)
Increase in other noncurrent assets (255,553) (212,902) (435,160)
Proceeds from disposal of property and equipment - - 172,502
Net cash flows used in investing activities (4,735,553) (249,435) (299,731)

CASH FLOWS FROM FINANCING ACTIVITIES

Increase (decrease) in:
Due to related parties (Note 11) 8,180,000 7,057,000 16,950,000
Accounts payable and other current liabilities (383,766) (1,706,973) (543,698)
Net cash flows from financing activities 7,796,234 5,350,027 16,406,302

NET INCREASE (DECREASE) IN CASH (10,205,766) 6,164,740 3,076,979

CASH AT BEGINNING OF YEAR 10,719,641 4,554,901 1,477,922

CASH AT END OF YEAR (Note 5) P513,875 P10,719,641 P4,554,901
CASH 2016 2015

Cash on hand P35,000 P45,000

Cash in banks 478,875 10,674,641
P513,875 P10,719,641

Cash with banks earn interest at their respective bank deposit rates.
Total interest income amounted to P7,670 and P12,305 in 2016 and 2015, respectively.

OTHER CURRENT ASSETS 2016 2015

Claims for VAT tax credit certificates (TCC) P23,772,232 P23,772,232
Others 8,005,180 8,265,296
31,827,412 32,037,528
Allowance for impairment losses on:
Claims for VAT TCC’s 12,944,529 12,994,529
Others 2,468,992 2,468,992
15,413,521 15,413,521
P16,413,891 P16,624,007
18. INCOME TAXES

a. The company is subject to regular corporate income rtqax or minimum corporate income tax (MCIT) whichever is higher. The provision
for current income tax in 2016, 2015, and 2014 pertains to MCIT.
b. The reconciliation of income tax computed at the statutory income tax rate to the provision for income tax as shown in the statement of
comprehensive income follows:

2016 2015 2014

_____________________________________________________________________________________________________________________
Income tax benefit at statutory rate (P17,338,290) (P15,743,687) (P20,184,675)
Additions to (reduction in):
Income tax resulting from:
Change in unrecognized deferred taxes 7,080,441 5,564,978 4,534,685
Non-deductible expenses 10,260,281 10,190,352 15,658,963
Interest and dividend income already subjected to final tax (2,301) (3,692) (1,433)
P131 P7,951 P7,540

c. The company has deductible temporary differences and unused NOLCO for which no deferred tax assets were recognized as it is not
probable that sufficient taxable profit will be available against which the benefit of the deferred tax assets can be utilized. These are as
follows:

December 31
_____________________________________________________________________________________________________________________
2016 2015 2014
Allowances for impairment losses on:
Property, plant and equipment P77,004,945 P77,004,945 P77,004,945
Deferred development costs (Note 9) 64,698,015 64,698,015 64,698,015
Claims for VAT TCC’s (Note 6) 12,944,529 12,944,529 12,944,529
Deferred exploration costs (Note 9) 8,843,918 8,843,918 8.843,918
Receivable from staff, employees and others (Note 6) 2,468,992 2,468,992 1,556,635
Allowance for inventory obsolescence (Note 7) 11,104,940 11,104,940 11,125,012
Pension liability (Note 13) 1,029,233 765,395 584,509
Unrealized foreign exchange loss 5,132,340 4,942,324 393,602
NOLCO 45,339,298 97,650,248 162,911,797
MCIT 15,622 80,129 476,929

As a December 31,20p16, the Company has NOLCO and MCIT that can be claimed as deduction from the future taxable income and fute tax
liabilities, respectively, as follows:

Year Incurred Year of Expiration NOLCO MCIT

2016 2019 P18,312,646 P131
2015 2018 12,554,886 7,951
2014 2017 14,471,766 7,540
P45,339,298 P15,622

Movements in NOLCO and MCIT are as follow:

NOLCO 2016 2015 2014

Balance at beginning of year P97,650,248 P162,911,797 P202,949,939
Additions 18,312,646 12,554,886 14,471,766
Expiration (70,623,596) (77,816,435) (54,509,908)
Balances at end of year P45,339298 P97,650,248 P162,911,797

MCIT 2016 2015 2014

Balances at beginning of year P80,129 P476,929 P500,686
Additions 131 7,951 7,540
Expiration (64,638) (404,751) (31,297)
Balances at end of year P15,622 P80,129 P476,929

d. The company did not avail of the Optional Standard Deduction in 2016 and 2015.
Unappropriated Retained Earnings, beginning (P2,462,309,464)
Adjustments -
Unapprropriated Retained Earnings, as adjusted, beginning ______________
(P2,462,309,464)
Add: Net loss actually earned/realized during the period (57,794,432)

Net income during the period closed to Retained Earnings

Less: Non-actual/unrealized income net of tax -

Equity in net income of associate/joint venture -
Unrealized foreign exchange gain-net(except those attribute to cash) -
Unrealized actuarial gain -
Fair value adjustments (mark-to-market gain) -
Fair value adjustments of investments property resulting to gain -
Adjustments due to deviation from PFRS/GAAP-gain -
Other unrealized gains or adjustments to the retained earnings as a -
Result of certain transactions accounted for under PFRS ____________
-
Subtotal ____________

Add: Non-actual losses -

Depreciation on revaluation increment (after tax) -
Adjustment due to deviation from PFRS/GAAP-loss -
Loss on fair value adjustments of investments property (after tax) ____________
Subtotal ____________

Net loss actually earned during the period (57,794,432)

Add (Less): -
Dividend declarations during the period -
Appropriations of retained earnings -
Reversals of appropriations -
Effects of prior period adjustments
Treasury shares ____________
Subtotal ____________ (57,794,432)
Unappropriated Retained Earnings, as adjusted, ending P___________